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

                                   FORM 10 - Q

 (Mark One)

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

                 For the quarterly period ended June 30, 2006.

                                       OR

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

                 For the transition period from _________ to __________.

                        Commission File Number: 001-32470


                        Franklin Street Properties Corp.
             (Exact name of registrant as specified in its charter)


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


                         401 Edgewater Place, Suite 200
                            Wakefield, MA 01880-6210
               (Address of principal executive offices)(Zip Code)

                                 (781) 557-1300
              (Registrant's telephone number, including area code)

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

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

       YES |X|      NO |_|

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

Large Accelerated 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 July 31, 2006 was
70,766,305.

<PAGE>

                        Franklin Street Properties Corp.

                                    Form 10-Q

                                Quarterly Report
                                  June 30, 2006

                                Table of Contents


Part I.  Financial Information
                                                                            Page
         Item 1.  Financial Statements

                  Consolidated Balance Sheets as of June 30, 2006 and
                  December 31, 2005......................................      3

                  Consolidated Statements of Income for the three and
                  six months ended June 30, 2006 and 2005................      4

                  Consolidated Statements of Cash Flows for the
                  six months ended June 30, 2006 and 2005................    5-6

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

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

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

         Item 4.  Controls and Procedures................................     30

Part II. Other Information

         Item 1.  Legal Proceedings......................................     31

         Item 1A. Risk Factors...........................................     31

         Item 2.  Unregistered Sales of Equity Securities and
                  Use of Proceeds........................................     37

         Item 3.  Defaults Upon Senior Securities........................     37

         Item 4.  Submission of Matters to a Vote of Security Holders....     38

         Item 5.  Other Information......................................     38

         Item 6.  Exhibits...............................................     39

Signatures        .......................................................     40

<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                        Franklin Street Properties Corp.
                           Consolidated Balance Sheets
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                          June 30,      December 31,
(in thousands, except share and par value amounts)                                          2006            2005
======================================================================================================================

<S>                                                                                      <C>             <C>
Assets:
Real estate assets:
          Land                                                                           $ 103,879       $  68,325
          Buildings and improvements                                                       730,860         451,488
          Fixtures and equipment                                                               612             602
----------------------------------------------------------------------------------------------------------------------
                                                                                           835,351         520,415
          Less accumulated depreciation                                                     36,046          29,016
----------------------------------------------------------------------------------------------------------------------
Real estate assets, net                                                                    799,305         491,399
Acquired real estate leases, less accumulated amortization
   of $15,804 and $10,402, respectively                                                     49,014          30,172
Investment in non-consolidated REITs                                                           877           5,006
Assets held for syndication, net                                                             9,197               -
Assets held for sale                                                                         9,628          69,952
Cash and cash equivalents                                                                   57,605          69,715
Restricted cash                                                                                466             461
Tenant rent receivables, less allowance for doubtful accounts
   of $350 and $350, respectively                                                              592           1,447
Straight-line rent receivable. Less allowance for doubtful accounts
   of $163 and $163, respectively                                                            4,512           4,569
Prepaid expenses                                                                               940             805
Other assets                                                                                   320           1,200
Office computers and furniture, net of accumulated depreciation
   of $795 and $729, respectively                                                              305             311
Deferred leasing commissions, net of accumulated amortization
   of $1,008, and $731, respectively                                                         4,632           2,136
----------------------------------------------------------------------------------------------------------------------
          Total assets                                                                   $ 937,393       $ 677,173
======================================================================================================================

Liabilities and Stockholders' Equity:
Liabilities:
   Bank note payable                                                                     $   9,192       $      --
   Accounts payable and accrued expenses                                                    14,359          11,583
   Accrued compensation                                                                      1,301           1,891
   Tenant security deposits                                                                  1,479           1,293
   Acquired unfavorable real estate leases, less accumulated amortization
      of $288, and $134, respectively                                                        2,538             823
----------------------------------------------------------------------------------------------------------------------
Total liabilities                                                                           28,869          15,590
----------------------------------------------------------------------------------------------------------------------

Commitments and contingencies

Stockholders' Equity:
   Preferred stock, $.0001 par value, 20,000,000 shares
     authorized, none issued or outstanding                                                     --              --
   Common stock, $.0001 par value, 180,000,000 shares authorized,
     70,766,305 and 59,794,608 shares issued and outstanding, respectively                       7               6
   Additional paid-in capital                                                              907,794         677,397
   Treasury stock, 731,898 and 731,898 shares at cost, respectively                        (14,008)        (14,008)
   Earnings (distributions) in excess of accumulated earnings/distributions                 14,731          (1,812)
----------------------------------------------------------------------------------------------------------------------

       Total stockholders' equity                                                          908,524         661,583
----------------------------------------------------------------------------------------------------------------------

       Total liabilities and stockholders' equity                                        $ 937,393       $ 677,173
======================================================================================================================
                                The accompanying notes are an integral part of these consoldated financial statements.
</TABLE>


                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                              For the                     For the
                                                                         Three Months Ended           Six Months Ended
                                                                              June 30,                    June 30,
---------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)                                 2006          2005          2006          2005
===========================================================================================================================

<S>                                                                     <C>           <C>           <C>           <C>
Revenue:
     Rental                                                             $ 21,463      $ 16,191      $ 44,844      $ 27,791
Related party revenue:
     Syndication fees                                                      3,505         1,603         5,426         4,122
     Transaction fees                                                      3,469         1,595         5,408         4,038
     Management fees and interest income from loans                          698           481           869         1,451
Other                                                                          1            --            22            --
---------------------------------------------------------------------------------------------------------------------------
             Total revenue                                                29,136        19,870        56,569        37,402
---------------------------------------------------------------------------------------------------------------------------

Expenses:
     Real estate operating expenses                                        5,010         3,253         9,783         5,593
     Real estate taxes and insurance                                       3,357         2,205         5,944         3,874
     Depreciation and amortization                                         5,569         3,487        10,733         5,896
     Selling, general and administrative                                   1,954         1,741         3,758         3,567
     Commissions                                                           1,809           867         2,832         2,191
     Interest                                                                546           788         1,140         1,743
---------------------------------------------------------------------------------------------------------------------------

       Total expenses                                                     18,245        12,341        34,190        22,864
---------------------------------------------------------------------------------------------------------------------------

Income before interest income, equity in earnings of
   non-consolidated REITs and taxes on income                             10,891         7,529        22,379        14,538
Interest income                                                              756           367         1,345           597
Equity in earnings of non-consolidated REITs                                 156           302           236           968
---------------------------------------------------------------------------------------------------------------------------

Income before taxes on income                                             11,803         8,198        23,960        16,103
Income tax expense                                                           347            70           404           114
---------------------------------------------------------------------------------------------------------------------------

     Income from continuing operations                                    11,456         8,128        23,556        15,989
     Income from discontinued operations                                     913         2,381         1,952         4,943
     Gain (Estimated loss) on sale of assets, net                         28,108        (1,055)       28,108        (1,055)
---------------------------------------------------------------------------------------------------------------------------

Net income                                                              $ 40,477       $ 9,454      $ 53,616      $ 19,877
===========================================================================================================================

Weighted average number of shares outstanding,
     basic and diluted                                                    67,149        56,815        63,492        53,242
===========================================================================================================================

Earnings per share, basic and diluted, attributable to:
     Continuing operations                                              $   0.17      $   0.15      $   0.37      $   0.30
     Discontinued operations                                                0.01          0.04          0.03          0.09
     Gains (losses) on sales of assets, net                                 0.42         (0.02)         0.44         (0.02)
---------------------------------------------------------------------------------------------------------------------------
Net income per share, basic and diluted                                 $   0.60      $   0.17      $   0.84      $   0.37
===========================================================================================================================
                                                               See accompanying notes to consolidated financial statements.
</TABLE>


                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                   For the
                                                                                              Six Months Ended
                                                                                                   June 30,
                                                                                         ----------------------------
(in thousands)                                                                               2006            2005
=====================================================================================================================

<S>                                                                                      <C>               <C>
Cash flows from operating activities:
   Net income                                                                            $  53,616         $ 19,877
   Adjustments to reconcile net income to net cash
        provided by  operating activities:
      (Gains) and estimated loss on assets sold or held for sale                           (28,108)           1,055
      Depreciation and amortization expense                                                 11,407            8,230
      Amortization of above market lease                                                     3,240              887
      Equity in earnings from non-consolidated REITs                                          (431)            (968)
      Distributions from non-consolidated REITs                                                609              980
      Shares issued as compensation                                                             --               31
  Changes in operating assets and liabilities:
     Restricted cash                                                                            (5)            (293)
     Tenant rent receivables, net                                                              855               90
     Straight-line rents, net                                                                   61             (724)
     Operations of assets held for syndication, net                                             --           (1,295)
     Prepaid expenses and other assets, net                                                  1,232             (843)
     Accounts payable and accrued expenses                                                  (1,226)          (1,144)
     Accrued compensation                                                                     (590)             235
     Tenant security deposits                                                                  186              293
  Payment of deferred leasing commissions                                                   (2,773)            (311)
---------------------------------------------------------------------------------------------------------------------

        Net cash provided by operating activities                                           38,073           26,100
---------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
      Cash acquired through issuance of common stock in merger transaction                  13,849           10,621
      Purchase of real estate assets, office computers and
          furniture, capitalized merger costs                                             (108,280)         (45,928)
      Merger costs paid                                                                       (838)            (402)
      Purchase of acquired favorable and unfavorable leases                                 (5,108)              --
      Investment in non-consolidated REITs                                                     (11)              43
      Investment in assets held for syndication, net                                        (9,545)          50,265
      Proceeds received on sale of real estate assets                                       87,750               --
---------------------------------------------------------------------------------------------------------------------

      Net cash provided by (used for) investing activities                                 (22,183)          14,599
---------------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
      Distributions to stockholders                                                        (37,073)         (35,734)
      Purchase of treasury shares                                                                               (16)
      Offering costs                                                                          (119)              --
      Borrowings (repayments) under bank note payable, net                                   9,192           (6,226)
---------------------------------------------------------------------------------------------------------------------

      Net cash used for financing activities                                               (28,000)         (41,976)
---------------------------------------------------------------------------------------------------------------------

Net decrease in cash and cash equivalents                                                  (12,110)          (1,277)

Cash and cash equivalents, beginning of period                                              69,715           52,752
---------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of period                                                 $  57,605         $ 51,475
=====================================================================================================================
                                                         See accompanying notes to consolidated financial statements.
</TABLE>


                                       5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                             For the
                                                                                        Six Months Ended
                                                                                             June 30,
                                                                                  ------------------------------
(in thousands)                                                                         2006          2005
================================================================================================================

<S>                                                                                     <C>            <C>
Supplemental disclosure of cash flow information:
   Cash paid for:
      Interest                                                                          $    965       $  1,795
      Income taxes                                                                           300            406
Non-cash investing and financing activities:
      Assets acquired through the issuance of common stock in merger, net                230,517        153,943
      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 Property
Management LLC, and FSP Holdings LLC. The Company also has a non-controlling
common stock interest in nine corporations organized to operate as real estate
investment trusts ("REITs") and a non-controlling preferred stock interest in
one REIT.

On April 30, 2005, the Company acquired four real estate investment trusts (the
"2005 Target REITs") by the merger of the four 2005 Target REITs with and into
four of the Company's wholly-owned subsidiaries. The merger was effective April
30, 2005 and, as a result, the Company issued 10,894,994 shares in a tax-free
exchange for all outstanding preferred shares of the 2005 Target REITs. The
mergers were accounted for as a purchase and the acquired assets and liabilities
were recorded at their fair value.

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 and
investment banking/investment 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
Sponsored REITs. FSP Property Management provides asset management and property
management services for the Sponsored REITs.

Properties

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

                                                               As of
                                                             June 30,
                                                        2006           2005
                                                     ---------      ---------
      Residential real estate:
         Number of properties                               --              4
         Number of apartments                               --            837

      Commercial real estate:
         Number of properties                               31             28
         Square feet                                 5,301,380      3,952,011


                                       7
<PAGE>

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

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

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, 2005, 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 accounting principles
generally accepted in the United States of America for interim financial
information and in conjunction with the rules and regulations of the Securities
and Exchange Commission. Accordingly, they do not include all of the disclosures
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments (consisting solely of normal recurring matters) necessary for a fair
presentation of the financial statements for these interim periods have been
included. Operating results for the three months and six months ended June 30,
2006 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2006 or for any other period.

Reclassifications

Certain balances from the 2005 balance sheet and interim financial statements
have been reclassified to conform to the 2006 presentation. The
reclassifications primarily were related to the disposition of six properties
sold in 2005 and three properties sold in 2006 and one asset held for sale as of
June 30, 2006, 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 total assets or net income for any period presented as a result of
these reclassifications.

Recent Accounting Standards

In June 2005, the Financial Accounting Standards Board ("FASB") ratified the
consensus reached by the Emerging Issues Task Force ("EITF") regarding EITF No.
05-6, "Determining the Amortization Period for Leasehold Improvements." The
guidance requires that leasehold improvements acquired in a business
combination, or purchased subsequent to the inception of a lease, be amortized
over the lesser of the useful life of the assets or a term that includes
renewals that are reasonably assured at the date of the business combination or
purchase. The guidance is effective for periods beginning after June 29, 2005.
The Company has adopted EITF 05-6, which did not materially impact the Company's
results of operations, financial position, or liquidity.

In March 2005, the FASB issued FASB Interpretation No. 47, which clarifies that
the term conditional asset retirement obligation as used in FASB Statement No.
143, "Accounting for Asset Retirement Obligations", refers to a legal obligation
to perform an asset retirement activity in which the timing and (or) method of
settlement are conditional on a future event that may or may not be within the
control of the entity. The guidance was effective for periods beginning after
December 15, 2005. The Company has adopted FIN 47, which did not impact the
Company's results of operations, financial position, or liquidity.

2.    Investment Banking/Investment Services Activity

During the six months ended June 30, 2006, the Company sold on a best efforts
basis, through private placements, preferred stock in the following Sponsored
REIT:

      Sponsored REIT                  Property Location     Gross Proceeds(1)
      -----------------------------------------------------------------------
                                                             (in thousands)
      FSP Phoenix Tower Corp.         Houston, TX               $84,350
                                                                =======

      (1)   The syndication of FSP Phoenix Tower Corp., which commenced in
            February 2006 was not complete at June 30, 2006. This amount
            represents the gross proceeds syndicated during the six months ended
            June 30, 2006.


                                       8
<PAGE>

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

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

Investment in Sponsored REITs

At June 30, 2006, the Company held an interest in nine Sponsored REITs. Eight
were fully syndicated and the Company no longer derives economic benefits or
risks from the common stock interest that is retained in them. The Company holds
a preferred stock investment in one of these Sponsored REITs, FSP Park Ten
Development Corp. (or "Park Ten Development"), from which it continues to derive
economic benefit and risk. The remaining entity that is not fully syndicated has
a value of approximately $9.2 million on the accompanying consolidated balance
sheets and is classified as an asset held for syndication. Prior to April 2006,
the Company held a preferred stock investment in FSP Blue Lagoon Drive Corp. (or
"Blue Lagoon"), which was one of the 2006 Target REITs acquired by merger on
April 30, 2006, and accordingly was eliminated when recording the merger.

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

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

      Operating Data:
      Rental revenues                                       $ 1,215
      Operating and maintenance
          expenses                                              554
      Depreciation and amortization                             288
      Interest expense                                          479
      Interest income                                             9
                                                            -------
                                                            $   (97)
                                                            =======

Equity in earnings of investment in non-consolidated REITs:

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

                                                                Six Months Ended
                                                                    June 30,
      (in thousands)                                            2006        2005
                                                                ----        ----

      Equity in earnings of Sponsored REITs                     $161        $841
      Equity in earnings of Blue Lagoon                           75         127
      Equity in earnings of Park Ten Development                  --          --
                                                                ----        ----
                                                                $236        $968
                                                                ====        ====

Equity in earnings of investments in Sponsored REITs is derived from the
Company's share of income following the commencement of syndication of Sponsored
REITs. Following the commencement of syndication the Company exercises influence
over, but does not control these entities, and investments are accounted for
using the equity method. Equity in earnings of Blue Lagoon and Park Ten
Development was derived from the Company's preferred stock investment in the
entities, which were acquired in January 2004 and September 2005, respectively.
Blue Lagoon was one of the 2006 Target REITs that the Company acquired by merger
on April 30, 2006, which 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 $609,000 and $980,000
from Sponsored REITs during the six months ended June 30, 2006 and 2005,
respectively.


                                       9
<PAGE>

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

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

Non-consolidated REITs:

The Company has in the past acquired by merger entities similar to the Sponsored
REITs, including on April 30, 2005, the four 2005 Target REITS, and 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.
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 stockholders of the Sponsored REIT.

At June 30, 2006, December 31, 2005 and June 30, 2005, the Company had ownership
interests in nine, thirteen and twelve Sponsored REITs, respectively.

Summarized financial information for these Sponsored REITs is as follows:

                                                      June 30,      December 31,
                                                        2006            2005
                                                     ---------      -----------
                                                        (in thousands)
      Balance Sheet Data (unaudited):
      Real estate, net                               $ 315,495       $ 403,161
      Other assets                                      60,231          82,163
      Total liabilities                                (54,646)        (46,831)
                                                     ---------       ---------
      Shareholders' equity                           $ 321,080       $ 438,493
                                                     =========       =========

                                                                For the
                                                           Six Months Ended
                                                               June 30,
                                                        2006            2005
                                                      --------        --------
                                                             (in thousands)
      Operating Data (unaudited):
      Rental revenue                                  $ 29,538        $ 27,721
      Other revenue                                      1,452             559
      Operating and maintenance expenses               (14,844)        (10,657)
      Depreciation and amortization                     (6,750)         (5,240)
      Interest expense and commitment fees              (7,006)         (2,730)
                                                      --------        --------
      Net income                                      $  2,390        $  9,653
                                                      ========        ========

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 $10,834,000 and $8,160,000 for the six months
ended June 30, 2006 and 2005, 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 $338,000 and $396,000 for
the six months ended June 30, 2006 and 2005, respectively. The Company is
typically entitled to interest on funds advanced to Sponsored REITs. The Company
recognized interest income of approximately $531,000 and $1,056,000 for the six
months ended June 30, 2006 and 2005, respectively, relating to these loans.


                                       10
<PAGE>

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

4.    Merger and Acquisition Transactions

On April 30, 2006, the Company issued 10,971,697 shares of common stock, $0.0001
par value per share, in exchange for all of the outstanding preferred stock of
the 2006 Target REITs (other than the shares of preferred stock in Blue Lagoon
held by the Company, which were cancelled) and paid approximately $12,000 in
lieu of fractional shares. The results of operations for each 2006 Target REIT
have been included in the Company's consolidated financial statements since May
1, 2006. The aggregate purchase price for the 2006 Target REITs was
approximately $235,384,000.

On June 27, 2006 the Company acquired a fifteen-story Class A office property
located at 3625 Cumberland Boulevard in Atlanta, Georgia ("One Overton Park")
for an aggregate purchase price of approximately $85,132,000.

With respect to the acquisition of each 2006 Target REIT, the excess of the
purchase price of the property over the historical cost of the property was
allocated to real estate investments and leases, including lease origination
costs. With respect to the acquisition of One Overton Park, the purchase price
of the property was allocated to real estate investments and leases, including
lease origination costs. Lease origination costs represent the value associated
with acquiring an in-place lease (i.e. the market cost to execute a similar
lease, including leasing commission, legal, vacancy, and other related costs).
The value assigned to buildings approximates their replacement cost; the value
assigned to land approximates its appraised value; and the value assigned to
leases approximates their fair value. Other assets and liabilities are recorded
at their historical costs, which approximates fair value. The following table
summarizes the estimated fair value of the assets acquired at the date of
acquisition:

                                                        Value of Assets Acquired
                                                        ------------------------
                                                             (in thousands)

      Real estate assets                                        $ 287,692
      Value of acquired real estate leases                         24,203
      Cash                                                         13,849
      Acquired unfavorable leases                                  (1,738)
      Other assets                                                    512
      Liabilities assumed                                          (4,002)
                                                                ---------
         Total                                                  $ 320,516
                                                                =========

Pro forma operating results for the Company, the 2006 Target REITs and One
Overton Place are shown in the following table. The results assume that the
mergers occurred and the shares of the Company's stock were issued on January 1,
2005 and that One Overton Place was acquired on January 1, 2005. The results are
not necessarily indicative of what the Company's actual results of operations
would have been for the period indicated, nor do they purport to represent the
results of operations of any future period.

<TABLE>
<CAPTION>
                                                    For Three Months Ended     For Six Months Ended
(unaudited)                                                June 30,                  June 30,
(in thousands except per share amounts)               2006          2005        2006          2005
                                                   ------------------------   -----------------------

<S>                                                 <C>            <C>         <C>           <C>
Revenue                                             $32,886        $27,054     $68,171       $51,705
                                                   ------------------------   -----------------------
Income from continuing operations                   $12,266        $10,175     $27,116       $19,582
                                                   ------------------------   -----------------------
Net income                                          $41,288        $11,500     $57,176       $23,470
                                                   ========================   =======================
Weighted average shares outstanding                  70,766         67,786      70,776        64,214
                                                   ========================   =======================

Income from continuing operations per share         $  0.17        $  0.15     $  0.38       $  0.30
                                                   ========================   =======================
Net income per share                                $  0.58        $  0.17     $  0.81       $  0.37
                                                   ========================   =======================
</TABLE>


                                       11
<PAGE>

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

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. During August 2005 the loan agreement was amended and restated.
Borrowings under the Loan Agreement bear interest at either the bank's prime
rate (8.25% at June 30, 2006) or a rate equal to LIBOR plus 125 basis points
(6.55% at June 30, 2006). The balance outstanding was $9,192,000 at June 30,
2006, and there was no balance outstanding at December 31, 2005. The weighted
average interest rate on amounts outstanding during the six months ended June
30, 2006 and 2005 was 6.44% and 4.91%, respectively; and for the year ended
December 31, 2005 was approximately 5.35%.

The Loan Agreement includes restrictions on property liens and requires
compliance with various financial covenants. Financial covenants include the
maintenance of at least $1,500,000 in operating cash accounts, a minimum
unencumbered cash and liquid investments balance and tangible net worth, and
compliance with various debt and operating income ratios, as defined in the Loan
Agreement. The Company was in compliance with the Loan Agreement's financial
covenants as of June 30, 2006 and December 31, 2005. Borrowings under the Loan
Agreement mature on August 18, 2008.

6.    Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted
average number of Company shares outstanding during the period. Diluted net
income per share reflects the potential dilution that could occur if securities
or other contracts to issue shares were exercised or converted into shares.
There were no potential dilutive shares outstanding at June 30, 2006 and 2005.

7.    Discontinued Operations

During the year ended December 31, 2005, the Company disposed of three apartment
properties and three commercial properties, which are in the real estate
segment. The three apartment properties included two located in Houston, Texas,
and one located in Baton Rouge, Louisiana. The three commercial properties
included one located in Folsom, California; one in Columbia, Maryland and one
located in San Diego, California. During the six months ended June 30, 2006, the
Company disposed of one apartment property and two commercial buildings, which
are in the real estate segment. The apartment property is located in Katy,
Texas. The two commercial properties are located in Santa Clara, California and
in Fairfax, Virginia. An agreement was also reached to sell an industrial
property located in Peabody, Massachusetts that is expected to be sold in the
third quarter of 2006 at a gain. Accordingly, this industrial property is
classified as an asset held for sale on the accompanying balance sheets.

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 Six Months Ended
(in thousands)                                        June 30,                     June 30,
                                                --------------------         --------------------
                                                  2006        2005             2006        2005
                                                --------    --------         --------    --------
<S>                                             <C>         <C>              <C>         <C>
Rental revenue                                  $  1,748    $  5,555         $  4,267    $ 11,203
Rental operating expenses                           (506)     (1,293)          (1,194)     (2,528)
Real estate taxes and insurance                     (161)       (712)            (473)     (1,398)
Depreciation and amortization                       (168)     (1,170)            (648)     (2,335)
Interest income                                       --           1               --           1
                                                --------    --------         --------    --------
Net income from discontinued operations         $    913    $  2,381         $  1,952    $  4,943
                                                ========    ========         ========    ========
</TABLE>


                                       12
<PAGE>

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

7.    Discontinued Operations (continued)

The gains from the properties sold are summarized below:

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

<S>                                    <C>                   <C>             <C>                 <C>           <C>
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 Drive       Fairfax, VA            Office         May 31, 2006         61,412        24,229
                                                                                               -------------------------
                                                                                                 $87,750       $28,108
                                                                                               =========================
</TABLE>

The gain recognition from the sale of the properties in Texas and Virginia was
deferred for tax purposes through the use of a Section 1031 exchange.

8.    Cash Dividends

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

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

      First quarter of 2006               $0.31         $18,536
      Second quarter of 2006              $0.31         $18,536

      First quarter of 2005               $0.31         $15,385
      Second quarter of 2005(a)           $0.41         $20,349

      (a)   Dividend paid in respect of four months of operations.

9.    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, 2005. 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 generally accepted accounting
principles in the United States (or 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; less recurring purchases of
property and equipment incurred to maintain the assets' value or for tenant
improvements ("Capital Expenditures") and payments for deferred leasing
commissions, plus proceeds from (payments to) funded reserves. 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.
Capital Expenditures, payments of deferred leasing commissions and the proceeds
from (payments to) the funded reserve are an adjustment to AFFO, as they
represent cash items not reflected in net income.


                                       13
<PAGE>

                        Franklin Street Properties Corp.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)
9.   Business Segments (continued)

The funded reserve represents funds that the Company has set aside from time to
time in anticipation of future capital needs. These reserves are typically used
for the payment of Capital Expenditures, deferred leasing commissions and
certain tenant allowances; however, there are no legal restrictions on their use
and they may be used for any Company purpose. 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. It is at the Company's
discretion to retain a portion of AFFO for operational needs. We believe that in
order to facilitate a clear understanding of the results of the Company, AFFO
should be examined in connection with net income and cash flows from operating,
investing and financing activities in the consolidated financial statements.

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

<TABLE>
<CAPTION>
                                                              Investment
                                                               Banking/
                                                Real Estate   Investment
(in thousands)                                   Operations    Services        Total
                                                -----------   -----------    --------
<S>                                              <C>           <C>           <C>
Three Months Ended March 31, 2006
Net Income                                       $ 13,054      $     85      $ 13,139
Equity 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
Capital Expenditures                                 (232)          (36)         (268)
Payment of deferred leasing costs                    (156)           --          (156)
Proceeds from funded reserves                         388            36           424
                                                 --------      --------      --------
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 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)
Capital Expenditures                               (1,492)          (24)       (1,516)
Payment of deferred leasing costs                  (2,617)           --        (2,617)
Proceeds from funded reserves                       4,109            24         4,133
                                                 --------      --------      --------
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 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
Capital Expenditures                               (1,724)          (60)       (1,784)
Payment of deferred leasing costs                  (2,773)           --        (2,773)
Proceeds from funded reserves                       4,497            60         4,557
                                                 --------      --------      --------
Adjusted Funds From Operations                   $ 39,759      $    634      $ 40,393
                                                 ========      ========      ========
</TABLE>


                                       14
<PAGE>

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

9.    Business Segments (continued)

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

<TABLE>
<CAPTION>
                                                            Investment
                                                             Banking/
                                              Real Estate   Investment
(in thousands)                                 Operations    Services       Total
                                              -----------   -----------   --------
<S>                                            <C>           <C>          <C>
Three Months Ended March 31, 2005
Net Income                                     $ 10,346      $     77     $ 10,423
Equity in income of non-consolidated REITs         (665)           --         (665)
Distributions from non-consolidated REITs           599            --          599
Depreciation and amortization                     3,598            34        3,632
Straight line rent                                 (307)           --         (307)
Capital Expenditures                               (327)           --         (327)
Payment of deferred leasing costs                   (95)           --          (95)
Proceeds from funded reserves                       422            --          422
                                               --------      --------     --------

Adjusted Funds From Operations                 $ 13,571      $    111     $ 13,682
                                               ========      ========     ========

Three Months Ended June 30, 2005
Net Income                                     $  9,362      $     92     $  9,454
Estimated loss on sale of asset                   1,055            --        1,055
Equity in income of non-consolidated REITs         (303)           --         (303)
Distributions from non-consolidated REITs           381            --          381
Depreciation and amortization                     5,448            37        5,485
Straight line rent                                 (417)           --         (417)
Capital Expenditures                             (1,601)           --       (1,601)
Payment of deferred leasing costs                  (216)           --         (216)
Proceeds from funded reserves                     1,817            --        1,817
                                               --------      --------     --------

Adjusted Funds From Operations                 $ 15,526      $    129     $ 15,655
                                               ========      ========     ========

Six Months Ended June 30, 2005
Net Income                                     $ 19,708      $    169     $ 19,877
Estimated loss on sale of asset                   1,055            --        1,055
Equity in income of non-consolidated REITs         (968)           --         (968)
Distributions from non-consolidated REITs           980            --          980
Depreciation and amortization                     9,046            71        9,117
Straight line rent                                 (724)           --         (724)
Capital Expenditures                             (1,928)           --       (1,928)
Payment of deferred leasing costs                  (311)           --         (311)
Proceeds from funded reserves                     2,239            --        2,239
                                               --------      --------     --------

Adjusted Funds From Operations                 $ 29,097      $    240     $ 29,337
                                               ========      ========     ========
</TABLE>


                                       15
<PAGE>

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

9.    Business Segments (continued)

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

                                                         Investment
                                                          Banking/
                                           Real Estate   Investment
(in thousands)                              Operations    Services       Total
                                           -----------   -----------   --------

Three Months Ended June 30, 2006:
     Revenue                                 $ 25,353     $  3,783     $ 29,136
     Interest income                              743           13          756
     Interest expense                             546           --          546
     Income from discontinued operations          913           --          913
     Capital expenditures                       1,492           24        1,516

Six Months Ended June 30, 2006:
     Revenue                                 $ 50,619     $  5,950     $ 56,569
     Interest income                            1,323           22        1,345
     Interest expense                           1,140           --        1,140
     Income from discontinued operations        1,952           --        1,952
     Capital expenditures                       1,725           60        1,785

Identifiable Assets as of June 30, 2006      $931,927     $  5,466     $937,393


Three Months Ended June 30, 2005:
     Revenue                                 $ 18,069     $  1,801     $ 19,870
     Interest income                              360            7          367
     Interest expense                             788           --          788
     Income from discontinued operations        2,381           --        2,381
     Capital expenditures                       1,601           --        1,601

Six Months Ended June 30, 2005:
     Revenue                                 $ 32,764     $  4,638     $ 37,402
     Interest income                              582           15          597
     Interest expense                           1,743           --        1,743
     Income from discontinued operations        4,943           --        4,943
     Capital expenditures                       1,928           --        1,928

Identifiable Assets as of June 30, 2005      $714,065     $  3,863     $717,928

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 stockholders, thereby effectively
subjecting the distributed net income of the Company to taxation at the
stockholder 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 stockholders it can
have and the concentration of their ownership, and the amount of the Company's
income that must be distributed annually.


                                       16
<PAGE>

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

10.   Income Taxes (continued)

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, FSP Investments LLC, a wholly-owned
subsidiary of the Company, elected to be treated as a TRS. As a result, FSP
Investments LLC 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 for when FSP Investments LLC 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 income tax expense reflected in the consolidated statements of income
relates only to the TRS. The expense differs from the amounts computed by
applying the Federal statutory rate of 34% to income before income taxes as
follows:

                                                                 For the
                                                            Six Months Ended
                                                                June 30,
      (in thousands)                                       2006          2005
                                                         ----------------------

      Federal income tax expense at statutory rate         $341           $96
      Increase in taxes resulting from:
         State income taxes, net of federal impact           63            18
                                                         ----------------------
                                                           $404          $114
                                                         ======================

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 July 14, 2006 to
stockholders of record on July 31, 2006 payable on August 21, 2006.

On July 24, 2006, the Company paid the entire balance outstanding under its Loan
Agreement of $9,192,000.

In July 2006, an agreement was reached to sell an industrial property in
Peabody, Massachusetts which is expected to be sold in the third quarter of 2006
at a gain.


                                       17
<PAGE>

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

The following discussion should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this report and in our
Annual Report on Form 10-K for the year ended December 31, 2005. 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

FSP Corp., or the Company, operates in two business segments: real estate
operations and investment banking/investment services. The real estate
operations segment involves real estate rental operations, leasing, interim
acquisition financing, development services and asset/property management
services. The investment banking/investment services segment involves the
provision of real estate investment 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 fully equitize the
Sponsored REITs through sale of preferred stock in private placements.

The main factor that affects our real estate operations is the broad economic
market conditions in the United States. These market conditions affect the
occupancy levels and the rent levels on both a national and local level. We
believe we have no influence on these 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 customers' risk/reward
profile for providing a stream of income and as a long-term hedge against
inflation.

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, 2005.

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, 2005.


                                       18
<PAGE>

Trends and Uncertainties

Real Estate Operations

Our property operations during the first half of 2006 produced profit results
that were generally in line with management's expectations. Most of our
properties are suburban office buildings, and, in most markets, it is
management's opinion that we are continuing to find improving conditions for
both occupancy and rental rates. However, there are still many tenant leases
which were signed at the height of the most recent office market cycle, which we
believe was approximately from 1997-2001. Consequently, we and perhaps many
other office property owners continue to believe we face rent roll downs as old
leases expire and new ones are signed. We also believe that national occupancy
levels continue to improve, but rent levels in most office markets are still
only modestly increasing from a very low level. We believe that significant
broad-based rental increases, above the 1997-2001 peak, are probably one to
three years away, assuming continued overall U.S. economic growth and
traditional cyclical real estate dynamics. We are aggressively managing our
lease turnover to maximize our rental operations' contribution as the office
markets continue to climb back up their cyclical curve. Concern always remains
about the possibility of a new, significant downturn in the broader economy that
would reverse the positive trends our markets are starting to see. Lofty
worldwide energy prices, inflation, interest rates and other geopolitical events
are likely to be influencing factors.

The portfolio was approximately 91% leased at June 30, 2006, which was generally
consistent with the quarter ended March 31, 2006. At the start of 2006, we
forecasted that approximately 17% of the square footage in our real estate
portfolio would expire during fiscal year 2006. As a result of expected lease
expirations, new leases, property sales, acquisitions and mergers, we are now
forecasting that approximately 7% of the square footage in our real estate
portfolio will expire during the balance of fiscal year 2006. We cannot predict
if these tenants will renew their leases or what the terms and conditions of any
lease renewals will be, although we expect to renew or sign new leases at
current market rates for the locations where the buildings are located, which in
most cases will be below the expiring rental rates. Based upon all available
information at this time, we are forecasting that approximately 12% of the
square footage in our real estate portfolio will expire during fiscal year 2007.

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. Both the number
of Sponsored REIT syndications completed and the amount of equity raised in 2005
were below our expectations. During the first half of 2006 our investment
banking group completed sales of preferred stock in a private placement, which
we call syndication proceeds, of $84.4 million. Future business in this area is
unpredictable.

Our property acquisition executives continue to be concerned about high
valuation levels for prime commercial investment real estate. It appears that a
combination of factors, including moderate interest rates, a growing general
economy and substantially increased capital allocation to real estate assets is
increasing prices on many properties we would have an interest in acquiring.
This upward pressure on prices has caused capitalization rates to fall and
prices per square foot to rise. Specifically, our acquisition executives are
having difficulty identifying enough property at a price acceptable under our
investment criteria to grow our overall investment banking/investment services
business. Lower revenue from this business has the effect of reducing net income
and Adjusted Funds From Operations (AFFO). As the first half of 2006 ended,
valuation levels for many top quality investment properties remained at
historically high levels, with significant competition from a variety of capital
sources to acquire them. We continue to rely solely on our in-house investment
executives to access interested investors who have capital they can afford to
place in an illiquid position for an indefinite period of time (i.e., invest in
a Sponsored REIT). We also continue to evaluate whether our in-house sales force
is capable, either through our existing client base or through new clients, of
raising sufficient investment capital in Sponsored REITs to achieve future
performance objectives.

Results of Operations

We consider contribution from each of our two business segments, real estate
operations and investment banking/investment services, in evaluating
performance. Contribution includes revenue from each segment, less related
expenses such as rental property operating expenses, depreciation and
amortization, commissions and interest income and expense. Selling, general and
administrative expenses arise primarily from corporate related expenses and
costs associated with our headquarters in Wakefield, Massachusetts where both
business segments are managed. Over the last few years there has been a shift in
expense and cost allocation between the segments from being primarily related to
investment banking activity to a greater focus on real estate operations. This
shift has occurred as a result of:

      o     The increase in the number of owned properties in our real estate
            portfolio, and related direct acquisition and disposition of real
            estate assets;

      o     The trend to a lower level of syndication proceeds from the
            investment banking segment; and

      o     An increased level of management time related to our real estate
            operations.


                                       19
<PAGE>

As a result of this internal shift, we compare the total selling, general and
administrative expenses from period-to-period as we believe it to be more
meaningful than comparison of allocated expenses to each segment.

The following table shows financial results from each segment for the three
months ended June 30, 2006 and 2005:

<TABLE>
<CAPTION>
(in thousands)
                                                            Three months ended June 30,
                                                        ----------------------------------
Real Estate Operations                                    2006         2005       Change
                                                          ----         ----       ------
<S>                                                      <C>         <C>         <C>
Revenues:
     Rental income                                       $21,463     $16,191     $ 5,272
     Transaction fees                                      3,191       1,397       1,794
     Management fees and interest income from loans          699         481         218
     Other income                                                         --          --
                                                        ----------------------------------
                                                          25,353      18,069       7,284
                                                        ----------------------------------
Expenses:
     Real estate operating expenses                        5,010       3,253       1,757
     Real estate taxes and insurance                       3,357       2,205       1,152
     Depreciation and amortization                         5,537       3,451       2,086
     Interest                                                546         788        (242)
                                                        ----------------------------------
                                                          14,450       9,697       4,753
                                                        ----------------------------------
Other items:
     Interest income                                         743         360         383
     Equity in earnings in non-consolidated REIT's           156         302        (146)
                                                        ----------------------------------
                                                             899         662         237
                                                        ----------------------------------

Contribution from real estate                             11,802       9,034       2,768
                                                        ----------------------------------

Investment Banking/Investment Services:
     Syndication fees                                      3,505       1,603       1,902
     Transaction fees                                        278         198          80
                                                        ----------------------------------
                                                           3,783       1,801       1,982
                                                        ----------------------------------
Expenses:
     Commissions                                           1,809         867         942
     Depreciation and amortization                            32          36          (4)
                                                        ----------------------------------
                                                           1,841         903         938
                                                        ----------------------------------
Other items:
     Interest income                                          13           7           6
     Taxes on income                                        (347)        (70)       (277)
                                                        ----------------------------------
                                                            (334)        (63)       (271)
                                                        ----------------------------------

Contribution from investment banking                       1,608         835         773
                                                        ----------------------------------

Selling, general and administrative expenses               1,954       1,741         213
                                                        ----------------------------------

Income from continuing operations (Combined)              11,456       8,128       3,328
Discontinued operations, less applicable income tax:
Income (Loss) from discontinued operations                   913       2,381      (1,468)
Gains (estimated loss) on sales of assets, net            28,108      (1,055)     29,163
                                                        ----------------------------------
     Net income                                          $40,477     $ 9,454     $31,023
                                                        ==================================
</TABLE>


                                       20
<PAGE>

General

      The real estate segment includes operating results of properties held in
our real estate portfolio, commitment fee income earned on real estate loans and
development fees earned for services provided. During 2005 we increased the real
estate portfolio by four properties from a merger and two properties by
acquisitions completed during the year. We also sold six properties in the
second half of 2005 and reached an agreement to sell another property, which
closed in the second quarter of 2006. As a result, as of December 31, 2005 we
operated 27 properties and had one property held for sale. During the first six
months of 2006 we acquired the five 2006 Target REITs by merger, acquired two
additional properties and sold three properties, including the property held for
sale at December 31, 2005. We also reached agreement to sell another property,
which is expected to close in the third quarter of 2006. As a result, as of June
30, 2006 we operated 31 properties and had one property held for sale.

Acquisitions, Mergers and Dispositions:

      In February 2005 we acquired one commercial property in Colorado, on April
30, 2005 we completed the acquisition by merger of the four 2005 Target REITs,
and in July 2005 we acquired one commercial property in Indiana. 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 and on June
27, 2006 we acquired a commercial property in Georgia. 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 six months ended June 30, 2006 as
compared to the same periods in 2005 are primarily a result of the timing of
these acquisitions and subsequent contribution of these acquired properties. The
operating results of the nine properties sold and the property held for sale
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 six months ended June 30, 2006 our investment banking/investment
services segment had total gross proceeds of $55.2 and 84.4 million,
respectively, which was derived from the syndication of FSP Phoenix Tower Corp.
For the three and six months ended June 30, 2005 there were total gross proceeds
of $24.3 million and $61.3 million, respectively, which included completion of
the syndication for FSP 505 Waterford Corp. and a continuing syndication of FSP
Galleria North Corp., which had been started in the fourth quarter of 2004. As a
result, total gross proceeds for the three and six months ended June 30, 2006
increased $30.9 million and $23.1 million, respectively, compared to the same
periods in 2005. The syndication currently in process commenced in February
2006, as compared to 2005, which had syndications in process for the entire six
month period.

Comparison of the three months ended June 30, 2006 to the three months ended
June 30, 2005

      Overview

      Total revenues increased $9.2 million or 46.6%, to $29.1 million for the
three months ended June 30, 2006, as compared to $19.9 million for the three
months ended June 30, 2005. Total expenses increased $5.9 million or 47.8%, to
$18.2 million for the three months ended June 30, 2006. The increases were
primarily attributable to properties acquired in the last twelve months and
increases in investment banking activity in the three months ended June 30, 2006
compared to the three months ended June 30, 2005.

      Each segment is discussed below.

      Real Estate Operations

      Contribution from the real estate segment increased $2.8 million or 30.6%,
to $11.8 million for the three months ended June 30, 2006 compared to $9.0
million for the three months ended June 30, 2005. The increase is primarily
attributable to:

      o     An increase in real estate operating income of $2.4 million to $13.1
            million for the three months ended June 30, 2006 compared to $10.7
            million for same period in 2005. We define real estate operating
            income as rental revenues less real estate operating expenses, real
            estate taxes and insurance. The increase was primarily a result of:
            o     Real estate operating income from our acquisition of the four
                  2005 Target REITs by merger on April 30, 2005, acquisitions by
                  direct purchase of properties in Colorado during February
                  2005, Indiana during July 2005, Texas during February 2006,
                  our acquisition of the five 2006 Target REITs by merger on
                  April 30, 2006, and to a lesser extent, our acquisition of a
                  property in Georgia in June 2006. Real estate operating income
                  from acquisitions is included in current operating income.
                  Each of these acquisitions resulted in an increase in real
                  estate operating income for the second quarter of 2006
                  compared to the second quarter of 2005; and
            o     A $0.2 million lease termination payment from a tenant in
                  Texas in the second quarter of 2006.


                                       21
<PAGE>

      o     A decrease in interest expense of $0.2 million resulting from a
            lower average loan balance outstanding for syndications in process
            during the three months ended June 30, 2006 compared to the three
            months ended June 30, 2005. A contributing factor was the use of
            cash to finance a portion of the syndication in process as opposed
            to bank debt during the 2006 period. The decrease was partially
            offset by higher interest rates and loan fees in the 2006 period
            than the 2005 period.
      o     An increase to interest income of $0.4 million during the three
            months ended June 30, 2006, which was primarily a result of higher
            interest rates earned on higher average balances of cash, cash
            equivalents and other investments compared to the three months ended
            June 30, 2005.
      o     A $1.8 million increase in transaction (loan commitment) fees, which
            was principally caused by the increase in gross syndication proceeds
            in the second quarter of 2006 compared to the same period in 2005.
      o     A net increase in management fees and loan interest income of $0.2
            million as a result of increased loan interest income on a larger
            loan balance and higher interest rates for the property in
            syndication, which was partially offset by lower management fees
            derived fewer properties managed, during the second quarter of 2006
            as compared to the second quarter of 2005.

These increases were partially offset by:

      o     An increase in depreciation expense of $2.1 million to $5.5 million
            for the three months ended June 30, 2006 as compared to $3.4 million
            for the same period in 2005. The increase was primarily a result of
            property acquisitions over the last twelve months.
      o     A decrease in equity in income from non-consolidated REITs of $0.1
            million, which was principally a result of the increase in gross
            syndication proceeds during the second quarter of 2006 compared to
            2005.

      Investment Banking/Investment Services

      Contribution from the investment banking and services segment was $1.6
million for the three months ended June 30, 2006; an increase of $0.8 million,
compared to the three months ended June 30, 2005. The increase was primarily
attributable to:

      o     An increase in syndication and transaction fee revenues of $2.0
            million, which was primarily attributable to a higher level of gross
            syndication proceeds during the three months ended June 30, 2006
            compared to the three months ended June 30, 2005.

The increase was partially offset by:

      o     An increase in commission expense of $0.9 million, which relates to
            the increase in gross syndication proceeds.
      o     An increase to income tax expense or $0.3 million as a result of
            greater pre-tax income from investment banking for the three months
            ended June 30, 2006 compared to the three months ended June 30,
            2005.

      Selling, general and administrative expenses

      Selling, general and administrative expenses increased $0.3 million to
$2.0 million for the three months ended June 30, 2006 compared to $1.7 million
for the three months ended June 30, 2005, which were primarily from costs of
monitoring and managing a larger portfolio of REITs and expenses incurred
related to the listing of our stock on the American Stock Exchange, which
commenced on June 2, 2005. We had approximately 40 employees as of June 30, 2006
at our headquarters in Wakefield compared to 39 employees as of June 30, 2005.

      Income from continuing operations

      Contribution from both segments, net of selling, general and
administrative expenses for the second quarter of 2006 increased $3.3 million to
$11.5 million compared the second quarter of 2005 for the reasons discussed
above.

      Discontinued Operations

      During the second quarter of 2005 we recorded an estimated loss of $1.1
million from an agreement to sell an office property located in Folsom,
California. During the second half of 2005, we sold six properties and
classified one property in Santa Clara, California as held for sale, which was
sold during the second quarter of 2006. During the three months ended June 30,
2006, we completed the sale of an office property in Fairfax, Virginia,
completed the sale of an apartment property in Katy, Texas, and reached an
agreement to sell an industrial property in Peabody, Massachusetts. The
industrial property in Peabody, Massachusetts is expected to be sold at a gain


                                       22
<PAGE>

and is classified as an asset held for sale. Accordingly, each of the six
properties sold in 2005, the three properties sold in 2006 and the property held
for sale as of June 30, 2006 are reported as discontinued operations on our
financial statements for the relevant periods presented. Income from
discontinued operations of $0.9 million for the three months ended June 30, 2006
resulted from the three properties we sold and the one property that is held for
sale. Income from discontinued operations of $2.4 million for the three months
ended June 30, 2005 resulted from the nine properties sold in 2006 and 2005 and
the property held for sale at June 30, 2006. The three properties sold during
the three months ended June 30, 2006 resulted in a gain of $28.1 million.

      During the first and third quarter of 2005 we acquired two office
properties, one in Englewood, Colorado and another in Indianapolis, Indiana,
through borrowings under the Loan Agreement. During February 2006 we acquired an
office property in Addison, Texas with cash. Proceeds from the sale of
properties during 2005 were used to repay the borrowings and provided a source
of cash used to acquire the property in 2006. Proceeds from the sale of the
three properties sold during the second quarter of 2006 were used to acquire an
office property in Atlanta, Georgia on June 27, 2006.

      We will continue to evaluate our portfolio, and from time-to-time may
decide to dispose of other properties.

Net Income

      Net income for the three months ended June 30, 2006 increased $31.0
million to $40.5 million compared to $9.5 million for the reasons discussed
above.


                                       23
<PAGE>

The following table shows financial results from each segment for the six months
ended June 30, 2006 and 2005:

<TABLE>
<CAPTION>
(in thousands)
                                                                       Six months ended June 30,
                                                           ------------------------------------------------
Real Estate Operations                                        2006                2005              Change
                                                              ----                ----              ------
<S>                                                        <C>                 <C>                 <C>
Revenues:
     Rental income                                         $ 44,844            $ 27,791            $ 17,053
     Transaction fees                                         4,884               3,522               1,362
     Management fees and interest income from loans             891               1,451                (560)
     Other income                                                                    --                  --
                                                           ------------------------------------------------
                                                             50,619              32,764              17,855
                                                           ------------------------------------------------
Expenses:
     Real estate operating expenses                           9,783               5,593               4,190
     Real estate taxes and insurance                          5,944               3,874               2,070
     Depreciation and amortization                           10,669               5,825               4,844
     Interest                                                 1,140               1,743                (603)
                                                           ------------------------------------------------
                                                             27,536              17,035              10,501
                                                           ------------------------------------------------
Other items:
     Interest income                                          1,323                 582                 741
     Equity in earnings in non-consolidated REIT's              236                 968                (732)
                                                           ------------------------------------------------
                                                              1,559               1,550                   9
                                                           ------------------------------------------------

Contribution from real estate                                24,642              17,279               7,363
                                                           ------------------------------------------------

Investment Banking/Investment Services:
     Syndication fees                                         5,426               4,122               1,304
     Transaction fees                                           524                 516                   8
                                                           ------------------------------------------------
                                                              5,950               4,638               1,312
                                                           ------------------------------------------------
Expenses:
     Commissions                                              2,832               2,191                 641
     Depreciation and amortization                               64                  71                  (7)
                                                           ------------------------------------------------
                                                              2,896               2,262                 634
                                                           ------------------------------------------------
Other items:
     Interest income                                             22                  15                   7
     Taxes on income                                           (404)               (114)               (290)
                                                           ------------------------------------------------
                                                               (382)                (99)               (283)
                                                           ------------------------------------------------

Contribution from investment banking                          2,672               2,277                 395
                                                           ------------------------------------------------

Selling, general and administrative expenses                  3,758               3,567                 191
                                                           ------------------------------------------------

Income from continuing operations (Combined)                 23,556              15,989               7,567
Discontinued operations, less applicable income tax:
Income (Loss) from discontinued operations                    1,952               4,943              (2,991)
Gains (estimated loss) on sales of assets, net               28,108              (1,055)             29,163
                                                           ------------------------------------------------
     Net income                                            $ 53,616            $ 19,877            $ 33,739
                                                           ================================================
</TABLE>


                                       24
<PAGE>

Comparison of the six months ended June 30, 2006 to the six months ended June
30, 2005:

      Overview

      Total revenues increased $19.2 million, or 51.2%, to $56.6 million for the
six months ended June 30, 2006, as compared to $37.4 million for the six months
ended June 30, 2005. Total expenses increased $11.3 million or 49.5% to $34.2
million for the six months ended June 30, 2006 compared to the six months ended
June 30, 2005. The increases were primarily attributable to properties acquired
in the last twelve months and increases in investment banking activity in the
six months ended June 30, 2006 compared to the six months ended June 30, 2005.

Each segment is discussed in greater detail below.

      Real Estate Operations

      Contribution from the real estate segment increased $7.4 million or 42.6%
to $24.6 million for the six months ended June 30, 2006 compared to the six
months ended June 30, 2005. The increase is primarily attributable to:
      o     An increase in real estate operating income of $10.8 million to
            $29.1 million for the six months ended June 30, 2006 compared to
            $18.3 million for same period in 2005. We define real estate
            operating income as rental revenues less real estate operating
            expenses, real estate taxes and insurance. The increase was
            primarily a result of:
            o     Real estate operating income from our acquisition of the four
                  2005 Target REITs by merger on April 30, 2005, acquisitions by
                  direct purchase of properties in Colorado during February
                  2005, Indiana during July 2005, Texas during February 2006,
                  our acquisition of the five 2006 Target REITs by merger on
                  April 30, 2006, and to a lesser extent, our acquisition of a
                  property in Georgia in June 2006. Real estate operating income
                  from acquisitions is included in current operating income.
                  Each of these acquisitions resulted in an increase in real
                  estate operating income for the six months ended June 30, 2006
                  compared to same period in 2005; and
            o     Lease termination payments of $4.8 million, including $4.6
                  million from a tenant in Illinois and $0.2 million from a
                  tenant in Texas during the six months ended June 30, 2006.
      o     A decrease in interest expense of $0.6 million resulting from a
            lower average loan balance outstanding for syndications in process
            during the six months ended June 30, 2006 compared to the six months
            ended June 30, 2005. A contributing factor was the use of cash to
            finance the syndication in process as opposed to bank debt during
            the 2006 period. The decrease was partially offset by higher
            interest rates and loan fees in the 2006 period than the 2005
            period.
      o     An increase to interest income of $0.7 million during the six months
            ended June 30, 2006, which was primarily a result of higher interest
            rates earned on higher average balances of cash, cash equivalents
            and other investments compared to the six months ended June 30,
            2005.
      o     A $1.3 million increase in transaction (loan commitment) fees, which
            was principally caused by the increase in gross syndication proceeds
            in the six months ended June 30, 2006 compared to the same period in
            2005.

These increases were partially offset by:

      o     A decrease in management fees and loan interest income of $0.6
            million principally as a result of decreased loan interest income as
            there was no loan balance outstanding in 2006 until late February,
            as compared to the six months ended June 30, 2005, when a large
            syndication was underway for the entire six month period. The impact
            of this decrease was partially mitigated by an increase in overall
            interest rates in the six months ended June 30, 2006 compared to the
            prior period.
      o     An increase in depreciation expense of $4.8 million to $10.6 million
            for the six months ended June 30, 2006 as compared to $5.8 million
            for the same period in 2005. The increase was primarily a result of
            property acquisitions over the last twelve months.
      o     A decrease in equity in income from non-consolidated REITs of $0.7
            million, which was principally a result of the increase in gross
            syndication proceeds on syndications in process during the six
            months ended June 30, 2006 compared to the same period in 2005.

      Investment Banking/Investment Services

      Contribution from the investment banking and services segment increased
$0.4 million to $2.7 million for the six months ended June 30, 2006 compared to
the six months ended June 30, 2005. The increase was primarily attributable to:

      o     An increase in syndication fee revenues of $1.3 million, which was
            primarily attributable to a higher level of gross syndication
            proceeds during the six months ended June 30, 2006 compared to the
            six months ended June 30, 2005.


                                       25
<PAGE>

The increase was partially offset by:

      o     An increase in commission expense of $0.6 million, which relates to
            the increase in gross syndication proceeds.
      o     An increase to income tax expense or $0.3 million as a result of
            greater pre-tax income from investment banking for the six months
            ended June 30, 2006 compared to the six months ended June 30, 2005.

      Selling, general and administrative expenses

      Selling, general and administrative expenses increased $0.2 million to
$3.8 million for the six months ended June 30, 2006 compared to $3.6 million for
the six months ended June 30, 2005, which were primarily from costs of
monitoring and managing a larger portfolio of REITs and expenses incurred
related to the listing of our stock on the American Stock Exchange, which
commenced on June 2, 2005. We had approximately 40 employees as of June 30, 2006
at our headquarters in Wakefield compared to 39 employees as of June 30, 2005.

      Income from continuing operations

      Contribution from both segments, net of selling, general and
administrative expenses for the six months ended June 30, 2006 increased $7.6
million to $23.6 million compared to $16.0 for the six months ended June 30,
2005 for the reasons discussed above.

      Discontinued Operations

      During the second quarter of 2005 the Company recorded an estimated loss
of $1.1 million from an agreement to sell an office property located in Folsom,
California. During the second half of 2005, the Company sold six properties and
classified one property in Santa Clara, California as held for sale, which was
sold during the second quarter of 2006. During the six months ended June 30,
2006, the Company completed the sale of an office property in Fairfax, Virginia,
and an apartment property in Katy, Texas, and reached an agreement to sell an
industrial property in Peabody, Massachusetts that is expected to be sold at a
gain in the third quarter of 2006, and is classified as held for sale.
Accordingly, each of the six properties sold in 2005 and the three properties
sold in 2006 and the property held for sale as of June 30, 2006 are reported as
discontinued operations on our financial statements for the relevant periods
presented. Income from discontinued operations of $2.0 million for the six
months ended June 30, 2006 resulted from the three properties the Company sold
and the one property that is held for sale. Income from discontinued operations
of $4.9 million for the six months ended June 30, 2005 resulted from the nine
properties sold in 2006 and 2005 and the property held for sale at June 30,
2006. The three properties sold during the six months ended June 30, 2006
resulted in a gain of $28.1 million.

      During the first and third quarter of 2005 the Company acquired two office
properties, one in Englewood, Colorado and another in Indianapolis, Indiana,
using borrowings under the Loan Agreement. During February 2006 the Company
acquired an office property in Addison, Texas with cash. Proceeds from the sale
of properties during 2005 were used to repay the borrowings and provided a
source of cash used to acquire the property in 2006. Proceeds from the sale of
the three properties sold during the second quarter of 2006 were used to acquire
an office property in Atlanta, Georgia on June 27, 2006.

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

Net Income

      Net income for the six months ended June 30, 2006 increased $33.7 million
to $53.6 million compared to $19.9 million for the reasons discussed above.


                                       26
<PAGE>

Liquidity and Capital Resources

      Cash and cash equivalents were $57.6 million at June 30, 2006 and $69.7
million at December 31, 2005. This decrease of $12.1 million is attributable to
$38.1 million provided by operating activities, less $22.2 million used for
investing activities, plus $28.0 million used for financing activities.
Management believes that existing cash, cash anticipated to be generated
internally by operations, cash anticipated to be generated by fees and
commissions from the sale of preferred stock in future Sponsored REITs and our
line of credit will be sufficient to meet working capital requirements and
anticipated capital expenditures and improvements for at least the next 12
months. Although there is no guarantee that we will be able to obtain the funds
necessary for our future growth, we anticipate generating funds from continuing
real estate operations and from fees and commissions from the sale of shares in
newly formed Sponsored REITs. We believe that we have adequate funds to cover
unusual expenses and capital improvements, in addition to normal operating
expenses. Our ability to maintain or increase our level of dividends to
stockholders, however, depends in significant part upon the level of interest on
the part of investors in purchasing shares of Sponsored REITs and the level of
rental income from our real properties.

      Operating Activities

      The cash provided by our operating activities of $38.1 million for the six
months ended June 30, 2006 is primarily attributable to net income of $53.6
million excluding non-cash activity, consisting primarily of gains on sales of
assets of $28.1 million, depreciation and amortization of $14.6 million; cash
received from non-consolidated REITs in excess of income of $0.2 million and
insignificant changes in operating assets and liabilities of $0.5 million. These
increases were partially offset by payments of deferred leasing commissions of
$2.7 million.

      Investing Activities

      Our cash used for investing activities of $22.2 million for the six months
ended June 30, 2006 is primarily attributable to the purchase of properties in
Addison, Texas for $26.4 million and Atlanta, Georgia for $85.2 million,
investment in assets held for syndication of $9.6 million, and, additions to
real estate investments and office equipment of approximately $1.8 million.
These uses were partially offset by cash added as a result of our acquisition of
the five 2006 Target REITs on April 30, 2006 of $13.8 million, and proceeds from
the sale of properties of $87.8 million.

      Financing Activities

      Our cash used for financing activities of $28.0 million for the six months
ended June 30, 2006 is primarily attributable to distributions to stockholders
of $37.1 million and offering costs associated with the use of a shelf filing of
$0.1 million, which was partially offset by net proceeds from our line of credit
of $9.2 million used to purchase assets held for syndication.

      Line of Credit

      We have a revolving line of credit agreement (the "Loan Agreement") with a
group of banks providing for borrowings at the Company's election of up to
$150,000,000. Borrowings under the Loan Agreement bear interest at either the
bank's prime rate (8.25% at June 30, 2006) or a rate equal to LIBOR plus 125
basis points (6.55% at June 30, 2006). The balance outstanding was $9,192,000 at
June 30, 2006, and there was no balance outstanding at December 31, 2005. As of
June 30, 2006, we were in compliance with all bank covenants required by the
Loan Agreement.

      Contingencies

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

      Assets Held for Syndication

      As of June 30, 2006 there was one asset held for syndication, consisting
of the office property owned by FSP Phoenix Tower Corp. and as of December 31,
2005 there were no assets held for syndication.


                                       27
<PAGE>

      Assets Held for Sale

      During the second quarter of 2006 an agreement was reached to sell a
commercial property in Peabody, Massachusetts that is expected to be sold in the
third quarter of 2006 at a gain. Accordingly, as of June 30, 2006, the property
is classified as held for sale on the balance sheet at its respective cost
basis.

      Related Party Transactions

      During the six months ended June 30, 2006, we began the syndication of FSP
Phoenix Tower Corp. On April 30, 2006, the Company acquired the five 2006 Target
REITs by merging them 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. Previously, the Company held a
preferred stock investment in Blue Lagoon, which was one of the 2006 Target
REITs acquired by merger on April 30, 2006, and accordingly was eliminated when
recording the merger. We did not enter into any other significant transactions
with related parties during the six months ended June 30, 2006. For a discussion
of transactions between us and related parties during 2005, 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, 2005.

      Other Considerations

      We generally pay the ordinary annual operating expenses of our properties
from the rental revenue generated by the properties. For the six months ended
June 30, 2006 and 2005, the rental income exceeded the expenses for each
individual property, with the exception of a property located in Westford,
Massachusetts, a property located in Santa Clara, California and a property
located in Folsom, California. The single tenant lease at the property located
in Westford, Massachusetts expired on October 31, 2004. We have not re-let this
property and expect that it will not produce revenue to cover its expenses in
the third quarter of 2006, and had operating expenses of approximately $61,000
and $135,000 for the three and six months periods ended June 30, 2006. During
the three months ended June 30, 2005, the Company received a restoration and
settlement payment from a tenant at the property located in Westford,
Massachusetts of $84,000, which exceeded operating expenses for the three month
period by $13,000. For the six months ended June 30, 2005, the property located
in Westford, Massachusetts had operating expenses, net of the restoration and
settlement payment of approximately $73,000. The property located in Santa
Clara, California has been vacant since October 2005 and had operating expenses
of $30,000 and $70,000 for approximately the two and five month periods ending
through May 31, 2006, respectively, on which date the property was sold at a
gain. The property located in Folsom, California, which was sold on July 13,
2005, had been vacant since June 2003 and had operating expenses of
approximately $70,000 and $158,000 for the three and six months ended June 30,
2005, respectively.


                                       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 six
months ended June 30, 2006.

      We borrow from time-to-time on our line of credit. These borrowings bear
interest at the bank's base rate (8.25% at June 30, 2006) or at LIBOR plus 125
basis points (6.55% at June 30, 2006), as elected by us when requesting funds.
As of June 30, 2006, $9,192,000 was outstanding under the line of credit
consisting of one borrowing at the LIBOR plus 125 basis point rate. We have used
funds drawn on our line of credit for the purpose of making interim mortgage
loans to Sponsored REITs and for interim financing of acquisitions. Generally
interim mortgage loans bear interest at the same variable rate payable by us
under our line of credit. We therefore believe that we have mitigated our
interest rate risk with respect to our borrowings for interim mortgage loans.
Historically we have satisfied obligations arising from interim financing of
acquisitions through cash or sale of properties in our portfolio, so we believe
that we can mitigate interest rate risk with respect to borrowings for interim
financing of acquisitions as well.


                                       29
<PAGE>

Item 4. Controls and Procedures.

Our management, with the participation of FSP Corp.'s President and Chief
Executive Officer and FSP Corp.'s Chief Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2006. Based on
this evaluation, FSP Corp.'s President and Chief Executive Officer and FSP
Corp.'s Chief Financial Officer concluded that, as of June 30, 2006, our
disclosure controls and procedures were (1) designed to ensure that material
information relating to us, including our consolidated subsidiaries, is made
known to FSP Corp.'s President and Chief Executive Officer and FSP Corp.'s Chief
Financial Officer by others within these entities as appropriate to allow timely
decisions regarding required disclosure, particularly during the period in which
this report was being prepared and (2) effective, in that they provide
reasonable assurance that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms.

No change to our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter
ended June 30, 2006 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.


                                       30
<PAGE>

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings

      From time to time, we are 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

      The following important factors, among others, could cause actual results
to differ materially from those indicated by forward-looking statements made in
this Quarterly Report on Form 10-Q and presented elsewhere by management from
time to time. The following risk factors contain no material changes from the
risk factors previously disclosed in our Annual Report on Form 10-K for the year
ended December 31, 2005.

If we are not able to collect sufficient rents from each of our owned real
properties, we may suffer significant operating losses or a reduction in cash
available for future dividends.

      A substantial portion of our revenues are generated by the rental income
of our real properties. If our properties do not provide us with a steady rental
income, our revenues will decrease and may cause us to incur operating losses in
the future.

We may not be able to find properties that meet our criteria for purchase.

      Growth in our investment banking/investment services business and our
portfolio of real estate is dependent on the ability of our acquisition
executives to find properties for sale and/or development which meet our
investment criteria. To the extent they fail to find such properties, we will be
unable to syndicate offerings of Sponsored REITs to investors, and this segment
of our business could have lower revenue, which would reduce the cash available
for distribution to our stockholders, and we would be unable to increase the
size of our portfolio of real estate.

If we are unable to fully syndicate a Sponsored REIT, we may be required to keep
a balance outstanding on our line of credit or use our cash balance to repay our
line of credit, which may reduce cash available for distribution to our
stockholders.

      We typically draw on our line of credit to make an interim mortgage loan
to a Sponsored REIT, so that it can acquire real property prior to the
consummation of the offering of its equity interests; this interim loan is
secured by a first mortgage against the real property acquired by the Sponsored
REIT. Once the offering has been completed, the Sponsored REIT repays the loan
out of the offering proceeds. If we are unable to fully syndicate a Sponsored
REIT, the Sponsored REIT could be unable to fully repay the loan, and we would
have to satisfy our obligation under our line of credit through other means. If
we are required to use cash for this purpose, we would have less cash available
for distribution to our stockholders.

A default under our line of credit could have a material adverse effect on the
cash available for distribution to our stockholders and would limit our growth.

      We typically draw on our line of credit to make an interim mortgage loan
to a Sponsored REIT, so that the Sponsored REIT can acquire real property prior
to the consummation of the offering of such Sponsored REIT's equity interests.
Once the offering has been completed, the Sponsored REIT repays the loan out of
the offering proceeds. We also may use the line of credit to purchase properties
directly for our real estate portfolio. A default under our line of credit could
result in difficulty financing growth in both the investment banking/investment
services and real estate segments of our business. It could also result in a
reduction in the cash available for distribution to our stockholders because
revenue for our investment banking/investment services segment is directly
related to the amount of equity raised by Sponsored REITs which we syndicate. In
addition, a significant part of our growth strategy is to acquire additional
real properties by cash purchase or by acquisition of Sponsored REITs, and the
inability to utilize the line of credit would make it substantially more
difficult to pursue acquisitions by either method. To the extent we have a
balance outstanding on the line of credit on the date of its default, we would
have to satisfy our obligation through other means. If we are required to use
cash for this purpose, we would have less cash available for distribution to our
stockholders.


                                       31
<PAGE>

We face risks in continuing to attract investors for Sponsored REITs.

      Our investment banking/investment services business continues to depend
upon its ability to attract purchasers of equity interests in Sponsored REITs.
Our success in this area will depend on the propensity and ability of investors
who have previously invested in Sponsored REITs to continue to invest in future
Sponsored REITs and on our ability to expand the investor pool for the Sponsored
REITs by identifying new potential investors. Moreover, our investment
banking/investment services business may be affected to the extent existing
Sponsored REITs incur losses or have operating results that fail to meet
investors' expectations.

We are dependent on key personnel.

      We depend on the efforts of George Carter, our Chief Executive Officer,
and our other executive officers. If they were to resign, our operations could
be adversely affected. We do not have employment agreements with Mr. Carter or
any other of our executive officers.

Our level of dividends may fluctuate.

      Because our investment banking/investment services business is
transactional in nature and real estate occupancy levels and rental rates can
fluctuate, there is no predictable recurring level of revenue from such
activities. As a result of this, the amount of cash available for distribution
may fluctuate, which may result in our not being able to maintain or grow
dividend levels in the future.

The real properties held by us may significantly decrease in value.

      As of June 30, 2006, we owned 32 properties, of which one was held for
sale. Some or all of these properties may decline in value. To the extent our
real properties decline in value, our stockholders could lose some or all the
value of their investments. The value of our common stock may be adversely
affected if the real properties held by us decline in value since these real
properties represent the majority of the tangible assets held by us. Moreover,
if we are forced to sell or lease the real property held by us below its initial
purchase price or its carrying costs or if we are forced to lease real property
at below market rates because of the condition of the property, our results of
operations would be adversely affected and such negative results of operations
may result in lower dividends being paid to holders of our common stock.

New acquisitions may fail to perform as expected.

      We may acquire new properties, whether by direct FSP Corp. purchase with
cash or our line of credit, by acquisition of Sponsored REITs or other entities
by cash or through the issuance of shares of our stock or by investment in a
Sponsored REIT. We acquired the four 2005 Target REITs and the properties they
own on April 30, 2005, a property in Colorado in February 2005, another property
in Indiana, in July 2005 and another property in Texas, in February 2006. We
also acquired the five 2006 Target REITs and the properties they own on April
30, 2006 and an office property in Georgia in June 2006. Newly acquired
properties may fail to perform as expected, in which case, our results of
operations could be adversely affected.

We face risks in owning, developing and operating real property.

      An investment in us is subject to the risks incident to the ownership,
development and operation of real estate-related assets. These risks include the
fact that real estate investments are generally illiquid, which may affect our
ability to vary our portfolio in response to changes in economic and other
conditions, as well as the risks normally associated with:

      o     changes in general and local economic conditions;
      o     the supply or demand for particular types of properties in
            particular markets;
      o     changes in market rental rates;
      o     the impact of environmental protection laws; and
      o     changes in tax, real estate and zoning laws.

      Certain significant costs, such as real estate taxes, utilities, insurance
and maintenance costs, generally are not reduced even when a property's rental
income is reduced. In addition, environmental and tax laws, interest rate
levels, the availability of financing and other factors may affect real estate
values and property income. Furthermore, the supply of commercial space
fluctuates with market conditions.


                                       32
<PAGE>

We face risks from tenant defaults or bankruptcies.

      If any of our tenants defaults on its lease, we may experience delays in
enforcing our rights as a landlord and may incur substantial costs in protecting
our investment. In addition, at any time, a tenant of one of our properties may
seek the protection of bankruptcy laws, which could result in the rejection and
termination of such tenant's lease and thereby cause a reduction in cash
available for distribution to our stockholders.

We may encounter significant delays in reletting vacant space, resulting in
losses of income.

      When leases expire, we will incur expenses and may not be able to re-lease
the space on the same terms. Certain leases provide tenants the right to
terminate early if they pay a fee. If we are unable to re-lease space promptly,
if the terms are significantly less favorable than anticipated or if the costs
are higher, we may have to reduce distributions to our stockholders. For
example, our standard lease term is five years, so approximately 20% of our
rental revenue from commercial properties could be expected to expire each year.

We face risks from geographic concentration.

      The properties in our portfolio as of June 30, 2006, excluding those held
for sale, by aggregate square footage, are distributed geographically as
follows: Southwest - 26%, Northeast - 17%, Midwest - 18%, West - 19% and
Southeast 20%. However, within certain of those regions, we hold a larger
concentration of our properties in Dallas, Texas - 18%, Atlanta, Georgia - 10%
and Houston, Texas - 8%. We are likely to face risks to the extent that any of
these areas in which we hold a larger concentration of our properties suffer
deteriorating economic conditions.

We compete with national, regional and local real estate operators and
developers, which could adversely affect our cash flow.

      Competition exists in every market in which our properties are currently
located and in every market in which properties we may acquire in the future
will be located. We compete with, among others, national, regional and numerous
local real estate operators and developers. Such competition may adversely
affect the percentage of leased space and the rental revenues of our properties,
which could adversely affect our cash flow from operations and our ability to
make expected distributions to our stockholders. Some of our competitors may
have more resources than we do or other competitive advantages. Competition may
be accelerated by any increase in availability of funds for investment in real
estate. For example, decreases in interest rates tend to increase the
availability of funds and therefore can increase competition. To the extent that
our properties continue to operate profitably, this will likely stimulate new
development of competing properties. The extent to which we are affected by
competition will depend in significant part on local market conditions.

There is limited potential for an increase in leased space gains in our
properties.

      We anticipate that future increases in revenue from our properties will be
primarily the result of scheduled rental rate increases or rental rate increases
as leases expire. Properties with higher rates of vacancy are generally located
in soft economic markets so that it may be difficult to realize increases in
revenue when vacant space is re-leased.

We are subject to possible liability relating to environmental matters, and we
cannot assure you that we have identified all possible liabilities.

      Under various federal, state and local laws, ordinances and regulations,
an owner or operator of real property may become liable for the costs of removal
or remediation of certain hazardous substances released on or in its property.
Such laws may impose liability without regard to whether the owner or operator
knew of, or caused, the release of such hazardous substances. The presence of
hazardous substances on a property may adversely affect the owner's ability to
sell such property or to borrow using such property as collateral, and it may
cause the owner of the property to incur substantial remediation costs. In
addition to claims for cleanup costs, the presence of hazardous substances on a
property could result in the owner incurring substantial liabilities as a result
of a claim by a private party for personal injury or a claim by an adjacent
property owner for property damage.

      In addition, we cannot assure you that:

      o     future laws, ordinances or regulations will not impose any material
            environmental liability;
      o     the current environmental conditions of our properties will not be
            affected by the condition of properties in the vicinity of such
            properties (such as the presence of leaking underground storage
            tanks) or by third parties unrelated to us;


                                       33
<PAGE>

      o     tenants will not violate their leases by introducing hazardous or
            toxic substances into our properties that could expose us to
            liability under federal or state environmental laws; or

      o     environmental conditions, such as the growth of bacteria and toxic
            mold in heating and ventilation systems or on walls, will not occur
            at our properties and pose a threat to human health.

We are subject to compliance with the Americans With Disabilities Act and fire
and safety regulations, any of which could require us to make significant
capital expenditures.

      All of our properties are required to comply with the Americans With
Disabilities Act (ADA), and the regulations, rules and orders that may be issued
thereunder. The ADA has separate compliance requirements for "public
accommodations" and "commercial facilities," but generally requires that
buildings be made accessible to persons with disabilities. Compliance with ADA
requirements might require, among other things, removal of access barriers and
noncompliance could result in the imposition of fines by the U.S. government or
an award of damages to private litigants.

      In addition, we are required to operate our properties in compliance with
fire and safety regulations, building codes and other land use regulations, as
they may be adopted by governmental agencies and bodies and become applicable to
our properties. Compliance with such requirements may require us to make
substantial capital expenditures, which expenditures would reduce cash otherwise
available for distribution to our stockholders.

We may lose capital investment or anticipated profits if an uninsured event
occurs.

      We carry, or our tenants carry, comprehensive liability, fire and extended
coverage with respect to each of our properties, with policy specification and
insured limits customarily carried for similar properties. There are, however,
certain types of losses, such as from wars, pollution or earthquakes, that may
be either uninsurable or not economically insurable (although most properties
located in California have earthquake insurance). Should an uninsured material
loss occur, we could lose both capital invested in the property and anticipated
profits.

Contingent or unknown liabilities acquired in mergers or similar transactions
could require us to make substantial payments.

      The properties which we acquired in mergers were acquired subject to
liabilities and without any recourse with respect to liabilities, whether known
or unknown. As a result, if liabilities were asserted against us based upon any
of these properties, we might have to pay substantial sums to settle them, which
could adversely affect our results of operations and financial condition and our
cash flow and ability to make distributions to our stockholders. Unknown
liabilities with respect to properties acquired might include:

      o     liabilities for clean-up or remediation of environmental conditions;
      o     claims of tenants, vendors or other persons dealing with the former
            owners of the properties; and
      o     liabilities incurred in the ordinary course of business.

We would incur adverse tax consequences if we failed to qualify as a REIT.

      The provisions of the tax code governing the taxation of real estate
investment trusts are very technical and complex, and although we expect that we
will be organized and will operate in a manner that will enable us to meet such
requirements, no assurance can be given that we will always succeed in doing so.
In addition, as a result of our acquisition of the target REITs pursuant to the
mergers, we might no longer qualify as a real estate investment trust. We could
lose our ability to so qualify for a variety of reasons relating to the nature
of the assets acquired from the target REITs, the identity of the stockholders
of the target REITs who become our stockholders or the failure of one or more of
the target REITs to have previously qualified as a real estate investment trust.
Moreover, you should note that if one or more of the REITs that we acquired in
April 2006, April 2005 or June 2003 did not qualify as a real estate investment
trust immediately prior to the consummation of its acquisition, we could be
disqualified as a REIT as a result of such acquisition.

      If in any taxable year we do not qualify as a real estate investment
trust, we would be taxed as a corporation and distributions to our stockholders
would not be deductible by us in computing our taxable income. In addition, if
we were to fail to qualify as a real estate investment trust, we could be
disqualified from treatment as a real estate investment trust in the year in
which such failure occurred and for the next four taxable years and,
consequently, we would be taxed as a regular corporation during such years.
Failure to qualify for even one taxable year could result in a significant
reduction of our cash available for distribution to our stockholders or could
require us to incur indebtedness or liquidate investments in order to generate
sufficient funds to pay the resulting federal income tax liabilities.


                                       34
<PAGE>

Provisions in our organizational documents may prevent changes in control.

      Our Articles of Incorporation and Bylaws contain provisions, described
below, which may have the effect of discouraging a third party from making an
acquisition proposal for us and may thereby inhibit a change of control under
circumstances that could otherwise give the holders of our common stock the
opportunity to realize a premium over the then-prevailing market prices.

      Ownership Limits. In order for us to maintain our qualification as a real
estate investment trust, the holders of our common stock may be limited to
owning, either directly or under applicable attribution rules of the Internal
Revenue Code, no more than 9.8% of the lesser of the value or the number of our
equity shares, and no holder of common stock may acquire or transfer shares that
would result in our shares of common stock being beneficially owned by fewer
than 100 persons. Such ownership limit may have the effect of preventing an
acquisition of control of us without the approval of our board of directors. Our
Articles of Incorporation give our board of directors the right to refuse to
give effect to the acquisition or transfer of shares by a stockholder in
violation of these provisions.

      Staggered Board. Our board of directors is divided into three classes. The
terms of these classes will expire in 2007, 2008 and 2009, respectively.
Directors of each class are elected for a three-year term upon the expiration of
the initial term of each class. The staggered terms for directors may affect our
stockholders' ability to effect a change in control even if a change in control
were in the stockholders' best interests.

      Preferred Stock. Our Articles of Incorporation authorize our board of
directors to issue up to 20,000,000 shares of preferred stock, par value $.0001
per share, and to establish the preferences and rights of any such shares
issued. The issuance of preferred stock could have the effect of delaying or
preventing a change in control even if a change in control were in our
stockholders' best interest.

      Increase of Authorized Stock. Our board of directors, without any vote or
consent of the stockholders, may increase the number of authorized shares of any
class or series of stock or the aggregate number of authorized shares we have
authority to issue. The ability to increase the number of authorized shares and
issue such shares could have the effect of delaying or preventing a change in
control even if a change in control were in our stockholders' best interest.

      Amendment of Bylaws. Our board of directors has the sole power to amend
our Bylaws. This power could have the effect of delaying or preventing a change
in control even if a change in control were in our stockholders' best interests.

      Stockholder Meetings. Our Bylaws require advance notice for stockholder
proposals to be considered at annual meetings of stockholders and for
stockholder nominations for election of directors at special meetings of
stockholders. Our Bylaws also provide that stockholders entitled to cast more
than 50% of all the votes entitled to be cast at a meeting must join in a
request by stockholders to call a special meeting of stockholders. These
provisions could have the effect of delaying or preventing a change in control
even if a change in control were in the best interests of our stockholders.

      Supermajority Votes Required. Our Articles of Incorporation require the
affirmative vote of the holders of no less than 80% of the shares of capital
stock outstanding and entitled to vote in order (i) to amend the provisions of
our Articles of Incorporation relating to the classification of directors,
removal of directors, limitation of liability of officers and directors or
indemnification of officers and directors or (ii) to amend our Articles of
Incorporation to impose cumulative voting in the election of directors. These
provisions could have the effect of delaying or preventing a change in control
even if a change in control were in our stockholders' best interest.

Our employee retention plan may prevent changes in control.

      During February 2006, our Board of Directors approved a change in control
plan, which included a form of retention agreement and discretionary payment
plan. Payments under the discretionary plan are capped at 1% of the market
capitalization of FSP Corp. as reduced by the amount paid under the retention
plan. The costs associated with these two components of the plan may have the
effect of discouraging a third party from making an acquisition proposal for us
and may thereby inhibit a change in control under circumstances that could
otherwise give the holders of our common stock the opportunity to realize a
greater premium over the then-prevailing market prices.


                                       35
<PAGE>

The price of our common stock may vary.

      The market prices for our common stock may fluctuate with changes in
market and economic conditions, including the market perception of REITs in
general, and changes in the financial condition of our securities. Such
fluctuations may depress the market price of our common stock independent of the
financial performance of FSP Corp. The market conditions for REIT stocks
generally could affect the market price of our common stock.


                                       36
<PAGE>

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

      (a) The information required by this Item 2(a) was previously reported in
our Current Report on Form 8-K filed with the Commission on May 4, 2006.

      (b) None.

      (c) The following table provides information about purchases by Franklin
Street Properties Corp. during the quarter ended June 30, 2006 of equity
securities that are registered by the Company pursuant to Section 12 of the
Exchange Act:

<TABLE>
<CAPTION>
                                  ISSUER PURCHASES OF EQUITY SECURITIES

---------------------------------------------------------------------------------------------------------------
                                (a)                 (b)                  (c)                     (d)

                                                                   Total Number of        Maximum Number (or
                                                                  Shares (or Units)       Approximate Dollar
                                                                  Purchased as Part      Value) of Shares (or
                                                                     of Publicly        Units) that May Yet Be
                          Total Number of    Average Price Paid    Announced Plans       Purchased Under the
                         Shares (or Units)       per Share           or Programs          Plans or Programs
Period                   Purchased (1) (2)       (or Unit)             (1) (2)                 (1) (2)
---------------------------------------------------------------------------------------------------------------
<S>                              <C>                <C>                   <C>                <C>
04/01/06-04/30/06                0                  N/A                   0                  $21,008,101

---------------------------------------------------------------------------------------------------------------
05/01/06-05/31/06                0                  N/A                   0                  $21,008,101

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

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

---------------------------------------------------------------------------------------------------------------
</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 expires at the earlier of (i) November 1,
2007 or (ii) a determination by the Board of Directors of FSP Corp. to
discontinue repurchases.

Item 3. Defaults Upon Senior Securities

None.


                                       37
<PAGE>

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

On May 12, 2006, the Company held its 2006 Annual Meeting of Stockholders (the
"2006 Annual Meeting"). The 2006 Annual Meeting was called for the following
purposes: (1) to elect three Class II directors to serve until the 2009 annual
meeting and (2) to transact such other business as may properly come before the
meeting or any adjournment thereof.

The following table sets forth the names of the directors elected at the 2006
Annual Meeting for new three-year terms and the number of votes cast for and
withheld from each director:

         Directors                    For                       Withheld
         ---------                    ---                       ---------

     Barry Silverstein             48,164,245                    187,612
    Barbara J. Fournier            44,522,319                    3,829,538
       John N. Burke               48,295,395                    56,462

The names of each of the other directors whose terms of office continued after
the 2006 Annual Meeting are as follows: George J. Carter, Dennis J.
McGillicuddy, Georgia Murray and Janet P. Notopoulos.

Item 5. Other Information

None.


                                       38
<PAGE>

                     PART II - OTHER INFORMATION (Continued)

Item 6. Exhibits

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

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

      3.1   Amended and Restated By-Laws (3)

      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 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.


                                       39
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                      Franklin Street Properties Corp.


       Date                Signature                   Title


Date: August 2, 2006  /s/ George J. Carter  Chief Executive Officer and Director
                      --------------------  (Principal Executive Officer)
                      George J. Carter



Date: August 2, 2006  /s/ John G. Demeritt  Chief Financial Officer
                      --------------------  (Principal Financial Officer)
                      John G. Demeritt


                                       40