<SUBMISSION>
<ACCESSION-NUMBER>0000950168-02-002403
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>4
<PERIOD>20020630
<FILING-DATE>20020814
<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>02734712
</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 June 30, 2002

                        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.
                     (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 53,415,547 shares outstanding as of August 1, 2002.

================================================================================

<PAGE>

                           HIGHWOODS PROPERTIES, INC.

               QUARTERLY REPORT FOR THE PERIOD ENDED JUNE 30, 2002

                                TABLE OF CONTENTS

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

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

           Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001........................       4

           Consolidated Statements of Income for the three and six months ended June 30, 2002
            and 2001....................................................................................       5

           Consolidated Statements of Stockholders' Equity for the six months ended
            June 30, 2002...............................................................................       6

           Consolidated Statements of Cash Flows for the six months ended June 30, 2002
            and 2001....................................................................................       7

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

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of
            Operations..................................................................................      14

           Disclosure Regarding Forward-Looking Statements..............................................      14

           Overview.....................................................................................      14

           Critical Accounting Policies.................................................................      15

           Results of Operations........................................................................      18

           Liquidity and Capital Resources..............................................................      21

           Recent Developments..........................................................................      25

           Impact of Recently Issued Accounting Standards...............................................      25

           Funds From Operations and Cash Available for Distributions...................................      26

           Property Information.........................................................................      28

           Inflation....................................................................................      37

Item 3.    Quantitative and Qualitative Disclosures About Market Risk...................................      38

PART II    OTHER INFORMATION

Item 2.    Changes in Securities and Use of Proceeds....................................................      39

Item 4.    Submission of Matters to a Vote of Security Holders..........................................      39

Item 6.    Exhibits and Reports on Form 8-K.............................................................      39
</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 2001 Annual Report on Form 10-K.

                                        3

<PAGE>

                           HIGHWOODS PROPERTIES, INC.

                           CONSOLIDATED BALANCE SHEETS

                                ($ in thousands)

<TABLE>
<CAPTION>
                                                                                             JUNE 30,        DECEMBER 31,
                                                                                               2002             2001
                                                                                          --------------    --------------
                                                                                           (UNAUDITED)
<S>                                                                                       <C>               <C>
ASSETS
Real estate assets, at cost:
  Land and improvements.........................................................          $      443,929    $      437,399
  Buildings and tenant improvements.............................................               2,949,380         2,924,384
  Development in process........................................................                  53,787           108,118
  Land held for development.....................................................                 183,267           153,468
  Furniture, fixtures and equipment.............................................                  19,842            19,398
                                                                                          --------------    --------------
                                                                                               3,650,205         3,642,767
  Less - accumulated depreciation...............................................                (431,065)         (381,773)
                                                                                          --------------    --------------
  Net real estate assets........................................................               3,219,140         3,260,994
Property held for sale..........................................................                  68,754           101,292
Cash and cash equivalents.......................................................                  14,194               576
Restricted cash.................................................................                   4,556             5,685
Accounts receivable, net........................................................                  15,423            23,659
Advances to related parties.....................................................                     788               788
Notes receivable................................................................                  33,181            43,761
Accrued straight-line rents receivable..........................................                  49,407            49,078
Investment in unconsolidated affiliates.........................................                  79,603            83,393
Other assets:
  Deferred leasing costs........................................................                 110,584           102,135
  Deferred financing costs......................................................                  25,916            26,121
  Prepaid expenses and other....................................................                  12,086            10,461
                                                                                          --------------    --------------
                                                                                                 148,586           138,717
  Less - accumulated amortization...............................................                 (67,867)          (59,657)
                                                                                          --------------    --------------
    Other assets, net...........................................................                  80,719            79,060
                                                                                          --------------    --------------
Total Assets....................................................................          $    3,565,765    $    3,648,286
                                                                                          ==============    ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages and notes payable.....................................................          $    1,675,358    $    1,719,230
Accounts payable, accrued expenses and other liabilities........................                  99,275           120,235
                                                                                          --------------    --------------
  Total Liabilities.............................................................               1,774,633         1,839,465
Minority interest...............................................................                 192,879           203,181
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), 104,945 shares issued and outstanding at June 30, 2002 and
 December 31, 2001..............................................................                 104,945           104,945
8% Series B Cumulative Redeemable Preferred Shares (liquidation preference $25
 per share), 6,900,000 shares issued and outstanding at June 30, 2002 and
 December 31, 2001..............................................................                 172,500           172,500
8% Series D Cumulative Redeemable Preferred Shares (liquidation preference $250
 per share), 400,000 shares issued and outstanding at June 30, 2002 and
 December 31, 2001..............................................................                 100,000           100,000
Common stock, $.01 par value, 200,000,000 authorized shares; 53,423,488 and
 52,891,822 shares issued and outstanding at June 30, 2002 and
 December 31, 2001, respectively................................................                     534               529
Additional paid-in capital......................................................               1,390,238         1,376,546
Distributions in excess of net earnings.........................................                (157,223)         (135,878)
Accumulated other comprehensive loss............................................                  (8,260)           (9,441)
Deferred compensation--restricted stock.........................................                  (4,481)           (3,561)
                                                                                          --------------    --------------
  Total Stockholders' Equity....................................................               1,598,253         1,605,640
                                                                                          --------------    --------------
Total Liabilities and Stockholders' Equity......................................          $    3,565,765    $    3,648,286
                                                                                          ==============    ==============
</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 JUNE 30,   SIX MONTHS ENDED JUNE 30,
                                                                  ---------------------------   -------------------------
                                                                      2002          2001           2002         2001
                                                                  -----------   -------------   -----------   -----------
<S>                                                               <C>           <C>             <C>           <C>
REVENUE:
  Rental property...........................................      $   118,613   $     124,385   $   242,569   $   251,226
  Equity in earnings of unconsolidated affiliates...........            2,475           1,592         5,039         2,425
  Interest and other income.................................            2,764           7,774         6,169        15,585
                                                                  -----------   -------------   -----------   -----------
Total Revenue...............................................          123,852         133,751       253,777       269,236
OPERATING EXPENSES:
  Rental property...........................................           36,940          37,775        75,059        74,167
  Depreciation and amortization.............................           31,298          28,773        62,309        57,630
  Interest expense:
    Contractual.............................................           27,117          26,253        53,151        54,574
    Amortization of deferred financing costs................              341             675           680         1,340
                                                                  -----------   -------------   -----------   -----------
                                                                       27,458          26,928        53,831        55,914
General and administrative..................................            5,537           5,451        10,711        10,663
                                                                  -----------   -------------   -----------   -----------
    Income before gain on disposition of land and
     depreciable assets, minority interest, discontinued
     operations and extraordinary item......................           22,619          34,824        51,867        70,862
  Gain on disposition of land and depreciable assets........            6,673           5,670         7,617        12,741
                                                                  -----------   -------------   -----------   -----------
    Income before minority interest, discontinued operations
     and extraordinary item.................................           29,292          40,494        59,484        83,603
Minority interest...........................................           (3,471)         (4,985)       (7,149)      (10,124)
                                                                  -----------   -------------   -----------   -----------
  Income from continuing operations.........................           25,821          35,509        52,335        73,479
DISCONTINUED OPERATIONS:
  Income from discontinued operations, net of minority
   interest.................................................               43             773           564         1,576
  Gain on sale of discontinued operations, net of minority
   interest.................................................            2,611               -         2,611             -
                                                                  -----------   -------------   -----------   -----------
                                                                        2,654             773         3,175         1,576

Net income before extraordinary item........................           28,475          36,282        55,510        75,055
Extraordinary item--loss on early extinguishment of debt....                -            (325)            -          (518)
                                                                  -----------   -------------   -----------   -----------
  Net income................................................           28,475          35,957        55,510        74,537
Dividends on preferred stock................................           (7,713)         (7,929)      (15,426)      (16,074)
                                                                  -----------   -------------   -----------   -----------
Net income available for common shareholders................      $    20,762   $      28,028   $    40,084   $    58,463
                                                                  ===========   =============   ===========   ===========

NET INCOME PER COMMON SHARE--BASIC:
  Income from continuing operations.........................      $      0.34   $        0.52   $      0.70   $      1.04
  Income from discontinued operations.......................             0.05            0.01          0.06          0.03
  Extraordinary item--loss on early extinguishment  of debt.                -           (0.01)            -         (0.01)
                                                                  -----------   -------------   -----------   -----------
  Net income................................................      $      0.39   $        0.52   $      0.76   $      1.06
                                                                  ===========   =============   ===========   ===========
  Weighted average shares outstanding--basic................           53,205          53,927        53,060        55,153
                                                                  ===========   =============   ===========   ===========

NET INCOME PER COMMON SHARE--DILUTED:
  Income from continuing operations.........................      $      0.34   $        0.51   $      0.69   $      1.03
  Income from discontinued operations.......................             0.05            0.01          0.06          0.03
  Extraordinary item--loss on early extinguishment of debt..                -           (0.01)            -         (0.01)
                                                                  -----------   -------------   -----------   -----------
  Net income................................................      $      0.39   $        0.51   $      0.75   $      1.05
                                                                  ===========   =============   ===========   ===========
  Weighted average shares outstanding--diluted..............           53,691          54,318        53,512        55,542
                                                                  ===========   =============   ===========   ===========
Distributions declared per common share.....................      $     0.585   $        0.57   $      1.17   $      1.14
                                                                  ===========   =============   ===========   ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        5

<PAGE>

                           HIGHWOODS PROPERTIES, INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                     FOR THE SIX MONTHS ENDED JUNE 30, 2002

       (Unaudited and $ in thousands, except for number of common shares)

<TABLE>
<CAPTION>
                                NUMBER OF
                                 COMMON         COMMON        SERIES A         SERIES B       SERIES D
                                 SHARES         STOCK        PREFERRED        PREFERRED       PREFERRED
                              ------------     --------     ------------     ------------    -----------
<S>                             <C>            <C>          <C>              <C>             <C>
Balance at
 December 31, 2001              52,891,822     $    529     $    104,945     $    172,500    $   100,000

Issuance of
 Common Stock                      474,586            5                -                -              -

Common Stock
 Dividends                               -            -                -                -              -

Preferred Stock
 Dividends                               -            -                -                -              -

Issuance of
 restricted stock                   57,080            -                -                -              -

Amortization of
 deferred compensation                   -            -                -                -              -

Net Income                               -            -                -                -              -

Other comprehensive
 income                                  -            -                -                -              -
                              ------------     --------     ------------     ------------    -----------
Balance at
 June 30, 2002                  53,423,488     $    534     $    104,945     $    172,500    $   100,000
                              ============     ========     ============     ============    ===========

<CAPTION>
                                                            ACCUMULATED
                                                              OTHER
                               ADDITIONAL      DEFERRED       COMPRE-        DISTRIBUTIONS
                                PAID-IN        COMPEN-        HENSIVE        IN EXCESS OF
                                CAPITAL         SATION        LOSS           NET EARNINGS       TOTAL
                              ------------     --------     ------------     -------------   -----------
<S>                           <C>              <C>          <C>              <C>             <C>
Balance at
 December 31, 2001            $  1,376,546     $ (3,561)    $     (9,441)    $    (135,878)  $ 1,605,640

Issuance of
 Common Stock                       12,125            -                -                 -        12,130

Common Stock
 Dividends                               -            -                -           (61,429)      (61,429)

Preferred Stock
 Dividends                               -            -                -           (15,426)      (15,426)

Issuance of
 restricted stock                    1,567       (1,567)               -                 -             -

Amortization of
 deferred compensation                   -          647                -                 -           647

Net Income                               -            -                -            55,510        55,510

Other comprehensive
 income                                  -            -            1,181                 -         1,181
                              ------------     --------     ------------     -------------   -----------
Balance at
 June 30, 2002                $  1,390,238     $ (4,481)    $     (8,260)    $    (157,223)  $ 1,598,253
                              ============     ========     ============     =============   ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        6

<PAGE>

                           HIGHWOODS PROPERTIES, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                         (Unaudited and $ in thousands)

<TABLE>
<CAPTION>
                                                                                      SIX MONTHS ENDED JUNE 30,
                                                                                      --------------------------
                                                                                         2002            2001
                                                                                      -----------    -----------
<S>                                                                                   <C>            <C>
OPERATING ACTIVITIES:
Net income......................................................................      $    55,510    $    74,537
Adjustments to reconcile net income to net cash provided by operating activities:
  Depreciation and amortization.................................................           62,934         59,664
  Amortization of deferred compensation.........................................              647            480
  Minority interest.............................................................            7,580         10,346
  Equity in earnings of unconsolidated affiliates...............................           (5,039)        (2,425)
Gain on disposition of land and depreciable assets..............................          (10,581)       (12,741)
Reserve for deferred rent receivable............................................            3,110              -
Loss on early extinguishment of debt............................................                -            518
Transition adjustment upon adoption of FASB 133.................................                -            556
Loss on ineffective portion of derivative instruments...........................                -            428
Changes in operating assets and liabilities.....................................          (14,224)       (14,326)
                                                                                      -----------    -----------
    Net cash provided by operating activities...................................           99,937        117,037
                                                                                      -----------    -----------

INVESTING ACTIVITIES:
Additions to real estate assets.................................................          (63,268)      (140,630)
Proceeds from disposition of real estate assets.................................          120,200        105,500
Payment from/(advances to) subsidiaries.........................................                -         27,560
Distributions from unconsolidated affiliates....................................            5,301          4,350
Investments in notes receivable.................................................           11,080         18,918
Other investing activities......................................................           (6,514)        (9,920)
                                                                                      -----------    -----------
    Net cash provided by investing activities...................................           66,799          5,778
                                                                                      -----------    -----------

FINANCING ACTIVITIES:
Distributions paid on common stock and common units.............................          (69,984)       (71,603)
Dividends paid on preferred stock...............................................          (15,426)       (16,074)
Payment of prepayment penalties.................................................                -           (518)
Borrowings on mortgages and notes payable.......................................           13,403          8,780
Repayments on mortgages and notes payable.......................................          (55,973)       (92,671)
Borrowings on revolving loans...................................................          174,500        215,000
Repayments on revolving loans...................................................         (203,500)      (103,500)
Net proceeds from the sale of common stock......................................            4,821          2,157
Net change in deferred financing costs..........................................            1,386           (164)
Repurchase of stock and units...................................................           (2,762)      (138,889)
Other financing activities......................................................              417             --
                                                                                      -----------    -----------
    Net cash used in financing activities.......................................         (153,118)      (197,482)
                                                                                      -----------    -----------
Net increase/(decrease) in cash and cash equivalents............................           13,618        (74,667)
Cash and cash equivalents at beginning of the period............................              576        104,780
                                                                                      -----------    -----------
Cash and cash equivalents at end of the period..................................      $    14,194    $    30,113
                                                                                      ===========    ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest..........................................................      $    60,590      $  61,837
                                                                                      ===========    ===========
</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>
                                                                                       SIX MONTHS ENDED JUNE 30,
                                                                                      --------------------------
                                                                                         2002            2001
                                                                                      -----------    -----------
<S>                                                                                   <C>            <C>
ASSETS:
Notes receivable................................................................      $       500    $       675
Accounts receivable.............................................................              139              -
Cash and cash equivalents.......................................................            1,114          1,074
Rental property and equipment, net..............................................           36,828         48,646
Deferred leasing costs..........................................................              995              -

LIABILITIES:
Mortgages and notes payable.....................................................           27,698         48,831
Accounts payable, accrued expenses and other liabilities........................           10,321          2,084
                                                                                      -----------    -----------
  Net assets....................................................................      $     1,557    $      (520)
                                                                                      ===========    ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        8

<PAGE>

                           HIGHWOODS PROPERTIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 2002

                                   (Unaudited)

1.   DESCRIPTION OF THE COMPANY

     The Company is a self-administered and self-managed REIT that operates in
the southeastern and midwestern United States. The Company's wholly-owned assets
include: 500 in-service office, industrial and retail properties; 1,304 acres of
undeveloped land suitable for future development; and an additional 10
properties under development.

     The Company conducts substantially all of its activities through, and
substantially all of its interests in the properties are held directly or
indirectly by, the Operating Partnership. The Company is the sole general
partner of the Operating Partnership. At June 30, 2002, the Company owned 88.3%
of the Common Units in the Operating Partnership. Limited partners (including
certain officers and directors of the Company) own the remaining Common Units.
Holders of Common Units may redeem them for the cash value of one share of
Common Stock or, at the Company's option, one share of Common Stock. When a
Common Unit holder redeems a Common Unit for a share of Common Stock or cash,
the minority interest will be reduced and the Company's share in the Operating
Partnership will be increased. The Common Units owned by the Company are not
redeemable for cash.

2.   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 in the Operating
Partnership owned by various individuals and entities other than the Company.
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 June 30, 2001 and December 31, 2001 financial
statements have been reclassified to conform to the June 30, 2002 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 2001 Annual Report on
Form 10-K.

                                        9

<PAGE>

                           HIGHWOODS PROPERTIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

3.   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.

     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 and six months ended June 30, 2002 and 2001 ($ in
thousands):

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED JUNE 30,     SIX MONTHS ENDED JUNE 30,
                                                            ---------------------------    ---------------------------
                                                               2002            2001           2002           2001
                                                            -----------     -----------    -----------    -----------
<S>                                                         <C>             <C>            <C>            <C>
RENTAL PROPERTY INCOME:
Office segment.......................................       $    98,316     $   102,235    $   201,625    $   206,223
Industrial segment...................................            10,783          11,933         21,329         23,513
Retail segment.......................................             9,256           8,653         19,003         18,355
Apartment segment....................................               258           1,564            612          3,135
                                                            -----------     -----------    -----------    -----------
  Total Rental Property Income.......................       $   118,613     $   124,385    $   242,569    $   251,226
                                                            ===========     ===========    ===========    ===========
NET OPERATING INCOME:
Office segment.......................................       $    66,676     $    64,460    $   136,992    $   143,414
Industrial segment...................................             8,843          11,933         17,579         19,837
Retail segment.......................................             6,071           8,653         12,689         12,175
Apartment segment....................................                83           1,564            250          1,633
                                                            -----------     -----------    -----------    -----------
  Total Net Operating Income.........................       $    81,673     $    86,610    $   167,510    $   177,059
                                                            -----------     -----------    -----------    -----------
Reconciliation to income before gain on disposition
 of land and depreciable assets, minority interest,
 discontinued operations and extraordinary item:
Equity in earnings of unconsolidated affiliates......       $     2,475     $     1,592    $     5,039    $     2,425
Interest and other income............................             2,764           7,774          6,169         15,585
Interest expense.....................................           (27,458)        (26,928)       (53,831)       (55,914)
General and administrative expenses..................            (5,537)         (5,451)       (10,711)       (10,663)
Depreciation and amortization........................           (31,298)        (28,773)       (62,309)       (57,630)
                                                            -----------     -----------    -----------    -----------
  Income before gain on disposition of land and
   depreciable assets, minority interest,
   discontinued operations and extraordinary item....       $    22,619     $    34,824    $    51,867    $    70,862
                                                            ===========     ===========    ===========    ===========

TOTAL ASSETS:
Office segment.......................................       $ 2,805,585     $ 2,708,324    $ 2,805,585    $ 2,708,324
Industrial segment...................................           328,320         398,740        328,320        398,740
Retail segment.......................................           249,797         258,135        249,797        258,135
Apartment segment....................................            11,741          39,607         11,741         39,607
Corporate and other..................................           170,322         205,209        170,322        205,209
                                                            -----------     -----------    -----------    -----------
  Total Assets.......................................       $ 3,565,765     $ 3,610,015    $ 3,565,765    $ 3,610,015
                                                            ===========     ===========    ===========    ===========
</TABLE>

                                       10

<PAGE>

                           HIGHWOODS PROPERTIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

4.   INVESTMENTS IN UNCONSOLIDATED AFFILIATES

     During the past several years, we have formed various joint ventures with
unrelated investors. We have retained minority equity interests ranging from
12.50% to 50.00% in these joint ventures. As required by GAAP, we have accounted
for our joint venture activity using the equity method of accounting, as we do
not control these joint ventures. As a result, the assets and liabilities of our
joint ventures are not included on our balance sheet. As of June 30, 2002, our
joint ventures have approximately $566.5 million of outstanding debt. All of the
joint venture debt is non-recourse to us except (1) in the case of customary
exceptions pertaining to such matters as misuse of funds, environmental
conditions and material misrepresentations and (2) with respect to $5.0 million
of construction debt related to the MG-HIW Metrowest I, LLC, which has been
guaranteed in part by us subject to a pro rata indemnity from our joint venture
partner. Our guarantee of the MG-HIW Metrowest I, LLC debt represented 50.00% of
the outstanding loan balance at June 30, 2002. Selected financial data for
unconsolidated affiliates for the six months ended June 30, 2002 and 2001 is
presented below ($ in thousands):

<TABLE>
<CAPTION>
                                                                                 PERCENT OWNED AT JUNE 30,
                                                                                --------------------------
                                                                                   2002           2001
                                                                                -----------    -----------
     <S>                                                                              <C>            <C>
     Board of Trade Investment Company.....................................           49.00%         49.00%
     Dallas County Partners I, LP..........................................           50.00          50.00
     Dallas County Partners II, LP.........................................           50.00          50.00
     Dallas County Partners III, LP........................................           50.00          50.00
     Fountain Three........................................................           50.00          50.00
     Kessinger/Hunter, LLC.................................................           30.00          30.00
     4600 Madison Associates, LP...........................................           12.50          12.50
     Dreilander-Fonds 98/29................................................           22.81          22.81
     Dreilander-Fonds 97/26 and 99/32......................................           42.93          44.70
     RRHWoods, LLC.........................................................           50.00          50.00
     Highwoods-Markel Associates, LLC......................................           50.00          50.00
     MG-HIW, LLC...........................................................           20.00          20.00
     MG-HIW Peachtree Corners, LLC.........................................           50.00          50.00
     MG-HIW Rocky Point, LLC (1)...........................................              --          50.00
     MG-HIW Metrowest I, LLC...............................................           50.00          50.00
     MG-HIW Metrowest II, LLC..............................................           50.00          50.00
     Concourse Center Associates, LLC......................................           50.00             --
     Plaza Colonnade, LLC..................................................           50.00             --
</TABLE>

<TABLE>
<CAPTION>
                                                                                  JUNE 30,       JUNE 30,
                                                                                    2002           2001
                                                                                -----------    -----------
     <S>                                                                        <C>            <C>
     Total assets..........................................................     $   891,175    $   886,671
     Total debt............................................................         566,462        556,505
     Total liabilities.....................................................         593,701        587,508
</TABLE>

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED JUNE 30,    SIX MONTHS ENDED JUNE 30,
                                                  ---------------------------   --------------------------
                                                     2002            2001           2002           2001
                                                  -----------    ------------   -----------    -----------
     <S>                                          <C>            <C>            <C>            <C>
     Total net income.......................      $     8,123    $      6,238   $    17,025    $    10,049
</TABLE>

----------

(1)  On June 26, 2002, we acquired our joint venture partner's interest in
     MG-HIW Rocky Point, LLC to bring our ownership interest in that entity to
     100.0%. At June 30, 2002, the assets and liabilities of this entity are
     included in the consolidated balance sheet and, thus, are not included
     under "Total assets", "Total debt" or "Total liabilities" in the above
     table. However, net income from this joint venture is included in the
     'Total net income' in the above table.

                                       11

<PAGE>

                           HIGHWOODS PROPERTIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

5.   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 the derivative 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.

     On the date that we enter into a derivative contract, we designate the
derivative as (1) a hedge of the variability of cash flows that are to be
received or paid in connection with a recognized liability (a "cash flow"
hedge), or (2) an instrument that is held as a non-hedge derivative. Changes in
the fair value of highly effective cash flow hedges, to the extent that the
hedge is effective, are recorded in AOCL, until earnings are affected by the
hedged transaction (i.e. until periodic settlements of a variable-rate liability
are recorded in earnings). Any hedge ineffectiveness (which represents the
amount by which the changes in the fair value of the derivative exceed the
variability in the cash flows of the transaction) is recorded in current-period
earnings. Changes in the fair value of non-hedging instruments are reported in
current-period earnings.

     We formally document all relationships between hedging instruments and
hedged items, as well as our risk-management objective and strategy for
undertaking various hedge transactions. This process includes linking all
derivatives that are designated as cash flow hedges to (1) specific assets and
liabilities on the balance sheet or (2) forecasted transactions. We also assess
and document, both at the hedging instrument's inception and on an ongoing
basis, whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in cash flows associated with the hedged items.
When we determine that a derivative is not (or has ceased to be) highly
effective as a hedge, we discontinue hedge accounting prospectively.

     During the six months ended June 30, 2002, we had an interest rate swap and
an interest rate collar each mature, resulting in a debit to interest rate
derivative liability and an offsetting credit to AOCL of $411,000. As of June
30, 2002, we had no derivative instruments reported as Other Liabilities or
Assets. However, $8.3 million of deferred financing costs from past cash flow
hedging instruments remain in AOCL at June 30, 2002 and will be recognized into
earnings as the underlying debt is repaid. We expect that the portion of the
cumulative loss recorded in AOCL at June 30, 2002 associated with the derivative
instruments, which will be recognized within the next 12 months, will be
approximately $1.6 million.

     On July 31, 2002, we entered into two $24.0 million five-year treasury lock
agreements with two financial counterparties at a fixed rate of 3.695% to
mitigate the change in expected interest payments on an anticipated five-year
fixed-rate financing. We expect that these treasury lock agreements will be
deemed highly effective in accordance with SFAS 133/138 and will be initially
reflected in AOCL on the consolidated balance sheet.

                                       12

<PAGE>

                           HIGHWOODS PROPERTIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

6.   OTHER COMPREHENSIVE INCOME /(LOSS)

     Other comprehensive income/(loss) represents net income plus the results of
certain non-stockholders' equity changes not reflected in the Consolidated
Statements of Income. The components of other comprehensive income/(loss) are as
follows ($ in thousands):

<TABLE>
<CAPTION>
                                                                                     SIX MONTHS ENDED JUNE 30,
                                                                                    ---------------------------
                                                                                       2002              2001
                                                                                    -----------      ----------
<S>                                                                                 <C>              <C>
Net Income.....................................................................     $    55,510      $   74,537
Accumulated other comprehensive income/(loss):
  Unrealized derivative gains/(losses) on cashflow hedges......................             411            (414)
  Reclassification of past hedging relationships...............................              --         (10,597)
  Amortization of past hedging relationships...................................             770             784
                                                                                    -----------      ----------
    Total other comprehensive income/(loss)....................................           1,181         (10,227)
                                                                                    -----------      ----------
    Total comprehensive income.................................................     $    56,691      $   64,310
                                                                                    ===========      ==========
</TABLE>

7.   DISCONTINUED OPERATIONS AND THE IMPAIRMENT OF LONG-LIVED ASSETS

     As of January 1, 2002, we adopted Financial Accounting Standards Board
Statement (SFAS) No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," and the appropriate amounts are disclosed separately under
income from discontinued operations on the consolidated income statement. Below
represents the total revenues, rental operating expenses, depreciation and
amortization, income from discontinued operations, net of minority interest,
gain on sale of discontinued operations, net of minority interest and net
carrying value of the properties sold and held for sale at June 30, 2002 (which
account for 834,128 rentable square feet) as a result of our capital recycling
program and included in income from discontinued operations for the three and
six months ended June 30, 2002 and 2001 ($ in thousands):

<TABLE>
<CAPTION>
                                                                          INCOME  FROM       GAIN ON SALE
                                              RENTAL     DEPRECIATION     DISCONTINUED      OF DISCONTINUED
                                   TOTAL     OPERATING       AND       OPERATIONS, NET OF  OPERATIONS, NET OF   NET CARRYING
                          TYPE     REVENUES   EXPENSES   AMORTIZATION  MINORITY INTEREST   MINORITY INTEREST       VALUE
                          --------------------------------------------------------------------------------------------------
<S>                       <C>      <C>       <C>         <C>           <C>                 <C>                  <C>
 Three Months Ended
    June 30, 2002
                          Office   $    769  $     450   $        270  $               43  $            2,611   $    19,411
                                   -----------------------------------------------------------------------------------------
                          Total    $    769  $     450   $        270  $               43  $            2,611   $    19,411
                                   =========================================================================================
    June 30, 2001
                          Office   $  1,815  $     588   $        344  $              773  $                -   $    44,258
                                   -----------------------------------------------------------------------------------------
                          Total    $  1,815  $     588   $        344  $              773  $                -   $    44,258
                                   =========================================================================================

  Six Months Ended
    June 30, 2002
                          Office   $  2,226  $     959   $        626  $              564  $            2,611   $    19,411
                                   -----------------------------------------------------------------------------------------
                          Total    $  2,226  $     959   $        626  $              564  $            2,611   $    19,411
                                   =========================================================================================
    June 30, 2001
                          Office   $  3,597  $   1,105   $        693  $            1,576  $                -   $    44,258
                                   -----------------------------------------------------------------------------------------
                          Total    $  3,597  $   1,105   $        693  $            1,576  $                -   $    44,258
                                   =========================================================================================
</TABLE>

     In addition, in accordance with SFAS 144, we have determined that as of
June 30, 2002, the carrying value of one industrial property held for sale is
greater than its fair value, less costs to sell. Additionally, we have
determined that the carrying value of one office property held and used will not
be recovered from its undiscounted future operating cash flows. In total, we
have recognized a $9.9 million impairment loss, which is included in the gain on
the sale of land and depreciable assets in the consolidated statements of income
for the three and six months ended June 30, 2002.

                                       13

<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.

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 this section and under the
heading "Business". 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:

        .   speculative development activity by our competitors in our existing
            markets could result in an excessive supply of office, industrial
            and retail properties relative to tenant demand;

        .   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 re-lease 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 and midwestern markets may suffer additional
            declines in economic growth or may not recover as fully or as
            quickly as expected.

     This list of risks and uncertainties, however, is not intended to be
exhaustive. You should also review the other cautionary statements we make in
"Business - Risk Factors" set forth in our 2001 Annual Report.

     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.

OVERVIEW

     We are a self-administered and self-managed equity REIT that began
operations through a predecessor in 1978. Since the Company's initial public
offering in 1994, we have evolved into one of the largest owners and operators
of suburban office, industrial and retail properties in the southeastern and
midwestern United States. At June 30, 2002, we:

        .   owned 500 in-service office, industrial and retail properties,
            encompassing approximately 37.9 million rentable square feet;

                                       14

<PAGE>

        .   owned an interest (50.0% or less) in 76 in-service office and
            industrial properties, encompassing approximately 7.4 million
            rentable square feet and 418 apartment units;

        .   owned 1,304 acres (and have agreed to purchase an additional eight
            acres over the next year) of undeveloped land suitable for future
            development;

        .   owned 10 development properties, encompassing approximately 992,000
            rentable square feet; and

        .   owned an interest (50.0% or less) in two development properties,
            encompassing 373,000 rentable square feet.

     The following summarizes our capital recycling program since the beginning
of 2000:

<TABLE>
<CAPTION>
                                                                    SIX MONTHS
                                                                       ENDED       YEAR ENDED   YEAR ENDED
                                                                   JUNE 30, 2002      2001         2000
                                                                   -------------   ----------   ----------
<S>                                                                        <C>          <C>         <C>
OFFICE, INDUSTRIAL AND RETAIL PROPERTIES
  (rentable square feet in thousands)
     Dispositions (1).........................................              (856)        (268)      (4,743)
     Contributions to Joint Ventures (1)......................                --         (118)      (2,199)
     Developments Placed In-Service...........................             1,337        1,351        3,480
     Acquisitions.............................................               205           72          669
                                                                   -------------   ----------   ----------
     Net Change in Wholly-owned
      In-Service Properties...................................               686        1,037       (2,793)
                                                                   =============   ==========   ==========

APARTMENT PROPERTIES
   (in units)
     Dispositions.............................................                --       (1,672)          --
                                                                   =============   ==========   ==========
</TABLE>

----------

(1)  Excludes wholly-owned development projects sold or contributed to joint
     ventures.

     In addition to the above property activity, we repurchased $2.8 million,
$147.4 million and $100.2 million of Common Stock and Common Units during 2002,
2001 and 2000, respectively, and $18.5 million of Preferred Stock during 2001.

     The Company conducts substantially all of its activities through, and
substantially all of its interests in the properties are held directly or
indirectly by, the Operating Partnership. The Company is the sole general
partner of the Operating Partnership. At June 30, 2002, the Company owned 88.3%
of the Common Units in the Operating Partnership.

CRITICAL ACCOUNTING POLICIES

     Our discussion and analysis of financial condition and results of
operations is based upon our Consolidated Financial Statements contained
elsewhere in this Quarterly Report. Our Consolidated Financial Statements
include the accounts of the Company and the Operating Partnership and their
majority-controlled affiliates. The preparation of financial statements in
conformity with GAAP requires us to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses for the reporting period. Actual results could
differ from our estimates.

     The estimates used in the preparation of our Consolidated Financial
Statements are more fully described in Note (1) to our audited Consolidated
Financial Statements for the year ended December 31, 2001, included in our 2001
Form 10-K. However, certain of our significant accounting policies are
considered critical accounting policies due to the increased level of
assumptions used or estimates made in determining their impact on our
Consolidated Financial Statements presented for any interim period. Management
has reviewed our critical accounting policies and estimates with the audit
committee of the Company's board of directors.

     We consider our critical accounting policies to be those used in the
determination of the reported amounts and disclosure related to the following:

                                       15

<PAGE>

        .   Impairment of long-lived assets;

        .   Allowance for doubtful accounts;

        .   Capitalized costs;

        .   Fair value of derivative instruments;

        .   Rental revenue; and

        .   Investments in joint ventures.

     Impairment of long-lived assets. Real estate and leasehold improvements are
classified as long-lived assets held for sale or as long-lived assets to be held
and used. In accordance with Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets," we record
assets held for sale at the lower of the carrying amount or fair value less cost
to sell. The impairment loss is the amount by which the carrying amount exceeds
the fair value less cost to sell. With respect to assets classified as held and
used, we periodically review these assets to determine whether our carrying
amount will be recovered from their undiscounted future operating cash flows and
we recognize an impairment loss to the extent we believe the carrying amount is
not recoverable. Our determination of future operating cash flows requires us to
make assumptions related to future rental rates, tenant concessions, operating
expenditures, property taxes and capital improvements. If our assumptions prove
incorrect and our estimates of future operating cash flows are materially
overstated, we could be required to recognize future impairment losses on our
properties.

     Allowance for doubtful accounts. Accounts receivable are reduced by an
allowance for amounts that may become uncollectible in the future. Our
receivable balance is comprised primarily of rents and operating cost recoveries
due from tenants as well as accrued rental rate increases to be received over
the life of the existing leases. We regularly evaluate the adequacy of our
allowance for doubtful accounts considering such factors as the credit quality
of our tenants, delinquency of payment, historical trends and current economic
conditions. Actual results may differ from these estimates under different
assumptions or conditions. If our assumptions regarding the collectibility of
accounts receivables prove incorrect, we could experience write-offs of accounts
receivable or accrued straight-line rents receivable in excess of our allowance
for doubtful accounts.

     Capitalized costs. Expenditures directly related to both the development of
real estate assets and the leasing of properties are included in net real estate
assets and are stated at cost in the consolidated balance sheets. The
development expenditures include pre-construction costs essential to the
development of properties, development and construction costs, interest costs,
real estate taxes, salaries and other costs incurred during the period of
development. The leasing expenditures include all general and administrative
costs, including salaries incurred in connection with successfully securing
leases on the properties. Estimated costs related to unsuccessful leases are
expensed as incurred. If our assumptions regarding the successful efforts of
development and leasing are incorrect, the resulting adjustments could impact
earnings.

     Fair value of derivative instruments. In the normal course of business, we
are exposed to the effect of interest rate changes. We limit our exposure by
following established risk management policies and procedures including the use
of derivatives. To mitigate our exposure to unexpected changes in interest
rates, derivatives are used primarily to hedge against rate movements on our
related debt. We are required to recognize all derivatives as either assets or
liabilities in the consolidated balance sheets and to measure those instruments
at fair value. Changes in fair value will affect either stockholders' equity or
net income depending on whether the derivative instrument qualifies as a hedge
for accounting purposes.

     To determine the fair value of derivative instruments, we use a variety of
methods and assumptions that are based on market conditions and risks existing
at each balance sheet date. For the majority of financial instruments, including
most derivatives, standard market conventions and techniques such as discounted
cash flow analysis, option pricing modes, replacement cost and termination cost
are used to determine fair value. All methods of assessing fair value result in
a general approximation of value, and such value may never actually be realized.

                                       16

<PAGE>

     Rental revenue. Rental revenue is comprised of base rent, including
termination fees, recoveries from tenants and parking and other income. In
accordance with GAAP, base rental revenue is recognized on a straight-line basis
over the terms of the respective leases. This means that, with respect to a
particular lease, actual amounts billed in accordance with the lease during any
given period may be higher or lower than the amount of rental revenue recognized
for the period. Accrued straight-line rents receivable represents the amount by
which straight-line rental revenue exceeds rents currently billed in accordance
with lease agreements. Recoveries from tenants represent reimbursements for
certain costs as provided in the lease agreements. These costs generally include
real estate taxes, utilities, insurance, common area maintenance and other
recoverable costs.

     Investments in joint ventures. We account for our investments in
unconsolidated joint ventures using the equity method of accounting because we
do not control these joint venture entities. These investments are initially
recorded at cost, as investments in unconsolidated affiliates, and are
subsequently adjusted for equity in earnings and cash contributions and
distributions. Any difference between the carrying amount of these investments
on our balance sheet and the underlying equity in net assets is amortized as an
adjustment to equity in earnings of unconsolidated affiliates over 40 years. In
connection with the MG-HIW, LLC joint venture, we have guaranteed Miller Global,
our partner who has an 80.0% interest in the joint venture, a minimum internal
rate of return on $50.0 million of their equity. If the minimum internal rate of
return is not achieved upon the sale of the assets or winding up of the joint
venture, Miller Global would receive a disproportionately greater interest of
the cash proceeds related to the assets subject to the internal rate of return
guarantee. Based upon the current operating performance of the assets and our
estimate of the residual value of the subject assets, the estimated internal
rate of return for Miller Global with respect to the assets exceeds the minimum
required return. As a result, we do not currently expect that our interest in
the joint venture will be adjusted upon the sale of the subject assets or the
winding up of the joint venture as a result of the internal rate of return
guarantee. However, if our assumptions and estimates prove incorrect, Miller
Global could receive a greater interest of the cash proceeds from any such sale
or winding up.

                                       17

<PAGE>

RESULTS OF OPERATIONS

     The following table sets forth information regarding our results of
operations for the three and six months ended June 30, 2002 and 2001 ($ in
millions):

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED               SIX MONTHS ENDED
                                                              JUNE 30,                        JUNE 30,
                                                         ------------------               ------------------
                                                           2002      2001     $ CHANGE      2002      2001     $ CHANGE
                                                         --------  --------   ---------   --------  --------   ---------
<S>                                                      <C>       <C>        <C>         <C>       <C>        <C>
REVENUE:
  Rental property...................................     $  118.6  $  124.4   $    (5.8)  $  242.6  $  251.2   $    (8.6)
  Equity in earnings of unconsolidated affiliates...          2.5       1.6         0.9        5.0       2.4         2.6
  Interest and other income.........................          2.7       7.8        (5.1)       6.2      15.6        (9.4)
                                                         --------  --------   ---------   --------  --------   ---------
Total Revenue.......................................        123.8     133.8       (10.0)     253.8     269.2       (15.4)
OPERATING EXPENSES:
  Rental property...................................         37.0      37.8        (0.8)      75.1      74.2         0.9
  Depreciation and amortization.....................         31.3      28.8         2.5       62.3      57.6         4.7
  Interest expense:
    Contractual.....................................         27.1      26.2         0.9       53.1      54.6        (1.5)
    Amortization of deferred financing costs........          0.3       0.7        (0.4)       0.7       1.3        (0.6)
                                                         --------  --------   ---------   --------  --------   ---------
                                                             27.4      26.9         0.5       53.8      55.9        (2.1)
  General and administrative........................          5.5       5.5           -       10.7      10.7           -
                                                         --------  --------   ---------   --------  --------   ---------
    Income before gain on disposition of land and
     depreciable assets, minority interest,
     discontinued operations and extraordinary item.         22.6      34.8       (12.2)      51.9      70.8       (18.9)
  Gain on disposition of land and depreciable assets          6.7       5.7         1.0        7.6      12.7        (5.1)
                                                         --------  --------   ---------   --------  --------   ---------
    Income before minority interest, discontinued
     operations and extraordinary item..............         29.3      40.5       (11.2)      59.5      83.6       (24.1)
Miority interest....................................         (3.5)     (5.0)        1.5       (7.2)    (10.1)        2.9
                                                         --------  --------   ---------   --------  --------   ---------
  Income from continuing operations.................         25.8      35.5        (9.7)      52.3      73.5       (21.2)
DISCONTINUED OPERATIONS:
  Income from discontinued operations, net of
    minority interest...............................          0.1       0.8         0.9        0.6       1.6        (1.0)
  Gain on sale of discontinued operations, net of
    minority interest...............................          2.6         -         2.6        2.6         -         2.6
                                                         --------  --------   ---------   --------  --------   ---------
                                                              2.7       0.8         3.5        3.2       1.6         1.6
  Net income before extraordinary item..............         28.5      36.3        (7.8)      55.5      75.1       (19.5)
Extraordinary item -- loss on early extinguishment
 of debt............................................            -      (0.3)        0.3          -      (0.5)        0.5
                                                         --------  --------   ---------   --------  --------   ---------
  Net income........................................         28.5      35.9        (7.5)      55.5      74.6       (19.0)
Dividends on preferred stock........................         (7.7)     (7.9)        0.2      (15.4)    (16.1)        0.6
                                                         --------  --------   ---------   --------  --------   ---------
  Net income available for common
   shareholders.....................................     $   20.8  $   28.0   $    (7.2)  $   40.1  $   58.5   $   (18.4)
                                                         ========  ========   =========   ========  ========   =========
</TABLE>

     Three Months Ended June 30, 2002. Revenues from rental operations decreased
$5.8 million, or 4.7%, from $124.4 million for the three months ended June 30,
2001 to $118.6 million for the three months ended June 30, 2002. The decrease
was primarily due to a decrease in the average occupancy rates from 93.2% in the
second quarter of 2001 to 87.2% in the second quarter of 2002. In addition, we
have written off approximately $3.1 million of accrued straight-line rent
receivables from WorldCom and its affiliates as of June 30, 2002. Slightly
offsetting the decrease was an increase in rental revenues as a result of an
increase in our property portfolio in 2002 as a result of our capital recycling
program, which included 1.3 million rentable square feet of properties that were
placed in service during 2002. Our in-service wholly-owned portfolio increased
from 36.7 million rentable square feet at June 30, 2001 to 37.9 million rentable
square feet at June 30, 2002.

     Same property rental revenue, recorded in accordance with GAAP, generated
from the 475 in-service properties wholly-owned on January 1, 2001, decreased
$7.5 million, or 6.4%, for the three months ended June 30, 2002, compared to the
three months ended June 30, 2001. Same store straight-line rent decreased $4.1
million, primarily as a result of the $3.1 million write-off of the WorldCom
accrued straight-line rent receivable and a decrease of $1.0 million due to the
impact from the straight lining of rents discussed generally in our critical
accounting policies. Same store rental revenues excluding straight-line rent and
termination fees decreased $3.6 million, or 3.2%. This decrease is a result of
lower same store average occupancy, which declined from 93.1% in 2001 to 87.3%
in 2002.

                                       18

<PAGE>

     During the three months ended June 30, 2002, 207 second generation leases
representing 1.9 million square feet of office, industrial and retail space were
executed at an average rate per square foot, which was 2.7% lower than the
average rate per square foot on the previous leases.

     Equity in earnings of unconsolidated affiliates increased $0.9 million, or
56.3%, from $1.6 million for the three months ended June 30, 2001 to $2.5
million for the three months ended June 30, 2002. The increase was primarily a
result of an increase in occupancy rates in 2002 for certain joint ventures
formed with unrelated investors and earnings from certain development joint
ventures formed with unrelated investors in late December 2000 in which the
properties have been placed in service during 2002.

     Interest and other income decreased $5.1 million, or 65.4%, from $7.8
million for the three months ended June 30, 2001 to $2.7 million for the three
months ended June 30, 2002. The decrease primarily resulted from a decrease in
leasing and development fee income in the three months ended June 30, 2002 and a
decrease in interest income in the three months ended June 30, 2002 due to lower
average cash balances (during 2001, we had higher cash balances as a result of
proceeds from dispositions related to our capital recycling program that were
ultimately used in our stock repurchase program) and the collection of notes
receivable during 2001 and 2002.

     Rental operating expenses (real estate taxes, utilities, insurance, repairs
and maintenance and other property-related expenses) decreased $0.8 million, or
2.1%, from $37.8 million for the three months ended June 30, 2001 to $37.0
million for the three months ended June 30, 2002. This decrease was primarily a
result of lower occupancy relative to variable operating expenses offset by
increases in real estate taxes, primarily due to higher property tax
assessments, utilities and small increases in various other rental expenses in
2002. Rental operating expenses as a percentage of related revenues increased
from 30.4% for the three months ended June 30, 2001 to 31.2% for the three
months ended June 30, 2002.

     Same property rental property expenses, which are the expenses of the 475
in-service properties wholly-owned on January 1, 2001, decreased $112,713, or
0.3%, for the three months ended June 30, 2002, compared to the three months
ended June 30, 2001. This decrease was primarily a result of lower occupancy
relative to variable operating expenses offset by increases in real estate
taxes, primarily due to higher property tax assessments, utilities and small
increases in various other rental expense accounts in 2002.

     Depreciation and amortization for the three months ended June 30, 2002 and
2001 totaled $31.3 million and $28.8 million, respectively. The increase of $2.5
million, or 8.7%, was due to an increase in the amortization of leasing
commissions and tenant improvements and an increase in depreciation expense
related to buildings placed in service during 2001 and 2002, partly offset by a
decrease in the depreciation expense as a result of dispositions during 2002 and
2001.

     Interest expense increased $0.5 million, or 1.9%, from $26.9 million for
the three months ended June 30, 2001 to $27.4 million for the three months ended
June 30, 2002. The increase was primarily attributable to an increase in the
average outstanding debt for the three months ended June 30, 2002 partly offset
by a decrease in weighted average interest rates during the three months ended
June 30, 2002. Interest expense for the three months ended June 30, 2002 and
2001 included $0.3 million and $0.7 million, respectively, of amortization of
deferred financing costs and the costs related to our interest rate hedge
contracts. Capitalized interest for the three months ended June 30, 2002 and
2001 were $2.6 million and $4.1 million, respectively.

     General and administrative expenses as a percentage of total revenues was
4.5% in the second quarter of 2002 and 4.1% in the second quarter of 2001.

     Gain on disposition of land and depreciable assets increased $1.0 million,
or 17.6%, from $5.7 million for the quarter ended June 30, 2001 to $6.7 million
for the quarter ended June 30, 2002. In 2001, the majority of the gain was a
result of the disposition of 883 apartment units. In 2002, the majority of the
gain was related to a gain of approximately $16.4 million related to the
disposition of 396,000 rentable square feet of office and development
properties, partly offset by an impairment loss of approximately $9.9 million
(see Note 7).

     Income before gain on disposition of land and depreciable assets, minority
interest, discontinued operations and extraordinary item equaled $22.6 million
and $34.8 million for the quarters ended June 30, 2002 and 2001,

                                       19

<PAGE>

respectively. The Company's net income allocated to minority interest totaled
$3.5 million and $5.0 million for the quarters ended June 30, 2002 and 2001,
respectively. The Company recorded $7.7 million and $7.9 million in preferred
stock dividends for each of the quarters ended June 30, 2002 and 2001,
respectively. The decrease in preferred stock dividends was a result of the
$18.5 million repurchase by the Company of its preferred stock during 2001.

     Six Months Ended June 30, 2002. Revenues from rental operations decreased
$8.6 million, or 3.4%, from $251.2 million for the six months ended June 30,
2001 to $242.6 million for the six months ended June 30, 2002. The decrease was
primarily due to a decrease in the average occupancy rates from 93.4% for the
six months ended June 30, 2001 to 88.0% for the six months ended June 30, 2002.
In addition, we have written off approximately $3.1 million of accrued
straight-line rent receivables from WorldCom and its affiliates as of June 30,
2002. Slightly offsetting the decrease was an increase in rental revenues as a
result of an increase in our property portfolio in 2002 as a result of our
capital recycling program, which included 1.3 million rentable square feet of
properties that were placed in service during 2002. Our in-service wholly-owned
portfolio increased from 36.7 million rentable square feet at June 30, 2001 to
37.9 million rentable square feet at June 30, 2002.

     Same property rental revenue, recorded in accordance with GAAP, generated
from the 475 in-service properties wholly-owned on January 1, 2001, decreased
$10.1 million for the six months ended June 30, 2002 compared to the six months
ended June 30, 2001. Same store straight-line rent revenue decreased $5.6
million as a result of the $3.1 million write-off of the WorldCom accrued
straight-line rent receivable and a decrease of $2.5 million due to the impact
from the straight lining of rents discussed generally in our critical accounting
policies. Same store revenues excluding straight-line rent and termination fees
decreased $5.3 million, or 2.3%. This decrease is a result of lower same store
average occupancy, which declined from 93.6% in 2001 to 88.1% in 2002.

     During the six months ended June 30, 2002, 344 second generation leases
representing 2.5 million square feet of office, industrial and retail space were
executed at an average rate per square foot which was 1.7% lower than the
average rate per square foot on the previous leases.

     Equity in earnings of unconsolidated affiliates increased $2.6 million, or
108.3%, from $2.4 million for the six months ended June 30, 2001 to $5.0 million
for the six months ended June 30, 2002. The increase was primarily a result of
an increase in occupancy rates in 2002 for certain joint ventures formed with
unrelated investors and earnings from certain development joint ventures formed
with unrelated investors in late December 2000 in which the properties have been
placed in service during 2002.

     Interest and other income decreased $9.4 million, or 60.3%, from $15.6
million for the six months ended June 30, 2001 to $6.2 million for the six
months ended June 30, 2002. The decrease primarily resulted from a decrease in
leasing and development fee income in the six months ended June 30, 2002 and a
decrease in interest income in the six months ended June 30, 2002 due to lower
average cash balances (during 2001, we had higher cash balances as a result of
proceeds from dispositions related to our capital recycling program that were
ultimately used in our stock repurchase program)and the collection of notes
receivable during 2001 and 2002.

     Rental operating expenses (real estate taxes, utilities, insurance, repairs
and maintenance and other property-related expenses) increased $0.9 million, or
1.2%, from $74.2 million for the six months ended June 30, 2001 to $75.1 million
for the six months ended June 30, 2002. The increase was primarily a result of
an increase in real estate taxes in 2002 partly offset by a decrease resulting
from lower occupancy relative to variable operating expenses. Rental operating
expenses as a percentage of related revenues increased from 29.5% for the six
months ended June 30, 2001 to 31.0% for the six months ended June 30, 2002.

     Same property rental property expenses, which are the expenses of the 475
in-service properties wholly-owned on January 1, 2001, decreased $423,368, or
0.6%, for the six months ended June 30, 2002, compared to the six months ended
June 30, 2001. This decrease was primarily a result of lower occupancy relative
to variable operating expenses offset by increases in real estate taxes,
primarily due to higher property tax assessments, utilities and small increases
in various other rental expenses.

     Depreciation and amortization for the six months ended June 30, 2002 and
2001 totaled $62.3 million and $57.6 million, respectively. The increase of $4.7
million, or 8.2%, was due to an increase in the amortization of leasing
commissions and tenant improvements and an increase in depreciation expense
related to buildings placed in service

                                       20

<PAGE>

during 2001 and 2002, partly offset by a decrease in the depreciation expense as
a result of dispositions during 2002 and 2001.

     Interest expense decreased $2.1 million, or 3.8%, from $55.9 million for
the six months ended June 30, 2001 to $53.8 million for the six months ended
June 30, 2002. The decrease was primarily attributable to the decrease in the
weighted average interest rates for the six months ended June 30, 2002, partly
offset by an increase in the average outstanding debt for the six months ended
June 30, 2002. Interest expense for the six months ended June 30, 2002 and 2001
included $0.7 million and $1.3 million, respectively, of amortization of
deferred financing costs and the costs related to our interest rate hedge
contracts. Capitalized interest for the six months ended June 30, 2002 and 2001
was $6.6 million and $7.1 million, respectively.

     General and administrative expenses as a percentage of total revenues was
4.2% and 4.0% in the first six months of 2002 and 2001, respectively.

     Gain on disposition of land and depreciable assets decreased $5.1 million,
or 40.4%, from $12.7 million for the six months ended June 30, 2001 to $7.6
million for the six months ended June 30, 2002. In 2001, the majority of the
gain was a result of the disposition of 1,160 apartment units. In 2002, the
majority of the gain was related to a gain of approximately $ 17.4 million
related to the disposition of 524,000 rentable square feet of office and
development properties, partly offset by an impairment loss of approximately
$9.9 million (see Note 7).

     Income before gain on disposition of land and depreciable assets, minority
interest, discontinued operations and extraordinary item equaled $51.9 million
and $70.8 million for the six months ended June 30, 2002 and 2001, respectively.
The Company's net income allocated to minority interest totaled $7.2 million and
$10.1 million for the six months ended June 30, 2002 and 2001, respectively. The
Company recorded $15.4 million and $16.1 million in preferred stock dividends
for each of the six months ended June 30, 2002 and 2001, respectively. The
decrease was a result of the $18.5 million repurchase by the Company of its
preferred stock during 2001.

LIQUIDITY AND CAPITAL RESOURCES

     Statement of Cash Flows. The following table sets forth the changes in the
Company's cash flows from the first six months of 2001 as compared to the first
six months of 2002 ($ in thousands):

<TABLE>
<CAPTION>
                                                            SIX MONTHS ENDED JUNE 30,
                                                           ---------------------------
                                                               2002           2001           CHANGE
                                                           -----------   -------------    ------------
     <S>                                                   <C>           <C>              <C>
     Cash Provided By Operating Activities                 $    99,937   $     117,037    $    (17,100)
     Cash Provided By Investing Activities                      66,799           5,778          61,021
     Cash Used in Financing Activities                        (153,118)       (197,482)         44,364
</TABLE>

     The decrease in cash provided by operating activities was primarily the
result of (1) our capital recycling program and a decrease in average occupancy
rates for our wholly-owned portfolio; (2) an increase in real estate taxes in
the first six months of 2002, primarily due to higher property assessments; and
(3) a decrease in interest income and development and leasing income in 2002. In
addition, the level of net cash provided by operating activities is also
affected by the timing of receipt of revenues and payment of expenses.

     The increase in cash provided by investing activities was primarily a
result of a decrease of $77.4 million in additions to real estate assets in the
first six months of 2002, partly offset by a decrease in the investments in
notes receivable from the first six months of 2001 to the first six months of
2002 and a decrease in the collection of advances from subsidiaries of $27.6
million from the first six months of 2001 to the first six months of 2002.

     The decrease in cash used in financing activities was primarily a result of
a decrease of $136.1 million in the repurchase of Common Stock and Common Units
from the first six months of 2001 to the first six months of 2002, a decrease of
$2.3 million in distributions paid on common stock, common units and preferred
stock during 2002 and an increase in net proceeds from the sale of common stock
of $2.7 million in 2002 partly offset by an increase of $99.2 million in net
repayment on the unsecured revolving loan, mortgages and notes payable from the
first six months of 2001 to the first six months of 2002.

     Capitalization. Based on our total market capitalization of $3.62 billion
at June 30, 2002 (at the June 30, 2002 stock price of $26.00 and assuming the
redemption for shares of Common Stock of the 7.1 million Common Units

                                       21

<PAGE>

of minority interest in the Operating Partnership), our debt represented
approximately 46.2% of our total market capitalization. Our total indebtedness
at June 30, 2002 was $1.7 billion and was comprised of $544.4 million of secured
indebtedness with a weighted average interest rate of 7.7% and $1.1 billion of
unsecured indebtedness with a weighted average interest rate of 6.5%. We do not
intend to reserve funds to retire existing secured or unsecured debt upon
maturity. For a more complete discussion of our long-term liquidity needs, see
"Current and Future Cash Needs."

     The following table sets forth the maturity schedule of our mortgages and
notes payable as of June 30, 2002 ($ in thousands):

<TABLE>
<CAPTION>
                                                   ----------------------------------------------------------------
                                                                                WITHIN       WITHIN       WITHIN
                                                                   WITHIN         2-3          4-5       6 OR MORE
                                                      TOTAL        1 YEAR        YEARS        YEARS        YEARS
                                                   -----------  -----------   ----------  -----------   -----------
<S>                                                <C>          <C>           <C>         <C>           <C>
Fixed Rate Debt:
    Unsecured:
         MOPPRS (1)............................    $   125,000  $         -   $        -  $         -   $   125,000
         Put Option Notes (2)..................        100,000            -            -            -       100,000
         Notes.................................        706,500            -      246,500      110,000       350,000
         Term Loan.............................              -            -            -            -             -
    Secured:
         Mortgages and loans payable...........        512,223        9,726       64,284      118,237       319,976
                                                   -----------  -----------   ----------  -----------   -----------
    Total Fixed Rate Debt......................      1,443,723        9,726      310,784      228,237       894,976
                                                   -----------  -----------   ----------  -----------   -----------

Variable Rate Debt:
    Unsecured:
         Revolving Loan........................        199,500            -      199,500            -             -
    Secured:
         Revolving Loan........................          4,409        4,409            -            -             -
         Mortgage loan payable.................         27,726          246       23,822        3,658             -
                                                   -----------  -----------   ----------  -----------   -----------
    Total Variable Rate Debt...................        231,635        4,655      223,322        3,658             -
                                                   -----------  -----------   ----------  -----------   -----------

Total Mortgages and Notes payable..............    $ 1,675,358  $    14,381   $  534,106  $   231,895   $   894,976
                                                   ===========  ===========   ==========  ===========   ===========
</TABLE>

----------

 (1) On February 2, 1998, the Operating Partnership sold $125.0 million of
     MandatOry Par Put Remarketed Securities ("MOPPRS") due February 1, 2013.
     The MOPPRS bear an interest rate of 6.835% from the date of issuance
     through January 31, 2003. After January 31, 2003, the interest rate to
     maturity on the MOPPRS will be 5.715% plus the applicable spread determined
     as of January 31, 2003. In connection with the initial issuance of the
     MOPPRS, a counter party was granted a remarketing option to purchase the
     MOPPRS from the holders thereof on January 31, 2003 at 100.0% of the
     principal amount. If the counter party elects not to exercise this option,
     the Operating Partnership would be required to repurchase the MOPPRS from
     the holders on January 31, 2003 at 100.0% of the principal amount plus
     accrued and unpaid interest.

(2)  On June 24, 1997, a trust formed by the Operating Partnership sold $100.0
     million of Exercisable Put Option Securities due June 15, 2004 ("X-POS"),
     which represent fractional undivided beneficial interests in the trust. The
     assets of the trust consist of, among other things, $100.0 million of
     Exercisable Put Option Notes due June 15, 2011 (the "Put Option Notes"),
     issued by the Operating Partnership. The Put Option Notes bear an interest
     rate of 7.19% from the date of issuance through June 15, 2004. After June
     15, 2004, the interest rate to maturity on the Put Option Notes will be
     6.39% plus the applicable spread determined as of June 15, 2004. In
     connection with the initial issuance of the Put Option Notes, a counter
     party was granted an option to purchase the Put Option Notes from the trust
     on June 15, 2004 at 100.0% of the principal amount. If the counter party
     elects not to exercise this option, the Operating Partnership would be
     required to repurchase the Put Option Notes from the Trust on June 15, 2004
     at 100.0% of the principal amount plus accrued and unpaid interest.

     The mortgage and loans payable and the secured revolving loan were secured
by real estate assets with an aggregate carrying value of $942.9 million at June
30, 2002.

     The Operating Partnership's unsecured notes of $931.5 million bear interest
rates ranging from 6.8% to 8.1%, with interest payable semi-annually in arrears.
The premium and discount related to the issuance of the unsecured notes is being
amortized over the life of the respective notes as an adjustment to interest
expense. All of the unsecured notes, except for the MOPPRS and Put Option Notes,
are redeemable at any time prior to maturity at our option, subject to certain
conditions including the payment of make-whole amounts.

                                       22

<PAGE>

     We currently have a $300.0 million unsecured revolving loan (with $199.5
million outstanding at June 30, 2002) that matures in December 2003 and a $55.2
million secured revolving loan (with $4.4 million outstanding at June 30, 2002)
that matures in March 2003. Our unsecured revolving loan also includes a $150.0
million competitive sub-facility. Depending upon the corporate credit ratings
assigned to us from time to time by the various rating agencies, our unsecured
revolving loan bears variable rate interest at a spread above LIBOR ranging from
0.70% to 1.55% and our secured revolving loan bears variable rate interest at a
spread above LIBOR ranging from 0.55% to 1.50%. We currently have a credit
rating of BBB- assigned by Standard & Poor's, a credit rating of BBB assigned by
Fitch Inc. and a credit rating of Baa2 assigned by Moody's Investor Service. As
a result, interest currently accrues on borrowings under our unsecured revolving
loan at an average rate of LIBOR plus 85 basis points and under our secured
revolving loan at an average rate of LIBOR plus 75 basis points. In addition, we
are currently required to pay an annual facility fee equal to .20% of the total
commitment under the unsecured revolving loan.

     The terms of each of our revolving loans and the indenture that governs our
outstanding notes require us to comply with various operating and financial
covenants and performance ratios. We are currently in compliance with all such
requirements. In addition, based on our current expectation of future operating
performance, we expect to remain in compliance for the foreseeable future.

     Joint Ventures. During the past several years, we have formed various joint
ventures with unrelated investors. We have retained minority equity interests
ranging from 12.5% to 50.0% in these joint ventures. As required by GAAP, we
have accounted for our joint venture activity using the equity method of
accounting, as we do not control these joint ventures. As a result, the assets
and liabilities of our joint ventures are not included on our balance sheet. As
of June 30, 2002, our joint ventures have approximately $566.5 million of
outstanding debt. All of the joint venture debt is non-recourse to us except (1)
in the case of customary exceptions pertaining to such matters as misuse of
funds, environmental conditions and material misrepresentations and (2) with
respect to $5.0 million of construction debt related to the MG-HIW Metrowest I,
LLC, which has been guaranteed in part by us subject to a pro rata indemnity
from our joint venture partner. Our guarantee of the MG-HIW Metrowest I, LLC
debt represented 50.0% of the outstanding loan balance at June 30, 2002.

     Interest Rate Hedging Activities. To meet in part our long-term liquidity
requirements, we borrow funds at a combination of fixed and variable rates.
Borrowings under our two revolving loans bear interest at variable rates. Our
long-term debt, which consists of long-term financings and the unsecured
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 interest rate on all of our variable rate debt is adjusted at one- and
three-month intervals, subject to settlements under these contracts. We also
enter into treasury lock agreements from time to time in order to limit our
exposure to an increase in interest rates with respect to future debt offerings.
Net payments made to counterparties under interest rate hedge contracts were
$415,051 during the six months ended June 30, 2002 and were recorded as
additional interest expense.

     Current and Future Cash Needs. Historically, rental revenue has been the
principal source of funds to meet our short-term liquidity requirements, which
primarily consist of operating expenses, debt service, stockholder distributions
and ordinary course 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
properties except for the $4.7 million renovation of Tampa Bay Park and the $7.9
million general and non-recurring renovations at Country Club Plaza. In
addition, we could incur tenant improvements and lease commissions related to
any releasing of space currently leased by WorldCom and US Air (see "Recent
Developments") and the redevelopment of the EPA site in Research Commons.

     In addition to the requirements discussed above, our short-term (within the
next 12 months) liquidity requirements also include the funding of approximately
$50.0 million of our existing development activity, including first generation
tenant improvements and lease commissions on properties placed in service that
are not

                                       23

<PAGE>

fully leased. See "Business - Development Activity." We expect to fund our
short-term liquidity requirements through a combination of working capital, cash
flows from operations and the following:

        . borrowings under our unsecured revolving loan (up to $114.1 million of
          availability as of July 26, 2002);

        . borrowings under our secured revolving loan (up to $49.4 million of
          availability as of July 26, 2002);

        . the selective disposition of non-core assets;

        . the sale or contribution of some of our wholly-owned properties,
          development projects and development land to strategic joint ventures
          to be formed with unrelated investors, which will have the net effect
          of generating additional capital through such sale or contributions;
          and

        . the issuance of secured debt (at June 30, 2002, we had $2.8 billion of
          unencumbered real estate assets at cost).

     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 two revolving loans and long-term
unsecured debt. We remain committed to maintaining a flexible 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 unsecured 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.

     We anticipate that our available cash and cash equivalents and cash flows
from operating activities, 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 payments may be adversely
affected.

     Distributions to Stockholders. To maintain its qualification as a REIT, the
Company must distribute to stockholders at least 90.0% 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.

     Share and Unit Repurchase Program. On April 25, 2001, we announced that the
Company's Board of Directors authorized the repurchase of up to an additional
5.0 million shares of Common Stock and Common Units. As of July 26, 2002, under
the new repurchase program, the Company had repurchased 1.4 million shares of
Common Stock and Common Units at a weighted average purchase price of $24.56 per
share and a total purchase price of $34.0 million. In determining whether or not
to repurchase additional capital stock, we will consider, among other factors,
the effect of repurchases on our liquidity and the price of our Common Stock.

     Disposition Activity. As part of our ongoing capital recycling program,
during the six months ended June 30, 2002, we have sold 856,000 square feet of
office properties and 75 acres of development land for gross proceeds of $120.2
million. In addition, we had 707,671 square feet of office properties and 99.4
acres of land under letter of intent or contract for sale in various
transactions totaling $79.9 million. These transactions are subject to customary
closing conditions, including due diligence and documentation, and are expected
to close during the third and fourth quarters of 2002. However, we can provide
no assurance that all or parts of these transactions will be consummated.

                                       24

<PAGE>

During the second quarter, we recorded a $9.9 million impairment reserve related
to two properties we expect to sell and/or re-develop.

RECENT DEVELOPMENTS

     WorldCom Bankruptcy. On July 21, 2002, WorldCom filed a voluntary petition
with the United States Bankruptcy Court seeking relief under Chapter 11 of the
United States Bankruptcy Code. We currently have 13 leases encompassing 986,082
square feet in nine locations with WorldCom and its affiliates, including four
leases encompassing 828,467 square feet in four locations with Intermedia
Communications, with lease expirations ranging from 2002 to 2013. Based on June
2002 rental revenue, our annualized rental revenue from these leases is $17.5
million, or approximately 3.7% of our total annualized rental revenue.
Approximately 185,000 square feet of the space leased by Intermedia has not yet
been upfitted or occupied and we estimate that a substantial portion of the
remaining Intermedia space currently appears to be under-utilized.

     In addition, our joint venture with Miller Global ("MG-HIW, LLC") has 14
leases encompassing 57,252 square feet in five locations with WorldCom and its
affiliates, including six leases encompassing 23,381 square feet in four
locations with Intermedia Communications, with lease expirations ranging from
2002 to 2007. We have a 20.0% ownership in this joint venture and, based on June
2002 rental revenue, our proportionate share of the annualized rental revenue
generated from these leases is $278,100.

     Approximately 81.0% of the annualized rental revenue related to our leases
with WorldCom and its affiliates, including our pro rata share of the annualized
rental revenue related to MG-HIW, LLC, is derived from properties in Tampa. The
remainder of this revenue is derived from properties in Greenville, South
Carolina, Richmond, Raleigh, Orlando and Nashville. WorldCom and its affiliates
are current on base rental payments through August 31, 2002. However, we have
written off approximately $3.1 million of accrued straight-line rent receivables
from WorldCom and its affiliates as of June 30, 2002.

     Due to the inherent uncertainties of the bankruptcy process, we are not
able to predict the impact of WorldCom's bankruptcy on its leasing and occupancy
of our properties or on our financial condition and results of operations.

     U.S. Airways Bankruptcy. On August 11, 2002, US Airways Group Inc. filed a
voluntary petition with the United States Bankruptcy Court seeking relief under
Chapter 11 of the United States Bankruptcy Code. We currently have seven leases
encompassing 414,059 square feet with US Airways and its affiliates with an
average remaining lease term of 5.4 years as of June 30, 2002. Based on June
2002 rental revenue, our annualized rental revenue from these leases is $6.9
million, or approximately 1.5% of our total annualized rental revenue.
Approximately 55,000 square feet of space is currently being sub-leased by US
Airways to a third party and we estimate that the balance of the space is
approximately 75 percent utilized by US Airways as a reservation call center and
for certain revenue accounting and information technology functions. All of the
414,059 square feet of space is located in Winston-Salem, North Carolina.

     US Airways is current on base rental payments through August 31, 2002. We
have an accrued straight line rent receivable from US Airways in the amount of
$495,000 as of June 30, 2002.

     Due to the inherent uncertainties of the bankruptcy process, we are not
able to predict the impact of US Airways' bankruptcy on its leasing and
occupancy of our properties or on our financial condition and results of
operations.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

     In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment of Disposal of Long-Lived Assets," which addresses financial
accounting and reporting for the impairment of disposal of long-lived assets.
This standard harmonizes the accounting for impaired assets and resolves some of
the implementation issues as originally described in SFAS No. 121. We adopted
SFAS No. 144 in the first quarter of 2002. Income from discontinued operations,
net of minority interest and the gain on sale of discontinued operations, net of
minority interest, for properties meeting the criteria in accordance with SFAS
No. 144 are reflected in the consolidated statements of income as discontinued
operations for all periods presented.

                                       25

<PAGE>

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 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 income from continuing operations before minority interest
(computed in accordance with GAAP) excluding gains (or losses) from debt
restructuring and sales of depreciable property and dividends paid to preferred
shareholders, plus depreciation and amortization. In addition, FFO includes both
recurring and non-recurring operating results and income from discontinued
operations. As a result, non-recurring items that are not defined as
"extraordinary" under GAAP are reflected in the calculation of FFO.

     Cash available for distribution is defined as funds from operations
increased by the amortization of deferred financing activities and reduced by
rental income from straight-line rents and non-revenue enhancing capital
expenditures for building improvements and tenant improvements and lease
commissions related to second generation space.

                                       26

<PAGE>

     FFO and cash available for distribution for the three and six month periods
ended June 30, 2002 and 2001 are summarized in the following table (in
thousands):

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED JUNE 30,  SIX MONTHS ENDED JUNE 30,
                                                               ---------------------------  ------------------------
                                                                  2002           2001          2002         2001
                                                               -----------   -------------  ----------   -----------
<S>                                                            <C>           <C>            <C>          <C>
FUNDS FROM OPERATIONS:
Income before gain on disposition of land and depreciable
 assets, minority interest, discontinued operations and
 extraordinary item..........................................  $    22,619   $      34,824  $   51,867   $    70,862
Add/(Deduct):
     Dividends to preferred shareholders.....................       (7,713)         (7,929)    (15,426)      (16,074)
     Transition adjustment upon adoption of FAS 133..........            -               -           -           556
     Income from discontinued operations.....................           49             883         641         1,799
     Gain on disposition of land.............................        5,989             537       5,758         1,563
     Depreciation and amortization...........................       31,568          29,117      62,934        58,323
     Depreciation on unconsolidated affiliates...............        2,149           1,912       4,633         3,904
                                                               -----------   -------------  ----------   -----------
       Funds from operations.................................       54,661          59,344     110,407       120,933

CASH AVAILABLE FOR DISTRIBUTION:
Add/(Deduct):
     Rental income from straight-line rents..................        1,049          (3,550)     (1,318)       (6,652)
     Amortization of deferred financing costs................          341             675         680         1,340
     Non-incremental revenue generating capital
     expenditures (1):
       Building improvements paid............................       (2,370)         (2,014)     (3,121)       (3,087)
       Second generation tenant improvements paid............       (3,380)         (4,021)     (6,911)       (7,776)
       Second generation lease commissions paid..............       (3,049)         (3,541)     (5,659)       (8,328)
                                                               -----------   -------------  ----------   -----------
         Cash available for distribution.....................  $    47,252   $      46,893  $   94,078   $    96,430
                                                               ===========   =============  ==========   ===========
Weighted average shares/units outstanding - basic (2)........       60,363          61,571      60,316        62,826
                                                               ===========   =============  ==========   ===========
Weighted average shares/units outstanding - diluted (2)......       60,849          61,962      60,767        63,215
                                                               ===========   =============  ==========   ===========

DIVIDEND PAYOUT RATIOS:
     Funds from operations...................................         65.1%           59.5%       64.4%         59.6%
                                                               ===========   =============  ==========   ===========
     Cash available for distribution.........................         75.3%           75.3%       75.6%         74.7%
                                                               ===========   =============  ==========   ===========
</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 Common Unit and per share basis; therefore, the per share
     information is unaffected by conversion.

                                       27

<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 June 30, 2002 and 2001:

<TABLE>
<CAPTION>
                                                         JUNE 30, 2002                     JUNE 30, 2001
                                                   ------------------------       -------------------------
                                                                   PERCENT                         PERCENT
                                                    RENTABLE       LEASED/         RENTABLE        LEASED/
                                                   SQUARE FEET   PRE-LEASED       SQUARE FEET    PRE-LEASED
                                                   -----------   ----------       -----------    ----------
<S>                                                 <C>                  <C>       <C>                   <C>
IN-SERVICE:
     Office                                         25,787,000           87%       24,639,000            93%
     Industrial                                     10,468,000           84%       10,396,000            93%
     Retail (1)                                      1,651,000           96%        1,628,000            95%
                                                   -----------   ----------       -----------    ----------
       Total or Weighted Average                    37,906,000           86%       36,663,000            93%
                                                   ===========   ==========       ===========    ==========

DEVELOPMENT:
     Completed--Not Stabilized
     Office                                            735,000           29%        1,019,000            51%
     Industrial                                        136,000           29%          184,000            21%
     Retail                                             20,000           90%               --            --
                                                   -----------   ----------       -----------    ----------
       Total or Weighted Average                       891,000           30%        1,203,000            47%
                                                   ===========   ==========       ===========    ==========

IN PROCESS
     Office (2)                                        201,000           70%        1,669,000            61%
     Industrial (2)                                     60,000            0           258,000             9%
     Retail                                                 --           --            20,000            72%
                                                   -----------   ----------       -----------    ----------
       Total or Weighted Average                       261,000           54%        1,947,000            54%
                                                   ===========   ==========       ===========    ==========

TOTAL:
     Office                                         26,723,000                     27,327,000
     Industrial                                     10,664,000                     10,838,000
     Retail (1)                                      1,671,000                      1,648,000
                                                   -----------                    -----------
       Total or Weighted Average                    39,058,000                     39,813,000
                                                   ===========                    ===========
</TABLE>

----------

(1)  Excludes basement space
(2)  Includes properties that we have an option to purchase.

                                       28

<PAGE>

     The following table sets forth information concerning the 20 largest
customers of our wholly-owned properties as of June 30, 2002 ($ in thousands):

<TABLE>
<CAPTION>
                                                                                       PERCENT OF TOTAL       AVERAGE
                                          NUMBER      RENTAL         ANNUALIZED         ANNUALIZED         REMAINING LEASE
CUSTOMERS                                OF LEASES  SQUARE FEET  RENTAL REVENUE (1)   RENTAL REVENUE(1)     TERM IN YEARS
---------                                ---------  -----------  ------------------   ------------------   ---------------
<S>                                            <C>    <C>        <C>                               <C>                <C>
Intermedia Communications/
  WorldCom..........................            13      986,082  $           17,466                 3.71%              8.1
AT&T................................            10      854,992              10,041                 2.98               5.6
Federal Government..................            55      644,188              12,151                 2.58               4.0
Capital One Services................             6      587,188              10,199                 2.17               6.1
IBM.................................             5      354,507               7,899                 1.68               6.5
Caterpillar Financial Services......             1      300,901               7,899                 1.68              12.7
PricewaterhouseCoopers..............             7      307,158               7,038                 1.50               7.7
US Air..............................             7      414,059               6,909                 1.47               5.4
State of Georgia....................             9      349,690               6,485                 1.38               6.0
Bell South..........................            12      223,774               4,595                 0.98               1.7
Sara Lee............................             8    1,184,134               4,404                 0.94               3.0
Northern Telecom, Inc...............             2      283,298               3,921                 0.83               4.7
Lockton Companies, Inc..............             1      127,485               3,117                 0.66              12.7
Volvo...............................             5      214,783               2,979                 0.63               7.1
Bank of America.....................            20      153,464               2,894                 0.62               1.8
International Paper Co..............            10      121,174               2,887                 0.61               0.5
Hartford Insurance..................             6      134,021               2,856                 0.61               3.8
Business Telecom, Inc...............             4      145,497               2,832                 0.60               2.8
Voicestream Wireless................             2      120,561               2,765                 0.59               4.0
Ford Motor Company..................             2      129,158               2,640                 0.56               7.5
                                         ---------  -----------  ------------------   ------------------   ---------------
Total...............................           185    7,636,114  $          125,977                26.78%              6.1
                                         =========  ===========  ==================   ==================   ===============
</TABLE>

----------

(1)  Annualized rental revenue is June 2002 rental revenue (base rent plus
     operating expense pass throughs) multiplied by 12.

                                       29

<PAGE>

     As of June 30, 2002, we were developing nine suburban office properties,
two industrial properties and one retail property totaling 1.2 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 partner two additional properties totaling
373,000 rentable square feet. At June 30, 2002, this development project had an
aggregate anticipated total investment of $80.7 million and was 51.0%
pre-leased.

IN-PROCESS

<TABLE>
<CAPTION>
                                                         ANTICIPATED
                                           RENTABLE        TOTAL       INVESTMENT    PRE-LEASING      ESTIMATED     ESTIMATED
NAME                        MARKET         SQUARE FEET   INVESTMENT    AT 06/30/02   PERCENTAGE (1)   COMPLETION   STABILIZATION(3)
---------------------  -----------------   -----------   -----------   -----------   --------------   -----------  ----------------
                                                              ($ IN THOUSANDS)
<S>                    <C>                     <C>       <C>           <C>                      <C>          <C>            <C>
OFFICE:
1825 Century Center    Atlanta                 101,000   $    16,254   $    14,027              100%         3Q02           3Q02
801 Raleigh Corporate
   Center 2)           Research Triangle       100,000        12,016         5,757               40          4Q02           2Q04
                                           -----------   -----------   -----------   --------------
In-Process Office
   Total or Weighted
   Average                                     201,000   $    28,270   $    19,784               70%
                                           ===========   ===========   ===========   ==============

INDUSTRIAL:
Tradeport V (2)        Atlanta                  60,000   $     2,913   $       484                0%         4Q02           4Q03
                                           -----------   -----------   -----------   --------------
In-Process Industrial
   Total or Weighted
   Average                                      60,000   $     2,913   $       484                0%
                                           ===========   ===========   ===========   ==============

Total or Weighted
   Average of all
   In-Process
   Development Projects                        261,000   $    31,183   $    20,268               54%
                                           ===========   ===========   ===========   ==============
</TABLE>

----------

(1) Letters of intent comprise 1% of the total pre-leasing percentage.
(2) We are developing these properties for a third party and own an option to
    purchase each property.
(3) We consider a development project to be stabilized on the date such project
    is at least 95% occupied.

                                       30

<PAGE>

COMPLETED--NOT STABILIZED (2)

<TABLE>
<CAPTION>
                                                            ANTICIPATED
                                                RENTABLE      TOTAL      INVESTMENT    PRE-LEASING      ESTIMATED     ESTIMATED
NAME                            MARKET         SQUARE FEET  INVESTMENT   AT 06/30/02   PERCENTAGE (1)   COMPLETION  STABILIZATION(3)
------------------------   -----------------   -----------  -----------  -----------   --------------   ----------  ----------------
                                                                 ($ IN THOUSANDS)
<S>                        <C>                   <C>        <C>          <C>                       <C>        <C>             <C>
OFFICE:
Met Life Building
   At Brookfield           Greenville              115,000  $    13,220  $    12,101               95%        3Q01            3Q02
Hickory Trace              Nashville                52,000        5,933        6,623               86         3Q01            3Q02
1501 Highwoods
   Boulevard               Piedmont Triad           98,000       11,290        9,931                4         4Q01            4Q02
Seven Springs I            Nashville               131,000       15,556       12,656               12         1Q02            1Q03
Centre Green Four          Research Triangle       100,000       11,764        9,395                0         4Q01            2Q03
GlenLake I                 Research Triangle       158,000       22,417       18,812               14         4Q01            2Q03
Shadow Creek II            Memphis                  81,000        8,750        6,980               19         4Q01            4Q03
                                               -----------  -----------  -----------   --------------
Office Total
   or Weighted
   Average                                         735,000  $    88,930  $    76,498               29%
                                               ===========  ===========  ===========   ==============

INDUSTRIAL:
Newpont IV                 Atlanta                 136,000  $     5,288  $     4,626               29%        4Q01            1Q03
                                               -----------  -----------  -----------   --------------
Completed-Not
   Stabilized Industrial
   Total or Weighted
   Average                                         136,000  $     5,288  $     4,626               29%
                                               ===========  ===========  ===========   ==============

RETAIL:
Granada Shops              Kansas City              20,000  $     5,020  $     4,173                90%       4Q01            2Q03
                                               -----------  -----------  -----------   --------------
Completed-Not
   Stabilized Retail
   Total or Weighted
   Average                                          20,000  $     5,020  $     4,173               90%
                                               ===========  ===========  ===========   ==============

Total or Weighted
   Average of all
   Completed-
   Not Stabilized
   Development Projects                            891,000  $    99,238  $    85,297               30%
                                               ===========  ===========  ===========   ==============

Total or Weighted
   Average of all
   Development Projects                          1,152,000  $   130,421  $   105,565               36%
                                               ===========  ===========  ===========   ==============
</TABLE>

----------

(1)  Letters of intent comprise 1% of the total pre-leasing percentage.
(2)  These properties contributed $362,000 in Net Operating Income (Property
     Revenue less Property Expense) during the three months ended June 30, 2002.
(3)  We consider a development project to be stabilized on the date such
     project is at least 95% occupied.

                                       31

<PAGE>

DEVELOPMENT ANALYSIS

<TABLE>
<CAPTION>
                                                                                       ANTICIPATED
                                                                        RENTABLE          TOTAL        PRE-LEASING
                                                                       SQUARE FEET      INVESTMENT     PERCENTAGE (1)
                                                                       -----------     -----------     --------------
                                                                                     ($ IN THOUSANDS)
<S>                                                                      <C>           <C>                        <C>
SUMMARY BY ESTIMATED STABILIZATION DATE:
     Third Quarter 2002...........................................         268,000     $    35,407                 95%
     Fourth Quarter 2002..........................................         199,000          11,290                 19%
     First Quarter 2003...........................................         267,000          20,844                 21%
     Second Quarter 2003..........................................         258,000          39,201                  9%
     Fourth Quarter 2003..........................................          60,000          11,663                  0%
     Second Quarter 2004..........................................         100,000          12,016                 40%
                                                                       -----------     -----------     --------------
     Total or Weighted Average....................................       1,152,000     $   130,421                 36%
                                                                       ===========     ===========     ==============

SUMMARY BY MARKET:
     Atlanta......................................................         297,000     $    24,455                 47%
     Greenville...................................................         115,000          13,220                 95%
     Kansas City..................................................          20,000           5,020                 90%
     Memphis......................................................          81,000           8,750                 19%
     Nashville....................................................         183,000          21,489                 33%
     Piedmont Triad...............................................          98,000          11,290                  4%
     Research Triangle............................................         358,000          46,197                 17%
                                                                       -----------     -----------     --------------
     Total or Weighted Average....................................       1,152,000     $   130,421                 36%
                                                                       ===========     ===========     ==============

     Build-to-Suit................................................         101,000     $    16,254                100%
     Multi-Tenant.................................................       1,051,000         114,167                 29%
                                                                       -----------     -----------     --------------
     Total or Weighted Average....................................       1,152,000     $   130,421                 36%
                                                                       ===========     ===========     ==============

<CAPTION>

                                                                         AVERAGE          AVERAGE
                                                                         RENTABLE      ANTICIPATED
                                                                          SQUARE           TOTAL           AVERAGE
                                                                           FEET         INVESTMENT     PRE-LEASING(1)
                                                                       -----------     -----------     --------------
                                                                                      ($ IN THOUSANDS)
<S>                                                                        <C>         <C>                         <C>
AVERAGE PER PROPERTY BY TYPE:
     Office.......................................................         104,000     $    13,022                 38%
     Industrial...................................................          98,000           4,101                 20%
     Retail.......................................................          20,000           5,020                 90%
                                                                       -----------     -----------     --------------
     Weighted Average.............................................          96,000     $    10,868                 36%
                                                                       ===========     ===========     ==============
</TABLE>

----------

(1)  Letters of intent comprise 1% of the total pre-leasing percentage.

                                       32

<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 June 30 and March 31, 2002 and December 31 and September 30,
2001.

<TABLE>
<CAPTION>
                                                             OFFICE LEASING STATISTICS THREE MONTHS ENDED
                                                   -------------------------------------------------------------------
                                                     6/30/02       3/31/02       12/31/01       9/30/01       AVERAGE
                                                   -----------   -----------   -----------   ------------   -----------
<S>                                                <C>           <C>           <C>           <C>            <C>
NET EFFECTIVE RENTS RELATED TO RE-LEASED SPACE:
Number of lease transactions (signed leases)...            162           110           116            135           131
Rentable square footage leased.................        874,467       417,102       437,454        630,043       589,767
Average per rentable square foot over the
   lease term:
   Base rent...................................    $     16.86   $     16.83   $     17.85   $      17.03   $     17.14
   Tenant improvements.........................          (0.86)        (0.98)        (1.19)         (0.90)        (0.98)
   Leasing commissions.........................          (0.56)        (0.78)        (0.97)         (0.59)        (0.73)
   Rent concessions............................          (0.14)        (0.15)        (0.11)         (0.11)        (0.13)
                                                   -----------   -----------   -----------   ------------   -----------
   Effective rent..............................    $     15.30   $     14.92   $     15.58   $      15.43   $     15.31
   Expense stop(1).............................          (5.17)        (5.17)        (4.50)         (4.54)        (4.85)
                                                   -----------   -----------   -----------   ------------   -----------
   Equivalent effective net rent...............    $     10.13   $      9.75   $     11.08   $      10.89   $     10.46
                                                   ===========   ===========   ===========   ============   ===========
Average term in years..........................            4.1           4.1           4.6            4.5           4.3
                                                   ===========   ===========   ===========   ============   ===========

CAPITAL EXPENDITURES RELATED TO RELEASED SPACE:
Tenant Improvements:
   Total dollars committed under
   signed leases...............................    $ 3,481,988   $ 2,031,231   $ 2,647,115   $  2,431,063   $ 2,647,849
   Rentable square feet........................        874,467       417,102       437,454        630,043       589,767
                                                   -----------   -----------   -----------   ------------   -----------
   Per rentable square foot....................    $      3.98   $      4.87   $      6.05   $       3.86   $      4.49
                                                   ===========   ===========   ===========   ============   ===========
Leasing Commissions:
   Total dollars committed under
   signed leases...............................    $ 1,272,854   $   984,220   $ 1,277,523   $  1,018,216   $ 1,138,203
   Rentable square feet........................        874,467       417,102       437,454        630,043       589,767
                                                   -----------   -----------   -----------   ------------   -----------
   Per rentable square foot....................    $      1.46   $      2.36   $      2.92   $       1.62   $      1.93
                                                   ===========   ===========   ===========   ============   ===========
Total:
   Total dollars committed under
   signed leases...............................    $ 4,754,842   $ 3,015,450   $ 3,924,637   $  3,449,279   $ 3,786,052
   Rentable square feet........................        874,467       417,102       437,454        630,043       589,767
                                                   -----------   -----------   -----------   ------------   -----------
   Per rentable square foot....................    $      5.44   $      7.23   $      8.97   $       5.47   $      6.42
                                                   ===========   ===========   ===========   ============   ===========

RENTAL RATE TRENDS:
Average final rate with expense
 pass throughs.................................    $     16.85   $     16.45   $     16.47   $      16.27   $     16.51
Average first year cash rental rate (2)........    $     16.06   $     15.84   $     17.25   $      16.51   $     16.41
                                                   ------------ ------------   -----------   ------------   -----------
Percentage (decrease)/increase.................           (4.7)%        (3.8)%         4.7%           1.5%         (0.6)%
                                                   ===========   ===========   ===========   ============   ===========
</TABLE>

----------

(1)"Expense stop" represents operating expenses (generally including taxes,
   utilities, routine building expense and common area maintenance) for which
   we will not be reimbursed by our tenants.
(2)First year cash rental rate is equal to base rent less concessions.

                                       33

<PAGE>

<TABLE>
<CAPTION>
                                                           INDUSTRIAL LEASING STATISTICS THREE MONTHS ENDED
                                                   --------------------------------------------------------------------
                                                     6/30/02       3/31/02        12/31/01      9/30/01       Average
                                                   -----------   -----------   -----------   ------------   ----------
<S>                                                <C>           <C>           <C>           <C>            <C>
NET EFFECTIVE RENTS RELATED TO RE-LEASED SPACE:
Number of lease transactions (signed leases)...             32            15            31             26            26
Rentable square footage leased.................      1,005,765        78,844       894,865        285,241       566,179
Average per rentable square foot
 over the lease term:
   Base rent...................................    $      3.58   $      6.95   $      3.52   $       4.71   $      4.69
   Tenant improvements.........................          (0.29)        (1.10)        (0.24)         (0.38)        (0.50)
   Leasing commissions.........................          (0.14)        (0.21)        (0.10)         (0.11)        (0.14)
   Rent concessions............................          (0.03)           --            --            --          (0.01)
                                                   -----------   -----------   -----------   ------------   -----------
   Effective rent..............................    $      3.12   $      5.64   $      3.18   $       4.22   $      4.04
   Expense stop (1)............................          (0.09)        (0.72)        (0.18)         (0.30)        (0.32)
                                                   -----------   -----------   -----------   ------------   -----------
   Equivalent effective net rent...............    $      3.03   $      4.92   $      3.00   $       3.92   $      3.72
                                                   ===========   ===========   ===========   ============   ===========
Average term in years..........................            6.3           4.1           2.2            3.3           4.0
                                                   ===========   ===========   ===========   ============   ===========

CAPITAL EXPENDITURES RELATED TO RE-LEASED SPACE:
Tenant Improvements:
   Total dollars committed under signed leases.    $ 2,088,547   $   386,263   $   661,591   $    606,380   $   935,695
   Rentable square feet........................      1,005,765        78,844       894,865        285,241       566,179
                                                   -----------   -----------   -----------   ------------   -----------
   Per rentable square foot....................    $      2.08   $      4.90   $      0.74   $       2.13   $      1.65
                                                   ===========   ===========   ===========   ============   ===========
Leasing Commissions:
   Total dollars committed under signed leases.    $   797,939   $    44,100   $   257,010   $     87,034   $   296,521
   Rentable square feet........................      1,005,765        78,844       894,865        285,241       566,179
                                                   -----------   -----------   -----------   ------------   -----------
   Per rentable square foot....................    $      0.79   $      0.56   $      0.29   $       0.31   $      0.52
                                                   ===========   ===========   ===========   ============   ===========
Total:
   Total dollars committed under signed leases.    $ 2,886,486   $   430,363   $   918,601   $    693,414   $ 1,232,216
   Rentable square feet........................      1,005,765        78,844       894,865        285,241       566,179
                                                   -----------   -----------   -----------   ------------   -----------
   Per rentable square foot....................    $      2.87   $      5.46   $      1.03   $       2.43   $      2.18
                                                   ===========   ===========   ===========   ============   ===========

RENTAL RATE TRENDS:
Average final rate with expense pass throughs..    $      3.61   $      6.99   $      3.58   $       4.85   $      4.76
Average first year cash rental rate (2)........    $      3.53   $      6.69   $      3.49   $       4.60   $      4.58
                                                   -----------   -----------   -----------   ------------   -----------
Percentage (decrease)/increase.................           (2.2)%        (4.2)%        (2.3)%         (5.1)%        (3.7)%
                                                   ===========   ===========   ===========   ============   ===========
</TABLE>

----------

(1) "Expense stop" represents operating expenses (generally including taxes,
     utilities, routine building expense and common area maintenance) for which
     we will not be reimbursed by our tenants.
(2)  First year cash rental rate is equal to base rent less concessions.

                                       34

<PAGE>

<TABLE>
<CAPTION>
                                                                   RETAIL LEASING STATISTICS THREE MONTHS ENDED
                                                      ----------------------------------------------------------------------
                                                        6/30/02        3/31/02      12/31/01        9/30/01        AVERAGE
                                                      ------------   ----------   -------------   -----------    -----------
<S>                                                   <C>            <C>          <C>              <C>           <C>
NET EFFECTIVE RENTS RELATED TO RE-LEASED SPACE:
Number of lease transactions (signed leases)...                 13           12              12             9             12
Rentable square footage leased.................             52,527       59,649          26,019        40,283         44,620
Average per rentable square foot over the lease
 term:
  Base rent....................................       $      18.15   $    25.66   $       15.75   $     16.33    $     18.97
  Tenant improvements..........................              (1.83)       (1.87)          (0.63)        (1.49)         (1.46)
  Leasing commissions..........................              (0.65)       (0.35)          (0.82)        (0.75)         (0.64)
  Rent concessions.............................              (0.03)       (0.02)             --            --          (0.01)
                                                      ------------   ----------   -------------   -----------    -----------
  Effective rent...............................       $      15.64   $    23.42   $       14.30   $     14.09    $     16.86
  Expense stop (1).............................              (1.02)          --              --            --          (0.26)
                                                      ------------   ----------   -------------   -----------    -----------
  Equivalent effective net rent................       $      14.62   $    23.42   $       14.30   $     14.09    $     16.60
                                                      ============   ==========   =============   ===========    ===========
Average term in years..........................                7.0          6.5             6.7           8.8            7.2
                                                      ============   ==========   =============   ===========    ===========

CAPITAL EXPENDITURES RELATED TO RE-LEASED SPACE:
Tenant Improvements:
  Total dollars committed under signed leases..       $  1,077,825   $  738,605   $     148,860   $   526,500    $   622,948
  Rentable square feet.........................             52,527       59,649          26,019        40,283         44,620
                                                      ------------   ----------   -------------   -----------    -----------
  Per rentable square foot.....................       $      20.52   $    12.38   $        5.72   $     13.07    $     13.96
                                                      ============   ==========   =============   ===========    ===========
Leasing Commissions:
  Total dollars committed under signed leases..       $    151,268   $   61,981   $      73,314   $   196,296    $   120,715
  Rentable square feet.........................             52,527       59,649          26,019        40,283         44,620
                                                      ------------   ----------   -------------   -----------    -----------
  Per rentable square foot.....................       $       2.88   $     1.04   $        2.82   $      4.87    $      2.71
                                                      ============   ==========   =============   ===========    ===========
Total:
  Total dollars committed under signed leases..       $  1,229,093   $  800,586   $     222,174   $   722,796    $   743,662
  Rentable square feet.........................             52,527       59,649          26,019        40,283         44,620
                                                      ------------   ----------   -------------   -----------    -----------
  Per rentable square foot.....................       $      23.40   $    13.42   $        8.54   $     17.94    $     16.67
                                                      ============   ==========   =============   ===========    ===========

RENTAL RATE TRENDS:
Average final rate with expense pass throughs..       $      17.38   $    18.25   $       14.16   $     11.28    $     15.27
Average first year cash rental rate (2)........       $      25.30   $    23.54   $       16.24   $     14.82    $     19.97
                                                      ------------   ----------   -------------   -----------    -----------
Percentage increase............................               45.6%        28.9%           14.7%         31.4%          30.8%
                                                      ============   ==========   =============   ===========    ===========
</TABLE>

----------

(1)  "Expense stop" represents operating expens es (generally including taxes,
     utilities, routine building expense and common area maintenance) for which
     we will not be reimbursed by our tenants.
(2)  First year cash rental rate is equal to base rent less concessions.

                                       35

<PAGE>

     The following tables set forth scheduled lease expirations at our wholly
owned in-service properties (excluding apartment units) as of June 30, 2002,
assuming no tenant exercises renewal options.

OFFICE PROPERTIES:

<TABLE>
<CAPTION>
                                                                                         AVERAGE          PERCENTAGE OF
                                                 PERCENTAGE OF                            ANNUAL          LEASED RENTS
                                RENTABLE            LEASED          ANNUAL RENTS       RENTAL RATE        REPRESENTED
              NUMBER OF        SQUARE FEET      SQUARE FOOTAGE         UNDER           PER SQUARE             BY
 LEASE         LEASES          SUBJECT TO       REPRESENTED BY        EXPIRING          FOOT FOR            EXPIRING
EXPIRING      EXPIRING       EXPIRING LEASES    EXPIRING LEASES      LEASES (1)        EXPIRATIONS           LEASES
--------     ----------     -----------------  -----------------  -----------------  ----------------   ----------------
                                                                  ($ IN THOUSANDS)
<S>               <C>              <C>                     <C>      <C>                  <C>                       <C>
    2002 (2)        472             1,875,426                8.3%   $        33,142      $      17.67                8.5%
    2003            553             3,399,318               15.1%            58,294             17.15               14.8%
    2004            501             2,946,726               13.1%            53,133             18.03               13.6%
    2005            436             3,123,080               13.9%            55,058             17.63               14.0%
    2006            312             2,835,436               12.6%            51,286             18.09               13.1%
    2007            135             1,587,833                7.1%            25,028             15.76                6.4%
    2008             81             1,791,348                8.0%            28,668             16.00                7.3%
    2009             23               720,140                3.2%            12,388             17.20                3.2%
    2010             40             1,401,967                6.2%            25,465             18.16                6.5%
    2011             38             1,320,434                5.9%            22,438             16.99                5.7%
Thereafter          115             1,493,851                6.6%            27,147             18.17                6.9%
             ----------     -----------------  -----------------  -----------------  ----------------   ----------------

                  2,706            22,495,559              100.0%   $       392,047      $      17.43              100.0%
             ==========     =================  =================  =================  ================   ================
</TABLE>

INDUSTRIAL PROPERTIES:

<TABLE>
<CAPTION>
                                                                                         AVERAGE          PERCENTAGE OF
                                                 PERCENTAGE OF                            ANNUAL          LEASED RENTS
                                RENTABLE            LEASED          ANNUAL RENTS       RENTAL RATE        REPRESENTED
              NUMBER OF        SQUARE FEET      SQUARE FOOTAGE         UNDER           PER SQUARE              BY
 LEASE         LEASES          SUBJECT TO       REPRESENTED BY        EXPIRING          FOOT FOR            EXPIRING
EXPIRING      EXPIRING       EXPIRING LEASES    EXPIRING LEASES      LEASES (1)        EXPIRATIONS           LEASES
--------     ----------     -----------------  -----------------  -----------------  ----------------   ----------------
                                                                  ($ IN THOUSANDS)
<S>                 <C>             <C>                    <C>      <C>                  <C>                       <C>
   2002(2)          108             1,302,081               14.9%   $         6,455      $       4.96               15.9%
   2003              85             1,068,830               12.2%             5,480              5.13               13.5%
   2004              91             2,502,631               28.7%             9,625              3.85               23.8%
   2005              52             1,006,248               11.5%             4,922              4.89               12.1%
   2006              34               718,943                8.2%             3,852              5.36                9.5%
   2007              23             1,230,906               14.1%             5,248              4.26               12.9%
   2008               7               214,340                2.5%             1,404              6.55                3.5%
   2009               7               273,813                3.1%             1,941              7.09                4.8%
   2010               3                46,508                0.5%               340              7.31                0.8%
   2011               1                33,555                0.4%               159              4.74                0.4%
Thereafter           19               344,575                3.9%             1,140              3.31                2.8%
             ----------     -----------------  -----------------  -----------------  ----------------   ----------------

                    430             8,742,430              100.0%   $        40,566      $       4.64              100.0%
             ==========     =================  =================  =================  ================   ================
</TABLE>

----------

(1)  Annual Rents Under Expiring Leases are June 2002 rental revenue (base rent
     plus operating expense pass-throughs) multiplied by 12.
(2)  Includes 196,000 square feet leases that are on a month to month basis or
     0.7% of total annualized revenue
(3)  Includes 188,000 square feet leases that are on a month to month basis or
     0.2% of total annualized revenue

                                       36

<PAGE>

RETAIL PROPERTIES:

<TABLE>
<CAPTION>
                                                                                      AVERAGE       PERCENTAGE OF
                                                 PERCENTAGE OF                        ANNUAL        LEASED RENTS
                                RENTABLE            LEASED         ANNUAL RENTS     RENTAL RATE      REPRESENTED
              NUMBER OF        SQUARE FEET      SQUARE FOOTAGE         UNDER        PER SQUARE           BY
  LEASE        LEASES          SUBJECT TO       REPRESENTED BY       EXPIRING        FOOT FOR         EXPIRING
EXPIRING      EXPIRING       EXPIRING LEASES    EXPIRING LEASES     LEASES (1)      EXPIRATIONS        LEASES
--------      ---------      ---------------    ---------------   --------------    -----------    --------------
                                                                 ($ IN THOUSANDS)
<S>                 <C>            <C>                    <C>    <C>                <C>                     <C>
   2002(2)           36               89,813                5.6%  $        1,236    $     13.76               3.3%
   2003              36               94,516                5.9%           2,290          24.23               6.0%
   2004              40              209,108               13.1%           2,776          13.28               7.3%
   2005              39               93,505                5.9%           2,665          28.50               7.0%
   2006              38              111,064                7.0%           2,768          24.92               7.3%
   2007              30              120,487                7.6%           2,205          18.30               5.8%
   2008              25              124,318                7.8%           4,293          34.53              11.3%
   2009              21              168,355               10.6%           3,298          19.59               8.7%
   2010              18               97,372                6.1%           2,856          29.33               7.5%
   2011              19              108,418                6.8%           2,573          23.73               6.8%
Thereafter           26              375,696               23.6%          10,965          29.19              29.0%
              ---------      ---------------    ---------------   --------------    ------------    --------------

                    328            1,592,652              100.0%  $       37,925    $     23.81             100.0%
              =========      ===============    ===============  ===============    ==-=========    ==============
</TABLE>

TOTAL:

<TABLE>
<CAPTION>
                                                                                      AVERAGE       PERCENTAGE OF
                                                 PERCENTAGE OF                        ANNUAL        LEASED RENTS
                                RENTABLE            LEASED         ANNUAL RENTS     RENTAL RATE      REPRESENTED
              NUMBER OF        SQUARE FEET      SQUARE FOOTAGE         UNDER        PER SQUARE           BY
  LEASE        LEASES          SUBJECT TO       REPRESENTED BY       EXPIRING        FOOT FOR         EXPIRING
EXPIRING      EXPIRING       EXPIRING LEASES    EXPIRING LEASES      LEASES(1)      EXPIRATIONS        LEASES
--------      ---------      ---------------    ---------------   --------------    -----------    --------------
                                                                 ($ IN THOUSANDS)
<S>               <C>             <C>                     <C>     <C>               <C>                     <C>
   2002(3)          616            3,267,320               10.0%  $       40,833    $     12.50               8.7%
   2003             674            4,562,664               13.9%          66,064          14.48              14.1%
   2004             632            5,658,465               17.1%          65,534          11.58              14.0%
   2005             527            4,222,833               12.9%          62,645          14.83              13.3%
   2006             384            3,665,443               11.2%          57,906          15.80              12.3%
   2007             188            2,939,226                9.0%          32,481          11.05               6.9%
   2008             113            2,130,006                6.5%          34,365          16.13               7.3%
   2009              51            1,162,308                3.5%          17,627          15.17               3.7%
   2010              61            1,545,847                4.7%          28,661          18.54               6.1%
   2011              58            1,462,407                4.5%          25,170          17.21               5.3%
Thereafter          160            2,214,122                6.7%          39,252          17.73               8.3%
              ---------      ---------------    ---------------   --------------    -----------    --------------

                  3,464           32,830,641              100.0%  $      470,538    $     14.33             100.0%
              =========      ===============    ===============   ===============   ===========    ==============
</TABLE>

----------

(1)  Annual Rents Under Expiring Leases are June 2002 rental revenue (base rent
     plus operating expense pass-throughs) multiplied by 12.
(2)  Includes 27,000 square feet leases that are on a month to month basis or
     0.0% of total annualized revenue
(3)  Includes 413,000 square feet leases that are on a month to month basis or
     1.0% of total annualized revenue

INFLATION

     In the last five years, inflation has not had a significant impact on us
because of the relatively low inflation rate in our geographic areas of
operation. Most of the leases require the tenants to pay their share of
increases in operating expenses, including common area maintenance, real estate
taxes and insurance, thereby reducing our exposure to inflation.

                                       37

<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 our revolving loans
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.

     As of June 30, 2002, the Company had approximately $231.7 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 June 30, 2003, our
interest expense would be increased or decreased approximately $2.3 million.

                                       38

<PAGE>

                           PART II--OTHER INFORMATION

                ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     (c) During the second quarter of 2002, the Company issued 250,000 shares of
Common Stock to a holder of Common Units in the Operating Partnership upon the
redemption of such Common Units in a private offering exempt from the
registration requirements pursuant to Section 4(2) of the Securities Act. The
holder of Common Units was an accredited investor under Rule 501 of the
Securities Act, and the offering did not involve a general solicitation by the
Company. The Company has registered the resale of such shares under the
Securities Act.

           ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     On May 20, 2002, we held our Annual Meeting of Stockholders. The final vote
of the matters presented for a vote at such meeting was as follows:

<TABLE>
<CAPTION>
         MATTER                                                            FOR            AGAINST       ABSTAIN
----------------------------------------------------------------------------------------------------------------
     <S>                                                                <C>              <C>           <C>
     (A) Election of Directors
         Thomas W. Adler......................................          41,346,366            --       1,046,476
         Kay N. Callison......................................          40,894,574            --       1,498,268
         William E. Graham, Jr................................          41,326,524            --       1,066,318
         Willard H. Smith Jr..................................          40,900,430            --       1,492,412
         John L. Turner.......................................          41,182,478            --       1,210,364
     (B) Ratify appointment of Ernst & Young, LLP
          as independent auditors.............................          41,509,062       755,952         129,618
</TABLE>

                    ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

      Exhibit No.       Description
      -----------       -----------
      10.1              Amended and Restated 1994 Stock Option Plan
      99.1              Statement of Chief Executive Officer of Highwoods
                        Properties Inc.
      99.2              Statement of Chief Financial Officer of Highwoods
                        Properties Inc.

                                       39

<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.

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

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

Date: August 14, 2002

                                       40

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>dex101.txt
<DESCRIPTION>AMENDED & RESTATED 1994 STOCK OPTION PLAN
<TEXT>
<PAGE>

                                                                   Exhibit 10.1

                           HIGHWOODS PROPERTIES, INC.
                   AMENDED AND RESTATED 1994 STOCK OPTION PLAN

SECTION 1. GENERAL PURPOSE OF THE PLAN: DEFINITIONS

     The name of the plan is the Highwoods Properties, Inc. Amended and Restated
1994 Stock Option Plan (the "Plan"). The purpose of the Plan is to encourage and
enable the officers, employees and directors of Highwoods Properties, Inc. (the
"Company") and its Subsidiaries upon whose judgment, initiative and efforts the
Company largely depends for the successful conduct of its business to acquire a
proprietary interest in the Company. It is anticipated that providing such
persons with a direct stake in the Company's welfare will assure a closer
identification of their interests with those of the Company, thereby stimulating
their efforts on the Company's behalf and strengthening their desire to remain
with the Company.

     The following terms shall be defined as set forth below:

     "Act" means the Securities Exchange Act of 1934, as amended.

     "Award" or "Awards", except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Stock Appreciation Rights, Phantom Stock and Restricted Stock Awards.

     "Board" means the Board of Directors of the Company.

     "Cause" means and shall be limited to a vote of the Board resolving that
the participant should be dismissed as a result of (i) any material breach by
the participant of any agreement to which the participant and the Company are
parties, (ii) any act (other than retirement) or omission to act by the
participant which may have a material and adverse effect on the business of the
Company or any Subsidiary or on the participant's ability to perform services
for the Company or any Subsidiary, including, without limitation, the commission
of any crime (other than ordinary traffic violations), or (iii) any material
misconduct or neglect of duties by the participant in connection with the
business or affairs of the Company or any Subsidiary.

     "Change Of Control" is defined in Section 13.

     "Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.

     "Committee" means the Board or any Committee of the Board referred to in
Section 2.

     "Disability" means disability as set forth in Section 22(e)(3) of the Code.

                                       1

<PAGE>

     "Effective Date" means the date on which the Plan is approved by the
stockholders as set forth in Section 15.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the related rules, regulations and interpretations.

     "Fair Market Value" on any given date means the last reported sale price at
which the Shares are traded on such date or, if no Shares are traded on such
date, the most recent date on which the Shares were traded, as reflected on the
New York Stock Exchange or, if applicable, any other national stock exchange on
which the Shares are traded.

     "Incentive Stock Option" means any Stock Option designated and qualified as
an "incentive stock option" as defined in Section 422 of the Code.

     "Independent Director" means a member of the Board who is not also an
employee of the Company or any Subsidiary. A director emeritus shall not be
considered as an active Board member for purposes of this definition.

     "Meeting Fees" means the fees paid by the Company to each Independent
Director as compensation for attending meetings of the Board or any committee of
the Board.

     "Non-Employee Director" means a director who qualifies as such under Rule
16b-3(b)(3) promulgated under the Act or any successor definition under the Act.

     "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.

     "Option" or "Stock Option" means any option to purchase Shares granted
pursuant to Section 5.

     "Phantom Stock" means Awards granted pursuant to Section 8.

     "Restricted Stock Award" means Awards granted pursuant to Section 5(c) or
Section 7.

     "Restricted Shares" means Shares subject to restrictions as provided in
Section 7 and the subject of a Restricted Stock Award.

     "Retainer Fee" means any annual fees paid by the Company to each
Independent Director, including fees paid for service on a committee of the
Board.

     "Share" means one or more, respectively, of the Company's shares of common
stock, par value $.01 per share, subject to adjustments pursuant to Section 3.

                                       2

<PAGE>

     "Stock Appreciation Rights" ("SARS") means Awards granted pursuant to
Section 6.

     "Subsidiary" means Highwoods Services, Inc. and any corporation or other
entity (other than the Company) in any unbroken chain of corporations or other
entities, beginning with the Company, if each of the corporations or entities
(other than the last corporation or entity in the unbroken chain) owns stock or
other interests possessing 50% or more of the economic interest or the total
combined voting power of all classes of stock or other interests in one of the
other corporations or entities in the chain.

SECTION 2. ADMINISTRATION OF PLAN: COMMITTEE AUTHORITY TO SELECT PARTICIPANTS
           AND DETERMINE AWARDS

     (a)  Committee. Except as set forth in Section 2(c), the Plan shall be
administered by the executive compensation committee of the Board, or any other
committee of not less than two Non-Employee Directors performing similar
functions, as appointed by the Board from time to time. Only Non-Employee
Directors may vote with respect to transactions involving an award or other
acquisition from the Company.

     (b)  Powers of Committee. The Committee shall have the power and authority
to grant Awards consistent with the terms of the Plan, including the power and
authority:

          (i)    to select participants to whom Awards may be granted from time
to time;

          (ii)   to determine the time or times of grant, and the extent, if
any, of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation
Rights, Phantom Stock, and Restricted Stock Awards, or any combination of the
foregoing, granted to any one or more participants;

          (iii)  to determine the number of Shares to be covered by any Award;

          (iv)   to determine and modify the terms and conditions, including
restrictions, not inconsistent with the terms of the Plan, of any Award, which
terms and conditions may differ among individual Awards and participants, and to
approve the form of written instruments evidencing the Awards;

          (v)    to accelerate the exercisability or vesting of all or any
portion of any Award;

          (vi)   subject to the provisions of Section 5(a)(iii), to extend the
period in which Stock Options may be exercised;

          (vii)  to determine whether, to what extent, and under what
circumstances Shares and other amounts payable with respect to an Award shall be
deferred either automatically

                                       3

<PAGE>

or at the election of the participant and whether and to what extent the Company
shall pay or credit amounts constituting interest (at rates determined by the
Committee) or dividends or deemed dividends on such deferrals; and

          (viii) to adopt, alter and repeal such rules, guidelines and practices
for administration of the Plan and for its own acts and proceedings as it shall
deem advisable; to interpret the terms and provisions of the Plan and any Awards
(including related written instruments); to make all determinations it deems
advisable for the administration of the Plan; to decide all disputes arising in
connection with the Plan; and to otherwise supervise the administration of the
Plan.

All decisions and interpretations of the Committee shall be binding on all
persons, including the Company and Plan participants.

SECTION 3. SHARES AVAILABLE UNDER THE PLAN; MERGERS; SUBSTITUTIONS

     (a)  Shares Issuable. The maximum number of Shares reserved and available
for issuance under the Plan shall be 6,000,000 Shares of which not more than
600,000 Shares may be Restricted Shares granted as provided in Section 5(c) or
Section 7 hereof. For purposes of this limitation, the Shares underlying any
Awards which are forfeited, canceled, reacquired by the Company, satisfied
without the issuance of Shares or otherwise terminated (other than by exercise)
shall be added back to the Shares available for issuance under the Plan so long
as the participants to whom such Awards had been previously granted received no
benefits of ownership of the underlying Shares to which the Award related.
Subject to such overall limitation, Shares may be issued up to such maximum
number pursuant to any type or types of Award, including Incentive Stock
Options. Shares issued under the Plan may be authorized but unissued Shares or
Shares reacquired by the Company.

     (b)  Stock Dividends, Mergers, Etc. In the event of a stock dividend, stock
split or similar change in capitalization affecting the Shares, the Committee
shall make appropriate adjustments in (i) the number and kind of stock or
securities on which Awards may thereafter be granted, (ii) the number and kind
of stock or securities remaining subject to outstanding Awards, and (iii) the
option or purchase price in respect of such stock or securities. In the event of
any merger, consolidation, dissolution or liquidation of the Company, the
Committee in its sole discretion may, as to any outstanding Awards, make such
substitution or adjustment in the aggregate number of Shares reserved for
issuance under the Plan and the number and purchase price (if any) of Shares
subject to such Awards as it may determine and as may be permitted by the terms
of such transaction, or amend or terminate such Awards upon such terms and
conditions as it shall provide (which, in the case of the termination of the
vested portion of any Award, shall require payment or other consideration which
the Committee deems equitable in the circumstances).

                                       4

<PAGE>

     (c)  Substitute Awards. The Committee may grant Awards under the Plan in
substitution for stock and stock-based awards held by employees of another
corporation who concurrently become employees of the Company or a Subsidiary as
the result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by the Company or a Subsidiary of
property or stock of the employing corporation. The Committee may direct that
the substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances.

SECTION 4. ELIGIBILITY

     Participants in the Plan will be such directors, full or part-time officers
and other employees of the Company and its Subsidiaries who are responsible for
or contribute to the management, growth, or profitability of the Company and its
Subsidiaries and who are selected from time to time by the Committee, in its
sole discretion.

SECTION 5. STOCK OPTIONS

     Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.

     Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. To the extent that any Option does not qualify
as an Incentive Stock Option, it shall constitute a Non-Qualified Stock Option.

     No Incentive Stock Option shall be granted under the Plan after June 16,
2004.

     (a)  Stock Options Granted to Employees. The Committee in its discretion
may grant Stock Options to employees of the Company or any Subsidiary. Stock
Options granted to employees pursuant to this Section 5(a) shall be subject to
the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem desirable:

          (i) Exercise Price. The exercise price per share for the Shares
covered by a Stock Option granted pursuant to this Section 5(a) shall be
determined by the Committee at the time of grant but shall not be less than 100%
of Fair Market Value on the date of grant. Notwithstanding the foregoing, with
respect to Non-Qualified Stock Options which are granted in lieu of cash bonus,
the exercise price per share shall not be less than 50% of the Fair Market Value
on the date of grant. If an employee owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the Code) more than 10% of
the combined voting power of all classes of stock of the Company or any
Subsidiary or parent corporation and an Incentive Stock Option is granted to
such employee, the option price of such Incentive Stock Option shall not be less
than 110% of Fair Market Value on the grant date.

                                       5

<PAGE>

          (ii)  Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the Option is granted. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or any
Subsidiary or parent corporation and an Incentive Stock Option is granted to
such employee, the term of such option shall be no more than five years from the
date of grant.

          (iii) Exercisability; Rights of a Stockholder. Stock Options shall
become vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Committee at or after the grant
date. The Committee may at any time accelerate the exercisability of all or any
portion of any Stock Option. An optionee shall have the rights of a stockholder
only as to Shares acquired upon the exercise of a Stock Option and not as to
unexercised Stock Options.

          (iv)  Method of Exercise. Stock Options may be exercised in whole or
in part, by giving written notice of exercise to the Company, specifying the
number of Shares to be purchased. Payment of the purchase price may be made by
one or more of the following methods or by such other method as the Committee
may allow:

                (A) In cash, by certified or bank check or other instrument
acceptable to the Committee;

                (B) In the form of Shares that are not then subject to
restrictions under any Company plan and that have been held by the optionee for
at least six months, if permitted by the Committee in its discretion. Such
surrendered Shares shall be valued at Fair Market Value on the exercise date; or

                (C) By the optionee delivering to the Company a properly
executed exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable to the
Company to pay the purchase price; provided that in the event the optionee
chooses to pay the purchase price as so provided, the optionee and the broker
shall comply with such procedures and enter into such agreements of indemnity
and other agreements as the Committee shall prescribe as a condition of such
payment procedure. Payment instruments will be received subject to collection.

The delivery of certificates representing the Shares to be purchased pursuant to
the exercise of a Stock Option will be contingent upon receipt from the optionee
(or a purchaser acting in his stead in accordance with the provisions of the
Stock Option) by the Company of the full purchase price for such Shares and the
fulfillment of any other requirements contained in the Stock Option or
applicable provisions or laws.

          (v)   Non-Transferability of Options. No Stock Option shall be
transferable by

                                       6

<PAGE>

the optionee otherwise than by will or by the laws of descent and distribution
and all Stock Options shall be exercisable, during the optionee's lifetime, only
by the optionee.

          (vi)   Termination By Reason of Death. If any optionee's employment by
the Company and its Subsidiaries terminates by reason of death, the Stock Option
may thereafter be exercised, to the extent exercisable at the date of death, by
the legal representative or legatee of the optionee, for a period of six months
(or such longer periods as the Committee shall specify at any time) from the
date of death, or until the expiration of the stated term of the Option, if
earlier.

          (vii)  Termination By Reason of Disability.

                 (A) Any Stock Option held by an optionee whose employment by
the Company and its Subsidiaries has terminated by reason of Disability may
thereafter be exercised, to the extent it was exercisable at the time of such
termination, for a period of six months (or such longer period as the Committee
shall specify at any time) from the date of such termination of employment, or
until the expiration of the stated term of the Option, if earlier.

                 (B) The Committee shall have sole authority and discretion to
determine whether a participant's employment has been terminated by reason of
Disability.

                 (C) Except as otherwise provided by the Committee at the time
of grant the death of an optionee during a period provided in this Section
5(a)(vii) for the exercise of a Non-Qualified Stock Option, shall extend such
period of six months from the date of death, subject to termination on the
expiration of the stated term of the Option, if earlier.

          (viii) Termination for Cause. If any optionee's employment by the
Company and its Subsidiaries has been terminated for Cause, any Stock Option
held by such optionee shall immediately terminate and be of no further force and
effect; provided, however, that the Committee may, in its sole discretion,
provide that such Stock Option can be exercised for a period of up to 30 days
from the date of termination of employment or until the expiration of the stated
term of the Option, if earlier.

          (ix)   Other Termination. Unless otherwise determined by the
Committee, if an optionee's employment by the Company and its Subsidiaries
terminate for any reason other than death, Disability, or for Cause, any Stock
Option held by such optionee may thereafter be exercised, to the extent it was
exercisable on the date of termination of employment for three months (or such
longer period as the Committee shall specify at any time) from the date of
termination of employment or until the expiration of the stated term of the
Option, if earlier.

          (x)    Annual Limit On Incentive Stock Options. To the extent required
for "incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the Shares
with respect to which Incentive Stock Options granted under this Plan and any
other plan of the Company or its Subsidiaries become

                                       7

<PAGE>

exercisable for the first time by an optionee during any calendar year shall not
exceed $100,000.

          (xi)  Form of Settlement. Shares issued upon exercise of a Stock
Option shall be free of all restrictions under the Plan, except as otherwise
provided in this Plan.

     (b)  Reload Options. At the discretion of the Committee, Options granted
under Section 5(a) may include a so-called "reload" feature pursuant to which an
optionee exercising an option by the delivery of a number of Shares in
accordance with Section 5(a)(iv)(B) hereof would automatically be granted
additional Options (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with the same expiration
date as the original Option being exercised, and with such other terms as the
Committee may provide) to purchase that number of Shares equal to the number
delivered to exercise the original Option.

     (c)  Restricted Shares and Stock Options Granted to Independent Directors.

          (i)   Automatic Grant of Options. Each Independent Director shall
automatically be granted a Non-Qualified Stock Option to purchase 10,000 Shares
upon assuming his or her position on the Board. The exercise price per Share for
the Shares covered by a Stock Option granted pursuant to this Section 5(c)(i)
shall be equal to, (x) as to each Independent Director serving on the Board on
the date of the initial public offering, the initial public offering price and,
(y) as to each Independent Director elected to serve on the Board subsequent to
the initial public offering, the Fair Market Value of a single Share on the date
the Stock Option is granted.

          (ii)  Discretionary Grant of Restricted Shares or Options. Commencing
January 1, 1996, the Committee in its discretion may grant Restricted Shares
(subject to the provisions of Section 7 hereof) or Non-Qualified Stock Options
in addition to those Non-Qualified Stock Options automatically awarded pursuant
to Section 5(c)(i). The exercise price per Share for the Shares covered by a
Stock Option granted pursuant to this Section 5(c)(ii) shall not be less than
the Fair Market Value of a single Share on the date the Stock Option is granted.

          (iii) Grant of Options or Restricted Shares in Lieu of Cash For
Retainer Fee and Meeting Fees.

                (A) Each Independent Director may elect to defer 0%, 50% or 100%
of his Retainer Fee and/or Meeting Fees for each calendar year (commencing
calendar year 1997) for the application of that amount towards either the grant
of Stock Options or Restricted Shares as set forth in Section 5(c)(iii)(B). On
or before December 31 of the year preceding the calendar year for which the fees
apply, each Independent Director shall make an irrevocable election in writing
on a Notice of Election attached hereto as "Exhibit A", or such other form as
may be approved by the Committee, to receive Stock Options or Restricted Shares
in lieu of all or a designated percentage of his Retainer Fee and/or Meeting
Fees.

                                       8

<PAGE>

               (B)  The number of Stock Options issuable in accordance with this
Section 5(c)(iii) with respect to the elected portion of an Independent
Director's Retainer Fee and the elected portion of an Independent Director's
Meeting Fees will be equal to the amount of the deferred fees divided by 25% of
the Fair Market Value of a Share on the date of the grant. The number of shares
of Restricted Shares issuable in accordance with this Section 5(c)(iii) with
respect to the elected portion of an Independent Director's Retainer Fee and the
elected portion of an Independent Director's Meeting Fees will be equal to the
amount of the deferred fees divided by 250% of the Fair Market Value of a Share
on the date of the grant.

               (C)  Fractional Options or Shares shall not be granted under this
Section 5(c)(iii) and any remaining amount of elected Retainer Fees and Meeting
Fees will be paid to each Independent Director in cash, on the date or dates
Option or Restricted Stock Award grants are made in accordance with this Section
5(c)(iii).

               (D)  The price at which a Share may be purchased under an Option
granted pursuant to this Section 5(c) (iii) shall be equal to 75% of the Fair
Market Value of a Share on the date of the grant.

          (iv) Exercise; Termination; Non-Transferability; Vesting.

               (A)  Except as provided in Section 13, no Option granted under
Section 5(c)(i) may be exercised before the first anniversary of the date upon
which it was granted. The Shares subject to such Options granted under Section
5(c)(i) shall become exercisable in 25% increments on each anniversary of the
date of grant beginning with the first such anniversary such that 100% of the
Shares subject to an Option shall be exercisable on or after the fourth
anniversary of the date of grant; provided, however, that the Independent
Director who has received a grant under Section 5(c)(i) must be a member of the
Board on any such anniversary date. The term and exercisability of each Option
granted under Section 5(c)(ii) shall be fixed by the Committee. Options granted
pursuant to Section 5(c)(iii) become exercisable six months from the date of
grant; provided, however, that the Independent Director who has received a grant
under Section 5(c)(iii) must be a member of the Board on such date. No Option
issued under Section 5(c) shall be exercisable after the expiration of 10 years
from the date such Option is granted.

               (B)  The rights of an Independent Director in an Option granted
under Section 5(c)(i) and 5(c)(ii) shall terminate six months after such
director ceases to be a director of the Company or the specified expiration
date, if earlier; provided, however, that if the Independent Director ceases to
be a director for Cause, the rights shall terminate immediately on the date on
which he ceases to be a director. The rights of an Independent Director in an
Option granted under Section 5(c)(iii) shall terminate three years after such
director ceases to be a director of the Company or the specified expiration
date, if earlier; provided, however, that if and when an Independent Director
becomes inactive or becomes a director emeritus, Options previously granted
pursuant to Section 5(c)(iii) shall remain exercisable the same as if the

                                       9

<PAGE>

inactive director or director emeritus was at all times an active Independent
Director.

               (C)  No Stock Option granted under this Section 5(c) shall be
transferable by the optionee otherwise than by Will or by the laws of descent
and distribution, and such Options shall be exercisable, during the optionee's
lifetime only by the optionee. Any Option granted to an Independent Director
pursuant to Section 5(c)(i) and 5(c)(ii) and outstanding on the date of his
death may be exercised by the legal representative or legatee of the optionee
for a period of six months from the date of death or until the expiration of the
stated term of the Option, if earlier. Any Option granted to an Independent
Director pursuant to Section 5(c)(iii) and outstanding on the date of his death
may be exercised by the legal representative or legatee of the optionee for a
period of three years from the date of death or until the expiration of the
stated term of the Option, if earlier.

               (D)  Options granted under this Section 5(c) may be exercised
only by written notice to the Company specifying the number of Shares to be
purchased. Payment of the full purchase price of the Shares to be purchased may
be made by one or more of the methods specified in Section 5(a)(iv). An optionee
shall have the rights of a stockholder only as to Shares acquired upon the
exercise of a Stock Option and not as to unexercised Stock Options.

               (E)  Subject to the immediately following sentence, no Restricted
Shares granted under Section 5(c)(iii) may be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of and in the event that the
Independent Director is no longer a director (whether an Independent Director or
not) of the Company for any reason (including death, retirement, Disability or
for Cause), the Company shall have the right, at the discretion of the
Committee, to require forfeiture to the Company of such Restricted Shares from
the participant or the participant's legal representative, which right of
forfeiture must be exercised not later than the 90th day following the date such
person ceased to be a director. Notwithstanding the immediately foregoing
sentence, the Restricted Shares granted under Section 5(c)(iii) shall vest, and
shall no longer be subject to the Company's forfeiture right or the
non-transferability restrictions in this Section 5(c)(iv)(E), six months after
the date of grant, provided that the participant must be a member of the Board
on such vesting date in order for vesting to occur. A recipient of Restricted
Shares granted under Section 5(c)(iii) shall have all of the rights of a
stockholder with respect to the Restricted Shares including voting and dividend
rights, subject to the non-transferability restrictions and Company forfeiture
rights described above in this Section 5(c)(iv)(E). Unless the Committee shall
otherwise determine, certificates evidencing Restricted Shares issued pursuant
to Section 5(c)(iii) shall remain in the possession of the Company until such
Shares are vested as provided above. The vesting and other terms of Restricted
Shares issued pursuant to Section 5(c)(ii) shall be fixed by the Committee and
subject to and in accordance with Section 7.

          (v)  Limited to Independent Directors. The provisions of this Section
5(c) shall apply only to Options and Restricted Shares granted or to be granted
to Independent Directors, and shall not be deemed to modify, limit or otherwise
apply to any other provision of this Plan or

                                       10

<PAGE>

to any Option or Restricted Shares issued under this Plan to a participant who
is not an Independent Director of the Company. To the extent inconsistent with
the provisions of any other Section of this Plan, the provisions of this Section
5(c) shall govern the rights and obligations of the Company and Independent
Directors respecting Options and Restricted Shares granted or to be granted to
Independent Directors. The provisions of this Section 5(c) which affect the
price, date of exercisability, vesting, option period or amount of Shares under
an Option or with respect to Restricted Shares shall not be amended more than
once in any six-month period, other than to comport with changes in the Code or
ERISA.

SECTION 6. STOCK APPRECIATION RIGHTS

     The Committee may from time to time grant SARs unrelated to Options or
related to Options or portions of Options granted to participants under the
Plan. Each SAR shall be evidenced by a written instrument and shall be subject
to such terms and conditions as the Committee may determine. Subject to such
terms and conditions established by the Committee the participant may exercise
an SAR or portion thereof, and thereupon shall be entitled to receive payment of
an amount equal to the aggregate appreciation in value of the Shares as to which
the SAR is awarded, as measured by the difference between the purchase price of
such Shares and their Fair Market Value at the date of exercise. Such payments
may be made in cash, in Shares valued at Fair Market Value as of the date of
exercise, or in any combination thereof, as the Committee in its discretion
shall determine.

SECTION 7. RESTRICTED STOCK AWARDS

     (a)  Nature of Restricted Stock Award. The Committee may grant Restricted
Stock Awards to any participant under the Plan. A Restricted Stock Award is an
Award entitling the recipient to acquire, at no cost or for a purchase price
determined by the Committee, Shares subject to such restrictions and conditions
as the Committee may determine at the time of grant. Conditions may be based on
continuing employment and/or achievement of pre-established performance goals
and objectives.

     (b)  Acceptance of Award. A participant who is granted a Restricted Stock
Award shall have no rights with respect to such Award unless the participant
shall have accepted the Award within 60 days (or such shorter date as the
Committee may specify) following the award date by making payment to the
Company, if required, by certified or bank check or other instrument or form of
payment acceptable to the Committee in an amount equal to the specified purchase
price, if any, of the Shares covered by the Award and by executing and
delivering to the Company a written instrument that sets forth the terms and
conditions of the Restricted Shares in such form as the Committee shall
determine.

     (c)  Rights as a Stockholder. Upon complying with Section 7(b) above, a
participant shall have all the rights of a stockholder with respect to the
Restricted Shares including voting and dividend rights, subject to
non-transferability restrictions and Company repurchase or

                                       11

<PAGE>

forfeiture rights described in this Section 7 and subject to such conditions
contained in the written instrument evidencing the Restricted Stock Award.
Unless the Committee shall otherwise determine, certificates evidencing the
Restricted Shares shall remain in the possession of the Company until such
Shares are vested as provided in Section 7(e) below.

     (d)  Restrictions. Restricted Shares may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein. In the event of termination of employment by the
Company and its Subsidiaries, or in the case of Independent Directors, an
Independent Director ceases to be a director, for any reason (including death,
retirement, Disability, or for Cause), the Company shall have the right, at the
discretion of the Committee, to repurchase at their original purchase price as
established at Section 7(a) above Restricted Shares with respect to which
conditions have not lapsed, or to require forfeiture of such Shares to the
Company if acquired at no cost, from the participant or the participant's legal
representative. The Company must exercise such right of repurchase or forfeiture
not later than the 90th day following such termination of employment (unless
otherwise specified in the written instrument evidencing the Restricted Stock
Award).

     (e)  Vesting of Restricted Shares. The Committee at the time of grant shall
specify the date or dates and/or the attainment of pre-established performance
goals, objectives and other conditions on which the non-transferability of the
Restricted Shares and the Company's right of repurchase or forfeiture shall
lapse. Subsequent to such date or dates and/or the attainment of such
pre-established performance goals, objectives and other conditions, the Shares
on which all restrictions have lapsed shall no longer be Restricted Shares and
shall be deemed "vested."

     (f)  Waiver, Deferral and Reinvestment of Dividends. The written instrument
evidencing the Restricted Stock Award may require or permit the immediate
payment, waiver, deferral or investment of dividends paid on the Restricted
Shares.

SECTION 8. PHANTOM STOCK

     The Committee may from time to time grant Phantom Stock Awards to any
participant under the Plan. Each Phantom Stock Award shall be evidenced by a
written instrument and shall be subject to such terms and conditions as the
Committee may determine. Subject to such terms and conditions as may be
established by the Committee, the participant may exercise a Phantom Stock Award
or portion thereof, and thereupon shall be entitled to receive payment of an
amount equal to the Fair Market Value at the date of exercise of the Shares as
to which the Phantom Stock is awarded. Such payments may be made in cash, in
Shares valued at Fair Market Value as of the date of exercise, or in any
combination thereof, as the Committee in its discretion shall determine.

SECTION 9. TAX WITHHOLDING

     (a)  Payment by Participant. Each participant shall, no later than the date
as of which

                                       12

<PAGE>

the value of an Award of any Shares or other amounts received thereunder first
becomes includable in the gross income of the participant for federal income tax
purposes, pay to the Company, or make arrangements satisfactory to the Committee
regarding payment of any federal, state, or local taxes of any kind required by
law to be withheld with respect to such income. The Company and its Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the participant.

     (b)  Payment in Shares. A participant may elect to have such tax
withholding obligation satisfied, in whole or in part, by (i) authorizing the
Company to withhold from the Shares to be issued pursuant to any Award a number
of Shares with an aggregate Fair Market Value (as of the date the withholding is
effected) that would satisfy the withholding amount due, or (ii) transferring to
the Company Shares owned by the participant with an aggregate Fair Market Value
(as of the date the withholding is effected) that would satisfy the withholding
amount due. With respect to any participant who is subject to Section 17 of the
Act, the following additional restrictions shall apply:

               (A)  the election to satisfy tax withholding obligations relating
to an Award in the manner permitted by this Section 9(b) shall be made either
(1) during the period beginning on the third business day following the date of
release of quarterly or annual summary statements of revenues of the Company and
ending on the twelfth business day following such date, or (2) at least six
months prior to the date as of which the receipt of such Award first becomes a
taxable event for federal income tax purposes;

               (B)  such election shall be irrevocable;

               (C)  such election shall be subject to the consent or disapproval
of the Committee; and

               (D)  the Shares withheld to satisfy tax withholding must pertain
to an Award which has been outstanding for at least six months.

SECTION 10. TRANSFER, LEAVE OF ABSENCE, ETC.

     For purposes of the Plan, the following events shall not be deemed a
termination of employment:

     (a)  a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another; or

     (b)  an approved leave of absence for military service or sickness, or for
any other purposes approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.

                                       13

<PAGE>

SECTION 11. AMENDMENTS AND TERMINATION

     The Board may, at any time, amend or discontinue the Plan and the Committee
may, at any time, amend or cancel any outstanding Award (or provide substitute
Awards at the same or reduced exercise or purchase price or with no exercise or
purchase price, but such price, if any, must satisfy the requirements which
would apply to the substitute or amended Award as if it were then initially
granted under this Plan) for the purpose of satisfying changes in law without
the holder's consent. To the extent required by the Code to ensure that Options
granted hereunder qualify as Incentive Stock Options and to the extent required
by the Act to ensure that Awards and Options granted under the Plan are exempt
under Rule 16b-3 promulgated under the Act, Plan amendments shall be subject to
approval by the Company's stockholders. Notwithstanding anything herein to the
contrary, neither the Board nor the Committee may reduce the exercise or
purchase price of any outstanding Award without stockholder approval.

SECTION 12. STATUS OF PLAN

     With respect to the portion of any Award which has not been exercised and
any payments in cash, Shares or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Shares or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the provisions of the foregoing sentence.

SECTION 13. CHANGE OF CONTROL PROVISIONS

     Upon the occurrence of a Change of Control as defined in this Section 13:

     (a)  Each outstanding Stock Option shall automatically become fully
exercisable notwithstanding any provision to the contrary herein.

     (b)  Restrictions and conditions on Restricted Stock Awards shall
automatically be deemed waived, and the recipients of such Awards shall become
entitled to receipt of the Shares subject to such Awards unless the Committee
shall otherwise expressly provide at the time of grant.

     (c)  "Change of Control" shall mean the occurrence of any one of the
following events:

          (i)  any "person," as such term is used in Section 13(d) and 14(d) of
the Act (other than the Company, any of its Subsidiaries, any trustee, fiduciary
or other person or entity

                                       14

<PAGE>

holding securities under any employee benefit plan of the Company or any of its
Subsidiaries), together with all "affiliates" and "associates" (as such terms
are defined in Rule 12b-2 under the Act) of such person, shall become the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the Company representing 40% or more of
either (A) the combined voting power of the Company's then outstanding
securities having the right to vote in an election of the Company's Board of
Directors ("Voting Securities") or (B) the then outstanding Shares of the
Company (in either such case other than as a result of acquisition of securities
directly from the Company); or

          (ii)  persons who, as of May 1, 1994, constitute the Company's Board
of Directors (the "Incumbent Directors") cease for any reason, including,
without limitation, as a result of a tender offer, proxy contest, merger or
similar transaction, to constitute at least a majority of the Board, provided
that any person becoming a director of the Company subsequent to May 1, 1994
whose election or nomination for election was approved by a vote of at least a
majority of the Incumbent Directors shall, for purposes of this Plan, be
considered an Incumbent Director; or

          (iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company or any Subsidiary where the stockholders
of the Company, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, beneficially own (as such term is
defined in Rule 13D-3 under the Act), directly or indirectly, shares
representing in the aggregate 50% of the voting shares of the corporation
issuing cash securities in the consolidation or merger (or of its ultimate
parent corporation, if any), (B) any sale, lease, exchange or other transfer (in
one transaction or a series of transactions contemplated or arranged by an party
as a single plan) of all or substantially all of the assets of the Company or
(C) any plan or proposal for the liquidation or dissolution of the Company.

Notwithstanding the foregoing, a "Change of Control" shall not be deemed to have
occurred for purposes of the foregoing clause (i) solely as the result of an
acquisition of securities by the Company which, by reducing the number of Shares
or other Voting Securities outstanding, increases (x) the proportionate number
of Shares beneficially owned by any person to 40% or more of the Shares then
outstanding or (y) the proportionate voting power represented by the Voting
Securities beneficially owned by any person to 40% or more of the combined
voting power of all then outstanding Voting Securities; provided, however, that
if any person referred to in clause (x) or (y) of this sentence shall thereafter
become the beneficial owner of any additional Shares or other Voting Securities
(other than pursuant to a stock split, stock dividend, or similar transaction),
then a "Change of Control" shall be deemed to have occurred for purposes of the
foregoing clause (i).

                                       15

<PAGE>

SECTION 14. GENERAL PROVISIONS

     (a)  No Distribution: Compliance With Legal Requirements. The Committee may
require each person acquiring Shares pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the Shares
without a view to distribution thereof.

     No Shares shall be issued pursuant to an Award until all applicable
securities laws and other legal and stock exchange requirements have been
satisfied. The Committee may require the placing of such stop-orders and
restrictive legends on certificates for Shares and Awards as it deems
appropriate.

     (b)  Delivery of Stock Certificates. Delivery of stock certificates to
participants under this Plan shall be deemed effected for all purposes when the
Company or a stock transfer agent of the Company shall have delivered such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.

     (c)  Other Compensation Arrangements: No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, subject to stockholder approval if
such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan and
the grant of Awards do not confer upon any employee any right to continued
employment with the Company or any Subsidiary.

SECTION 15. EFFECTIVE DATE OF PLAN

     This Plan shall become effective upon approval by the holders of a majority
of the Shares of the Company present or represented and entitled to vote at a
meeting of stockholders.

SECTION 16. GOVERNING LAW

     This Plan shall be governed by North Carolina law except to the extent such
law is preempted by federal law.

                                       16

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>4
<FILENAME>dex991.txt
<DESCRIPTION>STATEMENT OF CHIEF EXECUTIVE OFFICER
<TEXT>
<PAGE>


                                                                    Exhibit 99.1

                     STATEMENT OF CHIEF EXECUTIVE OFFICER OF
                           HIGHWOODS PROPERTIES, INC.

     In connection with the Quarterly Report of Highwoods Properties, Inc. (the
"Company") on Form 10-Q for the period ended June 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Ronald
P. Gibson, President and Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

     1)   The Report fully complies with the requirements of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     2)   The information contained in the Report fairly presents, in all
          material respects, the financial condition and results of operations
          of the Company.

   /s/ Ronald P. Gibson
------------------------------------
Ronald P. Gibson
President and Chief Executive Officer
August 14, 2002

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>5
<FILENAME>dex992.txt
<DESCRIPTION>STATEMENT OF CHIEF FINANCIAL OFFICER
<TEXT>
<PAGE>


                                                                    Exhibit 99.2

                     STATEMENT OF CHIEF FINANCIAL OFFICER OF
                           HIGHWOODS PROPERTIES, INC.

     In connection with the Quarterly Report of Highwoods Properties, Inc. (the
"Company") on Form 10-Q for the period ended June 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Carman
J. Liuzzo, Vice President and Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

     1)   The Report fully complies with the requirements of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     2)   The information contained in the Report fairly presents, in all
          material respects, the financial condition and results of operations
          of the Company.


   /s/ Carman J. Liuzzo
------------------------------------
Carman J. Liuzzo
Vice President and Chief Financial Officer
August 14, 2002

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