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

Investment in Sponsored REITs:

At June 30, 2015 and December 31, 2014, the Company held a common stock interest in 9 and 10 Sponsored REITs, respectively. The Company holds a non-controlling preferred stock investment in two of these Sponsored REITs, FSP 303 East Wacker Drive Corp. (“East Wacker”) and FSP Grand Boulevard Corp. (“Grand Boulevard”), from which it continues to derive economic benefits and risks.

During the year ended December 31, 2014, properties owned by four Sponsored REITs were sold and, thereafter, liquidating distributions for their preferred shareholders were declared and issued. The Company held a mortgage loan with two of these entities secured by the property owned by FSP Galleria North Corp. (“Galleria”) and the property owned by FSP Highland Place I Corp. (“Highland”). The loan with Galleria in the principal amount of $13,880,000 was repaid from the proceeds of the sale and the loan with Highland in the principal amount of $3,395,000 was repaid from the proceeds of the sale.

During the six months ended June 30, 2015, a property owned by a Sponsored REIT was sold and, thereafter, liquidating distributions for their preferred shareholders were declared and issued.

Equity in losses of investment in non-consolidated REITs:

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

	Six Months Ended
	June 30,
(in thousands)	2015		2014
Equity in loss of East Wacker	$	309	$	960
Equity in loss of Grand Boulevard	51		76

	$	360	$	1,036

Equity in losses of investments in non-consolidated REITs is derived from the Company’s share of income or loss in the operations of those entities. The Company exercises influence over, but does not control these entities, and investments are accounted for using the equity method.

Equity in losses of East Wacker is derived from the Company’s preferred stock investment in the entity. In December 2007, the Company purchased 965.75 preferred shares or 43.7% of the outstanding preferred shares of East Wacker for $82,813,000 (which represented $96,575,000 at the offering price net of commissions of $7,726,000, loan fees of $5,553,000 and acquisition fees of $483,000 that were excluded).

Equity in losses of Grand Boulevard is derived from the Company’s preferred stock investment in the entity. In May 2009, the Company purchased 175.5 preferred shares or 27.0% of the outstanding preferred shares of Grand Boulevard for $15,049,000 (which represented $17,550,000 at the offering price net of commissions of $1,404,000, loan fees of $1,009,000 and acquisition fees of $88,000 that were excluded).

The Company recorded distributions of $54,000 from non-consolidated REITs during the six months ended June 30, 2015 and 2014.

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 $346,000 and $497,000 for the six months ended June 30, 2015 and 2014, respectively.

From time to time the Company may make secured loans (“Sponsored REIT Loans”) to Sponsored REITs in the form of mortgage loans or revolving lines of credit to fund construction costs, capital expenditures, leasing costs and for other purposes. The Company anticipates that each Sponsored REIT Loan will be repaid at maturity or earlier from long term financings of the underlying properties, cash flows from the underlying properties or some other capital event. Each Sponsored REIT Loan is secured by a mortgage on the underlying property and has a term of approximately one to three years, which may be extended from time to time by one year or longer. Except for the mortgage loan which bears interest at a fixed rate, advances under each Sponsored REIT Loan bear interest at a rate equal to the 30-day LIBOR rate plus an agreed upon amount of basis points and most advances also require a 50 basis point draw fee.

The following is a summary of the Sponsored REIT Loans outstanding as of June 30, 2015:

			Maximum		Amount						Interest
		Maturity	Amount		Drawn at		Interest		Draw		Rate at
(dollars in thousands)	Location	Date	of Loan		30-Jun-15		Rate (1)		Fee (2)		30-Jun-15
Sponsored REIT

Secured revolving lines of credit
FSP Satellite Place Corp.	Duluth, GA	31-Mar-17	$	5,500	$	5,500	L+4.4	%	0.5	%	4.58	%
FSP 1441 Main Street Corp.	Columbia, SC	31-Mar-16	10,800		9,000		L+4.4	%	0.5	%	4.58	%
FSP Energy Tower I Corp.	Houston, TX	30-Jun-17	20,000		8,600		L+5.0	%	0.5	%	5.18	%

Secured construction loan
FSP 385 Interlocken Development Corp.	Broomfield, CO	30-Apr-16	42,000		37,541		L+4.4	%	n/a		4.58	%

Mortgage loan secured by property
FSP Energy Tower I Corp.	Houston, TX	30-Jun-17	33,000		33,000		6.41	%	n/a		6.41	%


			$	111,300	$	93,641

(1)

The interest rate is 30-day LIBOR rate plus the additional rate indicated, otherwise a fixed rate.

(2)

The draw fee is a percentage of each new advance, and is paid at the time of each new draw.

The Company recognized interest income and fees from the Sponsored REIT Loans of approximately $2,539,000 and $2,816,000 for the six months ended June 30, 2015 and 2014, respectively.

Non-consolidated REITs:

The balance sheet data below for 2015 and 2014 includes the 9 and 10 Sponsored REITs the Company held an interest in as of June 30, 2015 and December 31, 2014, respectively. The operating data below for 2015 and 2014 include the operations of the 10 and 14 Sponsored REITs in which the Company held an interest in during the six months ended June 30, 2015 and 2014, respectively.

Summarized financial information for these Sponsored REITs is as follows:

	June 30,			December 31,
(in thousands)	2015			2014
Balance Sheet Data (unaudited):
Real estate, net	$	421,429		$	451,822
Other assets	101,701			127,259
Total liabilities	(198,575		)	(203,239		)

Shareholders’ equity	$	324,555		$	375,842

	For the Six Months Ended
	June 30,
(in thousands)	2015			2014
Operating Data (unaudited):
Rental revenues	$	28,174		$	23,305
Other revenues	25			14
Operating and maintenance expenses	(15,266		)	(11,746		)
Depreciation and amortization	(9,925		)	(7,677		)
Interest expense	(4,930		)	(3,431		)

Net income (loss)	$	(1,922	)	$	465