UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10 - Q

(Mark One)

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

      For the quarterly period ended June 30, 2007.

                                       OR

|_|   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            (IRS Employer Identification Number)
 incorporation 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 |_|

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):

Large Accelerated |X|   Filer Accelerated Filer |_|   Non-Accelerated Filer |_|


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

      YES |_|                 NO |X|

The number of shares of common stock outstanding as of July 31, 2007 was
70,766,305.
<PAGE>

                        Franklin Street Properties Corp.

                                    Form 10-Q

                                Quarterly Report
                                  June 30, 2007

                                Table of Contents


Part I.  Financial Information
                                                                            Page
                                                                            ----
         Item 1.  Financial Statements

                  Consolidated Balance Sheets as of June 30, 2007 and
                  December 31, 2006......................................      3

                  Consolidated Statements of Income for the three and
                  six months ended June 30, 2007 and 2006................      4

                  Consolidated Statements of Cash Flows for the
                  six months ended June 30, 2007 and 2006................    5-6

                  Notes to Consolidated Financial Statements.............   7-17

         Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations....................  18-28

         Item 3.  Quantitative and Qualitative Disclosures About
                  Market Risk............................................     28

         Item 4.  Controls and Procedures................................     28

Part II. Other Information

         Item 1.  Legal Proceedings......................................     29

         Item 1A. Risk Factors...........................................     29

         Item 2.  Unregistered Sales of Equity Securities and
                  Use of Proceeds........................................     29

         Item 3.  Defaults Upon Senior Securities........................     29

         Item 4.  Submission of Matters to a Vote of Security Holders....     30

         Item 5.  Other Information......................................     30

         Item 6.  Exhibits...............................................     30

Signatures        .......................................................     31
<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                        Franklin Street Properties Corp.
                           Consolidated Balance Sheets
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                               June 30,    December 31,
(in thousands, except share and par value amounts)                               2007          2006
========================================================================================================
<S>                                                                          <C>            <C>
Assets:
Real estate assets:
          Land                                                               $    99,849    $  95,250
          Buildings and improvements                                             748,757      688,612
          Fixtures and equipment                                                      61           34
--------------------------------------------------------------------------------------------------------
                                                                                 848,667      783,896
          Less accumulated depreciation                                           43,632       33,738
--------------------------------------------------------------------------------------------------------
Real estate assets, net                                                          805,035      750,158
Acquired real estate leases, less accumulated amortization
   of $25,890 and $20,345, respectively                                           39,998       40,577
Investment in non-consolidated REITs                                               4,959        5,064
Assets held for syndication, net                                                  77,645           --
Assets held for sale                                                               8,938       62,174
Cash and cash equivalents                                                        107,600       69,973
Certificate of deposit                                                                --        5,143
Restricted cash                                                                      682          761
Tenant rent receivables, less allowance for doubtful accounts
   of $355 and $433, respectively                                                  2,106        2,440
Straight-line rent receivable, less allowance for doubtful accounts
   of $163 and $163, respectively                                                  6,288        4,346
Prepaid expenses                                                                     917          972
Deposits on real estate assets                                                        --        5,010
Other assets                                                                         294        1,118
Office computers and furniture, net of accumulated depreciation
   of $912 and $851, respectively                                                    360          375
Deferred leasing commissions, net of accumulated amortization
   of $1,935, and $1,313, respectively                                             8,428        7,206
--------------------------------------------------------------------------------------------------------
          Total assets                                                       $ 1,063,250    $ 955,317
========================================================================================================

Liabilities and Stockholders' Equity:
Liabilities:
   Bank note payable                                                         $   119,750    $      --
   Accounts payable and accrued expenses                                          15,648       25,275
   Accrued compensation                                                              917        2,643
   Tenant security deposits                                                        1,783        1,744
   Acquired unfavorable real estate leases, less accumulated amortization
     of $852, and $534, respectively                                               4,857        3,693
--------------------------------------------------------------------------------------------------------
             Total liabilities                                                   142,955       33,355
--------------------------------------------------------------------------------------------------------

Commitments and contingencies
Stockholders' 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,
     70,766,305 and 70,766,305 shares issued and outstanding, respectively             7            7
   Additional paid-in capital                                                    907,794      907,794
   Treasury stock, 731,898 and 731,898 shares at cost, respectively              (14,008)     (14,008)
   Earnings in excess of accumulated earnings/distributions                       26,502       28,169
--------------------------------------------------------------------------------------------------------
       Total stockholders' equity                                                920,295      921,962
--------------------------------------------------------------------------------------------------------
       Total liabilities and stockholders' equity                            $ 1,063,250    $ 955,317
========================================================================================================
                                            See accompanying notes to consolidated financial statements.
</TABLE>


                                       3
<PAGE>

                        Franklin Street Properties Corp.
                        Consolidated Statements of Income
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                   For the                  For the
                                                              Three Months Ended        Six Months Ended
                                                                   June 30,                 June 30,
----------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)                        2007       2006         2007       2006
==========================================================================================================

<S>                                                           <C>         <C>         <C>         <C>
Revenue:
     Rental                                                   $ 23,201    $17,940     $ 48,606    $37,815
Related party revenue:
     Syndication fees                                            3,448      3,505        6,403      5,426
     Transaction fees                                            3,761      3,469        6,842      5,408
     Management fees and interest income from loans              1,862        698        3,679        869
Other                                                                9          1           47         22
----------------------------------------------------------------------------------------------------------
             Total revenue                                      32,281     25,613       65,577     49,540
----------------------------------------------------------------------------------------------------------

Expenses:
     Real estate operating expenses                              5,771      4,110       12,076      7,903
     Real estate taxes and insurance                             4,039      2,993        8,327      5,199
     Depreciation and amortization                               6,889      4,782       14,172      9,197
     Selling, general and administrative                         2,000      1,954        3,888      3,758
     Commissions                                                 1,754      1,809        3,313      2,832
     Interest                                                    1,622        546        4,298      1,140
----------------------------------------------------------------------------------------------------------

       Total expenses                                           22,075     16,194       46,074     30,029
----------------------------------------------------------------------------------------------------------

Income before interest income, equity in earnings (deficit)
   of non-consolidated REITs and taxes on income                10,206      9,419       19,503     19,511
Interest income                                                    560        756        1,213      1,345
Equity in earnings (deficit) of non-consolidated REITs            (142)       156         (758)       236
----------------------------------------------------------------------------------------------------------

Income before taxes on income                                   10,624     10,331       19,958     21,092
Income tax expense                                                 373        347          613        404
----------------------------------------------------------------------------------------------------------

     Income from continuing operations                          10,251      9,984       19,345     20,688
     Income from discontinued operations                           635      2,385        1,273      4,820
     Gain on sale of assets                                     21,590     28,108       21,590     28,108
----------------------------------------------------------------------------------------------------------

Net income                                                    $ 32,476    $40,477     $ 42,208    $53,616
==========================================================================================================

Weighted average number of shares outstanding,
   basic and diluted                                            70,766     67,149       70,766     63,492
==========================================================================================================

Earnings per share, basic and diluted, attributable to:
     Continuing operations                                    $   0.14    $  0.15     $   0.27    $  0.33
     Discontinued operations                                      0.01       0.03         0.02       0.07
     Gains on sales of assets                                     0.31       0.42         0.31       0.44
----------------------------------------------------------------------------------------------------------
Net income per share, basic and diluted                       $   0.46    $  0.60     $   0.60    $  0.84
==========================================================================================================
                                              See accompanying notes to consolidated financial statements.
</TABLE>


                                       4
<PAGE>

                        Franklin Street Properties Corp.
                      Consolidated Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                    For the
                                                                                Six Months Ended
                                                                                    June 30,
                                                                             ----------------------
(in thousands)                                                                  2007         2006
=====================================================================================================
<S>                                                                          <C>          <C>
Cash flows from operating activities:
   Net income                                                                $  42,208    $  53,616
   Adjustments to reconcile net income to net cash
        provided by  operating activities:
      (Gains) on assets sold                                                   (21,590)     (28,108)
      Depreciation and amortization expense                                     14,938       11,407
      Amortization of above market lease                                         2,569        3,240
      Equity in (earnings) deficit from non-consolidated REITs                     725         (431)
      Distributions from non-consolidated REITs                                    723          609
  Changes in operating assets and liabilities:
     Restricted cash                                                                79           (5)
     Tenant rent receivables, net                                                  334          855
     Straight-line rents, net                                                   (2,049)          61
     Prepaid expenses and other assets, net                                        861        1,232
     Accounts payable and accrued expenses                                      (2,074)      (1,226)
     Accrued compensation                                                       (1,726)        (590)
     Tenant security deposits                                                       39          186
  Payment of deferred leasing commissions                                       (2,669)      (2,773)
-----------------------------------------------------------------------------------------------------

        Net cash provided by operating activities                               32,368       38,073
-----------------------------------------------------------------------------------------------------

Cash flows from investing activities:
      Cash acquired through issuance of common stock in merger transaction          --       13,849
      Purchase of real estate assets, office computers and
          furniture, capitalized merger costs                                  (72,416)    (108,280)
      Merger costs paid                                                             --         (838)
      Purchase of acquired favorable and unfavorable leases                     (3,726)      (5,108)
      Investment in non-consolidated REITs                                          (9)         (11)
      Investment in certificate of deposit                                       5,143           --
      Investment in assets held for syndication, net                           (74,420)      (9,545)
      Proceeds received on sales of real estate assets                          74,812       87,750
-----------------------------------------------------------------------------------------------------

      Net cash used for investing activities                                   (70,616)     (22,183)
-----------------------------------------------------------------------------------------------------

Cash flows from financing activities:
      Distributions to stockholders                                            (43,875)     (37,073)
      Offering costs                                                                --         (119)
      Borrowings under bank note payable, net                                  119,750        9,192
-----------------------------------------------------------------------------------------------------

      Net cash provided by (used for) financing activities                      75,875      (28,000)
-----------------------------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents                            37,627      (12,110)

Cash and cash equivalents, beginning of period                                  69,973       69,715
-----------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of period                                     $ 107,600    $  57,605
=====================================================================================================
                                         See accompanying notes to consolidated financial statements.
</TABLE>


                                       5
<PAGE>

                        Franklin Street Properties Corp.
                Consolidated Statements of Cash Flows (continued)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                      For the
                                                                                  Six Months Ended
                                                                                      June 30,
                                                                                --------------------
(in thousands)                                                                   2007        2006
====================================================================================================

<S>                                                                             <C>        <C>
Supplemental disclosure of cash flow information:
   Cash paid for:
      Interest                                                                  $3,398     $    965
      Income taxes                                                                 600          300

Non-cash investing and financing activities:
     Accrued costs for purchase of real estate assets                           $  963     $     --
     Deposits on real estate assets converted to investments in assets
        held for syndication                                                    $5,010     $     --
     Assets acquired through the issuance of common stock in merger, net        $   --     $230,517
     Investment in non-consolidated REITs converted to real estate assets
        and acquired real estate leases in conjunction with merger              $   --     $  4,018

                                       See accompanying notes to consolidated financial statements.
</TABLE>


                                       6
<PAGE>

                        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 Investments"),
FSP Property Management LLC ("FSP Property Management"), and FSP Holdings LLC.
The Company also has a non-controlling common stock interest in eleven
corporations organized to operate as real estate investment trusts ("REITs") and
a non-controlling preferred stock interest in two of those REITs.

On April 30, 2006, the Company acquired five real estate investment trusts (the
"2006 Target REITs"), by the merger of the five 2006 Target REITs with and into
five of the Company's wholly-owned subsidiaries. The merger was effective April
30, 2006 and, as a result, the Company issued 10,971,697 shares in a tax-free
exchange for all outstanding preferred shares of the 2006 Target REITs. The
mergers were accounted for as a purchase and the acquired assets and liabilities
were recorded at their fair value.

The Company operates in two business segments: real estate operations (including
real estate leasing, interim acquisition financing, development and
asset/property management) and investment banking/investment services (including
real estate acquisitions and broker/dealer services). FSP Investments provides
real estate investment and broker/dealer services. FSP Investments' services
include: (i) the organization of REIT entities (the "Sponsored REITs"), which
are syndicated through private placements; (ii) sourcing of the acquisition of
real estate on behalf of the Sponsored REITs; and (iii) the sale of preferred
stock in the Sponsored REITs. FSP Property Management provides asset management
and property management services for the Sponsored REITs.

The Company owns and operates a portfolio of real estate, which consisted of 27
properties and one property that was held for sale as of June 30, 2007. The
Company also pursues, 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 of
                                                    June 30,
                                              2007           2006
                                            ---------      ---------

       Commercial real estate:
          Number of properties                     27             25
          Square feet                       5,066,813      4,499,407

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 financial statements
and notes thereto contained in the Company's Annual Report on Form 10-K for its
fiscal year ended December 31, 2006, 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 in the United States of America for interim financial
information and in conjunction with the rules and regulations of the Securities
and Exchange Commission. Accordingly, they do not include all of the disclosures
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments (consisting solely of normal recurring matters) necessary for a fair
presentation of the financial statements for these interim periods have been
included. Operating results for the three and six months ended June 30, 2007 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2007 or for any other period.


                                       7
<PAGE>

                        Franklin Street Properties Corp.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

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

Reclassifications

Certain balances from the 2006 balance sheet and interim financial statements
have been reclassified to conform to the 2007 presentation. The
reclassifications primarily were related to the disposition of six properties
sold and one property held for sale in 2006, two properties sold in 2007 and one
asset held-for-sale in 2007, which are reported as discontinued operations for
all periods presented. These reclassifications changed rental revenues,
operating and maintenance expenses, depreciation and amortization, other income
and the related assets, which are segregated on the financial statements. There
was no change to net income for any period presented as a result of these
reclassifications.

Recent Accounting Standards

In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 157, which defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles (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 is
not expected to have a material impact on the Company's financial position,
operations or cash flow.

In June 2006, the FASB issued FASB Interpretation No. 48 ("FIN 48"), which
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
"Accounting for Income Taxes". This interpretation prescribes a recognition
threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return.
This interpretation also provides guidance on derecognition, classification,
interest and penalties, accounting for interim periods, disclosure and
transition. The guidance is effective for periods beginning after December 15,
2006. The adoption of this standard did not have a material impact on the
Company's financial position, operations or cash flow.


2.    Investment Banking/Investment Services Activity

During the six months ended June 30, 2007, the Company sold on a best efforts
basis, through private placements, preferred stock in the following Sponsored
REITs:

<TABLE>
<CAPTION>
                                                                       Date Syndication
Sponsored REIT                               Property Location           Completed            Gross Proceeds (1)
=========================================================================================     ==================
                                                                                                (in thousands)
<S>                                          <C>                        <C>                      <C>
FSP 50 South Tenth Street Corp.              Minneapolis, MN            January 9, 2007          $       25
FSP 303 East Wacker Drive Corp.              Chicago, IL                                            109,225
                                                                                                 -----------
                                             Total                                               $  109,250
                                                                                                 ===========
</TABLE>

      (1)   The syndication of FSP 50 South Tenth Street Corp. commenced in
            November 2006. The syndication of FSP 303 East Wacker Drive Corp.,
            which commenced in January 2007, was not complete at June 30, 2007.
            These amounts represent the gross proceeds syndicated during the six
            months ended June 30, 2007.

3.    Certificates of Deposit

Investment in certificates of deposit consists of investments the Company has
the ability and intent to hold until their maturity. As of June 30, 2007, the
Company did not hold any certificates of deposit. As of December 31, 2006 the
Company held a certificate of deposit with an original maturity of six months at
a carrying value of $5.1 million with an annual interest rate of 5% that matured
on April 11, 2007. The Company believed the aggregate fair value was
approximately the same as its carrying value on that date.


                                       8
<PAGE>

                        Franklin Street Properties Corp.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

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

Investment in Sponsored REITs:

At June 30, 2007, the Company held an interest in eleven Sponsored REITs. Ten
were fully syndicated and the Company no longer derives economic benefits or
risks from the common stock interest that is retained in them. The Company holds
a preferred stock investment in two of these Sponsored REITs, FSP Park Ten
Development Corp. ("Park Ten Development") and FSP Phoenix Tower Corp. ("Phoenix
Tower"), from which it continues to derive economic benefit and risk. The
remaining entity that was not fully syndicated at June 30, 2007, FSP 303 East
Wacker Drive Corp., has a value of approximately $77.6 million on the
accompanying consolidated balance sheets and is classified as assets held for
syndication.

The table below shows the Company's share of income and expenses from Sponsored
REITs prior to consolidation. Management fees of $18,000 and $11,000 for the six
months ended June 30, 2007 and 2006, respectively, and interest expenses are
eliminated in consolidation.

                                                             Six Months Ended
                                                                 June 30,
      (in thousands)                                         2007         2006
                                                           -------      -------

      Operating Data:
      Rental revenues                                      $ 2,079      $ 1,215
      Operating and maintenance
          expenses                                           1,102          554
      Depreciation and amortization                            442          288
      Interest expense                                         992          479
      Interest income                                           39            9
                                                           -------      -------
                                                           $  (418)     $   (97)
                                                           =======      =======

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

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

                                                              Six Months Ended
                                                                  June 30,
      (in thousands)                                         2007         2006
                                                            ------       ------

      Equity in earnings (deficit) of Sponsored REITs       $ (850)      $  161
      Equity in earnings of FSP Blue Lagoon Drive Corp.         --           75
      Equity in deficit of Park Ten Development                (11)          --
      Equity in earnings of Phoenix Tower                      103           --
                                                            ------       ------
                                                            $ (758)      $  236
                                                            ======       ======

Equity in earnings (deficit) 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 (deficit) 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).


                                       9
<PAGE>

                        Franklin Street Properties Corp.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

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

Equity in earnings of FSP Blue Lagoon Drive Corp. ("Blue Lagoon") is derived
from the Company's preferred stock investment in the entity. In January 2004,
the Company purchased 49.25 preferred shares, or 8.22%, of the authorized
preferred shares of Blue Lagoon for $4,248,000 (which represented $4,925,000 at
the offering price net of commissions of $394,000 and loan fees of $283,000 that
were excluded). Blue Lagoon was one of the 2006 Target REITs that the Company
acquired by merger on April 30, 2006 at which time the preferred stock
investment was canceled and the merger was accounted for as a purchase, and the
acquired assets and liabilities were recorded at their fair value.

The Company recorded distributions declared or received of $723,000 and $609,000
from Sponsored REITs during the six months ended June 30, 2007 and 2006,
respectively.

Non-consolidated REITs:

The Company has in the past acquired by merger entities similar to the Sponsored
REITs, including on April 30, 2006, the five 2006 Target REITs. The Company's
business model for growth includes the potential acquisition by merger in the
future of Sponsored REITs. However, 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 2007 includes operations of the eleven Sponsored
REITs the Company held an interest in as of June 30, 2007. The operating data
for 2006 includes operations of the nine Sponsored REITs the Company held an
interest in as of June 30, 2006 and operations from the five 2006 Target REITs
from January through April 30, 2006. The five 2006 Target REITs were merged into
the Company on April 30, 2006.

At June 30, 2007, December 31, 2006 and June 30, 2006, the Company had ownership
interests in eleven, ten and nine Sponsored REITs, respectively. Summarized
financial information for these Sponsored REITs is as follows:

                                                       June 30,     December 31,
                                                         2007           2006
                                                      ---------      ---------
                                                          (in thousands)
      Balance Sheet Data (unaudited):
      -------------------------------
      Real estate, net                                $ 616,638      $ 612,835
      Other assets                                       69,398         87,383
      Total liabilities                                (211,294)      (132,565)
                                                      ---------      ---------
      Shareholders equity                             $ 474,742      $ 567,653
                                                      =========      =========

                                                        For the Six Months Ended
                                                                June 30,
                                                        2007               2006
                                                       --------        --------
                                                            (in thousands)
      Operating Data (unaudited):
      ---------------------------
      Rental revenue                                   $ 44,479        $ 29,526
      Other revenue                                       1,500           1,452
      Operating and maintenance expenses                (21,375)        (14,652)
      Depreciation and amortization                     (10,557)         (6,750)
      Interest expense and commitment fees              (13,480)         (7,006)
                                                       --------        --------
      Net income                                       $    567        $  2,570
                                                       ========        ========


                                       10
<PAGE>

                        Franklin Street Properties Corp.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

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

Syndication fees and Transaction fees:

The Company provides syndication and real estate acquisition advisory services
for Sponsored REITs. Syndication and transaction fees from non-consolidated
entities amounted to approximately $13,245,000 and $10,834,000 for the six
months ended June 30, 2007 and 2006, 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 management fee income from
non-consolidated entities amounted to approximately $477,000 and $338,000 for
the six months ended June 30, 2007 and 2006, 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. The Company recognized interest income from interim
mortgage loans of approximately $3,202,000 and $531,000 for the six months ended
June 30, 2007 and 2006, respectively, relating to these loans.

5.    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
$150,000,000. Borrowings under the Loan Agreement bear interest at either the
bank's prime rate (8.25% at June 30, 2007) or a rate equal to LIBOR plus 125
basis points (6.57% at June 30, 2007). The balance outstanding was $119,750,000
at June 30, 2007, and there was no balance outstanding at December 31, 2006. The
weighted average interest rate on amounts outstanding during the six months
ended June 30, 2007 and 2006 was 6.57% and 6.34%, respectively; and for the year
ended December 31, 2006 was approximately 6.39%.

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, and
compliance with various debt and operating income ratios, as defined in the Loan
Agreement. The Company was in compliance with the Loan Agreement's financial
covenants as of June 30, 2007 and December 31, 2006. Borrowings under the Loan
Agreement mature on August 18, 2008.

6.    Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted
average number of Company shares outstanding during the period. Diluted net
income per share reflects the potential dilution that could occur if securities
or other contracts to issue shares were exercised or converted into shares.
There were no potential dilutive shares outstanding at June 30, 2007 and 2006.

7.    Discontinued Operations

During 2006 the Company sold six properties, each of which was sold at a gain.
The Company also reached an agreement to sell another commercial property,
located in Greenville, South Carolina, which sold on January 31, 2007 at a loss.
For the year ended December 31, 2006, the Company reported the gains from the
sale of these properties and a provision for loss on the Greenville property
held for sale. In May 2007, the Company reached an agreement to sell a property
located Westford, Massachusetts, which sold on July 16, 2007 at a gain. During
June 2007, the Company sold a property located in Alpharetta, Georgia at a gain
and a property located in San Diego, California at a gain. Accordingly, as of
June 30, 2007 the Westford property is classified as an asset held for sale on
June 30, 2007, and each of the properties sold previously or held for sale are
classified as assets held for sale as of December 31, 2006.


                                       11
<PAGE>

                        Franklin Street Properties Corp.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

7.    Discontinued Operations (continued)

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:

<TABLE>
<CAPTION>
                                                For the                   For the
                                           Three Months Ended         Six Months Ended
(in thousands)                                  June 30,                  June 30,
                                          --------------------      --------------------
                                            2007        2006          2007        2006
                                          --------    --------      --------    --------
<S>                                       <C>         <C>           <C>         <C>
Rental revenue                            $  1,537    $  5,272      $  3,117    $ 11,297
Rental operating expenses                     (365)     (1,406)         (739)     (3,074)
Real estate taxes and insurance               (171)       (525)         (365)     (1,218)
Depreciation and amortization                 (375)       (956)         (749)     (2,185)
Interest income                                  9          --             9          --
                                          --------    --------      --------    --------
Net income from discontinued operations   $    635    $  2,385      $  1,273    $  4,820
                                          ========    ========      ========    ========
</TABLE>

During the six months ended June 30, 2007 and 2006, respectively, gains on sales
of properties are summarized below:

<TABLE>
<CAPTION>
(dollars in thousands)                                                                                  Net
                                                     City/          Property         Date of           Sales
Property Address                                     State            Type            Sale            Proceeds       Gain
----------------                                     -----            ----            ----            --------       ----
<S>                                            <C>                   <C>          <C>                  <C>          <C>
2007

33 & 37 Villa Road                             Greenville, SC        Office       January 5, 2007      $ 5,830      $    --
11680 Great Oaks Way                           Alpharetta, GA        Office         June 21, 2007       32,535        6,601
17030 Goldentop Road                           San Diego, CA         Office         June 27, 2007       36,199       14,741
Settlement of escrows on
   prior property sales                                                                                    248          248
                                                                                                      ----------------------
Net Sales Proceeds and Gain
   on sales of real estate                                                                             $74,812      $21,590
                                                                                                      ======================

2006

22400 Westheimer Parkway                       Katy, TX             Apartment        May 24, 2006      $18,200      $ 2,371
4995 Patrick Henry Drive                       Santa Clara, CA       Office          May 31, 2006        8,138        1,508
12902 Federal Systems Park Dr                  Fairfax, VA           Office          May 31, 2006       61,412       24,229
                                                                                                      ----------------------
Net Sales Proceeds and Gain
   on sales of real estate                                                                             $87,750      $28,108
                                                                                                      ======================
</TABLE>

8.    Business Segments

The Company operates in two business segments: real estate operations (including
real estate leasing, interim acquisition financing, development and
asset/property management) and investment banking/investment services (including
real estate acquisition 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, 2006. The Company's operations are located in the United
States of America.

The Company evaluates the performance of its reportable segments based on
Adjusted Funds From Operations ("AFFO") as management believes that AFFO
represents the most accurate measure of the reportable segment's activity and is
the basis for distributions paid to equity holders. The Company defines AFFO as:
net income as computed in accordance with GAAP; excluding gains or losses on the
sale of real estate and non-cash income from Sponsored REITs; plus certain
non-cash items included in the computation of net income (depreciation and


                                       12
<PAGE>

amortization and straight-line rent adjustments); plus distributions received
from Sponsored REITs; plus the net proceeds from the sale of land. Depreciation
and amortization, gain or loss on the sale of real estate, and straight-line
rents are an adjustment to AFFO, as these are non-cash items included in net
income.

AFFO 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 AFFO in a different manner. We
believe that in order to facilitate a clear understanding of the results of the
Company, AFFO 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 AFFO by business segment is shown in the following table:

<TABLE>
<CAPTION>
                                                                           Investment
                                                                            Banking/
                                                           Real Estate     Investment
(in thousands)                                             Operations       Services        Total
                                                           ----------       --------      --------
<S>                                                          <C>            <C>           <C>
Three Months Ended March 31, 2007
Net Income                                                   $  9,376       $    356      $  9,732
(Equity) Deficit in income of non-consolidated REITs              583             --           583
Distributions from non-consolidated REITs                         281             --           281
Depreciation and amortization                                   8,970             30         9,000
Straight line rent                                             (1,273)            --        (1,273)
                                                             --------       --------      --------
Adjusted Funds From Operations                               $ 17,937       $    386      $ 18,323
                                                             ========       ========      ========

Three Months Ended June 30, 2007
Net Income                                                   $ 31,922       $    554      $ 32,476
Gain on sale of assets, net                                   (21,590)            --       (21,590)
(Equity) Deficit in income of non-consolidated REITs              142             --           142
Distributions from non-consolidated REITs                         442             --           442
Depreciation and amortization                                   8,478             30         8,508
Straight line rent                                               (776)            --          (776)
                                                             --------       --------      --------
Adjusted Funds From Operations                               $ 18,618       $    584      $ 19,202
                                                             ========       ========      ========

Six Months Ended June 30, 2007
Net Income                                                   $ 41,298       $    910      $ 42,208
Gain on sale of assets, net                                   (21,590)            --       (21,590)
(Equity) Deficit in income of non-consolidated REITs              725             --           725
Distributions from non-consolidated REITs                         723             --           723
Depreciation and amortization                                  17,448             60        17,508
Straight line rent                                             (2,049)            --        (2,049)
                                                             --------       --------      --------
Adjusted Funds From Operations                               $ 36,555       $    970      $ 37,525
                                                             ========       ========      ========
</TABLE>


                                       13
<PAGE>

                        Franklin Street Properties Corp.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

8.   Business Segments (continued)

<TABLE>
<CAPTION>
                                                                           Investment
                                                                            Banking/
                                                           Real Estate     Investment
(in thousands)                                             Operations       Services        Total
                                                           ----------       --------      --------
<S>                                                         <C>             <C>           <C>
Three Months Ended March 31, 2006
Net Income                                                  $ 13,054        $     85      $ 13,139
(Equity) Deficit in income of non-consolidated REITs            (275)             --          (275)
Distributions from non-consolidated REITs                        118              --           118
Depreciation and amortization                                  7,100              33         7,133
Straight line rent                                               200              --           200
                                                            --------        --------      --------
Adjusted Funds From Operations                              $ 20,197        $    118      $ 20,315
                                                            ========        ========      ========

Three Months Ended June 30, 2006
Net Income                                                  $ 39,993        $    484      $ 40,477
Gain on sale of assets, net                                  (28,108)             --       (28,108)
(Equity) Deficit in income of non-consolidated REITs            (156)             --          (156)
Distributions from non-consolidated REITs                        491              --           491
Depreciation and amortization                                  7,481              32         7,513
Straight line rent                                              (139)             --          (139)
                                                            --------        --------      --------
Adjusted Funds From Operations                              $ 19,562        $    516      $ 20,078
                                                            ========        ========      ========

Six Months Ended June 30, 2006
Net Income                                                  $ 53,047        $    569      $ 53,616
Gain on sale of assets, net                                  (28,108)             --       (28,108)
(Equity) Deficit in income of non-consolidated REITs            (431)             --          (431)
Distributions from non-consolidated REITs                        609              --           609
Depreciation and amortization                                 14,581              65        14,646
Straight line rent                                                61              --            61
                                                            --------        --------      --------
Adjusted Funds From Operations                              $ 39,759        $    634      $ 40,393
                                                            ========        ========      ========
</TABLE>


                                       14
<PAGE>

                        Franklin Street Properties Corp.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

8.    Business Segments (continued)

The following table is a summary of other financial information by business
segment:

<TABLE>
<CAPTION>
                                                             Investment
                                                              Banking/
                                             Real Estate     Investment
(in thousands)                               Operations       Services           Total
                                             ----------       --------         --------
<S>                                           <C>             <C>             <C>

Three Months Ended June 30, 2007:
     Revenue                                  $   28,531      $    3,750      $   32,281
     Interest income                                 540              20             560
     Interest expense                              1,622              --           1,622
     Income from discontinued operations             635              --             635
     Capital expenditures                          2,193              --           2,193

Six Months Ended June 30, 2007:
     Revenue                                  $   58,617      $    6,960      $   65,577
     Interest income                               1,184              29           1,213
     Interest expense                              4,298              --           4,298
     Income from discontinued operations           1,273              --           1,273
     Capital expenditures                          5,048              --           5,048

Identifiable Assets as of June 30, 2007       $1,057,718      $    5,532      $1,063,250


Three Months Ended June 30, 2006:
     Revenue                                  $   21,799      $    3,783      $   25,582
     Interest income                                 743              13             756
     Interest expense                                546              --             546
     Income from discontinued operations           2,385              --           2,385
     Capital expenditures                          1,492              24           1,516

Six Months Ended June 30, 2006:
     Revenue                                  $   43,560      $    5,950      $   49,510
     Interest income                               1,323              22           1,345
     Interest expense                              1,140              --           1,140
     Income from discontinued operations           4,820              --           4,820
     Capital expenditures                          1,725              60           1,785

Identifiable Assets as of June 30, 2006       $  931,927      $    5,466      $  937,393
</TABLE>


                                       15
<PAGE>

                        Franklin Street Properties Corp.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

9.    Cash Dividends

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

                                    Dividends          Total
     Quarter Paid                   Per Share        Dividends
---------------------------         ---------        ---------

First quarter of 2007                  $.31           $21,937
Second quarter of 2007                 $.31           $21,938

First quarter of 2006                  $.31           $18,536
Second quarter of 2006                 $.31           $18,536

10.   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 dividends 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
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. Effective January 1, 2001, a subsidiary of the Company has
elected to be treated as a TRS. As a result, FSP Investments operates as a
taxable corporation under the Code and has accounted for income taxes in
accordance with the provisions of Statement of Financial Accounting Standard
("SFAS") No. 109, Accounting for Income Taxes. Taxes are provided when FSP
Investments has net profits for both financial statement and income tax
purposes.

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's adoption of the provisions of FIN 48 effective January 1, 2007 did
not result in recording a liability, nor was any accrued interest and penalties
recognized with the adoption of FIN 48. 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 2003 and thereafter.


                                       16
<PAGE>

                        Franklin Street Properties Corp.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

10.   Income Taxes (continued)

The income tax expense reflected in the consolidated statements of income
relates only to the TRS. The expense differs from the amounts computed by
applying the Federal statutory rate of 34% to income before income taxes as
follows:

                                                               For the
                                                          Six Months Ended
                                                               June 30,
(in thousands)                                            2007         2006
                                                        --------     --------

Federal income tax expense at statutory rate            $    518     $    341
Increase in taxes resulting from:
   State income taxes, net of federal impact                  95           63
                                                        --------     --------
                                                        $    613     $    404
                                                        ========     ========

No deferred income taxes were provided as there were no material temporary
differences between the financial reporting basis and the tax basis of the
taxable REIT subsidiary.

11.   Subsequent Events

The Company repaid $60 million of its revolving line of credit on July 5, 2007
and declared a cash distribution of $0.31 per share on July 20, 2007 to
stockholders of record on July 31, 2007 payable on August 20, 2007.

On July 16, 2007, the Company sold a commercial office property in Westford,
Massachusetts. Gross proceeds from the sale of the property were approximately
$11.5 million, which resulted in a net gain of approximately $1.9 million.


                                       17
<PAGE>

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, 2006. 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 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

We operate in two business segments: real estate operations and investment
banking/investment services. The real estate operations segment involves real
estate rental operations, leasing, interim acquisition financing, development
services, asset/property management services, property acquisitions and
dispositions. 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 the 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. We continue to be
very optimistic about our full-year 2007 financial performance potential and
growth prospects.

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, 2006.

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 our Annual Report on Form 10-K for the year ended
December 31, 2006.


                                       18
<PAGE>

Trends and Uncertainties
------------------------

Real Estate Operations

Our property operations during the second quarter of 2007 produced profit
results that were generally in line with management's expectations. The
portfolio was approximately 88% leased as of June 30, 2007. Two properties
totaling approximately 263,000 square feet, one in the greater Seattle/Tacoma
area, and the other in Silicon Valley, did not contribute meaningful rental
income as each was substantially vacant. Both properties are in the process of
being physically repositioned in their respective markets from single- to
multi-tenant configurations. Lease-up of these two assets is likely to take up a
good portion of 2007 and possibly beyond. However, once repositioned and
re-leased, we believe these two properties can add meaningful rental income and
value. The Seattle property had one new lease signed for a portion of the
property during the second quarter of 2007 and a second one was signed in July
2007, which raised occupancy in the property to 12%.

One vacant property in Westford, Massachusetts was sold in July at a gain, which
effectively reduced vacant space in our portfolio by approximately 105,000
square feet.

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 rental rates. In most of our
markets, leasing conditions are still improving gradually, but market rents have
still not returned to the levels that were reached in the late 1990s and before
2001.

Investment Banking/Investment Services

Unlike our real estate operations business, which provides a rental revenue
stream which is ongoing and recurring in nature, our investment
banking/investment services business is transactional in nature. Equity raised
for Sponsored REIT syndications in the second quarter of 2007 totaled $60.1
million. Future business in this area, while always uncertain, continues to be
more encouraging than in the past three years. In January 2007, one of our
Sponsored REITs purchased a property for investment syndication. Permanent
equity capitalization of the property was structured as a private placement
preferred stock offering totaling $221 million. This offering is the largest
single-investment syndication in our history, and is ongoing as of the beginning
of the third quarter of 2007.

Despite this large current syndication, our property acquisition executives
continue to grapple with high valuation levels for prime commercial investment
real estate. Prolonged historically low interest rates, a growing general
economy, and substantially increased capital allocation to real estate assets
continue to make pricing on many properties we would have an interest in
acquiring too expensive for our investment/syndication model. This upward
pressure on prices is causing capitalization rates to remain low and prices per
square foot to rise. Specifically, our acquisition executives have a challenge
identifying enough property at a price acceptable under our investment criteria
to grow our overall investment banking/investment services business. As the
second quarter of 2007 ends, valuation levels for many top quality investment
properties remain at historically high levels, with significant competition from
a variety of capital sources to acquire them. We 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 also 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.

Results of Operations

Overview:

During 2006 we acquired the five 2006 Target REITs by merger, acquired three
additional properties with cash, sold six properties and reached an agreement to
sell another property, which closed on January 31, 2007. During the first six
months of 2007 we completed the sale of the property held for sale at December
31, 2006, sold two properties and reached an agreement to sell another property,
which closed on July 16, 2007. As a result of this activity, as of June 30,
2007, we operated 27 properties and had one property held for sale.


                                       19
<PAGE>

Acquisitions, Mergers and Dispositions:

On February 24, 2006 we acquired one commercial property in Texas, on April 30,
2006 we completed the acquisition by merger of the five 2006 Target REITs, on
June 27, 2006 we acquired a commercial property in Georgia and on December 21,
2006 we acquired a commercial property in Broomfield, Colorado. On June 13, 2007
we acquired a commercial property in Baltimore Maryland. The results of
operations for each of the acquired or merged properties are included in our
operating results as of their respective purchase or merger dates. Increases in
rental revenues and expenses for the three months ended June 30, 2007 as
compared to the same period in 2006 are primarily a result of the timing of
these acquisitions and subsequent contribution of these acquired properties. The
operating results of the nine properties sold and one property that was held for
sale were classified as discontinued operations in our financial statements for
all periods presented.

Sales of Real Estate:

The sales of real estate in 2006 included the following. On May 24, 2006 we sold
an apartment building in Katy, Texas, and on May 31, 2006 we sold two commercial
properties, one in Santa Clara, California and another in Fairfax, Virginia. On
August 9, 2006 we sold a commercial property in Peabody, Massachusetts, on
November 16, 2006 we sold a commercial property in Herndon, Virginia and on
December 21, 2006 we sold a commercial property in North Andover, Massachusetts.
As of December 31, 2006, we classified a property in Greenville, South Carolina
as held-for-sale, which was sold on January 31, 2007. Also during 2007, we sold
a commercial property in Alpharetta, Georgia on June 21, 2007 and another
commercial property in San Diego, California on June 27, 2007. As of June 30,
2007, we classified a commercial property in Westford, Massachusetts as held for
sale, which was sold on July 16, 2007.

Investment Banking:

The investment banking/investment services segment is primarily based on the
gross proceeds from the sale of securities of the Sponsored REITs. During the
three and six months ended June 30, 2007 our investment banking/investment
services segment had total gross proceeds of $60.1 million and $109.3 million,
respectively; which was derived primarily from the syndication of FSP 303 East
Wacker Drive Corp. During the three and six months ended June 30, 2006 our
investment banking/investment services segment had total gross proceeds of $55.2
million and $84.4 million, respectively; which was derived from the syndication
of FSP Phoenix Tower Corp. As a result, total gross proceeds during the three
and six months ended June 30, 2007 increased $4.9 million and $24.9 million,
respectively, compared to the same periods in 2006. The syndication currently in
process commenced in January 2007 and the syndication in process during the
three and six months ended June 30, 2006 commenced in February 2006.

Our acquisition executives continue to work on other property investment
opportunities, and we continue to be more optimistic about potential future
investment banking product than in the past several years. Our investment
banking business had better first half results than last year, and we are
optimistic about this business segment's potential for increased contribution
for the full year 2007.


                                       20
<PAGE>

The following table compares our income statement for the three months ended
June 30, 2007 and 2006:

<TABLE>
<CAPTION>
(in thousands)
                                                                     Three months ended June 30,
                                                               -------------------------------------
Revenue:                                                         2007           2006         Change
                                                               --------       --------      --------
<S>                                                            <C>            <C>           <C>
   Rental                                                      $ 23,201       $ 17,940      $  5,261
   Related party revenue:
     Syndication fees                                             3,448          3,505           (57)
     Transaction fees                                             3,761          3,469           292
     Management fees and interest income from loans               1,862            698         1,164
   Other                                                              9              1             8
-----------------------------------------------------------------------------------------------------
          Total revenue                                          32,281         25,613         6,668
-----------------------------------------------------------------------------------------------------

Expenses:
     Real estate operating expenses                               5,771          4,109         1,662
     Real estate taxes and insurance                              4,039          2,993         1,046
     Depreciation and amortization                                6,889          4,782         2,107
     Selling, general and administrative                          2,000          1,954            46
     Commissions                                                  1,754          1,809           (55)
     Interest                                                     1,622            546         1,076
-----------------------------------------------------------------------------------------------------
          Total expenses                                         22,075         16,193         5,882
-----------------------------------------------------------------------------------------------------

     Income before interest income, equity in earnings in
        non-consolidated REITs and taxes on income               10,206          9,420           786
     Interest income                                                560            756          (196)
     Equity in earnings (deficit) in non-consolidated REITs        (142)           156          (298)
-----------------------------------------------------------------------------------------------------

     Income before taxes on income                               10,624         10,332           292
     Taxes on income                                                373            347            26
-----------------------------------------------------------------------------------------------------

     Income from continuing operations                           10,251          9,985           266
     Income from discontinued operations                            635          2,385        (1,750)
-----------------------------------------------------------------------------------------------------

     Income before gain on sale of properties                    10,886         12,370        (1,484)
     Gain on sale of assets                                      21,590         28,108        (6,518)
-----------------------------------------------------------------------------------------------------
     Net income                                                $ 32,476       $ 40,478      $ (8,002)
=====================================================================================================
</TABLE>

Comparison of the three months ended June 30, 2007 to the three months ended
June 30, 2006

      Revenues

      Total revenues increased by $6.7 million to $32.3 million for the second
quarter ended June 30, 2007, as compared to $25.6 million for the quarter ended
June 30, 2006. The increase was primarily a result of:

      o     An increase to rental revenue of approximately $5.3 million arising
            from the acquisition of the five 2006 Target REITs by merger on
            April 30, 2006, a property in Georgia in June 2006, a property in
            Colorado in December 2006 and to a lesser extent, a property in
            Maryland in June 2007.
      o     An increase in loan interest income of approximately $1.1 million,
            which was principally a result of interest income from a larger loan
            balance during the second quarter of 2007 as compared to 2006 for
            the mortgage loan on the property in syndication. The impact of this
            increase was slightly greater as a result of higher interest rates
            charged for the second quarter of 2007 compared to 2006.
      o     A $0.3 million net increase in transaction (loan commitment) fees,
            which was principally a result of the increase in gross syndication
            proceeds in the quarter compared to the same period in 2006.


                                       21
<PAGE>

      Expenses

      Total expenses were $22.1 million for the three months ended June 30,
2007, an increase of $5.9 million compared to the three months ended June 30,
2006. The increase was primarily a result of:

      o     The increase in real estate operating expenses and real estate taxes
            and insurance of approximately $2.7 million, and depreciation of
            $2.1 million were primarily a result of real estate acquisitions and
            mergers discussed above.
      o     An increase in interest expense of approximately $1.1 million
            resulting from a higher average loan balance outstanding for
            syndications in process during the three months ended June 30, 2007
            compared to the three months ended June 30, 2006, which was slightly
            greater as a result of higher interest rates in the 2007 period than
            the 2006 period.
      o     Selling, general and administrative expenses, which increased
            insignificantly by $46,000 to $2.0 million for the three months
            ended June 30, 2007 compared to same period in 2006. We had 39
            employees as of June 30, 2007 at our headquarters in Wakefield
            compared to 40 employees as of June 30, 2006.

      These increases were partially offset by:

      o     A decrease in commission expense of $55,000, which was a result of
            greater rebates issued on syndication fee income during the three
            months ended June 30, 2007 compared to the same period in 2006.
            Rebates are offered to larger investors in syndication transactions.

      Interest income

      Interest income decreased to $0.2 million during the three months ended
June 30, 2007, which was primarily a result of a lower average balance of cash.
This was offset by slightly higher interest rates earned on balances of cash,
cash equivalents and other investments compared to the three months ended June
30, 2006. The lower average balances during the three months ended June 30, 2007
were primarily a result of a $30 million repayment on our line of credit made on
April 4, 2007 and a $21.9 million distribution paid to our shareholders in May
2007; and were partially offset by asset sale proceeds received on June 21, 2007
and on June 27, 2007 from the sale of two properties discussed above.

      Equity in earnings (deficit) of non-consolidated REITs

      Equity in earnings (deficit) from non-consolidated REITs decreased
approximately $0.3 million to a deficit of $0.1 million, which was principally a
result of a loss attributed to us from the syndication in process during the
second quarter of 2007, as compared to income of $0.2 million for the second
quarter of 2006.

      Taxes on income

      Taxes on income increased $27,000 in the second quarter of 2007 compared
to the second quarter of 2006. The increase was primarily due to greater taxable
income from the investment banking and investment services business in the 2007
period compared to 2006. During the second quarter in each of 2007 and 2006 we
had an effective tax rate of 40.3%. We expect an effective tax rate of
approximately 40.3% for our taxable REIT subsidiary in the future.

      Income from continuing operations

      The resulting income from continuing operations for the second quarter of
2007 increased $0.3 million to $10.3 million from $10.0 million in the second
quarter of 2006 for the reasons discussed above.

      Discontinued operations and gain on sale of assets

      During 2006, we sold six properties and classified one property in
Greenville, South Carolina as held for sale, which was sold on January 31, 2007.
During 2007, we completed the sale of the property in Greenville, South
Carolina, sold two additional properties and reached an agreement to sell a
property in Westford, Massachusetts. Accordingly, each of the nine properties
sold and the property held for sale are reported as discontinued operations on
our financial statements for the relevant periods presented. Income from
discontinued operations was $0.6 million for the three months ended June 30,
2007 and was $2.4 million for the three months ended June 30, 2006.


                                       22
<PAGE>

      For the three months ended June 30, 2007 we reported $21.6 million as gain
on sale of assets and for the three months ended June 30, 2006 we reported $28.1
million as gain on sale of assets.

      The Company will continue to evaluate its portfolio, and from time-to-time
may decide to dispose of other properties.

      Net Income

      Net income for the three months ended June 30, 2007 decreased $8.0 million
to $32.5 million compared to $40.5 million for the three months ended June 30,
2006, for the reasons discussed above.


                                       23
<PAGE>

The following table compares our income statement for the six months ended June
30, 2007 and 2006:

<TABLE>
<CAPTION>
(in thousands)
                                                                     Six months ended June 30,
                                                               -------------------------------------
Revenue:                                                         2007           2006         Change
                                                               --------       --------      --------
<S>                                                            <C>            <C>           <C>
   Rental                                                      $ 48,606       $ 37,815      $ 10,791
   Related party revenue:
     Syndication fees                                             6,403          5,426           977
     Transaction fees                                             6,842          5,408         1,434
     Management fees and interest income from loans               3,679            869         2,810
   Other                                                             47             22            25
------------------------------------------------------------------------------------------------------
          Total revenue                                          65,577         49,540        16,037
------------------------------------------------------------------------------------------------------

Expenses:
     Real estate operating expenses                              12,076          7,903         4,173
     Real estate taxes and insurance                              8,327          5,199         3,128
     Depreciation and amortization                               14,172          9,197         4,975
     Selling, general and administrative                          3,888          3,758           130
     Commissions                                                  3,313          2,832           481
     Interest                                                     4,298          1,140         3,158
------------------------------------------------------------------------------------------------------
          Total expenses                                         46,074         30,029        16,045
------------------------------------------------------------------------------------------------------

     Income before interest income, equity in earnings in
        non-consolidated REITs and taxes on income               19,503         19,511            (8)
     Interest income                                              1,213          1,345          (132)
     Equity in earnings (deficit) in non-consolidated REITs        (758)           236          (994)
------------------------------------------------------------------------------------------------------

     Income before taxes on income                               19,958         21,092        (1,134)
     Taxes on income                                                613            404           209
------------------------------------------------------------------------------------------------------

     Income from continuing operations                           19,345         20,688        (1,343)
     Income from discontinued operations                          1,273          4,820        (3,547)
------------------------------------------------------------------------------------------------------

     Income before gain on sale of properties                    20,618         25,508        (4,890)
     Gain on sale of assets                                      21,590         28,108        (6,518)
------------------------------------------------------------------------------------------------------
     Net income                                                $ 42,208       $ 53,616      $(11,408)
======================================================================================================
</TABLE>

Comparison of the six months ended June 30, 2007 to the six months ended
June 30, 2006

      Revenues

      Total revenues increased by $16.0 million to $65.6 million for the six
months ended June 30, 2007, as compared to $49.6 million for the six months
ended June 30, 2006. The increase was primarily a result of:

      o     An increase to rental revenue of approximately $10.8 million from
            real estate arising from the acquisitions of a property in Texas
            during February 2006, the five 2006 Target REITs by merger on April
            30, 2006, a property in Georgia in June 2006, a property in Colorado
            in December 2006 and, to a lesser extent, a property in Maryland in
            June 2007 net of a $4.8 million decrease in termination fee income
            during the first half of 2007 compared to the same period in 2006.
      o     An increase in management fees and interest income from loans of
            approximately $2.8 million, which was principally a result of
            interest income from a larger loan balance during the first half of
            2007 as compared to the same period in 2006 for the mortgage loan on
            the property in syndication. The impact of this increase was
            slightly greater as a result of higher interest rates charged for
            the first half of 2007 compared to 2006.
      o     A $2.4 million increase in syndication and transaction (loan
            commitment) fees, which was principally a result of the increase in
            gross syndication proceeds for the six month period in 2007 compared
            to the same period in 2006.


                                       24
<PAGE>

      Expenses

      Total expenses were $46.1 million for the six months ended June 30, 2007,
or an increase of $16.0 million compared to the six months ended June 30, 2006.
The increase was primarily a result of:

      o     The increase in real estate operating expenses, real estate taxes
            and insurance of $7.3 million, and depreciation of $5.0 million were
            primarily a result of the acquisitions and mergers in our real
            estate segment discussed above.
      o     An increase in interest expense of $3.1 million resulting from a
            higher average loan balance outstanding for syndications in process
            during the six months ended June 30, 2007 compared to the six months
            ended June 30, 2006, and was also slightly greater as a result of
            higher interest rates in the 2007 period than the 2006 period.
      o     Selling, general and administrative expenses, which increased
            insignificantly by $0.1 million for the six months ended June 30,
            2007 compared to same period in 2006. We had 39 employees as of June
            30, 2007 at our headquarters in Wakefield compared to 40 employees
            as of June 30, 2006.
      o     An increase in commission expense of $0.5 million, which was
            principally a result of the increase in gross syndication proceeds
            for the six month period in 2007 compared to the same period in
            2006.

      Interest income

      Interest income decreased to $0.1 million during the six months ended June
30, 2007, which was primarily a result of a lower average balance of cash, which
was offset by slightly higher interest rates earned on balances of cash, cash
equivalents and other investments compared to the six months ended June 30,
2006. The lower average balances during the six months ended June 30, 2007 were
primarily a result of the use of cash to finance a portion of a syndication in
process and a $21.9 million distribution paid in February and May 2007; and were
partially offset by asset sale proceeds received on June 21, 2007 and June 27,
2007.

      Equity in earnings (deficit) of non-consolidated REITs

      Equity in earnings (deficit) from non-consolidated REITs decreased
approximately $1.0 million to a deficit of $0.8 million, which was principally a
result of a loss attributed to us from the syndication in process during 2007,
as compared to income during the first half of 2006 of $0.2 million.

      Taxes on income

      Taxes on income increased $0.2 million for the six months ended June 30,
2007 compared to the same period of 2006. The increase was primarily due to
greater taxable income from the investment banking and investment services
business in the 2007 period compared to 2006. During both periods in 2007 and
2006 we had an effective tax rate of 40.3%. We expect an effective tax rate of
approximately 40.3% for our taxable REIT subsidiary in the future.

      Income from continuing operations

      The resulting income from continuing operations for the six months ended
June 30, 2007 decreased $1.3 million to $19.3 million compared the six months
ended June 30,2006 for the reasons discussed above.

      Discontinued operations and gain on sale of assets

      During 2006, we sold six properties and classified one property in
Greenville, South Carolina as held for sale, which was sold on January 31, 2007.
During 2007, we completed the sale of the property in Greenville, South
Carolina, sold two additional properties and reached an agreement to sell a
property in Westford, Massachusetts. Accordingly, each of the nine properties
sold and the property held for sale are reported as discontinued operations on
our financial statements for the relevant periods presented. Income from
discontinued operations was $1.3 million for the six months ended June 30, 2007
and was $4.8 million for the six months ended June 30, 2006.


                                       25
<PAGE>

      For the six months ended June 30, 2007 we reported $21.6 million as gain
on sale of assets and for the six months ended June 30, 2006 we reported $28.1
million as gain on sale of assets, which are summarized below.

<TABLE>
<CAPTION>
(dollars in thousands)                                                                                  Net
                                                     City/          Property         Date of           Sales
Property Address                                     State            Type            Sale            Proceeds       Gain
----------------                                     -----            ----            ----            --------       ----
<S>                                            <C>                   <C>          <C>                  <C>          <C>
2007

33 & 37 Villa Road                             Greenville, SC        Office       January 5, 2007      $ 5,830      $    --
11680 Great Oaks Way                           Alpharetta, GA        Office         June 21, 2007       32,535        6,601
17030 Goldentop Road                           San Diego, CA         Office         June 27, 2007       36,199       14,741
Settlement of escrows on
   prior property sales                                                                                    248          248
                                                                                                      ----------------------
Net Sales Proceeds and Gain
   on sales of real estate                                                                             $74,812      $21,590
                                                                                                      ======================

2006

22400 Westheimer Parkway                       Katy, TX             Apartment        May 24, 2006      $18,200      $ 2,371
4995 Patrick Henry Drive                       Santa Clara, CA       Office          May 31, 2006        8,138        1,508
12902 Federal Systems Park Dr                  Fairfax, VA           Office          May 31, 2006       61,412       24,229
                                                                                                      ----------------------
Net Sales Proceeds and Gain
   on sales of real estate                                                                             $87,750      $28,108
                                                                                                      ======================
</TABLE>

      The Company will continue to evaluate its portfolio, and from time-to-time
may decide to dispose of other properties.

      Net Income

      Net income for the six months ended June 30, 2007 decreased $11.4 million
to $42.2 million compared to $53.6 million for the six months ended June 30,
2006, for the reasons discussed above.

      Liquidity and Capital Resources

      Cash and cash equivalents were $107.6 million and $70.0 million at June
30, 2007 and December 31, 2006, respectively. This increase of $37.6 million is
attributable to $32.4 million provided by operating activities, less $70.6
million used for investing activities, plus $75.9 million provided 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 $32.4 million is
primarily attributable to net income of $42.2 million, less gains on sales of
properties of $21.6 million, plus the add-back of $16.2 million of non-cash
activity, $0.7 million of distributions from non-consolidated REITs and $1.2
million from decreases in prepaid and receivable balances. These increases in
operating cash were partially offset by decreases in accrued expenses and
compensation of $3.8 million and an increase of $2.6 million in payments made
for deferred leasing commissions.


                                       26
<PAGE>

      Investing Activities

      Our cash used for investing activities of $70.6 million is primarily
attributable to our investment in assets held for syndication of $74.4 million,
the purchase of a property in Baltimore for $62.8 million and additions to real
estate investments and office equipment of approximately $13.3 million, which
were partially offset by proceeds received on the sale of properties of $74.8
million and the redemption of a certificate of deposit of $5.1 million.

      Financing Activities

      Our cash provided by financing activities of $75.9 million is primarily
attributable to net proceeds from our line of credit of $119.8 million used to
purchase assets held for syndication, which were partially offset by
distributions to shareholders of $43.9 million.

      Line of Credit

      We have 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
$150,000,000. Borrowings under the Loan Agreement bear interest at either the
bank's prime rate (8.25% at June 30, 2007) or a rate equal to LIBOR plus 125
basis points (6.57% at June 30, 2007). The balance outstanding was $119,750,000
at June 30, 2007, and there was no balance outstanding at December 31, 2006. We
are in compliance with all bank covenants required by the Loan Agreement.

      Contingencies

      We are subject to various legal proceedings and claims that arise in the
ordinary course of its business. Although occasional adverse decisions (or
settlements) may occur, we believe that the final disposition of such matters
will not have a material adverse effect on our financial position or results of
operations.

      Assets Held for Syndication

      As of June 30, 2007 there was one asset held for syndication, consisting
of the office property owned by FSP 303 East Wacker Drive Corp. and as of
December 31, 2006 there were no assets held for syndication.

      Assets Held for Sale

      During 2006 an agreement was reached to sell a commercial property in
Greenville, South Carolina at a loss, which was sold on January 31, 2007. During
2007 we sold two properties at gains and reached an agreement to sell a
commercial property in Westford, Massachusetts at a gain, which was sold on July
16, 2007. Accordingly, as of December 31, 2006 the properties sold in 2007 are
classified as held for sale on the balance sheet, and as of June 30, 2007 the
Westford property is classified as held for sale on the balance sheet.

      Related Party Transactions

      During the six months ended June 30, 2007, we completed the syndication of
FSP 50 South Tenth Street Corp. and began the syndication of FSP 303 East Wacker
Drive Corp. We did not enter into any other significant transactions with
related parties during the six months ended June 30, 2007. For a discussion of
transactions between us and related parties during 2006, see Footnote No. 5
"Related Party Transactions" to the Consolidated Financial Statements of the
Company's Annual Report on Form 10-K for the year ended December 31, 2006.

      Other Considerations

      We generally pay the ordinary annual operating expenses of our properties
from the rental revenue generated by the properties. For the six months ended
June 30, 2007, the rental income exceeded the expenses for each individual
property, with the exception of a property located in Westford, Massachusetts,
which was sold on July 16, 2007, a property located in Federal Way, Washington
and a property located in San Jose, California. For the three months ended June
30, 2006 the rental income exceeded the expenses for each individual property,
with the exception of the property located in Westford, Massachusetts.

      o     The single tenant lease at the property located in Westford,
            Massachusetts, expired October 31, 2004. During the three months
            ended June 30, 2007 we reached an agreement to sell this property,
            which closed on July 16, 2007 at a gain. The property had operating
            expenses of $101,000 and $61,000 for the three months ended June 30,
            2007 and 2006, respectively and $187,000 and $135,000 for the six
            months ended June 30, 2007 and 2006, respectively.


                                       27
<PAGE>

      o     The single tenant lease at the property located in Federal Way,
            Washington, expired September 14, 2006. We have signed a lease for
            approximately 8% of the space, from which we had rental income of
            $19,000 during the three months ended June 30, 2007. We expect that
            the property will not produce revenue to cover its expenses in the
            third quarter of 2007. The property had operating expenses of
            $151,000 and $290,000 for the three and six months ended June 30,
            2007.

      o     The single tenant lease at the property located in San Jose,
            California, expired December 31, 2006. There is one tenant in the
            building occupying 19% of the rentable square feet of the property,
            from which we had rental income of $113,000 and $213,000 during the
            three and six months ended June 30, 2007. The property had operating
            expenses of $114,000 and $239,000 for the three and six months ended
            June 30, 2007. We are repositioning the property and have not re-let
            the remaining space and do not expect to add tenants until the
            repositioning work is complete. As a result, we do not believe the
            property will produce revenue to cover its expenses in the third
            quarter of 2007.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We were not a party to any derivative financial instruments at or during the six
months ended June 30, 2007.

We borrow from time-to-time on our line of credit. These borrowings bear
interest at the bank's base rate (8.25% at June 30, 2007) or at LIBOR plus 125
basis points (6.57% at June 30, 2007), as elected by us when requesting funds.
As of June 30, 2007, $119,750,000 was outstanding under the line of credit
consisting of one borrowing at the LIBOR plus 125 basis point rate. We have used
funds drawn on our line of credit for the purpose of making interim mortgage
loans to Sponsored REITs and for interim financing of acquisitions. Generally
interim mortgage loans bear interest at the same variable rate payable by us
under our line of credit. We therefore believe that we have mitigated our
interest rate risk with respect to our borrowings for interim mortgage loans.
Historically we have satisfied obligations arising from interim financing of
acquisitions through cash or sale of properties in our portfolio, so we believe
that we can mitigate interest rate risk with respect to borrowings for interim
financing of acquisitions as well.

Item 4. Controls and Procedures

Our management, with the participation of our chief executive officer and chief
financial officer, evaluated the effectiveness of our disclosure controls and
procedures as of June 30, 2007. The term "disclosure controls and procedures,"
as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, means controls and other procedures of a company that are designed to
ensure that information required to be disclosed by a company in the reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC's rules
and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by a company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the company's management,
including its principal executive and principal financial officers, as
appropriate to allow timely decisions regarding required disclosure. Management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving their objectives
and management necessarily applies its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Based on the evaluation of our
disclosure controls and procedures as of June 30, 2007, our chief executive
officer and chief financial officer concluded that, as of such date, our
disclosure controls and procedures were effective at the reasonable assurance
level.

Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting occurred during the
quarter ended June 30, 2007 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.


                                       28
<PAGE>

                           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 have been no material changes from the risk factors previously disclosed
in Part I, Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the
year ended December 31, 2006.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about purchases by Franklin Street
Properties Corp. during the quarter ended June 30, 2007 of equity securities
that are registered by the Company pursuant to Section 12 of the Exchange Act:

                      ISSUER PURCHASES OF EQUITY SECURITIES

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
                                     (a)                   (b)                    (c)                         (d)

                                                                             Total Number of            Maximum Number (or
                                                                            Shares (or Units)           Approximate Dollar
                                                                            Purchased as Part          Value) of Shares (or
                               Total Number of        Average Price            of Publicly            Units) that May Yet Be
                              Shares (or Units)       Paid per Share       Announced Plans or          Purchased Under the
Period                        Purchased (1) (2)         (or Unit)           Programs (1) (2)        Plans or Programs (1) (2)
-------------------------------------------------------------------------------------------------------------------------------

<S>                                   <C>                  <C>                      <C>                    <C>
04/01/07-04/30/07                     0                    N/A                      0                      $21,008,101
-------------------------------------------------------------------------------------------------------------------------------

05/01/07-05/31/07                     0                    N/A                      0                      $21,008,101
-------------------------------------------------------------------------------------------------------------------------------

06/01/07-06/30/07                     0                    N/A                      0                      $21,008,101
-------------------------------------------------------------------------------------------------------------------------------

Total:                                0                    N/A                      0                      $21,008,101
-------------------------------------------------------------------------------------------------------------------------------

(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. The stock repurchase authorization expires at the
      earlier of (i) November 1, 2007 or (ii) a determination by the Board of
      Directors of FSP Corp. to discontinue repurchases.
</TABLE>

Item 3. Defaults Upon Senior Securities

None.


                                       29
<PAGE>

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

On May 11, 2007, the Company held its 2007 Annual Meeting of Stockholders (the
"2007 Annual Meeting"). The 2007 Annual Meeting was called for the following
purposes: (1) to elect two Class I directors to serve until the 2010 annual
meeting and (2) to transact such other business as may properly come before the
meeting or any adjournment thereof.

The following table sets forth the names of the directors elected at the 2007
Annual Meeting for new three-year terms and the number of votes cast for and
withheld from each director:

      Directors                          For                     Withheld
      Dennis J. McGillicuddy             60,094,409              581,182
      Janet Prier Notopoulos             57,038,146              3,637,445

The names of each of the other directors whose terms of office continued after
the 2007 Annual Meeting are as follows: John N. Burke, Barbara J. Fournier,
Barry Silverstein, George J. Carter and Georgia Murray.

Item 5. Other Information

None.

Item 6. Exhibits

See Exhibit Index attached hereto, which is incorporated herein by reference.


                                       30
<PAGE>

                                   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                 Title


Date: July 31, 2007   /s/ George J. Carter  Chief Executive Officer and Director
                      --------------------  (Principal Executive Officer)
                      George J. Carter


Date: July 31, 2007   /s/ John G. Demeritt  Chief Financial Officer
                      --------------------  (Principal Financial Officer)
                      John G. Demeritt


                                       31
<PAGE>

                                  EXHIBIT INDEX


2.1   Agreement and Plan of Merger by and among the Company, Blue Lagoon
      Acquisition Corp., Innsbrook Acquisition Corp., Willow Bend Acquisition
      Corp., 380 Interlocken Acquisition Corp., Eldridge Green Acquisition
      Corp., FSP Blue Lagoon Drive Corp., FSP Innsbrook Corp., FSP Willow Bend
      Office Center Corp., FSP 380 Interlocken Corp. and FSP Eldridge Green
      Corp., dated as of March 15, 2006 (1)

2.2   Agreement of Sale and Purchase, dated May 19, 2006, by and between One
      Overton Park LLC and FSP One Overton Park LLC (2)

3.1   Articles of Incorporation (3)

3.2   Amended and Restated By-Laws (4)

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)   Filed as Exhibit 2.1 to the Company's Current Report on Form 8-K dated
      March 15, 2006 (File No. 001-32470) as filed on March 16, 2006 and
      incorporated herein by reference.

(2)   Filed as Exhibit 2.1 to the Company's Current Report on Form 8-K dated
      June 27, 2006 (File No. 001-32470) as filed on June 28, 2006 and
      incorporated herein by reference.

(3)   Filed as Exhibit 3.1 to the Company's Registration Statement on Form 8-A
      (File No. 001-32470) as filed on April 5, 2005 and incorporated herein by
      reference.

(4)   Filed as Exhibit 3.1 to the Company's Current Report on Form 8-K dated May
      12, 2006 (File No. 001-32470) as filed on May 15, 2006 and incorporated
      herein by reference.


                                       32