EX-99.2 3 ex99-2.htm

Exhibit 99.2

|  | Supplemental Operating and Financial Data Fourth Quarter 2014

Franklin Street Properties Corp. ● 401 Edgewater Place ● Wakefield, MA 01880 ● (781) 557-1300

www.franklinstreetproperties.com

|  | Table of Contents

| Page |  |  | Page
Company Overview | 3 |  | Tenant Analysis and Leasing Activity |
|  |  | 20 Largest Tenants, Industry Profile | 18
Key Financial Data |  |  | 20 Largest Tenants with Annualized Rent and Remaining Term | 19
Financial Highlights | 4 |  | Leasing Activity | 20
Income Statements | 5 |  | Lease Expirations by Square Feet | 21
Balance Sheets | 6 |  | Lease Expirations with Annualized Rent per Square Foot | 22
Cash Flow Statements | 7 |  | Capital Expenditures | 23
Property Net Operating Income (NOI) | 8 |  |  |
|  |  | Transaction Activity | 24
Reconciliation |  |  |  |
FFO & AFFO | 9 |  | Loan Portfolio of Secured Real Estate | 25
EBITDA | 10 |  |  |
Property NOI | 11 |  | Net Asset Value Components | 26
Debt Summary | 12 |  | Appendix: Definitions of Non-GAAP Measures |
|  |  | FFO | 27
Capital Analysis | 13 |  | EBITDA and NOI | 28
|  |  | AFFO | 29
Owned and Managed Portfolio Overview | 14-17 |  | AFFO Comparison | 30

All financial information contained in this supplemental information package is unaudited. In addition, certain statements contained in this supplemental information package may be deemed to be forward-looking statements within the meaning of the federal securities laws. Although FSP believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. Factors that could cause actual results to differ materially from FSP’s current expectations include general economic conditions, uncertainties relating to fiscal policy, changes in government regulations, regulatory uncertainty, geopolitical events, local real estate conditions, the performance of properties that FSP has acquired or may acquire, the timely lease-up of properties and other risks, detailed from time to time in FSP’s SEC reports. FSP assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

December 31, 2014 | 2

|  | Company Overview

Overview

Franklin Street Properties Corp. (“FSP”, “we”, “our” or the “Company”) (NYSE MKT: FSP) is investing in institutional-quality office properties in the U.S. FSP’s strategy is to invest in select urban infill and central business district (CBD) properties, with primary emphasis on our top five markets of Atlanta, Dallas, Denver, Houston, and Minneapolis. FSP seeks value-oriented investments with an eye towards long-term growth and appreciation, as well as current income. FSP is a Maryland corporation that operates in a manner intended to qualify as a real estate investment trust (REIT) for federal income tax purposes. FSP’s real estate operations include property acquisitions and dispositions, short-term financing, leasing, development and asset management.

Our Business

As of December 31, 2014, the Company owned and operated a portfolio of real estate consisting of 38 properties, managed 10 Sponsored REITs and held five promissory notes secured by mortgages on real estate owned by Sponsored REITs. From time-to-time, the Company may acquire real estate, make additional secured loans or acquire one of its Sponsored REITs. The Company may also pursue, on a selective basis, the sale of its properties in order to take advantage of the value creation and demand for its properties, or for geographic or property specific reasons.

Management Team |  |
George J. Carter |  | Scott H. Carter
President, Chief Executive Officer |  | Executive Vice President, General
Chairman of the Board |  | Counsel and Assistant Secretary
Barbara J. Fournier |  | Jeffrey B. Carter
Executive Vice President, Chief Operating Officer, |  | Executive Vice President and
Treasurer, Secretary and Director |  | Chief Investment Officer
Janet Notopoulos |  | John G. Demeritt
Executive Vice President and Director |  | Executive Vice President and
|  | Chief Financial Officer

Inquiries

Inquires should be directed to: John Demeritt, CFO

877-686-9496 or InvestorRelations@franklinstreetproperties.com

Snapshot (as of December 31, 2014) |
Corporate Headquarters | Wakefield, MA
Fiscal Year-End | 31-Dec
Total Properties | 38
Total Square Feet | 9.6
Trading Symbol | FSP
Exchange | NYSE MKT
Common Shares Outstanding | 100,187,405
Quarterly Dividend | $0.19
Dividend Yield | 6.2%
Total Market Capitalization | $2.1 Billion
Insider Holdings | 10.2%

December 31, 2014 | 3

|  | Summary of Financial Highlights

(in thousands except per share amounts, SF & number of properties) |  |
|  | 31-Dec-14 |  | 30-Sep-14 |  | 30-Jun-14 |  | 31-Mar-14 |  | 31-Dec-13 |  | 30-Sep-13 |  | 30-Jun-13 |  | 31-Mar-13
Income Items: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Rental revenue |  | $ | 61,022 |  |  | $ | 59,728 |  |  | $ | 60,994 |  |  | $ | 61,597 |  |  | $ | 61,307 |  |  | $ | 56,760 |  |  | $ | 46,017 |  |  | $ | 42,842 |
Total revenue |  |  | 62,489 |  |  |  | 61,190 |  |  |  | 62,741 |  |  |  | 63,263 |  |  |  | 63,024 |  |  |  | 58,446 |  |  |  | 47,671 |  |  |  | 44,495 |
Adjusted EBITDA* |  |  | 33,182 |  |  |  | 33,973 |  |  |  | 34,359 |  |  |  | 35,175 |  |  |  | 35,645 |  |  |  | 31,862 |  |  |  | 26,074 |  |  |  | 24,712 |
Equity in losses of non-consolidated REITs |  |  | (269 | ) |  |  | (455 | ) |  |  | (552 | ) |  |  | (484 | ) |  |  | (543 | ) |  |  | (431 | ) |  |  | (196 | ) |  |  | (188 | )
Net income |  |  | 4,295 |  |  |  | 1,567 |  |  |  | 3,713 |  |  |  | 3,573 |  |  |  | 6,591 |  |  |  | 4,094 |  |  |  | 4,741 |  |  |  | 4,401 |
FFO* |  |  | 27,525 |  |  |  | 27,904 |  |  |  | 28,254 |  |  |  | 28,779 |  |  |  | 29,220 |  |  |  | 27,566 |  |  |  | 22,810 |  |  |  | 21,237 |
Per Share Data: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
EPS |  | $ | 0.04 |  |  | $ | 0.02 |  |  | $ | 0.04 |  |  | $ | 0.04 |  |  | $ | 0.07 |  |  | $ | 0.04 |  |  | $ | 0.05 |  |  | $ | 0.05 |
FFO* |  | $ | 0.27 |  |  | $ | 0.28 |  |  | $ | 0.28 |  |  | $ | 0.29 |  |  | $ | 0.29 |  |  | $ | 0.28 |  |  | $ | 0.25 |  |  | $ | 0.26 |
Weighted Average Shares (diluted) |  |  | 100,187 |  |  |  | 100,187 |  |  |  | 100,187 |  |  |  | 100,187 |  |  |  | 100,187 |  |  |  | 100,187 |  |  |  | 91,847 |  |  |  | 82,937 |
Closing share price |  | $ | 12.27 |  |  | $ | 11.22 |  |  | $ | 12.58 |  |  | $ | 12.60 |  |  | $ | 11.95 |  |  | $ | 12.74 |  |  | $ | 13.20 |  |  | $ | 14.62 |
Dividend |  | $ | 0.19 |  |  | $ | 0.19 |  |  | $ | 0.19 |  |  | $ | 0.19 |  |  | $ | 0.19 |  |  | $ | 0.19 |  |  | $ | 0.19 |  |  | $ | 0.19 |
Payout Ratio: |  |  | 69 | % |  |  | 68 | % |  |  | 67 | % |  |  | 66 | % |  |  | 66 | % |  |  | 69 | % |  |  | 77 | % |  |  | 74 | %
Balance Sheet Items: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate, net |  | $ | 1,524,307 |  |  | $ | 1,542,012 |  |  | $ | 1,549,963 |  |  | $ | 1,558,136 |  |  | $ | 1,568,338 |  |  | $ | 1,575,690 |  |  | $ | 1,280,252 |  |  | $ | 1,128,398 |
Other assets, net |  |  | 412,083 |  |  |  | 425,305 |  |  |  | 438,634 |  |  |  | 467,539 |  |  |  | 475,696 |  |  |  | 500,939 |  |  |  | 428,789 |  |  |  | 383,244 |
Total assets, net |  |  | 1,936,390 |  |  |  | 1,967,317 |  |  |  | 1,988,597 |  |  |  | 2,025,675 |  |  |  | 2,044,034 |  |  |  | 2,076,629 |  |  |  | 1,709,041 |  |  |  | 1,511,642 |
Total liabilities, net |  |  | 956,743 |  |  |  | 968,948 |  |  |  | 975,853 |  |  |  | 993,273 |  |  |  | 993,868 |  |  |  | 1,017,480 |  |  |  | 627,997 |  |  |  | 657,809 |
Shareholders' equity |  |  | 979,647 |  |  |  | 998,369 |  |  |  | 1,012,744 |  |  |  | 1,032,402 |  |  |  | 1,050,166 |  |  |  | 1,059,149 |  |  |  | 1,081,044 |  |  |  | 853,833 |
Market Capitalization and Debt: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total Market Capitalization (a) |  | $ | 2,117,299 |  |  | $ | 2,029,103 |  |  | $ | 2,176,858 |  |  | $ | 2,198,861 |  |  | $ | 2,123,739 |  |  | $ | 2,227,888 |  |  | $ | 1,903,974 |  |  | $ | 1,834,295 |
Total debt outstanding |  |  | 888,000 |  |  |  | 905,000 |  |  |  | 916,500 |  |  |  | 936,500 |  |  |  | 926,500 |  |  |  | 951,500 |  |  |  | 581,500 |  |  |  | 621,750 |
Debt to Total Market Capitalization |  |  | 41.9 | % |  |  | 44.6 | % |  |  | 42.1 | % |  |  | 42.6 | % |  |  | 43.6 | % |  |  | 42.7 | % |  |  | 30.5 | % |  |  | 33.9 | %
Debt to Adjusted EBITDA |  |  | 6.7 |  |  |  | 6.7 |  |  |  | 6.7 |  |  |  | 6.7 |  |  |  | 6.5 |  |  |  | 7.5 |  |  |  | 5.6 |  |  |  | 6.3 |
Owned Portfolio Leasing Statistics: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owned portfolio assets (includes asset held for sale before 12/31/13) |  |  | 38 |  |  |  | 39 |  |  |  | 39 |  |  |  | 39 |  |  |  | 39 |  |  |  | 40 |  |  |  | 38 |  |  |  | 37 |
Portfolio total SF |  |  | 9,580,057 |  |  |  | 9,690,361 |  |  |  | 9,686,215 |  |  |  | 9,686,055 |  |  |  | 9,685,285 |  |  |  | 9,807,339 |  |  |  | 8,529,752 |  |  |  | 7,856,859 |
Portfolio % leased |  |  | 92.8 | % |  |  | 93.3 | % |  |  | 94.1 | % |  |  | 94.5 | % |  |  | 94.1 | % |  |  | 93.8 | % |  |  | 94.4 | % |  |  | 94.4 | %

(a) |  | Total Market Capitalization is the closing share price multilplied by the number of shares outstanding plus total debt outstanding on that date.

* |  | See pages 9 & 10 for reconciliations of Net Income to FFO and Adjusted EBITDA, respectively, and the Appendix for Defintions of these Non-GAAP Measures beginning on page 27.

December 31, 2014 | 4

|  | Condensed Consolidated Income Statements ($ in thousands, except per share amounts)

|  |  |  |  |  |  |  |  |  | For the |  |  |  |  |  |  |  |  |  | For the
|  | For the Three Months Ended |  | Year Ended |  | For the Three Months Ended |  | Year Ended
|  | 31-Mar-14 |  | 30-Jun-14 |  | 30-Sep-14 |  | 31-Dec-14 |  | 31-Dec-14 |  | 31-Mar-13 |  | 30-Jun-13 |  | 30-Sep-13 |  | 31-Dec-13 |  | 31-Dec-13
Revenue: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Rental |  | $ | 61,597 |  |  | $ | 60,994 |  |  | $ | 59,728 |  |  | $ | 61,022 |  |  | $ | 243,341 |  |  | $ | 42,842 |  |  | $ | 46,017 |  |  | $ | 56,760 |  |  | $ | 61,307 |  |  | $ | 206,926 |
Related party revenue: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Management fees and interest income from loans |  |  | 1,643 |  |  |  | 1,671 |  |  |  | 1,462 |  |  |  | 1,465 |  |  |  | 6,241 |  |  |  | 1,622 |  |  |  | 1,642 |  |  |  | 1,665 |  |  |  | 1,717 |  |  |  | 6,646 |
Other |  |  | 23 |  |  |  | 76 |  |  |  | — |  |  |  | 2 |  |  |  | 101 |  |  |  | 31 |  |  |  | 12 |  |  |  | 21 |  |  |  | — |  |  |  | 64 |
Total revenue |  |  | 63,263 |  |  |  | 62,741 |  |  |  | 61,190 |  |  |  | 62,489 |  |  |  | 249,683 |  |  |  | 44,495 |  |  |  | 47,671 |  |  |  | 58,446 |  |  |  | 63,024 |  |  |  | 213,636 |
Expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate operating expenses |  |  | 15,071 |  |  |  | 14,995 |  |  |  | 15,632 |  |  |  | 16,334 |  |  |  | 62,032 |  |  |  | 10,770 |  |  |  | 11,116 |  |  |  | 13,991 |  |  |  | 15,223 |  |  |  | 51,100 |
Real estate taxes and insurance |  |  | 9,251 |  |  |  | 9,763 |  |  |  | 8,555 |  |  |  | 9,288 |  |  |  | 36,857 |  |  |  | 6,595 |  |  |  | 7,308 |  |  |  | 8,801 |  |  |  | 8,912 |  |  |  | 31,616 |
Depreciation and amortization |  |  | 24,300 |  |  |  | 23,563 |  |  |  | 24,878 |  |  |  | 23,174 |  |  |  | 95,915 |  |  |  | 15,781 |  |  |  | 16,919 |  |  |  | 22,163 |  |  |  | 23,976 |  |  |  | 78,839 |
Selling, general and administrative |  |  | 3,272 |  |  |  | 3,148 |  |  |  | 3,071 |  |  |  | 3,492 |  |  |  | 12,983 |  |  |  | 2,532 |  |  |  | 3,204 |  |  |  | 3,477 |  |  |  | 2,698 |  |  |  | 11,911 |
Interest |  |  | 7,176 |  |  |  | 6,891 |  |  |  | 6,883 |  |  |  | 6,483 |  |  |  | 27,433 |  |  |  | 4,208 |  |  |  | 4,174 |  |  |  | 5,474 |  |  |  | 7,198 |  |  |  | 21,054 |
Total expenses |  |  | 59,070 |  |  |  | 58,360 |  |  |  | 59,019 |  |  |  | 58,771 |  |  |  | 235,220 |  |  |  | 39,886 |  |  |  | 42,721 |  |  |  | 53,906 |  |  |  | 58,007 |  |  |  | 194,520 |
Income before interest income, equity in losses of non-consolidated REITs and taxes |  |  | 4,193 |  |  |  | 4,381 |  |  |  | 2,171 |  |  |  | 3,718 |  |  |  | 14,463 |  |  |  | 4,609 |  |  |  | 4,950 |  |  |  | 4,540 |  |  |  | 5,017 |  |  |  | 19,116 |
Interest income |  |  | 1 |  |  |  | 1 |  |  |  | — |  |  |  | 1 |  |  |  | 3 |  |  |  | 1 |  |  |  | 4 |  |  |  | 5 |  |  |  | 6 |  |  |  | 16 |
Equity in losses of non-consolidated REITs |  |  | (484 | ) |  |  | (552 | ) |  |  | (455 | ) |  |  | (269 | ) |  |  | (1,760 | ) |  |  | (188 | ) |  |  | (196 | ) |  |  | (431 | ) |  |  | (543 | ) |  |  | (1,358 | )
Gain on sale of property, less applicable income tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 940 |  |  |  | 940 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Income before taxes on income |  |  | 3,710 |  |  |  | 3,830 |  |  |  | 1,716 |  |  |  | 4,390 |  |  |  | 13,646 |  |  |  | 4,422 |  |  |  | 4,758 |  |  |  | 4,114 |  |  |  | 4,480 |  |  |  | 17,774 |
Income tax expense |  |  | 137 |  |  |  | 117 |  |  |  | 149 |  |  |  | 95 |  |  |  | 498 |  |  |  | 119 |  |  |  | 115 |  |  |  | 118 |  |  |  | 128 |  |  |  | 480 |
Income from continuing operations |  |  | 3,573 |  |  |  | 3,713 |  |  |  | 1,567 |  |  |  | 4,295 |  |  |  | 13,148 |  |  |  | 4,303 |  |  |  | 4,643 |  |  |  | 3,996 |  |  |  | 4,352 |  |  |  | 17,294 |
Income from discontinued operations |  |  | — |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | — |  |  |  | 98 |  |  |  | 98 |  |  |  | 98 |  |  |  | 81 |  |  |  | 375 |
Gain on sale of property, less applicable income tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,158 |  |  |  | 2,158 |
Net income |  | $ | 3,573 |  |  | $ | 3,713 |  |  | $ | 1,567 |  |  | $ | 4,295 |  |  | $ | 13,148 |  |  | $ | 4,401 |  |  | $ | 4,741 |  |  | $ | 4,094 |  |  | $ | 6,591 |  |  | $ | 19,827 |
Weighted average number of shares outstanding, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
basic and diluted |  |  | 100,187 |  |  |  | 100,187 |  |  |  | 100,187 |  |  |  | 100,187 |  |  |  | 100,187 |  |  |  | 82,937 |  |  |  | 91,847 |  |  |  | 100,187 |  |  |  | 100,187 |  |  |  | 93,855 |
Earnings per share, basic and diluted, attributable to: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Continuing operations |  | $ | 0.04 |  |  | $ | 0.04 |  |  | $ | 0.02 |  |  | $ | 0.04 |  |  | $ | 0.13 |  |  | $ | 0.05 |  |  | $ | 0.05 |  |  | $ | 0.04 |  |  | $ | 0.04 |  |  | $ | 0.18 |
Discontinued operations |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Gain on sale of property, less applicable income tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 0.03 |  |  |  | 0.03 |
Net income per share, basic and diluted |  | $ | 0.04 |  |  | $ | 0.04 |  |  | $ | 0.02 |  |  | $ | 0.04 |  |  | $ | 0.13 |  |  | $ | 0.05 |  |  | $ | 0.05 |  |  | $ | 0.04 |  |  | $ | 0.07 |  |  | $ | 0.21 |

December 31, 2014 | 5

|  | Condensed Consolidated Balance Sheets (in thousands)

|  | March 31, |  | June 30, |  | September 30, |  | December 31, |  | March 31, |  | June 30, |  | September 30, |  | December 31,
|  | 2014 |  | 2014 |  | 2014 |  | 2014 |  | 2013 |  | 2013 |  | 2013 |  | 2013
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Land |  | $ | 185,479 |  |  | $ | 185,479 |  |  | $ | 185,479 |  |  | $ | 183,930 |  |  | $ | 141,545 |  |  | $ | 157,879 |  |  | $ | 185,479 |  |  | $ | 185,479 |
Buildings and improvements |  |  | 1,605,808 |  |  |  | 1,609,747 |  |  |  | 1,613,699 |  |  |  | 1,604,984 |  |  |  | 1,175,743 |  |  |  | 1,320,703 |  |  |  | 1,599,519 |  |  |  | 1,603,941 |
Fixtures and equipment |  |  | 1,296 |  |  |  | 1,395 |  |  |  | 1,633 |  |  |  | 1,677 |  |  |  | 904 |  |  |  | 960 |  |  |  | 985 |  |  |  | 1,170 |
|  |  | 1,792,583 |  |  |  | 1,796,621 |  |  |  | 1,800,811 |  |  |  | 1,790,591 |  |  |  | 1,318,192 |  |  |  | 1,479,542 |  |  |  | 1,785,983 |  |  |  | 1,790,590 |
Less accumulated depreciation |  |  | 234,447 |  |  |  | 246,658 |  |  |  | 258,799 |  |  |  | 266,284 |  |  |  | 189,794 |  |  |  | 199,290 |  |  |  | 210,293 |  |  |  | 222,252 |
Real estate assets, net |  |  | 1,558,136 |  |  |  | 1,549,963 |  |  |  | 1,542,012 |  |  |  | 1,524,307 |  |  |  | 1,128,398 |  |  |  | 1,280,252 |  |  |  | 1,575,690 |  |  |  | 1,568,338 |
Acquired real estate leases, net |  |  | 172,262 |  |  |  | 161,519 |  |  |  | 149,019 |  |  |  | 138,714 |  |  |  | 102,274 |  |  |  | 129,226 |  |  |  | 194,893 |  |  |  | 183,454 |
Investment in non-consolidated REITs |  |  | 79,983 |  |  |  | 79,405 |  |  |  | 78,907 |  |  |  | 78,611 |  |  |  | 81,746 |  |  |  | 81,523 |  |  |  | 81,065 |  |  |  | 80,494 |
Assets held for sale |  |  | — |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 10,431 |  |  |  | 10,286 |  |  |  | 10,143 |  |  |  | — |
Cash and cash equivalents |  |  | 20,031 |  |  |  | 18,455 |  |  |  | 15,930 |  |  |  | 7,519 |  |  |  | 17,282 |  |  |  | 24,962 |  |  |  | 25,539 |  |  |  | 19,623 |
Restricted cash |  |  | 688 |  |  |  | 728 |  |  |  | 707 |  |  |  | 742 |  |  |  | 583 |  |  |  | 602 |  |  |  | 623 |  |  |  | 643 |
Tenant rent receivables, net |  |  | 6,035 |  |  |  | 2,867 |  |  |  | 2,865 |  |  |  | 4,733 |  |  |  | 2,357 |  |  |  | 2,331 |  |  |  | 6,029 |  |  |  | 5,102 |
Straight-line rent receivable, net |  |  | 44,392 |  |  |  | 46,021 |  |  |  | 46,737 |  |  |  | 47,021 |  |  |  | 36,210 |  |  |  | 37,865 |  |  |  | 40,086 |  |  |  | 42,261 |
Prepaid expenses and other assets |  |  | 9,954 |  |  |  | 9,716 |  |  |  | 9,768 |  |  |  | 10,901 |  |  |  | 10,545 |  |  |  | 12,532 |  |  |  | 11,846 |  |  |  | 11,215 |
Related party mortgage loan receivable |  |  | 101,916 |  |  |  | 88,436 |  |  |  | 88,436 |  |  |  | 93,641 |  |  |  | 96,896 |  |  |  | 97,846 |  |  |  | 98,846 |  |  |  | 99,746 |
Other assets: derivative asset |  |  | 4,801 |  |  |  | 2,626 |  |  |  | 4,582 |  |  |  | 3,020 |  |  |  | — |  |  |  | 6,739 |  |  |  | 4,365 |  |  |  | 5,321 |
Deferred leasing commissions, net |  |  | 27,477 |  |  |  | 28,861 |  |  |  | 28,354 |  |  |  | 27,181 |  |  |  | 24,920 |  |  |  | 24,877 |  |  |  | 27,504 |  |  |  | 27,837 |
Total assets |  | $ | 2,025,675 |  |  | $ | 1,988,597 |  |  | $ | 1,967,317 |  |  | $ | 1,936,390 |  |  | $ | 1,511,642 |  |  | $ | 1,709,041 |  |  | $ | 2,076,629 |  |  | $ | 2,044,034 |
Liabilities and Stockholders’ Equity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bank note payable |  | $ | 316,500 |  |  | $ | 296,500 |  |  | $ | 285,000 |  |  | $ | 268,000 |  |  | $ | 221,750 |  |  | $ | 181,500 |  |  | $ | 331,500 |  |  | $ | 306,500 |
Term loan payable |  |  | 620,000 |  |  |  | 620,000 |  |  |  | 620,000 |  |  |  | 620,000 |  |  |  | 400,000 |  |  |  | 400,000 |  |  |  | 620,000 |  |  |  | 620,000 |
Accounts payable and accrued expenses |  |  | 34,390 |  |  |  | 34,590 |  |  |  | 40,228 |  |  |  | 42,561 |  |  |  | 25,493 |  |  |  | 29,971 |  |  |  | 39,907 |  |  |  | 44,137 |
Accrued compensation |  |  | 1,027 |  |  |  | 2,052 |  |  |  | 2,863 |  |  |  | 3,758 |  |  |  | 540 |  |  |  | 1,677 |  |  |  | 2,432 |  |  |  | 2,985 |
Tenant security deposits |  |  | 4,258 |  |  |  | 4,259 |  |  |  | 4,331 |  |  |  | 4,248 |  |  |  | 2,474 |  |  |  | 3,074 |  |  |  | 3,891 |  |  |  | 4,027 |
Other liabilities: derivative termination value |  |  | 3,825 |  |  |  | 5,985 |  |  |  | 4,847 |  |  |  | 7,268 |  |  |  | 778 |  |  |  | — |  |  |  | 4,579 |  |  |  | 2,044 |
Acquired unfavorable real estate leases, net |  |  | 13,273 |  |  |  | 12,467 |  |  |  | 11,679 |  |  |  | 10,908 |  |  |  | 6,774 |  |  |  | 11,775 |  |  |  | 15,171 |  |  |  | 14,175 |
Total liabilities |  |  | 993,273 |  |  |  | 975,853 |  |  |  | 968,948 |  |  |  | 956,743 |  |  |  | 657,809 |  |  |  | 627,997 |  |  |  | 1,017,480 |  |  |  | 993,868 |
Commitments and contingencies |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Stockholders’ Equity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Preferred stock |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Common stock |  |  | 10 |  |  |  | 10 |  |  |  | 10 |  |  |  | 10 |  |  |  | 8 |  |  |  | 10 |  |  |  | 10 |  |  |  | 10 |
Additional paid-in capital |  |  | 1,273,556 |  |  |  | 1,273,556 |  |  |  | 1,273,556 |  |  |  | 1,273,556 |  |  |  | 1,042,876 |  |  |  | 1,273,585 |  |  |  | 1,273,585 |  |  |  | 1,273,556 |
Accumulated other comprehensive income (loss) |  |  | 976 |  |  |  | (3,359 | ) |  |  | (265 | ) |  |  | (4,248 | ) |  |  | (778 | ) |  |  | 6,739 |  |  |  | (214 | ) |  |  | 3,277 |
Accumulated distributions in excess of accumulated earnings |  |  | (242,140 | ) |  |  | (257,463 | ) |  |  | (274,932 | ) |  |  | (289,671 | ) |  |  | (188,273 | ) |  |  | (199,290 | ) |  |  | (214,232 | ) |  |  | (226,677 | )
Total stockholders’ equity |  |  | 1,032,402 |  |  |  | 1,012,744 |  |  |  | 998,369 |  |  |  | 979,647 |  |  |  | 853,833 |  |  |  | 1,081,044 |  |  |  | 1,059,149 |  |  |  | 1,050,166 |
Total liabilities and stockholders’ equity |  | $ | 2,025,675 |  |  | $ | 1,988,597 |  |  | $ | 1,967,317 |  |  | $ | 1,936,390 |  |  | $ | 1,511,642 |  |  | $ | 1,709,041 |  |  | $ | 2,076,629 |  |  | $ | 2,044,034 |

December 31, 2014 | 6

|  | Condensed Consolidated Statements of Cash Flows (in thousands)

|  | Twelve Months ended December 31
|  | 2014 |  | 2013 |  | 2012
Cash flows from operating activities: |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 13,148 |  |  | $ | 19,827 |  |  | $ | 7,633 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization expense |  |  | 97,916 |  |  |  | 81,267 |  |  |  | 57,500 |
Amortization of above market lease |  |  | 635 |  |  |  | (365 | ) |  |  | 71 |
Gain (loss) on sale of properties, less applicable income tax |  |  | (940 | ) |  |  | (2,158 | ) |  |  | 14,826 |
Equity in earnings (losses) from non-consolidated REITs |  |  | 1,760 |  |  |  | 1,358 |  |  |  | (2,033 | )
Distributions from non-consolidated REITs |  |  | — |  |  |  | — |  |  |  | 705 |
Increase in allowance for doubtful accounts |  |  | 275 |  |  |  | (1,250 | ) |  |  | 65 |
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Restricted cash |  |  | (99 | ) |  |  | (68 | ) |  |  | (82 | )
Tenant rent receivables |  |  | 94 |  |  |  | (2,103 | ) |  |  | (354 | )
Straight-line rents |  |  | (4,737 | ) |  |  | (5,782 | ) |  |  | (4,464 | )
Lease acquisition costs |  |  | (440 | ) |  |  | (1,146 | ) |  |  | (2,520 | )
Prepaid expenses and other assets |  |  | 700 |  |  |  | (1,547 | ) |  |  | (328 | )
Accounts payable and accrued expenses |  |  | 206 |  |  |  | 11,137 |  |  |  | 3,717 |
Accrued compensation |  |  | 773 |  |  |  | 445 |  |  |  | 318 |
Tenant security deposits |  |  | 222 |  |  |  | 1,538 |  |  |  | 481 |
Payment of deferred leasing commissions |  |  | (6,347 | ) |  |  | (9,125 | ) |  |  | (5,179 | )
Net cash provided by operating activities |  |  | 103,166 |  |  |  | 92,028 |  |  |  | 70,356 |
Cash flows from investing activities: |  |  |  |  |  |  |  |  |  |  |  |
Property acquisitions |  |  | — |  |  |  | (454,447 | ) |  |  | (167,812 | )
Property improvements, fixtures and equipment |  |  | (18,370 | ) |  |  | (19,120 | ) |  |  | (15,824 | )
Office computers and furniture |  |  | (191 | ) |  |  | (355 | ) |  |  | (232 | )
Acquired real estate leases |  |  | — |  |  |  | (100,143 | ) |  |  | (37,302 | )
Investment in non-consolidated REITs |  |  | — |  |  |  | 4,858 |  |  |  | (1 | )
Distributions in excess of earnings from non-consolidated REITs |  |  | 107 |  |  |  | 108 |  |  |  | 2,105 |
Investment in related party mortgage loan receivable |  |  | (11,170 | ) |  |  | (8,200 | ) |  |  | (74,580 | )
Repayment of related party mortgage loan receivable |  |  | 17,275 |  |  |  | 2,350 |  |  |  | 121,200 |
Changes in deposits on real estate assets |  |  | — |  |  |  | — |  |  |  | — |
Investment in assets held for syndication, net |  |  | — |  |  |  | — |  |  |  | — |
Proceeds received on sales of real estate assets |  |  | 14,192 |  |  |  | 12,301 |  |  |  | 157 |
Net cash provided by (used in) investing activities |  |  | 1,843 |  |  |  | (562,648 | ) |  |  | (172,289 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |  |  |  |  |
Distributions to stockholders |  |  | (76,142 | ) |  |  | (69,588 | ) |  |  | (63,032 | )
Proceeds (costs) from equity offering, net |  |  | — |  |  |  | 230,682 |  |  |  | — |
Borrowings under bank note payable |  |  | 15,000 |  |  |  | 160,000 |  |  |  | 294,750 |
Borrowings (repayments) under Revolver |  |  | (53,500 | ) |  |  | (70,250 | ) |  |  | (527,000 | )
Borrowing (repayment) of term loan payable, net |  |  | — |  |  |  | 220,000 |  |  |  | 400,000 |
Deferred Financing Costs |  |  | (2,471 | ) |  |  | (1,868 | ) |  |  | (5,331 | )
Swap termination payment |  |  | — |  |  |  | — |  |  |  | — |
Net cash provided by (used in) financing activities |  |  | (117,113 | ) |  |  | 468,976 |  |  |  | 99,387 |
Net decreases in cash and cash equivalents |  |  | (12,104 | ) |  |  | (1,644 | ) |  |  | (2,546 | )
Cash and cash equivalents, beginning of period |  |  | 19,623 |  |  |  | 21,267 |  |  |  | 23,813 |
Cash and cash equivalents, end of period |  | $ | 7,519 |  |  | $ | 19,623 |  |  | $ | 21,267 |

December 31, 2014 | 7

|  | Property Net Operating Income (NOI)* with Same Store comparison (in thousands)

(in thousands) |  | Rentable |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Square |  |  |  |  |  |  |  |  |  | Year |  |  |  |  |  |  |  |  |  | Year |  |  |  |
|  | Feet |  | Three Months Ended: |  | Ended |  | Three Months Ended: |  | Ended |  | Inc |  | %
Region |  | or RSF |  | 31-Mar-14 |  | 30-Jun-14 |  | 30-Sep-14 |  | 31-Dec-14 |  | 31-Dec-14 |  | 31-Mar-13 |  | 30-Jun-13 |  | 30-Sep-13 |  | 31-Dec-13 |  | 31-Dec-13 |  | (Dec) |  | Change
East |  |  | 1,442 |  |  | $ | 4,727 |  |  | $ | 4,786 |  |  | $ | 4,758 |  |  | $ | 4,702 |  |  | $ | 18,973 |  |  | $ | 4,756 |  |  | $ | 5,440 |  |  | $ | 4,914 |  |  | $ | 5,150 |  |  | $ | 20,260 |  |  | $ | (1,287 | ) |  |  | -6.4% |
MidWest |  |  | 1,682 |  |  |  | 5,107 |  |  |  | 5,062 |  |  |  | 5,187 |  |  |  | 4,857 |  |  |  | 20,213 |  |  |  | 4,839 |  |  |  | 5,008 |  |  |  | 4,944 |  |  |  | 5,074 |  |  |  | 19,865 |  |  |  | 348 |  |  |  | 1.8% |
South |  |  | 3,525 |  |  |  | 14,135 |  |  |  | 13,694 |  |  |  | 13,720 |  |  |  | 13,803 |  |  |  | 55,352 |  |  |  | 13,226 |  |  |  | 13,297 |  |  |  | 13,199 |  |  |  | 13,410 |  |  |  | 53,132 |  |  |  | 2,220 |  |  |  | 4.2% |
West |  |  | 977 |  |  |  | 2,311 |  |  |  | 2,497 |  |  |  | 2,457 |  |  |  | 2,454 |  |  |  | 9,719 |  |  |  | 2,093 |  |  |  | 1,865 |  |  |  | 2,186 |  |  |  | 2,445 |  |  |  | 8,589 |  |  |  | 1,130 |  |  |  | 13.2% |
Same Store |  |  | 7,626 |  |  |  | 26,280 |  |  |  | 26,039 |  |  |  | 26,122 |  |  |  | 25,816 |  |  |  | 104,257 |  |  |  | 24,914 |  |  |  | 25,610 |  |  |  | 25,243 |  |  |  | 26,079 |  |  |  | 101,846 |  |  |  | 2,411 |  |  |  | 2.4% |
Acquisitions |  |  | 1,954 |  |  |  | 10,037 |  |  |  | 9,623 |  |  |  | 9,059 |  |  |  | 9,078 |  |  |  | 37,797 |  |  |  | — |  |  |  | 1,203 |  |  |  | 7,843 |  |  |  | 10,186 |  |  |  | 19,232 |  |  |  | 18,565 |  |  |  | 14.9% |
Property NOI from the portfolio |  |  | 9,580 |  |  |  | 36,317 |  |  |  | 35,662 |  |  |  | 35,181 |  |  |  | 34,894 |  |  |  | 142,054 |  |  |  | 24,914 |  |  |  | 26,813 |  |  |  | 33,086 |  |  |  | 36,265 |  |  |  | 121,078 |  |  |  | 20,976 |  |  |  | 17.3% |
Property NOI on assets sold |  |  |  |  |  |  | 256 |  |  |  | 264 |  |  |  | 272 |  |  |  | 207 |  |  |  | 999 |  |  |  | 510 |  |  |  | 505 |  |  |  | 507 |  |  |  | 340 |  |  |  | 1,862 |  |  |  | (863 | ) |  |  | -0.8% |
Property NOI |  |  |  |  |  | $ | 36,573 |  |  | $ | 35,926 |  |  | $ | 35,453 |  |  | $ | 35,101 |  |  | $ | 143,053 |  |  | $ | 25,424 |  |  | $ | 27,318 |  |  | $ | 33,593 |  |  | $ | 36,605 |  |  | $ | 122,940 |  |  | $ | 20,113 |  |  |  | 16.4% |
Same Store |  |  |  |  |  | $ | 26,280 |  |  | $ | 26,039 |  |  | $ | 26,122 |  |  | $ | 25,816 |  |  | $ | 104,257 |  |  | $ | 24,914 |  |  | $ | 25,610 |  |  | $ | 25,243 |  |  | $ | 26,079 |  |  | $ | 101,846 |  |  | $ | 2,411 |  |  |  | 2.4% |
Less Nonrecurring |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Items in NOI (a) |  |  |  |  |  |  | 707 |  |  |  | 287 |  |  |  | 173 |  |  |  | 56 |  |  |  | 1,223 |  |  |  | 63 |  |  |  | 557 |  |  |  | — |  |  |  | 378 |  |  |  | 998 |  |  |  | 225 |  |  |  | -0.2% |
Comparative |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Same Store |  |  |  |  |  | $ | 25,573 |  |  | $ | 25,752 |  |  | $ | 25,949 |  |  | $ | 25,760 |  |  | $ | 103,034 |  |  | $ | 24,851 |  |  | $ | 25,053 |  |  | $ | 25,243 |  |  | $ | 25,701 |  |  | $ | 100,848 |  |  | $ | 2,186 |  |  |  | 2.2% |

| (a) | Nonrecurring Items in NOI include proceeds from bankruptcies, lease termination fees or other significant nonrecurring income or expenses, which may affect comparability.

| * | See page 11 for a reconciliation of Net Income to Property NOI and the Appendix for Definitions of Non-GAAP Measures beginning on page 27. Property NOI Excludes NOI from investments in and interest income from secured loans to non-consolidated REITs.

December 31, 2014 | 8

|  | FFO & AFFO Reconciliation (in thousands, except per share amounts)

|  |  |  |  |  |  |  |  |  | For the |  |  |  |  |  |  |  |  |  | For the
|  | For the Three Months Ended |  | Year Ended |  | For the Three Months Ended |  | Year Ended
|  | 31-Mar-14 |  | 30-Jun-14 |  | 30-Sep-14 |  | 31-Dec-14 |  | 31-Dec-14 |  | 31-Mar-13 |  | 30-Jun-13 |  | 30-Sep-13 |  | 31-Dec-13 |  | 31-Dec-13
Net income |  | $ | 3,573 |  |  | $ | 3,713 |  |  | $ | 1,567 |  |  | $ | 4,295 |  |  | $ | 13,148 |  |  | $ | 4,401 |  |  | $ | 4,741 |  |  | $ | 4,094 |  |  | $ | 6,591 |  |  | $ | 19,827 |
Gain (loss) on sale, less applicable income tax |  |  | — |  |  |  |  |  |  |  |  |  |  |  | (940 | ) |  |  | (940 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2,158 | ) |  |  | (2,158 | )
GAAP income from non-consolidated REITs |  |  | 484 |  |  |  | 552 |  |  |  | 455 |  |  |  | 269 |  |  |  | 1,760 |  |  |  | 188 |  |  |  | 196 |  |  |  | 431 |  |  |  | 543 |  |  |  | 1,358 |
FFO from non-consolidated REITs |  |  | 419 |  |  |  | 351 |  |  |  | 508 |  |  |  | 652 |  |  |  | 1,930 |  |  |  | 647 |  |  |  | 696 |  |  |  | 459 |  |  |  | 346 |  |  |  | 2,148 |
Depreciation & amortization |  |  | 24,289 |  |  |  | 23,638 |  |  |  | 25,374 |  |  |  | 23,249 |  |  |  | 96,550 |  |  |  | 15,984 |  |  |  | 17,044 |  |  |  | 22,176 |  |  |  | 23,886 |  |  |  | 79,090 |
NAREIT FFO* |  |  | 28,765 |  |  |  | 28,254 |  |  |  | 27,904 |  |  |  | 27,525 |  |  |  | 112,448 |  |  |  | 21,220 |  |  |  | 22,677 |  |  |  | 27,160 |  |  |  | 29,208 |  |  |  | 100,265 |
Acquisition costs |  |  | 14 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 14 |  |  |  | 17 |  |  |  | 133 |  |  |  | 406 |  |  |  | 12 |  |  |  | 568 |
Funds From Operations (FFO)* |  | $ | 28,779 |  |  | $ | 28,254 |  |  | $ | 27,904 |  |  | $ | 27,525 |  |  | $ | 112,462 |  |  | $ | 21,237 |  |  | $ | 22,810 |  |  | $ | 27,566 |  |  | $ | 29,220 |  |  | $ | 100,833 |
Adjusted Funds From Operations (AFFO)* |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Funds From Operations (FFO)* |  |  | 28,779 |  |  |  | 28,254 |  |  |  | 27,904 |  |  |  | 27,525 |  |  |  | 112,462 |  |  |  | 21,237 |  |  |  | 22,810 |  |  |  | 27,566 |  |  |  | 29,220 |  |  |  | 100,833 |
Reverse FFO from non-consolidated REITs |  |  | (419 | ) |  |  | (351 | ) |  |  | (508 | ) |  |  | (652 | ) |  |  | (1,930 | ) |  |  | (647 | ) |  |  | (696 | ) |  |  | (459 | ) |  |  | (346 | ) |  |  | (2,148 | )
Distributions from non-consolidated REITs |  |  | 27 |  |  |  | 27 |  |  |  | 27 |  |  |  | 26 |  |  |  | 107 |  |  |  | 27 |  |  |  | 27 |  |  |  | 27 |  |  |  | 26 |  |  |  | 107 |
Amortization of deferred financing costs |  |  | 499 |  |  |  | 499 |  |  |  | 498 |  |  |  | 506 |  |  |  | 2,002 |  |  |  | 429 |  |  |  | 429 |  |  |  | 456 |  |  |  | 499 |  |  |  | 1,813 |
Straight-line rent |  |  | (1,783 | ) |  |  | (1,541 | ) |  |  | (714 | ) |  |  | (698 | ) |  |  | (4,736 | ) |  |  | (657 | ) |  |  | (1,186 | ) |  |  | (2,078 | ) |  |  | (1,862 | ) |  |  | (5,783 | )
Tenant improvements |  |  | (1,132 | ) |  |  | (1,837 | ) |  |  | (2,612 | ) |  |  | (4,244 | ) |  |  | (9,825 | ) |  |  | (1,724 | ) |  |  | (5,094 | ) |  |  | (4,594 | ) |  |  | (2,993 | ) |  |  | (14,405 | )
Leasing commissions |  |  | (1,080 | ) |  |  | (2,786 | ) |  |  | (577 | ) |  |  | (1,405 | ) |  |  | (5,848 | ) |  |  | (2,812 | ) |  |  | (909 | ) |  |  | (3,821 | ) |  |  | (1,498 | ) |  |  | (9,040 | )
Non-investment capex |  |  | (364 | ) |  |  | (1,621 | ) |  |  | (700 | ) |  |  | (851 | ) |  |  | (3,536 | ) |  |  | (482 | ) |  |  | (707 | ) |  |  | (498 | ) |  |  | (1,179 | ) |  |  | (2,866 | )
Adjusted Funds From Operations (AFFO)* |  | $ | 24,527 |  |  | $ | 20,644 |  |  | $ | 23,318 |  |  | $ | 20,207 |  |  | $ | 88,696 |  |  | $ | 15,371 |  |  | $ | 14,674 |  |  | $ | 16,599 |  |  | $ | 21,867 |  |  | $ | 68,511 |
Per Share Data: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
EPS |  | $ | 0.04 |  |  | $ | 0.04 |  |  | $ | 0.02 |  |  | $ | 0.04 |  |  | $ | 0.13 |  |  | $ | 0.05 |  |  | $ | 0.05 |  |  | $ | 0.04 |  |  | $ | 0.07 |  |  | $ | 0.21 |
FFO* |  |  | 0.29 |  |  |  | 0.28 |  |  |  | 0.28 |  |  |  | 0.27 |  |  |  | 1.12 |  |  |  | 0.26 |  |  |  | 0.25 |  |  |  | 0.28 |  |  |  | 0.29 |  |  |  | 1.07 |
AFFO* |  |  | 0.24 |  |  |  | 0.21 |  |  |  | 0.23 |  |  |  | 0.20 |  |  |  | 0.89 |  |  |  | 0.19 |  |  |  | 0.16 |  |  |  | 0.17 |  |  |  | 0.22 |  |  |  | 0.73 |
Weighted Average Shares (basic and diluted) |  |  | 100,187 |  |  |  | 100,187 |  |  |  | 100,187 |  |  |  | 100,187 |  |  |  | 100,187 |  |  |  | 82,937 |  |  |  | 91,847 |  |  |  | 100,187 |  |  |  | 100,187 |  |  |  | 93,855 |

* See the Appendix for Definitions of these Non-GAAP Measures beginning on page 27.

December 31, 2014 | 9

|  | EBITDA Reconciliation (in thousands, except ratio amounts)

|  | For the Three Months Ended |  | Year Ended |  | For the Three Months Ended |  | Year Ended
|  | 31-Mar-14 |  | 30-Jun-14 |  | 30-Sep-14 |  | 31-Dec-14 |  | 31-Dec-14 |  | 31-Mar-13 |  | 30-Jun-13 |  | 30-Sep-13 |  | 31-Dec-13 |  | 31-Dec-13
Net income |  | $ | 3,573 |  |  | $ | 3,713 |  |  | $ | 1,567 |  |  | $ | 4,295 |  |  | $ | 13,148 |  |  | $ | 4,401 |  |  | $ | 4,741 |  |  | $ | 4,094 |  |  | $ | 6,591 |  |  | $ | 19,827 |
Interest expense |  |  | 7,176 |  |  |  | 6,891 |  |  |  | 6,883 |  |  |  | 6,483 |  |  |  | 27,433 |  |  |  | 4,208 |  |  |  | 4,174 |  |  |  | 5,474 |  |  |  | 7,198 |  |  |  | 21,054 |
Depreciation and amortization |  |  | 24,289 |  |  |  | 23,638 |  |  |  | 25,374 |  |  |  | 23,249 |  |  |  | 96,550 |  |  |  | 15,984 |  |  |  | 17,044 |  |  |  | 22,176 |  |  |  | 23,886 |  |  |  | 79,090 |
Income taxes |  |  | 137 |  |  |  | 117 |  |  |  | 149 |  |  |  | 95 |  |  |  | 498 |  |  |  | 119 |  |  |  | 115 |  |  |  | 118 |  |  |  | 128 |  |  |  | 480 |
EBITDA |  |  | 35,175 |  |  |  | 34,359 |  |  |  | 33,973 |  |  |  | 34,122 |  |  |  | 137,629 |  |  |  | 24,712 |  |  |  | 26,074 |  |  |  | 31,862 |  |  |  | 37,803 |  |  |  | 120,451 |
Excluding (gain) loss on sale, less applicable income tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (940 | ) |  |  | (940 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2,158 | ) |  |  | (2,158 | )
Adjusted EBITDA |  | $ | 35,175 |  |  | $ | 34,359 |  |  | $ | 33,973 |  |  | $ | 33,182 |  |  | $ | 136,689 |  |  | $ | 24,712 |  |  | $ | 26,074 |  |  | $ | 31,862 |  |  | $ | 35,645 |  |  | $ | 118,293 |
Interest expense |  | $ | 7,176 |  |  | $ | 6,891 |  |  | $ | 6,883 |  |  | $ | 6,483 |  |  | $ | 27,433 |  |  | $ | 4,208 |  |  | $ | 4,174 |  |  | $ | 5,474 |  |  | $ | 7,198 |  |  | $ | 21,054 |
Scheduled principal payments |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Interest and scheduled principal payments |  | $ | 7,176 |  |  | $ | 6,891 |  |  | $ | 6,883 |  |  | $ | 6,483 |  |  | $ | 27,433 |  |  | $ | 4,208 |  |  | $ | 4,174 |  |  | $ | 5,474 |  |  | $ | 7,198 |  |  | $ | 21,054 |
Interest coverage ratio |  |  | 4.90 |  |  |  | 4.99 |  |  |  | 4.94 |  |  |  | 5.12 |  |  |  | 4.98 |  |  |  | 5.87 |  |  |  | 6.25 |  |  |  | 5.82 |  |  |  | 4.95 |  |  |  | 5.62 |
Debt service coverage ratio |  |  | 4.90 |  |  |  | 4.99 |  |  |  | 4.94 |  |  |  | 5.12 |  |  |  | 4.98 |  |  |  | 5.87 |  |  |  | 6.25 |  |  |  | 5.82 |  |  |  | 4.95 |  |  |  | 5.62 |
Debt |  | $ | 936,500 |  |  | $ | 916,500 |  |  | $ | 905,000 |  |  | $ | 888,000 |  |  |  |  |  |  | $ | 621,750 |  |  | $ | 581,500 |  |  | $ | 951,500 |  |  | $ | 926,500 |  |  |  |  |
Adjusted EBITDA |  |  | 35,175 |  |  |  | 34,359 |  |  |  | 33,973 |  |  |  | 33,182 |  |  |  |  |  |  |  | 24,712 |  |  |  | 26,074 |  |  |  | 31,862 |  |  |  | 35,645 |  |  |  |  |
Annualized |  |  | 140,700 |  |  |  | 137,436 |  |  |  | 135,892 |  |  |  | 132,728 |  |  |  |  |  |  |  | 98,848 |  |  |  | 104,296 |  |  |  | 127,448 |  |  |  | 142,580 |  |  |  |  |
Debt-to-EBITDA |  |  | 6.7 |  |  |  | 6.7 |  |  |  | 6.7 |  |  |  | 6.7 |  |  |  |  |  |  |  | 6.3 |  |  |  | 5.6 |  |  |  | 7.5 |  |  |  | 6.5 |  |  |  |  |

* See the Appendix for Definitions of these Non-GAAP Measures beginning on page 27. Amounts in the EBITDA reconciliation do not reflect our proportionate share of interest expense, depreciation, amortization , income taxes, gains or losses on sales and debt from our investments in non-consolidated REITs , which are accounted for under the equity method.

December 31, 2014 | 10

|  | Reconciliation of Net Income to Property NOI* (in thousands)

Reconciliation to Net income |  |  |  |  |  |  |  |  |  | Year |  |  |  |  |  |  |  |  |  | Year
|  |  |  | Three Months Ended: |  |  |  | Ended |  |  |  | Three Months Ended: |  |  |  | Ended
|  | 31-Mar-14 |  | 30-Jun-14 |  | 30-Sep-14 |  | 31-Dec-14 |  | 31-Dec-14 |  | 31-Mar-13 |  | 30-Jun-13 |  | 30-Sep-13 |  | 31-Dec-13 |  | 31-Dec-13
Net Income |  | $ | 3,573 |  |  | $ | 3,713 |  |  | $ | 1,567 |  |  | $ | 4,295 |  |  | $ | 13,148 |  |  | $ | 4,401 |  |  | $ | 4,741 |  |  | $ | 4,094 |  |  | $ | 6,591 |  |  | $ | 19,827 |
Add (deduct): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Discontinued operations |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (98 | ) |  |  | (98 | ) |  |  | (98 | ) |  |  | (81 | ) |  |  | (375 | )
Gain on sale of properties |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (940 | ) |  |  | (940 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2,158 | ) |  |  | (2,158 | )
Management fee income |  |  | (646 | ) |  |  | (682 | ) |  |  | (649 | ) |  |  | (619 | ) |  |  | (2,596 | ) |  |  | (559 | ) |  |  | (598 | ) |  |  | (692 | ) |  |  | (689 | ) |  |  | (2,538 | )
Depreciation and amortization |  |  | 24,300 |  |  |  | 23,563 |  |  |  | 24,878 |  |  |  | 23,174 |  |  |  | 95,915 |  |  |  | 15,784 |  |  |  | 16,917 |  |  |  | 22,163 |  |  |  | 23,976 |  |  |  | 78,840 |
Amortization of above/below market leases |  |  | (11 | ) |  |  | 74 |  |  |  | 497 |  |  |  | 75 |  |  |  | 635 |  |  |  | 48 |  |  |  | (29 | ) |  |  | (143 | ) |  |  | (91 | ) |  |  | (215 | )
Selling, general and administrative |  |  | 3,272 |  |  |  | 3,148 |  |  |  | 3,071 |  |  |  | 3,492 |  |  |  | 12,983 |  |  |  | 2,532 |  |  |  | 3,204 |  |  |  | 3,477 |  |  |  | 2,716 |  |  |  | 11,929 |
Interest expense |  |  | 7,176 |  |  |  | 6,891 |  |  |  | 6,883 |  |  |  | 6,483 |  |  |  | 27,433 |  |  |  | 4,208 |  |  |  | 4,174 |  |  |  | 5,474 |  |  |  | 7,198 |  |  |  | 21,054 |
Interest income |  |  | (1,410 | ) |  |  | (1,408 | ) |  |  | (1,216 | ) |  |  | (1,264 | ) |  |  | (5,298 | ) |  |  | (1,353 | ) |  |  | (1,382 | ) |  |  | (1,411 | ) |  |  | (1,438 | ) |  |  | (5,584 | )
Equity in earnings of non-consolidated REITs |  |  | 484 |  |  |  | 552 |  |  |  | 455 |  |  |  | 269 |  |  |  | 1,760 |  |  |  | 187 |  |  |  | 196 |  |  |  | 431 |  |  |  | 544 |  |  |  | 1,358 |
Non-property specific items, net |  |  | (165 | ) |  |  | 75 |  |  |  | (33 | ) |  |  | 136 |  |  |  | 13 |  |  |  | 22 |  |  |  | (60 | ) |  |  | 45 |  |  |  | (45 | ) |  |  | (38 | )
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | — |
Property NOI fromv the continuing portfolio |  |  | 36,573 |  |  |  | 35,926 |  |  |  | 35,453 |  |  |  | 35,101 |  |  |  | 143,053 |  |  |  | 25,172 |  |  |  | 27,065 |  |  |  | 33,340 |  |  |  | 36,523 |  |  |  | 122,100 |
Property NOI classified in discontinued operations |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 252 |  |  |  | 253 |  |  |  | 253 |  |  |  | 82 |  |  |  | 840 |
Property NOI |  | $ | 36,573 |  |  | $ | 35,926 |  |  | $ | 35,453 |  |  | $ | 35,101 |  |  | $ | 143,053 |  |  | $ | 25,424 |  |  | $ | 27,318 |  |  | $ | 33,593 |  |  | $ | 36,605 |  |  | $ | 122,940 |

* See the Appendix for Definition of Non-GAAP Measures beginning on page 27.

December 31, 2014 | 11

|  | Debt Summary

(dollars in thousands) |  |  |  | Maximum |  | Amount |  | Interest |  | (a) Interest |  |
|  | Maturity |  | Amount |  | Drawn at |  | Rate |  | Rate at |  | Facility
|  | Date |  | of Loan |  | 31-Dec-14 |  | Components |  | 31-Dec-14 |  | Fee
BAML Revolver |  |  | 29-Oct-18 |  |  | $ | 500,000 |  |  | $ | 268,000 |  |  |  | L+1.25% |  |  |  | 1.41 | % |  |  | 0.25% |
BAML Term Loan |  |  | 27-Sep-17 |  |  |  | 400,000 |  |  |  | 400,000 |  |  |  | 0.75% + 1.45% |  |  |  | 2.20 | % |  |  |  |
BMO Term Loan |  |  | 26-Aug-20 |  |  |  | 220,000 |  |  |  | 220,000 |  |  |  | 2.32% + 1.65% |  |  |  | 3.97 | % |  |  |  |
|  |  |  |  |  | $ | 1,120,000 |  |  | $ | 888,000 |  |  |  |  |  |  |  | 2.40 | % |  |  |  |

(a) Interest rate excludes amortization of deferred financing costs and facility fees, see notes below

On October 29, 2014, we amended and restated our bank facility we call the BAML Credit Facility, which has a total of $900 million available and is comprised of a revolver that we can borrow up to $500 million on, which we call the BAML Revolver and a term loan for $400 million that we call the BAML Term Loan. On August 26, 2013, we entered into a term loan we call the BMO Term Loan and borrowed $220 million. Additional information about these loans are in the footnotes to our financial statements. Pricing is based on our credit rating for the BAML Revolver, BAML Term Loan and the BMO Term Loan. Our credit rating as of December 31, 2014 was Baa3 from Moody’s.

| • | The BAML Revolver is priced based on our current credit rating at a spread of 1.25%, which was an interest rate of 1.41% as of December 31, 2014. The BAML Revolver is also subject to a facility fee based on our credit rating, which was 25 bps or approximately $1.25 million per year at December 31, 2014.

| • | The BAML Term Loan has LIBOR fixed at 0.75% for five years. At our current credit rating the spread for the BAML Term Loan is 1.45%, so our interest rate is 2.20% as of December 31, 2014.

| • | The BMO Term Loan has fixed LIBOR at 2.32% for seven years. At our current credit rating the spread over LIBOR is 1.65%, so our interest rate is 3.97% as December 31, 2014.

| • | We incurred financing costs to close the BAML Revolver, BAML Term Loan and the credit facilities that preceded them. We also incurred financing costs to close the BMO Term Loan. These costs are deferred and amortized into interest expense during the terms of the loans. The annual run rate for amortization to interest expense from deferred financing costs is approximately $2.1 million.

| • | The BAML Revolver can be extended for 1 year at the Company’s option upon payment of fees and includes an accordion feature that allows for up to $250 million of additional borrowing capacity. The BMO Term Loan includes an accordion feature that allows for up to $50 million of additional borrowing capacity. The accordion features are subject to receipt of lender commitments and satisfaction of certain customary conditions.

December 31, 2014 | 12

|  | Capital Analysis (in thousands, except per share amounts)

|  | 31-Mar-14 |  | 30-Jun-14 |  | 30-Sep-14 |  | 31-Dec-14 |  | 31-Mar-13 |  | 30-Jun-13 |  | 30-Sep-13 |  | 31-Dec-13
Market Data: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Shares Outstanding |  |  | 100,187 |  |  |  | 100,187 |  |  |  | 100,187 |  |  |  | 100,187 |  |  |  | 82,937 |  |  |  | 100,187 |  |  |  | 100,187 |  |  |  | 100,187 |
Closing market price per share |  | $ | 12.60 |  |  | $ | 12.58 |  |  | $ | 11.22 |  |  | $ | 12.27 |  |  | $ | 14.62 |  |  | $ | 13.20 |  |  | $ | 12.74 |  |  | $ | 11.95 |
Market capitalization |  | $ | 1,262,361 |  |  | $ | 1,260,358 |  |  | $ | 1,124,103 |  |  | $ | 1,229,299 |  |  | $ | 1,212,545 |  |  | $ | 1,322,474 |  |  | $ | 1,276,388 |  |  | $ | 1,197,239 |
Total Debt |  |  | 936,500 |  |  |  | 916,500 |  |  |  | 905,000 |  |  |  | 888,000 |  |  |  | 621,750 |  |  |  | 581,500 |  |  |  | 951,500 |  |  |  | 926,500 |
Total Market Capitalization |  | $ | 2,198,861 |  |  | $ | 2,176,858 |  |  | $ | 2,029,103 |  |  | $ | 2,117,299 |  |  | $ | 1,834,295 |  |  | $ | 1,903,974 |  |  | $ | 2,227,888 |  |  | $ | 2,123,739 |
Dividend Data: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total dividends paid |  | $ | 19,036 |  |  | $ | 19,035 |  |  | $ | 19,036 |  |  | $ | 19,036 |  |  | $ | 15,758 |  |  | $ | 15,758 |  |  | $ | 19,036 |  |  | $ | 19,036 |
Common dividend per share |  | $ | 0.19 |  |  | $ | 0.19 |  |  | $ | 0.19 |  |  | $ | 0.19 |  |  | $ | 0.19 |  |  | $ | 0.19 |  |  | $ | 0.19 |  |  | $ | 0.19 |
Quarterly dividend as a % of FFO* |  |  | 65.5 | % |  |  | 67.9 | % |  |  | 67.9 | % |  |  | 70.4 | % |  |  | 73.1 | % |  |  | 76.0 | % |  |  | 67.9 | % |  |  | 65.5 | %
Liquidity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 20,031 |  |  | $ | 18,455 |  |  | $ | 15,930 |  |  | $ | 7,519 |  |  | $ | 17,282 |  |  | $ | 24,962 |  |  | $ | 25,539 |  |  | $ | 19,623 |
Revolving credit facilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gross potential available under the BAML Credit Facility |  |  | 900,000 |  |  |  | 900,000 |  |  |  | 900,000 |  |  |  | 900,000 |  |  |  | 900,000 |  |  |  | 900,000 |  |  |  | 900,000 |  |  |  | 900,000 |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Outstanding balance |  |  | (716,500 | ) |  |  | (696,500 | ) |  |  | (685,000 | ) |  |  | (668,000 | ) |  |  | (621,750 | ) |  |  | (581,500 | ) |  |  | (731,500 | ) |  |  | (706,500 | )
Total Liquidity |  | $ | 203,531 |  |  | $ | 221,955 |  |  | $ | 230,930 |  |  | $ | 239,519 |  |  | $ | 295,532 |  |  | $ | 343,462 |  |  | $ | 194,039 |  |  | $ | 213,123 |

*See page 9 for a reconciliation of Net Income to FFO and the Appendix for Definitions of Non-GAAP Measures beginning on page 27.

December 31, 2014 | 13

|  | Portfolio Overview

| As of the Quarter Ended
| 31-Dec-14 | 30-Sep-14 | 30-Jun-14 | 31-Mar-14 | 31-Dec-13
Owned portfolio of commercial real estate: |  |  |  |  |
Number of properties | 38 | 39 | 39 | 39 | 39
Square feet | 9,580,057 | 9,690,361 | 9,686,215 | 9,686,055 | 9,685,285
Leased percentage | 92.8% | 93.3% | 94.1% | 94.5% | 94.1%
Investments in non-consolidated commercial real estate: |  |  |  |  |
Number of properties | 2 | 2 | 2 | 2 | 2
Square feet | 1,395,780 | 1,395,500 | 1,395,500 | 1,395,500 | 1,395,500
Leased percentage | 71.3% | 71.0% | 65.5% | 64.0% | 64.1%
Single Asset REITs (SARs) managed: |  |  |  |  |
Number of properties | 8 | 9 | 11 | 12 | 12
Square feet | 1,897,801 | 2,036,572 | 2,687,775 | 3,067,199 | 3,067,199
Leased percentage | 84.7% | 86.6% | 89.1% | 87.4% | 87.4%
Total owned (a) , investments |  |  |  |  |
and managed properties: |  |  |  |  |
Number of properties | 48 | 50 | 52 | 53 | 53
Square feet | 12,873,638 | 13,122,433 | 13,769,490 | 14,148,754 | 14,147,984
Leased percentage | 89.3% | 89.9% | 90.2% | 90.0% | 89.7%

December 31, 2014 | 14

|  | Owned Portfolio Overview

|  |  | Square | Percent | Wtd Ave (a) | GAAP (b)
MSA / Property Name | City | State | Feet | Leased | Occupied | Rent
East Region |  |  |  |  |  |
Baltimore |  |  |  |  |  |
East Baltimore | Baltimore | MD | 325,445 | 81.9% | 78.7% | $ 23.35
Washington, D.C. |  |  |  |  |  |
Meadow Point | Chantilly | VA | 138,537 | 92.6% | 92.6% | $ 27.47
Stonecroft | Chantilly | VA | 111,469 | 100.0% | 100.0% | $ 38.46
Loudoun Tech Center | Dulles | VA | 136,658 | 92.0% | 97.3% | $ 16.17
Richmond |  |  |  |  |  |
Innsbrook | Glen Allen | VA | 298,456 | 99.9% | 99.9% | $ 18.28
Charlotte |  |  |  |  |  |
Park Seneca | Charlotte | NC | 109,674 | 92.1% | 85.2% | $ 15.43
Forest Park | Charlotte | NC | 62,212 | 100.0% | 100.0% | $ 14.15
Raleigh-Durham |  |  |  |  |  |
Emperor Boulevard | Durham | NC | 259,531 | 100.0% | 100.0% | $ 35.66
East Region Total |  |  | 1,441,982 | 93.8% | 93.1% | $ 24.56
Midwest Region |  |  |  |  |  |
Chicago |  |  |  |  |  |
Northwest Point | Elk Grove Village | IL | 176,848 | 100.0% | 100.0% | $ 19.52
909 Davis Street | Evanston | IL | 195,245 | 97.9% | 97.9% | $ 35.70
Indianapolis |  |  |  |  |  |
River Crossing | Indianapolis | IN | 205,059 | 100.0% | 98.2% | $ 23.08
St. Louis |  |  |  |  |  |
Timberlake | Chesterfield | MO | 232,766 | 98.3% | 98.3% | $ 21.32
Timberlake East | Chesterfield | MO | 116,197 | 91.0% | 91.0% | $ 23.51
Lakeside Crossing | Maryland Heights | MO | 127,778 | 100.0% | 100.0% | $ 26.10
Minneapolis |  |  |  |  |  |
Eden Bluff | Eden Prairie | MN | 153,028 | 100.0% | 100.0% | $ 27.73
121 South 8th Street | Minneapolis | MN | 475,012 | 91.2% | 90.3% | $ 15.00
Midwest Region Total |  |  | 1,681,933 | 96.4% | 96.0% | $ 22.50

(a) Weighted Occupied Percentage for the year ended December 31, 2014

(b) Weighted Average GAAP Rent per Occupied Square Foot

December 31, 2014 | 15

|  | Owned Portfolio Overview

|  |  |  | Percent | Wtd Ave (a) | GAAP (b)
MSA / Property Name | City | State | Square Feet | Leased | Occupied | Rent
South Region |  |  |  |  |  |
Dallas-Fort Worth |  |  |  |  |  |
Willow Bend Office Center | Plano | TX | 117,050 | 100.0% | 98.7% | $ 20.89
Legacy Tennyson Center | Plano | TX | 202,600 | 100.0% | 100.0% | $ 17.59
One Legacy Circle | Plano | TX | 214,110 | 100.0% | 100.0% | $ 33.10
Addison Circle | Addison | TX | 293,926 | 89.6% | 92.6% | $ 24.47
Collins Crossing | Richardson | TX | 300,472 | 99.5% | 99.1% | $ 24.59
Liberty Plaza | Addison | TX | 218,934 | 90.6% | 93.8% | $ 20.63
Houston |  |  |  |  |  |
Park Ten | Houston | TX | 157,460 | 63.1% | 82.6% | $ 29.64
Eldridge Green | Houston | TX | 248,399 | 100.0% | 100.0% | $ 31.23
Park Ten Phase II | Houston | TX | 156,746 | 100.0% | 100.0% | $ 31.15
Westchase I & II | Houston | TX | 629,025 | 97.7% | 96.9% | $ 32.82
Miami-Ft. Lauderdale-West Palm Beach |  |  |  |  |  |
Blue Lagoon Drive | Miami | FL | 212,619 | 100.0% | 100.0% | $ 23.19
Atlanta |  |  |  |  |  |
One Overton Place | Atlanta | GA | 387,267 | 86.3% | 96.8% | $ 23.38
One Ravinia | Atlanta | GA | 386,603 | 95.2% | 92.1% | $ 23.04
999 Peachtree | Houston | TX | 621,946 | 97.7% | 93.6% | $ 29.23
South Region Total |  |  | 4,147,157 | 94.9% | 95.9% | $ 26.82
West Region |  |  |  |  |  |
Seattle |  |  |  |  |  |
Federal Way | Federal Way | WA | 117,010 | 57.1% | 54.7% | $ 18.46
San Francisco-San Jose-Oakland |  |  |  |  |  |
Hillview Center | Milpitas | CA | 36,288 | 100.0% | 100.0% | $ 16.10
Montague Business Center | San Jose | CA | 145,951 | 81.1% | 89.0% | $ 16.12
Denver |  |  |  |  |  |
380 Interlocken | Broomfield | CO | 240,185 | 95.8% | 92.6% | $ 29.56
1999 Broadway | Denver | CO | 676,379 | 88.9% | 90.8% | $ 30.81
Greenwood Plaza | Englewood | CO | 196,236 | 100.0% | 100.0% | $ 23.65
390 Interlocken | Broomfield | CO | 241,516 | 72.3% | 70.0% | $ 27.50
1001 17th Street | Denver | CO | 655,420 | 84.8% | 85.0% | $ 31.78
West Region Total |  |  | 2,308,985 | 85.7% | 86.2% | $ 28.33
Total Owned |  |  | 9,580,057 | 92.8% | 93.1% | $ 26.04

(a) Weighted Occupied Percentage for the year ended December 31, 2014

(b) Weighted Average GAAP Rent per Occupied Square Foot

December 31, 2014 | 16

|  | Managed Portfolio Overview

MSA / Property Name | City | State | Square Feet
Southeast Region |  |  |
Columbia |  |  |
1441 Main Street | Columbia | SC | 264,857
Atlanta |  |  |
Satellite Place | Duluth | GA | 134,785
Southeast Region Total |  |  | 399,642
Southwest Region |  |  |
Houston |  |  |
Energy Tower I | Houston | TX | 325,797
Denver |  |  |
385 Interlocken | Broomfield | CO | 296,868
Southwest Region Total |  |  | 622,665
Midwest Region |  |  |
Chicago |  |  |
East Wacker (a) | Chicago | IL | 860,709
Indianapolis |  |  |
Monument Circle | Indianapolis | IN | 213,760
St. Louis |  |  |
Lakeside Crossing II | Maryland Heights | MO | 116,000
Kansas City |  |  |
Grand Boulevard (b) | Kansas City | MO | 535,071
Cincinnati |  |  |
Centre Pointe V | West Chester | OH | 135,936
Union Centre | West Chester | OH | 409,798
Midwest Region Total |  |  | 2,271,274
Total Managed |  |  | 3,293,581
Total Owned & Managed |  | 12,873,638

(a) FSP has a Preferred Share Interest of 43.7% in the entity that owns this property.

(b) FSP has a Preferred Share Interest of 27.0% in the entity that owns this property.

December 31, 2014 | 17

|  | Tenants By Industry (By Square Feet)

December 31, 2014 | 18

|  | 20 Largest Tenants with Annualized Rent and Remaining Term (Owned Portfolio)

|  |  | Remaining | Aggregate | % of Aggregate |  | % of Aggregate
| Tenant | Number of | Lease Term | Leased | Leased | Annualized | Leased
| Name | Leases | in Months | Square Feet | Square Feet | Rent | Annualized Rent
1 | TCF National Bank | 2 | 12 | 263,111 | 2.8% | $ 2,937,400 | 1.3%
2 | Quintiles Transnational Corp | 1 | 51 | 259,531 | 2.7% | 8,821,181 | 3.9%
3 | CITGO Petroleum Corporation | 1 | 86 | 248,399 | 2.6% | 7,558,782 | 3.4%
4 | Sutherland Asbill Brennan LLP | 1 | 64 | 243,839 | 2.5% | 7,352,253 | 3.3%
5 | Newfield Exploration Company | 1 | 86 | 234,495 | 2.4% | 7,921,342 | 3.5%
6 | US Government (a) | 6 | 2, 8, 18, 41, 45, 69 | 224,427 | 2.3% | 7,222,999 | 3.2%
7 | Burger King Corporation | 1 | 45 | 212,619 | 2.2% | 5,217,670 | 2.3%
8 | Denbury Onshore, LLC | 2 | 55 | 202,600 | 2.1% | 3,510,042 | 1.5%
9 | RGA Reinsurance Company (b) | 2 | - | 197,354 | 2.1% | 4,304,802 | 1.9%
10 | SunTrust Bank (c) | 2 | 22, 81 | 182,888 | 1.9% | 3,754,246 | 1.7%
11 | Citicorp Credit Services, Inc | 1 | 24 | 176,848 | 1.9% | 3,689,049 | 1.6%
12 | C.H. Robinson Worldwide, Inc | 1 | 78 | 153,028 | 1.6% | 4,221,068 | 1.9%
13 | T-Mobile South, LLC dba T-Mobile | 1 | 50 | 151,792 | 1.6% | 3,588,227 | 1.6%
14 | Houghton Mifflin Harcourt Publishing Company | 1 | 27 | 150,050 | 1.6% | 5,962,139 | 2.6%
15 | Petrobras America, Inc. | 1 | 59 | 144,813 | 1.5% | 4,969,982 | 2.2%
16 | Murphy Exploration & Production Company | 1 | 28 | 144,677 | 1.5% | 4,439,625 | 2.0%
17 | Argo Data Resource Corporation | 1 | 104 | 140,246 | 1.5% | 3,741,362 | 1.7%
18 | Monsanto Company | 1 | 61 | 127,778 | 1.3% | 3,282,617 | 1.5%
19 | Federal National Mortgage Association | 1 | 21 | 123,144 | 1.3% | 2,678,382 | 1.2%
20 | Vail Corp d/b/a Vail Resorts (d) | 1 | 51, 99 | 122,232 | 1.3% | 3,430,358 | 1.5%
|  |  | Total | 3,703,871 | 38.7% | $ 98,603,524 | 43.8%

| (a) | Includes 180,444 and 5,090 square feet which expire in 2018 & 2016, respectively. The remaining 38,893 square feet expire between 2015-2020.

| (b) | Lease expired and tenants vacated on December 31, 2014. As of January 1, 2015, Kaiser Foundation Health Plan will become the 20th largest tenant with 120,979 square feet.

| (c) | Includes 55,388 square feet which expires October 31, 2016. The remaining 127,500 square feet expires September 30, 2021.

| (d) | Includes 38,293 square feet that expires March 31, 2019. The remaining 83,939 square feet expires March 31, 2023.

December 31, 2014 | 19

|  | Leasing Activity (Owned Portfolio)

|  | Year |  | Year |  | Year
|  | Ended |  | Ended |  | Ended
Leasing Activity |  | 31-Dec-14 |  | 31-Dec-13 |  | 31-Dec-12
(in Square Feet - SF) |  |  |  |  |  |
New leasing |  | 149,000 |  | 267,000 |  | 315,740
Renewals |  | 635,000 |  | 645,000 |  | 700,838
|  | 784,000 |  | 912,000 |  | 1,016,578
Other information per SF |  |  |  |  |  |
(Activity on a year-to-date basis) |  |  |  |  |  |
GAAP Rents on leasing |  | $ 26.89 |  | $ 23.33 |  | $ 22.41
Weighted average lease term |  | 6.25 Years |  | 7.2 Years |  | 5.1 Years
Increase over average GAAP |  |  |  |  |  |
rents in prior year |  | 11.8% |  | 8.0% |  | 1.5%
Average free rent |  | 3 Months |  | 3 Months |  | 3 Months
Tenant Improvements |  | $ 16.40 |  | $ 18.25 |  | $ 12.26
Leasing Costs |  | $ 7.66 |  | $ 8.48 |  | $ 5.40

December 31, 2014 | 20

|  | Lease Expirations by Square Feet (Owned Portfolio)

Year |  | Total Square Feet |  | % of Square Feet
2015 |  | 710,649 |  | 7.4%
2016 |  | 962,093 |  | 10.0%
2017 |  | 1,059,927 |  | 11.1%
2018 |  | 944,323 |  | 9.9%
2019 |  | 1,606,640 |  | 16.8%
2020 |  | 771,151 |  | 8.1%
2021 |  | 933,499 |  | 9.7%
2022 |  | 903,231 |  | 9.4%
2023 |  | 359,567 |  | 3.8%
2024 |  | 243,257 |  | 2.5%
2025 |  | 286,792 |  | 3.0%
2026 |  | 109,992 |  | 1.1%
Vacant |  | 688,936 |  | 7.2%
Total |  | 9,580,057 |  | 100.0%

December 31, 2014 | 21

|  | Lease Expirations with Annualized Rent per Square Foot (Owned Portfolio)

|  |  | Rentable |  |  |  | Annualized |  | Percentage |  |
| Number of |  | Square |  |  |  | Rent |  | of Total Final |  |
Year of | Leases |  | Footage |  | Annualized |  | Per Square |  | Annualized |  |
Lease | Expiring |  | Subject to |  | Rent Under |  | Foot Under |  | Rent Under |  |
Expiration | Within the |  | Expiring |  | Expiring |  | Expiring |  | Expiring |  | Cumulative
December 31, | Year |  | Leases |  | Leases (a) |  | Leases |  | Leases |  | Total
2015 | 110 | (b) |  | 710,649 |  |  | 17,647,630 |  | 24.83 |  | 7.8% |  | 7.8%
2016 | 72 |  |  | 962,093 |  |  | 20,118,004 |  | 20.91 |  | 8.9% |  | 16.7%
2017 | 75 |  |  | 1,059,927 |  |  | 29,480,637 |  | 27.81 |  | 13.1% |  | 29.8%
2018 | 64 |  |  | 944,323 |  |  | 27,380,387 |  | 28.99 |  | 12.2% |  | 42.0%
2019 | 57 |  |  | 1,606,640 |  |  | 42,132,132 |  | 26.22 |  | 18.7% |  | 60.7%
2020 | 32 |  |  | 771,151 |  |  | 20,964,007 |  | 27.19 |  | 9.3% |  | 70.0%
2021 | 20 |  |  | 933,499 |  |  | 22,261,544 |  | 23.85 |  | 9.9% |  | 79.9%
2022 | 18 |  |  | 903,231 |  |  | 25,031,685 |  | 27.71 |  | 11.1% |  | 91.0%
2023 and thereafter | 27 |  |  | 999,608 | (c) |  | 20,204,027 |  | 20.21 |  | 9.0% |  | 100.0%
| 475 |  |  | 8,891,121 |  |  | 225,220,053 |  | 25.33 |  | 100.0% |  |
Vacant SF as of 12/31/14 |  |  |  | 688,936 |  |  |  |  |  |  |  |  |
Total Portfolio Square Footage |  |  |  | 9,580,057 |  |  |  |  |  |  |  |  |

| (a) | Annualized rent represents the monthly rent, including tenant reimbursements, for each lease in effect at December 31, 2014 mulitplied by 12. Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges.

| (b) | Includes 24 leases that are month-to-month.

| (c) | Includes 53,120 square feet that are non-revenue producing building amenities.

December 31, 2014 | 22

|  | Capital Expenditures (in thousands)

(in thousands) |  | For the Three Months Ended |  |  | Year ended |
|  | 31-Mar-14 |  |  | 30-Jun-14 |  |  | 30-Sep-14 |  |  | 31-Dec-14 |  |  | 31-Dec-14 |
Tenant improvements |  | $ | 1,132 |  |  | $ | 1,837 |  |  | $ | 2,612 |  |  | $ | 4,244 |  |  | $ | 9,825 |
Deferred leasing costs |  |  | 1,080 |  |  |  | 2,786 |  |  |  | 577 |  |  |  | 1,405 |  |  |  | 5,848 |
Non-investment capex |  |  | 364 |  |  |  | 1,621 |  |  |  | 700 |  |  |  | 851 |  |  |  | 3,536 |
Recurring Capital Expenditures |  |  | 2,576 |  |  |  | 6,244 |  |  |  | 3,889 |  |  |  | 6,500 |  |  |  | 19,209 |
1st generation leasing |  |  | 33 |  |  |  | 9 |  |  |  | 394 |  |  |  | 580 |  |  |  | 1,016 |
Investment capex |  |  | 755 |  |  |  | 580 |  |  |  | 244 |  |  |  | 516 |  |  |  | 2,095 |
Total Capital Expenditures |  | $ | 3,364 |  |  | $ | 6,833 |  |  | $ | 4,527 |  |  | $ | 7,596 |  |  | $ | 22,320 |

|  | For the Three Months Ended: |  |  | Year ended |
|  | 31-Mar-13 |  |  | 30-Jun-13 |  |  | 30-Sep-13 |  |  | 31-Dec-13 |  |  | 31-Dec-13 |
Tenant improvements |  | $ | 1,724 |  |  | $ | 5,094 |  |  | $ | 4,594 |  |  | $ | 2,993 |  |  | $ | 14,405 |
Deferred leasing costs |  |  | 2,812 |  |  |  | 909 |  |  |  | 3,821 |  |  |  | 1,498 |  |  |  | 9,040 |
Non-investment capex |  |  | 482 |  |  |  | 707 |  |  |  | 498 |  |  |  | 1,179 |  |  |  | 2,866 |
Recurring Capital Expenditures |  |  | 5,018 |  |  |  | 6,710 |  |  |  | 8,913 |  |  |  | 5,670 |  |  |  | 26,311 |
1st generation leasing |  |  | 128 |  |  |  | 1,011 |  |  |  | 2 |  |  |  | 36 |  |  |  | 1,177 |
Investment capex |  |  | 515 |  |  |  | 743 |  |  |  | 1,054 |  |  |  | 299 |  |  |  | 2,611 |
Total Capital Expenditures |  | $ | 5,661 |  |  | $ | 8,464 |  |  | $ | 9,969 |  |  | $ | 6,005 |  |  | $ | 30,099 |

December 31, 2014 | 23

|  | Transaction Activity

Recent Acquisitions: |  |  |  |  |  |  | Purchase Price |  |
| City | State | Square Feet |  | Date Acquired |  | (in thousands) |  |
2013 |  |  |  |  |  |  |  |  |
1999 Broadway | Denver | CO | 673,793 |  | 5/22/13 |  | $ 183,000 |  |
999 Peachtree | Atlanta | GA | 621,946 |  | 7/1/13 |  | 157,900 |  |
1001 17th Street | Denver | CO | 655,420 |  | 8/28/13 |  | 217,000 |  |
2012 |  |  |  |  |  |  |  |  |
One Ravinia | Atlanta | GA | 386,603 |  | 7/31/12 |  | $ 52,750 |  |
Westchase | Houston | TX | 629,025 |  | 11/1/12 |  | 154,750 |  |
2011 |  |  |  |  |  |  |  |  |
Emperor Boulevard | Durham | NC | 259,531 |  | 3/4/11 |  | 75,800 |  |
Legacy Tennyson Center | Plano | TX | 202,600 |  | 3/10/11 |  | 37,000 |  |
One Legacy Circle | Plano | TX | 214,110 |  | 3/24/11 |  | 52,983 |  |
909 Davis | Evanston | IL | 195,245 |  | 9/30/11 |  | 37,062 |  |
East Renner Road | Richardson | TX | 122,300 |  | 10/6/11 |  | 11,282 |  |
Recent Dispositions: |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  | Net Sales |  | Gain (Loss)
| City | State | Square Feet |  | Date Sold |  | Proceeds |  | on Sale
|  |  |  |  |  |  | (in thousands)
2014 |  |  |  |  |  |  |  |  |
Centennial | Colorado Springs | CO | 110,405 |  | 12/3/14 |  | $ 15,500 |  | $ 940
2013 |  |  |  |  |  |  |  |  |
East Renner Road | Richardson | TX | 122,300 |  | 10/29/13 |  | $ 12,300 |  | $ 2,169
2012 |  |  |  |  |  |  |  |  |
Southfield | Southfield | MI | 252,613 |  | 12/21/12 |  | $ 293 |  | $ (14,826)
2011 |  |  |  |  |  |  |  |  |
Fairview | Falls Church | VA | 252,613 |  | 1/21/11 |  | 89,382 |  | 19,592
Bollman (a) | Savage | MD | 98,745 |  | 6/24/11 |  | 7,408 |  | 2,346

(a) Industrial property. All other acquisitions and dispositions are office properties

December 31, 2014 | 24

|  | Loan Portfolio of Secured Real Estate

(dollars in thousands) |  |  | Maximum | Amount |  |  | Interest
|  | Maturity | Amount | Drawn at | Interest | Draw | Rate at
Sponsored REIT | Location | Date | of Loan | 31-Dec-14 | Rate (1) | Fee (2) | 31-Dec-14
Secured revolving lines of credit |  |  |  |  |  |  |
FSP Satellite Place Corp. | Duluth, GA | 31-Mar-15 | $ 5,500 | $ 5,500 | L+4.4% | 0.5% | 4.55%
FSP 1441 Main Street Corp. | Columbia, SC | 31-Mar-15 | 10,800 | 9,000 | L+4.4% | 0.5% | 4.55%
FSP Energy Tower I Corp. | Houston, TX | 3-Jul-15 | 20,000 | 8,600 | L+5.0% | 0.5% | 5.15%
Secured construction loan |  |  |  |  |  |  |
FSP 385 Interlocken |  |  |  |  |  |  |
Development Corp. | Broomfield, CO | 30-Apr-15 | 42,000 | 37,541 | L+4.4% | n/a | 4.55%
Mortgage loan secured by property |  |  |  |  |  |  |
FSP Energy Tower I Corp. (3) | Houston, TX | 3-Jul-15 | 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.

| (3) | The loan has a secured fixed mortgage amount of $33,000,000, which was extended for one year from July 5, 2014 to July 3, 2015 and an extension fee of $108,900 was paid by the borrower to the Company.

December 31, 2014 | 25

|  | Net Asset Value Components

(in thousands except per share data) |  |  |
|  | As of |
|  | 31-Dec-14 |
Total Market Capitalization Values |  |  |  |
Shares outstanding |  |  | 100,187.4 |
Closing price, December 31st |  | $ | 12.27 |
Market capitalization |  | $ | 1,229,299 |
Debt |  |  | 888,000 |
Total Market Capitalization |  |  | 2,117,299 |
|  | 3 Months |
|  | Ended |
NOI Components |  | 31-Dec-14 |
Same Store NOI (1) |  | $ | 25,816 |
Acquisitions (1) (2) |  |  | 9,078 |
Property NOI (1) |  |  | 34,894 |
Full quarter adjustment (3) |  |  | — |
Stabilized portfolio |  | $ | 34,894 |
Financial Statement Reconciliation: |  |  |  |
Rental Revenue |  | $ | 61,022 |
Rental operating expenses |  |  | (16,334 | )
Real estate taxes and insurance |  |  | (9,288 | )
NOI on assets sold during the quarter |  |  | (207 | )
Taxes (4) |  |  | (95 | )
Management fees & other (5) |  |  | (204 | )
Property NOI (1) |  | $ | 34,894 |

Assets: |  |  |
Loans outstanding on secured RE |  | $ | 93,641 |
Investments in SARs (book basis) |  |  | 78,611 |
Straight-line rent receivable |  |  | 47,021 |
Asset held for sale |  |  | — |
Cash and cash equivalents |  |  | 7,519 |
Restricted cash |  |  | 742 |
Tenant rent receivables |  |  | 4,733 |
Prepaid expenses |  |  | 1,475 |
Office computers and furniture |  |  | 609 |
Other assets: |  |  |  |
Deferred financing costs, net |  |  | 7,637 |
Other assets: Derivative Market Value |  |  | 3,020 |
Phoenix Tower Liquidating Trust (6) |  |  | 4 |
Other assets |  |  | 1,176 |
|  | $ | 246,188 |
Liabilities: |  |  |  |
Debt |  | $ | 888,000 |
Accounts payable & accrued expenses |  |  | 46,319 |
Tenant security deposits |  |  | 4,248 |
Other liabilities: derivative liability |  |  | 7,268 |
|  | $ | 945,835 |

Other information:

Leased SF to be FFO producing during 2015 (in 000's) |  |  | 114 |
Straight-line rental revenue current quarter |  | $ | 699 |
Management fee income current quarter |  | $ | 202 |
Interest income from secured loans |  |  | 1,263 |
Management fees and interest income from loans |  | $ | 1,465 |
FFO from non-consolidated REITs - Q3 2014 (7): |  |  |  |
East Wacker |  | $ | 374 |
Grand Boulevard |  |  | 134 |
Total |  | $ | 508 |

Footnotes to the components

| (1) | See pages 11 & 29 for definitions and reconciliations

| (2) | Includes NOI from 3 acquisitions 2013

| (3) | Adjustment to reflect property NOI for a full quarter in the quarter acquired, if necessary

| (4) | HB3 Tax in Texas is classified as an income tax, though we treat it as a real estate tax in Property NOI

| (5) | Management & other fees are eliminated in consolidation but included on Property NOI

| (6) | Expected liquidating distribution from sale of equity interest (Collection within 2 years, subject to some expenses)

| (7) | We report FFO from non-consolidated REITs for the previous quarter as their financial statements are not yet complete for the current quarter.

December 31, 2014 | 26

|  | Appendix: Non-GAAP Financial Measure Definitions

Definition of Funds From Operations (“FFO”)

The Company evaluates performance based on Funds From Operations, which we refer to as FFO, as management believes that FFO represents the most accurate measure of activity and is the basis for distributions paid to equity holders. The Company defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property and acquisition costs of newly acquired properties that are not capitalized, plus depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges on properties or investments in non-consolidated REITs, and after adjustments to exclude equity in income or losses from, and, to include the proportionate share of FFO from, non-consolidated REITs.

FFO should not be considered as an alternative to net income (determined in accordance with GAAP), nor 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 and the National Association of Real Estate Investment Trusts, or NAREIT, may define this term in a different manner. We have included the NAREIT FFO definition in our table and note that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently than we do.

We believe that in order to facilitate a clear understanding of the results of the Company, FFO should be examined in connection with net income and cash flows from operating, investing and financing activities in the consolidated financial statements.

December 31, 2014 | 27

|  | Appendix: Non-GAAP Financial Measure Definitions

Definition of Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA

EBITDA is defined as net income plus interest expense, income tax expense and depreciation and amortization expense. Adjusted EBITDA is defined as EBITDA excluding gains and losses on sales of properties or shares of equity investments or provisions for losses on assets held for sale. EBITDA and Adjusted EBITDA are not intended to represent cash flow for the period, are not presented as an alternative to operating income as an indicator of operating performance, should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP and are not indicative of operating income or cash provided by operating activities as determined under GAAP. EBITDA and Adjusted EBITDA are presented solely as a supplemental disclosure with respect to liquidity because the Company believes it provides useful information regarding the Company's ability to service or incur debt. Because all companies do not calculate EBITDA or Adjusted EBITDA the same way, this presentation may not be comparable to similarly titled measures of other companies. The Company believes that net income is the financial measure calculated and presented in accordance with GAAP that is most directly comparable to EBITDA and Adjusted EBITDA.

Definition of Property Net Operating Income (Property NOI)

The Company provides property performance based on Net Operating Income, which we refer to as NOI. Management believes that investors are interested in this information. NOI is a non-GAAP financial measure that the Company defines as net income (the most directly comparable GAAP financial measure) plus selling, general and administrative expenses, depreciation and amortization, including amortization of acquired above and below market lease intangibles and impairment charges, interest expense, less equity in earnings of nonconsolidated REITs, interest income, management fee income, gains or losses on the sale of assets and excludes non-property specific income and expenses. The information presented includes footnotes and the data is shown by region with properties owned in both periods, which we call Same Store. The Comparative Same Store results include properties held for the periods presented and exclude significant nonrecurring income such as bankruptcy settlements and lease termination fees. NOI, as defined by the Company, may not be comparable to NOI reported by other REITs that define NOI differently. NOI should not be considered an alternative to net income as an indication of our performance or to cash flows as a measure of the Company's liquidity or its ability to make distributions.

December 31, 2014 | 28

|  | Appendix: Non-GAAP Financial Measure Definitions

Definition of Adjusted Funds From Operations (AFFO)

The Company defines AFFO as the sum of (1) FFO; (2) excluding our proportionate share of FFO and including distributions received, from non-consolidated REITs; (3) excluding the effect of straight-line rent; (4) plus deferred financing costs, (5) less recurring capital expenditures that are generally for (a) maintenance of properties, which we call non-investment capex or are second generation capital expenditures. Second generation costs include re-tenanting space after a tenant vacates, which include tenant improvements and leasing commissions.

We exclude development/redevelopment activities, capital expenditures planned at acquisition and costs to reposition a property. We also exclude first generation leasing costs, which are generally to fill vacant space in properties we acquire or were planned for at acquisition.

AFFO 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 this term in a different manner. We believe that in order to facilitate a clear understanding of the results of the Company, AFFO should be examined in connection with net income and cash flows from operating, investing and financing activities in the consolidated financial statements.

December 31, 2014 | 29

|  | AFFO* Comparison

Quarterly AFFO Per Share |  |  |  |  |
New Definition | Q1 | Q2 | Q3 | Q4 | Total
2014 | $ 0.24 | $ 0.21 | $ 0.23 | $ 0.20 | $ 0.89
2013 | $ 0.19 | $ 0.16 | $ 0.17 | $ 0.22 | $ 0.73
Old Definition | Q1 | Q2 | Q3 | Q4 | Total
2014 | $ 0.24 | $ 0.20 | $ 0.23 | $ 0.19 | $ 0.85
2013 | $ 0.18 | $ 0.14 | $ 0.16 | $ 0.21 | $ 0.69

Adjusted Funds From Operations (AFFO)* |  |  |  |  |  |
New Definition |  | For the Year Ended |
|  | December 31, |
(in thousands): |  | 2014 |  |  | 2013 |
Funds From Operations (FFO)* |  | $ | 112,462 |  |  | $ | 100,833 |
Reverse FFO from non-consolidated REITs |  |  | (1,930 | ) |  |  | (2,148 | )
Distributions from non-consolidated REITs |  |  | 107 |  |  |  | 107 |
Amortization of deferred financing costs |  |  | 2,002 |  |  |  | 1,813 |
Straight-line rent |  |  | (4,736 | ) |  |  | (5,783 | )
Tenant improvements |  |  | (9,825 | ) |  |  | (14,405 | )
Leasing commissions |  |  | (5,848 | ) |  |  | (9,040 | )
Non-investment capex |  |  | (3,536 | ) |  |  | (2,866 | )
Adjusted Funds From Operations (AFFO)* |  | $ | 88,696 |  |  | $ | 68,511 |
Weighted Average Shares (basic and diluted) |  |  | 100,187 |  |  |  | 93,855 |
AFFO Per Share |  | $ | 0.89 |  |  | $ | 0.73 |

Old Definition |  | For the Year Ended |
|  | December 31, |
(in thousands): |  | 2014 |  |  | 2013 |
Funds From Operations (FFO)* |  | $ | 112,462 |  |  | $ | 100,833 |
Reverse FFO from non-consolidated REITs |  |  | (1,930 | ) |  |  | (2,148 | )
Distributions from non-consolidated REITs |  |  | 107 |  |  |  | 107 |
Amortization of deferred financing costs |  |  | 2,002 |  |  |  | 1,813 |
Straight-line rent |  |  | (4,736 | ) |  |  | (5,783 | )
Tenant improvements |  |  | (10,350 | ) |  |  | (15,071 | )
Leasing commissions |  |  | (6,338 | ) |  |  | (9,257 | )
Non-investment capex |  |  | (5,632 | ) |  |  | (5,771 | )
Adjusted Funds From Operations (AFFO)* |  | $ | 85,585 |  |  | $ | 64,723 |
Weighted Average Shares (basic and diluted) |  |  | 100,187 |  |  |  | 93,855 |
AFFO Per Share |  | $ | 0.85 |  |  | $ | 0.69 |

| Note: | The new definition excludes development/redevelopment activities, capital expenditures planned at acquisition and costs to reposition a property. We also exclude first generation leasing costs, which are generally to fill vacant space in properties we acquire or were planned for at acquisition.

*Please see the definition of FFO on page 27 and AFFO on page 29.

December 31, 2014 | 30

|  | Investor Relations Contact (877) 686-9496 InvestorRelations@franklinstreetproperties.com

Franklin Street Properties Corp. ● 401 Edgewater Place ● Wakefield, MA 01880 ● (781) 557-1300

www.franklinstreetproperties.com