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

Investment in Sponsored REITs:

At March 31, 2013, the Company held a common stock interest in 15 Sponsored REITs, from which it no longer derives economic benefits or risks. The Company also 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.

In September 2006, the Company purchased 48 preferred shares or 4.6% of the outstanding preferred shares of one of its Sponsored REITs, FSP Phoenix Tower Corp (“Phoenix Tower”). On December 20, 2012, the property owned by Phoenix Tower was sold and, thereafter, Phoenix Tower declared and issued a liquidating distribution for its preferred shareholders, from which the Company was entitled to $4,862,000 and received $4,752,000 on January 4, 2013. As of March 31, 2013, the Company held a beneficial interest in the Phoenix Tower liquidating trust in the amount of $110,000, which is included in other assets in the accompanying consolidated balance sheet.

Equity in earnings (losses) of investment in non-consolidated REITs:

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

	Three Months Ended
	March 31,
(in thousands)	2013		2012

Equity in earnings of Phoenix Tower	$	-	$	3
Equity in earnings (loss) of East Wacker	(110)		439
Equity in loss of Grand Boulevard	(77)		(51)
	$	(187)	$	391

Equity in earnings of investments in non-consolidated REITs is derived from the Company’s share of income (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 earnings of Phoenix Tower was derived from the Company’s preferred stock investment in the entity. On December 20, 2012, the property owned by Phoenix Tower was sold and the Company’s share of the gain was $1,582,000.

Equity in earnings (loss) 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 loss 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 $27,000 and $929,000 from non-consolidated REITs during the three months ended March 31, 2013 and 2012, respectively.

Non-consolidated REITs:

The Company has in the past acquired by merger entities similar to the Sponsored REITs. The Company’s business model for growth includes the potential acquisition, by merger or otherwise, of Sponsored REITs. 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 below for 2013 and 2012 includes operations of the 15 and 16 Sponsored REITs the Company held an interest in as of March 31, 2013 and 2012, respectively.

At March 31, 2013, December 31, 2012 and March 31, 2012, the Company had ownership interests in 15, 15 and 16, Sponsored REITs. Summarized financial information for these Sponsored REITs is as follows:

	March 31,		December 31,
(in thousands)	2013		2012

Balance Sheet Data (unaudited):
Real estate, net	$	659,062	$	659,655
Other assets	154,496		156,785
Total liabilities	(317,365)		(316,311)
Shareholders’ equity	$	496,193	$	500,129

	For the Three Months Ended
	March 31,
(in thousands)	2013		2012

Operating Data (unaudited):
Rental revenues	$	23,372	$	27,658
Other revenues	18		37
Operating and maintenance expenses	(11,588)		(13,750)
Depreciation and amortization	(7,842)		(8,672)
Interest expense	(3,307)		(4,381)
Net income	$	653	$	892

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 $225,000 and $284,000 for the three months ended March 31, 2013 and 2012, 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 two to three years. 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 March 31, 2013:

(dollars in thousands)

Maximum

Amount

Interest

Maturity

Amount

Drawn at

Interest

Draw

Rate at