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

Investment in Sponsored REITs:

At March 31, 2016 and December 31, 2015, the Company held a common stock interest in eight and nine 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, 2015, a property owned by a Sponsored REIT was sold and, thereafter, liquidating distributions to its preferred shareholders were declared and issued.

During the three months ended March 31, 2016, a property owned by a Sponsored REIT, FSP 385 Interlocken Development Corp. (“385 Interlocken”), was sold and, thereafter, liquidating distributions to its preferred shareholders were declared and issued. The Company had previously made a secured construction loan to 385 Interlocken, which loan in the outstanding principal amount of $37,541,000 was repaid in its entirety from the proceeds of the sale.

Equity in losses of investment in non-consolidated REITs:

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


	Three Months Ended March 31,
(in thousands)	2016		2015

Equity in losses of East Wacker		257		285
Equity in losses of Grand Boulevard		29		37
	$	286	$	322

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 $27,000 from non-consolidated REITs during the three months ended March 31, 2016 and 2015.

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 $154,000 and $211,000 for the three months ended March 31, 2016 and 2015, 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 reviews Sponsored REIT loans for impairment each reporting period. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts recorded on the balance sheet. The Company applies normal loan review and underwriting procedures (as may be implemented or modified from time to time) in making that judgment. None of the Sponsored REIT loans have been impaired.

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. Except for two mortgage loans which bear 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 advances also require a 50 basis point draw fee.

The following is a summary of the Sponsored REIT Loans outstanding as of March 31, 2016:


			Maximum		Amount							Interest
(dollars in thousands)		Maturity	Amount		Drawn at		Interest			Draw		Rate at
Sponsored REIT	Location	Date	of Loan		31-Mar-16		Rate (1)			Fee (2)		31-Mar-16

Secured revolving lines of credit
FSP Satellite Place Corp.	Duluth, GA	31-Mar-17	$	5,500	$	3,975	L+	4.4	%	0.5	%	4.84	%
FSP 1441 Main Street Corp. (3)	Columbia, SC	31-Mar-17		10,800		9,000	L+	4.4	%	0.5	%	4.84	%
FSP Energy Tower I Corp.	Houston, TX	30-Jun-17		20,000		12,600	L+	5.0	%	0.5	%	5.44	%

Mortgage loan secured by property
FSP Monument Circle LLC (4)	Indianapolis, IN	7-Dec-18		21,000		21,000		4.90	%	n/a		4.90	%
FSP Energy Tower I Corp. (5)	Houston, TX	30-Jun-17		33,000		33,000		6.41	%	n/a		6.41	%

			$	90,300	$	79,575

(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)

This revolving line of credit was extended on March 25, 2016.

(4)

This mortgage loan includes an origination fee of $164,000 and an exit fee of $38,000 when repaid by the borrower.

(5)

This mortgage loan includes an annual extension fee of $108,900 paid by the borrower.

The Company recognized interest income and fees from the Sponsored REIT Loans of approximately $1,279,000 and $1,262,000 for the three months ended March 31, 2016 and 2015, respectively.

Non-consolidated REITs:

The balance sheet data below for 2016 and 2015 includes the 8 and 9 Sponsored REITs the Company held an interest in as of March 31, 2016 and December 31, 2015, respectively. The operating data below for 2016 and 2015 include the operations of the 9 and 10 Sponsored REITs in which the Company held an interest in during the three months ended March 31, 2016 and 2015, respectively.

Summarized financial information for these Sponsored REITs is as follows:


	March 31,		December 31,
(in thousands)	2016		2015

Balance Sheet Data (unaudited):
Real estate, net	$	359,005	$	418,959
Other assets		87,374		101,734
Total liabilities		(159,832)		(203,628)
Shareholders’ equity	$	286,547	$	317,065


	For the Three Months Ended
	March 31,
(in thousands)	2016		2015

Operating Data (unaudited):
Rental revenues	$	13,415	$	13,900
Other revenues		10		2
Operating and maintenance expenses		(7,576)		(8,235)
Depreciation and amortization		(4,510)		(4,975)
Interest expense		(2,197)		(2,457)
Gain on sale, less applicable income tax		19,748		—
Net income (loss)	$	18,890	$	(1,765)