SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 --------------

                                    FORM 10-K
                 For Annual and Transitional Reports Pursuant to
                     Sections 13 or 15(d) of the Securities
                              Exchange Act of 1934

              |X|  Annual Report Pursuant to Section 13 or 15(d) of
                    the Securities Exchange Act of 1934 For the
                       fiscal year ended December 31, 2001

              |_|  Transition Report Pursuant to Section 13 or
                   15(d) of the Securities Exchange Act of 1934

                           Commission File No. 0-32615

                        FRANKLIN STREET PROPERTIES CORP.
        (formerly known as Franklin Street Partners Limited Partnership)
        ----------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                   Maryland                                      04-3578653
                   --------                                      ----------
       (State or other jurisdiction of                        (I.R.S. Employer
       incorporation or organization)                        Identification No.)

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

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

        Securities registered pursuant to Section 12(b) of the Act: None

          Securities registered pursuant to Section 12(g) of the Act:

                    Common Stock, $.0001 par value per share

      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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|

      On March 26, 2002, the aggregate fair market value of Common Stock held by
non-affiliates of the registrant, as determined in good faith by the Board of
Directors of the Company, was $316,602,130.

      The number of shares of Common Stock outstanding as of March 26, 2002 was
24,586,249.

                       Documents Incorporated By Reference
                       -----------------------------------

Document Part                                                      Form 10-K
-------------                                                      ---------
Definitive Proxy Statement on Schedule 14A for the Annual           Part III
Meeting of Stockholders to be held on May 20, 2002, to be
filed with the Securities and Exchange Commission

Appendices B and C of the Definitive Proxy Statement on             Part IV
Schedule 14A, filed with the Securities and Exchange
Commission on December 18, 2001
<PAGE>

        TABLE OF CONTENTS

PART I.........................................................................1
  Item 1.  Business............................................................1
  Item 1A. Risk Factors........................................................4
  Item 2.  Properties..........................................................8
  Item 3.  Legal Proceedings...................................................9
  Item 4.  Submission of Matters to a Vote of Security Holders.................9
  Item 4A. Executive Officers of the Company..................................10
  Item 5.  Market For Registrant's Common Equity and Related
           Stockholder Matters................................................11
  Item 6.  Selected Financial and Other Data..................................12
  Item 7.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations................................12
  Item 7A, Quantitative and Qualitative Disclosure About Market Risk..........26
  Item 8.  Financial Statements and Supplementary Data........................26
  Item 9.  Changes in and Disagreements With Accountants on
           Accounting and Financial Disclosure................................26
PART II.......................................................................27
  Item 10. Directors and Executive Officers of the Registrant.................27
  Item 11. Executive Compensation.............................................27
  Item 12. Security Ownership of Certain Beneficial Owners And Management.....27
  Item 13. Certain Relationships and Related Transactions.....................27
PART III......................................................................27
  Item 14. Exhibits, Financial Statement Schedules, and Reports
           on Form 8-K........................................................27
Index to Consolidated Financial Statements...................................F-1
<PAGE>

PART I

Item 1. Business.

History

      Franklin Street Properties Corp. (the "Company") is a Maryland corporation
and is the successor to Franklin Street Partners Limited Partnership, a
Massachusetts limited partnership (the "Partnership"). The Company intends to
qualify for federal income tax purposes as a real estate investment trust. The
Partnership was originally formed as a Massachusetts general partnership in
January 1997 as the successor to a Massachusetts general partnership that was
formed in 1981 and known as Franklin Street Partners, and was subsequently
formed as a Massachusetts limited partnership in February 1997. On January 1,
2002, the Partnership merged with and into the Company, which was a wholly owned
subsidiary of the Partnership, with the Company being the surviving entity (the
"Conversion"). Pursuant to the Conversion, the Partnership ceased to exist, the
Company succeeded to the business of the Partnership and each unit of both
general and limited partnership interests in the Partnership was converted into
one share of common stock, $.0001 par value per share (the "Common Stock") of
the Company. As a result of the Conversion, the Company now holds, directly and
indirectly, 100% of the interest in three former subsidiaries of the
Partnership: FSP Investments LLC, a Massachusetts limited liability company
("FSP Investments"), FSP Property Management LLC, a Massachusetts limited
liability company ("FSP Property Management"), and FSP Holdings LLC, a Delaware
limited liability company ("FSP Holdings").

Organization

      FSP Investments acts as a real estate investment firm and broker/dealer
with respect to (a) the organization of investment vehicles which are typically
syndicated through private placements exempt from registration under the
Securities Act of 1933 ("Sponsored Entities"), some of which were limited
partnerships (the "Sponsored Partnerships") and some of which are corporations
intended to qualify for federal income tax purposes as real estate investment
trusts (the "Sponsored REITs"), (b) the acquisition of real estate by the
Sponsored Entities and (c) the sale of equity interests in the Sponsored
Entities. FSP Investments derives revenue from commissions received in
connection with the sale of equity interests in the Sponsored Entities. FSP
Investments also derives revenue from fees paid by the Sponsored Entities for
the services of FSP Investments in identifying, inspecting and negotiating to
purchase real properties on behalf of the Sponsored Entities. FSP Investments is
a registered broker/dealer with the Securities and Exchange Commission and is a
member of the National Association of Securities Dealers, Inc.

      On April 1, 1997, FSP Holdings acquired the general partnership interest
in four Sponsored Partnerships (the "Prior Entities"), each of which had been
organized by the executive officers of the general partner of the Partnership
prior to the formation of the Partnership while they were employed by another
entity. Between June 1997 and June 2000, FSP Investments completed the offerings
of limited partnership interests in 14 Sponsored Partnerships. The sole general
partner of each of the Sponsored Partnerships is FSP Holdings. Between June 2000
and December 31, 2001, FSP Investments completed the offerings of preferred
stock in nine Sponsored REITs. Effective January 1, 2001, one of the Sponsored
Partnerships converted from a Partnership to a Sponsored REIT. Accordingly, as
of December 31, 2001, there were 27 Sponsored Entities, of which 17 were
Sponsored Partnerships and ten were Sponsored REITs. The Company expects that
future Sponsored Entities will be Sponsored REITs.

      Each Sponsored Entity sold its equity interests only to "accredited
investors'" within the meaning of Regulation D under the Securities Act. The
Sponsored Entities (other than a Prior Entity that conducted its offering
pursuant to a registration statement on Form S-11) conducted their offerings
pursuant to exemptions from registration under Rule 506 of Regulation D and
Section 4(2) of the Securities Act. The Sponsored Entities issued equity
interests for aggregate gross cash proceeds of $480,200,000. Each Sponsored
Entity holds a single real property.

      Pursuant to mergers effective January 1, 1999, January 1, 2000 and October
1, 2000, respectively, the Partnership acquired all limited partners' interest
in the 17 Sponsored Partnerships. In connection with these mergers, the
Partnership issued units of its limited partnership interest (the "Units") to
the limited partners of the Sponsored Partnerships. The mergers that were
effective January 1, 1999 were approved by a vote of limited partners of the
Partnership. Neither the Partnership's governing documents nor applicable state
law required the approval of the limited partners of the Partnership for the
mergers that were effective January 1, 2000 and October 1,


<PAGE>

2000. Each merger was approved by a vote of the limited partners of the
applicable Sponsored Partnerships. Pursuant to the mergers, limited partners in
the Sponsored Partnerships exchanged an interest in a finite-life entity for an
interest in an infinite-life entity. As a result of the mergers, FSP Holdings is
the sole general partner of each Sponsored Partnership that was acquired and the
Partnership was the sole limited partner of each such Sponsored Partnership.

      Prior to the Conversion, the Partnership owned, directly or indirectly,
100% of the interest in the 17 Sponsored Partnerships, each of which owns real
property. As a result of the Conversion, the Company is now the sole limited
partner of each such Sponsored Partnership and now owns, directly or indirectly,
100% of the interest in the 17 Sponsored Partnerships. Reference in this annual
report to the Company's properties means the real properties owned by these 17
Sponsored Partnerships. The preferred stockholder interests in the ten Sponsored
REITs have not been acquired by the Company.

      FSP Property Management provides asset management services to each
Sponsored Entity and property management services to six Sponsored Entities. FSP
Property Management receives fee income from those Sponsored Entities that have
not been acquired by the Partnership or the Company. FSP Property Management
does not receive any rental income.

      FSP Holdings acts as the general partner of each Sponsored Partnership.

Investment Objectives

      The Company has two principal sources of revenue:

      o     Investment banking income consisting of brokerage commissions and
            other related fees paid to FSP Investments in connection with the
            organization and offering of Sponsored Entities and loan origination
            fees paid in connection with loans to Sponsored Entities.

      o     Rental income from the real properties it owns.

      The Company's investment objective is to increase the cash available for
distribution to its stockholders by increasing its revenue from investment
banking services and rental income. The Company expects that, through FSP
Investments, it will continue to organize and cause the offering of Sponsored
REITs in the future and that it will continue to derive investment banking
income from such activities. The Company also expects that in the future it will
acquire additional real properties. The Company may sell from time to time the
real properties it owns as market conditions warrant (although to date it has
only sold vacant land) and either distribute the proceeds to its stockholders or
retain some or all of such proceeds for investment in real properties or other
Company activities. The Company may acquire real properties in any geographic
area of the United States and of any property type. Of the 17 properties the
Company owns, four are apartment complexes, 11 are office buildings and two are
industrial; four of these properties are located in Texas, three properties are
located in Massachusetts, three properties are located in northern California,
two properties are located in Maryland, and one property is located in each of
southern California, Louisiana, Michigan, North Carolina and South Carolina. See
Item 2 hereof. The Company has no restrictions on the percentage of its assets
that may be invested in any one real property. The Company acquires its
properties primarily for their rental income and seeks to manage its properties
with a goal of increasing their value.

      The Company relies on the following principles in selecting real
properties for acquisition by a Sponsored Entity or the Company:

      o     Buying investment properties at a price which produces value for
            investors and avoiding overpaying for real estate merely to outbid
            competitors.

      o     Buying properties in excellent locations with substantial
            infrastructure in place around them and avoiding investing in
            locations where the construction of such infrastructure is
            speculative.


                                       -2-
<PAGE>

      o     Buying properties that are well-constructed and designed to appeal
            to a broad base of users and avoiding properties where quality has
            been sacrificed to cost savings in construction or which appeal only
            to a narrow group of users.

      o     Aggressively managing, maintaining and upgrading a property and
            refusing to neglect or undercapitalize management, maintenance and
            capital improvement programs.

      o     Having the ability to hold properties through down cycles and
            avoiding over leveraging properties and placing them at risk of
            foreclosure.

      The Company acquires and operates its real properties on an unleveraged
basis not subject to any mortgage loans. The Company has a revolving line of
credit that provides for borrowings of up to $50,000,000. The Company has drawn
on this line of credit, and intends to draw on this line of credit in the
future, to obtain funds for the purpose of making interim mortgage loans to
Sponsored Entities. The Company's policy is to cause these loans to be secured
by a first mortgage of the real property (which may be of any type) owned by the
Sponsored Entity. The Company makes these loans to enable a Sponsored Entity to
acquire real property prior to the consummation of the offering of its equity
interests, and the loan is repaid out of the offering proceeds. The Company has
no restriction on the percentage of its assets that may be invested in any
single mortgage.

Policies

      The Company's policy is not to invest in the securities of other common
stock issuers except short-term investments in money market funds and similar
securities and the holding of a nominal interest in Sponsored REITs for the
purpose of facilitating the organization and operation of such Sponsored REITs.
The Company does not expect to receive any material amounts of revenue from its
nominal interest in any Sponsored REITs.

      The Company's policy is not to issue senior securities, borrow money
(except as described above), make loans to other persons (except as described
above), invest in the securities of other issuers for the purpose of exercising
control, underwrite the securities of other issuers (except that FSP Investments
expects to continue to sell interests in Sponsored Entities on a best efforts
basis in offerings exempt from registration under the Securities Act) or offer
securities in exchange for property. The Company expects that it will engage in
the purchase and sale of real estate investments as market conditions warrant.
The Company may repurchase or otherwise reacquire its securities.

      Any of the Company's policies may be changed at any time by the Board of
Directors of the Company.

Competition

      With respect to its investment banking and brokerage business, the Company
faces competition for the investment dollars of potential purchasers of the
Sponsored Entities from every other kind of investment, including stocks, bonds,
mutual funds and other real-estate related investments, including other REITs.
Some of the Company's competitors have significantly more resources than the
Company and are able to advertise their investment products. Because the
offerings of the Sponsored Entities are made pursuant to an exemption from
registration under the Securities Act, FSP Investments may not advertise the
Sponsored Entities or otherwise engage in any general solicitation of investors
to purchase interests in the Sponsored Entities.

      With respect to its real estate investments, the Company faces competition
in each of the markets where the properties are located. See "Management's
Analysis and Discussion of Financial Condition and Results of Operations --
Trends and Uncertainties" in Item 7 hereof. As of December 31, 2001, 13 of the
Company's 17 properties had an occupancy level in excess of 95%; one property
had an occupancy rate of 60% (100% as of March 1, 2002); and three properties
had occupancy rates ranging from 70-80%. See "Properties" in Item 2 hereof.

Employees

      Prior to the Conversion, the general partner of the Partnership was FSP
General Partner LLC, a Massachusetts limited liability company (the "General
Partner"). The members of the General Partner and their respective ownership
interests therein were George J. Carter (33.94%), R. Scott MacPhee (30.66%),
Richard R.


                                       -3-
<PAGE>

Norris (21.40%), William W. Gribbell (11.36%), Barbara J. Corinha (1.60%),
Melissa G. Mucciaccio (0.67%), Janet P. Notopoulos (0.26%) and Patricia A
McMullen (0.11%). The General Partner had no other business other than acting as
general partner of the Partnership. Prior to the Conversion, the executive
officers of the General Partner devoted all of their business activities to the
Partnership and its subsidiaries. The former executive officers of the General
Partner are now the current executive officers of the Company and they devote
all of their business activities to the Company and its subsidiaries.

      The Company had 29 employees as of December 31, 2001.

Item 1A. Risk Factors

In addition to the other information in this Annual Report on Form 10-K, the
following factors should be considered in evaluating the Company and its
business:

The Company would incur adverse tax consequences if it failed to qualify as a
REIT.

      The Company intends to qualify as a real estate investment trust for
federal income tax purposes commencing with its first taxable year. If in any
taxable year the Company does not qualify as a real estate investment trust, it
would be taxed as a corporation and distributions to stockholders would not be
deductible by the Company in computing its taxable income. In addition, if the
Company were to fail to qualify as a real estate investment trust, the Company
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, would be taxed as a corporation during such years. Failure to
qualify for even one taxable year could result in a significant reduction of the
Company's cash available for distributions to stockholders or could require the
Company to incur indebtedness or liquidate investments in order to generate
sufficient funds to pay the resulting federal income tax liabilities. In
addition, timing differences between the receipt of income and payment of
expenses and the inclusion and deduction of such amounts in arriving at taxable
income of the Company could make it necessary for the Company to borrow in order
to make certain distributions to stockholders in satisfaction of the 90%
distribution requirement applicable to real estate investment trusts. The
provisions of the Internal Revenue Code governing the taxation of real estate
investment trusts are very technical and complex, and although the Company
expects that it will be organized and will operate in a manner that will enable
it to meet such requirements, no assurance can be given that it will succeed in
doing so during the entire life of the Company.

The Company faces risks in continuing to attract investors for the Sponsored
Entities.

      The Company's investment banking business depends upon its ability to
attract purchasers of equity interests in Sponsored Entities. The Company's
success in this area will depend on the propensity and ability of investors who
have previously invested in Sponsored Entities to continue to invest in future
Sponsored Entities and on the Company's ability to expand the investor pool for
the Sponsored Entities by identifying new potential investors.

The Company's level of dividends may fluctuate.

      Because the Company's investment banking business is transactional in
nature, 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 the Company's not being able to maintain growth
in dividend levels in the future.

The Company faces risks in owning and operating real property.

      An investment in the Company is subject to the risks incident to the
ownership and operation of real estate-related assets. These risks include the
fact that real estate investments are generally illiquid, which may impact the
Company's ability to vary its 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;


                                       -4-
<PAGE>

      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 and
multi-family residential space fluctuates with market conditions.

The Company faces risks from tenant defaults or bankruptcies.

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

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

      When leases expire, the Company 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 the Company is unable to re-lease space
promptly, if the terms are significantly less favorable than anticipated or if
the costs are higher, the Company may have to reduce its distributions to its
stockholders.

The Company faces risks from geographic concentration.

      A large percentage of real properties included in the Company's portfolio
are concentrated in Texas and Massachusetts, with each area constituting
approximately 20% of the aggregate square footage owned by the Company. The
Company also owns properties in California, Maryland, Louisiana, Michigan, North
Carolina and South Carolina. The Company is likely to face risks to the extent
that any of these areas suffer deteriorating economic conditions.

The Company competes with national, regional and local real estate operators and
developers, which could adversely affect the Company's cash flow.

      Competition exists in every market in which the Company's properties are
located. The Company competes with, among others, national, regional and
numerous local real estate operators and developers. Such competition may
adversely affect the occupancy levels and the rental revenues of the Company's
properties, which could adversely affect the Company's cash flow from operations
and its ability to make expected distributions to stockholders. Some of the
Company's competitors may have more resources than the Company 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. The extent to which the Company is affected by competition
will depend in significant part on local market conditions.

There is limited potential for occupancy gains in the Company's properties.

      The Company anticipates that future increases in revenue from the
Company's properties will be primarily the result of rental rate increases as
leases expire. Most of the Company's properties had a rate of occupancy in
excess of 95% as of December 31, 2001. Those properties with higher rates of
vacancy are located in soft economic markets so that it may be difficult to
realize increases in revenue when vacant space is re-leased. To the extent that
the existing properties continue to operate profitably, this will likely
stimulate new development of competing properties and result in greater
competition between the newly developed properties and the Company's properties.


                                       -5-
<PAGE>

The Company is subject to possible liability relating to environmental matters,
and the Company cannot assure you that it has 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. The Company cannot assure you that any
environmental assessments it has undertaken have revealed all potential
environmental liabilities, that any prior owner or operator of the properties
did not create any material environmental condition not known to the Company, or
that an environmental condition does not otherwise exist as to any one or more
of the properties that could have a material adverse effect on the Company's
financial condition or results of operations. In addition, the Company cannot
assure you that:

      o     future laws, ordinances or regulations will not impose any material
            environmental liability,

      o     the current environmental conditions of the Company's 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 the Company,

      o     the current environmental conditions of the Company's properties
            will not be affected by mold or other environmental pollutants that
            could affect indoor air quality

      o     tenants will not violate their leases by introducing hazardous or
            toxic substances into the Company's properties that could expose the
            Company 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 the Company's properties and pose a threat to human health.

The Company is subject to compliance with the Americans With Disabilities Act
and fire and safety regulations which could require the Company to make
significant capital expenditures.

        All of the Company's properties are required to comply with the
Americans With Disabilities Act, and the regulations, rules and orders that may
be issued thereunder (the "ADA"). 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, the
Company will be required to operate its 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 the
Company's properties. Compliance with such requirements may require the Company
to make substantial capital expenditures, which expenditures would reduce cash
otherwise available for distribution to stockholders.

The Company may become subject to loss in profit or in its capital investment in
the event of the occurrence of an uninsured event.

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


                                      -6-
<PAGE>

Provisions in our organizational documents may prevent changes in control.

      The Company's Articles of Incorporation (the "Articles") and Bylaws (the
"Bylaws") contain provisions, described below, which may have the effect of
discouraging a third party from making an acquisition proposal for the Company
and may thereby inhibit a change of control of the Company under circumstances
that could give the holders of shares of Common Stock the opportunity to realize
a premium over the then-prevailing market prices.

      Ownership Limits. In order for the Company to maintain its qualification
as a real estate investment trust, the holders of Common Stock will 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
equity shares of the Company, and no holder of Common Stock will be able to
acquire or transfer shares that would result in the Company's being beneficially
owned by fewer than 100 persons. Such ownership limit may have the effect of
preventing an acquisition of control of the Company without the approval of the
Board of Directors of the Company. Moreover, the Company will have the right to
redeem any shares of Common Stock that are acquired or transferred in violation
of these provisions at the market price. In addition, the Articles give the
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. The Board of Directors of the Company is divided into
three classes. The initial terms of these classes will expire in 2002, 2003 and
2004, 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 the stockholders' ability to effect a change in control of
the Company even if a change in control were in the stockholders' best
interests.

      Preferred Stock. The Articles authorize the Board of Directors of the
Company to issue up to 20,000,000 shares of preferred stock, par value $.0001
per share (the "Preferred Stock") 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 of the Company even if a change in
control were in the stockholders' best interest.

      Increase of Authorized Stock. The Board of Directors of the Company,
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 the Company has 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 of the Company even if a change in
control were in the stockholders' best interest.

      Amendment of Bylaws. The Board of Directors of the Company has the sole
power to amend the Bylaws. This power could have the effect of delaying or
preventing a change in control of the Company even if a change in control were
in the stockholders' best interests.

      Stockholder Meetings. The 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. The 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
of the Company even if a change in control were in the best interests of the
stockholders.

      Supermajority Votes Required. The Articles 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 the Articles 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 the Articles to impose cumulative voting in the election of
directors. These provisions could have the effect of delaying or preventing a
change in control of the Company even if a change in control were in the
stockholders' best interest.

There is no public trading market for our securities.

      There is no public trading market for the Company's Common Stock. The
Company cannot assure you that any market will develop or that there will be any
liquidity in a market for the Company's Common Stock.


                                      -7-
<PAGE>

Item 2. Properties.

      Set forth below is information regarding our properties as of December 31,
2001:

<TABLE>
<CAPTION>
                              Sponsored     Sponsored                                  Approx.
                            Partnership's   Partnersh   Number    Approx.             Number
                              Purchase       Date of      of      Square   Occupancy    of         Major
Property Location               Price       Purchase     Units     Feet    12/31/01   Tenants   Tenant(s)(1)
-----------------               -----       --------     -----     ----    --------   -------   ------------

<S>                         <C>             <C>           <C>    <C>       <C>          <C>      <C>
Apartments
----------

3919 Essex Lane             $ 10,100,000     6/30/93      135    118,800   over 95%     135      None - Apts.
Houston, TX (3)

3231 Allen Parkway          $ 10,700,000     8/11/94      159    129,000   over 95%     159      None - Apts.
Houston, TX (3)

4041 Weslayan & Law         $  4,200,000     4/29/97       84     70,500   over 95%      84      None - Apts.
Houston, TX (3)

7250 Perkins Road           $ 18,000,000    10/16/98      264    223,800   over 95%     264      None - Apts.
Baton Rouge, LA (4)

                            ------------                  ---    -------
Total Apartments            $ 43,000,000                  642    542,100
                            ------------                  ---    -------

Office
------

451 Andover Street          $  8,000,000      6/1/96              92,000   over 95%      40      Pentucket
North Andover, MA (3)                                                                            Medical

1515 Mockingbird Lane       $  6,850,000      7/1/97             110,600        75%      80      Primary
Charlotte, NC (3)                                                                                Physicians Care

33 & 37 Villa Road          $ 10,550,000      3/1/98             143,800        70%      40      Home Gold
Greenville, SC (3)

4995 Patrick Henry Dr.      $  6,800,000     12/1/97              40,300       100%       1      Agere
Santa Clara, CA (3)

678-686 Hillview Drive      $  4,862,500      3/9/99              36,300       100%       1      Headway
Milpitas, CA (4)                                                                                 Technologies

5751-5771 Copley Drive      $ 15,400,000     3/12/99             101,700        60%       3      XO, Nextel &
San Diego, CA (4)                                                                                Allegiance (2)

81 Blue Ravine              $  5,700,000     9/27/99              47,000       100%       1      Cardinal Health
Folsom, CA (5)

18000 W. Nine Mile Rd.      $ 14,950,000     9/30/99             212,500        80%       6      IBM
Southfield, Michigan (5)

11211 Taylor Draper         $ 10,000,000    12/29/99              68,600       100%       6      Columbia
Lane, Austin, Texas (5)                                                                          Universal Life
                                                                                                 Insurance Co.
7130-7150 Columbia          $ 19,850,000    12/20/99             188,800       100%       8      Columbia
Gateway Dr.                                                                                      National
Columbia, MD (5)

10 Lyberty Way              $  9,100,000     5/23/00             104,700       100%       1      Lucent
Westford, MA (5)            ------------                         -------                         Technologies
</TABLE>


                                      -8-
<PAGE>

<TABLE>
<CAPTION>
                              Sponsored    Sponsored                                  Approx.
                            Partnership's  Partnersh   Number    Approx.              Number
                              Purchase      Date of      of      Square    Occupancy    of         Major
Property Location               Price      Purchase     Units     Feet     12/31/01   Tenants   Tenant(s)(1)
-----------------               -----      --------     -----     ----     --------   -------   ------------
<S>                         <C>             <C>           <C>  <C>             <C>       <C>     <C>
Total Office                $112,062,500                       1,146,300
                            ------------                       ---------

Industrial

One Technology Dr.          $  9,175,000     12/1/95             188,000       100%       1      Alliant
Peabody, MA (3)                                                                                  Foodservice

8730 Bollman Place          $  5,600,000    12/14/99              99,000       100%       1      Alliant
Savage (Jessup), MD (5)     ------------                          ------
                                                                                                 Foodservice

Total Industrial            $ 14,775,000                         287,000

                            ============                  ===  =========
Grand Total                 $169,837,500                  642  1,975,400
                            ============                  ===  =========
</TABLE>

(1)   Major tenants are tenants who occupy 10% or more of the space in an
      individual property.
(2)   As of March 1, 2002, the building was 100% occupied with five tenants. The
      new tenants are AON Service Corporation and MD3, Inc.
(3)   Merged into the Company on January 1, 1999.
(4)   Merged into the Company on January 1, 2000.
(5)   Merged into the Company on October 1, 2000.

      All of the properties listed above are owned by the Company. None of our
properties are subject to any mortgage loans. We have no material undeveloped or
unimproved properties, and we have no proposed programs for the renovation,
improvement or development of any of our properties. We believe that our
properties are adequately covered by insurance as of December 31, 2001.

Item 3. Legal Proceedings.

      From time to time, the Company is subject to legal proceedings and claims
that arise in the ordinary course of its business. Although occasional adverse
decisions (or settlements) may occur, the Company believes that the final
disposition of such matters will not have a material adverse effect on the
Company's financial position, cash flows or results of operations.

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

      On December 18, 2001, the Partnership mailed a Consent
Solicitation/Confidential Offering Memorandum to its security holders seeking
their approval of the Conversion. The Conversion was approved by at least a
majority of the outstanding limited partnership interests and the Conversion was
effected on January 1, 2002. Following is a summary of the votes cast "for" and
"against" the Conversion, and votes withheld, including the percentage such
votes constituted of the total number of votes entitled to be cast:

      Votes For            Votes Against           Withheld
      ---------            -------------           --------
      21,319,672              123,695               10,561
        (90%)                  (0.5%)               (0.04%)


                                      -9-
<PAGE>

Item 4A. Executive Officers of the Company.

      The following table sets forth the names, ages and positions of all
executive officers of the Company.

Name                        Age    Position
----                        ---    --------

George J. Carter            53     President and Chief Executive Officer

Barbara J. Corinha          46     Vice President, Chief Operating Officer,
                                   Treasurer and Secretary
R. Scott MacPhee            44     Executive Vice President

Richard R. Norris           58     Executive Vice President

William W. Gribbell         42     Executive Vice President

Janet Prier Notopoulos      54     Vice President

      George J. Carter, age 53, is President and Chief Executive Officer of the
Company and is responsible for all aspects of the business of the Company and
its affiliates, with special emphasis on the evaluation, acquisition and
structuring of real estate investments. Prior to the Conversion, he was
President of the General Partner and was responsible for all aspects of the
business of the Partnership and its affiliates. From 1992 through 1996 he was
President of Boston Financial Securities, Inc. ("Boston Financial"). Prior to
joining Boston Financial, Mr. Carter was owner and developer of Gloucester Dry
Dock, a commercial shipyard in Gloucester, Massachusetts. From 1979 to 1988, Mr.
Carter served as Managing Director in charge of marketing of First Winthrop
Corporation, a national real estate and investment banking firm headquartered in
Boston, Massachusetts. Prior to that, he held a number of positions in the
brokerage industry including those with Merrill Lynch & Co. and Loeb Rhodes &
Co. Mr. Carter is a graduate of the University of Miami (B.S.). Mr. Carter is a
NASD General Securities Principal (Series 24) and holds a NASD Series 7 general
securities license.

      Barbara J. Corinha, age 46, is the Vice President, Chief Operating
Officer, Treasurer and Secretary of the Company. In addition, Ms. Corinha has as
her primary responsibility, together with Mr. Carter, the management of all
operating business affairs of the Company and its affiliates. Prior to the
Conversion, Ms. Corinha was the Vice President, Chief Operating Officer,
Treasurer and Secretary of the General Partner. From 1993 through 1996, she was
Director of Operations for the private placement division of Boston Financial.
Prior to joining Boston Financial, Ms. Corinha served as Director of Operations
for Schuparra Securities Corp. and as the Sales Administrator for Weston
Financial Group. From 1979 through 1986, Ms. Corinha worked at First Winthrop
Corporation in administrative and management capacities; including Office
Manager, Securities Operations and Partnership Administration. Ms. Corinha
attended Northeastern University and the New York Institute of Finance. Ms.
Corinha is a NASD General Securities Principal (Series 24). She also holds other
NASD supervisory licenses including Series 4 and Series 53, and a NASD Series 7
general securities license.

      R. Scott MacPhee, age 44, is an Executive Vice President of the Company
and has as his primary responsibility the direct equity placement of the
Sponsored Entities. Prior to the Conversion, Mr. MacPhee was an Executive Vice
President of the General Partner. From 1993 through 1996 he was an executive
officer of Boston Financial. From 1985 to 1993 Mr. MacPhee worked at Winthrop
Financial Associates. Mr. MacPhee attended American International College. Mr.
MacPhee holds a NASD Series 7 general securities license and is a registered
investment adviser.

      Richard R. Norris, age 58, is an Executive Vice President of the Company
and has as his primary responsibility the direct equity placement of the
Sponsored Entities. Prior to the Conversion, Mr. Norris was an Executive Vice
President of the General Partner. From 1993 through 1996 he was an executive
officer of Boston Financial. From 1983 to 1993 Mr. Norris worked at Winthrop
Financial Associates. Prior to that, he worked at Arthur Young & Company
(subsequently named Ernst & Young through a merger). Mr. Norris is a graduate of
Bowdoin College (B.A.) and Northeastern University (M.S.). Mr. Norris holds a
NASD Series 7 general securities license and is a registered investment adviser.


                                      -10-
<PAGE>

      William W. Gribbell, age 42, is an Executive Vice President of the Company
and has as his primary responsibility the direct equity placement of the
Sponsored Entities. Prior to the Conversion, Mr. Gribbell was an Executive Vice
President of the General Partner. From 1993 through 1996 he was an executive
officer of Boston Financial. From 1989 to 1993 Mr. Gribbell worked at Winthrop
Financial Associates. Mr. Gribbell is a graduate of Boston University (B.A.).
Mr. Gribbell holds a NASD Series 7 general securities license and is a
registered investment adviser.

      Janet Prier Notopoulos, age 54, is a Vice President of the Company and
President of FSP Property Management LLC and has as her primary responsibility
the oversight of the management of the real estate assets of the Company and its
affiliates. Prior to the Conversion, Ms. Notopoulos was a Vice President of the
General Partner. Prior to joining Franklin Street Partners in 1997, Ms.
Notopoulos was a real estate and marketing consultant for various clients. From
1975 to 1983, she was Vice President of North Coast Properties, Inc., a Boston
real estate investment company. Between 1969 and 1973, she was a real estate
paralegal at Goodwin, Procter & Hoar. Ms. Notopoulos is a graduate of Wellesley
College (B.A.) and the Harvard School of Business Administration (M.B.A).

      Each of the above persons other than Ms. Notopoulos began working for the
Partnership at its inception in 1997. Ms. Notopoulos was employed as a
consultant by the Partnership commencing in March 1997 and became a full-time
employee on January 1, 1998.

      There are no family relationships among any of the executive officers.

Item 5. Market For Registrant's Common Equity and Related Stockholder Matters.

      There is no established public trading market for the Company's Common
Stock.

      As of March 21, 2002, there were 741 holders of record of the Company's
Common Stock. This computation is based upon the number of record holders
reflected in our corporate records.

      The Company has declared a dividend of $.30 per share of Common Stock
payable to stockholders of record as of February 8, 2002. The Company has also
declared a dividend of $.01 per share of Common Stock payable to stockholders of
record as of February 15, 2002. Set forth below are the distributions per Unit
of limited partnership interest that the Partnership made in each quarter in the
last two fiscal years of the Partnership.

                                           Amount Per Limited and
                  Quarter Ended             General Partner Unit
                  -------------             --------------------

                     3/31/00                       $0.23
                     6/30/00                       $0.24
                     9/30/00                       $0.25
                    12/31/00                       $0.26
                     3/31/01                       $0.27
                     6/30/01                       $0.28
                     9/30/01                       $0.29
                    12/31/01                       $0.30

      While not guaranteed, the Company expects that cash dividends on the
Company's Common Stock comparable to the Partnership's most recent quarterly
distribution will continue to be paid in the future.

      On July 1, 2001, January 1, 2001 and April 1, 2000, the Partnership issued
149,131 Units, 2,522 Units and 230,000 Units of limited partnership interest,
respectively, as compensation to its executive officers and certain other
employees pursuant to an exemption from registration under Section 4(2) of the
Securities Act. Effective October 1, 2000, the Partnership acquired six
Sponsored Partnerships through merger. In connection with these mergers, the
Partnership issued 7,204,716 Units of limited partnership interest to the
limited partners of those Sponsored Partnerships. Effective January 1, 2000, the
Partnership acquired three Sponsored Partnerships through merger. In connection
with these mergers, the Partnership issued 4,999,972 Units of limited
partnership interest to the limited partners of those Sponsored Partnerships.
Effective January 1, 1999, the Partnership acquired eight Sponsored Partnerships
through merger. In connection with these mergers, the Partnership issued
11,999,907 Units


                                      -11-
<PAGE>

of limited partnership interest to the limited partners of those Sponsored
Partnerships. The Partnership issued the Units in each of these mergers pursuant
to exemptions from registration under Rule 506 of Regulation D and Section 4(2)
of the Securities Act. The Partnership based its belief that such transactions
had the benefit of these exemptions on the fact that no general solicitation was
conducted and on information furnished in investor questionnaires, and
representations made, by the limited partners of each acquired Sponsored
Partnership as to their status as accredited investors.

      On January 1, 2002, in connection with the Conversion, the Company issued
an aggregate of 24,586,249 shares of Common Stock to the general and limited
partners of the Partnership pursuant to an exemption from registration under
Rule 506 of Regulation D and Section 4(2) of the Securities Act. The Company
bases its belief that such transaction had the benefit of these exemptions on
the fact that no general solicitation was conducted and on information furnished
in investor questionnaires and representations made by the limited partners of
the Partnership as to their status as accredited investors.

Item 6. Selected Financial and Other Data.

      The following selected financial information is derived from the
historical consolidated financial statements of the Partnership. This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Item 7 hereof and
with the Partnership's consolidated financial statements and related notes
thereto included in Item 8 of this report.

<TABLE>
<CAPTION>
                                                      Year Ended December 31,
                                        -------------------------------------------------------
                                          2001        2000        1999        1998       1997
                                          ----        ----        ----        ----       ----
                                                                                     (unaudited)
                                                (In thousands, except per Unit amounts)
<S>                                     <C>         <C>         <C>          <C>        <C>
Operating Data:
Total revenues ....................     $ 54,447    $ 34,793    $ 18,048     $11,555    $ 7,203
Net income (loss) .................       25,368       8,914       1,139      (1,675)       272
Basic and diluted net income (loss)
    per limited and general
    partnership unit ..............         1.03        0.47        0.09       (0.88)      0.14
Distributions declared per Unit
    outstanding(1) ................         1.18        1.02        0.86        1.05       0.79

                                                            As of December 31,
                                        -------------------------------------------------------
                                          2001        2000        1999        1998       1997
                                          ----        ----        ----        ----       ----
Balance Sheet Data (at period end):
Total assets ......................     $204,117    $219,923    $190,486     $95,886    $66,117
Total liabilities .................        4,354      19,280      28,821       1,294      1,639
Minority interests in consolidated           --           63      78,090      89,593     56,304
    entities
Total partners' capital ...........      199,763     200,580      83,575       4,999      8,174
</TABLE>

(1)   As a result of the Conversion, each Unit was converted into one share of
      Common Stock.

      The 2000 and 1999 financial statements reflect the merger of 17 Sponsored
Partnerships. Prior to the applicable merger, the Partnership owned a
controlling general partner interest in the 17 Sponsored Partnerships--See Note
4 to the consolidated financial statements of the Partnership and "Financial
Information--Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Item 7 hereof.

Item 7. 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. Historical
results and percentage relationships set forth in the Consolidated Financial
Statements contained in the 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 Annual Report 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 the
Company's forward-looking statements involve risks


                                      -12-
<PAGE>

and uncertainty, including without limitation, changes in economic conditions in
the markets in which the Company owns properties, changes in the demand by
investors for investment in Sponsored REITs, the impact of the events of
September 11, 2001, risks of a lessening of demand for the types of real estate
owned by the Company, 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 "Risk Factors" in Item 1A. 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 will not update any of the forward-looking statements after the
date this annual report 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

      The Company operates in two business segments: investment banking services
and rental operations. FSP Investments provides real estate investment and
broker/dealer services that include: (a) the organization of Sponsored REITs in
2001 and 2000 and Sponsored Partnerships in 2000 and prior years, which were
syndicated through private placements; (b) the acquisition of real estate on
behalf of the Sponsored Entities; and (c) the sale of preferred stock in
Sponsored REITs or limited partnership interests in the Sponsored Partnerships.
The following table summarizes property owned by the Partnership and the
Sponsored Partnerships for the three years ended December 31, 2001, 2000 and
1999.

                                                       December 31,
                                        ---------------------------------------
                                          2001           2000           1999
                                          ----           ----           ----
Residential
        Number of Properties..........          4              4              4
        Number of Apartment Units.....        642            642            642
Commercial
        Number of Properties..........         13             13             12
        Square Footage................  1,433,300      1,433,300      1,328,500

      As described in Note 4 to Financial Statements, the Partnership
consummated three series of mergers. As described above, the Company operates in
two segments, real estate operations and broker/dealer and real estate
investment services. Prior to the consummation of the first series of mergers,
the Partnership operated in the segment of broker/dealer and real estate
investment services. The first series of mergers added the real estate
operations of certain Sponsored Partnerships to the Partnership's business. The
nature of the Partnership's business was not changed by the second and third
series of mergers.

      The mergers were accounted for as a purchase, whereby the assets and
liabilities of the Sponsored Partnerships were recorded at their fair values and
transaction costs were capitalized. In each merger the Partnership acquired the
minority interests in the Sponsored Partnerships. None of the merged Sponsored
Partnerships was subject to debt financing and no debt was assumed or created at
the time of the merger. The investors of the merged entities exchanged their
interests for an interest in the Partnership. There were no cash payments and no
contingent payments.

      The acquisitions have affected the Company in two ways: the real estate
portfolio is more diverse, both geographically and with respect to property
type; and the Company has a larger borrowing capacity.


                                      -13-
<PAGE>

      The following table sets forth the identity of each merged Sponsored
Partnership, the date of its merger and the estimated value ascribed to that
Partnership.
                                                               Estimated Value
                                                             at Merger Date (in
     Merged Partnership               Merger Date                thousands)
     ------------------               -----------                ----------
     Essex Lane                     January 1, 1999              $11,339
     FSP Apartment Properties       January 1, 1999               12,691
     One Technology                 January 1, 1999               11,989
     FSP North Andover              January 1, 1999                9,919
     FSP Weslayan Oaks              January 1, 1999                5,760
     FSP Park Seneca                January 1, 1999               10,126
     FSP Santa Clara                January 1, 1999                7,938
     FSP Piedmont                   January 1, 1999               12,435

     FSP Silverside                 January 1, 2000               19,063
     FSP Hillview                   January 1, 2000                5,328
     FSP Telecom                    January 1, 2000               16,814


     FSP Southfield Centre          October 1, 2000               16,412
     FSP Blue Ravine                October 1, 2000                6,475
     FSP Bollman Place              October 1, 2000                6,035
     FSP Austin N.W.                October 1, 2000               11,403
     FSP Gateway Crossing           October 1, 2000               20,870
     FSP Lyberty Way                October 1, 2000               10,612

      During 2001 and 2000, the Partnership retained 100% of the common stock in
six and three Sponsored REITs, respectively, for nominal consideration in
connection with the organization and syndication of such Sponsored REITs.
Additionally, the Partnership's general partner interest in one Sponsored
Partnership was exchanged for the common stock in a newly formed Sponsored REIT,
in connection with this Sponsored Partnership's reorganization from a limited
partnership to a REIT on January 1, 2001. The Partnership's cost of its
investment in the Sponsored REITs approximates its share of the underlying
equity in the net assets of the REITs. The Partnership's share of the Sponsored
REITs' earnings, after deducting preferred stock dividends paid or accrued, was
not material for the years ended December 31, 2001 and 2000. There were no
Sponsored REITs in 1999.

      The Sponsored REITs issued both common stock and preferred stock. The
common stock is owned solely by the Company and the preferred stock is owned by
unaffiliated investors. Each Sponsored REIT was organized to acquire a single
real estate property using the proceeds raised through a private offering of its
preferred stock. The Sponsored REITs do not contemplate having any long-term
financing. Following consummation of the offerings, the preferred shareholders
in each of the Sponsored REITs are entitled to 100% of the Sponsored REIT's cash
distributions. As a common shareholder, the Company has no rights to the
Sponsored REIT's regular cash distributions. However, upon liquidation of the
Sponsored REITs, the Company will be entitled to its percentage interest in any
proceeds after the preferred shareholders have recovered their investment. The
Company's percentage interest in each Sponsored REIT is less than 0.1%. The
affirmative vote of the holders of a majority of the Sponsored REIT's preferred
stockholders is required for any actions involving merger, sale of property,
amendment to charter or issuance of additional capital stock. In addition, all
of the Sponsored REITs allow the holders of more than 50% of the outstanding
preferred shares to remove, without cause, and replace one or more members of
the REIT's Board of Directors.

Critical Accounting Policies.

      Basis of Presentation. The consolidated financial statements of the
Partnership include the accounts of the Partnership, 17 Sponsored Partnerships
and wholly and majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. Prior to the
mergers, FSP Holdings was the general partner and owned a 5% interest in each of
the Sponsored Partnerships. As the general partner, FSP Holdings had the
exclusive rights and powers to manage and control the business of each Sponsored
Partnership without the consent or approval of the limited partners. The limited
partners in the Sponsored Partnerships could not elect to


                                      -14-
<PAGE>

replace the general partner, except for cause. Accordingly, prior to the
mergers, the accounts of the Sponsored Partnerships have been consolidated into
the Partnership's financial statements under the principles of accounting
applicable to investments in subsidiaries in accordance with SOP 78-9.

        Real Estate and Depreciation.

        Real estate assets are stated at the lower of cost or fair value, as
appropriate, less accumulated depreciation.

        Costs related to property acquisition and improvements are capitalized.
Typical capital items include new roofs, site improvements, various exterior
building improvements and major interior renovations. Funding for capital
improvements typically is provided by cash set aside at the time the property
was purchased.

      Routine replacements and ordinary maintenance and repairs that do not
extend the life of the asset are expensed as incurred. Typical expense items
include interior painting, landscaping, minor carpet replacements and
residential appliances. Funding for repairs and maintenance items typically is
provided by cash flows from operating activities. Depreciation is computed using
the straight line method over the assets' estimated useful lives as follows:

           Category                     Years
           --------                     -----

           Buildings:
              Residential                 27
              Commercial                  39
           Building Improvements        15-39
           Furniture and equipment       5-7


      The Partnership evaluates its assets used in operations by identifying
indicators of impairment and by comparing the sum of the estimated undiscounted
future cash flows for each asset to the asset's carrying value. When indicators
of impairment are present and the sum of the undiscounted future cash flows is
less than the carrying value of such asset, an impairment loss is recorded equal
to the difference between the asset's current carrying value and its fair value
based on discounting its estimated future cash flows. At December 31, 2001, no
such indicators of impairment were identified.

      Revenue Recognition.

      Rental income for Commercial Properties -- The Partnership has retained
substantially all of the risks and benefits of ownership of the Partnership's
commercial properties and accounts for its leases as operating leases. Rental
income from leases, which include scheduled increases in rental rates during the
lease term, is recognized on a straight-line basis. The Partnership does not
have any percentage rent arrangements with its commercial property tenants.
Reimbursable common area maintenance charges are included in rental income in
the period earned.

      Rental income for Residential Apartments -- The Partnership's residential
property leases are generally for terms of one year or less. Rental income from
tenants of residential apartment properties is recognized in the period earned.
Rent concessions, including free rent and leasing commissions are charged as a
reduction of rental revenue.

      Investment Banking Services -- Syndication fees ranging from 6% to 8% of
the gross offering proceeds from the sale of securities in Sponsored Entities
are generally recognized upon an investor closing; at that time the Partnership
has provided all required services, the fee is fixed and collected, and no
further contingencies exist. Commission expense ranging from 3% to 4% of the
gross offering proceeds is recorded in the period the related syndication fee is
earned.

      Investment Banking Services -- Transaction fees are generally recognized
upon the final investor closing of a Sponsored Entity. The final investor
closing is the last admittance of investors into a Sponsored Entity; at that
time, required funds have been received from the investors, charges relating to
the syndication have been paid or accrued, continuing investment and continuing
involvement criteria have been met, and legal and economic rights have been
transferred. Third party transaction-related costs are deferred and later
expensed to match revenue


                                      -15-
<PAGE>

recognition. Internal expenses are expensed as incurred. The Partnership follows
the requirements for profit recognition as set forth by Statement of Financial
Accounting Standards No. 66 "Accounting for Sales of Real Estate" and Statement
of Position 92-1 "Accounting for Real Estate Syndication Income."

Recent Accounting Standards

      In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" as amended by SFAS No. 137 and
No. 138. The provisions of this statement require that derivative instruments be
carried at fair value on the balance sheet. The statement continues to allow
derivative instruments to be used to hedge various risks and sets forth specific
criteria to be used to determine when hedge accounting can be used. For
derivative instruments not accounted for as hedges, changes in fair value are
required to be recognized in earnings. The provisions of this statement became
effective January 1, 2001. The Partnership has not historically had derivative
instruments, and this standard has had no impact on its financial position,
results of operations and cash flows.

      In June 2001, the FASB approved SFAS No. 141 "Business Combinations"
("SFAS 141") and No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142"),
effective July 1, 2001 and January 1, 2002, respectively, for the Partnership.
SFAS 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. The Partnership has adopted
SFAS 141; no combinations by the Partnership occurred after June 30, 2001 to
which this would apply. Under SFAS 142, amortization of goodwill, including
goodwill recorded in past business combinations, will discontinue upon adoption
of this standard. All goodwill and intangible assets will be tested for
impairment in accordance with the provisions of the Statement. The Partnership
has reviewed the provisions of SFAS 142 and believes that the impact of adoption
will not be material to its financial position, results of operations and cash
flows.

      In August 2001, the FASB issued SFAS No. 143 "Accounting for Asset
Retirement Obligations" ("SFAS 143") which addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS 143 requires that the
fair value of a liability for an asset retirement obligation be recognized in
the period in which it is incurred if a reasonable estimate of the fair value
can be made. The associated asset retirement costs are capitalized as part of
the carrying amount of the long-lived asset. SFAS 143 will be effective at the
beginning of 2003. The Partnership has reviewed the provisions of SFAS 143 and
believes that the impact of adoption will not be material to its financial
position, results of operations and cash flows.

      In October 2001, the FASB issued SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 supersedes
SFAS No. 121 and requires that long-lived assets that are to be disposed of by
sale be measured at the lower of book value or fair value less costs to sell.
SFAS 144 retains the fundamental provisions of SFAS No. 121 for (a) recognition
and measurement of the impairment of long-lived assets to be held and used, and
(b) measurement of long-lived assets to be disposed of by sale, but broadens the
definition of what constitutes a discontinued operation and how the results of a
discontinued operation are to be measured and presented. SFAS 144 will be
effective at the beginning of 2002. With the exception of reclassifying the
operations of real estate assets considered "held for sale" to "Discontinued
operations, net of tax" in the consolidated statement of income, the impact of
adoption will not have a material impact on the Partnership's financial position
and cash flows. The Partnership does not have any real estate assets that it
considers "held for sale".

Financing and Other Commitments

      The Partnership has a revolving line of credit agreement (the "Loan
Agreement") with a bank providing for borrowings at the Partnership's election
up to $50 million. Borrowings under the Loan Agreement bear interest at either
the bank's base rate or a variable LIBOR rate, as defined. There were no
outstanding borrowings by the Partnership under the Loan Agreement at December
31, 2001. The Partnership is in compliance with all bank covenants required by
this line of credit. The Loan Agreement matures on February 23, 2003. It is the
Company's intention to renew the line of credit when it matures.


                                      -16-
<PAGE>

      The Partnership has arranged for Citizens Bank to provide a line of credit
for the Partnership's senior officers in the maximum aggregate amount of $3
million. The borrowings under this line of credit are for the purpose of paying
income taxes on equity interests in the Company issued to such senior officers
as compensation. Loans under this line of credit have a term of one year and
bear interest at the bank's prime rate plus 50 basis points. Loans of $1,625,000
in the aggregate were outstanding to senior officers at December 31, 2001. Each
borrower has secured the loan by pledging shares of the Company's Common Stock
having an aggregate fair market value at the time of the loan of no less than
twice the principal amount of the loan. The Partnership has agreed to purchase
from Citizens Bank any loan on which the borrower defaults. Following the
purchase of the loan, the Partnership would have the same rights as Citizens
Bank, including the right to foreclose on the pledged stock.

      The Partnership's commercial rental operations include the leasing of
office buildings and industrial properties subject to leases with terms greater
than one year. The leases thereon expire at various dates through 2012.
Approximate future minimum rental income on non-cancelable operating leases as
of December 31, 2001 are (in thousands): 2002 - $15,415; 2003 - $13,307; 2004 -
$9,957; 2005 - $5,898; 2006 - $3,336; and $12,207 thereafter.

      The Partnership leases its corporate office space under a six-year
operating lease that commenced in June 1999. The lease includes a base annual
rent and additional rent for the Partnership's share of taxes and operating
costs. Approximate future minimum lease payments at December 31, 2001 are (in
thousands): 2002 - $199; 2003 - $203; 2004 - $209; and 2005 - $97.

      In connection with the purchase of a property by a Sponsored REIT in May
2001, the Partnership obligated itself to purchase an additional parcel of real
property within a certain amount of time if the owner offered such property for
sale to the Partnership. The Company satisfied this obligation by causing FSP
Timberlake East Corp., a newly-organized Sponsored REIT, to purchase this parcel
on March 4, 2002.

Off-Balance Sheet Investments

      The Partnership typically retains a minimal common stock ownership
interest in Sponsored REITs that it has organized. These ownership interests
have virtually no economic benefit or risk. At December 31, 2001 and 2000, the
Partnership had ownership interests in ten and four Sponsored REITs,
respectively. During 1999 and 2000, the Partnership acquired 100% of the
non-owned interests of certain Sponsored Partnerships (through a series of
mergers) that it had previously organized.

      Summarized financial information for the Sponsored REITs are as follows:

           (unaudited)                                 December 31,
                                                       ------------
                                                     2001         2000
                                                     ----         ----
                                                      (in thousands)
           Balance Sheet Data:
           Real estate, net                       $222,232       $56,565
           Other assets                             19,048         5,058
           Total liabilities                         6,755         1,950
           Shareholders equity                     234,525        59,673

           Operating Data:
           Rental revenues                        $ 19,816       $ 2,778
           Other revenues                              354           117
           Operating and maintenance expenses        5,973           948
           Depreciation and amortization             3,191           574
           Interest expense                          9,916         2,298
           Net income (loss)                         1,090          (925)

      There were no Sponsored REITS in 1999.


                                      -17-
<PAGE>

Results of Operations

      The following table shows the Partnership's financial data as a percentage
of total revenues for the three years ended December 31, 2001, 2000 and 1999 and
the variance in dollars between the years ended December 31, 2001 and 2000 and
the years ended December 31, 2000 and 1999.


<TABLE>
<CAPTION>
                                           Financial Data as a Percentage
                                                 of Total Revenues             Variance in Dollars
                                          -------------------------------     --------------------
                                          For the Year Ended December 31,      For the Year Ended
                                          -------------------------------     --------------------
                                                                                  December 31,
                                                                              --------------------
                                                                              2001 and    2000 and
                                            2001       2000        1999         2000        1999
                                          --------   --------    --------     --------    --------
                                                                                 (in thousands)
Revenue
<S>                                        <C>          <C>         <C>      <C>           <C>
    Rental Revenue
    Rental.............................     49.2%        73.1%       90.1%   $ 1,331       $9,119
    Interest and other.................      3.4%         4.8%        5.3%       184          771
    Investment Services Revenue
    Syndication fees...................     23.9%        11.6%        2.5%     8,964        3,592
    Transaction fees...................     23.3%        10.2%        1.9%     9,163        3,193
    Interest...........................      0.2%         0.3%        0.2%        12           70
                                           -----        -----       -----    -------      -------
    TOTAL REVENUE......................    100.0%       100.0%      100.0%    19,654       16,745
                                           -----        -----       -----    -------      -------
Expenses
    Rental Expenses
    Selling, general and administrative      3.7%         2.1%       10.4%     1,302       (1,137)
    Rental operating expenses..........     12.3%        18.7%       24.5%       537        2,060
    Depreciation and amortization......      8.7%        13.0%       17.6%       196        1,350
    Real estate taxes and insurance....      5.3%         7.1%        8.0%       427        1,025
    Interest...........................      0.8%         2.5%        1.7%       (42)         561
    Investment Services Expenses
    Selling, general and administrative      7.1%         6.7%        7.0%       854        1,621
    Commissions........................     12.0%         9.8%       14.6%     3,103          788
    Partnership units issued as
    compensation.......................      3.2%         6.6%        0.0%      (556)       2,300
    Depreciation and amortization......      0.1%         0.2%        0.3%       (12)          32
                                           -----        -----       -----    -------      -------
    TOTAL EXPENSES.....................     53.3%        66.8%       84.1%     5,809        8,600
                                           -----        -----       -----    -------      -------
Minority interests.....................      0.1%         7.6%       12.6%    (2,609)         370
Net income.............................     46.7%        33.2%       15.9%   $16,454       $7,775
                                           =====         =====       =====   =======       ======
</TABLE>

Comparison of The Year Ended December 31, 2001 To The Year Ended December 31,
2000

      Revenue

      Total revenues increased $19.6 million, or 56%, to $54.4 million for the
year ended December 31, 2001, as compared to $34.8 million for the year ended
December 31, 2000. Income from rental operations was $26.7 million for the year
ended December 31, 2001.

      The increase in rental income of $1.3 million, or 5.2%, compared to the
year ended December 31, 2000, is attributable to:

      o     the acquisition of one commercial property in 2000, which
            contributed revenue for a full year in 2001, as compared with a
            partial year in 2000, resulting in $0.5 million in incremental
            revenues;

      o     increased revenues of approximately $0.8 million as a result of rent
            increases on existing properties.

      The increase in investment services income (Syndication and Transaction
fees) of $18.1 million, or 239%, compared to the year ended December 31, 2000,
is attributable to the syndication of six Sponsored REITs (with aggregate gross
proceeds of $203.1 million) in 2001 compared to the syndication of three
Sponsored REITs (with aggregate gross proceeds of $60.2 million) in 2000. The
revenue associated with the syndication of three Sponsored


                                      -18-
<PAGE>

Partnerships in 2000 with aggregate gross proceeds of $47.4 million has been
eliminated in the Consolidated Statements of Income.

      The increase in interest and other income of $0.2 million, or 11%,
compared to the year ended December 31, 2000 is attributable to interest earned
on higher cash balances, cash equivalents and marketable securities in 2001
compared to 2000.

      Expenses

      Total expenses increased $5.8 million, or 25%, to $29.0 million for the
year ended December 31, 2001, as compared to $23.2 million for the year ended
December 31, 2000.

      The increase in selling, general and administrative expenses of $2.2
million, or 70%, compared to the year ended December 31, 2000, is attributable
to the extra costs associated with the syndication of six Sponsored REITS in
2001 (with aggregate gross proceeds of $203.1 million) compared to the
syndication of six Sponsored Entities in 2000 (with aggregate gross proceeds of
$107.6 million) as follows:

      o     increased payroll and related expenses of $1.5 million;

      o     increased consulting and professional fees of approximately $0.6
            million;

      o     increased other costs of approximately $0.1 million.

      The increase in commission expense of $3.1, million or 91%, compared to
the year ended December 31, 2000 is attributable to the increase of syndication
proceeds of approximately $95 million in 2001 as described above.

      The increase in rental expenses of $0.5 million, or 8.3%, compared to the
year ended December 31, 2000, is primarily attributable to the acquisition of
one commercial property in 2000, which incurred costs for a full year in 2001,
as compared with a partial year in 2000.

      The increase in depreciation and amortization expenses of $0.2 million, or
4%, compared to the year ended December 31, 2000, is primarily attributable to
the acquisition of one commercial property in 2000, which incurred a full year
of depreciation and amortization expense in 2001, as compared with a partial
year in 2000.

      The increase in real estate taxes and insurance expenses of $0.4 million,
or 17%, compared to the year ended December 31, 2000, is primarily attributable
to:

      o     the acquisition of one commercial property in 2000, which incurred
            costs for a full year in 2001, as compared with a partial year in
            2000, resulting in approximately $0.1 million in incremental
            expenses;

      o     tax rate increases on the existing properties of approximately $0.3
            million.

      The decrease in interest expense of $42 thousand, or 5%, compared to the
year ended December 31, 2000, is primarily attributable to lower interest rates
in 2001.

      The decrease in minority interest expense of $2.6 million for the year
ended December 31, 2001 compared to the minority interest for the year ended
December 31, 2000 is a result of the mergers completed during the year ended
December 31, 2000, as described in Note 4 to the Financial Statements.


                                      -19-
<PAGE>

Comparison Of The Year Ended December 31, 2000 To The Year Ended December 31,
1999

      Revenue

      Total revenues increased $16.8 million, or 92.8%, to $34.8 million for the
year ended December 31, 2000, as compared to $18.0 million for the year ended
December 31, 1999. Income from rental operations was $25.4 million for the year
ended December 31, 2000.

      The increase in rental income of $9.1 million, or 55.9%, compared to the
year ended December 31, 1999, is attributable to:

      o     the acquisition of seven commercial properties in 1999, which
            contributed revenue for a full year in 2000, as compared with a
            partial year in 1999, resulting in $8.0 million in incremental
            revenues;

      o     the acquisition of one commercial property in 2000, which
            contributed revenue for a partial year in 2000, as compared with no
            revenue in 1999, resulting in approximately $0.6 million in
            incremental revenues;

      o     increased revenue of approximately $0.5 million as a result of rent
            increases and other miscellaneous fees on existing properties.

      The increase in investment services income (Syndication and Transaction
fees) of $6.8 million, or 859%, compared to the year ended December 31, 1999, is
attributable to the syndication of three REITs in 2000 (with aggregate gross
proceeds of $60.2 million) compared to the syndication of one Sponsored Entity
in 1999 (with aggregate gross proceeds of $7.8 million).

      The increase in interest and other income of $0.8 million, or 89.1%,
compared to the year ended December 31, 1999 is attributable to interest earned
on higher cash balances, cash equivalents and marketable securities and higher
average yields in 2000 compared to 1999.

      Expenses

      Total expenses increased $8.6 million, or 53.0%, to $23.2 million for the
year ended December 31, 2000, as compared to $14.6 million for the year ended
December 31, 1999.

      The increase in selling, general and administrative expenses of $0.5
million, or 24%, compared to the year ended December 31, 1999, is attributable
to the extra costs associated with the syndication of six Sponsored Entities
(with aggregate gross proceeds of $107.6 million) in 2000 compared with the
syndication of six Sponsored Entities (with aggregate gross proceeds of $64.9
million) in 1999 as follows:

      o     increased payroll and related expenses of $0.7 million;

      o     offset by decreased other costs of approximately $0.2 million.

      The increase in other real estate operating expenses of $2.1 million, or
46.5%, compared to the year ended December 31, 1999, is primarily attributable
to the acquisition of seven commercial properties in 1999, which incurred costs
for a full year in 2000, as compared with a partial year in 1999.

      The increase in commission expense of $0.8 million, or 19%, compared to
the year ended December 31, 1999 is attributable to the syndication of six
Sponsored Entities (with aggregate gross proceeds of $107.6 million) in 2000
compared with the syndication of six Sponsored Entities (with aggregate gross
proceeds of $64.9 million) in 1999 as follows:

      The increase in depreciation and amortization expenses of $1.3 million or
44.8%, compared to the year ended December 31, 1999, is primarily attributable
to:


                                      -20-
<PAGE>

      o     the acquisition of seven commercial properties in 1999, which
            incurred depreciation and amortization expenses for a full year in
            2000, as compared with a partial year in 1999, resulting in $1.2
            million in incremental expenses;

      o     the acquisition of one commercial property in 2000, which incurred
            depreciation and amortization expenses for a partial year in 2000,
            as compared with no costs in 1999, resulting in approximately $0.1
            million in incremental costs;

      The increase in real estate taxes and insurance expenses of $1.0 million
or 70.8%, compared to the year ended December 31, 1999, is primarily
attributable to:

      o     the acquisition of seven commercial properties in 1999, which
            incurred costs for a full year in 2000, as compared with a partial
            year in 1999, resulting in approximately $0.8 million in incremental
            expenses;

      o     tax rate increases on the existing properties of approximately $0.2
            million.

      The increase in interest expense of $0.6 million, or 187.6%, compared to
the year ended December 31, 1999, is primarily attributable to the syndication
of three REITs in 2000 compared to the syndication of one unconsolidated
Sponsored Partnership in 1999.

      The increase in minority interest expense of $0.4 million for the year
ended December 31, 2000 compared to the minority interest for the year ended
December 31, 1999 is a result of the mergers completed during the year ended
December 31, 2000.

Trends and Uncertainties

      Rental Operations

      In 2001, the Company saw a reversal of some of the trends in 2000.
Absorption of new rental units and higher oil prices benefited the Houston
apartment properties for most of 2001 until the Enron bankruptcy at the end of
the year. The Enron bankruptcy and general economic conditions in Houston have
increased vacancy and rent concessions throughout Houston, but had not had a
material effect on the Company's apartments as of the end of the year. Vacancies
at the Company's apartments are expected to increase in 2002 as an immediate
result of the Enron bankruptcy on the downtown area, but it is not known how
long or how serious that impact will be, since Houston has a large and
diversified economic base beyond Enron.

      Office vacancy rates in most markets increased during 2001, making it
harder to increase rents or lease vacancies as they occurred throughout the
year. Unless there is a turnaround in the general economy in 2002, these
conditions are likely to remain and vacancies may increase along with increased
costs to lease the vacant space, such as concessions, free rent and other
incentives. When the economy does recover, it is likely to recover unevenly with
certain industry segments and geographic areas improving before others. Because
of the diversity of the Company's portfolio and the long term nature of its
office leases, the financial impact of any recovery or further deterioration may
be slow to materialize and is difficult to predict.

      During 2001, the Company had mixed success in leasing vacancies that
occurred due to normal lease expirations and as a result of unexpected vacancies
that arose because of tenant bankruptcies. In some markets, such as Greenville
and Charlotte, where vacancies arose during the year, only a portion of the
space has been relet. In others, such as San Diego and Austin, the entire space
was relet quickly, and the buildings are now 100% leased.

      There are no material lease expirations until a lease for 99,000 square
feet expires on November 30, 2002. The tenant under that lease has announced its
intention to vacate the premises, and the Company began actively marketing the
space to potential users at the beginning of 2002. The only year in which more
than 10% of the Company's square footage has leases expiring is 2004, during
which leases with respect to more than 20% of the Company's square footage will
expire. Some of these leases contain options to extend, and discussions have
taken place regarding early renewals for some of the leases. The Company cannot
now predict which leases will not be extended in 2004.


                                      -21-
<PAGE>

      Other tenants may fail in 2002, as they did in 2001, and present the same
challenges in 2002. One longstanding, privately held tenant in South Carolina is
significantly behind in its rent and may not be able to pay its arrearage or
future rent. The future of other publicly traded companies, such as XO and
Lucent, have been subjects of public speculation, but both tenants are currently
occupying the space and paying rent. Lucent has notified the Company that it is
considering subletting its space, but Lucent is and would still be liable for
the rent under any subletting or assignment of the lease.

      Real estate taxes are expected to increase in 2002 as municipalities try
to compensate for lost revenue by raising tax rates or by taxing commercial real
estate more heavily. Where possible, the Company intends to protest and file for
tax abatements, particularly for buildings that had vacancies in 2001. However,
it is not certain that those efforts will be successful or that the refunds will
be made in 2002.

      Due to the events of September 11, insurance costs are expected to
increase when the Company's policy is scheduled for renewal in April 2002, but
the amount of the increase and change in limits are not known at this time.
Individual states are debating and voting on whether or not to allow insurance
companies to deny coverage for terrorism, and the Company will not know until
the time of its renewal whether it will be able to obtain terrorism coverage for
all of its buildings at a reasonable price. In addition, coverage for damage
from toxic mold is expected to be excluded from the renewal policy, and such
coverage, if available, will need to be bought back at an additional premium
cost which may be prohibitively expensive. The Company intends to try to
maintain appropriate insurance coverage with reasonable deductibles at
reasonable rates but may have trouble doing so in the current insurance market.
There has not been a material increase in the cost of security to date, but if
there are additional acts of terrorism, the Company may be forced to add
security at properties where the costs cannot be passed on to the tenants.

      In addition to real estate taxes, security and insurance costs, other
costs may increase in 2002 as a result of inflation. Most of the Company's
office leases pass increased operating costs on to the tenants. However, two of
the Company's office buildings, constituting 13% of the total square footage,
have leases with fixed annual rent increases of between 4% and 5% instead of
operating cost escalation clauses or direct reimbursements. The leases for the
apartment units do not allow for recovery of increases in operating expenses;
however, the apartment tenants pay for most of the utility costs for their
units.

      In the course of owning and operating real estate, the potential exists
for the Company to dispose of one or more properties in its portfolio. Market
conditions in specific geographic locations could present the Company with the
opportunity to realize significant capital appreciation in an asset's value. The
Company maintains close attention to market conditions in all geographic
locations where its properties are located.

      Investment Services

      Unlike the Company's real estate business, which provides a rental revenue
stream which is ongoing and recurring in nature, the Company's investment
banking business is transactional in nature. While trends in 2001 were quite
positive in terms of the quantity, both in the number of transactions and equity
raised, of Sponsored REITs completed, future business in this area is
unpredictable.

      As 2002 begins, the Company's acquisition executives are reporting some of
the largest spreads between bid and ask prices for properties that they have
seen in the Company's history. Differing views of the strength and timing of a
national economic recovery as well as low interest rate carrying costs on
debt-financed properties are probably contributing to this situation. Without
the ability to acquire properties at attractive prices, the Company's investment
banking activities may suffer.

      Further, the Company continues to rely solely on its 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. While the
Company continues to expand its in-house sales force, uncertainties always exist
as to whether it is capable, either through the Company's existing client base
or through new prospective clients, of providing the amount of investment
capital to achieve future performance objectives. Further setbacks in the stock
market or the general economy could have negative effects, and while the tragic
events of September 11, 2001 did not disrupt the Company's transactional
business unit significantly, further terrorist attacks, if they occur, may have
a chilling effect on the willingness of investors to purchase interests in
future Sponsored Entities.


                                      -22-
<PAGE>

Liquidity and Capital Resources as of December 31, 2001

      Cash and cash equivalents were $24.4 million and $13.7 million at December
31, 2001 and December 31, 2000, respectively. This 78% increase of $10.6 million
is attributable to $33.4 million generated by operating activities and $21.8
million generated by investing activities, partially offset by $44.5 million
used by financing activities.

      Operating Activities

      The Partnership's cash provided by operating activities of $33.4 million
is primarily attributable to $32.0 million from operations, after addback of
$6.6 million from non-cash expenses of which $4.8 million relates to
depreciation and amortization and $1.7 million relates to equity based
compensation, and to $1.5 million from the increase in accounts payable and
accrued expenses, partially offset by a net change in other operating assets and
liabilities of $0.1 million.

      Investing Activities

      The Partnership's cash provided by investing activities of $21.8 million
is attributable to the decrease in investment of $16.7 million as a result of
repayment of a mortgage loan by a Sponsored REIT and $5.3 million as a result of
the redemption of marketable securities plus proceeds of $0.4 million received
on the sale of land, offset by the purchase of $0.7 million of property and
equipment.

      Financing Activities

      The Partnership's cash used by financing activities of $44.5 million is
attributable to repayments of the line of credit of $16.5 million and cash
distributions to partners of $27.9 million.

Liquidity and Capital Resources as of December 31, 2000

      Cash and cash equivalents were $13.7 million and $18.5 million at December
31, 2000 and 1999, respectively. This 25.9% decrease of $4.8 million is
attributable to $31.1 million used in investing activities partially offset by
$14.5 million provided by operating activities and $11.7 million provided by
financing activities.

      Investing Activities

      The Partnership's cash used in investing activities of $31.1 million is
primarily attributable to:

      o     $16.7 million relating to advances to a Sponsored REIT which were
            subsequently repaid in February 2001;

      o     $9.9 million for the purchase of property and equipment, partially
            offset by proceeds of $0.9 million from the sale of land; and

      o     $5.3 million for the purchase of marketable securities.

      Operating Activities

      The Partnership's cash provided by operating activities of $14.5 million
is primarily attributable to $18.5 million from operations, after addback of
$9.5 million from non-cash expenses of which $4.6 million relates to
depreciation and amortization, $2.3 million relates to equity based
compensation, and $2.5 million relates to minority interests.

      The cash provided by operating activities is partially offset by $2.5
million from the decrease in accounts payable and accrued expenses and by $1.5
million from an aggregate net decrease in other operating assets and
liabilities.


                                      -23-
<PAGE>

      Financing Activities

      The Partnership's cash provided by financing activities of $11.7 million
is attributable to capital contributions of $39.8 million from the issuance of
partnership units in connection with the acquisition by merger of three of the
merged entities and borrowings under the line of credit of $16.5 million;

      The cash provided by financing activities is partially offset by
repayments of the line of credit of $23.5 million and cash distributions to
partners of $21.0 million.

Sources and Uses of Funds

      Our principal demands for liquidity are cash for operations, distributions
to equity holders, debt repayments and expense associated with indebtedness. As
of December 31, 2001 we had $4.4 million in liabilities. The Company has no
permanent, long-term debt. In the near term, liquidity is generated from funds
from ongoing real estate operations and fees and commissions received from the
sale of shares in new Sponsored REITs.

      The Company maintains an unsecured line of credit through Citizens Bank.
The Company has entered into a Master Promissory Note and Loan Agreement which
provides for a revolving line of credit of up to $50 million. Borrowings under
the loan bear interest at the Company's election of either the bank's base rate
or a variable LIBOR rate. We use the unsecured line of credit to provide each
newly-formed Sponsored Entity with the funds to purchase its property. The
Company lends the purchase price of the property, at an interest rate equivalent
to the rate which the Company is paying to the bank, and takes back a mortgage.
The Company collects a loan fee from the Sponsored Entity. The loan is paid back
in full from the capital contributions of each Sponsored Entity's investors. The
Company's loan agreement with the bank includes customary restrictions on
property liens and requires compliance with various financial covenants.
Financial covenants include maintaining minimum cash balances in operating
accounts, tangible net worth of at least $140 million and compliance with other
various debt and income ratios. The Partnership was in compliance with all
covenants as of December 31, 2001. Borrowings under the loan agreement mature on
February 23, 2003.

      The Partnership did not have any borrowings outstanding as of December 31,
2001. However, the Company intends to utilize, and subsequent to December 31,
2001 has utilized, its line of credit for interim financing in connection with
the acquisition of real estate by newly-formed Sponsored REITs.

      The Company's real properties generate rental income to cover the
ordinary, annual operating expenses of the properties and to fund distributions
to equity holders. As of December 31, 2001, the rental income covered the
expenses for each of the Company's real properties. In addition to rental
income, the Company maintains cash reserves that may be used to fund
extraordinary expenses or major capital expenses. The cash reserves were set
aside when the Sponsored Partnerships that the Partnership acquired were
originally syndicated. The cash reserves as of December 31, 2001 are in excess
of the known needs for extraordinary expenses or capital improvements for the
real properties within the next few years. There are no external restrictions on
these reserves, and they may be used for any Company purpose.

      Although there is no guarantee 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. With adequate reserves in place to cover
extraordinary expenses or capital improvements, the Company believes that it has
adequate funds for future needs. The Company's ability to maintain or increase
its level of distributions to stockholders, however, depends upon the level of
interest on the part of investors in purchasing shares of Sponsored REITs and
the level of rental income from the Company's real properties. See "Risk
Factors" in Item 1A.

Related Party Transactions

      The Partnership typically retains a non-controlling common stock ownership
interest in Sponsored REITs that it has organized. These ownership interests
have virtually no economic benefit or risk. At December 31, 2001 and 2000, the
Partnership had ownership interests in ten and four Sponsored REITs,
respectively. During 1999 and 2000, the Company acquired 100% of the non-owned
interests of certain Sponsored Partnerships (through a series of


                                      -24-
<PAGE>

mergers) that it had previously organized. Neither the Company nor any other
related entity has an obligation to acquire the non-owned interests in any
previously syndicated Sponsored REIT.

      At the request of the Company, officers and directors of the Company serve
as officers and directors of Sponsored REITs. All of the Company's revenue from
investment banking services derives from transactions involving the Sponsored
REITs. The terms of the commissions and fees paid by the Sponsored REITs to the
Company and the terms of the mortgage loans made by the Company to the Sponsored
REITs accordingly were not the product of arms-length negotiations. The Company,
however, believes that such terms are no less favorable to the Company than it
could have obtained from third parties in arms-length negotiations.

      The Company has an arrangement for Citizens Bank to provide loans to the
Company's senior officers for the purpose of paying income taxes on the issuance
to them of shares of Common Stock as compensation. Each borrower has secured the
loan by pledging shares of the Company's Common Stock having an aggregate fair
market value at the time of the loan of no less than twice the principal amount
of the loan. The Company has agreed to purchase from Citizens Bank any such loan
on which the borrower defaults. Following the purchase of the loan, the
Partnership would have the same rights as Citizens Bank, including the right to
foreclose on the pledged stock. As of December 31, 2001, aggregate loans to
senior officers in the amount of $1,625,000 were outstanding.


                                      -25-
<PAGE>

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

      The Partnership was not a party to derivative financial instruments at or
during the year ended December 31, 2001.

      The Company borrows from time to time upon its line of credit. These
borrowings bear interest at a variable rate. The Company uses the funds it draws
on its line of credit only for the purpose of making interim mortgage loans to
Sponsored REITs. These mortgage loans bear interest at the same variable rate
payable by the Company under its line of credit. Therefore, the Company believes
that it has mitigated its interest rate risk with respect to its borrowings.

Item 8. Financial Statements and Supplementary Data.

      The financial statements of the Partnership at December 31, 2001 and
December 30, 2000 and for the years ended December 31, 2001, 2000 and 1999, and
the reports of PricewaterhouseCoopers LLP and BDO Seidman, LLP thereon, are
included elsewhere herein. Reference is made to the Index to Consolidated
Financial Statements in Item 14 hereof.

Item 9. Changes in and Disagreements With Accountants on Accounting and
        Financial Disclosure.

      The information required by this item has been previously reported by the
Registrant on a Current Report on Form 8-K filed with the Securities and
Exchange Commission on October 17, 2001.


                                      -26-
<PAGE>

PART II

Item 10. Directors and Executive Officers of the Registrant.

      The response to this item is contained in part under the caption
"Executive Officers of the Company" in Part I of this Annual Report on Form
10-K, and in part in the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held on May 20, 2002 (the "2002 Proxy Statement") in the
sections titled "Election of Directors -- Members of the Board of Directors" and
"Other Matters -- Section 16(a) Beneficial Ownership Reporting Compliance",
which sections are incorporated herein by reference.

Item 11. Executive Compensation.

      The response to this item is contained in the 2002 Proxy Statement in the
sections titled "Election of Directors -- Compensation of Directors" and
"Executive Compensation", which sections are incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners And Management.

      The response to this item is contained in the 2002 Proxy Statement in the
section titled "Beneficial Ownership of Voting Stock", which section is
incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions.

      The response to this item is item is contained in the 2002 Proxy Statement
in the section titled "Certain Relationships and Related Transactions," which is
incorporated herein by reference.

PART III

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

      (a)   The following documents are filed as part of this report:

      1.    Financial Statements:

            The Financial Statements listed in the accompanying Index to
            Financial Statements are filed as part of this Annual Report on Form
            10-K.

      2.    Financial Statement Schedules:

            The Financial Statement Schedule listed on the accompanying Index to
            Financial Statements is filed as part of this Annual Report on Form
            10-K.

      3.    Exhibits:

            The Exhibits listed in the Exhibit Index are filed as part of this
            Annual Report on Form 10-K.

      (b)   Reports on Form 8-K.

            The Company filed a Current Report on Form 8-K on October 17, 2001
            to report under Item 4 that it had dismissed its independent
            certified accountant and retained a new independent certified
            accountant.


                                      -27-
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf as of March 28, 2002 by the undersigned, thereunto duly authorized.

                                           FRANKLIN STREET PROPERTIES CORP.

                                           By:  /s/ George J. Carter
                                               -----------------------------
                                               George J. Carter
                                               Chief Executive Officer

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.

Signature                      Title                             Date
---------                      -----                             ----


/s/ George J. Carter           Chief Executive Officer and
--------------------------     Director (Principal Executive     March  28, 2002
George J. Carter               Officer)

/s/ Lloyd S. Dow               Controller                        March  28, 2002
--------------------------     (Principal Accounting Officer)
Lloyd S. Dow

/s/ Richard R. Norris          Director                          March  28, 2002
--------------------------
Richard R. Norris

/s/ Barbara J. Corinha         Director                          March  28, 2002
--------------------------
Barbara J. Corinha

/s/ William W. Gribbell        Director                          March  29, 2002
--------------------------
William W. Gribbell

/s/ Janet P. Notopoulos        Director                          March  28, 2002
--------------------------
Janet P. Notopoulos

/s/ R. Scott MacPhee           Director                          March  28, 2002
--------------------------
R. Scott MacPhee


                                      -28-
<PAGE>

                                  EXHIBIT INDEX

Exhibit No.     Description
-----------     -----------

  2.1(1)        Agreement and Plan of Merger, dated October 10, 2001, by and
                between Franklin Street Properties Corp. and Franklin Street
                Partners Limited Partnership.

  3.1(2)        Articles of Organization.

  3.2(3)        By-laws.

  10.1+*        Franklin Street Properties Corp. 2002 Stock Incentive Plan.

  10.2*         Loan Agreement dated as of February 23, 1999 by and among
                Citizens Bank of Massachusetts, the Company and certain
                affiliates of the Company, as amended.

  21.1(4)       Subsidiaries of the Registrant.

----------
  (1)       Incorporated by reference to Appendix A of Franklin Street Partners
            Limited Partnership's Definitive Proxy Statement on Schedule 14A,
            filed on December 18, 2001.
  (2)       Incorporated by reference to Appendix B of Franklin Street Partners
            Limited Partnership's Definitive Proxy Statement on Schedule 14A,
            filed on December 18, 2001.
  (3)       Incorporated by reference to Appendix C of Franklin Street Partners
            Limited Partnership's Definitive Proxy Statement on Schedule 14A,
            filed on December 18, 2001.
  (4)       Incorporated by reference to Franklin Street Partners Limited
            Partnership's Form 10-12G/A, filed on December 18, 2001.
  (+)       Management contract or compensatory plan or arrangement filed as an
            Exhibit to this Form 10-K pursuant to Items 14(a) and 14(c) of Form
            10-K.
  *         Filed herewith


                                      -29-
<PAGE>

                                                        Franklin Street Partners

                                            Limited Partnership and Subsidiaries

                   Index to Consolidated Financial Statements

Reports of independent certified public accountants                  F-2 - F-9

Consolidated financial statements:

Consolidated Balance sheets as of December 31, 2001 and 2000         F-10 - F-11

Consolidated Statements of income for the years ended                F-12
December 31, 2001, 2000 and 1999

Consolidated Statements of partners' capital for the years           F-13
ended December 31, 2001, 2000 and 1999

Consolidated Statements of cash flows for the years ended            F-14
December 31, 2001, 2000 and 1999

Notes to consolidated financial statements                           F-15 - F-31

Financial Statement Schedule - Schedule III                          F-32 - F-33

All other schedules for which a provision is made in the applicable accounting
resolutions of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.


                                       F-1
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners of
Franklin Street Partners Limited Partnership:

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, partners' capital and cash flows present
fairly, in all material respects, the financial position of Franklin Street
Partners Limited Partnership and Subsidiaries (the "Partnership") at December
31, 2001, and the results of their operations and their cash flows for the year
then ended in conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the financial statement
schedule listed in the accompanying index presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. These financial statements and
financial statement schedule are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audit. We conducted our
audit of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.

                                     PricewaterhouseCoopers LLP

Boston, Massachusetts
March 4, 2002


                                       F-2
<PAGE>

               Report of Independent Certified Public Accountants

To the Partners of
Franklin Street Partners Limited Partnership
Wakefield, Massachusetts

We have audited the accompanying consolidated balance sheet of Franklin Street
Partners Limited Partnership and subsidiaries as of December 31, 2000, and the
related consolidated statements of income, partners' capital and cash flows for
the years ended December 31, 2000 and 1999. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits. We did not audit
the financial statements of certain real estate partnerships, which statements
reflect total revenues of $4,794,000 for the year ended December 31, 1999. Those
statements were audited by other auditors whose reports have been furnished to
us, and our opinion, insofar as it relates to the amounts included for such real
estate partnerships, is based solely on the reports of the other auditors.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the reports of
the other auditors for 1999 provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors for
1999, the consolidated financial statements referred to above present fairly, in
all material respects, the financial position of Franklin Street Partners
Limited Partnership and subsidiaries at December 31, 2000, and the results of
their operations and their cash flows for the years ended December 31, 2000 and
1999, in conformity with accounting principles generally accepted in the United
States of America.

                                        BDO Seidman, LLP

Boston, Massachusetts
February 27, 2001, except Note 4
which is as of December 13, 2001


                                       F-3
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Partners
FSP Blue Ravine Limited Partnership
(a Massachusetts Limited Partnership)
Wakefield, Massachusetts

      We have audited the accompanying balance sheet of FSP Blue Ravine Limited
Partnership (A Massachusetts Limited Partnership), as of December 31, 1999, and
the related statements of operations, changes in partners' equity and cash flows
for the period August 13, 1999 (date of inception) to December 31, 1999. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

      We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of FSP Blue Ravine Limited
Partnership (a Massachusetts Limited Partnership) as of December 31, 1999, and
the results of its operations, and its cash flows for the period August 13, 1999
(date of inception) to December 31, 1999, in conformity with generally accepted
accounting principles.

Roy & Stevens, P.C.
Boston, Massachusetts
January 28, 2000


                                       F-4
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Partners
FSP Bollman Place Limited Partnership
(a Massachusetts Limited Partnership)
Wakefield, Massachusetts

      We have audited the accompanying balance sheet of FSP Bollman Place
Limited Partnership (A Massachusetts Limited Partnership), as of December 31,
1999, and the related statements of operations, changes in partners' equity and
cash flows for the period September 28, 1999 (date of inception) to December 31,
1999. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

      We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of FSP Bollman Place Limited
Partnership (a Massachusetts Limited Partnership) as of December 31, 1999, and
the results of its operations, and its cash flows for the period September 28,
1999 (date of inception) to December 31, 1999, in conformity with generally
accepted accounting principles.

Roy & Stevens, P.C.
Boston, Massachusetts
January 28, 2000


                                       F-5
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Partners
FSP Hillview Center Limited Partnership
(a Massachusetts Limited Partnership)
Wakefield, Massachusetts

      We have audited the accompanying balance sheet of FSP Hillview Center
Limited Partnership (A Massachusetts Limited Partnership), as of December 31,
1999, and the related statements of operations, changes in partners' equity and
cash flows for the year then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

      We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of FSP Hillview Center Limited
Partnership (a Massachusetts Limited Partnership) as of December 31, 1999, and
the results of its operations and cash flows for the year ended December 31,
1999, in conformity with generally accepted accounting principles.

Roy & Stevens, P.C.
Boston, Massachusetts
February 15, 2000


                                       F-6
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Partners
FSP Telecom Business Center Limited Partnership
(a Massachusetts Limited Partnership)
Wakefield, Massachusetts

      We have audited the accompanying balance sheet of FSP Telecom Business
Center Limited Partnership (A Massachusetts Limited Partnership), as of December
31, 1999, and the related statements of operations, changes in partners' equity
and cash flow for the period February 1, 1999 (date of inception) to December
31, 1999. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

      We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of FSP Telecom Business Limited
Partnership (a Massachusetts Limited Partnership) as of December 31, 1999, and
the results of its operations, and its cash flows for the period February 1,
1999 (date of inception) to December 31, 1999, in conformity with generally
accepted accounting principles.

Roy & Stevens, P.C.
Boston, Massachusetts
January 28, 2000


                                       F-7
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Partners
FSP Silverside Plantation Limited Partnership

      We have audited the accompanying balance sheet of FSP SILVERSIDE
PLANTATION LIMITED PARTNERSHIP as of December 31, 1999 and the related
statements of income, changes in partners' equity, and cash flows for the year
then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

      We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of FSP SILVERSIDE PLANTATION
LIMITED PARTNERSHIP as of December 31, 1999 and the results of its operations,
changes in partners' equity, and cash flows for the year then ended in
conformity with generally accepted accounting principles.

Habif, Arogeti & Wynne, LLP
Atlanta, Georgia
January 24, 2000


                                       F-8
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Partners
FSP Silverside Plantation Limited Partnership

      We have audited the accompanying balance sheet of FSP SILVERSIDE
PLANTATION LIMITED PARTNERSHIP as of December 31, 1998 and the related
statements of income, changes in partners' equity, and cash flows for the period
October 16, 1998 [Date of Inception] to December 31, 1998. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

      We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of FSP SILVERSIDE PLANTATION
LIMITED PARTNERSHIP as of December 31, 1998 and the results of its operations,
changes in partners' equity, and cash flows for the period October 16, 1998
[Date of Inception] to December 31, 1998 in conformity with generally accepted
accounting principles.

Habif, Arogeti & Wynne, LLP
Atlanta, Georgia
January 15, 1999


                                       F-9
<PAGE>

                                                        Franklin Street Partners
                                            Limited Partnership and Subsidiaries

                                                     Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                           December 31,
                                                                   ----------------------------
                                                                       2001            2000
===============================================================================================
                                                                          (in thousands,
                                                                       except unit amounts)
<S>                                                                  <C>            <C>
Assets:

Real estate assets:
        Land                                                         $  39,560      $   39,994
        Buildings and improvements                                     153,632         152,999
        Fixtures and equipment                                             920             995
-----------------------------------------------------------------------------------------------

                                                                       194,112         193,988

        Less accumulated depreciation                                   17,419          12,917
-----------------------------------------------------------------------------------------------

Real estate assets, net                                                176,693         181,071

Cash and cash equivalents                                               24,357          13,718
Restricted cash                                                            495             499
Marketable securities                                                       --           5,322
Investment in affiliated Sponsored Entity                                   --          16,734
Tenant rent receivables, less allowance for doubtful accounts
   of $210 and $10, respectively                                         1,434           1,238
Office computers and furniture, net of accumulated
   depreciation of $215 and $142, respectively                             397             303
Prepaid expenses and other assets, net                                     741           1,038
-----------------------------------------------------------------------------------------------

        Total assets                                                 $ 204,117      $  219,923
===============================================================================================
</TABLE>

        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                      F-10
<PAGE>

                                                        Franklin Street Partners
                                            Limited Partnership and Subsidiaries

                                                     Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                           December 31,
                                                                   -----------------------------
                                                                       2001            2000
================================================================================================
                                                                          (in thousands,
                                                                       except unit amounts)
<S>                                                                 <C>             <C>
Liabilities and Partners' Capital:

Liabilities:

  Bank note payable                                                 $       --      $    16,500
  Accounts payable and accrued expenses                                  2,112            1,575
  Accrued compensation                                                   1,747              706
  Tenant security deposits                                                 495              499
------------------------------------------------------------------------------------------------

        Total liabilities                                                4,354           19,280
------------------------------------------------------------------------------------------------

Minority interests in consolidated entities                                 --               63
------------------------------------------------------------------------------------------------

Commitments and contingencies

Partners' capital (deficit):
        Limited partners, 23,637,750 and 23,486,096
             units issued and outstanding, respectively                203,348          204,067
        General partner, 948,499 units issued and outstanding           (3,585)          (3,487)
------------------------------------------------------------------------------------------------

        Total partners' capital                                        199,763          200,580
------------------------------------------------------------------------------------------------

        Total liabilities and partners' capital                     $  204,117      $   219,923
================================================================================================
</TABLE>

        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                      F-11
<PAGE>

                                                        Franklin Street Partners
                                            Limited Partnership and Subsidiaries

                                               Consolidated Statements of Income

<TABLE>
<CAPTION>
                                                                     For the Year Ended
                                                                       December 31,
                                                          ----------------------------------------
                                                             2001          2000         1999
==================================================================================================
                                                           (in thousands, except unit and per
                                                               partnership unit amounts)
<S>                                                       <C>           <C>            <C>
Revenue:
    Rental                                                $    26,765   $    25,434    $    16,315
    Syndication fees                                           13,000         4,036            444
    Transaction fees                                           12,701         3,538            345
    Interest and other                                          1,981         1,785            944
---------------------------------------------------------------------------------------------------

        Total revenue                                          54,447        34,793         18,048
---------------------------------------------------------------------------------------------------

Expenses:
    Selling, general and administrative                         5,229         3,073          2,589
    Commissions                                                 6,525         3,422          2,634
    Partnership units issued as compensation                    1,744         2,300             --
    Rental operating expenses                                   7,026         6,489          4,429
    Depreciation and amortization                               4,797         4,613          3,231
    Real estate taxes and insurance                             2,900         2,473          1,448
    Interest                                                      818           860            299
---------------------------------------------------------------------------------------------------

        Total expenses                                         29,039        23,230         14,630
---------------------------------------------------------------------------------------------------

Income before minority interests                               25,408        11,563          3,418

Income applicable to minority interests                            40         2,649          2,279
---------------------------------------------------------------------------------------------------

Net income                                                $    25,368   $     8,914    $     1,139
===================================================================================================

Allocation of net income to:
        Limited Partners                                  $    24,386   $     8,539    $     1,049
        General Partner                                           982           375             90
---------------------------------------------------------------------------------------------------

                                                          $    25,368   $     8,914    $     1,139
===================================================================================================

Weighted average number of units outstanding, basic
and diluted                                                24,511,578    18,973,558     11,999,907
===================================================================================================

Basic and diluted net income per limited and
general partnership unit                                  $      1.03   $       .47    $       .09
===================================================================================================
</TABLE>

        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                      F-12
<PAGE>

                                                        Franklin Street Partners
                                            Limited Partnership and Subsidiaries

                                    Consolidated Statements of Partners' Capital

<TABLE>
<CAPTION>
                                                                                                      Total Partners
                                                Limited Partners            General Partner               Capital
                                            -----------------------       -------------------     -----------------------
                                                Units      Amount          Units        Amount       Units         Amount
=========================================================================================================================
                                                                  (in thousands, except unit amounts)

<S>                                         <C>          <C>              <C>       <C>           <C>          <C>
Balance, December 31, 1998                     952,301   $    6,425       948,499   $   (1,426)    1,900,800   $    4,999
        Units issued in January 1, 1999
         merger transaction                 10,099,107       88,413            --           --    10,099,107       88,413
        Net income                                  --        1,049            --           90            --        1,139
        Distributions                               --       (9,380)           --       (1,596)           --      (10,976)
-------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1999                  11,051,408       86,507       948,499       (2,932)   11,999,907       83,575
        Units issued in January 1, 2000
         merger transaction                  4,999,972       45,269            --           --     4,999,972       45,269
        Units issued in October 1, 2000
         merger transaction                  7,204,716       77,080            --           --     7,204,716       77,080
        Units issued for compensation          230,000        2,300            --           --       230,000        2,300
        Net income                                  --        8,539            --          375            --        8,914
        Distributions                               --      (15,628)           --         (930)           --      (16,558)
-------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2000                  23,486,096      204,067       948,499       (3,487)   24,434,595      200,580
        Net income                                  --       24,386            --          982            --       25,368
        Distributions                               --      (26,849)           --       (1,080)           --      (27,929)
        Units issued for compensation          151,654        1,744            --           --       151,654        1,744
-------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2001                  23,637,750   $  203,348       948,499   $   (3,585)   24,586,249   $  199,763
=========================================================================================================================
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                   statements


                                      F-13
<PAGE>

                                                        Franklin Street Partners
                                            Limited Partnership and Subsidiaries

                                           Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                            For the Year Ended December 31,
                                                           --------------------------------
                                                             2001         2000        1999
===========================================================================================
                                                                    (in thousands)

<S>                                                        <C>         <C>         <C>
Cash flows from operating activities:
    Net income                                             $ 25,368    $  8,914    $  1,139
    Adjustments to reconcile net income to net cash
        provided by operating activities:
           Depreciation and amortization                      4,797       4,613       3,231
           Partnership units issued for compensation          1,744       2,300          --
           Minority interests                                    40       2,649       2,279
           Changes in operating assets and liabilities:
             Restricted cash                                      4         (10)       (406)
             Tenant rent receivables                           (196)       (665)       (389)
             Prepaid expenses and other assets, net              75        (745)       (260)
             Accounts payable and accrued expenses              537      (2,865)      3,777
             Accrued compensation                             1,041         336        (142)
             Tenant security deposits                            (4)         10         406
-------------------------------------------------------------------------------------------

                 Net cash provided by operating              33,406      14,537       9,635
                    activities
-------------------------------------------------------------------------------------------

Cash flows from investing activities:
    Distributions from (investment in) affiliated            16,734     (16,734)         --
        Sponsored Entity
    Purchase of real estate assets and office computer         (733)     (9,952)    (77,255)
        and furniture
    Proceeds received on sales of land                          442         927          --
    Proceeds from (purchase of) marketable securities         5,322      (5,322)         --
-------------------------------------------------------------------------------------------

                 Net cash provided by (used for)             21,765     (31,081)    (77,255)
                    investing activities
-------------------------------------------------------------------------------------------

Cash flows from financing activities:
    Distributions to partners                               (27,929)    (16,558)    (10,976)
    Distributions to minority interests in consolidated        (103)     (4,506)     (2,375)
        entities
    Borrowings under bank note payable                           --      16,500      23,522
    Repayments of  bank note payable                        (16,500)    (23,522)         --
    Capital contributions from minority interest holders         --      39,829      63,316
-------------------------------------------------------------------------------------------

                 Net cash provided by (used for)            (44,532)     11,743      73,487
                    financing activities
-------------------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents         10,639      (4,801)      5,867

Cash and cash equivalents, beginning of year                 13,718      18,519      12,652
-------------------------------------------------------------------------------------------

Cash and cash equivalents, end of year                     $ 24,357    $ 13,718    $ 18,519
===========================================================================================

Supplemental disclosure of cash flow information:
    Cash paid for:
        Interest                                           $    818    $    860    $    299
</TABLE>

Non-cash investing and financing activities:

      In connection with the Conversion transactions described in Note 4, the
      Partnership issued limited partnership units in exchange for the limited
      partner minority interests in Sponsored Partnerships resulting in a
      non-cash fair value step-up in the Partnership's real estate properties
      totaling approximately $6,581 and $14,390 during the years ended December
      31, 2000 and 1999, respectively.

        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                      F-14
<PAGE>

1. Organization         Franklin Street Partners Limited Partnership (Franklin
                        Street Properties Corp. effective January 1, 2002) (the
                        "Partnership" or the "Company") was formed as a
                        Massachusetts limited partnership on February 4, 1997.
                        Prior to July 1, 2001 the Partnership owned a 99%
                        interest in FSP Investments LLC ("FSP Investments"), a
                        99% interest in FSP Property Management LLC ("FSP
                        Property Management") and 100% of FSP Holdings LLC ("FSP
                        Holdings"). Effective July 1, 2001, FSP Holdings
                        purchased the remaining 1% interest of both entities for
                        approximately $30,000. The Partnership also has a
                        non-controlling common stock interest in ten
                        corporations organized to operate as Real Estate
                        Investment Trusts ("REITs").

                        The Partnership operates in two business segments:
                        rental operations and investment services. FSP
                        Investments provides real estate investment and
                        broker/dealer services. FSP Investments' services
                        include: (i) the organization of REIT entities in 2000
                        and 2001 (the "Sponsored REITs") and limited
                        partnerships in and prior to 2000 (the "Sponsored
                        Partnerships" and, together with the Sponsored REITs,
                        the "Sponsored Entities"), which are syndicated through
                        private placements; (ii) the acquisition of real estate
                        on behalf of the Sponsored Entities; and (iii) the sale
                        of preferred stock in Sponsored REITs or limited
                        partnership interests in the Sponsored Partnerships. FSP
                        Property Management provides asset management and
                        property management services for the Sponsored Entities.

                        During 1999 and 2000, a total of 17 Sponsored
                        Partnerships were merged into the Partnership. Prior to
                        the merger transactions, FSP Holdings owned a 5%
                        controlling general partner interest in each of the
                        merged Sponsored Partnerships. Following the
                        consummation of the merger transactions, the Partnership
                        held, directly and indirectly, 100% of the partnership
                        interests in each of the 17 Sponsored Partnerships.

                        In December 2001 the limited partners of the Partnership
                        approved the conversion of the Partnership from a
                        partnership into a corporation and the subsequent
                        election to be taxed as a real estate investment trust
                        ("REIT"). As a REIT, the Company is entitled to a tax
                        deduction for dividends paid to its shareholders,
                        thereby effectively subjecting the distributed net
                        income of the Company to taxation at the shareholder
                        level only, provided it annually distributes at least
                        90% of its taxable income and meets certain other
                        qualifications. The conversion, which was effective
                        January 1, 2002, was accomplished, as a tax-free
                        reorganization, by merging the Partnership with and into
                        a wholly owned subsidiary, Franklin Street Properties
                        Corp., with the subsidiary as the surviving entity. As
                        part of the conversion into a REIT, FSP Investments will
                        elect to be a taxable REIT subsidiary and will incur
                        income taxes at normal tax rates.


                                      F-15
<PAGE>

                        The REIT will be taxed under Sections 856 through 860 of
                        the Internal Revenue Code of 1986, as amended,
                        commencing with its taxable year ending December 31,
                        2002. REITs are subject to a number of organizational
                        and operational requirements including a requirement
                        that 90.0% of the taxable income be distributed to
                        shareholders. Provided that the REIT continues to
                        qualify as a real estate investment trust, it will
                        generally not be subject to federal income tax on
                        taxable income distributed to its shareholders. However,
                        certain of the REIT's subsidiaries may be subject to
                        federal income tax.

                        On December 17, 1999, as part of a larger bill, the
                        President signed into law the REIT Modernization Act
                        ("RMA"). Effective beginning January 1, 2001, the RMA
                        has amended the tax rules relating to the composition of
                        a REIT's assets. Under prior law, a REIT was precluded
                        from owning more than 10.0% of the outstanding voting
                        securities of any one issuer, other than a wholly owned
                        subsidiary or another REIT. Beginning in 2001, a REIT
                        will also be precluded from owning more than 10.0% of
                        the value of all securities of any one issuer.

                        One exception to these restrictions is that a REIT will
                        be allowed to own up to 100% of the securities of a
                        Taxable REIT Subsidiary ("TRS") that can provide certain
                        non-customary services to REIT tenants and others
                        without disqualifying the rents that a REIT receives
                        from its tenants. However, no more than 20.0% of the
                        value of a REIT's total assets can be represented by
                        securities of one or more TRS's. The amount of interest
                        and other expenses from a TRS to a REIT will be limited
                        to ensure that a TRS is subject to an appropriate level
                        of corporate tax. The new 10.0% asset test will not
                        apply to certain arrangements (including third party
                        subsidiaries) in place on July 12, 1999, provided that a
                        subsidiary does not engage in a "substantial new line of
                        business" or acquire any "substantial asset", and a REIT
                        does not acquire any new securities in the subsidiary.
                        Under the RMA, a subsidiary will be able to convert tax
                        free into a TRS. The REIT anticipates electing TRS
                        status for certain of its subsidiaries beginning with
                        its taxable year ending December 31, 2002.

2. Significant
   Accounting
   Policies

   Basis of             The accompanying consolidated financial statements
   Presentation         include all of the accounts of the Partnership, 17
                        Sponsored Partnerships and majority-owned subsidiaries.
                        All significant intercompany accounts and transactions
                        have been eliminated in consolidation.

                        Prior to the mergers in 1999 and 2000, FSP Holdings was
                        the general partner and owned a 5% controlling general
                        partner interest in each of the Sponsored Partnerships.
                        FSP Holdings had the exclusive rights and powers to
                        manage and control the business of each Sponsored
                        Partnership without the consent or approval of the
                        limited partners. The limited partners in the Sponsored
                        Partnerships could not elect to replace the general
                        partner, except for cause. Accordingly, the Sponsored
                        Partnerships were accounted for under the principles of
                        accounting applicable to investments in subsidiaries in
                        accordance with SOP 78-9 and consolidated these entities
                        into the Partnership's financial statements.


                                      F-16
<PAGE>

   Business Segments    The Partnership follows Statement of Financial
                        Accounting Standards ("SFAS") No. 131 "Disclosures about
                        Segments of an Enterprise and Related Information,"
                        which established standards for the way that public
                        business enterprises report information about operating
                        segments in annual financial statements and requires
                        that those enterprises report selected information about
                        operating segments in interim financial reports issued
                        to shareholders.

   Minority Interests   Minority interests in consolidated entities ("minority
   in Consolidated      interests") represents the 95% limited partner interests
   Entities             in Sponsored Partnerships prior to the dates of merger
                        and, prior to July 1, 2001, the 1% interest in FSP
                        Investments and FSP Property Management, which was held
                        by an officer and member of the general partner of the
                        Partnership. Minority interests included in the
                        Partnership's consolidated statements of income
                        represents the minority interest holders' share of the
                        income of the consolidated entities. The minority
                        interests in the Partnership's consolidated balance
                        sheets reflects the original investment made by the
                        minority interest holders in the consolidated entities
                        along with their proportional share of the earnings less
                        cash distributions. Cash distributions paid to minority
                        interest holders were approximately $103,000,
                        $4,506,000, and $2,375,000 for the years ended December
                        31, 2001, 2000, and 1999, respectively.

   Estimates and        The Company prepares its financial statements and
   Assumptions          related notes in conformity with accounting principles
                        generally accepted in the United States of America.
                        These principles require management to make estimates
                        and assumptions that affect the reported amounts of
                        assets and liabilities and disclosure of contingent
                        assets and liabilities at the date of the financial
                        statements and the reported amounts of revenue and
                        expenses during the reporting period. Actual results
                        could differ from those estimates.

   Reclassifications    Certain balances in the 2000 and 1999 financial
                        statements have been reclassified to conform to the 2001
                        presentation.

   Investments in       Common stock investments in Sponsored REITs are
   REITs                accounted for using the equity method, as the
                        Partnership exercises significant influence, but does
                        not control these entities. Under the equity method of
                        accounting, the Partnership's cost is subsequently
                        adjusted by its share of the Sponsored REITs' earnings,
                        after deducting the Sponsored REITs' preferred stock
                        dividends paid or accrued. Equity in the losses of
                        Sponsored REITs is not recognized to the extent that the
                        investment balance would become negative. Dividends are
                        recognized as income after the investment balance is
                        reduced to zero.


                                      F-17
<PAGE>

                        There were no dividends received or income recognized,
                        from the Sponsored REITs for the years ended December
                        31, 2001 or 2000.

   Real                 Estate and Depreciation Real estate assets are stated at
                        the lower of cost or fair value, as appropriate, less
                        accumulated depreciation.

                        Costs related to property acquisition and improvements
                        are capitalized. Typical capital items include new
                        roofs, site improvements, various exterior building
                        improvements and major interior renovations. Funding for
                        capital improvements typically is provided by cash set
                        aside at the time the property was purchased.

                        Routine replacements and ordinary maintenance and
                        repairs that do not extend the life of the asset are
                        expensed as incurred. Typical expense items include
                        interior painting, landscaping, minor carpet
                        replacements and residential appliances. Funding for
                        repairs and maintenance items typically is provided by
                        cash flows from operating activities. Depreciation is
                        computed using the straight line method over the assets'
                        estimated useful lives as follows:

                                     Category                    Years
                                     --------                    -----
                                     Buildings:
                                       Residential                27
                                       Commercial                 39
                                     Building Improvements       15-39
                                     Furniture and equipment      5-7

                        The Partnership evaluates its assets used in operations
                        by identifying indicators of impairment and by comparing
                        the sum of the estimated undiscounted future cash flows
                        for each asset to the asset's carrying value. When
                        indicators of impairment are present and the sum of the
                        undiscounted future cash flows is less than the carrying
                        value of such asset, an impairment loss is recorded
                        equal to the difference between the asset's current
                        carrying value and its fair value based on discounting
                        its estimated future cash flows. At December 31, 2001,
                        no such indicators of impairment were identified.

   Cash and Cash        The Partnership considers all highly liquid debt
   Equivalents          instruments purchased with a maturity of three months or
                        less to be cash equivalents.

   Restricted Cash      Restricted cash consists of tenant security deposits.
                        Tenant security deposits are refunded when tenants
                        vacate provided that the tenant has not damaged the
                        property.

   Marketable           The Partnership accounts for investments in debt
   Securities           securities under the provisions of SFAS No. 115,
                        "Accounting for Certain Investments in Debt and Equity
                        Securities". The Partnership classified its debt
                        securities as available-for-sale.

                        There were no investments in marketable securities at
                        December 31, 2001.

                        Investments in marketable securities at December 31,
                        2000 of $5,322,000 mature within one year. These
                        securities are stated at cost, which approximates fair
                        market value.


                                      F-18
<PAGE>

   Concentration of     Cash, cash equivalents and short-term investments are
   Credit Risks         financial instruments that potentially subject the
                        Partnership to a concentration of credit risk. The
                        Partnership maintains its cash balances and short term
                        investments principally in one bank which the
                        Partnership believes to be creditworthy. The Partnership
                        periodically assesses the financial condition of the
                        bank and believes that the risk of loss is minimal. Cash
                        balances held with various financial institutions
                        frequently exceed the insurance limit of $100,000
                        provided by the Federal Deposit Insurance Corporation.

   Financial            Instruments The Partnership estimates that the carrying
                        value of cash and cash equivalents, restricted cash,
                        marketable securities and the bank note payable
                        approximate their fair values based on their short-term
                        maturity and prevailing interest rates.

   Prepaid Expenses     Included in Prepaid expenses and other assets, net at
                        December 31, 2001 and 2000 is $922,000 and $932,000,
                        respectively, which represents external leasing and
                        tenant improvement costs incurred in the leasing of
                        commercial space. These costs are amortized on a
                        straight-line basis over the terms of the related lease
                        agreements. Amortization expense was approximately
                        $222,000, $146,000 and $116,000 for the years ended
                        December 31, 2001, 2000 and 1999, respectively.

   Revenue              Commercial Properties -- The Partnership has retained
   Recognition          substantially all of the risks and benefits of ownership
                        of the Partnership's commercial properties and accounts
                        for its leases as operating leases. Rental income from
                        leases, which include scheduled increases in rental
                        rates during the lease term, is recognized on a
                        straight-line basis. The Partnership does not have any
                        percentage rent arrangements with its commercial
                        property tenants. Reimbursable common area maintenance
                        charges are included in rental income in the period
                        earned.

                        Residential Apartments -- The Partnership's residential
                        property leases are generally for terms of one year or
                        less. Rental income from tenants of residential
                        apartment properties is recognized in the period earned.
                        Rent concessions, including free rent and leasing
                        commissions incurred in connection with residential
                        property, leases are expensed as incurred.

                        Investment Banking Services -- Syndication fees ranging
                        from 6% to 8% of the gross offering proceeds from the
                        sale of securities in Sponsored Entities are generally
                        recognized upon an investor closing; at that time the
                        Partnership has provided all required services, the fee
                        is fixed and collected, and no further contingencies
                        exist. Commission expense ranging from 3% to 4% of the
                        gross offering proceeds is recorded in the period the
                        related syndication fee is earned.

                        Investment Banking Services -- Transaction fees are
                        generally recognized upon the final investor closing of
                        a Sponsored Entity. The final investor closing is the
                        last admittance of investors into a Sponsored Entity; at
                        that time, required funds have been received from the
                        investors, charges relating to the syndication have been
                        paid or accrued, continuing investment and continuing
                        involvement criteria have been met, and legal and
                        economic rights have been transferred. Third party
                        transaction-related costs are deferred and later
                        expensed to match revenue recognition. Internal costs
                        are expensed as incurred.

   Property and Asset   Property and asset management fees, interest income and
   Management Fees      other income are recognized when the related services
                        are performed and the earnings process is complete.


                                      F-19
<PAGE>

                        The Company follows the requirements for profit
                        recognition as set forth by Statement of Financial
                        Accounting Standards No. 66 "Accounting for Sales of
                        Real Estate" and Statement of Position 92-1 "Accounting
                        for Real Estate Syndication Income".

   Income               Taxes No provision has been made for Federal or state
                        income taxes in the consolidated financial statements of
                        the Partnership. Partners are required to report on
                        their individual tax returns their allocable share of
                        income, gains, losses, deductions and credits of the
                        Partnership.

   Net Income Per       The Partnership follows Statement of Financial
   Partnership Unit     Accounting Standards No. 128 "Earnings per Share", which
                        specifies the computation, presentation and disclosure
                        requirements for the Partnership's net income per
                        partnership unit. Basic net income per unit is computed
                        by dividing net income by the weighted average number of
                        partnership units outstanding during period. Diluted net
                        income per share reflects the potential dilution that
                        could occur if securities or other contracts to issue
                        units were exercised or converted into units. There were
                        no potential dilutive units outstanding at December 31,
                        2001, 2000, and 1999. The denominator used for
                        calculating basic and diluted net income per unit is as
                        follows:

                                                     Year Ended December 31,
                                             ----------------------------------
                                                2001        2000        1999
                        =======================================================
                        Weighted average
                        number of units
                        outstanding
                           Limited partners  23,563,079  18,025,059  11,051,408
                           General partner      948,499     948,499     948,499
                        -------------------------------------------------------
                                             24,511,578  18,973,558  11,999,907
                        =======================================================

   Recent Accounting    In June 1998, the Financial Accounting Standards Board
   Standards            ("FASB") issued Statements of Financial Accounting
                        Standards ("SFAS") No. 133, "Accounting for Derivative
                        Instruments and Hedging Activities" as amended by SFAS
                        No. 137 and No. 138. The provisions of this statement
                        require that derivative instruments be carried at fair
                        value on the balance sheet. The statement continues to
                        allow derivative instruments to be used to hedge various
                        risks and sets forth specific criteria to be used to
                        determine when hedge accounting can be used. For
                        derivative instruments not accounted for as hedges,
                        changes in fair value are required to be recognized in
                        earnings. The provisions of this statement became
                        effective January 1, 2001. The Partnership has not
                        historically had derivative instruments, and this
                        standard has had no impact on its financial position,
                        results of operations and cash flows.


                                      F-20
<PAGE>

                        In June 2001, the FASB approved SFAS No. 141 "Business
                        Combinations" ("SFAS 141") and No. 142 "Goodwill and
                        Other Intangible Assets" ("SFAS 142"), effective July 1,
                        2001 and January 1, 2002, respectively, for the
                        Partnership. SFAS 141 requires that the purchase method
                        of accounting be used for all business combinations
                        initiated after June 30, 2001. The Partnership has
                        adopted SFAS 141; however, no combinations by the
                        Partnership occurred after June 30, 2001 to which this
                        would apply. Under SFAS 142, amortization of goodwill,
                        including goodwill recorded in past business
                        combinations, will discontinue upon adoption of this
                        standard. All goodwill and intangible assets will be
                        tested for impairment in accordance with the provisions
                        of the Statement. The Partnership has reviewed the
                        provisions of SFAS 142 and believes that the impact of
                        adoption will not be material to its financial position,
                        results of operations and cash flows.

                        In August 2001, the FASB issued SFAS No. 143 "Accounting
                        for Asset Retirement Obligations" ("SFAS 143") which
                        addresses financial accounting and reporting for
                        obligations associated with the retirement of tangible
                        long-lived assets and the associated asset retirement
                        costs. This Statement requires that the fair value of a
                        liability for an asset retirement obligation be
                        recognized in the period in which it is incurred if a
                        reasonable estimate of the fair value can be made. The
                        associated asset retirement costs are capitalized as
                        part of the carrying amount of the long-lived asset.
                        SFAS 143 will be effective at the beginning of 2003. The
                        Partnership has reviewed the provisions of SFAS 143 and
                        believes that the impact of adoption will not be
                        material to its financial position, results of
                        operations and cash flows.


                                      F-21
<PAGE>
                        In October 2001, the FASB issued SFAS No. 144
                        "Accounting for the Impairment or Disposal of Long-Lived
                        Assets" ("SFAS 144"). SFAS 144 supersedes SFAS No. 121
                        and requires that long-lived assets that are to be
                        disposed of by sale be measured at the lower of book
                        value or fair value less costs to sell. SFAS 144 retains
                        the fundamental provisions of SFAS No. 121 for (a)
                        recognition and measurement of the impairment of
                        long-lived assets to be held and used, and (b)
                        measurement of long-lived assets to be disposed of by
                        sale, but broadens the definition of what constitutes a
                        discontinued operation and how the results of a
                        discontinued operation are to be measured and presented.
                        SFAS 144 will be effective at the beginning of 2002.

                        With the exception of reclassifiying, the operations of
                        real estate assets considered "held for sale" to
                        "Discontinued operations, net of tax" in the
                        consolidated statement of income, the impact of adoption
                        of SFAS 144 will not have a material impact on the
                        Partnership's financial position and cash flows. The
                        Partnership does not have any real estate assets that it
                        considers "held for sale."

3. Business Segments    The Partnership operates in two business segments:
                        rental operations and investment services (including
                        real estate acquisition, financing and broker/dealer
                        services). The Partnership has identified these segments
                        because this discrete 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". The Partnership's segments are located in the
                        United States of America. The Partnership previously
                        evaluated the performance of its reportable segments
                        based on Funds from Operations ("FFO"); however,
                        effective October 1, 2001 management changed its
                        evaluation performance measure to Cash Available for
                        Distribution ("CAD") as management believes that CAD
                        represents a more accurate measure of the reportable
                        segment's activity and is the basis for distributions
                        paid to equity holders. The Partnership defines CAD as:
                        net income as computed in accordance with accounting
                        principles generally accepted in the United States of
                        America ("GAAP"); plus non-cash items included in the
                        computation of net income (depreciation and
                        amortization, non-cash compensation expenses and
                        straight line rent adjustments);plus Investment Services
                        Proceeds received from controlled partnerships; plus the
                        net proceeds from the sale of land; less purchases of
                        property and equipment from operating cash. Purchases of
                        real estate assets from cash reserves established at the
                        acquisition date of the property are not reflected in
                        the computation of CAD. CAD should not be considered an
                        alternative to net income (determined in accordance with
                        GAAP), as an indicator of the Company's financial
                        performance, 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
                        CAD in a different manner.


                                      F-22
<PAGE>

              CAD by business segment is as follows (in thousands):

<TABLE>
<CAPTION>
                                               Rental    Investment            Intercompany    Total
                                             Operations   Services    Total    Elimination   Consolidated
                                             ============================================================
<S>                                           <C>        <C>         <C>        <C>           <C>
Year ended December 31, 2001:
  Net Income                                  $ 21,381   $  3,987    $25,368    $    --       $ 25,368
  Depreciation and amortization                  4,900         71      4,971       (174)         4,797
  Non-cash compensation expenses                    --      1,744      1,744         --          1,744
  Straight line rent                              (797)        --       (797)        --           (797)
  Proceeds from sale of surplus land               449         --        449         --            449
  Purchase of fixed assets from operating          (79)      (167)      (246)        --           (246)
  cash
---------------------------------------------------------------------------------------------------------

Cash Available for Distribution               $ 25,854   $  5,635    $31,489    $  (174)      $ 31,315
=========================================================================================================

Year ended December 31, 2000:
  Net Income                                  $ 11,351   $  2,789    $14,140    $(5,226)      $  8,914
  Investment services proceeds received from
    controlled partnerships (1)                     --         --         --      5,226          5,226
  Depreciation and amortization                  4,679         83      4,762       (149)         4,613
  Non cash compensation expenses                    --      2,300      2,300         --          2,300
  Straight line rent                              (185)        --       (185)        --           (185)
  Proceeds from sale of land                     1,068         --      1,068         --          1,068
  Purchase of fixed assets from operating         (512)      (135)      (647)        --           (647)
  cash
---------------------------------------------------------------------------------------------------------

Cash Available for Distribution               $ 16,401   $  5,037    $21,438  $    (149)       $21,289
=========================================================================================================

Year ended December 31, 1999:
  Net Income                                  $  3,665   $  5,089    $ 8,754    $(7,615)      $  1,139
  Investment services proceeds received from
       controlled partnerships                      --         --         --      7,615          7,615
  Depreciation and amortization                  3,272         68      3,340       (109)         3,231
  Straight line rent                              (102)        --       (102)        --           (102)
  Purchase of fixed assets from operating         (187)      (186)      (373)        --           (373)
  cash
---------------------------------------------------------------------------------------------------------

Cash Available for Distribution               $  6,648   $  4,971    $11,619    $  (109)      $ 11,510
=========================================================================================================
</TABLE>

(1)   The Partnership received various investment services income from the
      syndication of Sponsored Partnerships. Although this income was eliminated
      in the calculation of consolidated net income in accordance with GAAP, the
      cash received from the Sponsored Partnerships was available for
      distribution to the members of the Partnership.


                                      F-23
<PAGE>

The Partnership's cash distributions from operations for the years ended
December 31, 2001, 2000 and 1999 are summarized as follows:

                                                 Distribution Per   Total Cash
                        Quarter paid             Partnership Unit  Distributions
                        ========================================================
                                                                  (in thousands)
                        Second quarter of 2001           $.28      $  6,842
                        Third quarter of 2001             .29         7,087
                        Fourth quarter of 2001            .30         7,376
                        First quarter of 2002 (A)         .31         7,622
                        --------------------------------------------------------
                                                        $1.18       $28,927
                        ========================================================

                        Second quarter of 2000           $.24      $  4,080
                        Third quarter of 2000             .25         4,308
                        Fourth quarter of 2000            .26         4,480
                        First quarter of 2001             .27         6,597
                        --------------------------------------------------------
                                                        $1.02       $19,465
                        ========================================================

                        Second quarter of 1999           $.20      $  2,400
                        Third quarter of 1999             .21         2,520
                        Fourth quarter of 1999            .22         2,640
                        First quarter of 2000             .23         2,760
                        --------------------------------------------------------
                                                         $.86       $10,320
                        ========================================================
                        (A)   Represents dividends declared and paid by the
                              Company in the first quarter of 2002.

                        Cash distributions per partnership unit is based on the
                        total outstanding units at the end of each calendar
                        quarter. Cash available for distribution, as determined
                        at the sole discretion of the general partner, is
                        required to be distributed to unit holders within 90
                        days following the end of each calendar quarter. The
                        cash distribution of approximately $7,622,000 for the
                        fourth quarter of 2001 was declared and paid in 2002.
                        The cash distribution of approximately $6,597,000 for
                        the fourth quarter of 2000 was declared and paid in the
                        first quarter of 2001. The cash distribution of
                        approximately $2,670,000 for the fourth quarter of 1999
                        was declared and paid in 2000.


                                      F-24
<PAGE>

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

                                                  Rental     Investment
                                                 Operations   Services     Total
                        ========================================================
                                                        (in thousands)
                        December 31, 2001:
                            Revenue               $ 26,765   $ 25,701   $ 52,466
                            Interest Income          1,870        111      1,981
                            Interest Expense           818          0        818
                            Capital expenditures       566        167        733
                            Identifiable assets    199,140      4,977    204,117

                        December 31, 2000:
                            Revenue               $ 25,434   $  7,574   $ 33,008
                            Interest Income          1,686         99      1,785
                            Interest Expense           860         --        860
                            Capital expenditures     9,825        127      9,952
                            Identifiable assets    194,328     25,595    219,923

                        December 31, 1999:
                            Revenue               $ 16,315   $    789   $ 17,104
                            Interest Income            915         29        944
                            Interest Expense           299          0        299
                            Capital expenditures    77,060        195     77,255
                            Identifiable assets    159,324     31,162    190,486

4. Merger Transactions  The merger transactions involved the exchange of the
                        Partnership's limited partner units for the minority
                        interest holder's limited partnership units in 17
                        Sponsored Partnerships. The Partnership has recorded the
                        minority interest acquisitions based on the fair value
                        of assets and liabilities acquired. Additionally,
                        transaction costs incurred in connection with the 2000
                        and 1999 mergers totaling approximately $453,000 and
                        $736,000, respectively, have been reflected as a cost of
                        the minority interest acquisitions. The fair market
                        value of the merged entities' real estate was determined
                        based on independent appraisals.

                        Effective October 1, 2000, the Partnership and six
                        Sponsored Partnerships consummated a series of mergers
                        pursuant to an Agreement and Plan of Merger (the
                        "October 2000 Merger"). Under the terms of the October
                        2000 Merger, all limited partnership interests in the
                        six Sponsored Partnerships outstanding on October 1,
                        2000 were exchanged for 7,204,716 new limited
                        partnership units in the Partnership. The operations of
                        the six merged Sponsored Partnerships consist of six
                        commercial rental properties.

                        Effective January 1, 2000, the Partnership and three
                        Sponsored Partnerships consummated a series of mergers
                        pursuant to an Agreement and Plan of Merger (the
                        "January 2000 Merger"). Under the terms of the January
                        2000 Merger, all limited partnership interests in the
                        three Sponsored Partnerships outstanding on January 1,
                        2000 were exchanged for 4,999,972 new limited
                        partnership units in the Partnership. The operations of
                        the three merged Sponsored Partnerships consist of a
                        residential apartment property and two commercial real
                        estate properties.


                                      F-25
<PAGE>

                        Effective January 1, 1999, the Partnership and eight
                        Sponsored Partnerships consummated a series of mergers
                        pursuant to an Agreement and Plan of Merger (the "1999
                        Merger"). Under the terms of the 1999 Merger, all
                        limited partnership interests in the eight Sponsored
                        Partnerships outstanding on January 1, 1999 were
                        exchanged for 10,099,107 new limited partnership units
                        in the Partnership. Additionally, the partnership
                        interests held by the Partnership's existing general
                        partner and limited partners were exchanged for 948,499
                        new general partnership units and 952,301 new limited
                        partnership units, respectively. The operations of the
                        merged Sponsored Partnerships consist of five commercial
                        rental properties and three residential real estate
                        properties.

                        Following the consummation of the mergers described
                        above, the Partnership owned, directly and indirectly,
                        100% of the interests in each merged Sponsored
                        Partnership. The merger transactions were structured as
                        exchanges of partnership units and no cash was involved.
                        The Partnership's consolidated financial statements
                        include the full results of operations of the merged
                        Sponsored Partnerships from the date of merger.

                        The following pro forma consolidated results of
                        operations are presented as if the merger transactions
                        had occurred at the beginning of the periods presented:

                        Year ended December 31,            2000           1999
                        ========================================================
                        (unaudited)                          (in thousands,
                                                        except per unit amounts)
                        Revenue                          $34,793         $18,048
                        Net income                        10,987           3,121
                        Basic and diluted net income
                        per limited and general
                        partnership unit                 $  0.47         $  0.19

5. Related Party
   Transactions

   Investment in        The Partnership typically retains a non-controlling
   Affiliated           common stock ownership interest in Sponsored REITs that
   Sponsored REITs      it has organized. These ownership interests have
                        virtually no economic benefit or risk. At December 31,
                        2001 and 2000, the Partnership had ownership interests
                        in ten and four Sponsored REITs, respectively. During
                        1999 and 2000, the Company acquired 100% of the
                        non-owned interests of certain Sponsored Partnerships
                        (through a series of mergers) that it had previously
                        organized. Neither the Company nor any other related
                        entity has an obligation to acquire the non-owned
                        interests in any previously syndicated Sponsored REIT.

                        Summarized financial information for the Sponsored REITs
                        is as follows:

                        (unaudited)

                                                            2001          2000
                                                            ----          ----
                                                              (in thousands)
                        Balance Sheet Data:
                        -------------------
                        Real estate, net                  $222,232      $56,565
                        Other assets                        19,048        5,058
                        Total liabilities                    6,755        1,950
                        Shareholders equity                234,525       59,673


                                      F-26
<PAGE>

                                                            2001         2000
                                                            ----         ----
                                                              (in thousands)
                        Operating Data:
                        ---------------
                        Rental revenues                    $19,816       $2,778
                        Other revenues                         354          117
                        Operating and maintenance expenses   5,973          948
                        Depreciation and amortization        3,191          574
                        Interest expense                     9,916        2,298
                        Net income (loss)                    1,090         (925)

                        The Partnership's proportionate share of income prior to
                        syndication from these Sponsored REITs was $255,000, $0
                        and $0 for the years ended December 31, 2001, 2000 and
                        1999, respectively.

                        In addition to management services, the Partnership is
                        typically entitled to a return on funds advanced to
                        syndicated REITs. The Partnership recognized income of
                        $552,000, $402,000 and $0 for the years ended December
                        31, 2001, 2000 and 1999, respectively, relating to these
                        investments.

   Sponsored Entity     The Partnership has provided syndication and real estate
   Fees                 acquisition advisory services for the Sponsored REITs in
                        2001 and 2000 and Sponsored Partnerships prior to July
                        2000. Syndication and transaction fees from
                        non-consolidated related entities amounted to
                        approximately $25,701,000, $7,574,000 and $789,000 for
                        the years ended December 31, 2001, 2000 and 1999,
                        respectively.

   Management Fees      Management fees charged to the Sponsored Partnerships
                        prior to the respective mergers have been eliminated in
                        the accompanying consolidated statements of income due
                        to the Partnership's controlling interest in a Sponsored
                        Partnership. Total property management fee income from
                        non-consolidated entities amounted to approximately
                        $412,000, $178,000 and $16,000 for the years ended
                        December 31, 2001, 2000 and 1999, respectively, and is
                        included in "Interest and other income" in the
                        Consolidated Statements of Income. Property management
                        fees range from 1% to 5% of collected rents and the
                        applicable contracts are cancelable with 30 days'
                        notice.

6. Bank Note Payable    The Partnership has a revolving line of credit agreement
                        (the "Loan Agreement") with a bank providing for
                        borrowings at the Partnership's election up to
                        $50,000,000. Borrowings under the Loan Agreement bear
                        interest at either the bank's base rate or a variable
                        LIBOR rate, as defined. Borrowings outstanding under the
                        Loan Agreement consist of the following:

                        December 31,                             2001      2000
                        ========================================================
                                                                 (in thousands)

                        Note payable, bearing interest at
                             the bank's base rate
                             (9.5% at December 31, 2000).         $--    $16,500


                                      F-27
<PAGE>

                        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 tangible net worth of $140,000,000 and
                        compliance with various debt and operating income
                        ratios, as defined in the Loan Agreement. The
                        Partnership was in compliance with the Loan Agreement's
                        financial covenants as of December 31, 2001 and 2000.
                        The Loan Agreement matures on February 23, 2003.

                        The Partnership has arranged for Citizens Bank to
                        provide a line of credit for the Partnership's senior
                        officers in the maximum aggregate amount of $3 million.
                        The borrowings under this line of credit are for the
                        purpose of paying income taxes on equity interests in
                        the Company issued to such senior officers as
                        compensation. Loans under this line of credit have a
                        term of one year and bear interest at the bank's prime
                        rate plus 50 basis points. Each borrower has secured the
                        loan by pledging shares of the Company's Common Stock
                        having an aggregate fair market value at the time of the
                        loan of no less than twice the principal amount of the
                        loan. Borrowings of $1,625,000 and $800,000 were
                        outstanding to senior officers of the Partnership at
                        December 31, 2001 and 2000 respectively. The Partnership
                        has agreed to purchase from Citizens Bank any such loan
                        on which the borrower defaults. Following the purchase
                        of the loan, the Partnership would have the same rights
                        as Citizens Bank, including the right to foreclose on
                        the pledged. stock.

7. Partners' Capital

   General              The Partnership's general partner has the exclusive
                        right to manage the business of the Partnership and make
                        certain amendments to the Partnership Agreement, without
                        the consent or approval of the limited partners. The
                        Partnership's limited partners do not take part in
                        management and do not have any voting rights regarding
                        the Partnership's operations. A majority in interest of
                        the limited partners, with the consent of the general
                        partner, may amend the Partnership Agreement, subject to
                        certain limitations as defined in the Partnership
                        Agreement. Except as provided for under certain Federal
                        tax provisions described in the Partnership Agreement,
                        net income or net losses from operations are allocated
                        to all partners based on their percentage interest in
                        the Partnership. Net profits or losses arising from a
                        sale or other disposition of all or any portion of the
                        Partnership's property or upon liquidation of the
                        Partnership are allocated as follows:

                        Net Profit -- The Partnership's net profits are
                        allocated first to the extent of any partner's negative
                        capital account balance, and thereafter in proportion
                        with their percentage interest in the Partnership.

                        Net Losses -- First to the extent of any partner's
                        positive capital account balance, and thereafter in
                        proportion with their percentage interest in the
                        Partnership.

                        The Partnership's cash distributions are allocated to
                        the limited partners and the general partner based on
                        each partner's percentage interest in the Partnership.


                                      F-28
<PAGE>

   Equity-Based         In April 2000, January 2001 and July 2001, the
   Compensation         Partnership issued 230,000 Units, 2,522 Units and
                        149,131 Units, respectively, with a fair value of
                        approximately $2,300,000, $29,000 and $1,715,000,
                        respectively, to certain officers and employees of the
                        Partnership in lieu of cash compensation. These
                        partnership units were fully vested on the date of
                        issuance. Equity-based compensation charges of
                        $1,744,000 and $2,300,000 are reported in the
                        accompanying consolidated statement of income for the
                        year ended December 31, 2001 and 2000, respectively.

   General Partner      On December 30, 1999, FSP General Partner LLC (the
                        "General Partner") was organized solely to hold the
                        Partnership's general partner units, which were
                        previously held by eight individuals. The General
                        Partner's financial activities consist of receiving cash
                        distributions from the Partnership and paying such
                        amounts to its members. The members of the General
                        Partner function as officers and/or directors of the
                        Partnership. The Partnership pays no fees or other
                        compensation to the General Partner. The General Partner
                        has no commitment or intent to furnish direct or
                        indirect financial assistance to the Partnership.

8. Federal Income Tax   The difference between Partners' capital for financial
   Reporting            reporting purposes and for income tax purposes is
                        approximately as follows (in thousands):

                                                               2001      2000
                                                               ----      ----
                        Partnership capital - financial      $199,763  $200,580
                           reporting purposes,
                        Partnership's cumulative tax
                           reporting differences, primarily
                           relating to non-deductible
                           expenses, depreciation and other
                           temporary differences and the
                           effects of mergers                 (17,217)  (19,090)
                        --------------------------------------------------------

                        Partners' capital -- income tax
                           purposes                           $182,546 $181,490
                        ========================================================

                        The merger transactions described in Note 4 were treated
                        as tax-free reorganizations for income tax reporting
                        purposes.

9. Commitments          The Partnership's commercial rental operations include
   Rentals Under        the leasing of office buildings and industrial
   Operating Leases     properties subject to leases with terms greater than one
                        year. The leases thereon expire at various dates through
                        2012. The following is a schedule of approximate future
                        minimum rental income on non-cancelable operating leases
                        as of December 31, 2001:

                        Year ended December 31,
                        ========================================================
                                                                  (in thousands)
                        2002                                           $15,415
                        2003                                            13,307
                        2004                                             9,957
                        2005                                             5,898
                        2006                                             3,336
                        Thereafter                                      12,207
                        --------------------------------------------------------

                                                                       $60,120
                        ========================================================


                                      F-29
<PAGE>

                        Certain leases provide for fixed step rent increases.
                        Rental revenue is recognized on the straight-line basis
                        over the related lease term while billings by the
                        Company are based on required minimum rentals in
                        accordance with the lease agreements. Cumulative revenue
                        recognized in excess of amounts billed by the Company is
                        $1,382,000 and $585,000 at December 31, 2001 and 2000,
                        respectively, and is included in tenant rent
                        receivables.

   Office Lease         The Partnership leases its corporate office space under
                        a six-year operating lease that commenced in June 1999.
                        The lease includes a base annual rent and additional
                        rent for the Partnership's share of taxes and operating
                        costs.

                        Future minimum lease payments are approximately as
                        follows (in thousands):

                        Year ended December 31,
                        ========================================================

                        2002                                             $199
                        2003                                              203
                        2004                                              209
                        2005                                               97
                        --------------------------------------------------------

                                                                         $708
                        ========================================================

                        Rent expense was approximately $196,000, $184,000 and
                        $126,000 for the years ended December 31, 2001, 2000 and
                        1999, respectively, and is included in selling, general
                        and administration expenses in the Consolidated
                        Statement of Income.

   Retirement Plan      During 1999, the Partnership formed a retirement savings
                        plan for eligible employees. Under the plan, the
                        Partnership matches participant contributions up to
                        $6,500 ($6,000 in 2000) annually per participant. The
                        Partnership's total contribution under the plan amounted
                        to approximately $76,000, $53,000 and $13,000 for the
                        years ended December 31, 2001, 2000 and 1999,
                        respectively.

10. Subsequent Events

   Property Purchase    In connection with the purchase of a property by a
                        Sponsored REIT in May 2001, the Partnership obligated
                        itself to purchase an additional parcel of real property
                        within a certain amount of time if the owner offered
                        such property for sale to the Partnership. The Company
                        satisfied this obligation by causing FSP Timberlake East
                        Corp., a newly-organized Sponsored REIT, to purchase
                        this parcel on March 4, 2002.

   Dividends            On February 8, 2002, the Company declared a dividend of
                        $.30 per share of Common Stock payable to stockholders
                        of record as of February 8, 2002. On February 15, 2002,
                        the Company also declared a dividend of $.01 per share
                        of Common Stock payable to stockholders of record as of
                        February 15, 2002.


                                      F-30
<PAGE>

11. Quarterly Financial Information (unaudited)

<TABLE>
<CAPTION>
                                                                    2000
                                                  -----------------------------------------
                                                    First     Second     Third     Fourth
                                                   Quarter   Quarter    Quarter    Quarter
                                                  ---------  --------  ---------  ---------
                                                    (in thousands, except per unit data)

<S>                                              <C>         <C>         <C>        <C>
Revenue                                          $  6,404    $  6,760    $ 10,769   $ 10,860
Income before minority interests                      238         589       5,612      5,124
Income applicable to minority interests               412       1,111       1,107         19
Net income (net loss)                                (174)       (522)      4,505      5,105
Allocation of net income (net loss) to Limited
  Partners                                           (164)       (493)      4,257      4,939
Allocation of net income (net loss) to General
  Partner                                             (10)        (29)        248        166
Basic and diluted net income (net loss) per
  limited and general partnership unit              (0.01)      (0.03)       0.26       0.21
Weighted average number of units outstanding       17,000      17,230      17,230     24,436
</TABLE>

<TABLE>
<CAPTION>
                                                                    2001
                                                  -----------------------------------------
                                                    First     Second     Third     Fourth
                                                   Quarter   Quarter    Quarter    Quarter
                                                  ---------  --------  ---------  ---------
                                                    (in thousands, except per unit data)

<S>                                               <C>         <C>         <C>        <C>
Revenue                                           $12,787     $13,496     $11,302    $16,862
Income before minority interests                    6,023       5,935       4,083      9,367
Income applicable to minority interests                21          19           0          0
Net income                                          6,002       5,916       4,083      9,367
Allocation of net income to Limited Partners        5,769       5,686       3,925      9,006
Allocation of net income to General Partner           233         230         158        361
Basic and diluted net income per limited and
  general partnership unit                           0.25        0.24        0.17       0.38

Weighted average number of units outstanding       24,436      24,437      24,586     24,586
</TABLE>


                                      F-31
<PAGE>

                                                                    SCHEDULE III

          FRANKLIN STREET PARTNERS LIMITED PARTNERSHIP AND SUBSIDIARIES
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                December 31, 2001

<TABLE>
<CAPTION>
                                                                         Initial Cost
                                                           -----------------------------------
                                                                                     Costs
                                                                                  Capitalized
                                            Encumbrances                          (Disposals)
                                                                    Buildings &  Subsequent to
Description                                     (1)        Land     Improvement   Acquisition
                                            ------------   ----     -----------  -------------

<S>                                              <C>    <C>          <C>          <C>
Residential Apartments:
  Essex House, Houston, TX                       --     $  2,920     $  9,367     $    648
  Reata, Houston, TX                             --        3,399        9,657          597
  Weslayan Oaks, Houston, TX                     --        1,658        3,990           71
  Silverside Plantation, Baton Rouge, LA         --        2,000       17,082          119

Commercial Properties:
  North Andover
     Office Park, No. Andover, MA                --        1,311        8,136          902
  Park Seneca, Charlotte, NC                     --        1,915        7,817           26
  Piedmont Center, Greenville, SC                --        1,449        9,839          809
  4995 Patrick Henry, Santa Clara, CA            --        3,274        4,130           58
  One Technology Drive, Peabody, MA              --        1,658       10,246         (450)
  Hillview Center, Milpitas, CA                  --        2,203        2,813            7
  Telecom Business Center, San Diego, CA         --        5,035       11,363           79
  Southfield Centre, Southfield, MI              --        4,344       11,455          143
  Blue Ravine, Folsom, CA                        --          846        5,450           22
  Bollman Place, Savage, MD                      --        1,585        4,121           46
  Austin N.W., Austin, TX                        --          708       10,494          170
  10 Lyberty Way, Westford, MA                   --        1,315        8,862          162
  Gateway Crossing 95, Columbia, MD              --        4,453       15,931         (123)
                                           --------     --------     --------     --------
                                                 --     $ 40,073     $150,753     $  3,286
                                           ========     ========     ========     ========
</TABLE>


<TABLE>
<CAPTION>
                                                                   Historical Costs
                                           -------------------------------------------------------------

                                                                                          Total Costs,
                                                                                             Net of       Depreciable   Date of
                                                     Buildings &             Accumulated   Accumulated       Life     Acquisition
Description                                   Land  Improvements   Total(2)  Depreciation  Depreciation     Years        (3)
-----------                                -------- ------------   --------  ------------  ------------   ----------- -----------
                                                (in thousands)
<S>                                        <C>        <C>          <C>        <C>          <C>               <C>        <C>
Residential Apartments:
  Essex House, Houston, TX                 $  2,920   $ 10,015     $ 12,935   $  2,887     $ 10,048          5-27       1993
  Reata, Houston, TX                          3,399     10,254       13,653      2,386       11,267          5-27       1994
  Weslayan Oaks, Houston, TX                  1,658      4,061        5,719        717        5,002          5-27       1997
  Silverside Plantation, Baton Rouge, LA      2,021     17,180       19,201      2,010       17,191          5-27       1998

Commercial Properties:
  North Andover
     Office Park, No. Andover, MA             1,311      9,038       10,349      1,766        8,583          5-39       1996
  Park Seneca, Charlotte, NC                  1,815      7,943        9,758        781        8,977          5-39       1997
  Piedmont Center, Greenville, SC             1,449     10,648       12,097      1,126       10,971          5-39       1998
  4995 Patrick Henry, Santa Clara, CA         3,274      4,188        7,462        436        7,026          5-39       1997
  One Technology Drive, Peabody, MA           1,658      9,796       11,454      1,383       10,071          5-39       1995
  Hillview Center, Milpitas, CA               2,203      2,820        5,023        206        4,817          5-39       1999
  Telecom Business Center, San Diego, CA      5,035     11,442       16,477        832       15,645          5-39       1999
  Southfield Centre, Southfield, MI           4,344     11,598       15,942        673       15,269          5-39       1999
  Blue Ravine, Folsom, CA                       846      5,472        6,318        300        6,018          5-39       1999
  Bollman Place, Savage, MD                   1,585      4,167        5,752        224        5,528          5-39       1999
  Austin N.W., Austin, TX                       708     10,664       11,372        511       10,861          5-39       1999
  10 Lyberty Way, Westford, MA                1,315      9,024       10,339        352        9,987          5-39       2000
  Gateway Crossing 95, Columbia, MD           4,019     16,242       20,261        829       19,432          5-39       1999
                                           --------   --------     --------   --------     --------
                                           $ 39,560   $154,552     $194,112   $ 17,419     $176,693
                                           ========   ========     ========   ========     ========
</TABLE>

(1)   There are no encumbrances on the above properties.
(2)   The aggregate cost for Federal Income Tax purposes is $181,606.
(3)   Original date of acquisition by Sponsored Partnership.


                                      F-32
<PAGE>

                        The following table summarizes the changes in the
                        Partnership's real estate investments and accumulated
                        depreciation:

                                                          December 31,
                                                   -----------------------------
                                                   2001       2000      1999
                        ========================================================
                                                         (in thousands)

                        Real estate investments,
                        at cost:
                          Balance, beginning of   $193,988  $178,294  $ 86,835
                          period
                            Acquisitions                --    15,982    91,271
                            Improvements               566       639       188
                            Dispositions              (442)     (927)       --
                        --------------------------------------------------------

                          Balance, end of period  $194,112  $193,988  $178,294
                        ========================================================

                        Accumulated depreciation:
                          Balance, beginning of   $ 12,917  $  8,526  $  5,447
                          period
                            Depreciation             4,502     4,391     3,079
                            Dispositions                --        --        --
                        --------------------------------------------------------

                          Balance, end of period  $ 17,419  $ 12,917  $  8,526
                        ========================================================


                                      F-33