Fellow Stockholders

For the full year 2017, our Company's profitability as measured by funds from operations or FFO1, totaled approximately $111.4 million or $1.04 per share, an increase of approximately $5.1 million or $0.01 per share over the full year 2016. During the fourth quarter of 2017, FSP took advantage of a flattening yield curve and lengthened the average maturity of its debt stack as the Federal Reserve continued to move up shorter-term interest rates. In the process, the Company fixed interest rates on over 78% of its total debt while increasing its line of credit availability to about $522 million at December 31, 2017 from $220 million at December 31, 2016. These actions culminated with the closing of our first ever private placement of senior notes on December 20, 2017, and moved our weighted average debt maturity to approximately 4.5 years from 2.6 years. We estimate the weighted average interest rate on our debt will increase to 3.7% for 2018, assuming the effect of one Fed Fund rate increase in December 2017 and three anticipated Fed Fund rate increases in 2018, from a weighted average interest rate of approximately 3.0% in 2017. As we begin 2018, our fixed rate debt as a percentage of total debt is 78%, which is up from a weighted average of 59% in 2017. While this balance sheet action and anticipated Fed Fund rate increases will result in estimated increased borrowing costs of about $7 million in 2018, it provides better matching of longer-term, fixed cost capital characteristics with the longer-lived office assets we now own. At the same time, this action helps to reduce rising interest rate risk and other potential capital market disruptions. Over the past several years, our portfolio transition efforts have resulted in positioning a significant portion of our office property square footage into more urban and infill locations resulting in about 78% of our portfolio now being located within our five core markets of Atlanta, Dallas, Denver, Houston and Minneapolis. As of year-end 2017, the Company's portfolio of 34 office properties totaling approximately 9.8 million square feet was 89.7% leased, up from 88.7% leased as of the end of the third quarter 2017. FSP leased more square footage in the last two quarters of 2017 than in any six month period in its history.

US Map of locations

As 2018 begins, we are continuing to see the increased leasing momentum we experienced in the third and fourth quarters of 2017 and consequently are optimistic about the potential for improved occupancy during the course of the year. The energy sensitive markets of Houston and Denver that have struggled over the last few years now appear to be stabilizing. When combined with broader value-add opportunities at many of our recently acquired urban-infill properties, we believe these trends should contribute to more positive leasing outcomes in 2018 and 2019.

The transition of FSP's property portfolio from a suburban to a primarily urban orientation has generally resulted in higher leasing costs per square foot in exchange for longer leases and higher rents. With the anticipation of continued strong leasing of vacant space during 2018, we believe our net operating income, or NOI, from existing properties will continue to increase. While we can't be sure what our leasing volume and leasing costs will be in 2018 and 2019, our objective is to reach 92% to 94% stabilized "occupancy", which we believe could meaningfully increase the value of our property portfolio for stockholders. FSP is in a stronger financial position with more readily available liquidity than ever before to help it reach that objective.

Thank you for your continued support.

George J. Carter signature

George J. Carter

Chairman & Chief Executive Officer