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 September 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             (I.R.S. Employer Identification No.)
 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 Filer |X|   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 October 30, 2007 was
70,480,705.

<PAGE>

                        Franklin Street Properties Corp.

                                    Form 10-Q

                                Quarterly Report
                               September 30, 2007

                                Table of Contents


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

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

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

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

                  Notes to Consolidated Financial Statements.............   7-18

         Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations....................  19-28

         Item 3.  Quantitative and Qualitative Disclosures About
                  Market Risk............................................     29

         Item 4.  Controls and Procedures................................     29

Part II. Other Information

         Item 1.  Legal Proceedings......................................     30

         Item 1A. Risk Factors...........................................     30

         Item 2.  Unregistered Sales of Equity Securities and Use of
                  Proceeds...............................................     30

         Item 3.  Defaults Upon Senior Securities........................     31

         Item 4.  Submission of Matters to a Vote of Security Holders....     31

         Item 5.  Other Information......................................     31

         Item 6.  Exhibits...............................................     31

Signatures        .......................................................     32
<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                        Franklin Street Properties Corp.
                           Consolidated Balance Sheets
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                            September 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                                             752,927        688,612
          Fixtures and equipment                                                      61             34
----------------------------------------------------------------------------------------------------------
                                                                                 852,837        783,896
          Less accumulated depreciation                                           49,057         33,738
----------------------------------------------------------------------------------------------------------
Real estate assets, net                                                          803,780        750,158
Acquired real estate leases, less accumulated amortization
   of $20,561 and $20,345, respectively                                           37,005         40,577
Investment in non-consolidated REITs                                               4,948          5,064
Assets held for syndication, net                                                 115,196             --
Assets held for sale                                                                  --         62,174
Cash and cash equivalents                                                         53,417         69,973
Certificate of deposit                                                                --          5,143
Restricted cash                                                                      336            761
Tenant rent receivables, less allowance for doubtful accounts
   of $430 and $433, respectively                                                  1,387          2,440
Straight-line rent receivable, less allowance for doubtful accounts
   of $261 and $163, respectively                                                  7,069          4,346
Prepaid expenses                                                                   2,312            972
Deposits on real estate assets                                                        --          5,010
Other assets                                                                         477          1,118
Office computers and furniture, net of accumulated depreciation
   of $926 and $851, respectively                                                    371            375
Deferred leasing commissions, net of accumulated amortization
   of $1,781, and $1,313, respectively                                             8,295          7,206
----------------------------------------------------------------------------------------------------------
          Total assets                                                       $ 1,034,593      $ 955,317
==========================================================================================================

Liabilities and Stockholders' Equity:
Liabilities:
   Bank note payable                                                         $   104,550      $      --
   Accounts payable and accrued expenses                                          19,292         25,275
   Accrued compensation                                                            1,125          2,643
   Tenant security deposits                                                        1,923          1,744
   Acquired unfavorable real estate leases, less accumulated amortization
      of $1,010, and $534, respectively                                            4,627          3,693
----------------------------------------------------------------------------------------------------------
             Total liabilities                                                   131,517         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,
    70,480,705 and 70,766,305 shares issued and outstanding, respectively              7              7
   Additional paid-in capital                                                    907,794        907,794
   Treasury stock, 1,017,498 and 731,898 shares at cost, respectively            (18,775)       (14,008)
   Earnings in excess of accumulated earnings/distributions                       14,050         28,169
----------------------------------------------------------------------------------------------------------
       Total stockholders' equity                                                903,076        921,962
----------------------------------------------------------------------------------------------------------
       Total liabilities and stockholders' equity                            $ 1,034,593      $ 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         Nine Months Ended
                                                                   September 30,             September 30,
---------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)                         2007         2006         2007        2006
===============================================================================================================

<S>                                                            <C>          <C>          <C>          <C>
Revenue:
     Rental                                                    $ 27,431     $ 23,833     $ 76,037     $61,647
Related party revenue:
     Syndication fees                                               687          861        7,090       6,288
     Transaction fees                                               604        1,140        7,446       6,548
     Management fees and interest income from loans               1,497          209        5,176       1,078
Other                                                                37            2           84          24
---------------------------------------------------------------------------------------------------------------
             Total revenue                                       30,256       26,045       95,833      75,585
---------------------------------------------------------------------------------------------------------------

Expenses:
     Real estate operating expenses                               7,263        5,469       19,340      13,372
     Real estate taxes and insurance                              4,565        3,750       12,892       8,949
     Depreciation and amortization                                7,870        6,016       22,041      15,213
     Selling, general and administrative                          1,787        2,027        5,675       5,785
     Commissions                                                    406          458        3,720       3,289
     Interest                                                     1,823          119        6,120       1,260
---------------------------------------------------------------------------------------------------------------

       Total expenses                                            23,714       17,839       69,788      47,868
---------------------------------------------------------------------------------------------------------------

Income before interest income, equity in earnings (deficit)
   of non-consolidated REITs and taxes on income                  6,542        8,206       26,045      27,717
Interest income                                                     650          735        1,864       2,080
Equity in earnings (deficit) of non-consolidated REITs              147          481         (611)        717
---------------------------------------------------------------------------------------------------------------

Income before taxes on income                                     7,339        9,422       27,298      30,514
Income tax (benefit) expense                                       (261)        (131)         352         273
---------------------------------------------------------------------------------------------------------------

     Income from continuing operations                            7,600        9,553       26,946      30,241
       Income (loss) from discontinued operations                   (56)       1,916        1,216       6,736
     Gain on sale of assets                                       1,942        6,361       23,532      34,469
---------------------------------------------------------------------------------------------------------------

Net income                                                     $  9,486     $ 17,830     $ 51,694     $71,446
===============================================================================================================

Weighted average number of shares outstanding,
     basic and diluted                                           70,596       70,766       70,709      65,944
===============================================================================================================

Earnings per share, basic and diluted, attributable to:
     Continuing operations                                     $   0.11     $   0.13     $   0.38     $  0.46
     Discontinued operations                                         --         0.03         0.02        0.10
     Gains on sales of assets                                      0.02         0.09         0.33        0.52
---------------------------------------------------------------------------------------------------------------
Net income per share, basic and diluted                        $   0.13     $   0.25     $   0.73     $  1.08
===============================================================================================================
                                                   See accompanying notes to consolidated financial statements.
</TABLE>


                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                      For the
                                                                                 Nine Months Ended
                                                                                   September 30,
                                                                              ------------------------
(in thousands)                                                                   2007          2006
======================================================================================================
<S>                                                                           <C>           <C>
Cash flows from operating activities:
   Net income                                                                 $  51,694     $  71,446
   Adjustments to reconcile net income to net cash
        provided by  operating activities:
      (Gains) on assets sold                                                    (23,532)      (34,469)
      Depreciation and amortization expense                                      22,818        18,198
      Amortization of above market lease                                          3,706         5,208
      Equity in (earnings) deficit from non-consolidated REITs                      619          (912)
      Distributions from non-consolidated REITs                                   1,199           724
  Changes in operating assets and liabilities:
     Restricted cash                                                                425           (10)
     Tenant rent receivables, net                                                 1,053           614
     Straight-line rents, net                                                    (2,924)         (529)
     Prepaid expenses and other assets, net                                        (717)          570
     Accounts payable and accrued expenses                                          572         1,358
     Accrued compensation                                                        (1,273)         (366)
     Tenant security deposits                                                       179           248
  Payment of deferred leasing commissions                                        (2,905)       (4,422)
------------------------------------------------------------------------------------------------------

        Net cash provided by operating activities                                50,914        57,658
------------------------------------------------------------------------------------------------------

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                                   (75,887)     (112,253)
      Merger costs paid                                                              --          (838)
      Purchase of acquired favorable and unfavorable leases                      (3,726)       (5,106)
      Investment in non-consolidated REITs                                          (18)       (4,127)
      Investment in certificate of deposit                                        5,143            --
      Changes in deposits on real estate assets                                      --        (2,540)
      Investment in assets held for syndication, net                           (112,618)           --
      Proceeds received on sales of real estate assets                           85,673       103,739
------------------------------------------------------------------------------------------------------

      Net cash used for investing activities                                   (101,433)       (7,276)
------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
      Distributions to stockholders                                             (65,813)      (59,010)
      Purchase of treasury shares                                                (4,767)           --
      Offering costs                                                                 --          (119)
      Deferred financing costs                                                       (7)           --
      Borrowings under bank note payable, net                                   104,550            --
------------------------------------------------------------------------------------------------------

      Net cash provided by (used for) financing activities                       33,963       (59,129)
------------------------------------------------------------------------------------------------------

Net decrease in cash and cash equivalents                                       (16,556)       (8,747)

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

Cash and cash equivalents, end of period                                      $  53,417     $  60,968
------------------------------------------------------------------------------------------------------
</TABLE>


                                       5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                      For the
                                                                                 Nine Months Ended
                                                                                   September 30,
                                                                              ------------------------
(in thousands)                                                                   2007          2006
======================================================================================================
<S>                                                                           <C>           <C>

Supplemental disclosure of cash flow information:
   Cash paid for:
      Interest                                                                $   5,125     $  1,219
      Income taxes                                                                  730          515

Non-cash investing and financing activities:
     Accrued costs for purchase of real estate assets                         $   1,716     $     --
     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"), FSP Holdings LLC, and
FSP Protective TRS Corp. The Company also has a non-controlling common stock
interest in twelve corporations organized to operate as real estate investment
trusts ("REITs") and a non-controlling preferred stock interest in two of those
REITs.

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 as of September 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
                                                  September 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 nine months ended September 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 in
2006, and four properties 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 nine months ended September 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                                    113,300
      FSP Grand Boulevard Corp.               Kansas City, MO                                  5,875
                                                                                           ---------
                                              Total                                         $119,200
                                                                                           =========

      1.    The syndication of FSP 50 South Tenth Street Corp. commenced in November 2006. The
            syndications of FSP 303 East Wacker Drive Corp., which commenced in January 2007, and
            FSP Grand Boulevard Corp., which commenced in September 2007, were not complete at
            September 30, 2007.
</TABLE>

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 September 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 September 30, 2007, the Company held an interest in twelve Sponsored REITs.
Ten were fully syndicated and the Company no longer derives economic benefits or
risks from the common stock interest that it has 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 two
remaining entities that were not fully syndicated at September 30, 2007 are FSP
303 East Wacker Drive Corp., which has a carrying value of approximately $74.0
million, and FSP Grand Boulevard Corp., which has a carrying value of
approximately $41.2 million. Both are on the accompanying consolidated balance
sheets and are 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 $30,000 and $11,000 for the
nine months ended September 30, 2007 and 2006, respectively, and interest
expense on acquisition loans made by the Company to Sponsored REITs, are
eliminated in consolidation.

                                                           Nine Months Ended
                                                             September 30,
(in thousands)                                           2007           2006
                                                      ----------     ----------

Operating Data:
Rental revenues                                       $    3,449     $    1,215
Operating and maintenance expenses                         1,834            554
Depreciation and amortization expense                        856            288
Interest expense: permanent mortgage loan                    179
Interest expense: acquisition loan                         1,448            479
Interest income                                               51              9
                                                      ----------     ----------
                                                      $     (817)    $      (97)
                                                      ==========     ==========

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

                                                           Nine Months Ended
                                                             September 30,
(in thousands)                                           2007           2006
                                                      ----------     ----------

Equity in earnings (deficit) of Sponsored REITs       $     (776)    $      623
Equity in earnings of FSP Blue Lagoon Drive Corp.             --             75
Equity in earnings of Park Ten Development                     8             16
Equity in earnings of Phoenix Tower                          157              3
                                                      ----------     ----------
                                                      $     (611)    $      717
                                                      ==========     ==========

Equity in earnings (deficit) of investments in Sponsored REITs is derived from
the Company's share of income (loss) 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 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 $1,199,000 and
$724,000 from Sponsored REITs during the nine months ended September 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 twelve Sponsored
REITs the Company held an interest in as of September 30, 2007. The operating
data for 2006 includes operations of the nine Sponsored REITs the Company held
an interest in as of September 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 September 30, 2007, December 31, 2006 and September 30, 2006, the Company had
ownership interests in twelve, ten and nine Sponsored REITs, respectively.
Summarized financial information for these Sponsored REITs is as follows:

                                                   September 30,    December 31,
                                                       2007             2006
                                                    ----------       ----------
                                                          (in thousands)
       Balance Sheet Data (unaudited):
       Real estate, net                             $  691,579       $  612,835
       Other assets                                     76,960           87,383
       Total liabilities                              (290,973)        (132,565)
                                                    ----------       ----------
       Shareholders equity                          $  477,566       $  567,653
                                                    ==========       ==========

                                                      For the Nine Months Ended
                                                            September 30,
                                                         2007           2006
                                                      ----------     ----------
                                                            (in thousands)
       Operating Data (unaudited):
       Rental revenue                                 $   69,654     $   42,445
       Other revenue                                       2,348          2,137
       Operating and maintenance expenses                (33,605)       (21,318)
       Depreciation and amortization                     (16,280)        (9,623)
       Interest expense and commitment fees              (17,838)        (8,602)
                                                      ----------     ----------
       Net income                                     $    4,279     $    5,039
                                                      ==========     ==========


                                       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 $14,536,000 and $12,836,000 for the nine
months ended September 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 $637,000 and $476,000 for
the nine months ended September 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 $4,540,000 and $603,000 for the nine
months ended September 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 (7.75% at September 30, 2007) or a rate equal to LIBOR plus
125 basis points (6.38% at September 30, 2007). The balance outstanding was
$104,550,000 at September 30, 2007, and there was no balance outstanding at
December 31, 2006. The weighted average interest rate on amounts outstanding
during the nine months ended September 30, 2007 and 2006 was 6.62% and 6.50%,
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 September 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 September 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 in 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,
all of the properties sold during the nine months ended September 30, 2007 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 Three Months Ended    For the Nine Months Ended
      (in thousands)                            September 30,                September 30,
                                         -------------------------     -------------------------
                                            2007           2006           2007           2006
                                         ----------     ----------     ----------     ----------
      <S>                                <C>            <C>            <C>            <C>
      Rental revenue                     $       12     $    4,025     $    3,129     $   15,322
      Rental operating expenses                 (63)        (1,062)          (802)        (4,136)
      Real estate taxes and insurance            (5)          (281)          (370)        (1,499)
      Depreciation and amortization              --           (766)          (749)        (2,951)
      Interest income                            --             --              8             --
                                         ----------     ----------     ----------     ----------
      Net income (loss)
         from discontinued operations    $      (56)    $    1,916     $    1,216     $    6,736
                                         ==========     ==========     ==========     ==========
</TABLE>

During the nine months ended September 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
      10 Lyberty Way                           Westford, MA         Office         July 16, 2007       10,861          1,942
      Settlement of escrows on
         prior property sales                                                                             248            248
                                                                                                   -------------------------
      Net Sales Proceeds and Gain
         on sales of real estate                                                                     $ 85,673        $23,532
                                                                                                   =========================

      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
      One Technology Drive                     Peabody, MA          Office        August 9, 2006       15,989          6,361
                                                                                                   -------------------------
      Net Sales Proceeds and Gain
         on sales of real estate                                                                     $103,739        $34,469
                                                                                                   =========================
</TABLE>


                                       12
<PAGE>

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

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
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.


                                       13
<PAGE>

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

8.    Business Segments (continued)

The calculation of AFFO by business segment is shown in the following table:

<TABLE>
<CAPTION>
                                                                       Investment
                                                        Real Estate     Banking/
(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
                                                        ==========     ==========     ==========

Three Months Ended September 30, 2007
Net Income                                              $    9,874     $     (388)    $    9,486
Gain on sale of assets, net                                 (1,942)            --         (1,942)
(Equity) Deficit in income of non-consolidated REITs          (106)            --           (106)
Distributions from non-consolidated REITs                      476             --            476
Depreciation and amortization                                8,986             30          9,016
Straight line rent                                            (875)            --           (875)
                                                        ----------     ----------     ----------

Adjusted Funds From Operations                          $   16,413     $     (358)    $   16,055
                                                        ==========     ==========     ==========

Nine Months Ended September 30, 2007
Net Income                                              $   51,172     $      522     $   51,694
Gain on sale of assets, net                                (23,532)            --        (23,532)
(Equity) Deficit in income of non-consolidated REITs           619             --            619
Distributions from non-consolidated REITs                    1,199             --          1,199
Depreciation and amortization                               26,434             90         26,524
Straight line rent                                          (2,924)            --         (2,924)
                                                        ----------     ----------     ----------

Adjusted Funds From Operations                          $   52,968     $      612     $   53,580
                                                        ==========     ==========     ==========
</TABLE>


                                       14
<PAGE>

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

8.    Business Segments (continued)

<TABLE>
<CAPTION>
                                                                       Investment
                                                        Real Estate     Banking/
(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
                                                        ==========     ==========     ==========

Three Months Ended September 30, 2006
Net Income                                              $   18,025     $     (195)    $   17,830
Gain on sale of assets, net                                 (6,361)            --         (6,361)
(Equity) Deficit in income of non-consolidated REITs          (481)            --           (481)
Distributions from non-consolidated REITs                      115             --            115
Depreciation and amortization                                8,732             28          8,760
Straight line rent                                            (590)            --           (590)
                                                        ----------     ----------     ----------

Adjusted Funds From Operations                          $   19,440     $     (167)    $   19,273
                                                        ==========     ==========     ==========

Nine Months Ended September 30, 2006
Net Income                                              $   71,072     $      374     $   71,446
Gain on sale of assets, net                                (34,469)            --        (34,469)
(Equity) Deficit in income of non-consolidated REITs          (912)            --           (912)
Distributions from non-consolidated REITs                      724             --            724
Depreciation and amortization                               23,313             93         23,406
Straight line rent                                            (529)            --           (529)
                                                        ----------     ----------     ----------

Adjusted Funds From Operations                          $   59,199     $      467     $   59,666
                                                        ==========     ==========     ==========
</TABLE>


                                       15
<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 September 30, 2007:
     Revenue                                       $    29,498     $       758    $    30,256
     Interest income                                       634              16            650
     Interest expense                                    1,823              --          1,823
     Income (loss) from discontinued operations            (56)             --            (56)
     Capital expenditures                                4,059              88          4,147

Nine Months Ended September 30, 2007:
     Revenue                                       $    88,115     $     7,718    $    95,833
     Interest income                                     1,819              45          1,864
     Interest expense                                    6,120              --          6,120
     Income from discontinued operations                 1,216              --          1,216
     Capital expenditures                                9,195              88          9,283

Identifiable Assets as of September 30, 2007       $ 1,029,002     $     5,591    $ 1,034,593

Three Months Ended September 30, 2006:
     Revenue                                       $    24,972     $     1,073    $    26,045
     Interest income                                       722              13            735
     Interest expense                                      119              --            119
     Income from discontinued operations                 1,916              --          1,916
     Capital expenditures                                3,877              50          3,927

Nine Months Ended September 30, 2006:
     Revenue                                       $    68,562     $     7,023    $    75,585
     Interest income                                     2,045              35          2,080
     Interest expense                                    1,260              --          1,260
     Income from discontinued operations                 6,736              --          6,736
     Capital expenditures                                5,601             110          5,711

Identifiable Assets as of September 30, 2006       $   921,545     $     5,291    $   926,836
</TABLE>


                                       16
<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          $21,938
      Second quarter of 2007                      $.31          $21,937
      Third quarter of 2007                       $.31          $21,938

      First quarter of 2006                       $.31          $18,536
      Second quarter of 2006                      $.31          $18,536
      Third quarter of 2006                       $.31          $21,938


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 2004 and thereafter.


                                       17
<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
                                                              Nine Months Ended
                                                                September 30,
      (in thousands)                                          2007        2006
                                                            --------    --------

      Federal income tax expense at statutory rate          $    297    $    230
      Increase in taxes resulting from:
      State income taxes, net of federal impact                   55          43
                                                            --------    --------
                                                            $    352    $    273
                                                            ========    ========

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 declared a cash distribution of $0.31 per share on October 19, 2007
to stockholders of record on October 31, 2007 payable on November 20, 2007.

On October 19, 2007, the Company amended the Loan Agreement that evidences and
secures its revolving line of credit facility. The Loan Agreement was amended
to, among other things, increase the amount of borrowings available to the
Company from $150,000,0000 to $250,000,000. In addition, the maturity date was
extended from August 2008 to August 2011.

The Company repaid $8.6 million of borrowings from its amended revolving line of
credit facility on October 22, 2007.


                                       18
<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.

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.


                                       19
<PAGE>

Trends and Uncertainties

Real Estate Operations

The portfolio was approximately 91% leased as of September 30, 2007. The
increase in leasing came from several small leases and an approximately 79,000
square foot lease in one of the buildings in Houston. Two properties totaling
approximately 263,000 square feet, one in the greater Seattle/Tacoma area, and
the other in Silicon Valley, remain substantially vacant. Both properties were
being physically repositioned in their respective markets, and those renovations
were nearing completion at the end of the third quarter. We believe those
properties can add meaningful rental income and value to the portfolio as they
are leased.

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 markets in which the buildings are located, which in
some cases may be below the expiring rental rates. In most of our markets,
leasing conditions continued to improve in the third quarter, but we cannot
predict whether the subprime mortgage loan problems and their spill over into
the broader credit markets will have a negative impact on leasing conditions in
the fourth quarter or on the financial strength of our existing tenants.
Approximately 1.5% of our square footage was leased to mortgage companies in
September, and we have taken the credit risk related to those companies into
account in reviewing our reserve for bad debts.

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 third quarter of 2007 totaled $10.0
million. Business in this area, while always uncertain, was adversely affected
in the third quarter of 2007 by the recent turmoil in the financial, credit and
real estate markets. Investors that have historically participated in our
private placement real estate offerings have expressed uncertainty about
investing in this environment. Consequently, equity amounts raised by our
investment executives in the third quarter have dropped significantly from
approximately $109 million achieved in the first half of 2007. At this point, it
is unclear when a more visible market environment will return for our investment
banking business.

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 fourth quarter of 2007. During September 2007, another
Sponsored REIT commenced syndication on a property. Permanent equity
capitalization of the property was structured as a private placement preferred
stock offering totaling $65 million, which is also ongoing as of the beginning
of the fourth quarter of 2007.

Despite these two large current syndications, our property acquisition
executives are now grappling with greater uncertainty surrounding the valuation
levels for prime commercial investment real estate. We believe that the current
turmoil in the credit/mortgage markets, as well as perceptions about the future
U.S. economy and interest rates, are producing a larger than normal divergence
in the perception of value and future relative investment performance of
commercial properties. While we generally believe that such an environment has
the potential to produce some exceptional property acquisition opportunities,
caution, perspective and disciplined underwriting standards can significantly
impact the timing of any future acquisitions. Consequently, our ability to
provide a regular stream of real estate investment product necessary to grow our
overall investment banking/investment services business is uncertain. We also
continue to rely solely on our in-house investment executives to access
interested investors who have capital they can afford to place in an illiquid
position for an indefinite period of time (i.e., invest in a Sponsored REIT). We
continue to evaluate whether our in-house sales force is capable, either through
our existing client base or through new clients, of raising sufficient
investment capital in Sponsored REITs to achieve future performance objectives.

Results of Operations

Overview:

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


                                       20
<PAGE>

Mergers and Acquisitions:

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 and nine months ended September 30,
2007 as compared to the same periods in 2006 are primarily a result of the
timing of these acquisitions and subsequent contribution of these acquired
properties.

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, a commercial
property in San Diego, California on June 27, 2007, and a commercial property in
Westford, Massachusetts on July 16, 2007. The operating results of the ten
properties sold in 2006 and 2007 were classified as discontinued operations in
our financial statements for all periods presented.

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 nine months ended September 30, 2007 our investment banking/investment
services segment had total gross proceeds of $10.0 million and $119.2 million,
respectively; which was derived primarily from the syndication of FSP 303 East
Wacker Drive Corp and FSP Grand Boulevard Corp. During the three and nine months
ended September 30, 2006 our investment banking/investment services segment had
total gross proceeds of $15.9 million and $100.2 million, respectively; which
was derived from the syndication of FSP Phoenix Tower Corp. As a result, total
gross proceeds during the three and nine months ended September 30, 2007
decreased $5.9 million and increased $19.1 million, respectively, compared to
the same periods in 2006. The syndication of FSP 303 East Wacker Drive Corp.
commenced in January 2007 and the syndication of FSP Grand Boulevard Corp.
commenced in September 2007. The syndication of FSP Phoenix Tower Corp., which
was in process during the three and nine months ended September 30, 2006
commenced in February 2006.

Our acquisition executives continue to work on other property investment
opportunities. However, our investment banking business was negatively impacted
by the turmoil in the financial, credit and real estate markets that began in
the third quarter of 2007. Business growth in this area is challenged and
uncertain at the beginning of the fourth quarter of 2007.


                                       21
<PAGE>

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

<TABLE>
<CAPTION>
      (in thousands)
                                                                       Three months ended September 30,
                                                                     ------------------------------------
                                                                       2007         2006       Change
                                                                       ----         ----       ------
<S>                                                                  <C>          <C>          <C>
      Revenue:
         Rental                                                      $ 27,431     $ 23,833     $ 3,598
         Related party revenue:
           Syndication fees                                               687          861        (174)
           Transaction fees                                               604        1,140        (536)
           Management fees and interest income from loans               1,497          209       1,288
         Other                                                             37            2          35
      ---------------------------------------------------------------------------------------------------
                Total revenue                                          30,256       26,045       4,211
      ---------------------------------------------------------------------------------------------------

      Expenses:
           Real estate operating expenses                               7,263        5,469       1,794
           Real estate taxes and insurance                              4,565        3,750         815
           Depreciation and amortization                                7,870        6,016       1,854
           Selling, general and administrative                          1,787        2,027        (240)
           Commissions                                                    406          458         (52)
           Interest                                                     1,823          119       1,704
      ---------------------------------------------------------------------------------------------------
                Total expenses                                         23,714       17,839       5,875
      ---------------------------------------------------------------------------------------------------

           Income before interest income, equity in earnings in
               non-consolidated REITs and taxes on income               6,542        8,206      (1,664)
           Interest income                                                650          735         (85)
           Equity in earnings (deficit) in non-consolidated REITs         147          481        (334)
      ---------------------------------------------------------------------------------------------------

           Income before taxes on income                                7,339        9,422      (2,083)
           Taxes on income                                               (261)        (131)       (130)
      ---------------------------------------------------------------------------------------------------

           Income from continuing operations                            7,600        9,553      (1,953)
           Income (loss) from discontinued operations                     (56)       1,916      (1,972)
      ---------------------------------------------------------------------------------------------------

           Income before gain on sale of properties                     7,544       11,469      (3,925)
           Gain on sale of assets                                       1,942        6,361      (4,419)
      ---------------------------------------------------------------------------------------------------
           Net income                                                $  9,486     $ 17,830     $(8,344)
      ===================================================================================================
</TABLE>

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

      Revenues

      Total revenues increased by $4.2 million to $30.3 million for the quarter
ended September 30, 2007, as compared to $26.1 million for the quarter ended
September 30, 2006. The increase was primarily a result of:

      o     An increase to rental revenue of approximately $3.6 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 a property in Maryland in June 2007.
            The increase was net of a $1.7 million decrease in lease termination
            payments received. During the three months ended September 30, 2007
            we received no lease termination fee income compared to $1.7 million
            we received from one tenant in Illinois during the three months
            ended September 30, 2006.

      o     An increase in loan interest income of approximately $1.3 million,
            which was principally a result of interest income from larger loan
            balances during the third quarter of 2007 as compared to 2006 for
            the mortgage loans on the properties in syndication. The impact of
            this increase was slightly greater as a result of higher interest
            rates charged for the third quarter of 2007 compared to 2006.


                                       22
<PAGE>

      These increases were partially offset by:

      o     A $0.7 million decrease in syndication fees and transaction (loan
            commitment) fees, which was principally a result of the decrease in
            gross syndication proceeds in the quarter compared to the same
            period in 2006.

      Expenses

      Total expenses were $23.7 million for the three months ended September 30,
2007, an increase of $5.9 million compared to the three months ended September
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 $2.6 million, and depreciation of
            $1.9 million, which were primarily a result of real estate
            acquisitions and mergers discussed above.

      o     An increase in interest expense of approximately $1.7 million
            primarily resulting from a higher average loan balance outstanding
            during the three months ended September 30, 2007 compared to the
            three months ended September 30, 2006, and slightly higher interest
            rates in the 2007 period than the 2006 period.

      These increases were partially offset by:

      o     Selling, general and administrative expenses, which decreased
            insignificantly by $0.2 million to $1.8 million for the three months
            ended September 30, 2007 compared to same period in 2006. We had 39
            employees as of September 30, 2007 at our headquarters in Wakefield
            compared to 40 employees as of September 30, 2006.

      o     A decrease in commission expense of $0.1 million, which was
            principally a result of the decrease in gross syndication proceeds
            in the quarter compared to the same period in 2006.

      Interest income

      Interest income decreased $0.1 million to $0.7 million during the three
months ended September 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 September 30, 2006. The lower average balances during the three
months ended September 30, 2007 were primarily a result of a $60 million
repayment on our line of credit made on July 5, 2007 and a $21.9 million
distribution paid to our shareholders in August 2007; and were partially offset
by asset sale proceeds received on July 16, 2007 from the sale of a property
discussed above.

      Equity in earnings (deficit) of non-consolidated REITs

      Equity in earnings (deficit) from non-consolidated REITs decreased
approximately $0.3 million to $0.1 million, which was principally a result of a
lower amount attributed to us from the syndications in process during the third
quarter of 2007, as compared to the third quarter of 2006.

      Taxes on income

      Taxes on income decreased $0.1 million in the third quarter of 2007
compared to the third quarter of 2006. The decrease was primarily due to lower
taxable income from the investment banking and investment services business in
the 2007 period compared to 2006. During the third 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 third quarter of
2007 decreased $2.0 million to $7.6 million from $9.6 million in the third
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
and sold three additional properties. Accordingly, the ten properties sold are
reported as discontinued operations on our financial statements for the relevant
periods presented. There was a loss from discontinued operations of $0.1 million
for the three months ended September 30, 2007 related to the property sold on
July 16, 2007 that was vacant, as compared to income from discontinued
operations of $1.9 million for the three months ended September 30, 2006 related
to the ten properties sold.


                                       23
<PAGE>

      For the three months ended September 30, 2007 we reported $1.9 million as
gain on sale of assets and for the three months ended September 30, 2006 we
reported $6.4 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 September 30, 2007 decreased $8.3
million to $9.5 million compared to $17.8 million for the three months ended
September 30, 2006, for the reasons discussed above.

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

<TABLE>
<CAPTION>
(in thousands)
                                                                 Nine months ended September 30,
                                                               ----------------------------------
                                                                  2007        2006      Change
                                                                  ----        ----      ------
<S>                                                            <C>          <C>        <C>
Revenue:
   Rental                                                      $ 76,037     $61,647    $ 14,390
   Related party revenue:
     Syndication fees                                             7,090       6,288         802
     Transaction fees                                             7,446       6,548         898
     Management fees and interest income from loans               5,176       1,078       4,098
   Other                                                             84          24          60
-------------------------------------------------------------------------------------------------
          Total revenue                                          95,833      75,585      20,248
-------------------------------------------------------------------------------------------------

Expenses:
     Real estate operating expenses                              19,340      13,372       5,968
     Real estate taxes and insurance                             12,892       8,949       3,943
     Depreciation and amortization                               22,041      15,213       6,828
     Selling, general and administrative                          5,675       5,785        (110)
     Commissions                                                  3,720       3,289         431
     Interest                                                     6,120       1,260       4,860
-------------------------------------------------------------------------------------------------
          Total expenses                                         69,788      47,868      21,920
-------------------------------------------------------------------------------------------------

     Income before interest income, equity in earnings in
        non-consolidated REITs and taxes on income               26,045      27,717      (1,672)
     Interest income                                              1,864       2,080        (216)
     Equity in earnings (deficit) in non-consolidated REITs        (611)        717      (1,328)
-------------------------------------------------------------------------------------------------

     Income before taxes on income                               27,298      30,514      (3,216)
     Taxes on income                                                352         273          79
-------------------------------------------------------------------------------------------------

     Income from continuing operations                           26,946      30,241      (3,295)
     Income from discontinued operations                          1,216       6,736      (5,520)
-------------------------------------------------------------------------------------------------

     Income before gain on sale of properties                    28,162      36,977      (8,815)
     Gain on sale of assets                                      23,532      34,469     (10,937)
-------------------------------------------------------------------------------------------------
     Net income                                                $ 51,694     $71,446    $(19,752)
=================================================================================================
</TABLE>

Comparison of the nine months ended September 30, 2007 to the nine months ended
September 30, 2006

      Revenues

         Total revenues increased by $20.2 million to $95.8 million for the nine
months ended September 30, 2007, as compared to $75.6 million for the nine
months ended September 30, 2006. The increase was primarily a result of:

      o     An increase to rental revenue of approximately $14.4 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 a property in Maryland in June 2007. The
            increase was net of a $6.5 million decrease in lease termination


                                       24
<PAGE>

            payments received. During the nine months ended September 30, 2007
            we received lease termination fee income of $61,000 compared to
            approximately $6.5 million received from two tenants in Texas and
            one tenant in Illinois during the nine months ended September 30,
            2006.

      o     An increase in management fees and interest income from loans of
            approximately $4.1 million, which was principally a result of
            interest income from larger loan balances during the nine months of
            2007 as compared to the same period in 2006 for the mortgage loans
            on the properties in syndication. The impact of this increase was
            slightly greater as a result of higher interest rates charged for
            the first nine months of 2007 compared to 2006.

      o     A $1.7 million increase in syndication and transaction (loan
            commitment) fees, which was principally a result of the increase in
            gross syndication proceeds for the nine month period in 2007
            compared to the same period in 2006.

      Expenses

         Total expenses were $69.8 million for the nine months ended September
30, 2007, or an increase of $21.9 million compared to the nine months ended
September 30, 2006. The increase was primarily a result of:

      o     The increase in real estate operating expenses, real estate taxes
            and insurance of $9.9 million, and depreciation of $6.8 million,
            which were primarily a result of the acquisitions and mergers in our
            real estate segment discussed above.

      o     An increase in interest expense of $4.9 million resulting primarily
            from a higher average loan balance outstanding during the nine
            months ended September 30, 2007 compared to the nine months ended
            September 30, 2006, and slightly higher interest rates in the 2007
            period than the 2006 period.

      o     An increase in commission expense of $0.4 million, which was
            principally a result of the increase in gross syndication proceeds
            for the nine month period in 2007 compared to the same period in
            2006.

      These increases were partially offset by:

      o     Selling, general and administrative expenses, which decreased
            insignificantly by $0.1 million for the nine months ended September
            30, 2007 compared to same period in 2006. We had 39 employees as of
            September 30, 2007 at our headquarters in Wakefield compared to 40
            employees as of September 30, 2006.

      Interest income

      Interest income decreased $0.2 million to $1.9 million during the nine
months ended September 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 nine
months ended September 30, 2006. The lower average balances during the nine
months ended September 30, 2007 were primarily a result of a decrease in cash
and cash equivalents.

      Equity in earnings (deficit) of non-consolidated REITs

      Equity in earnings (deficit) from non-consolidated REITs decreased
approximately $1.3 million to a deficit of $0.6 million for the nine months
ended September 30, 2007, which was principally a result of a loss attributed to
us from the syndications in process during 2007, as compared to income during
the nine months ended September 30, 2006 of $0.7 million.

      Taxes on income

      Taxes on income increased $0.1 million for the nine months ended September
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 nine months ended
September 30, 2007 decreased $3.3 million to $26.9 million compared the nine
months ended September 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
and sold three additional properties. Accordingly, the ten properties sold are
reported as discontinued operations on our financial statements for the relevant
periods presented. Income from discontinued operations was $1.2 million for the
nine months ended September 30, 2007 and was $6.7 million for the nine months
ended September 30, 2006.


                                       25
<PAGE>

      For the nine months ended September 30, 2007 we reported $23.5 million as
gain on sale of assets and for the nine months ended September 30, 2006 we
reported $34.5 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
10 Lyberty Way                         Westford, MA          Office         July 16, 2007       10,861          1,942
Settlement of escrows on
   prior property sales                                                                            248            248
                                                                                            -------------------------
Net Sales Proceeds and Gain
   on sales of real estate                                                                    $ 85,673        $23,532
                                                                                            =========================

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
One Technology Drive                   Peabody, MA           Office        August 9, 2006       15,989          6,361
                                                                                            -------------------------
Net Sales Proceeds and Gain
   on sales of real estate                                                                    $103,739        $34,469
                                                                                            =========================
</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 nine months ended September 30, 2007 decreased $19.7
million to $51.7 million compared to $71.4 million for the nine months ended
September 30, 2006, for the reasons discussed above.

Liquidity and Capital Resources

      Cash and cash equivalents were $53.4 million and $70.0 million at
September 30, 2007 and December 31, 2006, respectively. This decrease of $16.6
million is attributable to $50.9 million provided by operating activities, less
$101.4 million used for investing activities, plus $33.9 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 primarily depends upon the level of rental income from our real
properties and the level of interest on the part of investors in purchasing
shares of Sponsored REITs.

         Operating Activities

         The cash provided by our operating activities of $50.9 million during
the nine months ended September 30, 2007 is primarily attributable to net income
of $51.7 million, less gains on sales of properties of $23.5 million, plus the
add-back of $24.4 million of non-cash activity and $1.2 million of distributions
from non-consolidated REITs. These increases in operating cash were partially
offset by $2.9 million in payments made for deferred leasing commissions.


                                       26
<PAGE>

      Investing Activities

      Our cash used for investing activities of $101.4 million during the nine
months ended September 30, 2007 is primarily attributable to our investment in
assets held for syndication of $112.6 million, the purchase of a property in
Baltimore for $62.8 million and additions to real estate investments and office
equipment of approximately $16.8 million, which were partially offset by
proceeds received on the sale of properties of $85.7 million and the redemption
of a certificate of deposit of $5.1 million.

      Financing Activities

      Our cash provided by financing activities of $33.9 million during the nine
months ended September 30, 2007 is primarily attributable to net proceeds from
our line of credit of $104.5 million used to purchase assets held for
syndication, which were partially offset by distributions to shareholders of
$65.8 million and $4.8 million for the purchase of treasury shares.

      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 (7.75% at September 30, 2007) or a rate equal to LIBOR plus
125 basis points (6.38% at September 30, 2007). The balance outstanding was
$104,550,000 at September 30, 2007, and there was no balance outstanding at
December 31, 2006. As of September 30, 2007, we were in compliance with all bank
covenants required by the Loan Agreement.

      On October 19, 2007, we amended the Loan Agreement to, among other things,
increase the amount of borrowings available to us from $150,000,000 to
$250,000,000. In addition, the maturity date was extended by three years to
August 11, 2011.

      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 September 30, 2007 there were two assets held for syndication,
consisting of the office property owned by FSP 303 East Wacker Drive Corp. and
the office property owned by FSP Grand Boulevard 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 three properties at gains. Accordingly, as of December 31, 2006 the
properties sold in 2007 are classified as held for sale on the balance sheet.

      Related Party Transactions

      During the nine months ended September 30, 2007, we completed the
syndication of FSP 50 South Tenth Street Corp. and began the syndications of FSP
303 East Wacker Drive Corp. and FSP Grand Boulevard Corp. We did not enter into
any other significant transactions with related parties during the nine months
ended September 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 nine months ended
September 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
September 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 2007 we reached an
            agreement to sell this property, which closed on July 16, 2007 at a


                                       27
<PAGE>

            gain. The property had operating expenses of $54,000 and $35,000 for
            the three months ended September 30, 2007 and 2006, respectively and
            $188,000 and $170,000 for the nine months ended September 30, 2007
            and 2006, respectively.

      o     The single tenant lease at the property located in Federal Way,
            Washington, expired September 14, 2006. We have signed a lease with
            a tenant for approximately 8% of the space and that space generated
            rental income of $40,000 and $59,000 during the three months and
            nine months ended September 30, 2007. We expect that the property
            will not produce revenue to cover its expenses in the fourth quarter
            of 2007. The property had operating expenses of $173,000 and
            $463,000 for the three and nine months ended September 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 $97,000 and $310,000 during the
            three and nine months ended September 30, 2007. The property had
            operating expenses of $114,000 and $353,000 for the three and nine
            months ended September 30, 2007. We are repositioning the property
            and as of the end of the quarter have not re-let the remaining
            space. As a result, we do not believe the property will produce
            revenue to cover its expenses in the fourth quarter of 2007.


                                       28
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

We borrow from time-to-time on our line of credit. These borrowings bear
interest at the bank's base rate (7.75% at September 30, 2007) or at LIBOR plus
125 basis points (6.38% at September 30, 2007), as elected by us when requesting
funds. As of September 30, 2007, $104,550,000 was outstanding under the line of
credit consisting of two borrowings 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 September 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 September 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 September 30, 2007 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.


                                       29
<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 were no material changes to the risk factors disclosed in Part I, "Item
1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December
31, 2006, except to the extent previously updated or to the extent additional
factual information disclosed elsewhere in this Quarterly Report on Form 10-Q
relates to such risk factors (including, without limitation, the matters
discussed in Trends and Uncertainties in Part I, "Item 2-Management's Discussion
and Analysis of Financial Condition and Results of Operations") . In addition to
the other information set forth in this report, you should carefully consider
the risk factors discussed in the Form 10-K, which could materially affect our
business, financial condition or future results. The risks described in our
Annual Report on Form 10-K are not the only risks facing our Company. Additional
risks and uncertainties not currently known to us or that we currently deem to
be immaterial also may materially adversely affect our business, financial
condition and/or operating results.

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

The following table provides information about purchases by Franklin Street
Properties Corp. during the quarter ended September 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             of Publicly         Units) that May Yet Be
                           Shares (or Units)         Price Paid         Announced Plans        Purchased Under the
                               Purchased             per Share            or Programs           Plans or Programs
Period                        (1) (2) (3)            (or Unit)            (1) (2) (3)              (1) (2) (3)
-----------------------------------------------------------------------------------------------------------------------
<S>                             <C>                    <C>                  <C>                    <C>
07/01/07-07/31/07                  0                    N/A                    0                   $21,008,101
-----------------------------------------------------------------------------------------------------------------------
08/01/07-08/31/07               285,600                $16.69               285,600                $16,240,465
-----------------------------------------------------------------------------------------------------------------------
09/01/07-09/30/07                  0                    N/A                    0                   $31,240,465
-----------------------------------------------------------------------------------------------------------------------
Total:                          285,600                 N/A                    0                   $31,240,465
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

(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.

(3) On September 10, 2007, FSP Corp. announced that the Board of Directors of
FSP Corp. had authorized certain modifications to the Company's October 28, 2005
common stock repurchase plan. More specifically, the Board of Directors of FSP
Corp. authorized the repurchase of up to $50 million of the Company's common
stock (inclusive of all repurchases made pursuant to the October 28, 2005 plan)
from time to time in the open market or in privately negotiated transactions.
The repurchase authorization expires at the earlier of (i) November 1, 2009 or
(ii) a determination by the Board of Directors of FSP Corp. to discontinue
repurchases.


                                       30
<PAGE>

Item 3. Defaults Upon Senior Securities

None.

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

None.

Item 5. Other Information

None.

Item 6. Exhibits

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


                                       31
<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.


<TABLE>
<CAPTION>
       Date                         Signature                            Title


<S>                           <C>                              <C>
Date:  October 30, 2007       /s/ George J. Carter             Chief Executive Officer and Director
                              ------------------------         (Principal Executive Officer)
                              George J. Carter


Date:  October 30, 2007       /s/ John G. Demeritt             Chief Financial Officer
                              ------------------------         (Principal Financial Officer)
                              John G. Demeritt
</TABLE>


                                       32
<PAGE>

                                  EXHIBIT INDEX

2.1   Agreement and Plan of Merger dated as of March 15, 2006 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. (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)

10.1  Third Amended and Restated Loan Agreement dated October 19, 2007 by and
      among the Company, certain wholly-owned subsidiaries of the Company, RBS
      Citizens, National Association, Bank of America, N.A., Wachovia Bank,
      National Association and Chevy Chase Bank, F.S.B. (5)

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.

(5)   Filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated
      October 22, 2007 (File No. 001-32470) as filed on October 22, 2007 and
      incorporated herein by reference.


                                       33