<SUBMISSION>
<ACCESSION-NUMBER>0000950109-01-501394
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>1
<PERIOD>20010331
<FILING-DATE>20010515
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>HIGHWOODS PROPERTIES INC
<CIK>0000921082
<ASSIGNED-SIC>6798
<IRS-NUMBER>561871668
<STATE-OF-INCORPORATION>MD
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>001-13100
<FILM-NUMBER>1638900
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>3100 SMOKETREE CT
<STREET2>STE 600
<CITY>RALEIGH
<STATE>NC
<ZIP>27604
<PHONE>9198724924
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>3100 SMOKETREE COURT
<STREET2>STE 600
<CITY>RALEIGH
<STATE>NC
<ZIP>27604
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>d10q.txt
<DESCRIPTION>FORM 10-Q
<TEXT>

<PAGE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               ----------------

                                   FORM 10-Q

              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended March 31, 2001

                       Commission file number: 001-13100

                               ----------------

                           HIGHWOODS PROPERTIES, INC.
             (Exact name of registrant as specified in its charter)

                Maryland                               56-1871668
    (State or other jurisdiction of                 (I.R.S. Employer
     incorporation or organization)              Identification Number)

                 3100 Smoketree Court, Suite 600, Raleigh, N.C.
                    l(Address of principal executive office)

                                     27604
                                   (Zip Code)

                                 (919) 872-4924
              Registrant's telephone number, including area code:

                               ----------------

   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 12 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 90 days. Yes [X] No [_]

                               ----------------

   The Company has only one class of common stock, par value $.01 per share,
with 53,875,783 shares outstanding as of May 1, 2001.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                           HIGHWOODS PROPERTIES, INC.

              QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2001

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
 <C>     <S>                                                               <C>
 PART I  FINANCIAL INFORMATION

 Item 1. Financial Statements...........................................     3

         Consolidated Balance Sheets as of March 31, 2001 and December
         31, 2000.......................................................     4

         Consolidated Statements of Income for the three months ended
         March 31, 2001 and 2000........................................     5

         Consolidated Statements of Stockholders' Equity for the three
          months ended
          March 31, 2001................................................     6

         Consolidated Statements of Cash Flows for the three months
          ended March 31,
          2001 and 2000.................................................     7

         Notes to Consolidated Financial Statements.....................     9

         Management's Discussion and Analysis of Financial Condition and
 Item 2. Results of Operations..........................................    12

         Results of Operations..........................................    12

         Liquidity and Capital Resources................................    13

         Recent Developments............................................    14

         Possible Environmental Liabilities.............................    15

         Compliance with the Americans with Disabilities Act............    16

         Funds From Operations and Cash Available for Distributions.....    16

         Disclosure Regarding Forward-Looking Statements................    18

         Property Information...........................................    19

         Inflation......................................................    27

 Item 3. Quantitative and Qualitative Disclosures About Market Risk.....    28

 PART II OTHER INFORMATION

 Item 1. Legal Proceedings..............................................    28

 Item 6. Exhibits and Reports on Form 8-K...............................    29
</TABLE>

                                       2
<PAGE>

                         PART I--FINANCIAL INFORMATION

Item 1.  Financial Statements

   We refer to (1) Highwoods Properties, Inc. as the "Company," (2) Highwoods
Realty Limited Partnership as the "Operating Partnership," (3) the Company's
common stock as "Common Stock" and (4) the Operating Partnership's common
partnership interests as "Common Units."

   The information furnished in the accompanying balance sheets, statements of
income, statements of stockholders' equity and statements of cash flows reflect
all adjustments (consisting of normal recurring accruals) that are, in our
opinion, necessary for a fair presentation of the aforementioned financial
statements for the interim period.

   The aforementioned financial statements should be read in conjunction with
the notes to consolidated financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations included herein and
in our 2000 Annual Report on Form 10-K.

                                       3
<PAGE>

                           HIGHWOODS PROPERTIES, INC.

                          CONSOLIDATED BALANCE SHEETS
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                         March 31,   December 31,
                                                           2001          2000
                                                        -----------  ------------
                                                        (Unaudited)
<S>                                                     <C>          <C>
                        ASSETS
Real estate assets, at cost:
 Land and improvements................................  $  415,301    $  421,270
 Buildings and tenant improvements....................   2,790,722     2,742,946
 Development in process...............................     110,425        87,622
 Land held for development............................     148,374       145,598
 Furniture, fixtures and equipment....................      11,736        11,433
                                                        ----------    ----------
                                                         3,476,558     3,408,869
 Less--accumulated depreciation.......................    (306,120)     (280,610)
                                                        ----------    ----------
 Net real estate assets...............................   3,170,438     3,128,259
Property held for sale................................      96,910       127,824
Cash and cash equivalents.............................      46,119       104,780
Restricted cash.......................................       2,145         2,192
Accounts receivable, net..............................      18,389        24,003
Advances to related parties...........................         --         27,560
Notes receivable......................................      71,559        80,918
Accrued straight-line rents receivable................      41,996        39,295
Investment in unconsolidated affiliates...............      78,777        78,423
Other assets:
 Deferred leasing costs...............................      88,953        83,269
 Deferred financing costs (See Note 4)................      26,350        43,110
 Prepaid expenses and other...........................      11,161        11,878
                                                        ----------    ----------
                                                           126,464       138,257
 Less--accumulated amortization.......................     (48,605)      (49,909)
                                                        ----------    ----------
   Other assets, net..................................      77,859        88,348
                                                        ----------    ----------
Total Assets..........................................  $3,604,192    $3,701,602
                                                        ==========    ==========

         LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages and notes payable...........................  $1,606,208    $1,587,019
Accounts payable, accrued expenses and other
 liabilities..........................................     107,375       109,824
                                                        ----------    ----------
 Total Liabilities....................................   1,713,583     1,696,843
Minority interest.....................................     211,201       213,214

Stockholders' Equity:
Preferred stock, $.01 par value, 50,000,000 authorized
 shares;
 8 5/8% Series A Cumulative Redeemable Preferred
  Shares (liquidation preference $1,000 per share),
  125,000 shares issued and outstanding at March 31,
  2001 and December 31, 2000..........................     125,000       125,000
 8% Series B Cumulative Redeemable Preferred Shares
  (liquidation preference $25 per share),
  6,900,000 shares issued and outstanding at March
  31, 2001 and December 31, 2000......................     172,500       172,500
 8% Series D Cumulative Redeemable Preferred Shares
  (liquidation preference $250 per share),
  400,000 shares issued and outstanding at March 31,
  2001 and December 31, 2000..........................     100,000       100,000
Common stock, $.01 par value, 200,000,000 authorized
 shares; 54,239,673 shares issued and outstanding at
 March 31, 2001 and 58,124,205 at December 31, 2000...         542           581
Additional paid-in capital............................   1,408,002     1,506,161
Distributions in excess of net earnings...............    (111,972)     (110,209)
Accumulated other comprehensive loss (See Note 4).....     (10,598)          --
Deferred compensation--restricted stock...............      (4,066)       (2,488)
                                                        ----------    ----------
 Total Stockholders' Equity...........................   1,679,408     1,791,545
                                                        ----------    ----------
Total Liabilities and Stockholders' Equity............  $3,604,192    $3,701,602
                                                        ==========    ==========
</TABLE>
          See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

                           HIGHWOODS PROPERTIES, INC.

                       CONSOLIDATED STATEMENTS OF INCOME
             (Unaudited and in thousands except per share amounts)

<TABLE>
<CAPTION>
                                                              Three Months
                                                                  Ended
                                                                March 31,
                                                            ------------------
                                                              2001      2000
                                                            --------  --------
<S>                                                         <C>       <C>
Revenue:
  Rental property.......................................... $128,621  $136,574
  Equity in earnings of unconsolidated affiliates..........      833       943
  Interest and other income................................    7,813     3,642
                                                            --------  --------
Total Revenue..............................................  137,267   141,159
Operating expenses:
  Rental property..........................................   36,909    39,461
  Depreciation and amortization............................   29,206    28,328
  Interest expense:
    Contractual............................................   28,321    27,047
    Amortization of deferred financing costs...............      665       721
                                                            --------  --------
                                                              28,986    27,768
  General and administrative...............................    5,212     5,096
                                                            --------  --------
    Income before gain on disposition of land and
     depreciable assets, minority interest and
     extraordinary item ...................................   36,954    40,506
  Gain on disposition of land and depreciable assets.......    7,071     6,946
                                                            --------  --------
    Income before minority interest and extraordinary
     item..................................................   44,025    47,452
Minority interest..........................................   (5,251)   (6,020)
                                                            --------  --------
  Income before extraordinary item.........................   38,774    41,432
Extraordinary item--loss on early extinguishment of debt...     (193)     (195)
                                                            --------  --------
  Net income...............................................   38,581    41,237
Dividends on preferred stock...............................   (8,145)   (8,145)
                                                            --------  --------
Net income available for common shareholders............... $ 30,436  $ 33,092
                                                            ========  ========
Net income per common share--basic:
  Income before extraordinary item......................... $   0.54  $   0.55
  Extraordinary item--loss on early extinguishment of
   debt....................................................      --        --
                                                            --------  --------
  Net income............................................... $   0.54  $   0.55
                                                            ========  ========
  Weighted average shares outstanding--basic...............   56,393    60,406
                                                            ========  ========
Net income per common share--diluted:
  Income before extraordinary item......................... $   0.54  $   0.55
  Extraordinary item--loss on early extinguishment of
   debt....................................................      --        --
                                                            --------  --------
  Net income............................................... $   0.54  $   0.55
                                                            ========  ========
  Weighted average shares outstanding--diluted.............   56,659    60,492
                                                            ========  ========
Distributions declared per common share.................... $   0.57  $  0.555
                                                            ========  ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       5
<PAGE>

                           HIGHWOODS PROPERTIES, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                   For the Three Months Ended March 31, 2001
               (Unaudited and in thousands except share amounts)

<TABLE>
<CAPTION>
                                                                                             Accumulated
                  Number of                                        Additional                   Other     Distributions
                    Common    Common Series A  Series B  Series D   Paid-In      Deferred   Comprehensive in excess of
                    Shares    Stock  Preferred Preferred Preferred  Capital    Compensation     Loss      Net Earnings
                  ----------  ------ --------- --------- --------- ----------  ------------ ------------- -------------
<S>               <C>         <C>    <C>       <C>       <C>       <C>         <C>          <C>           <C>
Balance at
 December 31,
 2000...........  58,124,205   $581  $125,000  $172,500  $100,000  $1,506,161    $(2,488)          --       $(110,209)
Issuance of
 Common Stock...      11,178    --        --        --        --           68        --            --             --
Common Stock
 Dividends......         --     --        --        --        --          --         --            --         (32,199)
Preferred Stock
 Dividends......         --     --        --        --        --          --         --            --          (8,145)
Issuance of
 restricted
 stock..........      71,190    --        --        --        --        1,779     (1,779)          --             --
Amortization of
 deferred
 compensation...         --     --        --        --        --          --         201           --             --
Repurchase of
 Common Stock...  (3,966,900)   (39)      --        --        --     (100,006)       --            --             --
Net Income......         --     --        --        --        --          --         --            --          38,581
Reclassification
 of derivative
 instruments....         --     --        --        --        --          --         --        (10,598)           --
                  ----------   ----  --------  --------  --------  ----------    -------      --------      ---------
Total other
 comprehensive
 loss...........
Balance at March
 31, 2001.......  54,239,673   $542  $125,000  $172,500  $100,000  $1,408,002    $(4,066)     $(10,598)     $(111,972)
                  ==========   ====  ========  ========  ========  ==========    =======      ========      =========
<CAPTION>
                                  Other
                              Comprehensive
                    Total         Loss
                  ----------- -------------
<S>               <C>         <C>
Balance at
 December 31,
 2000...........  $1,791,545         --
Issuance of
 Common Stock...          68         --
Common Stock
 Dividends......     (32,199)        --
Preferred Stock
 Dividends......      (8,145)        --
Issuance of
 restricted
 stock..........         --          --
Amortization of
 deferred
 compensation...         201         --
Repurchase of
 Common Stock...    (100,045)        --
Net Income......      38,581      38,581
Reclassification
 of derivative
 instruments....     (10,598)   (10,598)
                  ----------- -------------
Total other
 comprehensive
 loss...........                  27,983
                              =============
Balance at March
 31, 2001.......  $1,679,408
                  ===========
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       6
<PAGE>

                           HIGHWOODS PROPERTIES, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                          (Unaudited and in thousands)

<TABLE>
<CAPTION>
                                                               Three Months
                                                             Ended March 31,
                                                             -----------------
                                                               2001     2000
                                                             --------  -------
<S>                                                          <C>       <C>
Operating activities:
Net income.................................................  $ 38,581  $41,237
Adjustments to reconcile net income to net cash provided by
 operating activities:
  Depreciation and amortization............................    29,871   29,049
  Amortization of deferred compensation....................       201      --
  Minority interest........................................     5,251    6,020
  Equity in earnings of unconsolidated affiliates..........      (833)    (943)
Loss on early extinguishment of debt.......................       193      195
Gain on disposition of land and depreciable assets.........    (7,071)  (6,946)
Transition adjustment upon adoption of FASB 133............       556      --
Loss on ineffective portion of derivative instruments......       466       --
Changes in operating assets and liabilities................      (446)  (9,507)
                                                             --------  -------
    Net cash provided by operating activities..............    66,769   59,105
                                                             --------  -------
Investing activities:
Additions to real estate assets............................   (59,310) (49,787)
Proceeds from disposition of real estate assets............    49,700   20,666
Payment from advances to subsidiaries......................    27,560    1,237
Distributions from unconsolidated affiliates...............     1,333      622
Investments in notes receivable............................     8,684   (5,001)
Other investing activities.................................    (5,705)  (1,046)
                                                             --------  -------
    Net cash provided by /(used in) investing activities...    22,262  (33,309)
                                                             --------  -------

Financing activities:
Distributions paid on common stock and common units........   (36,506) (38,438)
Dividends paid on preferred stock..........................    (8,145)  (8,145)
Payment of prepayment penalties............................      (193)    (195)
Borrowings on mortgages and notes payable..................    16,402   72,215
Repayments on mortgages and notes payable..................   (33,733) (67,334)
Borrowings on revolving loans..............................    69,000  129,000
Repayments on revolving loans..............................   (47,000) (88,000)
Net proceeds from the sale of common stock.................        68      107
Net change in deferred financing costs.....................      (738)    (418)
Repurchase of common stock and units.......................  (106,847) (35,301)
                                                             --------  -------
    Net cash used in financing activities..................  (147,692) (36,509)
                                                             --------  -------
Net decrease in cash and cash equivalents..................   (58,661) (10,713)
Cash and cash equivalents at beginning of the period.......   104,780   34,496
                                                             --------  -------
Cash and cash equivalents at end of the period.............  $ 46,119  $23,783
                                                             ========  =======

Supplemental disclosure of cash flow information:
Cash paid for interest.....................................  $ 23,489  $24,583
                                                             ========  =======
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       7
<PAGE>

                           HIGHWOODS PROPERTIES, INC.

               CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
                          (Unaudited and in thousands)

Supplemental disclosure of non-cash investing and financing activities

   The following table summarizes the net assets contributed by the holders of
Common Units in the Operating Partnership and the net assets acquired subject
to mortgage notes payable.

<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                             March 31,
                                                       ----------------------
                                                          2001        2000
                                                       ----------- ----------
                                                       (Unaudited) (Unaudited)
<S>                                                    <C>         <C>
Assets:
Notes receivable .....................................   $   675        --
Cash and cash equivalents.............................       551        --
Rental property and equipment, net....................    19,881     $1,356

Liabilities:
Accounts payable, accrued expenses and other
 liabilities..........................................    22,520        --
Mortgages and notes payable...........................     1,392        --
                                                         -------     ------
  Net assets..........................................   $(2,805)    $1,356
                                                         =======     ======
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       8
<PAGE>

                           HIGHWOODS PROPERTIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2001
                                  (Unaudited)

1. BASIS OF PRESENTATION

   The consolidated financial statements include the accounts of the Company
and the Operating Partnership and their majority-controlled affiliates. All
significant intercompany balances and transactions have been eliminated in the
consolidated financial statements.

   The extraordinary loss represents the write-off of loan origination fees and
prepayment penalties paid on the early extinguishment of debt, net of the
minority interest.

   The Company has elected and expects to continue to qualify as a REIT under
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended.
Therefore, no provision has been made for income taxes related to REIT taxable
income to be distributed to stockholders.

   Minority interest in the Company represents Common Units owned by various
individuals and entities and not the Company in the Operating Partnership, the
entity that owns substantially all of the Company's properties and through
which the Company, as the sole general partner, conducts substantially all of
its operations. Per share information is calculated using the weighted average
number of shares outstanding (including common share equivalents). In addition,
minority interest includes equity of consolidated real estate partnerships
which are owned by various individuals and entities and not the Company.

   Certain amounts in the March 31, 2000 financial statements have been
reclassified to conform to the March 31, 2001 presentation. These
reclassifications had no material effect on net income or stockholders' equity
as previously reported.

   The accompanying financial information has not been audited, but in the
opinion of management, all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of our financial position, results
of operations and cash flows have been made. For further information, refer to
the financial statements and notes thereto included in our 2000 Annual Report
on Form 10-K.

2. SEGMENT INFORMATION

   Our sole business is the acquisition, development and operation of rental
real estate properties. We operate office, industrial and retail properties and
apartment units. There are no material inter-segment transactions.

   Our chief operating decision maker ("CDM") assesses and measures operating
results based upon property level net operating income. The operating results
for the individual assets within each property type have been aggregated since
the CDM evaluates operating results and allocates resources on a property-by-
property basis within the various property types.


                                       9
<PAGE>

                           HIGHWOODS PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   The accounting policies of the segments are the same as those described in
Note 1. Further, all operations are within the United States and no tenant
comprises more than 10% of consolidated revenues. The following table
summarizes the rental income, net operating income and total assets for each
reportable segment for the three months ended March 31, 2001 and 2000.

<TABLE>
<CAPTION>
                                                        Three Months Ended
                                                             March 31,
                                                       ----------------------
                                                          2001        2000
                                                       ----------  ----------
<S>                                                    <C>         <C>
Rental Income:
Office segment........................................ $  103,941  $  110,510
Industrial segment....................................     11,715      13,115
Retail segment........................................      9,695       8,395
Apartment segment.....................................      3,270       4,554
                                                       ----------  ----------
    Total Rental Income............................... $  128,621  $  136,574
                                                       ==========  ==========
Net Operating Income:
Office segment........................................ $   73,361  $   77,396
Industrial segment....................................      9,976      10,851
Retail segment........................................      6,584       6,049
Apartment segment.....................................      1,791       2,817
                                                       ----------  ----------
    Total Net Operating Income........................     91,712      97,113
                                                       ----------  ----------
Reconciliation to income before minority interest and
 extraordinary item:
Equity in income of unconsolidated affiliates.........        833         943
Gain on disposition assets............................      7,071       6,946
Interest and other income.............................      7,813       3,642
Interest expense......................................    (28,986)    (27,768)
General and administrative expense....................     (5,212)     (5,096)
Depreciation and amortization.........................    (29,206)    (28,328)
                                                       ----------  ----------
Income before minority interest and extraordinary
 item................................................. $   44,025  $   47,452
                                                       ==========  ==========
Total Assets:
Office segment........................................ $2,700,177  $2,996,001
Industrial segment....................................    337,605     438,389
Retail segment........................................    243,538     272,664
Apartment segment.....................................     86,761     115,387
Corporate and other...................................    236,111     198,910
                                                       ----------  ----------
    Total Assets...................................... $3,604,192  $4,021,351
                                                       ==========  ==========
</TABLE>

3. LEGAL CONTINGENCIES

   On October 2, 1998, John Flake, a former stockholder of J.C. Nichols, filed
a putative class action lawsuit on behalf of himself and the other former
stockholders of J.C. Nichols in the United States District Court for the
District of Kansas against J.C. Nichols, certain of its former officers and
directors and the Company. The complaint asserts claims against J.C. Nichols
and certain named directors and officers of J.C. Nichols for breach of
fiduciary duty to J.C. Nichols' stockholders, and to members of the J.C.
Nichols Company Employee Stock Ownership Trust, as well as claims under Section
14(a) of the Securities Exchange Act of 1934 Sections 11 and 12(2) of the
Securities Act of 1933 variously against J.C. Nichols, the named directors and
officers of J.C. Nichols and the Company. By order dated June 18, 1999, the
court granted in part and denied in

                                       10
<PAGE>

                           HIGHWOODS PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

part our motion to dismiss, and the court thereafter certified the proposed
class of plaintiffs with respect to the remaining claims. By order dated August
28, 2000, the court granted in part and denied in part defendants' summary
judgment motion. Defendants sought reconsideration of the court's ruling with
respect to certain of the securities claims as to which the court denied their
summary judgment motion, and by order dated January 11, 2001, the court granted
in part that reconsideration motion. On the eve of the trial of this matter,
the parties settled all their remaining claims. The parties have executed a
Stipulation of Settlement, which has been submitted to the court. The final
settlement hearing is scheduled for May 24, 2001. We do not believe the
settlement will have a material adverse effect on our business, financial
condition or results of operations.

4. DERIVATIVE FINANCIAL INSTRUMENTS

   On January 1, 2001, we adopted Financial Accounting Standards Board
Statement (SFAS) No. 133/138, "Accounting for Derivative Instruments and
Hedging Activities," as amended. This Statement requires us to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of derivatives
will either be offset against the change in fair value of the hedged assets,
liabilities or firm commitments through earnings, or recognized in Accumulated
Other Comprehensive Loss ("AOCL") until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value is
recognized in earnings. In connection with the adoption of SFAS 133/138 in
January 2001, we recorded a net transition adjustment of $555,962 of unrealized
loss in interest and other income and a net transition adjustment of $125,000
in AOCL. Adoption of the standard also resulted in our recognizing $127,000 of
derivative instrument liabilities and a reclassification of approximately $10.6
million of deferred financing costs from past cashflow hedging relationships
from other assets to AOCL.

   Our interest rate risk management objective is to limit the impact of
interest rate changes on earnings and cashflows and to lower overall borrowing
costs. To achieve these objectives, we enter into interest rate hedge contracts
such as collars, swaps, caps and treasury lock agreements in order to mitigate
our interest rate risk with respect to various debt instruments. We do not hold
these derivatives for trading or speculative purposes.

   All of our derivatives are designated as cashflow hedges (i.e., hedging the
exposure of variability in expected future cash flows that is attributable to a
particular risk) at March 31, 2001. The effective portion of the cumulative
loss on the derivative instruments was $10.6 million at March 31, 2001 and is
reported as a component of AOCL in shareholders' equity and recognized into
earnings in the same period or periods during which the hedged transaction
affects earnings (as the underlying debt is paid down). We expect that the
portion of the cumulative loss recorded in AOCL at March 31, 2001 associated
with the derivative instruments which will be recognized within the next 12
months will be approximately $1.5 million. The ineffective portion of our
derivatives' changes in fair value has resulted in a loss of $1.0 million and
is reported in interest and other income on the Consolidated Statements of
Income at March 31, 2001.

   Derivative liabilities totaling approximately $860,788 related to our
interest rate swap, cap and collar agreements, with a notional amount of $113.1
million, are recorded in other accounts payable, accrued expenses and other
liabilities in the Consolidated Condensed Balance Sheets at March 31, 2001. The
fair value of our interest rate swap, cap and collar agreements was ($860,788)
at March 31, 2001 and is based on individual market values as calculated
monthly using a published forward curve for the floating portion and the agreed
upon fixed rate for the fixed portion of the interest rate swap, cap and collar
agreements.

                                       11
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

   The following discussion should be read in conjunction with all of the
financial statements appearing elsewhere in the report and is based primarily
on the consolidated financial statements of the Company.

Results of Operations

   Three Months Ended March 31, 2001. Revenues from rental operations decreased
$8.0 million, or 5.9%, from $136.6 million for the three months ended March 31,
2000 to $128.6 million for the comparable period in 2001. The decrease is
primarily a result of the disposition of and contribution of 6.5 million square
feet of wholly owned office, industrial and retail properties and 277 apartment
units, offset in part by the acquisition of 741,000 square feet of wholly owned
office properties and the completion of 2.2 million square feet of development
activity during the last nine months of 2000 and the first three months of
2001. Our in-service portfolio decreased from 40.2 million square feet at March
31, 2000 to 36.5 million square feet at March 31, 2001. Same property revenues,
which are the revenues of the 455 in-service properties and 1,608 apartment
units owned on January 1, 2000, increased 3.3% for the three months ended March
31, 2001, compared to the same three months in 2000.

   During the three months ended March 31, 2001, 161 leases representing 1.1
million square feet of office, industrial and retail space were executed at an
average rate per square foot which was 7.9% higher than the average rate per
square foot on the expired leases.

   Interest and other income increased $4.2 million, or 116.7%, from $3.6
million for the three months ended March 31, 2000 to $7.8 million for the
comparable period in 2001. The increase was a result of an increase in interest
income and third party fee income partly offset by an adjustment related to the
adoption of FASB 133.

   Rental operating expenses decreased $2.6 million, or 6.6%, from $39.5
million for the three months ended March 31, 2000 to $36.9 million for the
comparable period in 2001. The decrease is primarily a result of the
disposition of and contribution of 6.5 million square feet of wholly owned
office, industrial and retail properties and 277 apartment units, offset in
part by the acquisition of 741,000 square feet of wholly owned office
properties and the completion of 2.2 million square feet of development
activity during the last nine months of 2000 and the first three months of
2001. Rental operating expenses as a percentage of related revenues was 28.7%
and 28.9% for the three months ended March 31, 2001 and 2000, respectively.

   Depreciation and amortization for the three months ended March 31, 2001 and
2000 totaled $29.2 million and $28.3 million, respectively. The increase of
$878,000, or 3.1%, is due to an increase in tenant improvements in 2000 and
2001. Interest expense increased $1.2 million, or 4.3%, from $27.8 million for
the three months ended March 31, 2000 to $29.0 million for the comparable
period in 2001. The increase is attributable to a decrease in capitalized
interest in 2001 from 2000. Interest expense for the three months ended March
31, 2001 and 2000 included $665,000 million and $721,000 million, respectively,
of amortization of deferred financing costs and the costs related to our
interest rate hedge contracts. General and administrative expenses increased
0.2% from 3.6% of total revenue for the three months ended March 31, 2000 to
3.8% for the comparable period in 2001.

   Income before minority interest and extraordinary item was $44.0 million and
$47.5 million for the three months ended March 31, 2001 and 2000, respectively.
The Company's net income allocated to minority interest totaled $5.3 million
and $6.0 million for the three months ended March 31, 2001 and 2000,
respectively. The Company recorded $8.1 million in preferred stock dividends
for the three months ended March 31, 2001 and 2000.


                                       12
<PAGE>

Liquidity and Capital Resources

   Statement of Cash Flows. For the three months ended March 31, 2001, the
Company generated $66.8 million in cash flows from operating activities and
$22.3 million in investing activities (primarily as a result of dispositions of
real estate assets and repayments from subsidiaries, partly offset by additions
to real estate assets). These combined cash flows of $89.1 million were used
during the quarter to partly fund financing activities of $147.7 million,
primarily consisting of the repurchase of Common Stock and Common Units and the
payment of distributions.

   Capitalization. Our total indebtedness at March 31, 2001 totaled $1.6
billion and was comprised of $629.0 million of secured indebtedness with a
weighted average interest rate of 7.8% and $1.0 billion of unsecured
indebtedness with a weighted average interest rate of 7.3%. Except as stated
below, all of the mortgage and notes payable outstanding at March 31, 2001 were
either fixed rate obligations or variable rate obligations covered by interest
rate hedge contracts. Approximately $32.5 million of floating rate notes were
not covered by interest rate hedge contracts on March 31, 2001.

   Based on the Company's total market capitalization of $3.5 billion at March
31, 2001 (at the March 31, 2001 stock price of $24.65 and assuming the
redemption for shares of Common Stock of the 7.7 million Common Units of
minority interest in the Operating Partnership), the Company's debt represented
approximately 45.5% of its total market capitalization.

   To meet in part our long-term liquidity requirements, we borrow funds at a
combination of fixed and variable rates. Borrowings under our $300.0 million
unsecured revolving loan (the "Revolving Loan") bear interest at variable
rates. Our long-term debt, which consists of long-term financings and the
issuance of debt securities, typically bears interest at fixed rates. In
addition, we have assumed fixed rate and variable rate debt in connection with
acquiring properties. Our interest rate risk management objective is to limit
the impact of interest rate changes on earnings and cash flows and to lower our
overall borrowing costs. To achieve these objectives, from time to time we
enter into interest rate hedge contracts such as collars, swaps, caps and
treasury lock agreements in order to mitigate our interest rate risk with
respect to various debt instruments. We do not hold or issue these derivative
contracts for trading or speculative purposes.

   The following table sets forth information regarding our interest rate hedge
contracts as of March 31, 2001:

<TABLE>
<CAPTION>
                                                                       Fair
                  Notional Maturity                         Fixed     Market
Type of Hedge      Amount    Date      Reference Rate       Rate       Value
-------------     -------- -------- --------------------  ---------  ---------
<S>               <C>      <C>      <C>                   <C>        <C>
Swap............. $19,671  06/10/02 1-Month LIBOR + 0.75% 6.95%      $(392,540)
Collar........... $80,000  10/15/01 1-Month LIBOR         5.60-6.25% $(468,248)
Cap.............. $13,434  06/15/01 1-Month LIBOR         7.75%            --
</TABLE>

   The interest rate on our variable rate debt is adjusted at one-month
intervals, subject to settlements under these contracts. Net
(receipts)/payments made to counterparties under interest rate hedge contracts
were $(24,105) during the first quarter of 2001 and $7,545 during the first
quarter of 2000 and were recorded as (decreases)/increases to interest expense.

   In addition, we are exposed to certain losses in the event of nonperformance
by the counterparties under the interest rate hedge contracts. We expect the
counterparties, which are major financial institutions, to perform fully under
these contracts. However, if the counterparties were to default on their
obligations under the interest rate hedge contracts, we could be required to
pay the full rates on our debt, even if such rates were in excess of the rates
in the contracts.

   Current and Future Cash Needs. Historically, rental revenue has been the
principal source of funds to pay operating expenses, debt service, stockholder
distributions and capital expenditures, excluding nonrecurring

                                       13
<PAGE>

capital expenditures. In addition, construction management, maintenance,
leasing and management fees have provided sources of cash flow. We presently
have no plans for major capital improvements to the existing in-service
properties, other than normal recurring building improvements, tenant
improvements and lease commissions. We expect to meet our short-term liquidity
requirements generally through working capital and net cash provided by
operating activities along with the Revolving Loan.

   Our short-term (within the next 12 months) liquidity needs also include,
among other things, the funding of approximately $80.0 million of our existing
development activity. We expect to fund our short-term liquidity needs through
a combination of:

   .  borrowings under our Revolving Loan (approximately $248.0 million was
      available at March 31, 2001);

   .  the issuance of secured debt;

   .  the selective disposition of non-core assets; and

   .  the sale or contribution of some of our wholly owned properties to
      strategic joint ventures to be formed with selected partners
      interested in investing with us, which will have the net effect of
      generating additional capital through such sale or contributions.

   Our long-term liquidity needs generally include the funding of existing and
future development activity, selective asset acquisitions and the retirement of
mortgage debt, amounts outstanding under the Revolving Loan and long-term
unsecured debt. We remain committed to maintaining a flexible and conservative
capital structure. Accordingly, we expect to meet our long-term liquidity needs
through a combination of (1) the issuance by the Operating Partnership of
additional unsecured debt securities, (2) the issuance of additional equity
securities by the Company and the Operating Partnership as well as (3) the
sources described above with respect to our short-term liquidity. We expect to
use such sources to meet our long-term liquidity requirements either through
direct payments or repayment of borrowings under the Revolving Loan. We do not
intend to reserve funds to retire existing secured or unsecured indebtedness
upon maturity. Instead, we will seek to refinance such debt at maturity or
retire such debt through the issuance of equity or debt securities or the
incurrence of other debt.

   We anticipate that our available cash and cash equivalents and cash flows
from operating activities, together with cash available from borrowings and
other sources, will be adequate to meet our capital and liquidity needs in both
the short and long term. However, if these sources of funds are insufficient or
unavailable, the Company's ability to make the expected distributions to
stockholders discussed below and satisfy other cash requirements may be
adversely affected.

   Distributions to Stockholders. In order to qualify as a REIT for Federal
income tax purposes, the Company is required to make distributions to its
stockholders of at least 95% of REIT taxable income. The Company expects to use
its cash flow from operating activities for distributions to stockholders and
for payment of recurring, non-incremental revenue-generating expenditures. The
following factors will affect cash flows from operating activities and,
accordingly, influence the decisions of the Board of Directors regarding
distributions: (1) debt service requirements after taking into account the
repayment and restructuring of certain indebtedness; (2) scheduled increases in
base rents of existing leases; (3) changes in rents attributable to the renewal
of existing leases or replacement leases; (4) changes in occupancy rates at
existing properties and procurement of leases for newly acquired or developed
properties; and (5) operating expenses and capital replacement needs.

Recent Developments

   Stock Repurchases. On April 25, 2001, we announced that we had essentially
completed our previously announced 10.0 million share and unit repurchase
program pursuant to which we repurchased 9.9 million shares of Common Stock and
Common Units at a weighted average price of $24.18 per share/unit, for a total

                                       14
<PAGE>

purchase price of $239.2 million. In addition, the Company announced that its
board of directors has authorized the repurchase of up to an additional 5
million shares of Common Stock and Common Units. To date, we have not
repurchased any shares or units under our new program.

   Disposition Activity. During the three months ended March 31, 2001, we sold
approximately 76,000 rentable square feet of office properties, 277 apartment
units and 73.0 acres of development land for gross proceeds of $49.7 million.
In addition, we currently have 182,000 rentable square feet of wholly owned
properties and 1,395 apartment units under contract for sale in various
transactions totaling $120.0 million. These transactions are subject to
customary closing conditions, including due diligence and documentation, and
are expected to close at various times throughout 2001. However we can provide
no assurance that all or parts of these transactions will be consummated.

   As of May 14, 2001, we expect to use a portion of the net proceeds from our
recent and pending disposition activity to reinvest in tax-deferred exchange
transactions under Section 1031 of the Internal Revenue Code. We expect to
reinvest up to $10.0 million of the net proceeds from completed disposition
activity and up to $112.0 million of the net proceeds from pending disposition
activity to acquire, in tax-deferred exchange transactions, in-service
properties, development land and development projects located in core markets
and in sub-markets where we have a strong presence. For an exchange to qualify
for tax-deferred treatment under Section 1031, the net proceeds from the sale
of a property must be held by an escrow agent until applied toward the purchase
of real estate qualifying for gain deferral. Given the competition for
properties meeting our investment criteria, there may be some delay in
reinvesting such proceeds. Delays in reinvesting such proceeds will reduce our
income from operations. In addition, the use of net proceeds from dispositions
to fund development activity, either through direct payments or repayment of
borrowings under our Revolving Loan, will reduce our income from operations
until such development projects are placed in service.

Possible Environmental Liabilities

   In connection with owning or operating our properties, we may be liable for
certain costs due to possible environmental liabilities. Under various laws,
ordinances and regulations, such as the Comprehensive Environmental Response
Compensation and Liability Act, and common law, an owner or operator of real
estate is liable for the costs to remove or remediate certain hazardous or
toxic chemicals or substances on or in the property. Owners or operators are
also liable for certain other costs, including governmental fines and injuries
to persons and property. Such laws often impose liability without regard to
whether the owner or operator knew of, or was responsible for, the presence of
the hazardous or toxic chemicals or substances. The presence of such
substances, or the failure to remediate such substances properly, may adversely
affect the owner's or operator's ability to sell or rent such property or to
borrow using such property as collateral. Persons who arrange for the disposal,
treatment or transportation of hazardous or toxic chemicals or substances may
also be liable for the same types of costs at a disposal, treatment or storage
facility, whether or not that person owns or operates that facility.

   Certain environmental laws also impose liability for releasing asbestos-
containing materials. Third parties may seek recovery from owners or operators
of real property for personal injuries associated with asbestos-containing
materials. A number of our properties have asbestos-containing materials or
material that we presume to be asbestos-containing materials. In connection
with owning and operating our properties, we may be liable for such costs.

   In addition, it is not unusual for property owners to encounter on-site
contamination caused by off-site sources. The presence of hazardous or toxic
chemicals or substances at a site close to a property could require the
property owner to participate in remediation activities or could adversely
affect the value of the property. Contamination from adjacent properties has
migrated onto at least three of our properties; however, based on current
information, we do not believe that any significant remedial action is
necessary at these affected sites.


                                       15
<PAGE>

   As of the date hereof, we have obtained Phase I environmental assessments
(and, in certain instances, Phase II environmental assessments) on
substantially all of our in-service properties. These assessments have not
revealed, nor are we aware of, any environmental liability at our properties
that we believe would materially adversely affect our financial position,
operations or liquidity taken as a whole. This projection, however, could be
incorrect depending on certain factors. For example, material environmental
liabilities may have arisen after the assessments were performed or our
assessments may not have revealed all environmental liabilities or may have
underestimated the scope and severity of environmental conditions observed.
There may also be unknown environmental liabilities at properties for which we
have not obtained a Phase I environmental assessment or have not yet obtained a
Phase II environmental assessment. In addition, we base our assumptions
regarding environmental conditions, including groundwater flow and the
existence and source of contamination, on readily available sampling data. We
cannot guarantee that such data is reliable in all cases. Moreover, we cannot
provide any assurances (1) that future laws, ordinances or regulations will not
impose a material environmental liability or (2) that tenants, the condition of
land or operations in the vicinity of our properties or unrelated third parties
will not affect the current environmental condition of our properties.

   Some tenants use or generate hazardous substances in the ordinary course of
their respective businesses. In their leases, we require these tenants to
comply with all applicable laws and to be responsible to us for any damages
resulting from their use of the property. We are not aware of any material
environmental problems resulting from tenants' use or generation of hazardous
or toxic chemicals or substances. We cannot provide any assurances, however,
that all tenants will comply with the terms of their leases or remain solvent.
If tenants do not comply or do not remain solvent, we may at some point be
responsible for contamination caused by such tenants.

Compliance with the Americans with Disabilities Act

   Under the Americans with Disabilities Act (the "ADA"), all public
accommodations and commercial facilities are required to meet certain federal
requirements related to access and use by disabled persons. These requirements
became effective in 1992. Compliance with the ADA requirements could require
removal of access barriers, and noncompliance could result in imposition of
fines by the U.S. government or an award of damages to private litigants.
Although we believe that our properties are substantially in compliance with
these requirements, we may incur additional costs to comply with the ADA.
Although we believe that such costs will not have a material adverse effect on
us, if required changes involve a greater expenditure than we currently
anticipate, our results of operations, liquidity and capital resources could be
materially adversely affected.

Funds From Operations and Cash Available for Distributions

   We consider funds from operations ("FFO") to be a useful financial
performance measure of the operating performance of an equity REIT because,
together with net income and cash flows, FFO provides investors with an
additional basis to evaluate the ability of a REIT to incur and service debt
and to fund acquisitions and other capital expenditures. FFO does not represent
net income or cash flows from operating, investing or financing activities as
defined by Generally Accepted Accounting Principles ("GAAP"). It should not be
considered as an alternative to net income as an indicator of our operating
performance or to cash flows as a measure of liquidity. FFO does not measure
whether cash flow is sufficient to fund all cash needs, including principal
amortization, capital improvements and distributions to stockholders. Further,
FFO as disclosed by other REITs may not be comparable to our calculation of
FFO, as described below. FFO and cash available for distributions should not be
considered as alternatives to net income as an indication of our performance or
to cash flows as a measure of liquidity.

   FFO equals net income (computed in accordance with GAAP) excluding gains (or
losses) from debt restructuring and sales of depreciable assets, plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. In March 1995, the National Association of
Real Estate Investment Trusts ("NAREIT") issued a clarification of the
definition of FFO. This clarification provides that amortization of deferred
financing costs and depreciation of non-real estate assets are no longer to be
added

                                       16
<PAGE>

back to net income in arriving at FFO. In October 1999, NAREIT issued an
additional clarification effective as of January 1, 2000 stipulating that FFO
should include both recurring and non-recurring operating results. Consistent
with this clarification, non-recurring items that are not defined as
"extraordinary" under GAAP will be reflected in the calculation of FFO. Gains
and losses from the sale of depreciable operating property will continue to be
excluded from the calculation of FFO.

   Cash available for distribution is defined as FFO reduced by non-revenue
enhancing capital expenditures for building improvements and tenant
improvements and lease commissions related to second generation space.

   FFO and cash available for distribution for the three month period ended
March 31, 2001 and 2000 are summarized in the following table (in thousands):

<TABLE>
<CAPTION>
                                                              Three Months
                                                                  Ended
                                                                March 30,
                                                             ----------------
                                                              2001     2000
                                                             -------  -------
<S>                                                          <C>      <C>
Funds from operations:
Income before minority interest and extraordinary item...... $44,025  $47,452
Add/(Deduct):
  Dividends to preferred stockholders.......................  (8,145)  (8,145)
  Transition adjustment upon adoption of FASB 133...........     556      --
  Gain on disposition of land and depreciable assets........  (7,071)  (6,946)
  Gain on disposition of land...............................   1,026      --
  Depreciation and amortization.............................  29,206   28,328
  Depreciation of unconsolidated affiliates.................   1,992      878
                                                             -------  -------
    Funds from operations...................................  61,589   61,567
Cash available for distribution:
Add/(Deduct):
  Rental income from straight-line rents....................  (3,102)  (3,800)
  Amortization of deferred financing costs..................     665      721
  Non-incremental revenue generating capital
   expenditures(1):
    Building improvements paid..............................  (1,073)  (1,369)
    Second generation tenant improvements paid..............  (3,755)  (4,782)
    Second generation lease commissions paid................  (4,787)  (3,131)
                                                             -------  -------
      Cash available for distribution....................... $49,537  $49,206
                                                             =======  =======
Weighted average common shares/common units outstanding--
 basic(2)...................................................  64,094   69,256
                                                             =======  =======
Weighted average common shares/common units outstanding--
 diluted(2).................................................  64,359   69,341
                                                             =======  =======
Dividend payout ratios:
  Funds from operations.....................................    59.6%    62.5%
                                                             =======  =======
  Cash available for distribution...........................    74.1%    78.2%
                                                             =======  =======
</TABLE>
--------
(1) Amounts represent cash expenditures.
(2) Assumes redemption of Common Units for shares of Common Stock. Minority
    interest Common Unit holders and the stockholders of the Company share
    equally on a per share and per Common Unit basis; therefore, the resultant
    per share information is unaffected by the conversion.

   On April 25, 2001, the Company's Board of Directors declared a dividend for
the first quarter ended March 31, 2001 of $0.57 per share ($2.28 on an
annualized basis) payable on May 17, 2001 to stockholders of record on May 4,
2001.


                                       17
<PAGE>

Disclosure Regarding Forward-Looking Statements

   Some of the information in this Quarterly Report on Form 10-Q may contain
forward-looking statements. Such statements include, in particular, statements
about our plans, strategies and prospects under "Management's Discussion and
Analysis of Financial Condition and Results of Operations." You can identify
forward-looking statements by our use of forward-looking terminology such as
"may," "will," "expect," "anticipate," "estimate," "continue" or other similar
words. Although we believe that our plans, intentions and expectations
reflected in or suggested by such forward-looking statements are reasonable, we
cannot assure you that our plans, intentions or expectations will be achieved.
When considering such forward-looking statements, you should keep in mind the
following important factors that could cause our actual results to differ
materially from those contained in any forward-looking statement:

  . our markets could suffer unexpected increases in development of office,
    industrial and retail properties;

  . the financial condition of our tenants could deteriorate;

  . the costs of our development projects could exceed our original
    estimates;

  . we may not be able to complete development, acquisition, reinvestment,
    disposition or joint venture projects as quickly or on as favorable terms
    as anticipated;

  . we may not be able to lease or release space quickly or on as favorable
    terms as old leases;

  . we may have incorrectly assessed the environmental condition of our
    properties;

  . an unexpected increase in interest rates would increase our debt service
    costs;

  . we may not be able to continue to meet our long-term liquidity
    requirements on favorable terms;

  . we could lose key executive officers; and

  . our southeastern markets may suffer an unexpected decline in economic
    growth or increase in unemployment rates.

   Given these uncertainties, we caution you not to place undue reliance on
forward-looking statements. We undertake no obligation to publicly release the
results of any revisions to these forward-looking statements that may be made
to reflect any future events or circumstances or to reflect the occurrence of
unanticipated events.

                                       18
<PAGE>

Property Information

   The following table sets forth certain information with respect to our
wholly owned in-service and development properties (excluding apartment units)
as of March 31, 2001 and 2000:

<TABLE>
<CAPTION>
                                                      Rentable   Percent Leased/
March 31, 2001                                       Square Feet   Pre-Leased
--------------                                       ----------- ---------------
<S>                                                  <C>         <C>
In-Service:
  Office............................................ 24,509,000         94%
  Industrial........................................ 10,358,000         95%
  Retail(1).........................................  1,645,000         94%
                                                     ----------        ---
  Total or Weighted Average......................... 36,512,000         94%
                                                     ==========        ===
Development:
Completed--Not Stabilized
  Office............................................    524,000         78%
  Industrial........................................    306,000         52%
  Retail............................................        --         --
                                                     ----------        ---
  Total or Weighted Average.........................    830,000         69%
                                                     ==========        ===
In Process
  Office............................................  2,079,000         52%
  Industrial........................................    122,000        --
  Retail............................................     20,000         34%
                                                     ----------        ---
  Total or Weighted Average.........................  2,221,000         49%
                                                     ==========        ===
Total:
  Office............................................ 27,112,000
  Industrial........................................ 10,786,000
  Retail............................................  1,665,000
                                                     ----------
  Total or Weighted Average......................... 39,563,000
                                                     ==========

<CAPTION>
                                                      Rentable   Percent Leased/
March 31, 2000                                       Square Feet   Pre-Leased
--------------                                       ----------- ---------------
<S>                                                  <C>         <C>
In-Service:
  Office............................................ 27,517,000         94%
  Industrial........................................ 11,153,000         93%
  Retail............................................  1,543,000         95%
                                                     ----------        ---
  Total or Weighted Average......................... 40,213,000         94%
                                                     ==========        ===
Development:
Completed--Not Stabilized
  Office............................................  1,745,000         69%
  Industrial........................................    297,000         60%
  Retail............................................    180,000         94%
                                                     ----------        ---
  Total or Weighted Average.........................  2,222,000         70%
                                                     ==========        ===
In Process
  Office............................................  1,101,000         78%
  Industrial........................................    284,000         57%
  Retail............................................        --         --
                                                     ----------        ---
  Total or Weighted Average.........................  1,385,000         74%
                                                     ==========        ===
Total:
  Office............................................ 30,363,000
  Industrial........................................ 11,734,000
  Retail............................................  1,723,000
                                                     ----------
  Total or Weighted Average......................... 43,820,000
                                                     ==========
</TABLE>
--------
(1) Excludes basement space

                                       19
<PAGE>

   As of March 31, 2001, we were developing 24 suburban office properties, 4
industrial properties and 1 retail property totaling 3.1 million rentable
square feet of office and industrial space. The following table summarizes
these development projects. In addition to the properties described in this
table, we are developing with our joint venture partners seven additional
properties totaling 859,000 rentable square feet. At March 31, 2001, these
seven development projects had an aggregate budgeted cost of $107.1 million and
were 67.0% pre-leased.

In-Process

<TABLE>
<CAPTION>
                                           Rentable
                                            Square   Estimated Cost at  Pre-Leasing  Estimated    Estimated
         Name                 Market         Feet      Cost    3/31/01 Percentage(1) Completion Stabilization
         ----            ----------------- --------- --------- ------- ------------- ---------- --------------
                                                     ($ in thousands)
<S>                      <C>               <C>       <C>       <C>     <C>           <C>        <C>
Office:
Highwoods Preserve V     Tampa               185,000 $ 27,633  $17,273      100%        3Q01         3Q01
Met Life Building at
 Brookfield(2)           Greenville          118,000   13,220    3,938       67%        3Q01         4Q01
Romac                    Tampa               128,000   18,582    5,967      100%        4Q01         4Q01
Verizon Wireless(2)      Greenville          193,000   16,356    2,975      100%        1Q02         1Q02
International Place 3    Memphis             214,000   34,272    5,462      100%        2Q02         2Q02
Cool Springs II          Nashville           205,000   22,718   16,294       19%        2Q01         2Q02
Centre Green Two(2)      Research Triangle    97,000   11,596    6,225       61%        2Q01         2Q02
ParkWest One(2)          Research Triangle    46,000    4,364    1,871       28%        2Q01         2Q02
ParkWest Two(2)          Research Triangle    48,000    4,544    1,998      100%        2Q01         2Q02
Hickory Trace            Nashville            52,000    5,933    4,260      --          3Q01         3Q02
Centre Green Four(2)     Research Triangle   100,000   11,764    4,418      --          3Q01         3Q02
North Shore Commons A    Richmond            115,000   13,084    9,003       58%        2Q01         3Q02
Stony Point III(2)       Richmond            107,000   11,425    2,577       45%        2Q01         3Q02
Shadow Creek II(2)       Memphis              81,000    8,750    1,877      --          4Q01         4Q02
Highwoods Park at
 Jefferson Village(2)    Piedmont Triad      101,000    9,839    1,159      --          4Q01         4Q02
GlenLake I(2)            Research Triangle   158,000   19,089    3,011      --          4Q01         4Q02
Seven Springs I(2)       Nashville           131,000   15,556    3,739      --          1Q02         1Q03
                                           --------- --------  -------     ----
In-Process Office Total
 or Weighted Average                       2,079,000 $248,725  $92,047       52%
                                           ========= ========  =======     ====
Industrial:
Tradeport Place IV       Atlanta             122,000 $  4,447   $1,988      --          3Q01         3Q02
                                           --------- --------  -------     ----
In-Process Industrial
 Total or Weighted
 Average                                     122,000 $  4,447   $1,988      --
                                           ========= ========  =======     ====
Retail:
Plaza Redevelopment
 (Granada Shops)         Kansas City          20,000 $  4,680     $176       34%        4Q01         4Q01
                                           --------- --------  -------     ----
In-Process Retail Total
 or Weighted Average                          20,000 $  4,680     $176       34%
                                           ========= ========  =======     ====
Total or Weighted
 Average of all
 In-Process Development
 Projects                                  2,221,000 $257,852  $94,211       49%
                                           ========= ========  =======     ====
</TABLE>
--------
(1) Letters of intent comprise 2% of the Total Pre-Leasing Percentage.
(2) We are developing these properties for a third party and own an option to
    purchase each property.


                                       20
<PAGE>

Completed--Not Stabilized

<TABLE>
<CAPTION>
                                            Rentable
                                             Square   Estimated Cost at   Pre-Leasing  Estimated    Estimated
          Name                 Market         Feet      Cost    3/31/01  Percentage(1) Completion Stabilization
          ----            ----------------- --------- --------- -------- ------------- ---------- -------------
                                                       ($ in thousands)
<S>                       <C>               <C>       <C>       <C>      <C>           <C>        <C>
Office:
Deerfield III             Atlanta              54,000 $  5,276  $  4,185      100%        4Q00        3Q01
Shadow Creek              Memphis              80,000    8,989     7,547       82%        4Q00        4Q01
380 Park Place            Tampa                82,000    9,675     8,419       78%        1Q01        4Q01
Highwoods Plaza           Tampa                66,000    7,505     6,436       30%        4Q00        1Q02
Situs III                 Research Triangle    39,000    4,543     2,693       94%        1Q01        1Q02
Maplewood                 Research Triangle    36,000    3,901     3,240      100%        1Q01        1Q02
Highwoods Tower II        Research Triangle   167,000   25,134    19,601       75%        1Q01        2Q02
                                            --------- --------  --------      ---         ----        ----
Office Total or Weighted
 Average                                      524,000 $ 65,023   $52,121       78%
                                            ========= ========  ========      ===
Industrial:
Holden Road               Piedmont Triad       64,000 $  2,014    $1,750       60%        1Q01        3Q01
Tradeport Place III       Atlanta             122,000    4,780     4,568      100%        4Q00        4Q01
Enterprise Center I       Piedmont Triad      120,000    3,807     3,218      --          4Q00        4Q01
                                            --------- --------  --------      ---
Completed-Not Stabilized
 Retail Total or
 Weighted Average                             306,000 $ 10,601    $9,536       52%
                                            ========= ========  ========      ===
Total or Weighted
 Average of all
 Completed-Not
 Stabilized
 Development Projects                         830,000 $ 75,624  $ 61,657       69%
                                            --------- --------  --------      ---
Total or Weighted
 Average of all
 Development Projects                       3,051,000 $333,476  $155,868       54%
                                            ========= ========  ========      ===
</TABLE>
--------
(1)   Letters of intent comprise 2% of the Total Pre-Leasing Percentage.

                                       21
<PAGE>

<TABLE>
<CAPTION>
                      Rentable
                       Square  Estimated  Pre-Leasing
                        Feet     Cost    Percentage(1)
                      -------- --------- -------------
                               (in thousands)
<S>                   <C>      <C>       <C>
Development Analysis
</TABLE>

<TABLE>
<S>                                                      <C>       <C>      <C>
Summary by Estimated Stabilization Date:
  Second Quarter 2001...................................       --       --   --
  Third Quarter 2001....................................   303,000 $ 34,923  92%
  Fourth Quarter 2001...................................   670,000   63,733  69%
  First Quarter 2002....................................   334,000   32,305  85%
  Second Quarter 2002...................................   777,000  102,628  64%
  Third Quarter 2002....................................   496,000   46,653  23%
  Fourth Quarter 2002...................................   340,000   37,678 --
  First Quarter 2003....................................   131,000   15,556 --
                                                         --------- -------- ---
    Total or Weighted Average........................... 3,051,000 $333,476  54%
                                                         ========= ======== ===
Summary by Market:
  Atlanta...............................................   298,000 $ 14,503  59%
  Greenville............................................   311,000   29,576  87%
  Kansas City...........................................    20,000    4,680  34%
  Memphis...............................................   375,000   52,011  75%
  Nashville.............................................   388,000   44,207  10%
  Piedmont Triad........................................   285,000   15,660  13%
  Research Triangle.....................................   691,000   84,935  46%
  Richmond..............................................   222,000   24,509  52%
  Tampa.................................................   461,000   63,395  86%
                                                         --------- -------- ---
    Total or Weighted Average........................... 3,051,000 $333,476  54%
                                                         ========= ======== ===
  Build-to-Suit.........................................   720,000 $ 96,843 100%
  Multi-Tenant.......................................... 2,331,000  236,633  40%
                                                         --------- -------- ---
    Total or Weighted Average........................... 3,051,000 $333,476  54%
                                                         ========= ======== ===
</TABLE>

<TABLE>
<CAPTION>
                                                Average
                                                Rentable  Average
                                                 Square  Estimated  Pre-Leasing
                                                  Feet     Cost    Percentage(1)
                                                -------- --------- -------------
                                                         (in thousands)
<S>                                             <C>      <C>       <C>
Per Property Type:
  Office....................................... 108,458   $13,073        57%
  Industrial................................... 107,000     3,762        37%
  Retail.......................................  20,000     4,680        34%
                                                -------   -------       ---
  All.......................................... 105,207   $11,499        54%
                                                =======   =======       ===
</TABLE>
--------
(1) Letters of intent comprise 2% of the Total pre-leasing percentage.


                                       22
<PAGE>

   The following table sets forth certain information about leasing activities
at our wholly owned in-service properties (excluding apartment units) for the
three months ended March 31, 2001 and December 31, September 30 and June 30,
2000.

<TABLE>
<CAPTION>
                                        Office Leasing Statistics
                                            Three Months Ended
                         ------------------------------------------------------------
                           3/31/01     12/31/00     9/30/00     6/30/00     Average
                         -----------  -----------  ----------  ----------  ----------
<S>                      <C>          <C>          <C>         <C>         <C>
Net Effective Rents
 Related to Re-Leased
 Space:
Number of lease
 transactions
 (signed leases)........         132          199         174         221         182
Rentable square footage
 leased.................     941,419    1,187,466   1,056,239     990,663   1,043,947
Average per rentable
 square foot over the
 lease term:
   Base rent............ $     17.73  $     17.51  $    15.23  $    18.43  $    17.23
   Tenant improvements..       (1.13)       (1.14)      (1.21)      (1.39)      (1.22)
   Leasing commissions..       (0.57)       (0.59)      (0.40)      (0.57)      (0.53)
   Rent concessions.....       (0.01)       (0.03)      (0.03)      (0.05)      (0.03)
                         -----------  -----------  ----------  ----------  ----------
   Effective rent.......       16.02        15.75       13.59       16.42       15.45
   Expense stop(1)......       (2.96)       (4.73)      (4.03)     ( 5.37)      (4.27)
                         -----------  -----------  ----------  ----------  ----------
   Equivalent effective
    net rent............ $     13.06  $     11.02  $     9.56  $    11.05  $    11.17
                         ===========  ===========  ==========  ==========  ==========
Average term in years...         5.3          4.6         4.9         4.6         4.8
                         ===========  ===========  ==========  ==========  ==========
Capital Expenditures
 Related to Released
 Space:
Tenant Improvements:
  Total dollars
   committed under
   signed leases........ $ 7,103,609  $ 7,273,031  $6,676,576  $5,510,054  $6,640,817
  Rentable square feet..     941,419    1,187,466   1,056,239     990,663   1,043,947
                         -----------  -----------  ----------  ----------  ----------
  Per rentable square
   foot................. $      7.55  $      6.12  $     6.32  $     5.56  $     6.36
                         ===========  ===========  ==========  ==========  ==========
Leasing Commissions:
  Total dollars
   committed under
   signed leases........ $ 3,361,410  $ 2,873,345  $1,910,278  $2,392,441  $2,634,369
  Rentable square feet..     941,419    1,187,466   1,056,239     990,663   1,043,947
                         -----------  -----------  ----------  ----------  ----------
  Per rentable square
   foot................. $      3.57  $      2.42  $     1.81  $     2.41  $     2.52
                         ===========  ===========  ==========  ==========  ==========
Total:
  Total dollars
   committed under
   signed leases........ $10,465,020  $10,146,377  $8,586,853  $7,902,495  $9,275,186
  Rentable square feet..     941,419    1,187,466   1,056,239     990,663   1,043,947
                         -----------  -----------  ----------  ----------  ----------
  Per rentable square
   foot................. $     11.12  $      8.54  $     8.13  $     7.98  $     8.88
                         ===========  ===========  ==========  ==========  ==========
Rental Rate Trends:
  Average final rate
   with expense pass
   throughs............. $     15.05  $     15.83  $    14.30     $ 16.59  $    15.44
  Average first year
   cash rental rate..... $     16.04  $     16.38  $    14.96     $ 17.58  $    16.24
                         -----------  -----------  ----------  ----------  ----------
  Percentage increase...         6.6%         3.5%        4.6%        6.0%        5.2%
                         ===========  ===========  ==========  ==========  ==========
</TABLE>
--------
(1) "Expense stop" represents operating expenses (generally including taxes,
    utilities, routine building expense and common area maintenance) which we
    will not be reimbursed by our tenants.


                                       23
<PAGE>

<TABLE>
<CAPTION>
                               Industrial Leasing Statistics Three Months
                                                 Ended
                              ------------------------------------------------
                              3/31/01   12/31/00  9/30/00   6/30/00   Average
                              --------  --------  --------  --------  --------
<S>                           <C>       <C>       <C>       <C>       <C>
Net Effective Rents Related
 to Re-Leased Space:
Number of lease transactions
 (signed leases)                    27        31        31        46        34
Rentable square footage
 leased.....................   190,663   355,947   349,079   362,521   314,553
Average per rentable square
 foot over the lease term:
  Base rent.................  $   5.88  $   5.29  $   4.54  $   5.14  $   5.21
  Tenant improvements.......     (0.20)    (0.29)    (0.32)    (0.28)    (0.27)
  Leasing commissions.......     (0.09)    (0.15)    (0.15)    (0.12)    (0.13)
  Rent concessions..........     (0.00)    (0.00)    (0.00)    (0.01)    (0.00)
                              --------  --------  --------  --------  --------
  Effective rent............      5.59      4.85      4.07      4.73      4.81
  Expense stop (1)..........     (0.74)    (0.30)    (0.23)    (0.48)    (0.44)
                              --------  --------  --------  --------  --------
  Equivalent effective net
   rent.....................  $   4.85  $   4.55  $   3.84  $   4.25  $   4.37
                              ========  ========  ========  ========  ========
Average term in years.......       2.5       2.7       3.6       4.2       3.3
                              ========  ========  ========  ========  ========
Capital Expenditures Related
 to Re-leased Space:
Tenant Improvements:
  Total dollars committed
   under signed leases......  $ 91,304  $412,679  $510,520  $389,592  $351,023
  Rentable square feet......   190,663   355,947   349,079   362,521   314,553
                              --------  --------  --------  --------  --------
  Per rentable square foot..  $   0.48  $   1.16  $   1.46  $   1.07  $   1.12
                              ========  ========  ========  ========  ========
Leasing Commissions:
  Total dollars committed
   under signed leases......  $ 61,239  $145,117  $167,772  $185,028  $139,789
  Rentable square feet......   190,663   355,947   349,079   362,521   314,553
                              --------  --------  --------  --------  --------
  Per rentable square foot..  $   0.32  $   0.41  $   0.48  $   0.51  $   0.44
                              ========  ========  ========  ========  ========
Total:
  Total dollars committed
   under signed leases......  $152,542  $557,796  $678,292  $574,620  $490,813
  Rentable square feet......   190,663   355,947   349,079   362,521   314,553
                              --------  --------  --------  --------  --------
  Per rentable square foot..  $   0.80  $   1.57  $   1.94  $   1.59  $   1.56
                              ========  ========  ========  ========  ========
Rental Rate Trends:
Average final rate with
 expense pass throughs......  $   4.89  $   4.92  $   4.11  $   4.44  $   4.59
Average first year cash
 rental rate................  $   5.06  $   5.23  $   4.51  $   4.72  $   4.88
                              --------  --------  --------  --------  --------
Percentage increase.........       3.4%      6.3%      9.6%      6.4%      6.3%
                              ========  ========  ========  ========  ========
</TABLE>
--------
(1)  "Expense stop" represents operating expenses (generally including taxes,
     utilities, routine building expense and common area maintenance) which we
     will not be reimbursed by our tenants.


                                       24
<PAGE>

<TABLE>
<CAPTION>
                            Retail Leasing Statistics Three Months Ended
                           --------------------------------------------------
                           3/31/01   12/31/00  9/30/00    6/30/00    Average
                           --------  --------  --------  ----------  --------
<S>                        <C>       <C>       <C>       <C>         <C>
Net Effective Rents
 Related to Re-Leased
 Space:
Number of lease
 transactions (signed
 leases)..................        9        15        21          15        15
Rentable square footage
 leased...................   38,618    35,057    53,217      37,036    40,982
Average per rentable
 square foot over the
 lease term:
    Base rent............. $  29.31  $  24.07  $  22.26  $    21.84  $  24.37
    Tenant improvements...    (1.86)    (1.90)    (1.26)      (1.97)    (1.75)
    Leasing commissions...    (0.29)    (0.49)    (0.58)      (0.57)    (0.48)
    Rent concessions......    (0.22)    (0.00)    (0.03)      (0.00)    (0.06)
                           --------  --------  --------  ----------  --------
    Effective rent........    26.94     21.68     20.39       19.30     22.08
    Expense stop (1)......     0.00      0.00      0.00      ( 0.12)    (0.03)
                           --------  --------  --------  ----------  --------
    Equivalent effective
     net rent............. $  26.94  $  21.68  $  20.39  $    19.18  $  22.05
                           ========  ========  ========  ==========  ========
Average term in years.....      9.3       6.7       7.6         8.3       8.0
                           ========  ========  ========  ==========  ========
Capital Expenditures
 Related to Re-leased
 Space:
Tenant Improvements:
  Total dollars committed
   under signed
   leases................. $729,480  $655,301  $600,136  $  914,200  $724,779
  Rentable square feet....   38,618    35,057    53,217      37,036    40,982
                           --------  --------  --------  ----------  --------
  Per rentable square
   foot................... $  18.89  $  18.69  $  11.28  $    24.68  $  17.69
                           ========  ========  ========  ==========  ========
Leasing Commissions:
Total dollars committed
 under signed leases...... $ 93,045  $ 66,986  $143,269  $  175,122  $119,606
  Rentable square feet....   38,618    35,057    53,217      37,036    40,982
                           --------  --------  --------  ----------  --------
  Per rentable square
   foot................... $   2.41  $   1.91  $   2.69  $     4.73  $   2.92
                           ========  ========  ========  ==========  ========
Total:
  Total dollars committed
   under signed
   leases................. $822,525  $722,287  $743,406  $1,089,322  $844,385
  Rentable square feet....   38,618    35,057    53,217      37,036    40,982
                           --------  --------  --------  ----------  --------
  Per rentable square
   foot................... $  21.30  $  20.60  $  13.97  $    29.41  $  20.60
                           ========  ========  ========  ==========  ========
Rental Rate Trends:
Average final rate with
 expense pass throughs.... $  12.91  $  18.41  $  13.85  $    16.60  $  15.44
Average first year cash
 rental rate.............. $  19.70  $  22.57  $  19.40  $    19.06  $  20.18
                           --------  --------  --------  ----------  --------
Percentage increase.......     52.6%     22.6%     40.1%       14.8%     30.7%
                           ========  ========  ========  ==========  ========
</TABLE>
--------
(1) "Expense stop" represents operating expenses (generally including taxes,
    utilities, routine building expense and common area maintenance) which we
    will not be reimbursed by our tenants.


                                       25
<PAGE>

   The following tables set forth scheduled lease expirations at our wholly
owned in-service properties (excluding apartment units) as of March 31, 2001,
assuming no tenant exercises renewal options.

Office Properties:

<TABLE>
<CAPTION>
                                                   Percentage of                               Percentage of
                                                   Leased Square  Annual Rents Average Annual  Leased Rents
    Year of                        Total Rentable     Footage        Under     Rental Rate Per  Represented
     Lease                Number    Square Feet   Represented by    Expiring   Square Foot for  by Expiring
   Expiration            of Leases    Expiring    Expiring Leases  Leases(1)   Expirations(1)     Leases
   ----------            --------- -------------- --------------- ------------ --------------- -------------
                                                           (in thousands)
<S>                      <C>       <C>            <C>             <C>          <C>             <C>
2001....................     599      2,431,357        10.5%         $40,152       $16.51          10.3%
2002....................     548      3,154,987        13.7%          52,079        16.51          13.4%
2003....................     548      3,542,989        15.3%          59,604        16.82          15.3%
2004....................     368      2,659,604        11.5%          46,824        17.61          12.1%
2005....................     419      3,100,350        13.4%          52,818        17.04          13.6%
2006....................     157      2,281,087         9.9%          37,545        16.46           9.7%
2007....................      46      1,070,034         4.6%          16,668        15.58           4.3%
2008....................      48      1,269,730         5.5%          19,018        14.98           4.9%
2009....................      18        714,403         3.1%          11,431        16.00           2.9%
2010....................      44      1,501,620         6.5%          26,205        17.45           6.7%
2011 and thereafter.....      45      1,382,964         6.0%          26,231        18.97           6.8%
                           -----     ----------       ------        --------       ------         ------
                           2,840     23,109,125       100.0%        $388,575       $16.81         100.0%
                           =====     ==========       ======        ========       ======         ======
</TABLE>

Industrial Properties:

<TABLE>
<CAPTION>
                                                   Percentage of                               Percentage of
                                                   Leased Square  Annual Rents Average Annual  Leased Rents
    Year of                        Total Rentable     Footage        Under     Rental Rate Per  Represented
     Lease                Number    Square Feet   Represented by    Expiring   Square Foot for  by Expiring
   Expiration            of Leases    Expiring    Expiring Leases  Leases(1)   Expirations(1)     Leases
   ----------            --------- -------------- --------------- ------------ --------------- -------------
                                                           (in thousands)
<S>                      <C>       <C>            <C>             <C>          <C>             <C>
2001....................    110      1,450,864         14.5%         $6,694         $4.61          14.4%
2002....................    111      1,774,868         17.8%          7,797          4.39          16.7%
2003....................     90      1,370,468         13.7%          6,875          5.02          14.7%
2004....................     62      2,136,315         21.5%          8,912          4.17          19.1%
2005....................     42        684,591          6.9%          3,995          5.84           8.6%
2006....................     17        503,707          5.0%          2,806          5.57           6.0%
2007....................     13      1,081,566         10.8%          4,425          4.09           9.5%
2008....................      4        196,045          2.0%          1,306          6.66           2.8%
2009....................      6        268,813          2.7%          1,819          6.77           3.9%
2010....................      4        182,746          1.8%          1,043          5.71           2.2%
2011 and thereafter.....      6        326,680          3.3%            969          2.97           2.1%
                            ---      ---------        ------        -------         -----         ------
                            465      9,976,663        100.0%        $46,641         $4.68         100.0%
                            ===      =========        ======        =======         =====         ======
</TABLE>
--------
(1) Includes operating expense pass throughs and excludes the effect of future
    contractual rent increases.


                                       26
<PAGE>

Retail Properties:

<TABLE>
<CAPTION>
                                                   Percentage of                                 Percentage of
                                                   Leased Square                 Average Annual  Leased Rents
    Year of                        Total Rentable     Footage      Annual Rents  Rental Rate Per  Represented
     Lease                Number    Square Feet   Represented by  Under Expiring Square Foot for  by Expiring
   Expiration            of Leases    Expiring    Expiring Leases   Leases(1)    Expirations(1)     Leases
   ----------            --------- -------------- --------------- -------------- --------------- -------------
                                                            (in thousands)
<S>                      <C>       <C>            <C>             <C>            <C>             <C>
2001....................      46        153,464        10.0%           $2,830        $18.44           8.7%
2002....................      33         69,975         4.5%            1,389         19.85           4.3%
2003....................      44        108,530         7.1%            2,460         22.67           7.6%
2004....................      35        213,016        13.8%            2,658         12.48           8.2%
2005....................      39         90,406         5.9%            2,543         28.13           7.8%
2006....................      23         80,907         5.3%            1,971         24.36           6.1%
2007....................      18         74,779         4.9%            1,492         19.95           4.6%
2008....................      16        108,901         7.1%            3,607         33.12          11.1%
2009....................      21        169,286        11.0%            3,184         18.81           9.8%
2010....................      17         94,138         6.1%            2,471         26.25           7.6%
2011 and thereafter.....      24        375,561        24.3%            7,801         20.77          24.2%
                           -----     ----------       ------         --------        ------         ------
                             316      1,538,963       100.0%         $ 32,406        $21.06         100.0%
                           =====     ==========       ======         ========        ======         ======

Total:

<CAPTION>
                                                   Percentage of                                 Percentage of
                                                   Leased Square   Annual Rents  Average Annual  Leased Rents
    Year of                        Total Rentable     Footage     Under Expiring Rental Rate Per  Represented
     Lease                Number    Square Feet   Represented by    Leases(1)    Square Foot for  by Expiring
   Expiration            of Leases    Expiring    Expiring Leases (in thousands) Expirations(1)     Leases
   ----------            --------- -------------- --------------- -------------- --------------- -------------
<S>                      <C>       <C>            <C>             <C>            <C>             <C>
2001....................     755      4,035,685        11.7%          $49,676        $12.31          10.6%
2002....................     692      4,999,830        14.4%           61,265         12.25          13.1%
2003....................     682      5,021,987        14.5%           68,939         13.73          14.7%
2004....................     465      5,008,935        14.6%           58,394         11.66          12.5%
2005....................     500      3,875,347        11.2%           59,356         15.32          12.7%
2006....................     197      2,865,701         8.3%           42,322         14.77           9.1%
2007....................      77      2,226,379         6.4%           22,585         10.14           4.8%
2008....................      68      1,574,676         4.5%           23,931         15.20           5.1%
2009....................      45      1,152,502         3.3%           16,434         14.26           3.5%
2010....................      65      1,778,504         5.1%           29,719         16.71           6.4%
2011 and thereafter.....      75      2,085,205         6.0%           35,001         16.79           7.5%
                           -----     ----------       ------         --------        ------         ------
                           3,621     34,624,751       100.0%         $467,622        $13.51         100.0%
                           =====     ==========       ======         ========        ======         ======
</TABLE>
--------
(1) Includes operating expenses pass throughs and excludes the effect of future
    contractual rent increases.

Inflation

   Historically inflation has not had a significant impact on our operations
because of the relatively low inflation rate in our geographic areas of
operation. Most of the leases require the tenants to pay their pro rata share
of increased incremental operating expenses, including common area maintenance,
real estate taxes and insurance, thereby reducing our exposure to increases in
operating expenses resulting from inflation. In addition, many of the leases
are for terms of less than seven years, which may enable us to replace existing
leases with new leases at a higher base rent if rents on the existing leases
are below the market rate.


                                       27
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

   The effects of potential changes in interest rates are discussed below. Our
market risk discussion includes "forward-looking statements" and represents an
estimate of possible changes in fair value or future earnings that would occur
assuming hypothetical future movements in interest rates. These disclosures are
not precise indicators of expected future losses, but only indicators of
reasonably possible losses. As a result, actual future results may differ
materially from those presented. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
for a description of our accounting policies and other information related to
these financial instruments.

   To meet in part our long-term liquidity requirements, we borrow funds at a
combination of fixed and variable rates. Borrowings under the revolving loan
bear interest at variable rates. Our long-term debt, which consists of long-
term financings and the issuance of debt securities, typically bears interest
at fixed rates. In addition, we have assumed fixed rate and variable rate debt
in connection with acquiring properties. Our interest rate risk management
objective is to limit the impact of interest rate changes on earnings and cash
flows and to lower our overall borrowing costs. To achieve these objectives,
from time to time we enter into interest rate hedge contracts such as collars,
swaps, caps and treasury lock agreements in order to mitigate our interest rate
risk with respect to various debt instruments. We do not hold or issue these
derivative contracts for trading or speculative purposes.

   Certain Variable Rate Debt. As of March 31, 2001, the Company had
approximately $32.5 million of variable rate debt outstanding that was not
protected by interest rate hedge contracts. If the weighted average interest
rate on this variable rate debt is 100 basis points higher or lower during the
12 months ended March 31, 2002, our interest expense would be increased or
decreased approximately $325,000. In addition, as of March 31, 2001, we had
$22.0 million of additional variable rate debt outstanding that was protected
by an interest rate collar that effectively keeps the interest rate within a
range of 65 basis points. We do not believe that a 100 basis point increase or
decrease in interest rates would materially affect our interest expense with
respect to this $22.0 million of debt.

   Interest Rate Hedge Contracts. For a discussion of our interest rate hedge
contracts in effect at March 31, 2001, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources--Capitalization." If interest rates increase by 100 basis
points, the aggregate fair market value of these interest rate hedge contracts
as of March 31, 2001 would increase by approximately $559,000. If interest
rates decrease by 100 basis points, the aggregate fair market value of these
interest rate hedge contracts as of March 31, 2001 would decrease by
approximately $648,000.

   In addition, we are exposed to certain losses in the event of nonperformance
by the counterparties under the hedge contracts. We expect the counterparties,
which are major financial institutions, to perform fully under these contracts.
However, if the counterparties were to default on their obligations under the
interest rate hedge contracts, we could be required to pay the full rates on
our debt, even if such rates were in excess of the rates in the contracts.

                           PART II--OTHER INFORMATION

Item 1.  Legal Proceedings

   On October 2, 1998, John Flake, a former stockholder of J.C. Nichols, filed
a putative class action lawsuit on behalf of himself and the other former
stockholders of J.C. Nichols in the United States District Court for the
District of Kansas against J.C. Nichols, certain of its former officers and
directors and the Company. The complaint asserts claims against J.C. Nichols
and certain named directors and officers of J.C. Nichols for breach of
fiduciary duty to J.C. Nichols' stockholders, and to members of the J.C.
Nichols Company Employee Stock Ownership Trust, as well as claims under Section
14(a) of the Securities Exchange Act of 1934 Sections 11 and 1292) of the
Securities Act of 1933 variously against J.C. Nichols, the named directors and

                                       28
<PAGE>

officers of J.C. Nichols and the company. By order dated June 18, 1999, the
court granted in part and denied in part our motion to dismiss, and the court
thereafter certified the proposed class of plaintiffs with respect to the
remaining claims. By order dated August 28, 2000, the court granted in part and
denied in part defendants' summary judgment motion. Defendants sought
reconsideration of the court's ruling with respect to certain of the securities
claims as to which the court denied their summary judgment motion, and by order
dated January 11, 2001, the court granted in part that reconsideration motion.
On the eve of the trial of this matter, the parties settled all their remaining
claims. The parties have executed a Stipulation of Settlement, which has been
submitted to the court. The final settlement hearing is scheduled for May 24,
2001. We do not believe the settlement will have a material adverse effect on
our business, financial condition or results of operations.

Item 6. Exhibits and Reports on Form 8-K

   (b) Reports on Form 8-K

   On January 25, 2001, we filed a Current Report on Form 8-K reporting under
Item 5 that we had repurchased additional shares of Common Stock and Common
Units.

   On April 27, 2001, we filed a Current Report on Form 8-K reporting under
Items 5 and 7 that we had essentially completed our previously announced 10
million share and unit repurchase program and that our board of directors had
authorized the repurchase of up to an additional 5 million shares of Common
Stock and Common Units.

                                       29
<PAGE>

                                   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.

                                          Highwoods Properties, Inc.

                                                   /s/  Ronald P. Gibson
                                          By: _________________________________
                                                      Ronald P. Gibson
                                               President and Chief Executive
                                                          Officer

                                                   /s/  Carman J. Liuzzo
                                          By: _________________________________
                                                      Carman J. Liuzzo
                                                  Chief Financial Officer
                                               (Principal Accounting Officer)

Date: May 15, 2001

                                       30
</TEXT>
</DOCUMENT>
</SUBMISSION>
