UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10 - Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period _________ to __________. Commission File Number: 0-32615 Franklin Street Partners Limited Partnership (Exact name of registrant as specified in its charter) Massachusetts 04-2724223 (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) 401 Edgewater Place, Suite 200 Wakefield, MA 01880-6210 (Address of principal executive offices) Registrant's telephone number (781) 246-4900 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days. YES |_| NO |X| APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Not applicable
Franklin Street Partners Limited Partnership Form 10-Q Quarterly Report June 30, 2001 Table of Contents Part I. Financial Information Page ---- Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 2001 and December 31, 2000 3 Consolidated Statements of Operations for the three months ended June 30, 2001 and 2000 and for the six months ended June 30, 2001 and 2000 4 Consolidated Statements of Cash flows for the six months ended June 30, 2001 and 2000 5 Notes to the Consolidated Financial Statements 6-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-12 Item 3. Quantitative and Qualitative Disclosures about Market Risk 13 Part II. Other Information Item 1. Legal Proceedings 14 Item 2. Changes in Securities 14 Item 3. Defaults upon Senior Securities 14 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 5. Other Information 14 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15 2
PART I - FINANCIAL INFORMATION Item 1. Financial Statements Franklin Street Partners Limited Partnership and Subsidiaries Consolidated Balance Sheets <TABLE> <CAPTION> June 30, December 31, (in thousands) 2001 2000 ================================================================================================================== (Unaudited) <S> <C> <C> Assets: Real estate investments, at cost: Land $ 35,144 $ 35,524 Buildings and improvements 136,297 136,276 Fixtures and equipment 995 995 - ------------------------------------------------------------------------------------------------------------------ 172,436 172,795 Less accumulated depreciation 14,157 12,164 - ------------------------------------------------------------------------------------------------------------------ Real estate investments, net 158,279 160,631 Cash and cash equivalents 22,303 13,718 Restricted cash 515 499 Marketable securities 1,001 5,322 Due from related parties 47 16,734 Tenant rent receivables, net of allowance for doubtful accounts of $210 in 2001 and $10 in 2000 806 1,238 Prepaid expenses and other assets 1,143 1,038 Office computers and furniture, net of accumulated depreciation of $163 in 2001 and $142 in 2000 364 303 - ------------------------------------------------------------------------------------------------------------------ Total assets $ 184,458 $ 199,483 ================================================================================================================== Liabilities and Partners' Capital Liabilities: Bank note payable $ -- $ 16,500 Accounts payable and accrued expenses 4,999 2,281 Tenant security deposits 515 499 - ------------------------------------------------------------------------------------------------------------------ Total liabilities 5,514 19,280 - ------------------------------------------------------------------------------------------------------------------ Minority interests in consolidated subsidiaries 52 63 - ------------------------------------------------------------------------------------------------------------------ Partners' capital (deficit): Limited partners, 23,488,618 in 2001 and 23,486,096 in 2000 units issued and outstanding 181,280 182,478 General partner, 948,499 units issued and outstanding in 2001 and 2000 (2,388) (2,338) - ------------------------------------------------------------------------------------------------------------------ Total partners' capital 178,892 180,140 - ------------------------------------------------------------------------------------------------------------------ Total liabilities and partners' capital $ 184,458 $ 199,483 ================================================================================================================== </TABLE> See accompanying notes to consolidated financial statements. 3
Franklin Street Partners Limited Partnership and Subsidiaries Consolidated Statements of Operations (Unaudited) <TABLE> <CAPTION> For the For the Three Months Six Months Ended Ended June 30, June 30, ---------------------- ------------------- (in thousands, except per partnership unit amounts) 2001 2000 2001 2000 =========================================================================================================================== <S> <C> <C> <C> <C> Revenues: Rental income $ 6,831 $ 6,562 $ 13,319 $ 12,760 Investment services income 6,349 -- 12,102 -- Interest and other income 316 198 862 404 - --------------------------------------------------------------------------------------------------------------------------- Total revenues 13,496 6,760 26,283 13,164 - --------------------------------------------------------------------------------------------------------------------------- Expenses: Selling, general and administrative 3,528 2,716 6,705 5,305 Other real estate operating expenses 2,022 1,548 3,433 2,963 Depreciation and amortization 981 1,049 2,132 2,030 Real estate taxes and insurance 698 650 1,416 1,344 Interest expense 209 108 394 495 Minority interests 19 23 40 27 - --------------------------------------------------------------------------------------------------------------------------- Total expenses 7,457 6,094 14,120 12,164 - --------------------------------------------------------------------------------------------------------------------------- Net income $ 6,039 $ 666 $ 12,163 $ 1,000 =========================================================================================================================== Allocation of net income to: Limited Partners $ 5,805 $ 638 $ 11,691 $ 956 General Partner 234 28 472 44 - --------------------------------------------------------------------------------------------------------------------------- $ 6,039 $ 666 $ 12,163 $ 1,000 - --------------------------------------------------------------------------------------------------------------------------- Basic and diluted net income per limited and general partnership unit $ .25 $ .03 $ .50 $ .05 =========================================================================================================================== </TABLE> See accompanying notes to consolidated financial statements. 4
Franklin Street Partners Limited Partnership and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) <TABLE> <CAPTION> For the Six Months Ended June 30, ------------------- (in thousands) 2001 2000 ============================================================================================================================= <S> <C> <C> Cash flows from operating activities: Net income $ 12,163 $ 1,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,132 2,030 Partnership units issued as compensation 29 2,300 Gain on sale of land (11) (149) Minority interests 40 27 Changes in operating assets and liabilities: Restricted cash (16) -- Prepaid expenses (123) 130 Tenant rent receivables 432 (63) Due from related parties 187 (170) Deposits and other assets (100) (226) Accounts payable and accrued expenses 2,718 (1,250) Tenant security deposits 16 -- - ----------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 17,467 3,629 - ----------------------------------------------------------------------------------------------------------------------------- Cash flow from investing activities: Repayment of loans from related party 16,500 -- Purchase of property and equipment (161) (8,088) Proceeds received on sale of land 449 1,076 Sale of marketable securities 4,321 -- - ----------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used for) investing activities 21,109 (7,012) - ----------------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Cash distributions to partners (13,440) (10,737) Cash distributions to minority interest holders (51) (30) Net repayments under line of credit facility (16,500) (23,522) Capital contributions -- 39,829 - ----------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used for) financing activities (29,991) 5,540 - ----------------------------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 8,585 2,157 Cash and cash equivalents, beginning of period 13,718 18,519 - ----------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 22,303 $ 20,676 ============================================================================================================================= Supplemental disclosure of cash flow information: Cash paid for: Interest $ 394 $ 495 Income taxes $ -- $ -- </TABLE> See accompanying notes to consolidated financial statements. 5
Franklin Street Partners Limited Partnership Notes to Consolidated Financial Statements (Unaudited) Organization and Operations Franklin Street Partners Limited Partnership (the "Partnership") was formed as a Massachusetts limited partnership on February 4, 1997. The Partnership owns a 99% interest in FSP Investments LLC ("FSP Investments") and a 99% interest in FSP Property Management LLC ("FSP Property Management"). The Partnership operates in two business segments: rental operations and investment services. FSP Investments provides real estate investment and broker/dealer services. FSP Investment's services include: (i) the organization of real estate investment trusts ("REIT") entities (the "Sponsored REITs"), which are syndicated through private placements; (ii) the acquisition of real estate on behalf of the Sponsored REITs; and (iii) the sale through best efforts prior to placements of preferred stock in Sponsored REITs. During 1999 and 2000, a total of seventeen Sponsored Partnerships were merged into the Partnership. The Partnership previously owned a 5% general partner interest in each of the Sponsored Partnerships. The mergers were tax-free reorganizations accounted for similar to a pooling of interest, whereby the assets and liabilities of the Sponsored Partnerships were recorded at their historic book values and transaction costs were charged to expenses. Basis of Presentation The consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Certain information and footnote disclosures normally included in the Partnership's annual financial statements have been condensed or omitted. The interim financial statements, in the opinion of management, reflect all adjustments necessary for a fair statement of the results for the interim periods ended June 30, 2001 and 2000. These adjustments are of a normal and recurring nature. Operating results for the three and six months ended June 30, 2001 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2001. These interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2000, which are contained in the Partnership's Form 10 filed with the Securities and Exchange Commission (the "SEC"). Management's Estimates and Assumptions The accompanying financial statements were prepared by the Partnership in conformity with generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. The Partnership reviews all significant estimates affecting the financial statements on a recurring basis and records the effect of any necessary adjustments prior to their issuance. Actual results could differ from those estimates. Net Income Per Partnership Unit The Partnership follows SFAS No. 128 "Earnings per Share", which specifies the computation, presentation and disclosure requirements for the Partnership's net income per partnership unit. Basic net income per unit is computed by dividing net income by the weighted average number of partnership units outstanding during period. Diluted net income per unit reflects the potential dilution that could occur if securities or other contracts to issue units were exercised or converted into units. There were no potential dilutive units outstanding at June 30, 2001 and 2000. The partnership units issued in connection with the merger transactions have been treated as outstanding for all periods presented since the date of inception of each acquired partnership. 6
Franklin Street Partners Limited Partnership Notes to Consolidated Financial Statements (Unaudited) Net Income Per Partnership Unit (Continued) The denominator used for calculating basic and diluted net income per unit is as follows: <TABLE> <CAPTION> For the For the Three Months Six Months Ended Ended June 30, June 30, ---------------------- ------------------- 2001 2000 2001 2000 ============================================================================================================================ <S> <C> <C> <C> <C> Weighted average number of units outstanding: Limited partners 23,488,619 22,261,387 23,488,409 20,704,319 General partner 948,499 948,499 948,499 948,499 - ---------------------------------------------------------------------------------------------------------------------------- 24,437,118 23,209,886 24,436,908 21,652,818 ============================================================================================================================ </TABLE> Business Segments Segment operating results are measured and assessed based on a performance measure known as Funds From Operations ("FFO"). FFO is defined as net income (computed in accordance with generally accepted accounting principles) plus depreciation and amortization and other non-cash expenses. FFO is not a measure of operating results or cash flows from operating activities as measured by generally accepted accounting principles, and is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity. FFO by business segment are as follows (in thousands): <TABLE> <CAPTION> Per Consolidated Rental Investment Intercompany Statements of Operations Services Total Eliminations Operations =========================================================================================================================== <S> <C> <C> <C> <C> <C> For the six months ended June 30, 2001: Total revenues $ 13,951 $ 12,523 $ 26,474 $ (191) $ 26,283 Total expenses (6,945) (7,453) (14,398) 278 (14,120) Depreciation and amortization 2,129 90 2,219 (87) 2,132 Non-cash expenses -- 1,529 1,529 -- 1,529 - --------------------------------------------------------------------------------------------------------------------------- FFO $ 9,135 $ 6,689 $ 15,824 $ -- $ 15,824 =========================================================================================================================== For the six months ended June 30, 2000: Total revenues $ 13,164 $ 6,019 $ 19,183 $(6,019) $ 13,164 Total expenses (7,167) (5,865) (13,032) 868 (12,164) Depreciation and amortization 2,013 90 2,103 (73) 2,030 Non-cash expenses -- 2,300 2,300 -- 2,300 - --------------------------------------------------------------------------------------------------------------------------- FFO $ 8,010 $ 2,544 $ 10,554 $(5,224) $ 5,330 =========================================================================================================================== </TABLE> Non-cash expenses of $1,529,000 and $2,300,000 for the six months ended June 30, 2001 and 2000, respectively, are comprised of equity-based compensation charges. 7
Franklin Street Partners Limited Partnership Notes to Consolidated Financial Statements (Unaudited) Business Segments (Continued) The Partnership's cash distributions from operations are summarized as follows (in thousands, except per partnership unit amounts): Distribution Total Per Partnership Cash Quarter Paid Unit Distributions ================================================================================ First quarter of 2001 $.27 $ 6,597 Second quarter of 2001 .28 6,843 - -------------------------------------------------------------------------------- $ 13,440 ================================================================================ Cash distributions per partnership unit is based on the total outstanding units at the end of each calendar quarter. Cash available for distribution, as determined at the sole discretion of the general partner, is required to be distributed to unit holders within 90 days following the end of each calendar quarter. The cash distribution of approximately $6,597,000 for the fourth quarter of 2000 was declared and paid in the first quarter of 2001. The cash distribution of approximately $6,843,000 for the first quarter of 2001 was declared and paid in the second quarter 2001. The following table is a summary of other financial information by business segment (in thousands): Rental Investment Operations Services Total ================================================================================ June 30, 2001: Capital expenditures $ 79 $ 82 $ 161 Total assets $ 177,725 $ 6,733 $184,458 June 30, 2000: Capital expenditures $ 8,018 $ 70 $ 8,088 Total assets $ 179,863 $ 3,953 $183,816 Subsequent Event Effective July 1, 2001, a wholly-owned subsidiary of the Partnership purchased the 1% ownership interest in FSP Investments and the 1% ownership interest in FSP Property Management for an aggregate purchase price of approximately $32,000. As a result of the purchase, there is no longer a minority interest holder in the subsidiaries of the Partnership. 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following table summarizes property owned by the Partnership: June 30, ---------------------- 2001 2000 ---- ---- Residential: Number of properties 4 4 Number of apartment units 642 642 Commercial: Number of properties 13 13 Square footage 1,433,300 1,433,300 Results of Operations The following table shows the Partnership's financial data as a percentage of total revenues for the three months ended June 30, 2001 and 2000 and for the six months ended June 30, 2001 and 2000 and the variance in dollars between the periods: <TABLE> <CAPTION> Financial Data as a Percentage Variance in of Total Revenues Thousands of Dollars ------------------------------------------ --------------------------------------- For the three For the six For the three For the six months ended months ended months ended months ended June 30, June 30, June 30, June 30, ----------------- ---------------- --------------- ---------------- 2001 2000 2001 2000 2001 and 2000 2001 and 2000 ---- ---- ---- ---- ------------- ------------- <S> <C> <C> <C> <C> <C> <C> Revenues: Rental income 51% 97% 51% 97% $ 269 $ 559 Syndication and commission income 47 0 46 0 6,349 12,102 Interest and other income 2 3 3 3 118 458 ----- ----- ----- ----- ----------- ----------- Total revenues 100 100 100 100 6,736 13,119 ----- ----- ----- ----- ----------- ----------- Expenses: Selling, general and administrative 26 40 26 40 812 1,400 Other real estate operating expenses 15 23 13 23 474 470 Depreciation and amortization 7 16 8 15 (68) 102 Real estate taxes and insurance 5 10 5 10 48 72 Interest expense 2 2 2 4 101 (101) Minority interest 0 0 0 0 (4) 13 ----- ----- ----- ----- ----------- ----------- Total expenses 55 91 54 92 1,363 1,956 ----- ------- ----- ----- ----------- ----------- Net income 45% 9% 46% 8% $ 5,373 $ 11,163 ===== ===== ===== ===== =========== ========== </TABLE> The Partnership's net income for the three months ended June 30, 2001 was $6.0 million reflecting an increase of $5.4 million over the net income of $666 thousand during the comparable period in 2000. The Partnership's net income for the six months ended June 30, 2001 was $12.2 million reflecting an increase of $11.2 million over the net income of $1.0 million during the comparable period in 2000. The increase in net income during the 2001 periods compared to 2000 resulted primarily from increased investment service income related to the syndication of Sponsored REIT's in 2001. 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Revenues Total revenues during the three months ended June 30, 2001 increased by $6.7 million or 100% compared to the three months ended June 30, 2000. Total revenues increased $13.1 million or 99%, to $26.3 million for the six months ended June 30, 2001, as compared to $13.2 million for the six months ended June 30, 2000. Income from rental operations was $13.3 million for the six months ended June 30, 2001 compared to $12.8 million for the six months ended June 30, 2000. The increase in rental income of $559 thousand, or 4.4%, compared to the six months ended June 30, 2000, is attributable to: o the acquisition of one commercial property in 2000, which generated revenue for a full year in 2001 compared with a partial year in 2000, resulting in $300 thousand in additional revenue; o the increase in rents for one property of approximately $425 thousand; o the net increase in other rents of about $305 thousand less vacancies and delinquencies of approximately $170 thousand; o offset by increased delinquencies in one property of approximately $300 thousand, substantially all of which occurred during the quarter ended June 30, 2001. The increase in investment services (syndication and commission) income of $6.3 million and $12.1 million for the three months and six months ended June 30, 2001, respectively, compared to the same periods in 2000, is attributable to the syndication of three Sponsored REIT's in 2001. The Partnership syndicated three Sponsored Partnerships during the six months ended June 30, 2000 and generated syndication and commission fees of $6.0 million; however, these fees are eliminated in the consolidated results. The increase in interest and other income of $118 thousand and $458 thousand for the three months and six months ended June 30, 2001, respectively, compared to the same periods in 2000, is attributable to interest earned on higher cash balances, cash equivalents and marketable securities and higher average yields in 2001 compared to 2000. Expenses Total expenses increased $1.4 million or 22% and $2.0 million or 16% for the three months and six months ended June 30, 2001, respectively, compared to the same periods in 2000. The increase in selling, general and administrative expenses of $1.4 million or 26%, compared to the six months ended June 30, 2000, is attributable to: o increased broker commissions and related costs of approximately $1.7 million; o increased professional fees of approximately $115 thousand; o increased other costs of approximately $120 thousand; o offset by decreased payroll and related expenses of approximately $535 thousand. The increase in other real estate operating expenses of $470 thousand or 16%, compared to the six months ended June 30, 2000, is primarily attributable to: o an increase in the allowance for bad debts of $200 thousand, all of which occurred during the quarter ended June 30, 2001; and o increased other costs of $270 thousand. 10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Expenses (Continued) Depreciation and amortization expenses in 2001 approximated depreciation and amortization expenses for the three months and six months ended June 30, 2000 due to consistent levels of property. The increase in real estate taxes and insurance expenses of $72 thousand or 5.4% for the six months ended June 30, 2001, compared to the six months ended June 30, 2000 is primarily attributable to a general increase in real estate taxes. The decrease in interest expense of $101 thousand or 20% for the six months ended June 30, 2001, compared to the six months ended June 30, 2000, is primarily attributable to the decrease in outstanding debt balances during 2001 compared to 2000. The minority interest for the year six months ended June 30, 2001 approximated the minority interest for the six months ended June 30, 2000. Liquidity and Capital Resources Cash and cash equivalents were $22.3 million and $13.7 million at June 30, 2001 and December 31, 2000, respectively. This 25.9% increase of $8.6 million is attributable to $17.5 million provided by operating activities and $21.1 million provided by investing activities partially offset by $30.0 million used by financing activities. Operating Activities The Partnership's cash provided by operating activities of $17.5 million is primarily attributable to: o $14.3 million from operations, after addback of $2.1 million from non cash expenses, primarily depreciation and amortization; o $2.7 million from the increase in accounts payable and accrued expenses, and o $0.5 million from the net change in other operating assets and liabilities. Investing Activities The Partnership's cash provided by investing activities of $21.1 million is primarily attributable to: o $16.5 million from the proceeds of a loan to a related party; o $4.3 million from the sale of marketable securities; and o $0.3 million provided by the proceeds from the sale of excess land partially offset by the purchase of other property and equipment. Financing Activities The Partnership's cash used for financing activities of $30.0 million is attributable to: o $13.4 million cash distributions to partners; o $16.5 million of net repayments under the line of credit facility. 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) In the near term, liquidity is generated from funds from ongoing real estate operations and investment services fees and commissions received in connection with the sale of shares by new Sponsored REITs. The Partnership maintains an unsecured line of credit through Citizens Bank. The Partnership has entered into a Master Promissory Note and Loan Agreement which provides for a revolving line of credit of up to $53 million. Borrowings under the loan bear interest at either the bank's base rate or a variable LIBOR rate. The Partnership uses the unsecured line of credit to provide each newly-formed Sponsored REIT with the funds to purchase its property. The Partnership loans the purchase price of the property, at an interest rate equivalent to the rate which the Partnership is paying to the bank and takes back a mortgage. The Partnership collects a commitment fee from the Sponsored REIT. The loan is paid back in full from the capital contributions of each Sponsored REIT's investors. The Partnership's loan agreement with the bank includes customary restrictions on property liens and requires compliance with various financial covenants. Financial covenants include maintaining minimum cash balances in operating accounts, tangible net worth of at least $104 million and compliance with other various debt and income ratios. The Partnership was in compliance with all covenants as of June 30, 2001. As part of a syndication of a Sponsored REIT, the Partnership entered into an agreement whereby the Partnership agreed to purchase a certain additional property if the owner of the property offered the property for sale. The price of the property ranges from $15 million to $22 million based upon a formula. The seller must deliver notice to the Partnership of its intent to sell the property no later than the end of May 2002. In the event that the Partnership is unable to syndicate this property the Partnership would have to borrow under its revolving credit facility. The Partnership did not have any borrowings under its revolving credit facility as of June 30, 2001. The Partnership's real properties generate rental income to cover the ordinary, annual operating expenses of the properties and to fund distributions to partners. As of June 30, 2001, the rental income covered the expenses for each of the Partnership's real properties. In addition to rental income, the Partnership maintains cash reserves that may be used to fund extraordinary expenses or major capital expenses. The cash reserves were set aside when the Sponsored Partnerships that the Partnership has acquired were originally syndicated. The cash reserves, included in cash and cash equivalents, as of June 30, 2001 of approximately $7.2 million are in excess of the known needs for extraordinary expenses or capital improvements for the real properties within the next few years. There are no external restrictions on these reserves, and they may be used for any Partnership purpose. Although there is no guarantee we will be able to obtain the funds necessary for our future growth, we anticipate generating funds from continuing real estate operations and from fees and commissions from the sale of shares in newly-formed Sponsored REITs. The Partnership believes that it has adequate funds to cover extraordinary expenses and capital improvements, in addition to normal operating expenses. 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company was not a party to derivative commodity investments at or during the year ended December 31, 2000 or during the six months ended June 30, 2001. The Company's only other financial instruments (as defined by financial Accounting Standards Board Statement No. 107) are its cash and cash equivalents and marketable securities for which cost approximates market value. The Company's only indebtedness consists of draws from time to time upon its line of credit. These borrowings bear interest at a variable rate. The Company uses the funds it draws on its line of credit only for the purpose of making interim mortgage loans to Sponsored REITs. These mortgage loans bear interest at the same variable rate payable by the Company under its line of credit. Therefore, the Company believes that it has mitigated its interest rate risk with respect to its borrowings. 13
PART II - OTHER INFORMATION Item 1. Legal Proceedings: Not applicable. Item 2. Changes in Securities: Not applicable. Item 3. Defaults Upon Senior Securities: Not applicable. Item 4. Submission of Matters to a Vote of Security Holders: Not applicable. Item 5. Other Information: Not applicable. Item 6. Exhibits and Reports on Form 8 - K: (a) Exhibits: None; (b) Reports on Form 8 - K: The Partnership did not file any report on Form 8-K with the SEC during the quarter ended June 30, 2001. 14
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Franklin Street Partners Limited Partnership August 14, 2001 FSP General Partner LLC its General Partner By: /s/ George J. Carter ----------------------------- Managing Member and President 15