2015 Annual Report

Portfolio Transformation Underway

At FSP, we believe that the 2008 financial crisis, subsequent recession and changing U.S. population demographics have had a generational effect on the U.S. economy that includes among other things, a longer-lasting but slower growth upcycle than is typical. This, combined with a lack of significant U.S. Government policy-driven fiscal initiatives, and a distinct slowing of growth in the economies of many of our country’s largest trading partners, makes cyclical investing in suburban commodity office assets less attractive than longer-term ownership of urban infill and CBD properties.

This view of the U.S. and global economy has influenced us to initiate a strategic shift in the future composition of our property portfolio. We believe that positioning capital in Class “A” office properties located in dense amenity-rich infill and/or CBD environments possessing strong long-term employment growth drivers could better position our shareholders to participate in an extended appreciation cycle. In 2015, FSP emphasized as a key strategic focus, investment into such urban infill office properties within the strongest urban districts of our top five core markets of Atlanta, Dallas, Denver, Houston and Minneapolis. We believe these markets offer long-term macro-economic drivers that have the potential to grow employment over and above broader U.S. averages. At the same time, we are selectively selling our commodity suburban properties, both in our five core markets and in our non-core markets, when we believe value maximization can be achieved.

Consistent with this outlook, during 2015 FSP announced the disposition of Willow Bend Office Center in Plano, Texas; Eden Bluff Corporate Center in Eden Prairie, Minnesota; Park Seneca in Charlotte, North Carolina; and Montague Business Center in San Jose, California. All of these assets were commodity suburban properties that were sold at significant gains, and facilitated our reinvestment of those proceeds into our newest acquisition of Two Ravinia, a 442,000 square foot, multi-tenant office tower located in the Central Perimeter of Atlanta, Georgia.

As we look ahead, we are anticipating further dispositions of non-core/commodity properties and subsequent re-investment into urban/infill assets within our core markets. This process of recycling will likely span 2016 and into 2017. We are confident that this process will generate greater long-term property values and dividend returns for our shareholders.

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