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

                                    FORM 10-K

    FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

(Mark One)

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

            For the fiscal year ended December 31, 2004

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

               For the transition period from _______ to _________

                           Commission File No. 0-32615

                        FRANKLIN STREET PROPERTIES CORP.
             (Exact name of registrant as specified in its charter)

              Maryland                                     04-3578653
              --------                                     ----------
  (State or other jurisdiction of                       (I.R.S. Employer
   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|

      Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes |X| No |_|.

      As of June 30, 2004, 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 registrant, was $660,695,041.

      There were 49,631,513 shares of Common Stock outstanding as of March 10,
2005.

      Documents incorporated by reference: The Registrant intends to file a
definitive proxy statement pursuant to Regulation 14A, promulgated under the
Securities Exchange Act of 1934, as amended, to be used in connection with the
Registrant's Annual Meeting of Stockholders to be held on April 29, 2005. The
information required in response to Items 10 - 14 of Part III of this Form 10-K,
other than that contained in Item 4A, "Directors and Executive Officers of FSP
Corp.," is hereby incorporated by reference to such proxy statement.
<PAGE>

                                TABLE OF CONTENTS

FRANKLIN STREET PROPERTIES CORP..............................................  1

PART I.......................................................................  1
  Item 1.  Business..........................................................  1
  Item 2.  Properties........................................................ 11
  Item 3.  Legal Proceedings................................................. 13
  Item 4.  Submission of Matters to a Vote of Security Holders............... 14

PART II...................................................................... 17
  Item 5.  Market For Registrant's Common Equity and Related Stockholder
              Matters........................................................ 17
  Item 6.  Selected Financial and Other Data................................. 18
  Item 7.  Management's Discussion And Analysis Of Financial Condition And
              Results Of Operations.......................................... 19
  Item 8.  Financial Statements and Supplementary Data....................... 32
  Item 9.  Changes in and Disagreements With Accountants on Accounting and
              Financial Disclosure........................................... 32
  Item 9A. Controls and Procedures........................................... 32
  Item 9B. Other information................................................. 33

PART III..................................................................... 34
  Item 10. Directors and Executive Officers of the Registrant................ 34
  Item 11. Executive Compensation............................................ 34
  Item 12. Security Ownership of Certain Beneficial Owners and Management
              and Related Stockholder Matters................................ 34
  Item 13. Certain Relationships and Related Transactions.................... 34
  Item 14. Principal Accountant Fees and Services............................ 34

PART IV...................................................................... 34
  Item 15. Exhibits and Financial Statement Schedules........................ 34
<PAGE>

PART I

Item 1. Business.

History

      Our company, Franklin Street Properties Corp., which we will refer to as
FSP Corp. or the Company, is a Maryland corporation that operates in a manner
intended to qualify as a real estate investment trust for federal income tax
purposes. FSP Corp. is the successor to Franklin Street Partners Limited
Partnership, or the FSP Partnership, which was originally formed as a
Massachusetts general partnership in January 1997 as the successor to a
Massachusetts general partnership that was formed in 1981. On January 1, 2002,
the FSP Partnership converted into FSP Corp. As a result of this conversion, the
FSP Partnership ceased to exist and we succeeded to the business of the FSP
Partnership. In the conversion, each unit of both general and limited
partnership interests in the FSP Partnership was converted into one share of our
common stock. As a result of the conversion, we hold, directly and indirectly,
100% of the interest in three former subsidiaries of the FSP Partnership: FSP
Investments LLC, FSP Property Management LLC, and FSP Holdings LLC. We operate
some of our business through these subsidiaries.

      On June 1, 2003, we acquired 13 real estate investment trusts by merger.
In these mergers, we issued 25,000,091 shares of our common stock to holders of
preferred stock in these REITs. As a result of these mergers, we now hold all of
the assets previously held by these REITs.

      On August 13, 2004, we entered into an agreement to acquire four real
estate investment trusts, which we refer to as Target REITs, by the merger of
the four Target REITs with and into four of our wholly-owned subsidiaries. We
expect that these mergers will close on April 30, 2005. Upon the consummation of
these mergers, we expect to issue 10,894,994 shares of our common stock to
holders of preferred stock in these Target REITs.

      On January 19, 2005, we received a notice from the American Stock Exchange
approving our listing application, contingent upon our being in compliance with
the American Stock Exchange's listing standards on the day of listing. We expect
to have our common stock listed on the American Stock Exchange immediately after
the consummation of our acquisition of the four Target REITs.

Our Business

      We operate in two business segments and have two principal sources of
revenue:

      o     Real estate operations, including real estate leasing, interim
            acquisition financing and asset/property management, which generate
            rental income, loan origination fees and management fees,
            respectively.

      o     Investment banking/investment services, which generate brokerage
            commissions and other fees related to the organization of
            single-purpose entities that own real estate and the private
            placement of equity in those entities. We call these entities
            Sponsored Entities, and although we previously organized them as
            partnerships, in 2001 we began to organize them as corporations
            operated in a manner intended to qualify as real estate investment
            trusts, which we refer to as Sponsored REITs.

      See Note 3 to our consolidated financial statements.

      Real Estate

      We own a portfolio of real estate, consisting of 28 properties as of
December 31, 2004, which includes apartment complexes, office buildings and
industrial use properties. We derive rental revenue from income paid to us by
tenants of these properties. See Item 2 of this Annual Report on Form 10-K.

      FSP Corp. typically makes a loan to each Sponsored REIT secured by a
mortgage on the borrower's real estate. Those loans produce revenue in the form
of interest and loan origination fees payable to FSP Corp. These loans typically
are repaid out of the proceeds of the borrower's equity offering.


                                        1
<PAGE>

      We also provide asset management services, property management services
and/or property accounting services to our portfolio and certain of our
Sponsored REITs through our subsidiary FSP Property Management LLC. FSP Corp.
recognizes revenue for its receipt of fee income from Sponsored REITs that have
not been acquired by us. FSP Property Management does not receive any rental
income.

      Investment Banking/Investment Services

      Through our subsidiary FSP Investments, which acts as a real estate
investment banking firm and broker/dealer, we organize Sponsored REITs, and sell
equity in them through private placements exempt from registration under the
Securities Act of 1933. These single-purpose entities each typically acquire a
single real estate asset. FSP Investments sells preferred stock in the Sponsored
REIT through best efforts offerings to "accredited investors" within the meaning
of Regulation D of the Securities Act. We retain 100% of the common stock
interest in the Sponsored REIT, though there is virtually no economic benefit or
risk subsequent to the completion of the syndication. Since 1997, FSP
Investments has sponsored 41 Sponsored Entities, 14 of which were partnerships,
and 27 of which were Sponsored REITs.

      FSP Investments derives revenue from syndication and other transaction
fees received in connection with the sale of preferred stock in the Sponsored
REITs and from fees paid by the Sponsored REITs for its services in identifying,
inspecting and negotiating to purchase real properties on their behalf. 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. We have made an election to treat FSP Investments as a "taxable REIT
subsidiary" for federal income tax purposes.

Investment Objectives

      Our investment objective is to increase the cash available for
distribution in the form of dividends to our stockholders by increasing revenue
from rental income, any net gains from sales of properties and investment
banking services. We expect that, through FSP Investments, we will continue to
organize and cause the offering of Sponsored REITs in the future and that we
will continue to derive investment banking/investment services income, from such
activities as well as real estate revenue from loan origination fees and
interest. We may also acquire additional real properties by direct cash purchase
or by acquisition of Sponsored REITs. In addition, we may invest in real estate
by purchasing shares of preferred stock offered in the syndications of our
Sponsored REITs.

      From time to time, as market conditions warrant, we may sell properties
owned by us. In 2004 no properties were sold. When we sell a property, we either
distribute some or all of the sale proceeds to our stockholders as a
distribution or retain some or all of such proceeds for investment in real
properties or other corporate activities.

      We may acquire, and have acquired, real properties in any geographic area
of the United States and of any property type. Of the 28 properties we own, four
are apartment complexes, 22 are office buildings and two are industrial. See
Item 2 of this Annual Report on Form 10-K.

      We rely on the following principles in selecting real properties for
acquisition by a Sponsored REIT or FSP Corp. and managing them after
acquisition:

      o     we seek to buy investment properties at a price which produces value
            for investors and avoid overpaying for real estate merely to outbid
            competitors;

      o     we seek to buy properties in excellent locations with substantial
            infrastructure in place around them and avoid investing in locations
            where the future construction of such infrastructure is speculative;

      o     we seek to buy properties that are well-constructed and designed to
            appeal to a broad base of users and avoid properties where quality
            has been sacrificed to cost savings in construction or which appeal
            only to a narrow group of users;


                                        2
<PAGE>

      o     we aggressively manage, maintain and upgrade our properties and
            refuse to neglect or undercapitalize management, maintenance and
            capital improvement programs;

      o     we believe that we have the ability to hold properties through down
            cycles and avoid leveraging properties and placing them at risk of
            foreclosure; as of December 31, 2004, none of our 28 properties was
            subject to mortgage debt.

Line of Credit

      We currently have an unsecured revolving line of credit with a group of
banks that provides for borrowings of up to $125,000,000. We have drawn on this
line of credit, and intend to draw on this line of credit in the future, to
obtain funds primarily for the purpose of making interim mortgage loans to
Sponsored REITs. We typically cause these loans to be secured by a first
mortgage of the real property owned by the Sponsored REIT. We make these loans
to enable a Sponsored REIT to acquire real property prior to the consummation of
the offering of its equity interests, and the loan is repaid out of the offering
proceeds. We have no restriction on the percentage of our assets that may be
invested in any single mortgage.

Competition

      With respect to our real estate investments, we face competition in each
of the markets where the properties are located. In order to maintain or
increase the rental revenues for a property, it must be competitive on location,
cost and amenities with other buildings of similar use. Some of our competitors
may have significantly more resources than we do and may be able to offer more
attractive rental rates or services. On the other hand, some of our competitors
may be smaller or have less fixed overhead costs, less cash or other resources
that make them willing or able to accept lower rents in order to maintain a
certain occupancy level. In markets where there is not currently significant
existing property competition, our competitors may decide to enter the market
and build new buildings to compete with our existing projects. Our competition
is not only with other landlords, but also with the choice of home ownership or
ownership of office condominiums, and larger market forces (including changes in
interest rates and tax treatment) and individual decisions beyond our control
may affect our ability to compete with those forms of ownership.

      With respect to our investment banking and investment services business,
we face competition for investment dollars from every other kind of investment,
including stocks, bonds, mutual funds and other real-estate related investments,
including other REITs. Some of our competitors have significantly more resources
than we do and are able to advertise their investment products. Because the
offerings of the Sponsored REITs are made pursuant to an exemption from
registration under the Securities Act, FSP Investments may not advertise the
Sponsored REITs or otherwise engage in any general solicitation of investors to
purchase interests in the Sponsored REITs, which may affect our ability to
compete for investment dollars.

Employees

      We had 37 employees as of December 31, 2004.

Available Information

      We are subject to the informational requirements of the Securities
Exchange Act of 1934, and, in accordance therewith, we file reports and other
information with the Securities and Exchange Commission (SEC). The reports and
other information we file can be inspected and copied at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. Copies of such material can be obtained by mail from the Public Reference
Section of the SEC at 450 West Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such reports and other information may also be obtained from
the web site that the SEC maintains at http://www.sec.gov. Further information
about these public reference facilities may be obtained by calling the SEC at
1-800-SEC-0330.


                                        3
<PAGE>

      Reports and other information concerning us may also be obtained
electronically through a variety of databases, including, among others,
Electronic Data Gathering and Retrieval (EDGAR) program, Knight-Ridder
Information Inc., Federal Filing/Dow Jones and Lexis/Nexis.

      We do not make our reports available electronically, as we do not
currently maintain an Internet website. We will voluntarily provide paper copies
of our filings and code of ethics upon written request at the address on the
cover of this Annual Report on Form 10-K, free of charge.

Item 1A. Risk Factors.

      The following important factors, among others, could cause actual results
to differ materially from those indicated by forward-looking statements made in
this Annual Report on Form 10-K and presented elsewhere by management from time
to time.

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

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

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

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

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

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

Failure to renew, replace or extend our line of credit could have a material
adverse effect on the cash available for distribution to our stockholders and
would limit our growth.

      Our line of credit matures in August 2005. We typically draw on our line
of credit to make an interim mortgage loan to a sponsored REIT, so that the
sponsored REIT can acquire real property prior to the consummation of the
offering of such sponsored REIT's equity interests. Once the offering has been
completed, the sponsored REIT repays the loan out of the offering proceeds. An
inability to renew, replace or extend our line of credit could result in
difficulty financing growth in the investment banking/investment services
segment of our business. It could also result in a reduction in the cash
available for distribution to our stockholders because revenue for our
investment banking/investment services segment is directly related to the amount
of equity raised by sponsored REITs which we syndicate. In addition, a
significant part of our growth strategy is to acquire additional real properties
by cash purchase or by acquisition of sponsored REITs, and the loss of the line
of credit would make it substantially more difficult to pursue acquisitions by
either method. To the extent we have a balance outstanding on the line of credit


                                        4
<PAGE>

on the date of its maturity, we would have to satisfy our obligation through
other means. If we are required to use cash for this purpose, we would have less
cash available for distribution to its stockholders.

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

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

We are dependent on key personnel.

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

Our level of dividends may fluctuate.

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

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

      As of December 31, 2004, we owned 28 properties. Some or all of these
properties may decline in value. To the extent our real properties decline in
value, our stockholders could lose some or all the value of their investments.
Although currently there is no public market for the shares of our common stock,
the value of our common stock may still be adversely affected if the real
properties held by us decline in value since these real properties represent the
majority of the tangible assets held by us. Moreover, if either we are forced to
sell or lease the real property held by us below its initial purchase price or
its carrying costs or if we are forced to lease real property at below market
rates because of the condition of the property, our results of operations would
be adversely affected and such negative results of operations may result in
lower dividends being paid to holders of our common stock.

New acquisitions may fail to perform as expected.

      We may acquire new properties, whether by direct FSP Corp. cash purchase,
by acquisition of Sponsored REITs or other properties by cash or through the
issuance of shares of our stock or by investment in a Sponsored REIT. We are
currently a party to a merger agreement pursuant to which we expect to acquire
four Sponsored REITs and the properties they own on April 30, 2005. Newly
acquired properties may fail to perform as expected, in which case, our results
of operations could be adversely affected.

We face risks in owning and operating real property.

      An investment in us 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 our ability to vary
our portfolio in response to changes in economic and other conditions, as well
as the risks normally associated with:

      o     changes in general and local economic conditions;

      o     the supply or demand for particular types of properties in
            particular markets;


                                        5
<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.

We face risks from tenant defaults or bankruptcies.

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

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

      When leases expire, we will incur expenses and may not be able to re-lease
the space on the same terms. Certain leases provide tenants the right to
terminate early if they pay a fee. If we are unable to re-lease space promptly,
if the terms are significantly less favorable than anticipated or if the costs
are higher, we may have to reduce distributions to our stockholders.
Approximately $10,393,000, or 17.6%, of our annualized rental revenue from
commercial and residential apartment properties derives from leases which expire
during 2005.

We face risks from geographic concentration.

      The properties in our portfolio, by aggregate square footage, are
distributed geographically as follows: Southwest - 26%, Northeast - 31%, Midwest
- 19%, West - 16% and Southeast 8%. However, within certain of those regions, we
hold a larger concentration of our properties in Houston, Texas - 18% and
Washington, DC - 13%. We are likely to face risks to the extent that any of
these areas in which we hold a larger concentration of our properties suffer
deteriorating economic conditions.

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

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

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

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


                                        6
<PAGE>

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

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

      In addition, we cannot assure you that:

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

      o     the current environmental conditions of our properties will not be
            affected by the condition of properties in the vicinity of such
            properties (such as the presence of leaking underground storage
            tanks) or by third parties unrelated to us;

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

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

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

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

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

There are significant conditions to our obligation to redeem shares of our
common stock, and any such redemption will result in the stockholders tendering
shares receiving less than their estimated fair market value.

      Under our redemption plan, we are only obligated to use our best efforts
to redeem shares of our common stock from stockholders wishing to have them
redeemed. Stockholders wishing to have their shares redeemed must so request on
or before the July 1 which precedes the January 1 date on which the redemption
will be effective, and any such request will be irrevocable. There are
significant conditions to our obligation to redeem shares of our common stock
including:

      o     we cannot be insolvent or be rendered insolvent by the redemption;

      o     the redemption cannot impair our capital or operations;


                                        7
<PAGE>

      o     the redemption cannot contravene any provision of federal or state
            securities laws;

      o     the redemption cannot result in our failing to qualify as a REIT;
            and

      o     our management must determine that the redemption is in our best
            interests.

      Any redemption effected by us under this plan would result in those
stockholders tendering shares of our common stock receiving 90% of the estimated
fair market value of such shares, as determined by our board of directors in its
sole and absolute discretion, and not their full estimated fair market value. If
our common stock becomes listed for trading on AMEX or any other national
securities exchange or the NASDAQ National Market, we will no longer be
obligated to, and do not intend to, effect any redemption. We also do not intend
to accept any requests for redemption from the time of the mailing of the
Consent Solicitation/Prospectus related to the mergers, which occurred on March
1, 2005, until the effective date of the mergers, which we expect to be April
30, 2005.

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

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

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

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

      o     liabilities for clean-up or remediation of environmental conditions;

      o     claims of tenants, vendors or other persons dealing with the former
            owners of the properties; and

      o     liabilities incurred in the ordinary course of business.

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

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

      If in any taxable year we do not qualify as a real estate investment
trust, we would be taxed as a corporation and distributions to our stockholders
would not be deductible by us in computing our taxable income. In addition, if
we were to fail to qualify as a real estate investment trust, we could be
disqualified from treatment as a real estate investment trust in the year in


                                        8
<PAGE>

which such failure occurred and for the next four taxable years and,
consequently, we would be taxed as a regular corporation during such years.
Failure to qualify for even one taxable year could result in a significant
reduction of our cash available for distribution to our stockholders or could
require us to incur indebtedness or liquidate investments in order to generate
sufficient funds to pay the resulting federal income tax liabilities.

Provisions in our organizational documents may prevent changes in control.

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

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

      Staggered Board. Our board of directors is divided into three classes. The
terms of these classes will expire in 2005, 2006 and 2007, respectively.
Directors of each class are elected for a three-year term upon the expiration of
the initial term of each class. The staggered terms for directors may affect our
stockholders' ability to effect a change in control even if a change in control
were in the stockholders' best interests.

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

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

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

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

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


                                        9
<PAGE>

The listing of our common stock on the American Stock Exchange or another
national securities exchange and the trading price of our common stock following
such listing are uncertain. Our common stock could trade at a lower price than
anticipated.

      Although we have filed an application to list our common stock on the
AMEX, and the AMEX has approved the application, there can be no assurances that
our common stock will be listed for trading. Therefore, a trading market may not
develop at all, or if one does, it may not be meaningful. If a trading market
does develop, the market prices for our common stock may fluctuate with changes
in market and economic conditions, including the market perception of REITs in
general, and changes in the financial condition of our securities. Such
fluctuations may depress the market price of our common stock independent of the
financial performance of FSP Corp. The market conditions for REIT stocks
generally could affect the market price of our common stock.


                                       10
<PAGE>

Item 2. Properties.

      Set forth below is information regarding our properties as of December 31,
2004:

<TABLE>
<CAPTION>
                             Sponsored
                             Entity                                Percent       Approx.
                             Date of     Number     Approx.        Leased as     Number
Property Location            Purchase    of Units   Square Feet    of 12/31/04   of Tenants    Major Tenants(1)
-----------------            --------    --------   -----------    -----------   ----------    -------------

<S>                          <C>          <C>       <C>             <C>             <C>          <C>
Apartment/Residential
---------------------
3919 Essex Lane               6/30/93     135       118,798         over 90%        135          None - Apts.
Houston, TX  77027

7250 Perkins Road            10/16/98     264       223,812         over 95%        264          None - Apts.
Baton Rouge, LA 70808

4000 Essex Lane               7/28/00     210       187,338         over 90%        210          None - Apts.
Houston, TX  77027

22400 Westheimer Parkway,     4/24/02     228       231,363         over 90%        228          None - Apts.
Katy, Texas  77450

                                        ------     ---------
Total Apartments                          837       761,311
                                        ------     ---------

Office
------
451 Andover Street             6/1/96                92,446         99%             40           Pentucket
North Andover, MA 01845                                                                          Medical

1515 Mockingbird Lane          7/1/97               108,778         82%             70           Primary Physicians
Charlotte, NC 28209                                                                              Care

4995 Patrick Henry Dr.        12/1/97                40,280         100%            1            Agere
Santa Clara, CA 95054

33 & 37 Villa Road             3/1/98               144,029         38%             20           New Horizons
Greenville, SC 29615                                                                             Computer

678-686 Hillview Drive         3/9/99                36,288         100%            1            Headway
Milpitas, CA 95035                                                                               Technologies

5751-5771 Copley Drive        3/12/99               101,726         100%            4            XO, Nextel,
San Diego, CA 92111                                                                              Aon Service
                                                                                                 Corp. & REVA Medical

600 Forest Point Circle        7/8/99                62,212         87%             2            American Red Cross
Charlotte, NC 28273                                                                              Cellco d/b/a Verizon

81 Blue Ravine                9/27/99                47,058         0%              0
Folsom, CA 95630

18000 W. Nine Mile Rd.        9/30/99               215,306         90%             7            IBM
Southfield, Michigan 48075
</TABLE>


                                       11
<PAGE>

<TABLE>
<CAPTION>
                             Sponsored
                             Entity                                Percent       Approx.
                             Date of     Number     Approx.        Leased as     Number
Property Location            Purchase    of Units   Square Feet    of 12/31/04   of Tenants    Major Tenants(1)
-----------------            --------    --------   -----------    -----------   ----------    -------------

<S>                          <C>                    <C>               <C>           <C>          <C>
11211 Taylor Draper Lane     12/29/99                  68,533         63%           6            CACI Technologies,
Austin, Texas 78759                                                                              State Farm, Tiburon
                                                                                                 Rodriguez
                                                                                                 Transportation

7130-7150 Columbia           12/20/99                 188,819         97%           7            Avnet, EVI, Nextira and
Gateway Drive,                                                                                   Science Application Corp.
Columbia, MD 21046                                                                               American Home Mortgage

10 Lyberty Way                5/23/00                 104,711         0%            0
Westford, MA 01886

17030 Goldentop Road          9/22/00                 141,405         100%          1            Northrop
San Diego, CA 92127                                                                              Grumman

4820 & 4920 Centennial        9/28/00                 110,730         82%           3            Hewlett-Packard
Blvd.                                                                                            Starkey Laboratories
Colorado Springs, CO 80919                                                                       Dalsa

14151 Park Meadow Drive       3/15/01                 134,849         100%          1            CACI, Inc.-Federal
Chantilly, VA 20151

1370 & 1390 Timberlake        5/24/01                 232,722         99%           3            Reinsurance Group
Manor Parkway,                                                                                   of America and AMDOCs
Chesterfield, MO 63017

501 & 505 South 336th         9/14/01                 117,227         100%          1            Weyerhaeuser Company
Street
Federal Way, WA 98003

12902 Federal Systems Park    9/17/01                 210,993         100%          1            IBM
Drive, Fairfax, VA 22033

50 Northwest Point Rd.        12/5/01                 176,848         100%          1            Motorola
Elk Grove Village, IL 60005

1350 Timberlake Manor          3/4/02                 116,312         94%           8            Computer Associates,
Parkway                                                                                          Quest Software, RGA,
Chesterfield, MO 63017                                                                           Wachovia Securities

2251 Corporate Park Ridge Dr. 5/23/02                 158,016         100%          2            Scitor Corporation
Herndon, VA 20171                                                                                Juniper Networks, Inc.

16285 Park Ten Place          6/27/02                 155,715         100%          5            Mustang Engineering
Houston, Texas 77084                                                                             & TMI aka Trendmaker
                                                                                                 Homes

                                                   ----------
Total Office                                        2,765,003
                                                   ----------
</TABLE>


                                       12
<PAGE>

<TABLE>
<CAPTION>
                             Sponsored
                             Entity                                Percent       Approx.
                             Date of     Number     Approx.        Leased as     Number
Property Location            Purchase    of Units   Square Feet    of 12/31/04   of Tenants    Major Tenants(1)
-----------------            --------    --------   -----------    -----------   ----------    -------------

<S>                           <C>         <C>       <C>               <C>             <C>       <C>
Industrial
----------

One Technology Dr.            12/1/95                 188,000         100%            1         Alliant Foodservice
Peabody, MA 01960

8730 Bollman Place           12/14/99                  98,745         100%            1         Maines Paper and
Savage (Jessup), MD 20794                                                                       Foodservice, Inc.

                                                   ------------
Total Industrial                                      286,745
                                                   ------------

                                       -------     ------------
Grand Total                               837       3,813,059
                                       =======     ============
</TABLE>

----------
(1)   Major tenants are tenants who occupy 10% or more of the space in an
      individual property.

      All of the properties listed above are owned by us. None of our properties
is 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, 2004.

Item 3. Legal Proceedings.

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


                                       13
<PAGE>

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

      No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.

Item 4A. Directors and Executive Officers of FSP Corp.

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

<TABLE>
<CAPTION>
              Name                     Age                Position
              ----                     ---                --------

<S>                                    <C>      <C>
George J. Carter (5)                   56       President, Chief Executive Officer and Director

Barbara J. Fournier (2) (4)            49       Vice President, Chief Operating Officer, Treasurer, Secretary
                                                and Director (Principal Financial Officer)

Dennis J. McGillicuddy (1) (2) (3)     63       Director

Barry Silverstein (1) (2) (4)          71       Director

John N. Burke (1) (4)                  43       Director

John G. Demeritt                       44       Senior Vice President, Finance (Principal Accounting Officer)

Richard R. Norris (5)                  61       Executive Vice President and Director

R. Scott MacPhee                       47       Executive Vice President

William W. Gribbell                    45       Executive Vice President

Janet Prier Notopoulos (3)             57       Vice President and Director
</TABLE>

----------
(1)   Member of the Audit Committee
(2)   Member of the Compensation Committee
(3)   Class I Director
(4)   Class II Director
(5)   Class III Director

      George J. Carter, age 56, is President, Chief Executive Officer and a
Director of FSP Corp. and is responsible for all aspects of the business of FSP
Corp. 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 FSP 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.


                                       14
<PAGE>

      Barbara J. Fournier, age 49, is the Vice President, Chief Operating
Officer, Treasurer, Secretary and a Director of FSP Corp. In addition, Ms.
Fournier has as her primary responsibility, together with Mr. Carter, the
management of all operating business affairs of FSP Corp. and its affiliates.
Ms. Fournier is also the Principal Financial Officer. Prior to the Conversion,
Ms. Fournier 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. Fournier served as Director of Operations for
Schuparra Securities Corp. and as the Sales Administrator for Weston Financial
Group. From 1979 through 1986, Ms. Fournier worked at First Winthrop Corporation
in administrative and management capacities; including Office Manager,
Securities Operations and Partnership Administration. Ms. Fournier attended
Northeastern University and the New York Institute of Finance. Ms. Fournier 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.

      Dennis J. McGillicuddy, age 63, has been a director of the Company and the
Chairman of the Compensation Committee since May 2002. Mr. McGillicuddy joined
the Audit Committee in July 2004. Mr. McGillicuddy graduated from the University
of Florida with a B.A. degree and in 1966 he graduated from the University of
Florida Law School with a J.D. degree. In 1968, Mr. McGillicuddy joined Barry
Silverstein in founding Coaxial Communication, a cable television company.
Initially operating in small, rural communities in the southeast, Coaxial
expanded its operations to Columbus, Ohio, the suburbs of Cincinnati, Ohio, and
St. Paul, Minnesota, as well as smaller systems in West Virginia, Kentucky and
Illinois. In 1998 and 1999, Coaxial sold its cable systems. Since January 2001,
Mr. McGillicuddy has served as a manager of BDS Management LLC, a management
services company. Mr. McGillicuddy has served on the boards of various
charitable organizations. He is currently president of the Board of Trustees of
Florida Studio Theater, a professional non-profit theater organization. Also,
Mr. McGillicuddy is an officer and board member of The Florida Winefest and
Auction Inc., a Sarasota-based charity, which provides funding for programs of
local charities that deal with disadvantaged children and their families.

      Barry Silverstein, age 71, has been a director of the Company and a member
of the Compensation Committee since May 2002. Mr. Silverstein joined the Audit
Committee in July 2004. Mr. Silverstein took his law degree from Yale University
in 1957 and subsequently held positions as attorney/officer/director of various
privately-held manufacturing companies in Chicago, Illinois. After selling those
interests in 1964, he moved to Florida to manage his own portfolio and to teach
at the University of Florida Law School. In 1968, Mr. Silverstein became the
principal founder and shareholder in Coaxial Communication, a cable television
company. Initially operating in small, rural communities in the southeast,
Coaxial expanded its operations to Columbus, Ohio, the suburbs of Cincinnati,
Ohio, and St. Paul, Minnesota, as well as smaller systems in West Virginia,
Kentucky and Illinois. In 1998 and 1999, Coaxial sold its cable systems. Since
January 2001, Mr. Silverstein has served as a member of BDS Management LLC, a
management services company.

      John N. Burke, age 43 has been a director of the Company and Chairman of
the Audit Committee since June 2004. Prior to staring his own accounting, tax
and consulting firm in January 2003, he was an Assurance Partner in the Boston
office of BDO Seidman, LLP, an international accounting and consulting firm.
From 1987 to 2003, Mr. Burke served several private and publicly traded real
estate clients at BDO Seidman, LLP and assisted companies with initial public
offerings, private equity and debt financings and merger and acquisition
transactions. Mr. Burke's consulting experience includes SEC reporting matters,
compliance with Sarbanes-Oxley, tax and business planning and evaluation of
internal controls and management information systems. Mr. Burke is a Certified
Public Accountant and a member of the American Institute of Certified Public
Accountants. Mr. Burke holds a Master's of Science in Taxation and studied
undergraduate accounting and finance at Bentley College.


                                       15
<PAGE>

      John G. Demeritt, age 44, is the Senior Vice President, Finance and
Principal Accounting Officer of FSP Corp. Prior to joining the Company in 2004,
Mr. Demeritt was a Manager with Vitale Caturano & Company, Ltd., an independent
accounting firm where he focused on Sarbanes Oxley compliance. Previously, from
March 2002 to March 2004 he provided consulting services to public and private
companies where he focused on SEC filings, evaluation of business processes and
acquisition integration. During 2001 and 2002 he was Vice President of Financial
Planning & Analysis at Cabot Industrial Trust, a publicly traded real estate
investment trust, which was acquired by CalWest in December 2001. From October
1995 to December 2000 he was Controller and Officer of The Meditrust Companies
(now known as the The La Quinta Companies), a publicly traded real estate
investment trust, where he was involved with a number of merger and financing
transactions. Prior to that, from 1986 to 1995 he had financial and accounting
responsibilities at three other public companies, and was previously associated
with Laventhol & Horwath, an independent accounting firm from 1983 to 1986. Mr.
Demeritt is a Certified Public Accountant and holds a Bachelor of Science degree
from Babson College.

      Richard R. Norris, age 61, is an Executive Vice President and a Director
of FSP Corp. 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.

      R. Scott MacPhee, age 47, is an Executive Vice President of FSP Corp. 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.

      William W. Gribbell, age 45, is an Executive Vice President of FSP Corp.
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.

      Janet Prier Notopoulos, age 57, is a Vice President and a Director of FSP
Corp. and President of FSP Property Management and has as her primary
responsibility the oversight of the management of the real estate assets of FSP
Corp. and its affiliates. Prior to the Conversion, Ms. Notopoulos was a Vice
President of the General Partner. Prior to joining the FSP Partnership 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).

      With the exception of John G. Demeritt, each of the above executive
officers has been a full-time employee of FSP Corp. or its predecessor for the
past five fiscal years.

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


                                       16
<PAGE>

PART II

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

      There is no established public trading market for our common stock. The
fair value of our common stock as determined by our board of directors was
$17.70 per share as of December 31, 2004.

      As of March 10, 2005, there were 1,430 holders of record of our common
stock. This computation is based upon the number of record holders reflected in
our corporate records.

      We have declared a dividend of $0.31 per share of our common stock payable
to stockholders of record as of February 7, 2005. Set forth below are the
distributions per share of common stock made by FSP Corp., in each quarter since
2002.

                                         Distribution Per Share of
          Quarter Ended                  Common Stock of FSP Corp.
          -------------                  -------------------------

             3/31/02                               $0.31
             6/30/02                               $0.31
             9/30/02                               $0.31
            12/31/02                               $0.31
             3/31/03                               $0.31
             6/30/03                               $0.31
             9/30/03                               $0.31
            12/31/03                               $0.43*
             3/31/04                               $0.31
             6/30/04                               $0.31
             9/30/04                               $0.31
            12/31/04                               $0.31

      *Included a special dividend of $0.12 per share.

      While not guaranteed, we expect that cash dividends on our common stock
comparable to our most recent quarterly dividend will continue to be paid in the
future.


                                       17
<PAGE>

Item 6. Selected Financial and Other Data.

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

<TABLE>
<CAPTION>
                                                             Year Ended December 31,
                                           -------------------------------------------------------------
                                             2004         2003         2002         2001         2000
                                           --------     --------     --------     --------     --------

<S>                                        <C>          <C>          <C>          <C>          <C>
(In thousands, except per share
or unit amounts)

Operating Data:
Total revenue                              $100,052     $ 80,700     $ 53,662     $ 51,583     $ 32,793
Income from:
  Continuing operations                      47,763       39,823       26,741       24,621        8,171
  Discontinued operations                        --          195          571          747          743
  Gain on sale of properties                     --        6,362           --           --           --
                                           --------     --------     --------     --------     --------
  Net income                                 47,763       46,380       27,312       25,368        8,914

Basic and diluted income per share
and per limited and general
partnership unit from:
  Continuing operations                        0.96         1.02         1.09         1.00         0.43
  Discontinued operations                        --           --         0.02         0.03         0.04
  Gain on sale of properties                     --         0.16           --           --           --
                                           --------     --------     --------     --------     --------
  Total                                        0.96         1.18         1.11         1.03         0.47

Distributions declared per
unit/share outstanding (1) from:
  Operations                                   1.24         1.24         1.24         1.18         1.02
  Sale of properties                             --         0.12           --           --           --
                                           --------     --------     --------     --------     --------
  Total                                        1.24         1.36         1.24         1.18         1.02

                                                               As of December 31,
                                           -------------------------------------------------------------
                                             2004         2003          2002         2001        2000
                                           --------     --------     --------     --------     --------
Balance Sheet Data
Total assets                               $573,111     $528,529     $201,936     $204,117     $219,923
Total liabilities                            70,023       11,674        4,771        4,354       19,280
Minority interests in
   consolidated entities                         --           --           --           --           63
Total shareholders'/partners capital        503,088      516,855      197,165      199,763      200,580
</TABLE>

(1)   As a result of the conversion of the FSP Partnership into FSP Corp., each
      unit in the FSP Partnership was converted into one share of common stock
      in FSP Corp.

      The 2003 financial statements reflect acquisition by merger of 13
Sponsored REITs. Prior to the acquisition, FSP Corp. held a non-controlling
interest with virtually no economic benefits or risks in these REITs.


                                       18
<PAGE>

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, 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 on Form 10-K may also contain forward-looking
statements based on current judgments and current knowledge of management, which
are subject to certain risks, trends and uncertainties that could cause actual
results to differ materially from those indicated in such forward-looking
statements. Accordingly, readers are cautioned not to place undue reliance on
forward-looking statements. Investors are cautioned that our forward-looking
statements involve risks and uncertainty, including without limitation changes
in economic conditions in the markets in which we own properties, changes in the
demand by investors for investment in Sponsored REITs, risks of a lessening of
demand for the types of real estate owned by us, changes in government
regulations, and expenditures that cannot be anticipated such as utility rate
and usage increases, unanticipated repairs, additional staffing, insurance
increases and real estate tax valuation reassessments. See "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 on Form 10-K is
filed to conform them to actual results or to changes in our expectations that
occur after such date, other than as required by law.

Overview

      FSP Corp. operates in two business segments: real estate operations and
investment banking/investment services. The real estate operations segment
involves real estate rental operations, leasing, interim acquisition financing
and asset/property management services. The investment banking/investment
services segment involves the provision of real estate investment and
broker/dealer services that include the organization of Sponsored REITs, the
acquisition of real estate on behalf of Sponsored REITs and the syndication of
Sponsored REITs through sale of preferred stock in private placements.

      The main factor that affects our real estate operations is the broad
economic market conditions in the United States. These market conditions affect
the occupancy levels and the rent levels on both a national and local level. We
have no influence on the national market conditions. We look to acquire quality
properties in good locations in order to lessen the impact of downturns in the
market and to take advantage of upturns when they occur.

      Our investment banking/investment services customers are primarily
institutions and high net-worth individuals. To the extent that the broad
capital markets affect these investors our business is also affected. These
investors have many investment choices. We must continually search for real
estate at a price and at a competitive risk/reward rate of return that meets our
customer's risk/reward profile for providing a stream of income and as a
long-term hedge against inflation.

Trends and Uncertainties

      Real Estate Operations

      Our property operations during the fourth quarter of 2004 produced profit
results that were generally in line with management's expectations. We believed
2004 would be another tough year for real estate rental operations. In fact,
2004 showed no significant improvement in either occupancy or rental rates in
most real estate markets around the country. In most office markets, occupancy
rates increased slightly and sublease inventory began to decrease while rental
rates continued to decline. However, the general economy did continue to improve
in 2004, and management believes that 2005 may be the first year in the last
three years to show legitimate broad-based improvement in real estate operating
fundamentals, particularly in the long-suffering office property sector, our
predominant property type. Nevertheless, assuming a normal cyclical continuation
of the current U.S. economic expansion, it is likely to take several more years
for office occupancies and rents to reach levels that were prevalent in 1999,
2000, and 2001.


                                       19
<PAGE>

      The portfolio was approximately 90% leased at December 31, 2004. Less than
10% of the square footage in our non-residential real estate portfolio has
leases that are scheduled to expire in 2005. We cannot predict if these tenants
will renew their leases or what the terms and conditions of the lease renewals
will be, although we expect to renew or sign new leases at current market rates
for the locations in which the buildings are located, which in most cases will
be below the expiring rental rates.

      While our apartment properties were over 90% leased at the end of the
quarter, we continue to be unable to raise rents significantly.

      Sale of Properties

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

      Investment Banking/Investment Services

      Unlike our real estate operations business, which provides a rental
revenue stream which is ongoing and recurring in nature, our investment
banking/investment services business is transactional in nature. Both the number
of Sponsored REIT syndications completed and the amount of equity raised in 2004
were below our expectations. Future business in this area is unpredictable.

      Our property acquisition executives were concerned about high valuation
levels for prime commercial investment real estate in 2004. It appears that a
combination of factors, including low interest rates, a recovering general
economy and increased capital allocation to real estate assets is increasing
prices on many properties we would have an interest in acquiring. This upward
pressure on prices is causing capitalization rates to fall and prices per square
foot to rise. Specifically, our acquisition executives were not able to identify
enough property during 2004 at a price acceptable under our investment criteria
to grow our overall investment banking/investment services business. Lower
revenues from this business reduced the cash available for distribution to
stockholders as dividends. As 2005 begins, valuation levels for many top quality
investment properties remain at historically high levels, with significant
competition from a variety of capital sources to acquire them. We continue to
rely solely on our in-house investment executives to access interested investors
who have capital they can afford to place in an illiquid position for an
indefinite period of time (i.e., invest in a Sponsored REIT). We also continue
to evaluate our in-house sales force, as to whether we are capable, either
through our existing client base or through new clients, of raising sufficient
investment capital in Sponsored REITs to achieve future performance objectives.

Critical Accounting Policies

      We have certain critical accounting policies that are subject to judgments
and estimates by our management and uncertainties of outcome that affect the
application of these policies. We base our estimates on historical experience
and on various other assumptions we believe to be reasonable under the
circumstances. On an on-going basis, we evaluate our estimates. In the event
estimates or assumptions prove to be different from actual results, adjustments
are made in subsequent periods to reflect more current information. The
accounting policies that we believe are most critical to the understanding of
our financial position and results of operations, and that require significant
management estimates and judgments, are discussed below.

      Critical accounting policies are those that have the most impact on the
reporting of our financial condition and results of operations and those
requiring significant judgments and estimates. We believe that our judgments and
assessments are consistently applied and produce financial information that
fairly presents our results of operations. Our most critical accounting policies
involve our investments in Sponsored REITs and our investments in real property.
These policies affect our:

      o     allocation of purchase prices between various asset categories and
            the related impact on our recognition of rental income and
            depreciation and amortization expense;

      o     assessment of the carrying values and impairments of long lived
            assets;


                                       20
<PAGE>

      o     classification of leases; and

      o     revenue recognition in the syndication of Sponsored REITs.

      Allocation of Purchase Price

      We have historically allocated the purchase prices of properties to land,
buildings and improvements. Each component of purchase price generally has a
different useful life. For properties acquired subsequent to June 1, 2001, the
effective date of Statement of Financial Accounting Standards ("SFAS") No. 141
"Business Combinations," we allocate the value of real estate acquired among
land, buildings, improvements and identified intangible assets and liabilities,
which may consist of the value of above market and below market leases, the
value of in-place leases, and the value of tenant relationships. Purchase price
allocations and the determination of the useful lives are based on management's
estimates. Under some circumstances we may rely upon studies commissioned from
independent real estate appraisal firms in determining the purchase price
allocations.

      Purchase price allocated to land and building and improvements is based on
management's determination of the relative fair values of these assets assuming
the property was vacant. Management determines the fair value of a property
using methods similar to those used by independent appraisers. Purchase price
allocated to above market leases is based on the present value (using an
interest rate which reflects the risks associated with the leases acquired) of
the difference between (i) the contractual amounts to be paid pursuant to the
in-place leases and (ii) our estimate of fair market lease rates for the
corresponding leases, measured over a period equal to the remaining
non-cancelable terms of the respective leases. Purchase price allocated to
in-place leases and tenant relationships is determined as the excess of (i) the
purchase price paid for a property after adjusting existing in-place leases to
market rental rates over (ii) the estimated fair value of the property as if
vacant. This aggregate value is allocated between in-place lease values and
tenant relationships is based on management's evaluation of the specific
characteristics of each tenant's lease; however, the value of tenant
relationships has not been separated from in-place lease value because such
value and its consequence to amortization expense is immaterial for acquisitions
reflected in our financial statements. Factors considered by us in performing
these analyses include (i) an estimate of carrying costs during the expected
lease-up periods, including real estate taxes, insurance and other operating
income and expenses, and (ii) costs to execute similar leases in current market
conditions, such as leasing commissions, legal and other related costs. If
future acquisitions result in our allocating material amounts to the value of
tenant relationships, those amounts would be separately allocated and amortized
over the estimated life of the relationships.

      Depreciation Expense

      We compute depreciation expense using the straight-line method over
estimated useful lives of up to 40 years for buildings and improvements, and up
to 15 years for personal property. The allocated cost of land is not
depreciated. The capitalized above-market lease values (included in acquired
real estate leases in our consolidated balance sheets) are amortized as a
reduction to rental income over the remaining non-cancelable terms of the
respective leases. We do not have any capitalized below market leases. The value
of in-place leases, exclusive of the value of above-market and below-market
in-place leases, is amortized over the remaining non-cancelable periods of the
respective leases. If a lease is terminated prior to its stated expiration, all
unamortized amounts relating to that lease are written off. Inappropriate
allocation of acquisition costs, or incorrect estimates of useful lives, could
result in depreciation and amortization expenses which do not appropriately
reflect the allocation of our capital expenditures over future periods, as is
required by generally accepted accounting principles.

      Impairment

      We periodically evaluate our real estate properties for impairment
indicators. These indicators may include declining tenant occupancy, weak or
declining tenant profitability, cash flow or liquidity, our decision to dispose
of an asset before the end of its estimated useful life or legislative, economic
or market changes that permanently reduce the value of our investments. If
indicators of impairment are present, we evaluate the carrying value of the
property by comparing it to its expected future undiscounted cash flows. If the
sum of these expected future cash flows is less than the carrying value, we
reduce the net carrying value of the property to the present value of these
expected future cash flows. This analysis requires us to judge whether
indicators of impairment exist and to estimate likely future cash flows. If we


                                       21
<PAGE>

misjudge or estimate incorrectly or if future tenant profitability, market or
industry factors differ from our expectations, we may record an impairment
charge which is inappropriate or fail to record a charge when we should have
done so, or the amount of such charges may be inaccurate.

      Lease Classification

      Some of our real estate properties are leased on a triple net basis,
pursuant to non-cancelable, fixed term, operating leases. Each time we enter a
new lease or materially modify an existing lease we evaluate whether it is
appropriately classified as a capital lease or as an operating lease. The
classification of a lease as capital or operating affects the carrying value of
a property, as well as our recognition of rental payments as revenue. These
evaluations require us to make estimates of, among other things, the remaining
useful life and market value of a property, discount rates and future cash
flows. Incorrect assumptions or estimates may result in misclassification of our
leases.

      Revenue Recognition

      We earn syndication and transaction fees in connection with the
syndication of Sponsored REITs. This revenue is recognized pursuant to the
provisions of SFAS No. 66 "Accounting for Sales of Real Estate," and Statement
of Position 92-1 "Accounting for Real Estate Syndication Income." Revenue is
recognized provided the criteria for sale accounting in SFAS No. 66 are met.
Accordingly, we recognize syndication fees related to commissions when shares of
the Sponsored REIT are sold and the investor's funds have been transferred from
escrow into our account. We recognize transaction fees related to loan
commitment and acquisition fees upon an investor closing and the subsequent
payment of the Sponsored REIT's loan and fees payable to the Company. Other
transaction fees are recognized upon the final syndication of the Sponsored
REIT.

      Ownership of Stock in a Sponsored REIT

      Common stock investments in Sponsored REITs are consolidated while the
entity is controlled by the Company. Following the commencement of syndication
the Company exercises influence over, but does not control these entities and
investments are accounted for using the equity method. Once under the equity
method of accounting, our cost basis is adjusted by its share of the Sponsored
REITs' earnings, if any, prior to completion of the syndication. Equity in
losses of Sponsored REITs is not recognized to the extent that the investment
balance would become negative. Distributions received are recognized as income
once the investment balance is reduced to zero, unless there is an asset held
for syndication from the Sponsored REIT entity. Equity in losses or
distributions received in excess of investment is recorded as an adjustment to
the carrying value of the asset held for syndication.

      We recognize our share of the operations during the period we consolidate
and when the equity method is appropriate, as opposed to classifying the
Sponsored REITs as discontinued operations, because we earn an ongoing asset
and/or property management fee from Sponsored REITs. These ongoing fees, in
addition to the influence that we exercise over the Sponsored REIT, constitute a
continuing involvement between the Company and the Sponsored REIT and preclude
treatment as discontinued operations.

      These policies involve significant judgments made based upon our
experience, including judgments about current valuations, ultimate realizable
value, estimated useful lives, salvage or residual value, the ability of our
tenants to perform their obligations to us, current and future economic
conditions and competitive factors in the markets in which our properties are
located. Recent declines in our occupancy percentages at some of our properties
reflect current economic conditions and competition. Competition, economic
conditions and other factors may cause additional occupancy declines in the
future. In the future we may need to revise our carrying value assessments to
incorporate information which is not now known and such revisions could increase
or decrease our depreciation expense related to properties we own, result in the
classification of our leases as other than operating leases or decrease the
carrying values of our assets.


                                       22
<PAGE>

Recent Accounting Standards

      In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities. In December 2003, the FASB revised
FIN 46 with certain modifications and clarifications. The objective of this
interpretation is to provide guidance on how to identify a variable interest
entity ("VIE") and determine when the assets, liabilities, non-controlling
interests, and results of operations of a VIE need to be included in a company's
consolidated financial statements. A VIE exists when either the total equity
investment at risk is not sufficient to permit the entity to finance its
activities by itself, or the equity investors lack one of three characteristics
associated with owning a controlling financial interest. Application of this
guidance was effective for interests in certain VIEs commonly referred to as
special-purpose entities (SPEs) as of December 31, 2003. The provisions of this
interpretation became effective upon issuance. The adoption of this standard had
no impact on the Company's financial position, results of operations or cash
flow.

      In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity". This
statement was effective for financial instruments entered into or modified after
May 31, 2003; otherwise effective at the beginning of the first interim period
beginning after June 15, 2003, except for mandatorily redeemable financial
instruments of nonpublic entities which are subject to the provisions of this
Statement for the first fiscal period beginning after December 15, 2003. SFAS
No. 149 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. The
adoption of this standard had no impact on our financial position, results of
operations or cash flows.

Results of Operations

      We operate in two business segments: Real Estate Operations and Investment
Banking/Investment Services. We consider contribution from each segment in
evaluating performance. Contribution includes revenue from each segment, less
related expenses such as rental property operating expenses, depreciation and
amortization, commissions, selling, general and administrative expenses and
interest income and expense.


                                       23
<PAGE>

The following table shows each segment for the years ended December 31, 2004 and
2003.

<TABLE>
<CAPTION>
(in thousands)

Real Estate Operations                                         2004          2003        Change
                                                               ----          ----        ------
<S>                                                        <C>           <C>           <C>
Revenues:
  Rental income                                            $ 71,782      $ 50,341      $ 21,441
  Transaction fees                                           11,976        13,328        (1,352)
  Management fees and interest income from loans                581           961          (380)
  Other                                                          17            20            (3)
                                                           -------------------------------------
                                                             84,356        64,650        19,706
                                                           -------------------------------------
Expenses:
  Real estate operating expenses                             14,809        10,533         4,276
  Real estate taxes and insurance                             9,479         6,329         3,150
  Depreciation and amortization                              13,445         9,342         4,103
  Selling, general and administrative                         1,508         1,064           444
  Interest                                                    1,527         1,036           491
                                                           -------------------------------------
                                                             40,768        28,304        12,464
                                                           -------------------------------------
Other items:
  Interest income                                               822           293           529
  Equity in earnings of non-consolidated REIT's                 620           753          (133)
                                                           -------------------------------------
                                                              1,442         1,046           396
                                                           -------------------------------------

Contribution from real estate                                45,030        37,392         7,638
                                                           -------------------------------------

Investment Banking/Investment Services
Revenues:
  Syndication fees                                           13,579        14,631        (1,052)
  Transaction fees                                            2,117         1,417           700
  Other                                                          --             2            (2)
                                                           -------------------------------------
                                                             15,696        16,050          (354)
                                                           -------------------------------------
Expenses:
  Commissions                                                 6,959         7,291          (332)
  Depreciation and amortization                                 147            56            91
  Selling, general and administrative                         4,178         4,647          (469)
                                                           -------------------------------------
                                                             11,284        11,994          (710)
                                                           -------------------------------------
Other items:
  Interest income                                                46            75           (29)
  Taxes on income                                            (1,725)       (1,700)          (25)
                                                           -------------------------------------
                                                             (1,679)       (1,625)          (54)
                                                           -------------------------------------

Contribution from investment banking                          2,733         2,431           302
                                                           -------------------------------------

  Income from continuing operations                          47,763        39,823         7,940
  Discontinued operations, less applicable income tax:
    Income from discontinued operations                          --           195          (195)
    Gain on sale of properties                                   --         6,362        (6,362)
                                                           -------------------------------------
  Net income                                               $ 47,763      $ 46,380      $  1,383
                                                           =====================================
</TABLE>


                                       24
<PAGE>

Comparison of the year ended December 31, 2004 to the year ended
December 31, 2003

      The real estate segment included 28 owned properties for the full year of
2004 compared to 2003. On June 1, 2003, we completed the acquisition by merger
of 13 Sponsored REITs, which added 13 properties to our portfolio. Increases in
rental revenues and expenses are primarily a result of those mergers.

      Our investment banking/investment services segment syndicated eight
Sponsored REITs with total gross proceeds of $208.2 million in 2004 compared to
five Sponsored REITs syndicated in 2003 with total gross proceeds of $231.8
million, a decrease of $23.6 million or 10.2%. This decrease was attributable to
the increased difficulty in finding properties that met our investment criteria
in 2004, as compared to 2003, as discussed above in "Trends and Uncertainties -
Investment Banking/Investment Services." Revenues and expenses for investment
banking/investment services are directly related to the gross proceeds of these
syndications.

      Total revenues increased $19.3 million, or 24%, to $100.1 million for the
year ended December 31, 2004, as compared to $80.7 million for the year ended
December 31, 2003. Total expenses were $52.1 million for the year ended December
31, 2004; an increase of $11.8 million, or 29%, compared to the year ended
December 31, 2003. Each segment is discussed below.

      Real Estate Operations

      Contribution from the real estate segment was $45.0 million for the year
ended December 31, 2004; an increase of $7.6 million, or 20.4%, compared to the
year ended December 31, 2003. The increase is primarily attributable to:

      o     An increase to revenues of $21.4 million from the benefit of having
            28 properties in the portfolio for 2004 compared to 2003. On June 1,
            2003 we completed the acquisition by merger of 13 Sponsored REITs,
            which added 13 properties to the 15 properties in our portfolio at
            that time. The benefit of owning the merged properties for the full
            year was partially offset by a slight decrease in occupancy in the
            portfolio prior to the merger; and decreases in transaction (loan
            commitment) fees of $1.3 million and other revenues of $0.4 million,
            which were principally caused by a decrease in gross syndication
            proceeds compared to 2003.

      o     An increase in rental property operating expenses, real estate
            taxes, insurance and depreciation of $11.5 million, which primarily
            relates to the increase in the number of properties in our portfolio
            from the mergers.

      o     An increase in selling, general and administrative costs of $0.4
            million related primarily to professional fees related to compliance
            with Sarbanes-Oxley and increased audit fees; and additional
            infrastructure costs to monitor and manage a larger portfolio of
            REITs.

      o     A decrease in equity from non-consolidated REITs, which was
            principally caused by the impact of EITF 98-13, where equity in
            losses or dividends received in excess of investment in
            non-consolidated REITs of $0.2 million were deferred from revenue
            recognition and recorded as a reduction in the carrying value of
            assets held for syndication from a Sponsored REIT.

      Investment Banking/Investment Services

      Contribution of the investment banking and services segment was $2.7
million for the year ended December 31, 2004; a increase of $0.3 million, or
12.4%, compared to the year ended December 31, 2003. The increase was primarily
attributable to:

      o     A decrease in syndication fee revenues of $1.0 million, which was
            primarily attributable to the increased difficulty in finding
            properties that met our investment criteria in 2004, as compared to
            2003, as discussed above in "Trends and Uncertainties - Investment
            Banking/Investment Services". This decrease was partially offset by
            an increase in transaction fee revenue of $0.7 million. The increase
            primarily related to transaction fee revenue recognized from a 2003
            syndication, which closed in early 2004.


                                       25
<PAGE>

      o     A decrease in commission expense of $0.3 million, which relates to
            the decrease in gross syndication proceeds compared to 2003.

      o     An increase in depreciation expense of $0.1 million related to
            capital expenditures in our Wakefield headquarters.

      o     A decrease to selling, general and administrative costs of $0.5
            million related primarily to a reduction in bonus compensation.

      o     Interest income decreased $29,000 to $46,000 for the year ended
            December 31, 2004 compared to 2003, primarily as a result of
            decreases in general interest rates and lower gross syndication
            proceeds in 2004 compared to 2003.

      o     Taxes on income increased by $25,000 to $1.7 million for the year
            ended December 31, 2004 at an effective tax rate of 38.7%, compared
            to 2003, during which our effective tax rate was 41.2%. The
            effective rate in 2004 was lower as a result of an adjustment to the
            statutory rate to better reflect the benefit of lower tax rates at
            lower levels of taxable income. We expect an effective tax rate of
            approximately 40.3% for our taxable REIT subsidiary in the future.

Combined

Contribution from both segments for the year ended December 31, 2004 combined
increased $8.0 million to $47.8 million compared to $39.8 million for the
reasons discussed above.

Discontinued Operations

During 2004 no properties were sold, while in 2003 two properties were. For the
year ended December 31, 2003, we reported income from discontinued operations of
$0.2 million and a gain on sale of properties of $6.4 million.

Net Income

The resulting net income for the year ending December 31, 2004 was $47.8 million
compared to net income of $46.4 million for the year ended December 31, 2003.


                                       26
<PAGE>

The following table shows each segment for the years ended December 31, 2003 and
2002.

<TABLE>
<CAPTION>
(in thousands)

Real Estate Operations                                      2003          2002        Change
                                                            ----          ----        ------
<S>                                                     <C>           <C>           <C>
Revenues:
  Rental income                                         $ 50,341      $ 26,166      $ 24,175
  Transaction fees                                        13,328        12,081         1,247
  Management fees and interest income from loans             961           676           285
  Other                                                       20             8            12
                                                        ------------------------------------
                                                          64,650        38,931        25,719
                                                        ------------------------------------
Expenses:
  Real estate operating expenses                          10,533         5,673         4,860
  Real estate taxes and insurance                          6,329         2,794         3,535
  Depreciation and amortization                            9,342         4,504         4,838
  Selling, general and administrative                      1,064         1,111           (47)
  Interest                                                 1,036           894           142
                                                        ------------------------------------
                                                          28,304        14,976        13,328
                                                        ------------------------------------
Other items:
  Interest income                                            292           223            69
  Equity in earnings of non-consolidated REIT's              754            38           716
                                                        ------------------------------------
                                                           1,046           261           785
                                                        ------------------------------------

Contribution from real estate                             37,392        24,216        13,176
                                                        ------------------------------------

Investment Banking/Investment Services
Revenues:
  Syndication fees                                        14,631        13,720           911
  Transaction fees                                         1,417         1,010           407
  Other                                                        2             1             1
                                                        ------------------------------------
                                                          16,050        14,731         1,319
                                                        ------------------------------------
Expenses:
  Commissions                                              7,291         6,824           467
  Depreciation and amortization                               56           169          (113)
  Selling, general and administrative                      4,647         4,587            60
                                                        ------------------------------------
                                                          11,994        11,580           414
                                                        ------------------------------------
Other items:
  Interest income                                             75            73             2
  Taxes on income                                         (1,700)         (699)       (1,001)
                                                        ------------------------------------
                                                          (1,625)         (626)         (999)
                                                        ------------------------------------

Contribution from investment banking                       2,431         2,525           (94)
                                                        ------------------------------------

  Income from continuing operations                       39,823        26,741        13,082
  Discontinued operations, less applicable income tax:
  Income from discontinued operations                        195           571          (376)
  Gain on sale of properties                               6,362            --         6,362
                                                       -------------------------------------
  Net income                                            $ 46,380      $ 27,312      $ 19,068
                                                       =====================================
</TABLE>


                                       27
<PAGE>

Comparison of the year ended December 31, 2003 to the year ended
December 31, 2002

      On June 1, 2003, we completed the acquisition by merger of 13 Sponsored
REITs, which more than doubled the size of our real estate operations. Increases
in rental revenues and expenses are primarily a result of these mergers. We also
sold two properties in 2003. The results of operations for these two properties
are shown as discontinued operations. We owned 15 properties for a full year
and, as a result of the mergers, 13 properties for seven months in 2003. The
results of operations for 2002 have been adjusted to reflect the sale of two
properties in 2003.

      Our investment banking/investment services segment syndicated five
Sponsored REITs with total gross proceeds of $231.8 million in 2003; an increase
of $21.7 million compared to six Sponsored REITs syndicated in 2002 with total
gross proceeds of $210.1 million. Revenues and expenses for investment
banking/investment services are directly related to the gross proceeds of these
syndications.

      Total revenues increased $27.0 million, or 50%, to $80.7 million for the
year ended December 31, 2003, as compared to $53.7 million for the year ended
December 31, 2002. Total expenses were $40.3 million for the year ended December
31, 2003; an increase of $13.7 million, or 51.7%, compared to the year ended
December 31, 2002. Each segment is discussed below.

      Real Estate Operations

      Contribution from the real estate segment was $37.4 million for the year
ended December 31, 2003; an increase of $13.2 million, or 54.4%, compared to the
year ended December 31, 2002. The increase is primarily attributable to:

      o     An increase in rental revenue of $24.2 million consisting
            principally of a $24.9 million increase from having 28 properties in
            the portfolio for seven months of 2003 which were not in the
            portfolio in 2002; rent increases in the remaining properties of
            $0.5 million; and a decrease due to vacancies at four properties
            aggregating $1.2 million.

      o     An increase in transaction (loan commitment) fees of $1.2 million
            relating to an increase in gross syndication proceeds, and an
            increase in other revenues of $0.3 million, resulting from
            additional Sponsored REITs managed by our property management
            subsidiary and due to new syndications.

      o     An increase to rental property operating expenses, real estate
            taxes, insurance and depreciation of $13.2 million, which relates to
            the increase in the number of properties in our portfolio from the
            mergers in 2003.

      o     Increases to equity in income from non-consolidated REIT's of $0.7
            million, primarily as a result of distributions paid in excess of
            investments for syndicated REIT's completed during 2003 compared to
            2002.

      o     There were no significant changes to selling, general and
            administrative expenses, interest expense and interest income
            related to real estate operations.

      Investment Banking/Investment Services

      Contribution of the investment banking and services segment was $2.4
million for the year ended December 31, 2003; a decrease of $0.1 million, or
3.7%, compared to the year ended December 31, 2002. The decrease was primarily
attributable to:

      o     An increase in syndication and transaction fee revenues of $1.3
            million, which was the result of an increase in gross syndication
            proceeds compared to 2002.


                                       28
<PAGE>

      o     An increase in commission expense of $0.4 million, which relates to
            the increase in gross syndication proceeds compared to 2002.

      o     There were no significant changes to selling, general and
            administrative expenses, interest expense and interest income
            related to Investment Banking/Investment Services.

      o     Taxes on income were $1.7 million for the year ended December 31,
            2003, a net increase of $1.0 million or 140% compared to the year
            ended December 31, 2002. The tax rate for 2003 on the taxable REIT
            subsidiary was approximately 41% compared to the tax rate for 2002
            of approximately 22%. The 2002 rate included certain benefits that
            will not occur in the future.

Combined

Contribution from both segments combined was $39.8 million compared to $26.7
million, an increase of $13.1 million for the reasons discussed above.

Discontinued Operations

Discontinued operations in 2003 and 2002 related to the two properties that were
sold in 2003. For the year ended December 31, 2003, we reported income from
discontinued operations of $0.2 million, representing income from the beginning
of the year to the date of sale of each property, compared to $0.6 million,
representing income for the full year ended December 31, 2002 for each property.
For the year ended December 31, 2003 we reported the gain on sale of properties
of $6.4 million.

Net Income

The resulting net income for the year ending December 31, 2003 was $46.4 million
compared to net income of $27.3 million for the year ended December 31, 2002.

Liquidity and Capital Resources

      Cash and cash equivalents were $52.8 million and $58.8 million at December
31, 2004 and December 31, 2003, respectively. This decrease of $6.0 million is
attributable to $61.7 million provided by operating activities, less $61.4
million used for investing activities, less $6.3 million used for financing
activities. Management believes that existing cash, cash anticipated to be
generated internally by operations, cash anticipated to be generated by the sale
of preferred stock in future Sponsored REITs and our line of credit will be
sufficient to meet working capital requirements and anticipated capital
expenditures for at least the next 12 months.

      Operating Activities

      The cash provided by our operating activities of $61.7 million is
primarily attributable to net income of $47.8 million, plus the add-back of
$13.7 million of non-cash activity and an insignificant increase in operating
assets of $0.2 million.

      Investing Activities

      Our cash used by investing activities of $61.4 million is attributable to
$1.5 million to acquire or improve real estate assets; $0.1 million for office
space and computers at our headquarters; $4.3 million of investments in
non-consolidated REIT's and an additional $55.5 million invested in assets held
for syndication.

      Financing Activities

      Our cash used by financing activities of $6.3 million is attributable to
$61.5 million of distributions to shareholders, repayment of $4.1 million of the
loan outstanding at December 31, 2003, and $0.1 million used to purchase


                                       29
<PAGE>

treasury shares of our Company's shares. These uses were offset by borrowing of
$59.4 million used to acquire assets held for syndication at December 31, 2004.

      Line of Credit

      We have a revolving line of credit agreement with a group of banks
providing for borrowings of up to $125 million. Borrowings under the line of
credit bear interest at either the bank's base rate (5.25% at December 31, 2004)
or at LIBOR plus 125 basis points (3.67% at December 31, 2004), as defined.
Borrowings outstanding under the line of credit at December 31, 2004 were $59.4
million at the bank's base rate. We are in compliance with all bank covenants
required by this line of credit. The maturity date of the line of credit is
August 18, 2005, and we intend to evaluate extension, renewal or replacement of
the facility.

      Rental Income Commitments

      Our commercial real estate 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 2013. Approximate
future minimum rental income from non-cancelable operating leases as of December
31, 2004 is:

                                      Amount
                   Date           (in thousands)
                   ----           -------------

                   2005             $ 46,401

                   2006               39,950

                   2007               32,381

                   2008               29,797

                   2009               24,132

                 2010-2013            17,070

Contractual Obligations

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Contractual                                        Payment due by period
Obligations                                            (in thousands)
---------------------------------------------------------------------------------------------------------
                      Total         2005         2006       2007       2008        2009      After 2009
---------------------------------------------------------------------------------------------------------
<S>                  <C>           <C>           <C>        <C>        <C>        <C>         <C>
Line of Credit       $59,439       $59,439       $ --       $ --       $ --       $  --       $  --
---------------------------------------------------------------------------------------------------------
Operating Leases       1,086           295        302        308        181          --          --
---------------------------------------------------------------------------------------------------------
Total                $60,525       $59,734       $302       $308       $181       $  --       $  --
---------------------------------------------------------------------------------------------------------
</TABLE>

      The operating leases in the table above consist of our lease of corporate
office space, which was amended in 2003. The lease includes a base annual rent
and additional rent for our share of taxes and operating costs.

Off-Balance Sheet Arrangements

Investments in Sponsored REITs

As part of our business model we organize single-purpose entities that own real
estate, purchases of which are financed through the private placement of equity
in those entities, typically through syndication. We call these entities
Sponsored REITs, and they are operated in a manner intended to qualify as real
estate investment trusts. We earn fees related to the sale of preferred stock in
the Sponsored REITs in these syndications. The Sponsored REITs issue both common
stock and preferred stock. The common stock is owned solely by FSP Corp. and,
except for two non-management directors of FSP Corp., who from time to time
invest in Sponsored REITs, the preferred stock is owned by unaffiliated
investors. Following consummation of the offerings, the preferred stockholders
in each of the Sponsored REITs are entitled to 100% of the Sponsored REIT's cash
distributions. Subsequent to the completion of the offering of preferred shares,


                                       30
<PAGE>

the Company does not share in any of a Sponsored REIT's earnings, or any related
dividend, and the common stock ownership interests have virtually no economic
benefit or risk. Prior to the completion of the offering of preferred shares,
the Company shares in a Sponsored REIT's earnings (and related dividends) to the
extent of its ownership interest in the Sponsored REIT.

As a common stockholder, upon completion of the syndication, we have no rights
to the Sponsored REIT's earnings or any related cash distributions. However,
upon liquidation of a Sponsored REIT, we are entitled to our percentage interest
in any proceeds remaining after the preferred stockholders have recovered their
investment. Our 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 that Sponsored REIT's board of directors.

Common stock investments in Sponsored REITs are consolidated while the entity is
controlled by the Company. Following the commencement of syndication the Company
exercises influence over, but does not control these entities and investments
are accounted for using the equity method. Under the equity method of
accounting, the Company's cost basis is adjusted by its share of the Sponsored
REITs' earnings, if any, prior to completion of the syndication. Equity in
losses of Sponsored REITs is not recognized to the extent that the investment
balance would become negative and distributions received are recognized as
income once the investment balance is reduced to zero, unless there are assets
held for syndication from the Sponsored REIT entity. Equity in losses or
distributions received in excess of investment is recorded as an adjustment to
the carrying value of the assets held for syndication.

At December 31, 2004, we held an interest in 15 Sponsored REITs, of which 13
were fully syndicated and we no longer share economic benefit or risk. The value
of the two entities which were not fully syndicated is approximately $59.2
million and is shown on the consolidated balance sheets as assets held for
syndication. At December 31, 2003 we held an interest in eight Sponsored REITs,
of which seven were fully syndicated. The value of the entity which was not
fully syndicated was approximately $4.1 million and is shown on the consolidated
balance sheets as assets held for syndication. At December 31, 2002 we held an
interest in 16 Sponsored REITs, all of which were fully syndicated.

The table below shows the Company's share of income and expenses from Sponsored
REITs prior to consolidation. Management fees of $102,000, $5,000 and $14,000
for the years ended December 31, 2004, 2003 and 2002, respectively; and interest
expenses are eliminated in consolidation.

                                                       Year Ended December 31,
(in thousands)                                       2004       2003       2002
                                                     ----       ----       ----

Operating Data:
Rental revenues                                     $3,772      $552      $1,357
Operating and maintenance expenses                   1,439       177         410
Depreciation and amortization                          584       133         233
Interest expense                                       922       163         243
Interest income                                         25        --          10
                                                    ----------------------------
                                                    $  852      $ 79      $  481
                                                    ============================

During the years ended December 31, 2004, 2003 and 2002, the Company recorded
equity in earnings of Sponsored REITs following the commencement of syndication
of $390,000, $753,000 and $38,000, respectively

                                       31
<PAGE>

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

      We were not a party to any derivative financial instruments at or during
the year ended December 31, 2004.

      We borrow from time-to-time on our line of credit. These borrowings bear
interest at the bank's base rate (5.25% at December 31, 2004) or at LIBOR plus
125 basis points (3.67% at December 31, 2004), as elected by us when requesting
funds as defined. As of December 31, 2004, $59,439,000 was outstanding under the
line of credit at the bank's base rate. We have used the funds drawn on our 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
us under our line of credit. We therefore believe that we have mitigated our
interest rate risk with respect to our borrowings.

Item 8. Financial Statements and Supplementary Data.

      The information required by this item is included elsewhere herein.
Reference is made to the Index to Consolidated Financial Statements in Item 15
of Part IV.

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

      Not applicable.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

      Our management, with the participation of FSP Corp.'s President and Chief
Executive Officer and FSP Corp.'s Vice President and Chief Operating Officer
(Principal Financial Officer), evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(d) under the
Exchange Act) as of December 31, 2004. Based on this evaluation, FSP Corp.'s
President and Chief Executive Officer and FSP Corp.'s Vice President and Chief
Operating Officer (Principal Financial Officer) concluded that, as of December
31, 2004, our disclosure controls and procedures were (1) designed to ensure
that material information relating to us, including our consolidated
subsidiaries, is made known to FSP Corp.'s President and Chief Executive Officer
and FSP Corp.'s Vice President and Chief Operating Officer (Principal Financial
Officer) by others within these entities, particularly during the period in
which this report was being prepared and (2) effective, in that they provide
reasonable assurance that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms.

Management's Annual Report on Internal Control Over Financial Reporting

      The management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting. Internal control
over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated
under the Securities Exchange Act of 1934 as a process designed by, or under the
supervision of, the Company's principal executive and principal financial
officers and effected by the Company's board of directors, management and other
personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:

o     Pertain to the maintenance of records that in reasonable detail accurately
      and fairly reflect the transactions and dispositions of the assets of the
      Company;

o     Provide reasonable assurance that transactions are recorded as necessary
      to permit preparation of financial statements in accordance with generally
      accepted accounting principles, and that receipts and expenditures of the
      Company are being made only in accordance with authorizations of
      management and directors of the Company; and


                                       32
<PAGE>

o     Provide reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of the Company's assets that
      could have a material effect on the financial statements.

      Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

      The Company's management assessed the effectiveness of the Company's
internal control over financial reporting as of December 31, 2004. In making
this assessment, the Company's management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control-Integrated Framework.

      Based on our assessment, management concluded that, as of December 31,
2004, the Company's internal control over financial reporting is effective based
on those criteria.

      Management's assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2004 has been audited by Ernst & Young
LLP, an independent registered public accounting firm, as stated in their report
which is included elsewhere herein.

Changes in Internal Control Over Financial Reporting

      No change to our internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the
quarter ended December 31, 2004 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

Item 9B.  Other Information

On March 10, 2005, we amended our merger agreement with our wholly-owned
subsidiaries and four Target REITs to extend the termination date from March 31,
2005 to May 15, 2005. The amendment is attached hereto as Exhibit 2.2.


                                       33
<PAGE>

PART III

      Certain information required by Part III of this Form 10-K is omitted
because we will file a definitive proxy statement pursuant to Regulation 14A not
later than 120 days after the end of the fiscal year covered by this Form 10-K,
and certain information to be included therein is incorporated herein by
reference.

Item 10. Directors and Executive Officers of the Registrant.

      The response to this item is contained in part under the caption "Item 4A.
Directors and Executive Officers of the Registrant" in Part I hereof and the
remainder is contained in the Proxy Statement and is incorporated herein by
reference.

Item 11. Executive Compensation.

      The response to this item is contained in the Proxy Statement under the
caption "Executive Compensation" and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.

      The response to this item is contained in the Proxy Statement under the
caption "Beneficial Ownership of Voting Stock" and under the caption "Securities
Authorized for Issuance Under Equity Compensation Plans" and is incorporated
herein by reference.

Item 13. Certain Relationships and Related Transactions.

      The response to this item is contained in the Proxy Statement under the
caption "Certain Relationships and Related Transactions" and is incorporated
herein by reference.

Item 14. Principal Accountant Fees and Services.

      The response to this item is contained in the Proxy Statement under the
caption "Auditor Fees and Other Matters" and is incorporated herein by
reference.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

      (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 Schedule:

            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.


                                       34
<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 10, 2005 by the undersigned, thereunto duly authorized.

                                FRANKLIN STREET PROPERTIES CORP.


                                By: /s/ George J. Carter
                                    --------------------------------------
                                    George J. Carter
                                    President and 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              President, Chief Executive      March 10, 2005
---------------------------       Officer and Director
George J. Carter                  (Principal Executive Officer)

/s/ Barbara J. Fournier           Vice President, Chief           March 10, 2005
---------------------------       Operating Officer, Treasurer,
Barbara J. Fournier               Secretary and Director
                                  (Principal Financial Officer)

/s/ John G. Demeritt
---------------------------       Senior Vice President,          March 10, 2005
John G. Demeritt                  Finance
                                  (Principal Accounting Officer)

/s/ Richard R. Norris             Director                        March 10, 2005
---------------------------
Richard R. Norris

/s/ Janet P. Notopoulos           Director                        March 10, 2005
---------------------------
Janet P. Notopoulos

/s/ Barry Silverstein             Director                        March 10, 2005
---------------------------
Barry Silverstein

/s/ Dennis J. McGillicuddy        Director                        March 10, 2005
---------------------------
Dennis J. McGillicuddy

/s/ John Burke                    Director                        March 10, 2005
---------------------------
John Burke


                                       35
<PAGE>

                                  EXHIBIT INDEX

Exhibit No.       Description
-----------       -----------
   2.1 (1)        Agreement and Plan of Merger by and among FSP Corp. and four
                  Target REITs (as defined therein), dated as of August 13,
                  2004 (the "Merger Agreement").

   2.2*           Amendment No. 1 to the Merger Agreement, dated March 10, 2005.

   3.1 (2)        Articles of Organization.

   3.2 (3)        By-laws.

  10.1+ (4)       2002 Stock Incentive Plan of FSP Corp.

  10.2 (5)        Amended and Restated Loan Agreement dated as of August 18,
                  2003 by and among Citizens Bank of Massachusetts, Fleet
                  National Bank, FSP Corp. and certain affiliates of FSP Corp.

  10.3*+          Summary of executive compensation of named executive officers.

  10.4*+          Summary of compensation paid to non-employee directors.

  14.1 (6)        Code of Conduct and Ethics

  21.1*           Subsidiaries of the Registrant.

  23.1*           Consent of Ernst & Young LLP.

  23.2*           Consent of PricewaterhouseCoopers LLP

  31.1*           Certification of FSP Corp.'s President and Chief Executive
                  Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.

  31.2*           Certification of FSP Corp.'s Vice President, Chief
                  Operating Officer (equivalent of Chief Financial Officer),
                  Treasurer and Secretary pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.

  32.1*           Certification of FSP Corp's President and Chief Executive
                  Officer pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

  32.2*           Certification of FSP Corp's Vice President, Chief Operating
                  Officer (equivalent of Chief Financial Officer), Treasurer and
                  Secretary pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

----------
(1)   Incorporated by reference to FSP Corp.'s Current Report on Form 8-K, filed
      on August 13, 2004.
(2)   Incorporated by reference to Appendix B of FSP Partnership's Definitive
      Proxy Statement on Schedule 14A, filed on December 18, 2001.
(3)   Incorporated by reference to Appendix C of FSP Partnership's Definitive
      Proxy Statement on Schedule 14A, filed on December 18, 2001.
(4)   Incorporated by reference to FSP Corp.'s Annual Report on Form 10-K, filed
      on March 29, 2002.
(5)   Incorporated by reference to FSP Corp.'s Quarterly Report on Form 10-Q,
      filed on November 14, 2003.
(6)   Incorporated by reference to FSP Corp.'s Current Report on Form 8-K, filed
      on August 3, 2004
+     Management contract or compensatory plan or arrangement filed as an
      Exhibit to this Form 10-K pursuant to Items 15(a) and 15(c) of Form 10-K.
*     Filed herewith


                                       36
<PAGE>

                        Franklin Street Properties Corp.
                   Index to Consolidated Financial Statements


Reports of Independent Registered Public Accounting Firms                    F-2

Consolidated Financial Statements:

Consolidated Balance Sheets as of December 31,                               F-5
2004 and 2003

Consolidated Statements of Income for the years ended December 31,           F-7
2004, 2003, and 2002

Consolidated Statements of Stockholders' Equity as of December 31,           F-8
2004, 2003, and 2002

Consolidated Statements of Cash Flows for the years ended December 31,       F-9
2004, 2003 and 2002

Notes to the consolidated financial statements                              F-10

Financial Statement Schedule - Schedule III                                 F-28

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


                                       F-1
<PAGE>

             Report of Independent Registered Public Accounting Firm

To the Board of Directors and
Stockholders of Franklin Street Properties Corp.:

We have audited the accompanying consolidated balance sheets of Franklin Street
Properties Corp. as of December 31, 2004 and 2003, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the two
years in the period ended December 31, 2004. Our audits also included the
financial statement schedule listed in the Index at Item 15(a)(2). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits. The financial statements and
schedule of Franklin Street Properties Corp. for the year ended December 31,
2002, were audited by other auditors whose report dated March 5, 2003, except
for Note 11, as to which the date is March 15, 2004, expressed an unqualified
opinion on those statements and schedule.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 provide a
reasonable basis for our opinion.

In our opinion, the 2004 and 2003 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Franklin Street Properties Corp. at December 31, 2004 and 2003, and the
consolidated results of its operations and its cash flows for each of the two
years in the period ended December 31, 2004, in conformity with U.S. generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

We also have audited, in accordance with standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of Franklin Street
Properties Corp.'s internal control over financial reporting as of December 31,
2004, based upon criteria established in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated March 10, 2005 expressed an unqualified opinion thereon.


                                                           /s/ Ernst & Young LLP

Boston, Massachusetts
March 10, 2005


                                       F-2
<PAGE>

             Report of Independent Registered Public Accounting Firm

To the Board of Directors and
Stockholders of Franklin Street Properties Corp.:

We have audited management's assessment, included in the accompanying
Management's Annual Report on Internal Control Over Financial Reporting, that
Franklin Street Properties Corp. maintained effective internal control over
financial reporting as of December 31, 2004, based on criteria established in
Internal Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). Franklin Street
Properties Corp.'s management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express an
opinion on management's assessment and an opinion on the effectiveness of the
company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, management's assessment that Franklin Street Properties Corp.
maintained effective internal control over financial reporting as of December
31, 2004, is fairly stated, in all material respects, based on the COSO
criteria. Also, in our opinion, Franklin Street Properties Corp. maintained, in
all material respects, effective internal control over financial reporting as of
December 31, 2004, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the 2004 consolidated financial
statements of Franklin Street Properties Corp. and our report dated March 10,
2005 expressed an unqualified opinion thereon.

                                                           /s/ Ernst & Young LLP

Boston, Massachusetts
March 10, 2005


                                       F-3
<PAGE>

                 Report of Independent Registered Public Accounting Firm


To the Board of Directors and
Stockholders of Franklin Street Properties Corp:

In our opinion, the consolidated statements of income, of stockholders' equity
and of cash flows for the year ended December 31, 2002, of Franklin Street
Properties Corp. (the "Company"), present fairly, in all material respects, the
results of operations and cash flows of the Company for the year ended December
31, 2002 in conformity with accounting principles generally accepted in the
United States of America. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). 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, 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 5, 2003, except for Note 11, as to which the date is March 15, 2004


                                       F-4
<PAGE>

                        Franklin Street Properties Corp.
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                               December 31,
                                                                                    ------------------------------
(in thousands, except share and par value amounts)                                    2004                2003
==================================================================================================================
<S>                                                                                 <C>                <C>
Assets:
Real estate assets:
         Land                                                                       $  71,267          $  71,236
         Buildings and improvements                                                   404,830            403,243
         Fixtures and equipment                                                           885                889
------------------------------------------------------------------------------------------------------------------

                                                                                      476,982            475,368

         Less accumulated depreciation                                                 37,227             25,836
------------------------------------------------------------------------------------------------------------------

Real estate assets, net                                                               439,755            449,532

Acquired real estate leases, less accumulated amortization of $3,020
   and $1,539, respectively                                                             6,483              7,964
Investment in non-consolidated REITs                                                    4,270                 --
Assets held for syndication, net                                                       59,246              4,117
Cash and cash equivalents                                                              52,752             58,793
Restricted cash                                                                         1,033                982
Tenant rent receivables, less allowance for doubtful accounts
   of $350 and $155, respectively                                                         769                881
Straight-line rent receivable, less allowance for doubtful accounts
   of $460 and $360, respectively                                                       4,947              4,087
Prepaid expenses                                                                          901                806
Other assets                                                                            1,097                 --
Office computers and furniture, net of accumulated
   depreciation of $597 and $473, respectively                                            374                398
Deferred leasing commissions, net of accumulated amortization
   of $873, and $586, respectively                                                      1,484                969
------------------------------------------------------------------------------------------------------------------

         Total assets                                                               $ 573,111          $ 528,529
==================================================================================================================
</TABLE>

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


                                       F-5
<PAGE>

                        Franklin Street Properties Corp.
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                                December 31,
                                                                                      --------------------------------
(in thousands, except share and par value amounts)                                        2004                2003
======================================================================================================================
<S>                                                                                   <C>                 <C>
Liabilities and Stockholders' Equity:

Liabilities:
   Bank note payable                                                                  $  59,439           $   4,117
   Accounts payable and accrued expenses                                                  8,846               5,030
   Accrued compensation                                                                     705               1,545
   Tenant security deposits                                                               1,033                 982
----------------------------------------------------------------------------------------------------------------------

         Total liabilities                                                               70,023              11,674
----------------------------------------------------------------------------------------------------------------------

Commitments and contingencies

Stockholders' Equity:
   Preferred stock, $.0001 par value, 20,000,000 shares
         authorized, none issued or outstanding                                              --                  --
   Common stock, $.0001 par value, 180,000,000 shares authorized,
         49,630,338 and 49,630,338 shares issued and outstanding, respectively                5                   5
   Additional paid-in capital                                                           512,813             512,797
   Treasury stock, 575 shares at cost                                                       (10)                 --
   Earnings (distributions) in excess of accumulated earnings/distributions              (9,720)              3,647
   Accumulated undistributed net realized gain on sale of properties                         --                 406
----------------------------------------------------------------------------------------------------------------------

       Total stockholders' equity                                                       503,088             516,855
----------------------------------------------------------------------------------------------------------------------

       Total liabilities and stockholders' equity                                     $ 573,111           $ 528,529
======================================================================================================================
</TABLE>

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


                                       F-6
<PAGE>

                        Franklin Street Properties Corp.
                        Consolidated Statements of Income

<TABLE>
<CAPTION>
                                                                                   For the Year Ended
                                                                                      December 31,
                                                                     -------------------------------------------
(in thousands, except per share amounts)                                  2004            2003            2002
================================================================================================================
<S>                                                                   <C>             <C>             <C>
Revenue:
   Rental                                                             $ 71,782        $ 50,341        $ 26,166
   Related party revenue:
     Syndication fees                                                   13,579          14,631          13,720
     Transaction fees                                                   14,093          14,745          13,091
     Management fees and interest income from loans                        581             961             676
   Other                                                                    17              22               9
----------------------------------------------------------------------------------------------------------------

         Total revenue                                                 100,052          80,700          53,662
----------------------------------------------------------------------------------------------------------------

Expenses:
     Real estate operating expenses                                     14,809          10,532           5,673
     Real estate taxes and insurance                                     9,479           6,329           2,794
     Depreciation and amortization                                      13,592           9,398           4,673
     Selling, general and administrative                                 5,686           5,711           5,698
     Commissions                                                         6,959           7,291           6,824
     Interest                                                            1,527           1,036             894
----------------------------------------------------------------------------------------------------------------

         Total expenses                                                 52,052          40,297          26,556
----------------------------------------------------------------------------------------------------------------

     Income before interest income, equity in earnings in non-
        consolidated REIT's and taxes on income                         48,000          40,403          27,106
     Interest income                                                       868             367             296
     Equity in earnings in non-consolidated REITs                          620             753              38
----------------------------------------------------------------------------------------------------------------

     Income before taxes on income                                      49,488          41,523          27,440
     Taxes on income                                                     1,725           1,700             699
----------------------------------------------------------------------------------------------------------------

     Income from continuing operations                                  47,763          39,823          26,741
     Income from discontinued operations                                    --             195             571
----------------------------------------------------------------------------------------------------------------

     Income before gain on sale of properties, less
        applicable income tax                                           47,763          40,018          27,312
     Gain on sale of properties, less applicable income tax                 --           6,362              --
----------------------------------------------------------------------------------------------------------------

     Net income                                                       $ 47,763        $ 46,380        $ 27,312
================================================================================================================

Weighted average number of shares outstanding,
basic and diluted                                                       49,628          39,214          24,606
================================================================================================================

Earnings per share, basic and diluted, attributable to:
     Continuing operations                                            $   0.96        $   1.02        $   1.09
     Discontinued operations                                                --              --            0.02
     Gain on sale of properties, less applicable income tax                 --            0.16              --
----------------------------------------------------------------------------------------------------------------

Net income per share, basic and diluted                               $   0.96        $   1.18        $   1.11
================================================================================================================
</TABLE>

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


                                       F-7
<PAGE>

                        Franklin Street Properties Corp.
                 Consolidated Statement of Stockholders' Equity
<TABLE>
<CAPTION>
                                                                                     Earnings/      Accumulated
                                                                                  (distributions)  Undistributed
                                                                                   in excess of     Net Realized
                                         Common Stock     Additional                accumulated       Gain on         Total
                                     ------------------    Paid-In    Treasury       earnings/        Sale of      Stockholders'
                                     Shares      Amount    Capital     Stock       distributions     Properties       Equity
                                     ------      ------    -------     ------      -------------     ----------       ------
(in thousands)
================================================================================================================================
<S>                                 <C>         <C>       <C>          <C>           <C>            <C>           <C>
Balance, December 31, 2001              --      $ --      $      --    $ --          $     --       $    --       $      --
   Shares issued for:
      Partnership units             24,586         2        199,761      --                --            --         199,763
      Compensation                      44        --            604      --                --            --             604
   Net income                           --        --             --      --            27,312            --          27,312
   Distributions                        --        --         (7,622)     --           (22,892)           --         (30,514)
--------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2002          24,630         2        192,743      --             4,420            --         197,165
   Shares issued                    25,000         3        320,054      --                --            --         320,057
   Net income                           --        --             --      --            40,018         6,362          46,380
   Distributions                        --        --             --      --           (40,791)       (5,956)        (46,747)
--------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2003          49,630         5        512,797      --             3,647           406         516,855
   Treasury shares purchased
      10,399 shares at cost             --        --             --    (155)               --            --            (155)
   Treasury shares issued               --        --             16     145                --            --             161
   Net income                           --        --             --      --            47,763            --          47,763
   Distributions                        --        --             --      --           (61,130)         (406)        (61,536)
--------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2004          49,630      $  5      $ 512,813    $(10)         $ (9,720)      $    --       $ 503,088
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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


                                       F-8
<PAGE>

                        Franklin Street Properties Corp.
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
(in thousands)                                                                For the Year Ended December 31,
                                                                           ------------------------------------
                                                                              2004         2003        2002
===============================================================================================================
<S>                                                                        <C>         <C>          <C>
Cash flows from operating activities:
     Net income                                                            $ 47,763    $  46,380    $ 27,312
     Adjustments to reconcile net income to net cash provided by
         operating activities:
              Depreciation and amortization expense                          13,006        9,531       4,947
              Amortization of above market lease                                235          137          --
              Gain on sale of real estate assets                                 --       (6,362)         --
              Sponsored REIT income during consolidation                       (852)         (79)       (481)
              Equity in earnings of non-consolidated REITs                     (620)        (753)        (38)
              Distributions from non-consolidated REITs                       1,582          832         519
              Increase to bad debt reserve                                      195           --          --
              Shares issued as compensation                                     161           --         604
         Changes in operating assets and liabilities:
              Restricted cash                                                   (51)          (1)         12
              Tenant rent receivables, net                                      (83)        (302)       (264)
              Straight-line rents, net                                         (860)      (1,030)     (1,686)
              Prepaid expenses and other assets, net                         (1,192)         305        (239)
              Accounts payable and accrued expenses                           3,816       (9,053)       (858)
              Accrued compensation                                             (840)         258       1,287
              Tenant security deposits                                           51            1         (12)
         Payment of deferred leasing commissions                               (582)        (487)       (615)
----------------------------------------------------------------------------------------------------------------

                    Net cash provided by operating activities                61,729       39,377      30,488
----------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
     Cash from issuance of common stock in the merger transaction                --       23,524          --
     Purchase of real estate assets and office computers and
         furniture, capitalized merger costs                                 (1,641)      (2,388)     (1,174)
     Investment in non-consolidated REITs                                    (4,270)          --          --
     Changes in deposits on real estate assets                                   --          841        (841)
     Investment in assets held for syndication                              (55,490)      (4,117)         --
     Proceeds received on sales of real estate assets                            --       21,870          --
----------------------------------------------------------------------------------------------------------------

                    Net cash provided by (used for) investing
                         activities                                         (61,401)      39,730      (2,015)
----------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
     Distributions to stockholders                                          (61,536)     (46,747)    (30,514)
     Purchase of treasury shares                                               (155)          --          --
     Borrowings under bank note payable                                      59,439        4,117          --
     Repayments of bank note payable                                         (4,117)          --          --
----------------------------------------------------------------------------------------------------------------

                    Net cash used for financing activities                   (6,369)     (42,630)    (30,514)
----------------------------------------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents                         (6,041)      36,477      (2,041)

Cash and cash equivalents, beginning of year                                 58,793       22,316      24,357
----------------------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of year                                     $ 52,752    $  58,793    $ 22,316
================================================================================================================

Supplemental disclosure of cash flow information:
     Cash paid for:
         Interest                                                          $  1,503    $   1,036    $    894
         Taxes on income                                                   $  1,665    $   1,963    $    390
      Non-cash investing and financing activities: assets acquired
         through issuance of common stock in the merger transaction, net   $     --    $ 297,468    $     --
</TABLE>

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


                                       F-9
<PAGE>

                        Franklin Street Properties Corp.
                 Notes to the Consolidated Financial Statements

1. Organization

Franklin Street Properties Corp. ("FSP Corp." or the "Company", known as
Franklin Street Partners Limited Partnership, or the "Partnership", prior to
January 1, 2002) was formed as a Massachusetts limited partnership on February
4, 1997. FSP Corp. holds, directly and indirectly, 100% of the interest in three
former subsidiaries of the FSP Partnership: FSP Investments LLC, FSP Property
Management LLC, and FSP Holdings LLC. The Company also has a non-controlling
common stock interest in 15 corporations organized to operate as real estate
investment trusts ("REITs").

In December 2001, the limited partners of the Partnership approved the
conversion of the Partnership from a partnership into a corporation (the
"Conversion"). The Conversion was effective January 1, 2002, and 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. In 2002, the Company elected to be taxed as
a real estate investment trust ("REIT"). As part of the Conversion, all of the
Partnership's outstanding units were converted on a one-for-one basis into
24,586,249 shares of common stock of the Company. The Conversion was accounted
for as a reorganization of affiliated entities, with assets and liabilities
recorded at their historical costs.

On May 30, 2003, the shareholders of the Company approved the Company's
acquisition by merger of 13 REITs (the "2003 Target REITs"). The mergers were
effective June 1, 2003 and, as a result, the Company issued 25,000,091 shares in
a tax-free exchange for all the outstanding preferred shares of the 2003 Target
REITs. The mergers were accounted for as a purchase and the acquired assets and
liabilities were recorded at their fair value.

On August 13, 2004, the Company entered into an agreement to acquire four real
estate investment trusts ("Target REITs"), by the merger of the four Target
REITs with and into four of the Company's wholly-owned subsidiaries. The Company
expects that these mergers will close on April 30, 2005. Upon the consummation
of these mergers, the Company expects to issue 10,894,994 shares of common stock
to holders of preferred stock in these Target REITs.

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

2. Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include all of the accounts
of the Company and its majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.

Estimates and Assumptions

The Company prepares its financial statements and related notes in conformity
with accounting principles generally accepted in the United States of America
("GAAP"). 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.


                                      F-10
<PAGE>

                        Franklin Street Properties Corp.
                 Notes to the Consolidated Financial Statements

2. Significant Accounting Policies (continued)

Investments in Sponsored REITs

Common stock investments in Sponsored REITs are consolidated while the entity is
controlled by the Company. Following the commencement of syndication the Company
exercises influence over, but does not control these entities and investments
are accounted for using the equity method. Under the equity method of
accounting, the Company's cost basis is adjusted by its share of the Sponsored
REITs' earnings, if any, prior to completion of the syndication. Equity in
losses of Sponsored REITs is not recognized to the extent that the investment
balance would become negative. Distributions received are recognized as income
once the investment balance is reduced to zero, unless there is a loan
receivable from the Sponsored REIT entity. Equity in losses or distributions
received in excess of the common stock investment is recorded as an adjustment
up to the carrying value of the assets held for syndication.

Subsequent to the completion of the syndication of preferred shares, the Company
does not share in any of the Sponsored REITs' earnings, or any related
distribution, as a result of its common stock ownership.

On January 30, 2004, the Company purchased 49.25 preferred shares (approximately
8.2%) of a Sponsored REIT, FSP Blue Lagoon Drive Corp. ("Blue Lagoon"), for
$4,248,000. The Company agreed to vote its shares in any matter presented to a
vote by the stockholders of Blue Lagoon in the same proportion as shares voted
by other stockholders of the Company. The investment in Blue Lagoon is accounted
for under the equity method.

Real Estate and Depreciation

Real estate assets are stated at the lower of cost, less accumulated
depreciation, or fair value, as appropriate, which in the opinion of management
is not in excess of an individual property's estimated undiscounted cash flows.

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 acquired.

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 Company periodically reviews its properties to determine if their carrying
amounts will be recovered from future operating cash flows. The evaluation of
anticipated cash flows is highly subjective and is based in part on assumptions
regarding future occupancy, rental rates and capital requirements that could
differ materially from actual results in future periods. Since cash flows are
considered on an undiscounted basis in the analysis that the Company conducts to
determine whether an asset has been impaired, the Company's strategy of holding
properties over the long term directly decreases the likelihood of recording an
impairment loss. If the Company's strategy changes or market conditions
otherwise dictate an earlier sale date, an impairment loss may be recognized. If
the Company determines that impairment has occurred, the affected assets must be
reduced to their fair value. No such impairment losses have been recognized to
date.


                                      F-11
<PAGE>

                        Franklin Street Properties Corp.
                 Notes to the Consolidated Financial Statements

2. Significant Accounting Policies (continued)

Acquired Real Estate Leases and Amortization

The Company accounts for leases acquired as a result of the acquisition of real
estate assets under the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 141. "Business Combinations". Accordingly, the Company
recorded a value relating to the leases acquired as a result of the acquisition
by merger of 13 Sponsored REITs in 2003. Acquired real estate leases represent
costs associated with acquiring an in-place lease (i.e. the market cost to
execute a similar lease, including leasing commission, legal, vacancy and other
related costs) and the value relating to leases with rents above the market
rate. Amortization is computed using the straight-line method over the life of
the leases, which range from 31 months to 90 months.

Amortization related to costs associated with acquiring an in-place lease is
included in depreciation and amortization on the consolidated statements of
income. Amortization related to leases with rents above or below the market rate
is included with rental revenue in the consolidated statements of income. The
estimated annual amortization expense for the five years succeeding December 31,
2004 are as follows:

      (in thousands)
      --------------

                2005                                    $     1,910
                2006                                          1,435
                2007                                          1,047
                2008                                            985
                2009 and thereafter                           1,102

Discontinued Operations

The Company accounts for properties as held for sale under the provisions of
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets",
which typically occurs upon the execution of a purchase and sale agreement and
belief by management that the sale or disposition is probable of occurrence
within one year. Upon determining that a property is held for sale, the Company
discontinues depreciating the property and reflects the property in its
consolidated balance sheets at the lower of its carrying amount or fair value
less the cost to sell. The Company reports the results of operations of its
properties classified as discontinued operations in its statements of income if
no significant continuing involvement exists after the sale or disposition.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. Also included
in cash equivalents at December 31, 2004 is $11 million of cash held as
certificates of deposit with maturity dates exceeding three months. There are no
prepayment penalties if the Company withdraws these funds prior to maturity.

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.

Tenant Rent Receivables

Tenant rent receivables are expected to be collected within one year. The
Company provides an allowance for doubtful accounts based on its estimate of a
tenant's ability to make future rent payments. The computation of this allowance
is based in part on the tenants' payment history and current credit status.


                                      F-12
<PAGE>

                        Franklin Street Properties Corp.
                 Notes to the Consolidated Financial Statements

2. Significant Accounting Policies (continued)

Concentration of Credit Risks

Cash and cash equivalents are financial instruments that potentially subject the
Company to a concentration of credit risk. The Company maintains its cash
balances principally in two banks which the Company believes to be creditworthy.
The Company periodically assesses the financial condition of the banks 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 Company estimates that the carrying value of cash and cash equivalents,
restricted cash, and the bank note payable approximate their fair values based
on their short-term maturity and prevailing interest rates.


Straight-line Rent Receivable

Certain leases provide for fixed rent increases over the life of the lease.
Rental revenue is recognized on a straight-line basis over the related lease
term; however, billings by the Company are based on required minimum rentals in
accordance with the lease agreements. Straight-line rent receivable, which is
the cumulative revenue recognized in excess of amounts billed by the Company, is
$4,947,000, and $4,087,000 at December 31, 2004 and 2003, respectively. The
Company provides an allowance for doubtful accounts based on its estimate of a
tenant's ability to make future rent payments. The computation of this allowance
is based in part on the tenants' payment history and current credit status.

Deferred Leasing Commissions

Deferred leasing commissions represent direct and incremental external leasing
costs incurred in the leasing of commercial space. These costs are capitalized
and are amortized on a straight-line basis over the terms of the related lease
agreements. Amortization expense was approximately $287,000, $258,000 and
$193,000 for the years ended December 31, 2004, 2003 and 2002, respectively. The
estimated annual amortization expense for the five years succeeding December 31,
2004 are as follows:

      (in thousands)
      --------------

              2005                                      $     379
              2006                                            352
              2007                                            265
              2008                                            179
              2009 and thereafter                             307

Revenue Recognition

Rental Revenue - Rental revenue includes income from leases, certain
reimbursable expenses, straight-line rent adjustments and other income
associated with renting the property. A summary of rental revenue is shown in
the following table:

                                                        Year Ending
      (in thousands)                                    December 31,
                                            ------------------------------------
                                                2004         2003         2002
      ==========================================================================
      Income from leases                    $  61,815    $  41,968     $ 20,909
      Straight-line rent adjustment               860        1,030        1,686
      Reimbursable expenses                     9,107        6,964        3,393
      Other                                        --          379          178
      --------------------------------------------------------------------------
           Total                            $  71,782    $  50,341    $  26,166
      ==========================================================================


                                      F-13
<PAGE>

                        Franklin Street Properties Corp.
                 Notes to the Consolidated Financial Statements

2. Significant Accounting Policies (continued)

Rental Revenue, Commercial Properties -- The Company has retained substantially
all of the risks and benefits of ownership of the Company's commercial
properties and accounts for its leases as operating leases. Rental income from
leases, which include rent concessions (including free rent and tenant
improvement allowances) and scheduled increases in rental rates during the lease
term, is recognized on a straight-line basis. The Company does not have any
percentage rent arrangements with its commercial property tenants. Reimbursable
costs are included in rental income in the period earned.

Rental Revenue, Residential Apartments -- The Company'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. Leasing
commissions incurred in connection with residential property leases are expensed
as incurred.

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

Syndication Fees -- Syndication fees ranging from 6% to 8% of the gross offering
proceeds from the sale of securities in Sponsored REITs are generally recognized
upon an investor closing; at that time the Company 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. There is typically
more than one investor closing in the syndication of a Sponsored REIT.

Transaction Fees -- Transaction fees relating to loan commitment fees and
acquisition fees are recognized upon an investor closing and the subsequent
payment of the Sponsored REIT's loan to the Company. Fees related to
organizational, offering and other expenditures are recognized upon the final
investor closing of the Sponsored REIT. The final investor closing is the last
admittance of investors into a Sponsored REIT; at that time, required funds have
been received from the investors and charges relating to the syndication have
been paid or accrued.

Other

Other income, including property and asset management fees, is recognized when
the related services are performed and the earnings process is complete.

Income Taxes

Taxes on income for the years ended December 31, 2004, 2003 and 2002 represent
taxes incurred by FSP Investments which is a taxable REIT subsidiary.

Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted
average number of shares outstanding during the period. Diluted net income per
share reflects the potential dilution that could occur if securities or other
contracts to issue shares were exercised or converted into shares. There were no
potential dilutive shares outstanding at December 31, 2004, 2003, and 2002. The
denominator used for calculating basic and diluted net income per share was
49,628,000, 39,214,000 and 24,606,000 for the years ending December 31, 2004,
2003, and 2002, respectively.

Recent Accounting Standards

In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities. In December 2003, the FASB revised
FIN 46 with certain modifications and clarifications. The objective of this
interpretation is to provide guidance on how to identify a variable interest
entity ("VIE") and determine when the assets, liabilities, non-controlling
interests, and results of operations of a VIE need to be included in a company's
consolidated financial statements. A VIE exists when either the total equity
investment at risk is not sufficient to permit the entity to finance its
activities by itself, or the equity investors lack one of three characteristics
associated with owning a controlling financial interest. Application of this
guidance was effective for interests in certain VIEs commonly referred to as
special-purpose entities (SPEs) as of December 31, 2003. The provisions of this
interpretation became effective upon issuance. The adoption of this standard had
no impact on the Company's financial position, operations or cash flow.


                                      F-14
<PAGE>

                        Franklin Street Properties Corp.
                 Notes to the Consolidated Financial Statements

2. Significant Accounting Policies (continued)

      In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity". This
statement was effective for financial instruments entered into or modified after
May 31, 2003; otherwise effective at the beginning of the first interim period
beginning after June 15, 2003, except for mandatorily redeemable financial
instruments of nonpublic entities which are subject to the provisions of this
Statement for the first fiscal period beginning after December 15, 2003. SFAS
No. 149 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. The
adoption of this standard had no impact on our financial position, results of
operations or cash flows.

Reclassifications

Certain balances in the 2003 and 2002 financial statements have been
reclassified to conform to 2004 presentation. The reclassifications primarily
were related to Sponsored REIT income and expenses. The Company had previously
presented its proportionate share of Sponsored REIT's revenues and expenses and
has reclassified those amounts to consolidate the real estate operations
activity from inception of the Sponsored REIT until the initiation of
syndication upon which the equity method of accounting is applied. These
reclassifications changed rental revenues, operating and maintenance expenses,
depreciation and amortization, other income and equity in earnings of
non-consolidated REITs. There was no change to income from continuing operations
or net income for any period presented as a result of these reclassifications.

3. Business Segments

The Company operates in two business segments: real estate operations (including
real estate leasing, interim acquisition financing and asset/property
management) and investment banking/investment services (including real estate
acquisition and broker/dealer services). The Company has identified these
segments because this information is the basis upon which management makes
decisions regarding resource allocation and performance assessment. The
accounting policies of the reportable segments are the same as those described
in the "Significant Accounting Policies". The Company's operations are located
in the United States of America.

The Company evaluates the performance of its reportable segments based on Cash
Available for Distribution ("CAD") as management believes that CAD represents
the most accurate measure of the reportable segment's activity and is the basis
for distributions paid to equity holders. The Company defines CAD as: net income
as computed in accordance with accounting principles generally accepted in the
United States of America ("GAAP"); excluding gains or losses on the sale of real
estate and non-cash income from Sponsored REITs; plus certain non-cash items
included in the computation of net income (depreciation and amortization,
certain non-cash compensation expenses and straight-line rent adjustments); plus
distributions received from Sponsored REITs; plus the net proceeds from the sale
of land; less purchases of property and equipment ("Capital Expenditures") and
payments for deferred leasing commissions, plus proceeds from (payments to) cash
reserves established at the acquisition date of the property. Depreciation and
amortization, gain or loss on the sale of real estate, non-cash compensation and
straight-line rents are an adjustment to CAD, as these are non-cash items
included in net income. Capital expenditures, payments of deferred leasing
commissions and the proceeds from (payments to) the funded reserve are an
adjustment to CAD, as they represent cash items not reflected in net income.

The funded reserve represents funds that the Company has set aside in
anticipation of future capital needs. These reserves are typically used for the
payment of capital expenditures, deferred leasing commissions and certain tenant
allowances; however, there are no legal restrictions on their use and they may
be used for any Company purpose. CAD should not be considered as an alternative
to net income (determined in accordance with GAAP), as an indicator of the
Company's financial performance, nor as an alternative to cash flows from
operating activities (determined in accordance with GAAP), nor as a measure of
the Company's liquidity, nor is it necessarily indicative of sufficient cash
flow to fund all of the Company's needs. Other real estate companies may define
CAD in a different manner. It is at the Company's discretion to retain a portion
of CAD for operational needs. We believe that in order to facilitate a clear
understanding of the results of the Company, CAD should be examined in
connection with net income and cash flows from operating, investing and
financing activities in the consolidated financial statements.


                                      F-15
<PAGE>

                        Franklin Street Properties Corp.
                 Notes to the Consolidated Financial Statements

3. Business Segments (continued)

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

<TABLE>
<CAPTION>
      (in thousands):                                               Investment
                                                           Real      Banking/
                                                          Estate    Investment
                                                        Operations   Services     Total
      ====================================================================================
      <S>                                               <C>         <C>        <C>
      Year ended December 31, 2004:
         Net income                                     $ 45,030    $ 2,733    $ 47,763
         Sponsored REIT income during consolidation         (852)        --        (852)
         Equity in earnings of non-consolidated REITs       (620)        --        (620)
         Distribution from non-consolidated REITs          1,582         --       1,582
         Non-cash compensation expenses                       --        161         161
         Depreciation and amortization                    13,096        147      13,243
         Straight-line rent                                 (860)        --        (860)
         Capital expenditures                             (1,541)      (100)     (1,641)
         Merger costs                                       (447)        --        (447)
         Payment of deferred leasing commissions            (582)        --        (582)
         Proceeds from funded reserves                     2,123         --       2,123
      ------------------------------------------------------------------------------------

      Cash Available for Distribution                   $ 56,929    $ 2,941    $ 59,870
      ====================================================================================

      Year ended December 31, 2003:
         Net income                                     $ 43,949    $ 2,431    $ 46,380
         Sponsored REIT income during consolidation         (212)        --        (212)
         Equity in earnings of non-consolidated REITs       (753)        --        (753)
         Distribution from non-consolidated REITs            832         --         832
         Gain on sale of properties                       (6,362)        --      (6,362)
         Depreciation and amortization                     9,745         56       9,801
         Straight-line rent                               (1,030)        --      (1,030)
         Capital expenditures                             (1,125)      (248)     (1,373)
         Merger costs                                     (1,015)        --      (1,015)
         Payment of deferred leasing commissions            (487)        --        (487)
         Proceeds from funded reserves                     1,877         --       1,877
         Proceeds from sale of land                           55         --          55
      ------------------------------------------------------------------------------------

      Cash Available for Distribution                   $ 45,474    $ 2,239    $ 47,713
      ====================================================================================

      Year ended December 31, 2002:
         Net income                                     $ 24,787    $ 2,525    $ 27,312
         Sponsored REIT income during consolidation         (714)        --        (714)
         Equity in earnings of non-consolidated REITs        (38)        --         (38)
         Distribution from non-consolidated REITs            519         --         519
         Depreciation and amortization                     5,011        169       5,180
         Straight-line rent                               (1,686)        --      (1,686)
         Non-cash compensation expenses                       --        604         604
         Capital expenditures                             (1,163)       (11)     (1,174)
         Payment of deferred leasing commissions            (615)        --        (615)
         Proceeds from funded reserves                     3,200         --       3,200
      ------------------------------------------------------------------------------------

      Cash Available for Distribution                   $ 29,301    $ 3,287    $ 32,588
      ====================================================================================
</TABLE>


                                      F-16
<PAGE>

                        Franklin Street Properties Corp.
                 Notes to the Consolidated Financial Statements

3. Business Segments (continued)

The Company's cash distributions for the years ended December 31, 2004, 2003 and
2002 are summarized as follows:

      Quarter paid                              Distribution       Total Cash
                                               Per Share/Unit     Distributions
      ==========================================================================
                                                                 (in thousands)
      Second quarter of 2004                      $  .31         $  15,385
      Third quarter of 2004                          .31            15,385
      Fourth quarter of 2004                         .31            15,385
      First quarter of 2005 (A)                      .31            15,385
      --------------------------------------------------------------------------
                                                  $ 1.24         $  61,540
      ==========================================================================

      Second quarter of 2003                      $  .31         $   7,635
      Third quarter of 2003                          .31            10,135
      Fourth quarter of 2003 (B)                     .43            21,342
      First quarter of 2004 (C)                      .31            15,381
      --------------------------------------------------------------------------
                                                  $1.36          $  54,493
      ==========================================================================

      Second quarter of 2002                      $  .31         $   7,622
      Third quarter of 2002                          .31             7,635
      Fourth quarter of 2002                         .31             7,635
      First quarter of 2003 (D)                      .31             7,635
      --------------------------------------------------------------------------
                                                  $ 1.24          $ 30,527
      ==========================================================================

(A)   Represents distributions declared and paid by the Company in the first
      quarter of 2005.
(B)   Includes a special distribution of $.12 per share in the aggregate amount
      of $5,956,000.
(C)   Represents distributions declared and paid by the Company in the first
      quarter of 2004.
(D)   Represents distributions declared and paid by the Company in the first
      quarter of 2003.

Cash distributions per share are declared and paid based on the total
outstanding shares as of the record date and are typically paid in the quarter
following the quarter that CAD is generated.


                                      F-17
<PAGE>

                        Franklin Street Properties Corp.
                 Notes to the Consolidated Financial Statements

3. Business Segments (continued)

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

                                                             Investment
                                                     Real      Banking/
                                                    Estate   Investment
                                                  Operations  Services   Total
      ==========================================================================
                                                              (in thousands)
      December 31, 2004:
        Revenue                                   $ 84,356    $15,696   $100,052
        Interest income                                822         46        868
        Interest expense                             1,527         --      1,527
        Capital expenditures                         1,541        100      1,641
        Identifiable assets                        567,609      5,502    573,111

      December 31, 2003:
        Revenue                                   $ 64,650    $16,050   $ 80,700
        Interest income                                292         75        367
        Interest expense                             1,036         --      1,036
        Income from discontinued operations, net       195         --        195
        Capital expenditures                         1,125        248      1,373
        Identifiable assets                        524,788      3,741    528,529

      December 31, 2002:
        Revenue                                   $ 38,931    $14,731   $ 53,662
        Interest income                                223         73        296
        Interest expense                               894         --        894
        Income from discontinued operations, net       571         --        571
        Capital expenditures                         1,163         11      1,174
        Identifiable assets                        194,996      6,940    201,936

4. Merger Transactions

On June 1, 2003, the Company issued 25,000,091 shares of common stock, $0.0001
par value per share in exchange for all of the outstanding preferred stock of 13
Sponsored REITs it acquired by merger. The results of operations for each of the
Sponsored REITs have been included in the Company's consolidated financial
statements since that date. The merger transactions were structured as exchanges
of shares and no cash was involved.

The aggregate purchase price was approximately $320,992,000. On the acquisition
date, for each Sponsored REIT, the increase between the appraised value of the
property and the historical cost of the property was allocated to real estate
investments and leases, including lease origination costs. Lease origination
costs represent the value associated with acquiring an in-place lease (i.e. the
market cost to execute a similar lease, including leasing commission, legal,
vacancy, and other related costs). The value assigned to buildings approximates
their replacement cost; the value assigned to land approximates its appraised
value; and the value assigned to leases approximates their fair value. Other
assets and liabilities are recorded at their historical costs, which
approximates fair value. The following table summarizes the estimated fair value
of the assets acquired at the date of acquisition:


                                      F-18
<PAGE>

                        Franklin Street Properties Corp.
                 Notes to the Consolidated Financial Statements

4. Merger Transactions (continued)

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

      Real estate assets                                       $  298,425
      Value of acquired real estate leases                          9,503
      Cash                                                         23,524
      Other assets                                                  1,120
      Liabilities assumed                                         (11,580)
                                                               ----------
      Total                                                    $  320,992
                                                               ==========

The following table shows the allocation of the aggregate increase of
$19,500,000 between the value of the real estate assets and leases acquired
(including expenses of the merger of $1,015,000) and the historical costs of the
13 Sponsored REITs.

      (in thousands)                                                Life
                     Category                      Amount         In Years
      ----------------------------------------------------------------------

      Land                                       $     944           N/A
      Buildings and improvements                    15,747         27-39
                                                 ----------
          Real estate investments                   16,691
          Lease origination costs                    2,809          4-10
                                                 ----------
         Total                                   $  19,500
                                                 ==========

Pro forma operating results for the Company and the 13 Sponsored REITs the
Company acquired during 2003 are shown in the following table. The results
assume that the mergers occurred and the shares of the Company's stock were
issued on January 1, 2002 and are not necessarily indicative of what the
Company's actual results of operations would have been for the period indicated,
nor do they purport to represent the results of operations of any future period.

                                                            For Year Ended
      (unadudited)                                           December 31,
      (in thousands except per share amount)             2003            2002
                                                       ------------------------

      Revenue                                          $ 98,972        $ 82,675
      Expenses                                          (52,574)        (48,781)
      Interest income                                       484             556
      Taxes on income                                    (1,700)           (699)
                                                       ------------------------
      Net income from continuing operations              45,182          33,751
      Income from discontinued operations                   195             571
      Gain on sale of property                            6,362              --
                                                       ========================
      Net income                                       $ 51,739        $ 34,322
                                                       ========================
      Weighted average shares outstanding                49,630          49,606
                                                       ========================
      Net income per share                             $   1.04        $   0.69
                                                       ========================


                                      F-19
<PAGE>

                        Franklin Street Properties Corp.
                 Notes to the Consolidated Financial Statements

5. Related Party Transactions

Investment in Sponsored REITs

At December 31, 2004, the Company held an interest in 15 Sponsored REITs. Twelve
were fully syndicated and the Company no longer derives economic benefits or
risks from them. Blue Lagoon was syndicated in January 2004 and the Company
purchased a preferred stock investment in it. The remaining two entities were
not fully syndicated and have a value of approximately $59.2 million on the
accompanying consolidated balance sheets as assets held for syndication. At
December 31, 2003 the Company held an interest in eight Sponsored REITs, of
which seven were fully syndicated. The value of Blue Lagoon, which was not fully
syndicated as of December 31, 2003, was approximately $4.1 million on the
accompanying consolidated balance sheets as assets held for syndication. At
December 31, 2002 the Company held an interest in 16 Sponsored REITs, all of
which were fully syndicated.

The table below shows the Company's share of income and expenses from Sponsored
REITs prior to consolidation. Management fees of $102,000, $5,000 and $14,000
for the years ended December 31, 2004, 2003 and 2002, respectively; and interest
expenses are eliminated in consolidation.

                                                       Year Ended December 31,
(in thousands)                                       2004       2003       2002
                                                     ----       ----       ----

Operating Data:
Rental revenues                                     $3,772      $552      $1,357
Operating and maintenance expenses                   1,439       177         410
Depreciation and amortization                          584       133         233
Interest expense                                       922       163         243
Interest income                                         25        --          10
                                                    ----------------------------
                                                    $  852      $ 79      $  481
                                                    ============================

Equity in earnings of investment in non-consolidated REITs:

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

                                                         Year Ended December 31,
(in thousands)                                           2004      2003     2002
                                                         ----      ----     ----

Equity in earnings of Sponsored REITs                    $390      $753     $ 38
Equity in earnings of Blue Lagoon                         230        --       --
                                                         -----------------------
                                                         $620      $753     $ 38
                                                         =======================

Equity in earnings of investments in Sponsored REITs is derived from the
Company's share of income following the commencement of syndication of Sponsored
REITs. Following the commencement of syndication the Company exercises influence
over, but does not control these entities and investments are accounted for
using the equity method.

Equity in earnings of Blue Lagoon is derived from the Company's preferred stock
investment in the entity. In January 2004 the Company purchased 49.25 preferred
shares or 8.22% of Blue Lagoon for $4,248,000 (which represented $4,925,000 at
the offering price net of commissions of $394,000 and loan fees of $283,000 that
were excluded).

During the year ended December 31, 2004, the Company received distributions of
$1,582,000 and $235,000 from Sponsored REITs and Blue Lagoon, respectively.
During the years ended December 31, 2003 and 2002, the Company received
distributions from investments in Sponsored REITs of $882,000 and $519,000,
respectively.


                                      F-20
<PAGE>

                        Franklin Street Properties Corp.
                 Notes to the Consolidated Financial Statements

5. Related Party Transactions, (continued)

Non-consolidated REITs

The Company has in the past acquired by merger entities similar to the Sponsored
REITs. The Company also entered into an agreement to acquire by merger (the
"2004 Merger Agreement") four Sponsored REITs, which it expects to consummate on
April 30, 2005. The Company's business model for growth includes the potential
acquisition by merger in the future of Sponsored REITs. However, other than as
set forth in the 2004 Merger Agreement, the Company has no legal or any other
enforceable obligation to acquire or to offer to acquire any Sponsored REIT. In
addition, any offer (and the related terms and conditions) that might be made in
the future to acquire any Sponsored REIT would require the approval of the
boards of directors of the Company and the Sponsored REIT and the approval of
the shareholders of the Sponsored REIT.

The operating data for 2004 includes the operations of the 15 Sponsored REITs in
which the Company held an interest at December 31, 2004. The operating data for
2003 includes the operations of eight Sponsored REITs in which the Company held
an interest at December 31, 2003 and 13 2003 Target REITs from January through
May 31, 2003. The 13 2003 Target REITs were merged into the Company on June 1,
2003. The operating data for 2002 includes the operations of the 16 Sponsored
REITs in which the Company held an interest at December 31, 2002.

Summarized financial information for the Sponsored REITs is as follows:

                                                      December 31,
      (unaudited)                                2004              2003
                                             ------------------------------
                                                     (in thousands)
      Balance Sheet Data:
      -------------------
      Real estate, net                       $  457,140        $  257,700
      Other assets                               91,678            53,646
      Total liabilities                         (83,484)          (18,129)
                                             ----------        ----------
      Shareholders equity                    $  465,334        $  293,217
                                             ==========        ==========

                                                 For the Year Ended
      (unaudited)                                   December 31,
                                          ----------------------------------
                                             2004        2003       2002
                                          ----------------------------------
                                                     (in thousands)
      Operating Data:
      ---------------
      Rental revenues                      $ 58,474    $ 45,819   $ 46,836
      Other revenues                            655         370        543
      Operating and maintenance
      expenses                              (20,335)    (16,594)   (14,191)
      Depreciation and amortization         (10,597)    (11,155)    (7,220)
      Interest expense                      (13,316)    (13,965)   (13,395)
                                          ----------------------------------
      Net income (loss)                    $ 14,881    $  4,475   $ 12,573
                                           ==================================

Syndication fees and Transaction fees:

The Company provided syndication and real estate acquisition advisory services
for Sponsored REITs. Syndication and transaction fees from non-consolidated
entities amounted to approximately $27,672,000, $29,376,000, and $26,811,000 for
the years ended December 31, 2004, 2003 and 2002, respectively.

Management fees and interest income from loans:

Asset management fees range from 1% to 5% of collected rents and the applicable
contracts are cancelable with 30 days' notice. Asset management fee income from
non-consolidated entities amounted to approximately $539,000, $325,000, and
$247,000 for the years ended December 31, 2004, 2003 and 2002, respectively. The
Company is typically entitled to interest on funds advanced to Sponsored REITs.
The Company recognized interest income of approximately $42,000, $636,000 and
$429,000 for the years ended December 31, 2004, 2003 and 2002, respectively,
relating to these loans.


                                      F-21
<PAGE>

                        Franklin Street Properties Corp.
                 Notes to the Consolidated Financial Statements

6. Bank Note Payable

The Company has a revolving line of credit agreement (the "Loan Agreement") with
a group of banks providing for borrowings at the Company's election of up to
$125,000,000. Borrowings under the Loan Agreement bear interest at either the
bank's base rate (5.25% at December 31, 2004) or at a LIBOR plus 125 basis
points (3.67% at December 31, 2004), as defined. The balance outstanding was
$59,439,000 at the bank's base rate at December 31, 2004, and $4,117,000 at the
bank's base rate (or 4%) as of December 31, 2003. The weighted average interest
rate on amounts outstanding during the years ended December 31, 2004 and 2003
was approximately 3.62% and 3.87%, respectively.

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 and compliance with various debt and operating income ratios,
as defined in the Loan Agreement. The Company was in compliance with the Loan
Agreement's financial covenants as of December 31, 2004 and 2003. The Loan
Agreement matures on August 18, 2005.

7. Stockholders' Equity

Equity-Based Compensation

On May 20, 2002, the stockholders of the Company approved the 2002 Stock
Incentive Plan (the "Plan"). The Plan is an equity-based incentive compensation
plan, and provides for the grants of up to a maximum of 2,000,000 shares of the
Company's common stock ("Awards"). All of the Company's employees, officers,
directors, consultants and advisors are eligible to be granted awards. Awards
under the Plan are made at the discretion of the Company's Board of Directors,
and have no vesting requirements. Upon granting an Award, the Company will
recognize compensation cost equal to the fair value of the Company's common
stock, as determined by the Company's Board of Directors, on the date of the
grant.

In March 2004 the Company issued 9,824 shares to certain officers and employees
under the Plan with an estimated value of $161,000. There was no equity-based
compensation for the year ended December 31, 2003. In July 2002 the Company
issued 43,998 shares an estimated value of $604,000 to an executive officer of
the Company. These shares were fully vested on the date of issuance.
Equity-based compensation charges of $161,000 and $604,000 are included in
selling, general & administrative expenses in the accompanying consolidated
statements of income for the years ended December 31, 2004 and 2002.

A summary of shares available and granted under the plan and the related
compensation costs is shown in the following table:

                                               Shares
                                              Available      Compensation
                                              for Grant          Cost
                                           -------------    --------------
      Balance, December 31, 2001                     --      $        --
      Shares approved for grant               2,000,000               --
      Shares granted                            (43,998)         604,000
                                           -------------    --------------
      Balance, December 31, 2002 and 2003     1,956,002          604,000
      Shares granted                             (9,824)         161,000
                                           -------------    --------------
      Balance, December 31, 2004              1,946,178      $   765,000
                                           =============    ==============

Treasury Shares

During January 2004 the Company redeemed 9,824 shares through a redemption plan
for $147,000. These shares were subsequently issued to employees in connection
with the Plan. In August 2004 the Company redeemed an aggregate of 575
fractional shares for $10,000.


                                      F-22
<PAGE>

                        Franklin Street Properties Corp.
                 Notes to the Consolidated Financial Statements

8. Federal Income Tax Reporting

General

The Company has elected to be taxed as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"). As a REIT, the Company generally is entitled to a
tax deduction for distributions paid to its shareholders, thereby effectively
subjecting the distributed net income of the Company to taxation at the
shareholder level only. The Company must comply with a variety of restrictions
to maintain its status as a REIT. These restrictions include the type of income
it can earn, the type of assets it can hold, the number of shareholders it can
have and the concentration of their ownership, and the amount of the Company's
taxable income that must be distributed annually.

One such restriction is that the Company generally cannot own more than 10% of
the voting power or value of the securities of any one issuer unless the issuer
is itself a REIT or a taxable REIT subsidiary ("TRS"). In the case of TRSs, the
Company's ownership of securities in all TRSs generally cannot exceed 20% of the
value of all of the Company's assets and, when considered together with other
non-real estate assets, cannot exceed 25% of the value of all of the Company's
assets. Effective January 1, 2002, a subsidiary of the Company, FSP Investments,
is a TRS. As a result, FSP Investments operates as a taxable corporation under
the Code and has accounted for income taxes in accordance with the provisions of
SFAS No. 109, Accounting for Income Taxes. Taxes are provided when FSP
Investments has net profits for both financial statement and income tax
purposes.

Income taxes are recorded based on the future tax effects of the difference
between the tax and financial reporting bases of the Company's assets and
liabilities. In estimating future tax consequences, potential future events are
considered except for potential changes in income tax law or in rates.

Net operating losses

Section 382 of the Code restricts a corporation's ability to use net operating
losses ("NOLs") to offset future taxable income following certain "ownership
changes." Such an ownership change occurred with the June 2003 merger and
accordingly a portion of the NOLs incurred by the Sponsored REITs available for
use by the Company in any particular future taxable year will be limited. To the
extent that the Company does not utilize the full amount of the annual NOLs
limit, the unused amount may be carried forward to offset taxable income in
future years. NOLs expire 20 years after the year in which they arise, and the
last of the Company's NOLs will expire in 2023. A valuation allowance is
provided for the full amount of the NOLs as the realization of any tax benefits
from such NOLs is not assured. The gross amount of NOLs available to the Company
were $7,918,000 and $5,839,000 as of December 31, 2004 and 2003, respectively.


                                      F-23
<PAGE>

                        Franklin Street Properties Corp.
                 Notes to the Consolidated Financial Statements

8. Federal Income Tax Reporting (continued)

Tax Rates

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

<TABLE>
<CAPTION>
                                                                 For the years ended December 31,
                                                 --------------------------------------------------------------
(in thousands)                                          2004                  2003                   2002
                                                        ----                  ----                   ----

<S>                                              <C>         <C>       <C>        <C>        <C>          <C>
Federal income tax expense at statutory rate     $ 1,516     34.0%     $ 1,446    35.0%      $ 1,128      35.0%
Increase (decrease) in taxes resulting from:
   State income taxes, net of federal impact         280      6.3%         254     6.2%          197       6.1%
   Other                                             (71)    -1.6%          --                  (626)    -19.4%
                                                 -------    -----      -------   -----       -------    ------
   Taxes on income                               $ 1,725     38.7%     $ 1,700    41.2%      $   699      21.7%
                                                 =======    =====      =======   =====       =======    ======
</TABLE>

For the year ended December 31, 2004, "Other" consists of an adjustment to the
statutory rate to better reflect the benefit of lower tax rates at lower levels
of taxable income. For the year ended December 31, 2002 this amount is primarily
a tax benefit on cash bonuses accrued in 2001, which were paid in 2002 and were
treated as a permanent difference. The permanent difference was due to the
conversion of the entity from a partnership.

Taxes on income are a current tax expense. No deferred income taxes were
provided as there were no material temporary differences between the financial
reporting basis and the tax basis of the TRS.

At December 31, 2004 and 2003, the Company's net tax basis of its real estate
assets is less than the amount set forth in the Company's consolidated balance
sheets by $17,365,000 and $14,270,000 respectively.

Reconciliation Between GAAP Net Income and Taxable Income:

The following reconciles book net income to taxable income for the years ended
December 31, 2004, 2003 and 2002.

<TABLE>
<CAPTION>
                                                    For the year ended December 31,
                                                    -------------------------------
(in thousands)                                         2004        2003        2002
                                                       ----        ----        ----

<S>                                                 <C>         <C>         <C>
Net income per books                                $ 47,763    $ 46,380    $ 27,312
Adjustments to book income
Book depreciation and amortization                    13,592       9,398       4,699
Deferred rent, net                                        55          22        (368)
Tax depreciation and amortization                    (11,449)     (7,879)     (3,824)
Tax basis less book basis of properties sold, net         --       2,347
Straight line rent adjustment, net                      (860)     (1,030)     (1,151)
Non-taxable distributions                                 --          --      (2,113)
Other, net                                              (611)       (104)       (507)
                                                    --------    --------    --------
Taxable income                                      $ 48,490    $ 49,134    $ 24,048
                                                    ========    ========    ========
</TABLE>


                                      F-24
<PAGE>

                        Franklin Street Properties Corp.
                 Notes to the Consolidated Financial Statements

8. Federal Income Tax Reporting (continued)

Tax Components

The following summarizes the tax components of the Company's common
distributions paid per share for the years ended December 31, 2004, 2003 and
2002:

                         -----------------   ----------------   ----------------
                               2004                2003               2002
                         -----------------   ----------------   ----------------
                         Per Share    %      Per Share   %      Per Share   %
                         ---------    -      ---------   -      ---------   -
Ordinary income            $ 1.01   81.48%    $ 1.03   75.61%    $ 0.98   78.81%
Qualified dividends          0.03    2.79%      0.08    5.76%        --      --
Capital gain (1)               --      --       0.25   18.63%        --      --
Return of capital            0.20   15.73%        --      --       0.26   21.19%
                           ------  ------     ------  ------     ------  ------
Total                      $ 1.24     100%    $ 1.36     100%    $ 1.24     100%
                           ======  ======     ======  ======     ======  ======

Dividend paid per share

(1)   The 18.63% capital gain consists of 9.03%, 5.43% and 4.17% of capital
      gains taxed at 15%, 20% and 25%, respectively for 2003.

9. Commitments

The Company's commercial real estate operations include the leasing of office
buildings and industrial properties subject to leases with terms greater than
one year. The leases 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, 2004:

                                        Year ended
      (in thousands)                   December 31,
      ==============================================

      2005                          $       46,401
      2006                                  39,950
      2007                                  32,381
      2008                                  29,797
      2009                                  24,132
      Thereafter (2010-2013)                17,070
      ----------------------------------------------
                                          $189,731
      ==============================================

The Company leases its corporate office space under an operating lease that was
amended in 2003. The lease includes a base annual rent and additional rent for
the Company's share of taxes and operating costs. Future minimum lease payments
are as follows:

      (in thousands)                   Year ended
                                      December 31,
      ----------------------------------------------
      2005                              $    295
      2006                                   302
      2007                                   308
      2008                                   181
      Thereafter                              --
      ----------------------------------------------
                                        $  1,086
      ==============================================

Rent expense was approximately $306,000, $219,000 and $206,000 for the years
ended December 31, 2004, 2003 and 2002, respectively, and is included in
selling, general and administration expenses in the Consolidated Statements of
Income.


                                      F-25
<PAGE>

                        Franklin Street Properties Corp.
                 Notes to the Consolidated Financial Statements

10. Retirement Plan

In 1999, the Company began a retirement savings plan for eligible employees.
Under the plan, the Company annually matches participant contributions up to the
maximum allowed by tax regulations. The Company's total contribution under the
plan amounted to approximately $160,000, $132,000 and $105,000 for the years
ended December 31, 2004, 2003 and 2002, respectively.

11. Discontinued Operations

During the year ended December 31, 2003, the Company disposed of two apartment
properties, Weslayan Oaks and Reata, both located in Houston, Texas. The
operating results for these two real estate assets have been reflected as
discontinued operations in the consolidated statements of income on a
comparative basis for the years ended December 31, 2003 and 2002. There were no
sales of properties in 2004.

The operating results for the real estate assets sold during 2003 are summarized
below.

      (in thousands)                                        For the Years Ended
                                                               December 31,
                                                          ---------------------
                                                            2003         2002
                                                          --------     --------
      Rental revenue                                      $  1,215     $  2,603
      Rental operating expenses                               (507)      (1,034)
      Real estate taxes and insurance                         (247)        (491)
      Depreciation and amortization                           (266)        (507)
                                                          --------     --------
      Net income from discontinued operations             $    195     $    571
                                                          ========     ========

12. Subsequent Events

On January 28, 2005 the Board of Directors of the Company declared a cash
distribution of $0.31 per share of common stock payable on February 15, 2005 to
stockholders of record on February 7, 2005.


                                      F-26
<PAGE>

                        Franklin Street Properties Corp.
                 Notes to the Consolidated Financial Statements

13. Selected unaudited quarterly information

Selected unaudited quarterly information is shown in the following table

<TABLE>
<CAPTION>
                                                                       2004
                                                      --------------------------------------
                                                       First    Second     Third    Fourth
                                                       Quarter  Quarter   Quarter   Quarter
                                                      -------- --------  --------  ---------
                                                       (in thousands, except per share data)
      <S>                                             <C>       <C>       <C>       <C>
      Revenue                                         $25,599   $28,299   $17,152   $29,002
                                                      ======== ======== =========  =========

      Income from continuing operations               $13,219   $13,676   $ 6,945   $13,923
      Income from discontinued operations                  --        --        --        --
      Gain on sale of properties                           --        --        --        --
                                                      -------- -------- ---------  ---------
      Net income                                      $13,219   $13,676   $ 6,945   $13,923
                                                      ======== ======== =========  =========

      Basic and diluted net income per share          $  0.27   $  0.28   $  0.14   $  0.28
                                                      ======== ======== =========  =========

      Weighted average number of shares outstanding    49,624    49,630    49,630    49,630
                                                      ======== ======== =========  =========

<CAPTION>
                                                                      2003
                                                      ---------------------------------------
                                                       First     Second    Third     Fourth
                                                      Quarter    Quarter   Quarter   Quarter
                                                      --------  --------- --------  ---------
                                                       (in thousands, except per share data)
      <S>                                             <C>       <C>       <C>       <C>
      Revenue                                         $12,613   $13,745   $30,437   $ 23,905
                                                      ========  ========= ========  =========

      Income from continuing operations               $ 5,772   $ 6,733   $15,711   $ 11,608
      Income from discontinued operations                  95        50        55         (6)
      Gain on sale of properties                        1,421        --     4,914         27
                                                      --------  --------- --------  ---------
      Net income                                      $ 7,288   $ 6,783   $20,680   $ 11,629
                                                      ========  ========= ========  =========

      Basic and diluted net income per share          $  0.30   $  0.21   $  0.42   $   0.23
                                                      ========  ========= ========  =========

      Weighted average number of shares outstanding    24,630    32,964    49,630     49,630
                                                      ========  ========= ========  =========
</TABLE>

Quarterly revenue amounts reported in 2004 and 2003 were reclassified to conform
to presentation for the year ended December 31, 2004. The reclassification was
related to Sponsored REIT income and expenses. The Company had previously
presented its proportionate share of Sponsored REIT revenues and expenses and
has reclassified those amounts to consolidate the real estate operations
activity from inception of the Sponsored REIT until the initiation of
syndication upon which the equity method of accounting is applied. These
reclassifications changed rental revenues, operating and maintenance expenses,
depreciation and amortization, other income and equity in earnings of
non-consolidated REITs. There was no change to income from continuing operations
or net income reported in any quarter of 2004 or 2003 as a result of these
reclassifications.


                                      F-27
<PAGE>

                                                                    SCHEDULE III

                        FRANKLIN STREET PROPERTIES CORP.
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                December 31, 2004

<TABLE>
<CAPTION>
                                                                      Initial Cost
                                                           ---------------------------------
                                                                                   Costs
                                                                                 Capitalized
                                                                     Buildings   (Disposals)
                                                                   Improvements  Subsequent
                                             Encumbrances               and          to
Description                                      (1)         Land    Equipment   Acquisition
-----------                                  ------------    ----    ---------   -----------
                                                             (in thousands)
<S>                                               <C>      <C>      <C>          <C>
Residential Apartments:
  Essex House, Houston, TX                        --       $ 2,920  $   9,367    $   711
  Silverside Plantation, Baton Rouge, LA          --         2,000     17,082        119
  Gael Apartments, Houston, TX                    --         2,796     16,127         --
  Merrywood Apartments, Katy, TX                  --         2,170     15,334         --

Commercial Properties:
  One Technology Drive, Peabody, MA               --         1,658     10,246       (450)
  NAOP, No. Andover, MA                           --         1,311      8,136        927
  Park Seneca, Charlotte, NC                      --         1,815      7,917        344
  4995 Patrick Henry, Santa Clara, CA             --         3,274      4,130         58
  Piedmont Center, Greenville, SC                 --         1,449      9,839      1,063
  Hillview Center, Milpitas, CA                   --         2,203      2,813          7
  Telecom Business Center, San Diego, CA          --         5,035     11,363        453
  Southfield Centre, Southfield, MI               --         4,344     11,455      1,153
  Blue Ravine, Folsom, CA                         --           846      5,450         59
  Bollman Place, Savage, MD                       --         1,585      4,121        109
  Austin N.W., Austin, TX                         --           708     10,494        622
  Gateway Crossing 95, Columbia, MD               --         4,453     15,931        411
  Forest Park, Charlotte, NC                      --         1,559      5,672         --
  10 Lyberty Way, Westford, MA                    --         1,315      8,862        404
  Centennial Center, Colorado Springs, CO         --         1,549     11,877        375
  Goldentop Technology Center, San Diego, CA      --         5,356     17,049         20
  Meadow Point, Chantilly, VA                     --         2,634     18,911         --
  Timberlake, Chesterfield, MO                    --         2,984     38,661          3
  Fair Lakes, Fairfax, VA                         --         4,383     33,976          1
  Northwest Point, Elk Grove Village, IL          --         2,914     26,295          9
  Federal Way, Federal Way, WA                    --         2,518     13,212         --
  Timberlake East, Chesterfield, MO               --         2,626     17,608         66
  Plaza Ridge, Herndon, VA                        --         4,210     25,640         --
  Park Ten, Houston, TX                           --         1,061     21,303        (29)
                                             ----------    -------  ---------    --------
                                                  --       $71,676  $ 398,871    $ 6,435
                                             ==========    =======  =========    ========

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


                                                         Buildings                         Total Costs,
                                                        Improvements                          Net of       Depreciable   Date of
                                                            and       Total   Accumulated   Accumulated        Life     Acquisition
Description                                      Land    Equipment     (2)   Depreciation  Depreciation       Years        (3)
-----------                                      ----    ---------    -----  ------------  ------------    -----------  -----------
                                                (in thousands)
<S>                                           <C>       <C>          <C>       <C>          <C>               <C>          <C>
Residential Apartments:
  Essex House, Houston, TX                    $  2,924  $  10,074    $12,998   $  4,091     $  8,907          5-27         1993
  Silverside Plantation, Baton Rouge, LA         2,021     17,180     19,201      3,743       15,458          5-27         1998
  Gael Apartments, Houston, TX                   2,796     16,127     18,923        928       17,995          5-27         2000
  Merrywood Apartments, Katy, TX                 2,170     15,334     17,504        883       16,621          5-27         2002

Commercial Properties:
  One Technology Drive, Peabody, MA              1,658      9,796     11,454      2,178        9,276          5-39         1995
  NAOP, No. Andover, MA                          1,311      9,063     10,374      2,506        7,868          5-39         1996
  Park Seneca, Charlotte, NC                     1,815      8,261     10,076      1,350        8,726          5-39         1997
  4995 Patrick Henry, Santa Clara, CA            3,274      4,188      7,462        723        6,739          5-39         1997
  Piedmont Center, Greenville, SC                1,449     10,902     12,351      1,930       10,421          5-39         1998
  Hillview Center, Milpitas, CA                  2,203      2,820      5,023        416        4,607          5-39         1999
  Telecom Business Center, San Diego, CA         5,035     11,816     16,851      1,714       15,137          5-39         1999
  Southfield Centre, Southfield, MI              4,344     12,608     16,952      1,591       15,361          5-39         1999
  Blue Ravine, Folsom, CA                          846      5,509      6,355        716        5,639          5-39         1999
  Bollman Place, Savage, MD                      1,585      4,230      5,815        527        5,288          5-39         1999
  Austin N.W., Austin, TX                          708     11,116     11,824      1,403       10,421          5-39         1999
  Gateway Crossing 95, Columbia, MD              4,019     16,776     20,795      2,084       18,711          5-39         1999
  Forest Park, Charlotte, NC                     1,559      5,672      7,231        230        7,001          5-39         1999
  10 Lyberty Way, Westford, MA                   1,315      9,266     10,581      1,074        9,507          5-39         2000
  Centennial Center, Colorado Springs, CO        1,549     12,252     13,801        504       13,297          5-39         2000
  Goldentop Technology Center, San Diego, CA     5,356     17,069     22,425        692       21,733          5-39         2000
  Meadow Point, Chantilly, VA                    2,634     18,911     21,545        768       20,777          5-39         2001
  Timberlake, Chesterfield, MO                   2,984     38,664     41,648      1,570       40,078          5-39         2001
  Fair Lakes, Fairfax, VA                        4,383     33,977     38,360      1,380       36,980          5-39         2001
  Northwest Point, Elk Grove Village, IL         2,914     26,304     29,218      1,067       28,151          5-39         2001
  Federal Way, Federal Way, WA                   2,518     13,212     15,730        537       15,193          5-39         2001
  Timberlake East, Chesterfield, MO              2,626     17,674     20,300        717       19,583          5-39         2002
  Plaza Ridge, Herndon, VA                       4,210     25,640     29,850      1,041       28,809          5-39         2002
  Park Ten, Houston, TX                          1,061     21,274     22,335        864       21,471          5-39         2002
                                              --------  ---------    --------  --------     --------
                                              $ 71,267  $ 405,715    $476,982  $ 37,227     $439,755
                                              ========  =========    ========  ========     ========
</TABLE>

(1)   There are no encumbrances on the above properties.
(2)   The aggregate cost for Federal Income Tax purposes is $471,353
(3)   Original date of acquisition by Sponsored Entity.


                                      F-28
<PAGE>

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

                                                  December 31,
                                     -------------------------------------
(in thousands)                           2004         2003         2002
==========================================================================

Real estate investments, at cost:
   Balance, beginning of year         $ 475,368    $ 195,275    $ 194,112
     Acquisitions                            --      298,425           --
     Improvements                         1,614        1,125        1,163
     Dispositions                            --      (19,457)          --
--------------------------------------------------------------------------

   Balance, end of year               $ 476,982    $ 475,368    $ 195,275
==========================================================================

Accumulated depreciation:
   Balance, beginning of year         $  25,836    $  21,999    $  17,419
     Depreciation                        11,391        7,786        4,580
     Dispositions                            --       (3,949)          --
--------------------------------------------------------------------------

   Balance, end of year               $  37,227    $  25,836    $  21,999
==========================================================================


                                      F-29