UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM 10 -
Q





(Mark
One)


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


For the
quarterly period ended March 31, 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 April 25, 2008 was
70,480,705.





Franklin
StreetProperties Corp.





Form
10-Q





Quarterly
Report


March 31,
2008





Table of
Contents








Part
      I.
            Financial
      InformationPageItem
      1.
            Financial
      StatementsConsolidated
      Balance Sheets as of March 31, 2008 and December 31, 2007
            3Consolidated
      Statements of Income for the three months ended March 31, 2008 and
      2007
            4Consolidated
      Statements of Cash Flows for the three months ended March 31, 2008 and
      2007
            5Notes
      to Consolidated Financial Statements
            6-13Item
      2.
            Management’s
      Discussion and Analysis of Financial Conditionand
      Results of Operations
            14-19Item
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk
            20Item
      4.
            Controls
      and Procedures
            20Part
      II.
            Other
      InformationItem
      1.
            Legal
      Proceedings
            22Item
      1A.
            Risk
      Factors
            22Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            22Item
      3.
            Defaults
      Upon Senior Securities
            23Item
      4.
            Submission
      of Matters to a Vote of Security Holders
            23Item
      5.
            Other
      Information
            23Item
      6.
            Exhibits
            23Signatures
            
            
            24











PART
I – FINANCIAL INFORMATION


Item
1.      Financial Statements





Franklin
Street Properties Corp.


Consolidated
Balance Sheets


(Unaudited)





March
      31,
            
            
            December
      31,(in
      thousands, except share and par value amounts)
            
            2008
            
            
            2007Assets:Real
      estate assets:Land
            
            $
            99,140
            
            
            $
            99,140Buildings
      and improvements
            
            
            745,488
            
            
            
            743,027Fixtures
      and equipment
            
            
            219
            
            
            
            212844,847
            
            
            
            842,379Less
      accumulated depreciation
            
            
            57,449
            
            
            
            52,060Real
      estate assets, net
            
            
            787,398
            
            
            
            790,319Acquired
      real estate leases, less accumulated amortizationof
      $25,801 and $23,401, respectively
            
            
            30,826
            
            
            
            33,695Investment
      in non-consolidated REITs
            
            
            86,235
            
            
            
            85,663Assets
      held for syndication, net
            
            
            24,593
            
            
            
            26,310Cash
      and cash equivalents
            
            
            32,227
            
            
            
            46,988Restricted
      cash
            
            
            336
            
            
            
            336Tenant
      rent receivables, less allowance for doubtful accountsof
      $509 and $430, respectively
            
            
            1,694
            
            
            
            1,472Straight-line
      rent receivable, less allowance for doubtful accountsof
      $261 and $261, respectively
            
            
            7,638
            
            
            
            7,387Prepaid
      expenses
            
            
            1,654
            
            
            
            1,395Other
      assets
            
            
            1,540
            
            
            
            406Office
      computers and furniture, net of accumulated depreciationof
      $1,002 and $968, respectively
            
            
            340
            
            
            
            309Deferred
      leasing commissions, net of accumulated amortizationof
      $2,290, and $1,975, respectively
            
            
            9,581
            
            
            
            9,186Total
      assets
            
            $
            984,062
            
            
            $
            1,003,466Liabilities and Stockholders’
      Equity:Liabilities:Bank note
      payable
            
            $
            84,750
            
            
            $
            84,750Accounts payable and accrued
      expenses
            
            
            16,633
            
            
            
            20,255Accrued
      compensation
            
            
            415
            
            
            
            1,564Tenant security
      deposits
            
            
            1,923
            
            
            
            1,874Acquired unfavorable real estate
      leases, less accumulated amortizationof
      $1,424, and $1,226,
      respectively
            
            
            4,186
            
            
            
            4,405Totalliabilities
            
            
            107,907
            
            
            
            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
            
            
            (12,871
            )
            
            
            1,592Total
      stockholders’ equity
            
            
            876,155
            
            
            
            890,618Total
      liabilities and stockholders’ equity
            
            $
            984,062
            
            
            $
            1,003,466The
      accompanying notes are an integral part of these consolidated financial
      statements.




3


Franklin
Street Properties Corp.


Consolidated
Statements of Income


(Unaudited)





For
      the
              Three
      Months Ended
              March
      31,(in
      thousands, except per share amounts)
            
            2008
            
            
            2007Revenue:Rental
            
            $
            26,656
            
            
            $
            25,104Related
      party revenue:Syndication
      fees
            
            
            205
            
            
            
            2,956Transaction
      fees
            
            
            168
            
            
            
            3,081Management
      fees and interest income from loans
            
            
            561
            
            
            
            1,817Other
            
            
            20
            
            
            
            38Total
      revenue
            
            
            27,610
            
            
            
            32,996Expenses:Real
      estate operating expenses
            
            
            6,699
            
            
            
            6,207Real
      estate taxes and insurance
            
            
            4,279
            
            
            
            4,168Depreciation
      and amortization
            
            
            7,359
            
            
            
            7,177Selling,
      general and administrative
            
            
            2,009
            
            
            
            1,888Commissions
            
            
            158
            
            
            
            1,559Interest
            
            
            1,192
            
            
            
            2,676Total
      expenses
            
            
            21,696
            
            
            
            23,675Income
      before interest income, equity in earnings (losses) ofnon-consolidated
      REITs and taxes on income
            
            
            5,914
            
            
            
            9,321Interest
      income
            
            
            303
            
            
            
            653Equity
      in earnings (losses) of non-consolidated REITs
            
            
            793
            
            
            
            (616
            )Income
      before taxes
            
            
            7,010
            
            
            
            9,358Income
      tax (benefit) expense
            
            
            (376
            )
            
            
            295Income
      from continuing operations
            
            
            7,386
            
            
            
            9,063Income
      from discontinued operations
            
            
            -
            
            
            
            669Net
      income
            
            $
            7,386
            
            
            $
            9,732Weighted
      average number of shares outstanding,basic
      and diluted
            
            
            70,481
            
            
            
            70,766Earnings
      per share, basic and diluted, attributable to:Continuing
      operations
            
            $
            0.10
            
            
            $
            0.13Discontinued
      operations
            
            
            -
            
            
            
            0.01Net
      income per share, basic and diluted
            
            $
            0.10
            
            
            $
            0.14The
      accompanying notes are an integral part of these consolidated financial
      statements.


4


Franklin
Street Properties Corp.


Consolidated
Statements of Cash Flows


(Unaudited)





For
      the
              Three
      Months Ended
              March
      31,(in
      thousands)
            
            2008
            
            
            2007Cash
      flows from operating activities:Net
      income
            
            $
            7,386
            
            
            $
            9,732Adjustments
      to reconcile net income to net cash
              provided
      by  operating activities:Depreciation
      and amortization expense
            
            
            7,371
            
            
            
            7,666Amortization
      of above market lease
            
            
            1,139
            
            
            
            1,334Equity
      in earnings (losses) from non-consolidated REITs
            
            
            (793
            )
            
            
            583Distributions
      from non-consolidated REITs
            
            
            546
            
            
            
            281Increase
      in bad debt reserve
            
            
            79
            
            
            
            -Changes
      in operating assets and liabilities:Restricted
      cash
            
            
            -
            
            
            
            79Tenant
      rent receivables, net
            
            
            (301
            )
            
            
            503Straight-line
      rents, net
            
            
            (251
            )
            
            
            (1,273
            )Prepaid
      expenses and other assets, net
            
            
            (376
            )
            
            
            755Accounts
      payable and accrued expenses
            
            
            (4,379
            )
            
            
            (1,856
            )Accrued
      compensation
            
            
            (1,148
            )
            
            
            (1,388
            )Tenant
      security deposits
            
            
            49
            
            
            
            (90
            )Payment
      of deferred leasing commissions
            
            
            (818
            )
            
            
            (661
            )Net
      cash provided by operating activities
            
            
            8,504
            
            
            
            15,665Cash
      flows from investing activities:Purchase
      of real estate assets, office computers and
              furniture,
      capitalized merger costs
            
            
            (1,777
            )
            
            
            (9,327
            )Other
      assets
            
            
            -
            
            
            
            (9
            )Investment
      in loan receivable
            
            
            (1,000
            )
            
            
            -Redemption
      of (investment in) certificate of deposit
            
            
            -
            
            
            
            (37
            )Investment
      in assets held for syndication, net
            
            
            1,391
            
            
            
            (121,431
            )Proceeds
      received on sales of real estate assets
            
            
            -
            
            
            
            5,830Net
      cash used in investing activities
            
            
            (1,386
            )
            
            
            (124,974
            )Cash
      flows from financing activities:Distributions
      to stockholders
            
            
            (21,849
            )
            
            
            (21,938
            )Repayments
      under bank note payable
            
            
            -
            
            
            
            130,000Deferred
      financing costs
            
            
            (30
            )
            
            
            -Net
      cash (used in) provided by financing activities
            
            
            (21,879
            )
            
            
            108,062Net
      decrease in cash and cash equivalents
            
            
            (14,761
            )
            
            
            (1,247
            )Cash
      and cash equivalents, beginning of period
            
            
            46,988
            
            
            
            69,973Cash
      and cash equivalents, end of period
            
            $
            32,227
            
            
            $
            68,726Non-cash investing and financing
      activities:Accrued
      costs for purchase of real estate assets
            
            $
            2,369
            
            
            $
            2,042Deposits
      on investments in assets held for syndication
            
            $
            -
            
            
            $
            5,010The
      accompanying notes are an integral part of these consolidated financial
      statements.




5


Franklin
Street Properties Corp.


Notes
to 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 three 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
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 26 properties as ofMarch 31, 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.





Properties





The
following table summarizes the Company’s investment in real estate assets,
excluding assets held for syndication and assets held for sale:





As ofMarch 31,2008
            
            
            2007Commercial real
      estate:Number of
      properties
            
            
            26
            
            
            
            25Square
      feet
            
            
            4,997,128
            
            
            
            4,672,475





Basis
of Presentation





The
unaudited 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 months ended March 31, 2008
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2008 or for any other period.





Reclassifications





Certain amounts from the 2007 income
statement have been reclassified to conform to the 2008
presentation.  The reclassificationprimarilyreflected 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.








6


Franklin
Street Properties Corp.


Notes
to Consolidated Financial Statements


(Unaudited)





1.      Organization,
Properties, Basis of Presentation and Recent Accounting Pronouncements
(continued)





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 has not had 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 has not had 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 three months ended March 31, 2008, the Company sold on a best efforts basis,
through private placements, preferred stock in the following Sponsored
REIT:





Sponsored
    REIT
            Property
      Location
            
            Gross
    Proceeds(in thousands)1FSP Grand Boulevard
      Corp.
            Kansas City,
    MO
            
            $
            2,675Total
            
            $
            2,675





1.
            The
      syndication of FSP Grand Boulevard Corp. (“Grand Bouelvard”), which
      commenced in September 2007, was not complete at March 31,
      2008.





3.      Related
Party Transactions and Investments in Non-Consolidated Entities





Investment
in Sponsored REITs:





At March
31, 2008, the Company held an interest in twelve Sponsored
REITs.  Eleven 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 preferred stock investment in three of
these Sponsored REITs, FSP Park Ten Development Corp. (“Park Ten Development”),
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 entity that was not fully syndicated at March
31, 2008, Grand Boulevard has a carrying cost of approximately $24.6 million on
the accompanying consolidated balance sheets and is classified as assets held
for syndication.





7


Franklin
Street Properties Corp.


Notes
to Consolidated Financial Statements


(Unaudited)





3.      Related
Party Transactions and Investments in Non-consolidated Entities
(continued)





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 thethree monthsendedMarch31, 2007are eliminated in
consolidation.





Three Months EndedMarch
      31,(in
      thousands)
            
            2007Operating
      Data:Rental
      revenues
            
            $
            2,079Operating
      and maintenance expenses
            
            
            (1,102
            )Depreciation
      and amortization
            
            
            (442
            )Interest
      expense
            
            
            (992
            )Interest
      income
            
            
            39$
            (418
            )





Equity in earnings
(losses)  of investment in non-consolidated
REITs:





The
following table includes equity in earnings (losses) of investments in
non-consolidated REITs:





Three
      Months EndedMarch
      31,(in
      thousands)
            
            2008
            
            
            2007Equity
      in earnings (losses) of Sponsored REITs
            
            $
            59
            
            
            $
            (666
            )Equity
      in earnings (losses) of Park Ten Development
            
            
            10
            
            
            
            (7
            )Equity
      in earnings of Phoenix Tower
            
            
            36
            
            
            
            57Equity
      in earnings of East Wacker
            
            
            688
            
            
            
            -$
            793
            
            
            $
            (616
            )





Equity in
earnings (losses) of investments in Sponsored REITs is derived from the
Company’s share of income 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 is 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.





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).





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 $546,000 and $281,000 from Sponsored
REITs during the three months ended March 31, 2008 and 2007,
respectively.




8


Franklin
Street Properties Corp.


Notes
to Consolidated Financial Statements


(Unaudited)





3.      Related
Party Transactions and Investments in Non-consolidated Entities
(continued)





Non-consolidated
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, the existing holders of preferred stock in Park Ten Development
will receive cash consideration of approximately $127,290 per share. The
acquisition will be effected by merging a wholly-owned subsidiary of the
Company with and into Park Ten Development.  Consummation of the
acquisition requires the approval of Park Ten Development's stockholders. The
acquisition is expected to close on or about May 15, 2008.  The
Company’s business model for growth includes the potential acquisition by merger
in the future of Sponsored REITs.  Following the consummation of the
acquisition of Park Ten Development by merger, 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 March 31, 2008.  The operating
data for 2007 includes operations of the eleven Sponsored REITs the Company held
an interest in as of March 31, 2007.





At March
31, 2008, December 31, 2007 and March 31, 2007, the Company had ownership
interests in twelve, twelve and eleven  Sponsored REITs,
respectively.  Summarized financial information for
these Sponsored REITs is as follows:





March 31,
            
            
            December
31,(in
    thousands)
            
            2008
            
            
            2007Balance
      Sheet Data (unaudited):Real estate,
      net
            
            $
            681,099
            
            
            $
            684,441Other
assets
            
            
            90,459
            
            
            
            96,180Total
      liabilities
            
            
            (193,186
            )
            
            
            (202,757
            )Shareholders'
      equity
            
            $
            578,372
            
            
            $
            577,864





For
      the Three Months EndedMarch
      31,(in
    thousands)
            
            2008
            
            
            2007Operating
      Data (unaudited):Rental
    revenues
            
            $
            26,654
            
            
            $
            22,099Other
    revenues
            
            
            644
            
            
            
            781Operating and
      maintenance  expenses
            
            
            (12,805
            )
            
            
            (10,735
            )Depreciation and
      amortization
            
            
            (6,074
            )
            
            
            (4,339
            )Interest
      expense
            
            
            (2,472
            )
            
            
            (7,017
            )Net income
            
            $
            5,947
            
            
            $
            789





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 $373,000and$6,037,000for thethree months endedMarch 31, 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$240,000and$228,000for thethree months endedMarch 31, 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.


9


Franklin
Street Properties Corp.


Notes
to Consolidated Financial Statements


(Unaudited)





3.      Related
Party Transactions and Investments in Non-consolidated Entities
(continued)





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.  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 $321,000 and $1,589,000 for thethree months endedMarch 31, 2008and 2007,respectively, relating to these
loans.





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 (5.25% at March 31,
2008) or a rate equal to LIBOR plus 100 basis points (3.7% at March 31, 2008).
There were borrowings of $84,750,000 at the LIBOR plus 100 basis point rate at a
weighted average rate of 4.8% and 6.2% outstanding under the line of credit at
March 31, 2008 and December 31, 2007, respectively.  The weighted
average interest rate on amounts outstanding during the three months ended March
31, 2008 and 2007 was approximately 4.77% 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 March 31, 2008 and December 31, 2007.
Borrowings under the Loan Agreement mature on August 11, 2011.





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 March
31, 2008 and 2007.





6.      Discontinued
Operations





During
2007, the Company sold five properties.  Accordingly, each of the five
properties sold are classified as discontinued operations on our financial
statements.  Income from discontinued operations was approximately
$669,000 for the three months ended March 31, 2007.





The operating results for these real
estate assets have been reflected as discontinued operations in the consolidated
statements of income for all periods presented, and are summarized
below:




For
      the Three Months Ended(in
      thousands)
              
              March
      31,2007Rental
      revenue
              
              $
              1,880Rental
      operating expenses
              
              
              (473
              )Real
      estate taxes and insurance
              
              
              (258
              )Depreciation
      and amortization
              
              
              (480
              )Net
      income from discontinued operations
              
              $
              669
 10


Franklin
Street Properties Corp.


Notes
to Consolidated Financial Statements


(Unaudited)





7.      Business
Segments





The
Company operates in two business segments: real estate operations (including
real estate leasing, interest income on interim acquisition and other financing
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 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.





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 March 31, 2007Net
      Income
            
            $
            6,548
            
            
            $
            3,184
            
            
            $
            9,732Equity
      in income (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
            
            
            $
            19,586








11


Franklin
Street Properties Corp.


Notes
to 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
            
            
            TotalMarch 31,
    2008:Revenue
            
            $
            27,237
            
            
            $
            373
            
            
            $
            27,610Interest
      income
            
            
            292
            
            
            
            11
            
            
            
            303Interest
      expense
            
            
            1,192
            
            
            
            -
            
            
            
            1,192Capital
      expenditures
            
            
            (2,477
            )
            
            
            (56
            )
            
            
            (2,533
            )Identifiable
      assets
            
            $
            979,467
            
            
            $
            4,595
            
            
            $
            984,062March 31,
    2007:Revenue
            
            $
            26,960
            
            
            $
            6,037
            
            
            $
            32,997Interest
      income
            
            
            645
            
            
            
            8
            
            
            
            653Interest
      expense
            
            
            2,676
            
            
            
            -
            
            
            
            2,676Capital
      expenditures
            
            
            (2,854
            )
            
            
            -
            
            
            
            (2,854
            )Identifiable
      assets
            
            $
            1,056,974
            
            
            $
            6,098
            
            
            $
            1,063,072





8.      Cash Dividends





The
Company declared and paid dividends as follows (in thousands, except per share
amounts):





Quarter
Paid
            
            Dividends
              Per Share
            
            
            Total
              DividendsFirst quarter of
      2008
            
            $
            .31
            
            
            $
            21,849First quarter of
      2007
            
            $
            .31
            
            
            $
            21,938





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 a taxable
corporation under the Code and have accounted for income taxes in accordance
with the provisions of SFAS No. 109, Accounting for Income Taxes.





12


Franklin
Street Properties Corp.


Notes
to Consolidated Financial Statements


(Unaudited)





9.      Income
Taxes (continued)





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 did not result 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 consolidated statements of income related to
the TRS was a tax benefit of $433,000 for the three months ended March 31, 2008
and tax expense of $240,000 for the three months ended March 31,
2007.  The expense differs from the amounts computed by applying the
Federal statutory rate of 34% to income before income taxes as
follows:





For theThree Months
      EndedMarch 31,(in
    thousands)
            
            2008
            
            
            2007Federal income tax expense
      (credit) at statutory rate
            
            $
            (365
            )
            
            $
            203Increase in taxes resulting
      from:State income taxes (credit), net
      of federal impact
            
            
            (68
            )
            
            
            37Revised Texas Franchise
      Tax
            
            
            57
            
            
            
            55$
            (376
            )
            
            $
            295





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
property tax for school districts.  Because the tax base on the Texas
margin 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 $57,000 and $55,000 for the three months
ended March 31, 2008 and 2007, respectively.





10.    Subsequent
Events





The
Company declared a cash distribution of $0.31 per share on April 18, 2008 to
stockholders of record on April 30, 2008 payable on May 20, 2008.





On April
28, 2008, Park Ten Development informed the Company that the requisite number of
holders of its preferred stock had voted to approve the Company’s
acquisition of Park Ten Development by merger. The Company  expects to
consummate the transaction on or about May 15, 2008.




13
  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 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




14


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 could 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.





Real Estate
Operations





Our real
estate portfolio was approximately 93% leased as of March 31, 2008 and December
31, 2007.  We have one repositioned property in the greater
Seattle/Tacoma area that has been slower to lease and remains substantially
vacant; however, we believe that this property will lease up over time, if the
local market conditions are favorable. We ended 2007 with strong leasing
activity in most of our markets, but we have not seen a similar level of
activity so far in 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 first quarter 2008 was $2.7 million, representing one of
the slowest quarters in the history of our investment banking
business.  The slowdown in our investment banking business actually
began in the third quarter of 2007 and, at this point, it is 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 remains
uncertain as 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.





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 months ended March 31, 2007.





We
continue to evaluate our portfolio, and in the future may decide to dispose of
additional properties from time-to-time in the ordinary course of
business.  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.




15


The
following table shows results for the three months ended March 31, 2008 and
2007.




(in
      thousands)Three
      months ended March 31,Revenue:
            
            2008
            
            
            2007
            
            
            ChangeRental
            
            $
            26,656
            
            
            $
            25,104
            
            
            $
            1,552Related
      party revenue:Syndication
      fees
            
            
            205
            
            
            
            2,956
            
            
            
            (2,751
            )Transaction
      fees
            
            
            168
            
            
            
            3,081
            
            
            
            (2,913
            )Management
      fees and interest income from loans
            
            
            561
            
            
            
            1,817
            
            
            
            (1,256
            )Other
            
            
            20
            
            
            
            38
            
            
            
            (18
            )Total
      revenue
            
            
            27,610
            
            
            
            32,996
            
            
            
            (5,386
            )Expenses:Real
      estate operating expenses
            
            
            6,699
            
            
            
            6,207
            
            
            
            492Real
      estate taxes and insurance
            
            
            4,279
            
            
            
            4,168
            
            
            
            111Depreciation
      and amortization
            
            
            7,359
            
            
            
            7,177
            
            
            
            182Selling,
      general and administrative
            
            
            2,009
            
            
            
            1,888
            
            
            
            121Commissions
            
            
            158
            
            
            
            1,559
            
            
            
            (1,401
            )Interest
            
            
            1,192
            
            
            
            2,676
            
            
            
            (1,484
            )Total
      expenses
            
            
            21,696
            
            
            
            23,675
            
            
            
            (1,979
            )Income
      before interest income, equity in earnings (losses) in non-consolidated
      REITs and taxes
            
            
            5,914
            
            
            
            9,321
            
            
            
            (3,407
            )Interest
      income
            
            
            303
            
            
            
            653
            
            
            
            (350
            )Equity
      in earnings (losses) in non-consolidated REITs
            
            
            793
            
            
            
            (616
            )
            
            
            1,409Income
      before taxes
            
            
            7,010
            
            
            
            9,358
            
            
            
            (2,348
            )Income
      tax (benefit) expense
            
            
            (376
            )
            
            
            295
            
            
            
            (671
            )Income
      from continuing operations
            
            
            7,386
            
            
            
            9,063
            
            
            
            (1,677
            )Income
      from discontinued operations
            
            
            -
            
            
            
            669
            
            
            
            (669
            )Net
      income
            
            $
            7,386
            
            
            $
            9,732
            
            
            $
            (2,346
            )





Comparison
of the three months ended March 31, 2008  to the three months ended
March 31,  2007:




Revenues




Total
revenues decreased by $5.4 million to $27.6 million for the quarter ended March
31, 2008, as compared to $33.0 million for the quarter ended March 31,
2007.  The decrease was primarily a result of:




o
            A
      $5.7 million decrease in syndication fees and transaction (loan
      commitment) fees, which was principally a result of the decrease in gross
      syndication proceeds in for the quarter ended March 31, 2008 compared to
      the same period in 2007.


o
            A
      decrease in loan interest income of approximately $1.3 million, which was
      principally a result of larger loan receivable balance during the first
      quarter of 2007 as compared the first quarter of 2008, from which interest
      income is derived.  The impact of this decrease was also greater
      as a result of a lower interest rate charged for the first quarter of 2008
      compared to 2007.





These
decreases were partially offset by:





o
            An
      increase to rental revenue of approximately $1.6 million arising primarily
      from the acquisition of a property in Maryland in June 2007 and the
      benefit of net increases in leasing made over the last twelve
      months.





16


Expenses





Total
expenses decreased by $2.0 million to $21.8 million for the three months ended
March 31, 2008 compared to the three months ended March 31, 2007.  The
decrease was primarily a result of:





o
            A
      decrease in commission expense of $1.4 million, which was principally a
      result of the decrease in gross syndication proceeds in the quarter
      compared to the same period in
2007.


o
            A
      decrease in interest expense of approximately $1.5 million primarily
      resulting from a lower average loan balances outstanding during the three
      months ended March 31, 2008 compared to the three months ended March 31,
      2007 and lower interest rates during the three months ended March 31, 2008
      compared to the 2007 period.





These
decreases were partially offset by:





o
            An
      increase in real estate operating expenses and real estate taxes and
      insurance of approximately $0.6 million, and depreciation of $0.2 million,
      which were primarily from the acquisition of a property in Maryland in
      June 2007.


o
            Selling,
      general and administrative expenses, which increased insignificantly by
      $0.1 million to $2.0 million for the three months ended March 31, 2008
      compared to same period in 2007.  We had 37 and 38 employees as
      of March 31, 2008 and 2007, respectively, at our headquarters in
      Wakefield.





Interest
income





Interest
income decreased $0.3 million to $0.3 million during the three months ended
March 31, 2008, which was primarily a result of a lower average interest rates
on invested funds and a lower average balance 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 $1.4
million to $0.8 million, which was principally a result of our preferred stock
investments in East Wacker, which we acquired in December 2007, and equity in
earnings of non-consolidated REITs in the first quarter of 2008 compared to
losses in the first quarter of 2007.





Taxes on
income





Taxes on
income decreased $0.7 million to a credit of $0.4 million in the first quarter
of 2008 compared to the first quarter of 2007.  The decrease was
primarily due to a taxable loss from the investment banking and investment
services business in the 2008 period compared to 2007.  During the
first 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 first quarter of 2008
decreased $1.7 million to $7.4 million from $9.1 million in the first quarter of
2007 for the reasons discussed above.





Discontinued
operations





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 March 31,
2007 related to the properties sold.





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 March 31, 2008 decreased $2.3 million to $7.4
million compared to $9.7 million for the three months ended March 31, 2007, for
the reasons discussed above.





17


Liquidity
and Capital Resources




Cash and
cash equivalents were $32.2 million and $47.0 million at March 31, 2008 and
December 31, 2007, respectively. This decrease of $14.8 million is attributable
to $8.5 million provided by operating activities, less $1.4 million used for
investing activities, less $21.9 million used by financing
activities.  Management believes that existing cash, cash anticipated
to be generated internally by operations, cash anticipated to be generated by
fees and commissions from the sale of preferred stock in future Sponsored REITs
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 $8.5 million is primarily attributable
to net income of $7.4 million, plus the add-back of $7.5 million of non-cash
activity and $0.5 million of distributions from non-consolidated REITs and was
partially offset by increases in tenant receivables and prepaid and other
expenses of $0.6 million and decreases in accrued expenses and compensation of
$5.5 million and payment of leasing commissions of $0.8 million.




Investing
Activities




Our cash
used for investing activities of $1.4 million is primarily attributable to
additions to real estate investments and office equipment of approximately $1.8
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 $1.4 million of proceeds received from the
syndication in process with FSP Grand Boulevard Corp.




Financing
Activities




Our cash
used by financing activities of $21.9 million is primarily attributable to
distributions to shareholders.




Line
of Credit




We have a
revolving line of credit agreement with a group of banks providing for
borrowings at our election of up to $250,000,000 that matures on August 11,
2011.  Borrowings under our line of credit bear interest at either the
bank's prime rate (5.25% at March 31, 2008) or a rate equal to LIBOR plus 100
basis points (3.70% at March 31, 2008). There were borrowings of $84,750,000 at
the LIBOR plus 100 basis point rate at a weighted average rate of 4.8% and 6.2%
outstanding under our line of credit at March 31, 2008 and December 31, 2007,
respectively.  The weighted average interest rate on amounts
outstanding during the three months ended March 31, 2008 and 2007 was
approximately 4.77% 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 March 31, 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. 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.




18


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
March 31, 2008 and December 31, 2007, we had one asset held for syndication, a
property in Kansas City, Missouri.




Related
Party Transactions




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.  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 March
19, 2008, we 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, the existing holders of preferred stock in
FSP Park Ten Development Corp. will receive cash consideration of approximately
$127,290 per share. The acquisition will be effected by merging a wholly owned
acquisition subsidiary of the Company with and into Park Ten
Development.  As of March 31, 2008, the agreement and plan of merger
had been approved by our Board of Directors and Park Ten Development’s Board of
Directors.  Consummation of the acquisition requires the approval of
Park Ten Development's stockholders.  The acquisition is expected to
close on or about May 15, 2008.




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.




Other
Considerations




We
generally pay the ordinary annual operating expenses of our properties from the
rental revenue generated by the properties.  For the three months
ended March 31, 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 Federal
Way, Washington, and a property located in San Jose, California.  The
Westford, Massachusetts property had operating expenses of approximately $86,000
for the three months ended March 31, 2007.  The San Jose, California
property had rental income that exceeded expenses during the three months ended
March 31, 2008 and had rental income of $100,000 and operating expenses of
$124,000 for the three months ended March 31, 2007.  The property at
Federal Way, Washington had a single tenant lease, which expired September 14,
2006.  The building was vacant during the three months ended March 31,
2007 and generated no revenue.  Over the remainder of 2007 we signed
leases with two tenants for approximately 12% of the space, which generated
rental income of $69,000 during the three months ended March 31, 2008; however
we expect the property will not produce revenue to cover its expenses in the
second quarter of 2008.  The Federal Way property had operating
expenses of $140,000 and $139,000 for the three months ended March 31, 2008 and
2007, respectively.







19


Item
3.    Quantitative and Qualitative Disclosures About Market
Risk





We were
not a party to any derivative financial instruments at or during the three
months ended March 31, 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 (5.25% at March 31, 2008) or at 30 day LIBOR
plus 100 basis points (3.70% at March 31, 2008), as elected by us when
requesting funds as defined.  Generally the borrowings are for 30 day
LIBOR plus 100 Basis points.  As of March 31, 2008 and December 31,
2007, we had two borrowings totaling $84,750,000 in the aggregate at the 30 day
LIBOR plus 100 basis point rate, representing a weighted average rate of 4.8%
and 6.2%, 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.  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 March 31, 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
            $ 84,750
            $ 84,750
            $          -
            $          -
            $          -
            $          -
            $          -Total
            $ 84,750
            $ 84,750
            $          -
            $          -
            $          -
            $          -
            $          -





If market
rates of our line of credit borrowings at maturity increased by 10%, or
approximately 48 basis points, over the current variable rate, the increase in
interest expense would decrease future earnings and cash flows by $0.4 million
annually.  We do not believe that the interest rate risk represented
by our variable rate borrowings is material as of March 31, 2008.




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 March 31, 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 March 31, 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.







20


Changes
in Internal Control Over Financial Reporting





No change
in our internal control over financial reporting occurred during the quarter
ended March 31, 2008 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial
reporting.


21


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
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 March 31, 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)01/01/08-01/31/08
            0
            N/A
            0
            $31,240,46502/01/08-02/29/08
            0
            N/A
            0
            $31,240,46503/01/08-03/31/08
            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.





22


Item
3.    Defaults Upon Senior Securities





None.





Item
4.    Submission of Matters to a Vote of Security
Holders





None.





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.





23


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:  April
      29, 2008
            /s/ George J.
      Carter
              George
      J. Carter
            Chief
      Executive Officer and Director (Principal Executive
    Officer)Date:  April
      29, 2008
            /s/ John G.
      Demeritt
              John
      G. Demeritt
            Chief
      Financial Officer
              (Principal
      Financial Officer)











24


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













25