<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 September 30, 2001
                        Commission file number: 000-21731

                                   ___________

                      Highwoods Realty Limited Partnership
             (Exact name of registrant as specified in its charter)

                                   ___________

            North Carolina                                56-1864557
   (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)

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

                                   ___________

     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 [_]

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

<PAGE>

                      HIGHWOODS REALTY LIMITED PARTNERSHIP

            QUARTERLY REPORT FOR THE PERIOD ENDED SEPTEMBER 30, 2001

                                TABLE OF CONTENTS

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

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

         Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000 ......................   4

         Consolidated Statements of Income for the three and nine months ended September 30, 2001 and
         2000 ............................................................................................   5

         Consolidated Statements of Cash Flows for the nine months ended September 30, 2001 and 2000 .....   6

         Notes to Consolidated Financial Statements ......................................................   8

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

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

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

         Recent Developments .............................................................................  15

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

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

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

         Disclosure Regarding Forward-Looking Statements .................................................  17

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

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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk ......................................  28
</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 and statements of cash flows reflect all adjustments (consisting of
normal recurring accruals) that are, in our opinion, necessary for a fair
presentation of the aforementioned financial statements for the interim period.

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

                                       3

<PAGE>
                      HIGHWOODS REALTY LIMITED PARTNERSHIP
                           Consolidated Balance Sheets
                             (dollars in thousands)
<TABLE>
<CAPTION>
                                                                                                   September 30,  December 31, 2000
                                                                                                   -------------  -----------------
                                                                                                        2001
                                                                                                        ----
                                                                                                    (Unaudited)
<S>                                                                                                 <C>           <C>
                                        ASSETS
Real estate assets, at cost:
    Land and improvements ....................................................................      $   409,186      $   398,944
    Buildings and tenant improvements ........................................................        2,877,018        2,742,377
    Development in process ...................................................................          144,326           87,622
    Land held for development ................................................................          145,061          144,727
    Furniture, fixtures and equipment ........................................................           13,125           11,433
                                                                                                    -----------      -----------
                                                                                                      3,588,716        3,385,103
    Less--accumulated depreciation ...........................................................         (355,010)        (280,609)
                                                                                                    -----------      -----------
    Net real estate assets ...................................................................        3,233,706        3,104,494
Property held for sale .......................................................................           30,992          127,824
Cash and cash equivalents ....................................................................           52,904          102,486
Restricted cash ..............................................................................            2,930            2,192
Accounts receivable, net .....................................................................           21,732           23,841
Advances to related parties ..................................................................               --           27,560
Notes receivable .............................................................................           13,567           72,047
Accrued straight-line rents receivable .......................................................           47,433           39,295
Investment in unconsolidated affiliates ......................................................           71,310           72,951
Other assets:
    Deferred leasing costs ...................................................................           99,568           83,269
    Deferred financing costs (see Notes 3 and 4) .............................................           26,157           43,110
    Prepaid expenses and other ...............................................................           11,487           11,857
                                                                                                    -----------      -----------
                                                                                                        137,212          138,236
    Less--accumulated amortization ...........................................................          (55,882)         (49,889)
                                                                                                    -----------      -----------
    Other assets, net ........................................................................           81,330           88,347
                                                                                                    -----------      -----------
Total Assets .................................................................................      $ 3,555,904      $ 3,661,037
                                                                                                    ===========      ===========
                        LIABILITIES AND PARTNERS' CAPITAL
Mortgages and notes payable ..................................................................      $ 1,623,157      $ 1,568,019
Accounts payable, accrued expenses and other liabilities .....................................          101,824          104,342
                                                                                                    -----------      -----------
    Total Liabilities ........................................................................        1,724,981        1,672,361
Minority interest ............................................................................            4,742               --
Redeemable operating partnership units:
    Class A Common Units, 7,410,256 outstanding at September 30, 2001 and 7,630,088 at
      December 31, 2000, respectively ........................................................          183,404          189,798
    Class B Common Units, 196,492 outstanding at September 30, 2001 and December 31, 2000 ....            4,863            4,888
    Series A Preferred Units, 104,945 outstanding at September 30, 2001 and 125,000
    outstanding at December 31, 2000 .........................................................          103,308          121,809
    Series B Preferred Units, 6,900,000 outstanding at September 30, 2001 and
      December 31, 2000 ......................................................................          166,890          166,346
    Series D Preferred Units, 400,000 outstanding at September 30, 2001 and
      December 31, 2000 ......................................................................           96,842           96,842

Partners' Capital
Class A Common Units:
    General partner Common Units, 600,295 at September 30, 2001 and 652,649 at  December
      31, 2000, respectively .................................................................           12,845           14,114
    Limited partner Common Units, 52,018,915 at September 30, 2001 and 56,982,135 at December
      31, 2000, respectively .................................................................        1,271,716        1,397,367
    Deferred compensation-restricted units ...................................................           (3,751)          (2,488)
    Accumulated other comprehensive loss (see Notes 3 and 4) .................................           (9,936)              --
                                                                                                    -----------      -----------
        Total Partners' Capital ..............................................................        1,270,874        1,408,993
                                                                                                    -----------      -----------
    Total Liabilities and Partners' Capital ..................................................      $ 3,555,904      $ 3,661,037
                                                                                                    ===========      ===========
</TABLE>
           See accompanying notes to consolidated financial statements

                                       4

<PAGE>

                      HIGHWOODS REALTY LIMITED PARTNERSHIP

                        Consolidated Statements of Income
              (Unaudited and in thousands except per unit amounts)

<TABLE>
<CAPTION>
                                                                                       Three Months Ended        Nine Months Ended
                                                                                       ------------------        -----------------
                                                                                         September 30,             September 30,
                                                                                         -------------             -------------
                                                                                      2001         2000         2001          2000
                                                                                      ----         ----         -----         ----
<S>                                                                                <C>          <C>          <C>          <C>
Revenue:
     Rental property ...........................................................   $ 125,405    $ 130,727    $ 379,428    $ 403,559
     Equity in earnings of unconsolidated affiliates ...........................       3,043        1,063        5,177        2,641
     Interest and other income .................................................       4,690        5,874       18,347       15,860
                                                                                   ---------    ---------    ---------    ---------
          Total Revenue ........................................................     133,138      137,664      402,952      422,060
Operating expenses:
     Rental property ...........................................................      37,612       39,331      112,832      119,950
     Depreciation and amortization .............................................      29,420       30,104       87,531       87,630
     Interest expense:
          Contractual ..........................................................      25,483       26,097       77,652       79,143
          Amortization of deferred financing costs .............................         324          564        1,664        1,862
                                                                                   ---------    ---------    ---------    ---------
                                                                                      25,807       26,661       79,316       81,005
General and administrative .....................................................       4,239        5,453       14,253       15,566
                                                                                   ---------    ---------    ---------    ---------

Income before gain/(loss) on disposition of land and depreciable assets
and extraordinary item .........................................................      36,060       36,115      109,020      117,909
Gain/(loss) on disposition of land and depreciable assets ......................       3,357       10,557       16,123       (8,559)
                                                                                   ---------    ---------    ---------    ---------
Income before extraordinary item ...............................................      39,417       46,672      125,143      109,350
     Extraordinary item--loss on early extinguishment of debt ..................          --       (3,310)        (518)      (4,344)
                                                                                   ---------    ---------    ---------    ---------
     Net income ................................................................      39,417       43,362      124,625      105,006
Distributions on preferred units ...............................................      (7,713)      (8,145)     (23,787)     (24,435)
                                                                                   ---------    ---------    ---------    ---------
     Net income available for Class A Common Units .............................   $  31,704    $  35,217    $ 100,838    $  80,571
                                                                                   =========    =========    =========    =========
Net income per Common Unit--basic:
     Income before extraordinary item ..........................................   $     .52    $     .58    $    1.64    $    1.25
          Extraordinary item--loss on early extinguishment of debt .............          --         (.05)        (.01)        (.06)
                                                                                   ---------    ---------    ---------    ---------
     Net income ................................................................   $     .52    $     .53    $    1.63    $    1.19
                                                                                   =========    =========    =========    =========
Net income per Common Unit--diluted:
     Income before extraordinary item ..........................................   $     .52    $     .58    $    1.63    $    1.25
          Extraordinary item--loss on early extinguishment of debt .............          --         (.05)        (.01)        (.06)
                                                                                   ---------    ---------    ---------    ---------
     Net income ................................................................   $     .52    $     .53    $    1.62    $    1.19
                                                                                   =========    =========    =========    =========
Distributions declared per Common Unit .........................................   $    .585    $     .57    $   1.725    $    1.68
                                                                                   =========    =========    =========    =========
Weighted average Common Units outstanding--basic:
     Class A Common Units:
          General Partner ......................................................         607          657          616          673
          Limited Partners .....................................................      60,070       65,011       61,031       66,620
     Class B Common Units:
          Limited Partners .....................................................         196          196          196          196
                                                                                   ---------    ---------    ---------    ---------
               Total ...........................................................      60,873       65,864       61,843       67,489
                                                                                   =========    =========    =========    =========
Weighted average Common Units outstanding--diluted:
     Class A Common Units:
          General Partner ......................................................         611          661          620          675
          Limited Partners .....................................................      60,486       65,428       61,422       66,856
     Class A Common Units:
          Limited Partners .....................................................         196          196          196          196
                                                                                   ---------    ---------    ---------    ---------
               Total ...........................................................      61,293       66,285       62,238       67,727
                                                                                   =========    =========    =========    =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       5

<PAGE>

                      HIGHWOODS REALTY LIMITED PARTNERSHIP

                      Consolidated Statements of Cash Flows
                          (Unaudited and in thousands)

<TABLE>
<CAPTION>
                                                                                                      Nine Months Ended
                                                                                                         September 30,
                                                                                                         -------------
                                                                                                     2001             2000
                                                                                                     ----             ----
<S>                                                                                               <C>              <C>
Operating activities:
Net income ....................................................................................   $ 124,625        $ 105,006
     Adjustments to reconcile net income to net cash provided by operating activities:
     Depreciation and amortization ............................................................      89,195           89,492
     Equity in earnings of unconsolidated affiliates ..........................................      (5,177)          (2,641)
     Amortization of deferred compensation.....................................................         755              391
(Gain)/Loss on disposition of land and depreciable assets .....................................     (16,123)           8,559
Loss on early extinguishment  of debt .........................................................         518            4,344
Transition adjustment upon adoption of FASB 133 ...............................................         556               --
Loss on ineffective portion of derivative instruments .........................................         428               --
Changes in operating assets and liabilities ...................................................     (15,871)           1,970
                                                                                                  ---------        ---------
          Net cash provided by operating activities ...........................................     178,151          207,121
                                                                                                  ---------        ---------
Investing activities:
Additions to real estate assets ...............................................................    (187,579)        (223,343)
Proceeds from disposition of real estate assets ...............................................     157,000          339,600
Repayment from advances to subsidiaries .......................................................      27,560            1,932
Distributions from unconsolidated affiliates ..................................................       6,566            1,556
Investments in notes receivable ...............................................................      57,805            6,641
Other investing activities ....................................................................      (8,453)         (19,099)
                                                                                                  ---------        ---------
          Net cash provided by investing activities ...........................................      52,899          107,287
                                                                                                  ---------        ---------
Financing activities:
Distributions paid on Common Units ............................................................    (107,611)        (114,187)
Distributions paid on Preferred Units .........................................................     (23,787)         (24,435)
Borrowings on mortgages and notes payable .....................................................      12,780           73,198
Repayment of mortgages and notes payable ......................................................    (100,187)        (147,286)
Borrowings on revolving loans .................................................................     246,900          279,500
Repayment on revolving loans ..................................................................    (154,900)        (298,000)
Loss on early extinguishment of debt ..........................................................        (518)          (4,344)
Net proceeds of contributed capital ...........................................................         817              836
Repurchase of common stock, common units, preferred
    stock and preferred units .................................................................    (155,308)         (90,342)
Net change in deferred financing costs ........................................................         155             (104)
Other financing activities ....................................................................       1,027            1,978
                                                                                                  ---------        ---------
          Net cash used in financing activities ...............................................    (280,632)        (318,842)
                                                                                                  ---------        ---------
Net decrease in cash and cash equivalents .....................................................     (49,582)          (4,434)
Cash and cash equivalents at beginning of the period ..........................................     102,486           33,915
                                                                                                  ---------        ---------
Cash and cash equivalents at end of the period ................................................   $  52,904        $  29,481
                                                                                                  =========        =========
Supplemental disclosure of cash flow information:
Cash paid for interest ........................................................................   $  81,843        $  93,047
                                                                                                  =========        =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       6

<PAGE>

                      HIGHWOODS REALTY LIMITED PARTNERSHIP
                      Consolidated Statements of Cash Flows
                          (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>
                                                                                                   Nine Months
                                                                                               Ended September 30,
                                                                                               -------------------
                                                                                               2001           2000
                                                                                               ----           ----
<S>                                                                                         <C>            <C>
Assets:
Notes receivable ........................................................................   $     675      $  23,775
Cash and cash equivalents ...............................................................       6,880             --
Net real estate assets ..................................................................      58,012        (24,656)
Liabilities:
Mortgages and notes payable .............................................................       7,241             --
Accounts payable, accrued expenses and other liabilities ................................      58,545             --
                                                                                            ---------      ---------
Net assets ..............................................................................   $    (219)     $    (881)
                                                                                            =========      =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       7

<PAGE>

                      HIGHWOODS REALTY LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               September 30, 2001
                                   (Unaudited)

1. BASIS OF PRESENTATION

     The Operating Partnership is a subsidiary of the Company. At September 30,
2001, the Company owned 87.4% of the Common Units in the Operating Partnership.

     The consolidated financial statements include the accounts of the Operating
Partnership and its wholly owned affiliates. All significant intercompany
balances and transactions have been eliminated in the consolidated financial
statements.

     The Operating Partnership's 104,945 Series A Preferred Units are senior to
the Class A and B Common Units and rank pari passu with the Series B and D
Preferred Units. The Series A Preferred Units have a liquidation preference of
$1,000 per unit. Distributions are payable on the Series A Preferred Units at
the rate of $86.25 per annum per unit.

     The Operating Partnership's 6,900,000 Series B Preferred Units are senior
to the Class A and B Common Units and rank pari passu with the Series A and D
Preferred Units. The Series B Preferred Units have a liquidation preference of
$25 per unit. Distributions are payable on the Series B Preferred Units at the
rate of $2.00 per annum per unit.

     The Operating Partnership's 400,000 Series D Preferred Units are senior to
the Class A and B Common Units and rank pari passu with the Series A and B
Preferred Units. The Series D Preferred Units have a liquidation preference of
$250 per unit. Distributions are payable on Series D Preferred Units at a rate
of $20.00 per annum per unit.

     The Class A Common Units are owned by the Company and by certain limited
partners of the Operating Partnership. The Class A Common Units owned by the
Company are classified as general partners' capital and limited partners'
capital. The Class B Common Units are owned by certain limited partners (not the
Company) and only differ from the Class A Common Units in that they are not
eligible for allocation of income and distributions. The Class B Common Units
will convert to Class A Common Units in 25% annual installments commencing one
year from the date of issuance. Prior to such conversion, such Class B Common
Units will not be redeemable for cash or shares of the Company's Common Stock.

     Generally one year after issuance, the Operating Partnership is obligated
to redeem each of the Class A Common Units not owned by the Company (the
"Redeemable Operating Partnership Units") at the request of the holder thereof
for cash, provided that the Company at its option may elect to acquire such unit
for one share of Common Stock or the cash value thereof. The Company's Class A
Common Units are not redeemable for cash. The Redeemable Operating Partnership
Units are classified outside of the permanent partners' capital in the
accompanying balance sheet at their fair market value (equal to the fair market
value of a share of Common Stock) at the balance sheet date.

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

     Certain amounts in the September 30, 2000 financial statements have been
reclassified to conform to the September 30, 2001 presentation. These
reclassifications had no material effect on net income or partners' capital as
previously reported.

     Minority interest represents the limited partnership interest in a
partnership which was formed to develop real estate properties, owned by holders
other than the Operating Partnership.

                                       8

<PAGE>

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

2. SEGMENT INFORMATION

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

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

                                       9

<PAGE>
     The accounting policies of the segments are the same as those described in
Note 1. Further, all operations are within the United States and no tenant
comprises more than 10% of consolidated revenues. The following table summarizes
the rental income, net operating income and total assets for each reportable
segment for the three and nine months ended September 30, 2001 and 2000.
<TABLE>
<CAPTION>
                                                         Three Months                   Nine Months
                                                      Ended September 30,           Ended September 30,
                                                  --------------------------      ------------------------
                                                     2001            2000            2001          2000
                                                  ----------      ----------      ----------    ----------
                                                       (in thousands)                  (in thousands)
<S>                                               <C>             <C>             <C>           <C>
Rental Income:
Office segment .................................  $  104,389      $  106,202      $  315,712    $  331,944
Industrial segment .............................      11,623          11,523          35,137        33,288
Retail segment .................................       8,970           8,631          27,325        25,285
Apartment segment ..............................         423           4,371           1,254        13,042
                                                  ----------      ----------      ----------    ----------
   Total Rental Income .........................  $  125,405      $  130,727      $  379,428    $  403,559
                                                  ==========      ==========      ==========    ==========
Net Operating Income:
Office segment .................................  $   71,877      $   74,132      $  218,308    $  230,555
Industrial segment .............................       9,612           9,793          29,450        28,026
Retail segment .................................       6,077           5,163          18,252        17,464
Apartment segment ..............................         227           2,308             586         7,564
                                                  ----------      ----------      ----------    ----------
   Total net operating income ..................  $   87,793      $   91,396      $  266,596    $  283,609
Reconciliation to income before extraordinary
  item:
Equity in income of unconsolidated affiliates ..       3,043           1,063           5,177         2,641
(Loss)/Gain on disposition of assets, net of
   income tax provision ........................       3,357          10,557          16,123        (8,559)
Interest and other income ......................       4,690           5,874          18,347        15,860
Interest expense ...............................     (25,807)        (26,661)        (79,316)      (81,005)
General and administrative expenses ............      (4,239)         (5,453)        (14,253)      (15,566)
Depreciation and amortization ..................     (29,420)        (30,104)        (87,531)      (87,630)
                                                  ----------      ----------      ----------    ----------
Income before extraordinary item ...............  $   39,417      $   46,672      $  125,143    $  109,350
                                                  ==========      ==========      ==========    ==========
Total Assets:
Office segment .................................  $2,721,133      $2,813,007      $2,721,133    $2,813,007
Industrial segment .............................     386,475         365,217         386,475       365,217
Retail segment .................................     259,739         269,865         259,739       269,865
Apartment segment ..............................      10,202         116,163          10,202       116,163
Corporate and other ............................     178,355         192,064         178,355       192,064
                                                  ----------      ----------      ----------    ----------
Total assets ...................................  $3,555,904      $3,756,316      $3,555,904    $3,756,316
                                                  ==========      ==========      ==========    ==========
</TABLE>
3. 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.

                                       10

<PAGE>

     All of our derivatives are designated as cashflow hedges (i.e., hedging the
exposure of variability in expected future cash flows that is attributable to a
particular risk) at September 30, 2001. The effective portion of the cumulative
loss on the derivative instruments was $9.9 million at September 30, 2001 and is
reported as a component of AOCL in partners' capital and recognized into
earnings in the same period or periods during which the hedged transaction
affects earnings (as the underlying debt is paid down). We expect that the
portion of the cumulative loss recorded in AOCL at September 30, 2001 associated
with the derivative instruments which will be recognized within the next 12
months will be approximately $1.6 million. The ineffective portion of our
derivatives' changes in fair value has resulted in a loss of $685,000 for the
nine months ended September 30, 2001 which is included in interest and other
income on the Consolidated Statements of Income at September 30, 2001.

     Derivative liabilities totaling approximately $646,000 related to our
interest rate swap and collar agreements, with a notional amount of $99.3
million, are recorded in accounts payable, accrued expenses and other
liabilities in the Consolidated Balance Sheets at September 30, 2001. The fair
value of our interest rate swap and collar agreements was $(646,000) at
September 30, 2001. To determine the fair values 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, long-term investments and long-term
debt, standard market conventions and techniques such as discounted cash flow
analysis, option pricing models, 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.

4.   ACCUMULATED OTHER COMPREHENSIVE LOSS

     Accumulated other comprehensive loss represents net income plus the results
of certain non-shareholders' equity changes not reflected in the Consolidated
Statements of Income. The components of accumulated other comprehensive loss are
as follows:

                                                            Nine Months Ended
                                                              September 30,
                                                        ------------------------
                                                           2001           2000
                                                        ---------       --------
Net Income ...........................................  $ 108,527       $ 90,933
Accumulated other comprehensive loss:
   Unrealized derivative losses on cashflow hedges ...       (514)           ---
   Reclassification of past hedging relationships ....    (10,597)           ---
   Amortization of past hedging relationships ........      1,175            ---
                                                        ---------       --------
      Total accumulated comprehensive loss ...........     (9,936)           ---
                                                        ---------       --------
      Total comprehensive income .....................  $  98,591       $ 90,933
                                                        =========       ========

                                       11


<PAGE>

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

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

Results of Operations

     Three Months Ended September 30, 2001. Revenues from rental operations
decreased $5.3 million, or 4.1%, from $130.7 million for the three months ended
September 30, 2000 to $125.4 million for the comparable period in 2001. The
decrease is primarily a result of the disposition of 2.7 million square feet of
wholly owned office and industrial properties and 1,672 apartment units, offset
in part by the acquisition of 475,000 square feet of wholly owned office and
industrial properties and the completion of 1.3 million square feet of
development activity during the last three months of 2000 and the first nine
months of 2001. Our in-service portfolio decreased from 37.8 million square feet
at September 30, 2000 to 36.9 million square feet at September 30, 2001. Same
property revenues, which are the revenues of the 468 in-service properties owned
on July 1, 2000, increased 3.1% for the three months ended September 30, 2001,
compared to the same three months of 2000.

     During the three months ended September 30, 2001, 170 leases representing
1.0 million square feet of office, industrial and retail space were executed at
an average rate per square foot which was 1.9% higher than the average rate per
square foot on the expired leases.

     Interest and other income decreased $1.2 million, or 20.3%, from $5.9
million for the three months ended September 30, 2000 to $4.7 million for the
comparable period in 2001. The decrease was a result of a decrease in
development fee income and interest income, partly offset by an increase in
management fee income and an adjustment related to the adoption of SFAS 133 in
2001.

     Rental operating expenses decreased $1.7 million, or 4.3%, from $39.3
million for the three months ended September 30, 2000 to $37.6 million for the
comparable period in 2001. The decrease is primarily a result of the disposition
of 2.7 million square feet of wholly owned office and industrial properties and
1,672 apartment units, offset in part by the acquisition of 475,000 square feet
of wholly owned office and industrial properties and the completion of 1.3
million square feet of development activity during the last three months of 2000
and the first nine months of 2001. Rental operating expenses as a percentage of
related revenues was 30.1% for the three months ended September 30, 2000 and
30.0% for the three months ended September 30, 2001.

     Depreciation and amortization for the three months ended September 30, 2001
and 2000 was $29.4 million and $30.1 million, respectively. The decrease of $0.7
million, or 2.3%, is due to a decrease in depreciable assets over the prior
year. Interest expense decreased $0.9 million, or 3.4%, from $26.7 million for
the three months ended September 30, 2000 to $25.8 million for the comparable
period in 2001. The decrease is attributable to a decrease in outstanding debt
and weighted average interest rates in 2001, partly offset by a decrease in
capitalized interest in 2001. Interest expense for the three months ended
September 30, 2001 and 2000 included $0.3 million and $0.6 million,
respectively, of amortization of deferred financing costs and the costs related
to our interest rate hedge contracts. General and administrative expenses
decreased 0.8% from 4.0% of total revenue for the three months ended September
30, 2000 to 3.2% for the comparable period in 2001.

     Income before extraordinary item was $39.4 million and $46.7 million for
the three months ended September 30, 2001 and 2000, respectively. The Operating
Partnership recorded $7.7 million in preferred unit distributions for the three
months ended September 30, 2001 and $8.1 million in preferred unit distributions
for the three months ended September 30, 2000.

     Nine Months Ended September 30, 2001. Revenues from rental operations
decreased $24.2 million, or 6.0%, from $403.6 million for the nine months ended
September 30, 2000 to $379.4 million for the comparable period in 2001. The
decrease is primarily a result of the disposition of 2.7 million square feet of
wholly owned office and industrial properties and 1,672 apartment units, offset
in part by the acquisition of 475,000 square feet of wholly owned office and
industrial properties and the completion of 1.3 million square feet of
development activity during the last three months of 2000 and the first nine
months of 2001. Our in-service portfolio decreased from 37.8 million square feet
at September 30, 2000 to 36.9 million square feet at September 30, 2001. Same
property revenues, which are the revenues of the 451 in-service properties owned
on January 1, 2000, increased 2.5% for the nine months ended September 30, 2001,
compared to the same nine months of 2000.

                                       12

<PAGE>

     During the nine months ended September 30, 2001, 530 leases representing
3.0 million square feet of office, industrial and retail space were executed at
an average rate per square foot which was 5.1% higher than the average rate per
square foot on the expired leases.

     Interest and other income increased $2.4 million, or 15.1%, from $15.9
million for the nine months ended September 30, 2000 to $18.3 million for the
comparable period in 2001. The increase was a result of an increase in interest
income, leasing, development and management fees, partly offset by an adjustment
related to the adoption of SFAS 133.

     Rental operating expenses decreased $7.2 million, or 6.0%, from $120.0
million for the nine months ended September 30, 2000 to $112.8 million for the
comparable period in 2001. The decrease is primarily a result of the disposition
and contribution of 2.7 million square feet of wholly owned office and
industrial properties and 1,672 apartment units, offset in part by the
acquisition of 475,000 square feet of wholly owned office and industrial
properties and the completion of 1.3 million square feet of development activity
during the last three months of 2000 and the first nine months of 2001. Rental
operating expenses as a percentage of related revenues remained constant at
29.7% for the nine months ended September 30, 2000 and 2001.

     Depreciation and amortization for the nine months ended September 30, 2001
and 2000 was $87.5 million and $87.6 million, respectively. The decrease of $0.1
million, or 0.1%, is due to a decrease in depreciable assets over the prior
year. Interest expense decreased $1.7 million, or 2.1%, from $81.0 million for
the nine months ended September 30, 2000 to $79.3 million for the comparable
period in 2001. The decrease is attributable to a decrease in outstanding debt
and weighted average interest rates for the nine months ended September 30,
2001, partly offset by a decrease in capitalized interest in 2001. Interest
expense for the nine months ended September 30, 2001 and 2000 included $1.7
million and $1.9 million, respectively, of amortization of deferred financing
costs and the costs related to our interest rate hedge contracts. General and
administrative expenses decreased 0.2% from 3.7% of total revenue for the nine
months ended September 30, 2000 to 3.5% for the comparable period in 2001.

     Income before extraordinary item was $125.1 million and $109.0 million for
the nine months ended September 30, 2001 and 2000, respectively. The Operating
Partnership recorded $23.8 million in preferred unit distributions for the nine
months ended September 30, 2001 and $24.4 million in preferred unit
distributions for the nine months ended September 30, 2000.

Liquidity and Capital Resources

     Statement of Cash Flows. For the nine months ended September 30, 2001, the
Operating Partnership generated $178.2 million in cash flows from operating
activities and $52.9 million from investing activities (primarily as a result of
the disposition of real estate assets and repayments from subsidiaries, partly
offset in part by additions to real estate assets). These combined cash flows of
$231.1 million were used to partly fund financing activities of $280.6 million,
primarily consisting of the repurchase of Common and Preferred Units and the
payment of distributions.

     Capitalization. The Operating Partnership's total indebtedness at September
30, 2001 totaled $1.6 billion and was comprised of approximately $580.3 million
of secured indebtedness with a weighted average interest rate of 7.6% and
approximately $1.0 billion of unsecured indebtedness with a weighted average
interest rate of 7.0%. Except as stated below, all of the mortgage and notes
payable outstanding at September 30, 2001 were either fixed rate obligations or
variable rate obligations covered by interest rate hedge contracts.
Approximately $66.5 million of floating rate notes were not covered by interest
rate hedge contracts on September 30, 2001.

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

                                       13

<PAGE>

     The following table sets forth information regarding our interest rate
hedge contracts as of September 30, 2001:

<TABLE>
<CAPTION>
                                                                                            Fair
                       Notional      Maturity                                              Market
Type of Hedge           Amount         Date         Reference Rate        Fixed Rate       Value
-------------           ------         ----         --------------        ----------       -----
<S>                    <C>           <C>         <C>                      <C>            <C>
Swap ...............    $19,334       6/10/02    1-month LIBOR + 0.75%         6.95%     $(514,828)
Collar .............    $80,000      10/15/01    1-month LIBOR            5.60-6.25%     $(131,444)
</TABLE>

     The interest rates on our variable rate debt is adjusted at one-month
intervals, subject to settlements under these contracts. Net payments made to
counterparties under interest rate hedge contracts were $703,603 during the nine
months ended September 30, 2001, and were recorded as increases to interest
expense.

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

     Current and Future Cash Needs. Historically, rental revenue has been the
principal source of funds to pay operating expenses, debt service, partnership
distributions and capital expenditures, excluding nonrecurring capital
expenditures. In addition, construction management, maintenance, leasing and
management fees have provided sources of cash flow. We presently have no plans
for major capital improvements to the existing in-service properties, other than
normal recurring building improvements, tenant improvements and lease
commissions. We expect to meet our short-term liquidity requirements generally
through working capital and net cash provided by operating activities along with
the Revolving Loan.

     Our short-term (within the next 12 months) liquidity needs also include,
among other things, the funding of approximately $76.2 million of our existing
development activity. We expect to fund our short-term liquidity needs through a
combination of:

     .    additional borrowings under our Revolving Loan (approximately $141.5
          million was available as of September 30, 2001);

     .    the issuance of secured debt;

     .    the selective disposition of non-core assets; and

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

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

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

                                       14

<PAGE>

Recent Developments

     Unit Repurchases. On May 31, 2001, the Company completed its previously
announced 10.0 million share and unit repurchase program pursuant to which the
Company repurchased Common Stock and Common Units at a weighted average per
share price of $24.19 for a total purchase price of $241.9 million. In addition,
on April 25, 2001, the Company announced that its board of directors has
authorized the repurchase of up to an additional 5.0 million shares of Common
Stock and Common Units. As of November 6, 2001, the Company has repurchased 1.2
million shares of Common Stock and Common Units at a weighted average purchase
price of $24.41 per share and a total purchase price of $29.1 million under this
new repurchase program. Separately, on June 19, 2001, the Company repurchased in
a privately negotiated transaction 20,055 Series A Preferred Shares at $922.50
per share, for a total purchase price of $18.5 million. For each Series A
Preferred Share repurchased by the Company, one equivalent Series A Preferred
Unit is retired.

     Disposition Activity. During the nine months ended September 30, 2001, we
sold approximately 248,000 rentable square feet of office properties, 1,672
apartment units and 173.0 acres of development land for gross proceeds of $157.0
million. In addition, we currently have 300,250 rentable square feet of wholly
owned properties and 81.0 acres of land under contract for sale in various
transactions totaling $53.0 million. These transactions are subject to customary
closing conditions, including due diligence and documentation, and are expected
to close at various times throughout 2001. However, we can provide no assurance
that all or parts of these transactions will be consummated.

     As of November 12, 2001, we expect to use a portion of the cash proceeds
from our recent and pending disposition activity to reinvest in tax-deferred
exchange transactions under Section 1031 of the Internal Revenue Code. We expect
to reinvest up to $38.0 million of the cash proceeds from completed disposition
activity and up to $36.0 million of the cash proceeds from pending disposition
activity to acquire, in tax-deferred exchange transactions, in-service
properties, development land and development projects located in core markets
and in sub-markets where we have a strong presence. For an exchange to qualify
for tax-deferred treatment under Section 1031, the net proceeds from the sale of
a property must be held by an escrow agent until applied toward the purchase of
real estate qualifying for gain deferral. Given the competition for properties
meeting our investment criteria, there may be some delay in reinvesting such
proceeds. Delays in reinvesting such proceeds will reduce our income from
operations. In addition, the use of net proceeds from dispositions to fund
development activity, either through direct payments or repayment of borrowings
under our Revolving Loan, will reduce our income from operations until such
development projects are placed in service.

Possible Environmental Liabilities

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

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

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

     As of the date hereof, we have obtained Phase I environmental assessments
(and, in certain instances, Phase II environmental assessments) on substantially
all of our in-service properties. These assessments have not revealed, nor are
we aware of, any environmental liability at our properties that we believe would
materially adversely affect our financial position, operations or liquidity
taken as a whole. This projection, however, could be incorrect depending on
certain

                                       15

<PAGE>

factors. For example, material environmental liabilities may have arisen after
the assessments were performed or our assessments may not have revealed all
environmental liabilities or may have underestimated the scope and severity of
environmental conditions observed. There may also be unknown environmental
liabilities at properties for which we have not obtained a Phase I environmental
assessment or have not yet obtained a Phase II environmental assessment. In
addition, we base our assumptions regarding environmental conditions, including
groundwater flow and the existence and source of contamination, on readily
available sampling data. We cannot guarantee that such data is reliable in all
cases. Moreover, we cannot provide any assurances (1) that future laws,
ordinances or regulations will not impose a material environmental liability or
(2) that tenants, the condition of land or operations in the vicinity of our
properties or unrelated third parties will not affect the current environmental
condition of our properties.

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

Compliance with the Americans with Disabilities Act

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

Funds From Operations and Cash Available for Distributions

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

     FFO equals net income (computed in accordance with GAAP) excluding gains
(or losses) from debt restructuring and sales of depreciable assets, plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. In March 1995, the National Association of Real
Estate Investment Trusts ("NAREIT") issued a clarification of the definition of
FFO. This clarification provides that amortization of deferred financing costs
and depreciation of non-real estate assets are no longer to be added back to net
income in arriving at FFO. In October 1999, NAREIT issued an additional
clarification effective as of January 1, 2000 stipulating that FFO should
include both recurring and non-recurring operating results. Consistent with this
clarification, non-recurring items that are not defined as "extraordinary" under
GAAP will be reflected in the calculation of FFO. Gains and losses from the sale
of depreciable operating property will continue to be excluded from the
calculation of FFO.

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

                                       16

<PAGE>

     FFO and cash available for distribution for the three and nine month
periods ended September 30, 2001 and 2000 are summarized in the following table
(unaudited and in thousands):

<TABLE>
<CAPTION>
                                                          Three Months Ended        Nine Months Ended
                                                             September 30,             September 30,
                                                         ---------------------    ---------------------
                                                           2001         2000        2001         2000
                                                         --------     --------    --------     --------
<S>                                                      <C>           <C>        <C>          <C>
Funds from operations:
Income before extraordinary item .....................   $ 39,417     $ 46,672    $125,143     $109,350
Add/(Deduct):
   Distributions to preferred unit holders ...........     (7,713)      (8,145)    (23,787)     (24,435)
   Transition adjustment upon adoption of FAS 133 ....        ---          ---         556          ---
   (Gain)/loss on disposition of land and
     depreciable assets ..............................     (3,357)     (10,557)    (16,123)       8,559
   Gain/(loss) on disposition of land ................       (538)       3,288       1,025        3,288
   Depreciation and amortization .....................     29,420       30,104      87,531       87,630
   Depreciation of unconsolidated affiliates .........      1,826        1,657       5,560        3,444
                                                         --------     --------    --------     --------
     Funds from operations before minority interest ..     59,055       63,019     179,905      187,836
Cash available for distribution:
Add/(Deduct):
   Rental income from straight-line rents ............     (2,701)      (3,657)     (8,947)     (11,452)
   Amortization of deferred financing costs ..........        324          564       1,664        1,862
   Non-incremental revenue generating capital
    expenditures (1):
     Building improvements paid ......................     (2,872)      (2,248)     (5,959)      (5,913)
     Second generation tenant improvements paid ......     (4,834)      (7,900)    (12,610)     (17,730)
     Second generation lease commissions paid ........     (2,867)      (1,859)    (11,195)      (8,668)
                                                         --------     --------    --------     --------
       Cash available for distribution ...............   $ 46,105     $ 47,919    $142,858     $145,935
                                                         ========     ========    ========     ========
Weighted average common shares/common units
   outstanding - basic ...............................     60,873       65,864      61,843       67,489
                                                         ========     ========    ========     ========
Weighted average common shares/common units
   outstanding - diluted .............................     61,293       66,285      62,238       67,727
                                                         ========     ========    ========     ========
Dividend payout ratios:
   Funds from operations .............................       61.0%        60.0%       59.7%        60.6%
                                                         ========     ========    ========     ========
   Cash available for distribution ...................       78.0%        78.8%       75.2%        78.0%
                                                         ========     ========    ========     ========
</TABLE>

_________
(1) Amounts represent cash expenditures.

Disclosure Regarding Forward-Looking Statements

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

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

     .    the financial condition of our tenants could deteriorate;

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

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

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

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

                                       17

<PAGE>

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

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

     .    we could lose key executive officers; and

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

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

                                       18

<PAGE>

Property Information

     The following table sets forth certain information with respect to our
wholly owned in-service and development properties (excluding apartment units)
as of September 30, 2001 and 2000:

                                                 Rentable     Percent Leased/
September 30, 2001                              Square Feet     Pre-Leased
------------------                            -------------   ---------------
In-Service:
     Office ..............................       24,829,000          92.9%
     Industrial ..........................       10,396,000          92.3%
     Retail (1) ..........................        1,628,000          95.1%
                                              -------------   -----------
     Total or Weighted Average ...........       36,853,000          92.7%
                                              =============   ===========
Development:
Completed--Not Stabilized
     Office ..............................        1,188,000          62.1%
     Industrial ..........................          184,000          37.2%
     Retail ..............................               --            --
                                              -------------   -----------
     Total or Weighted Average ...........        1,372,000          58.8%
                                              =============   ===========
In Process
     Office ..............................        1,285,000          52.5%
     Industrial ..........................          258,000          47.3%
     Retail ..............................           20,000          90.0%
                                              -------------   -----------
     Total or Weighted Average ...........        1,563,000          52.1%
                                              =============   ===========
Total:
     Office ..............................       27,302,000
     Industrial ..........................       10,838,000
     Retail (1) ..........................        1,648,000
                                              -------------
     Total or Weighted Average ...........       39,788,000
                                              =============


                                                 Rentable     Percent Leased/
September 30, 2000                              Square Feet      Pre-Leased
------------------                              -----------   ---------------
In-Service:
     Office ..............................       25,984,000          94.0%
     Industrial ..........................       10,204,000          94.5%
     Retail ..............................        1,569,000          94.4%
                                              -------------   -----------
     Total or Weighted Average ...........       37,757,000          94.1%
                                              =============   ===========
Development:
Completed--Not Stabilized
     Office ..............................          759,000          79.0%
     Industrial ..........................               --            --
     Retail ..............................           81,000          90.0%
                                              -------------   -----------
     Total or Weighted Average ...........          840,000          80.0%
                                              =============   ===========
In Process
     Office ..............................        1,709,000          55.0%
     Industrial ..........................          395,000          87.0%
     Retail ..............................               --            --
                                              --------------  -----------
     Total or Weighted Average ...........        2,104,000          61.0%
                                              =============   ===========
Total:
     Office ..............................       28,452,000
     Industrial ..........................       10,599,000
     Retail ..............................        1,650,000
                                              -------------
     Total or Weighted Average ...........       40,701,000
                                              =============
_______________

(1)  Excludes basement space.

                                       19

<PAGE>

     As of September 30, 2001, we were developing 23 suburban office properties,
four industrial properties and one retail property totaling 2.9 million rentable
square feet of office and industrial space. The following table summarizes these
development projects. In addition to the properties described in this table, we
are developing with our joint venture partners five additional properties
totaling 660,000 rentable square feet. At September 30, 2001, these development
projects had an aggregate budgeted cost of $99.7 million and were 62.0 %
pre-leased.

In-Process

<TABLE>
<CAPTION>
                                                     Rentable
                                                      Square   Estimated    Cost at    Pre-Leasing    Estimated    Estimated
           Name                       Market           Feet      Cost       9/30/01   Percentage(1)  Completion  Stabilization
           ----                       ------           ----      ----       -------   -------------  ----------  -------------
                                                                      ($ in thousands)

<S>                              <C>                <C>        <C>         <C>        <C>            <C>         <C>
Office:

Highwoods Center III at
   Tradeport(2)                  Atlanta               43,000  $   4,037    $  2,329       100%         4Q01         4Q01
Verizon Wireless(2)              Greenville           193,000     16,356      11,731       100%         1Q02         1Q02
International Place 3            Memphis              214,000     34,272      20,592       100%         2Q02         2Q02
Innslake(2)                      Richmond              65,000      7,214       4,529       100%         4Q01         2Q02
1825 Century Center(2)           Atlanta              102,000     16,254       1,019       100%         3Q02         3Q02
Shadow Creek II(2)               Memphis               81,000      8,750       5,522        19%         4Q01         4Q02
Highwoods Park at Jefferson
   Village(2)                    Piedmont Triad        98,000     11,290       8,945        --          4Q01         4Q02
Centre Green Four                Research Triangle    100,000     11,764       8,786        --          4Q01         4Q02
GlenLake I(2)                    Research Triangle    158,000     22,417      16,379        --          4Q01         4Q02
Seven Springs I(2)               Nashville            131,000     15,556      10,984         2%         1Q02         1Q03
801 Corporate Center Drive(2)    Research Triangle    100,000     12,016         828        40%         4Q02         2Q04
                                                    ---------  ---------   ---------      ----
In-Process Office Total or
   Weighted Average                                 1,285,000  $ 159,926   $  91,644        53%
                                                    =========  =========   =========      ====
Industrial:
Tradeport Place IV               Atlanta              122,000  $   4,447   $   3,765       100%         4Q01         4Q01
Newpoint IV                      Atlanta              136,000      5,288       3,503        --%         4Q01         4Q02
                                                    ---------  ---------   ---------      ----
In-Process Industrial Total or
   Weighted Average                                   258,000  $   9,735   $   7,268        47%
                                                    =========  =========   =========      ====
Retail:
Plaza Redevelopment (Granada
   Shops)                        Kansas City           20,000  $   4,680   $   3,017        90%         4Q01         4Q01
                                                    ---------  ---------   ---------      ----
In-Process Retail Total or
   Weighted Average                                    20,000  $   4,680   $   3,017        90%
                                                    =========  =========   =========      ====
Total or Weighted Average of
   all In-Process Development
   Projects                                         1,563,000  $ 174,341   $ 101,929        52%
                                                    =========  =========   =========      ====
</TABLE>

_________

(1)  Letters of intent comprise 4% of the Total Pre-Leasing Percentage.
(2)  We are developing these properties for a third party and own an option to
     purchase each property.

                                       20

<PAGE>

Completed--Not Stabilized

<TABLE>
<CAPTION>
                                                 Rentable
                                                  Square        Estimated      Cost at    Pre-Leasing    Estimated   Estimated
           Name                Market              Feet            Cost        9/30/01    Percentage(1)  Completion  Stabilization
           ----                ------            ----------    ----------      --------   -------------  ----------  -------------
                                                                    ($ in thousands)
<S>                         <C>                  <C>           <C>           <C>          <C>            <C>         <C>
Office:
380 Park Place              Tampa                    82,000    $    9,675    $    9,758            92%        1Q01       4Q01
Highwoods Plaza             Tampa                    66,000         7,505         6,861            37%        4Q00       1Q02
Deerfield III               Atlanta                  54,000         5,276         4,135            --         4Q00       2Q02
Met Life Building at
    Brookfield              Greenville              117,000        13,220        12,177            75%        3Q01       2Q02
Cool Springs II             Nashville               205,000        22,718        18,649            40%        2Q01       2Q02
Highwoods Tower II          Research Triangle       167,000        25,134        22,132            89%        1Q01       2Q02
Centre Green Two            Research Triangle        97,000        11,596         9,923            31%        2Q01       2Q02
ParkWest One                Research Triangle        46,000         4,364         3,717            74%        2Q01       2Q02
Shadow Creek                Memphis                  80,000         8,989         8,074            75%        4Q00       3Q02
Hickory Trace               Nashville                52,000         5,933         5,762            51%        3Q01       3Q02
North Shore Commons A       Richmond                115,000        13,084        13,684            79%        2Q01       3Q02
Stony Point III             Richmond                107,000        11,425        10,751            73%        2Q01       3Q02
                                                 ----------    ----------    ----------   -----------
Office Total or Weighted
   Average                                        1,188,000    $  138,919    $  125,623            62%
                                                 ==========    ==========    ==========   ===========
Industrial:
Holden Road                 Piedmont Triad           64,000    $    2,014    $    2,490            60%        1Q01       2Q02
Enterprise Center I         Piedmont Triad          120,000         3,807         3,398            25%        4Q00       2Q02
                                                 ----------    ----------    ----------   ------------
Industrial Total or
Weighted Average                                    184,000    $    5,821    $    5,888            37%
                                                 ==========    ==========    ==========   ===========

Total or Weighted
   Average of all
   Completed-Not
   Stabilized
   Development Projects                           1,372,000      $144,740    $  131,511           59%
                                                 ----------    ----------    ----------   -----------
Total or Weighted
   Average of all
   Development Projects                           2,935,000      $319,081    $  233,440           55%
                                                 ==========    ==========    ==========   ===========
</TABLE>
_________________

(1)   Letters of intent comprise 4% of the Grand Total Pre-Leasing Percentage.

                                       21

<PAGE>

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

 Summary by Estimated Stabilization Date:
     Fourth Quarter 2001 .....................        267,000    $  22,839          97%
     First Quarter 2002 ......................        259,000       23,861          84%
     Second Quarter 2002 .....................      1,149,000      129,615          64%
     Third Quarter 2002 ......................        456,000       55,685          78%
     Fourth Quarter 2002 .....................        573,000       59,509           3%
     First Quarter 2003 ......................        131,000       15,556           2%
     Second Quarter 2004 .....................        100,000       12,016          40%
                                                   ----------    ---------        ----
        Total or Weighted Average ............      2,935,000    $ 319,081          55%
                                                   ==========    =========        ====
Summary by Market:
     Atlanta .................................        457,000    $  35,302          58%
     Greenville ..............................        310,000       29,576          91%
     Kansas City .............................         20,000        4,680          90%
     Memphis .................................        375,000       52,011          77%
     Nashville ...............................        388,000       44,207          29%
     Piedmont Triad ..........................        282,000       17,111          24%
     Research Triangle .......................        668,000       87,291          38%
     Richmond ................................        287,000       31,723          82%
     Tampa ...................................        148,000       17,180          67%
                                                   ----------    ---------        ----
        Total or Weighted Average ............      2,935,000    $ 319,081          55%
                                                   ==========    =========        ====

     Build-to-Suit ...........................        509,000    $  66,882         100%
     Multi-Tenant ............................      2,426,000      252,199          46%
                                                   ----------    --------         ----
        Total or Weighted Average ............      2,935,000    $ 319,081          55%
                                                   ==========    =========        ====
</TABLE>

<TABLE>
<CAPTION>
                                                     Average
                                                    Rentable      Average
                                                     Square      Estimated     Pre-Leasing
                                                      Feet          Cost      Percentage(1)
                                                      ----          ----      -------------
                                                               (in thousands)
<S>                                                 <C>          <C>          <C>
Per Property Type:
     Office .................................        107,522     $  12,993          57%
     Industrial .............................        110,500         3,889          43%
     Retail .................................         20,000         4,680          90%
                                                    --------     ---------        ----
     All ....................................        104,821     $  11,396          55%
                                                    ========     =========        ====
</TABLE>

____________

(1)  Letters of intent comprise 4% of the Total Pre-Leasing Percentage.

                                       22

<PAGE>

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

<TABLE>
<CAPTION>
                                                                              Office Leasing Statistics
                                                                              -------------------------
                                                                                  Three Months Ended
                                                                                  ------------------
                                                             9/30/01       6/30/01      3/31/01      12/31/00      Average
                                                             -------       -------      -------      --------      -------
<S>                                                         <C>          <C>          <C>           <C>          <C>
Net Effective Rents Related to Re-Leased Space:
Number of lease transactions (signed leases) .............         135          155           132           199          155
Rentable square footage leased ...........................     630,043      773,415       941,419   $ 1,187,466      883,086
Average per rentable square foot over the lease term:
  Base rent ..............................................  $    17.03   $    16.36   $     17.73   $     17.51   $    17.16
  Tenant improvements ....................................       (0.90)       (1.17)        (1.13)        (1.14)       (1.09)
  Leasing commissions ....................................       (0.59)       (0.67)        (0.57)        (0.59)       (0.60)
  Rent concessions .......................................       (0.11)       (0.03)        (0.01)        (0.03)       (0.05)
                                                            ----------   ----------   -----------   -----------   ----------
  Effective rent .........................................       15.43        14.49         16.02         15.75        15.42
  Expense stop(1) ........................................       (4.54)       (3.37)        (2.96)        (4.73)       (3.90)
                                                            ----------   ----------   -----------   -----------   ----------
  Equivalent effective net rent ..........................  $    10.89   $    11.12   $     13.06   $     11.02   $    11.52
                                                            ==========   ==========   ===========   ===========   ==========
Average term in years ....................................         4.5          4.9           5.3           4.6          4.8
                                                            ==========   ==========   ===========   ===========   ==========
Capital Expenditures Related to Re-Leased Space:
Tenant Improvements:
  Total dollars committed under signed leases ............  $2,431,063   $5,052,983   $ 7,103,609   $ 7,273,031   $5,465,172
  Rentable square feet ...................................     630,043      773,415       941,419     1,187,466      883,086
                                                            ----------   ----------   -----------   -----------   ----------
  Per rentable square foot ...............................  $     3.86   $     6.53   $      7.55   $      6.12   $     6.19
                                                            ==========   ==========   ===========   ===========   ==========
Leasing Commissions:
  Total dollars committed under signed leases ............  $1,018,216   $1,991,418   $ 3,361,410   $ 2,873,345   $2,311,097
  Rentable square feet ...................................     630,043      773,415       941,419     1,187,466      883,086
                                                            ----------   ----------   -----------   -----------   ----------
  Per rentable square foot ...............................  $     1.62   $     2.57   $     3.57    $      2.42   $     2.62
                                                            ==========   ==========   ===========   ===========   ==========
Total:
  Total dollars committed under signed leases ............  $3,449,279   $7,044,401   $10,465,020   $10,146,377   $7,776,269
  Rentable square feet ...................................     630,043      773,415       941,419     1,187,466      883,086
                                                            ----------   ----------   -----------   -----------   ----------
  Per rentable square foot ...............................  $     5.47   $     9.11   $     11.12   $      8.54   $     8.81
                                                            ==========   ==========   ===========   ===========   ==========
Rental Rate Trends:
Average final rate with expense pass throughs ............  $    16.27   $    14.84   $     15.05   $     15.83   $    15.49
Average first year cash rental rate ......................  $    16.51   $    15.54   $     16.04   $     16.38   $    16.12
                                                            ----------   ----------   -----------   -----------   ----------
Percentage increase ......................................         1.5%         4.7%          6.6%          3.5%         4.0%
                                                            ==========   ==========   ===========   ===========   ==========
</TABLE>

__________

(1)  "Expense Stop" represents operating expenses (generally including taxes,
     utilities, routine building expense and common area maintenance) which will
     not be reimbursed by our tenants.

                                       23

<PAGE>

<TABLE>
<CAPTION>
                                                                             Industrial Leasing Statistics
                                                                             -----------------------------
                                                                                  Three Months Ended
                                                                                  ------------------
                                                             9/30/01       6/30/01      3/31/01     12/31/00     Average
                                                             -------       -------      -------     --------     -------
<S>                                                         <C>          <C>          <C>          <C>          <C>
Net Effective Rents Related to Re-Leased Space:
Number of lease transactions (signed leases) ..........            26           23           27           31           27
Rentable square footage leased ........................       285,241      153,507      190,663      355,947      246,340
Average per rentable square foot over the lease term:
  Base rent ...........................................     $    4.71    $    5.84    $    5.88    $    5.29    $    5.43
  Tenant improvements .................................         (0.38)       (0.27)       (0.20)       (0.29)       (0.28)
  Leasing commissions .................................         (0.11)       (0.15)       (0.09)       (0.15)       (0.13)
  Rent concessions ....................................           ---          ---          ---          ---          ---
                                                            ---------    ---------    ---------    ---------    ---------
  Effective rent ......................................          4.22         5.42         5.59         4.85         5.02
  Expense stop(1) .....................................         (0.30)       (0.49)       (0.74)       (0.30)       (0.46)
                                                            ---------    ---------    ---------    ---------    ---------
  Equivalent effective net rent .......................     $    3.92    $    4.93    $    4.85    $    4.55    $    4.56
                                                            =========    =========    =========    =========    =========
  Average term in years ...............................           3.3          2.5          2.5          2.7          2.7
                                                            =========    =========    =========    =========    =========
Capital Expenditures Related to Re-Leased Space:
Tenant Improvements:
  Total dollars committed under signed leases .........     $ 606,380    $ 175,777    $  91,304    $ 412,679    $ 321,535
  Rentable square feet ................................       285,241      153,507      190,663      355,947      246,340
                                                            ---------    ---------    ---------    ---------    ---------
  Per rentable square foot ............................     $    2.13    $    1.15    $    0.48    $    1.16    $    1.31
                                                            =========    =========    =========    =========    =========
Leasing Commissions:

  Total dollars committed under signed leases .........     $  87,034    $  63,679    $  61,239    $ 145,117    $  89,267
  Rentable square feet ................................       285,241      153,507      190,663      355,947      246,340
                                                            ---------    ---------    ---------    ---------    ---------
  Per rentable square foot ............................     $    0.31    $    0.41    $    0.32    $    0.41    $    0.36
                                                            =========    =========    =========    =========    =========
Total:
  Total dollars committed under signed leases .........     $ 693,414    $ 239,456    $ 152,542    $ 557,796    $ 410,802
  Rentable square feet ................................       285,241      153,507      190,663      355,947      246,340
                                                            ---------    ---------    ---------    ---------    ---------
  Per rentable square foot ............................     $    2.43    $    1.56    $    0.80    $    1.57    $    1.67
                                                            =========    =========    =========    =========    =========
Rental Rate Trends:
Average final rate with expense pass throughs .........     $    4.85    $    5.73    $    4.89    $    4.92    $    5.10
Average first year cash rental rate ...................     $    4.60    $    5.75    $    5.06    $    5.23    $    5.16
                                                            ---------    ---------    ---------    ---------    ---------
Percentage (decrease)/increase ........................          (5.1)%        0.4%         3.4%         6.3%        1.2%
                                                            =========    =========    =========    =========    =========
</TABLE>

_____________

(1)  "Expense Stop" represents operating expenses (generally including taxes,
     utilities, routine building expense and common area maintenance) which will
     not be reimbursed by our tenants.

                                       24

<PAGE>

<TABLE>
<CAPTION>
                                                                                  Retail Leasing Statistics
                                                                                    Three Months Ended
                                                                                  -------------------------
                                                            9/30/01        6/30/01       3/31/01       12/31/00      Average
                                                            --------       -------      ---------      --------      --------
<S>                                                       <C>             <C>           <C>           <C>          <C>
Net Effective Rents Related to Re-Leased Space:
Number of lease transactions (signed leases) ...........           9            14              9            15            12
Rentable square footage leased .........................      40,283        21,072         38,618        35,057        33,758
Average per rentable square foot over the lease term:
  Base rent ............................................  $    16.33    $    22.84      $   29.31     $   24.07     $   23.14
  Tenant improvements ..................................       (1.49)        (0.66)         (1.86)        (1.90)        (1.48)
  Leasing commission ...................................       (0.75)        (0.57)         (0.29)        (0.49)        (0.52)
  Rent concessions .....................................          --            --          (0.22)           --         (0.06)
                                                          ----------    ----------      ---------     ---------     ---------
  Effective rent .......................................       14.09         21.61          26.94         21.68         21.08
  Expense stop(1) ......................................          --            --             --            --            --
                                                          ----------    ----------      ---------     ---------     ---------
  Equivalent effective net rent ........................  $    14.09    $    21.61      $   26.94     $   21.68     $   21.08
                                                          ==========    ==========      =========     =========     =========
  Average term in years ................................         8.8           5.3            9.3           6.7           7.5
                                                          ==========    ==========      =========     =========     =========

Capital Expenditures Related to Re-Leased Space:

Tenant Improvements:
  Total dollars committed under signed leases ..........  $  526,500    $  121,713      $ 729,480     $ 655,301     $ 508,248
  Rentable square feet .................................      40,283        21,072         38,618        35,057        33,758
                                                          ----------    ----------      ---------     ---------     ---------
  Per rentable square foot .............................  $    13.07    $     5.78      $   18.89     $   18.69     $   15.06
                                                          ==========    ==========      =========     =========     =========

Leasing Commissions:
  Total dollars committed under signed leases ..........  $  196,296    $   61,537      $  93,045     $  66,986     $ 104,466
  Rentable square feet .................................      40,283        21,072         38,618        35,057        33,758
                                                          ----------    ----------      ---------     ---------     ---------
  Per rentable square foot .............................  $     4.87    $     2.92      $    2.41     $    1.91     $    3.09
                                                          ==========    ==========      =========     =========     =========
Total:
  Total dollars committed under signed leases ..........  $  722,796    $  183,249      $ 822,525     $ 722,287     $ 612,714
  Rentable square feet .................................      40,283        21,072         38,618        35,057        33,758
                                                          ----------    ----------      ---------     ---------     ---------
  Per rentable square foot .............................  $    17.94    $     8.70      $   21.30     $   20.60     $   18.15
                                                          ==========    ==========      =========     =========     =========
Rental Rate Trends:
Average final rate with expense pass throughs ..........  $    11.28    $    17.99      $   12.91     $   18.41     $   15.15
Average first year cash rental rate ....................  $    14.82    $    21.51      $   19.70     $   22.57     $   19.65
                                                          ----------    ----------      ---------     ---------     ---------
Percentage increase ....................................       31.4%          19.6%          52.6%         22.6%         29.7%
                                                          ==========    ==========      =========     =========     =========
</TABLE>
___________

(1)   "Expense Stop" represents operating expenses (generally including taxes,
      utilities, routine building expense and common area maintenance) which
      will not be reimbursed by our tenants.

                                       25

<PAGE>

     The following tables set forth scheduled lease expirations at our wholly
owned in-service properties (excluding apartment units) as of September 30,
2001, assuming no tenant exercises renewal options.

Office Properties:

<TABLE>
<CAPTION>
                                                           Percentage of                                         Percentage of
                                                           Leased Square     Annual Rents      Average Annual    Leased Rents
         Year of                        Total Rentable        Footage            Under        Rental Rate Per     Represented
          Lease              Number      Square Feet      Represented by       Expiring       Square Foot for     By Expiring
       Expiration           of Leases      Expiring       Expiring Leases      Lease (1)       Expirations(1)       Leases
       -----------          ---------      --------       ---------------      ---------       --------------       ------
                                                                            (in thousands)
<S>                         <C>           <C>                   <C>         <C>                  <C>                <C>
Remainder of 2001 .......       224           656,109               2.8%        $  10,558           $   16.09            2.6%
2002 ....................       554         3,014,927              13.0%           51,040               16.93           12.8%
2003 ....................       573         3,717,421              15.9%           63,050               16.96           15.7%
2004 ....................       443         2,796,127              12.0%           49,686               17.77           12.4%
2005 ....................       411         3,131,218              13.4%           54,335               17.35           13.5%
2006 ....................       295         2,671,036              11.5%           45,889               17.18           11.4%
2007 ....................        56           803,317               3.5%           12,891               16.05            3.2%
2008 ....................        77         1,810,679               7.8%           27,274               15.06            6.8%
2009 ....................        23         1,058,870               4.6%           18,556               17.52            4.6%
2010 ....................        40         1,493,144               6.4%           27,621               18.50            6.9%
2011 and thereafter .....        97         2,114,025               9.1%           40,445               19.13           10.1%
                             ------       -----------            -------      -----------           ---------         -------
                              2,793        23,266,873             100.0%        $ 401,345           $   17.25          100.0%
                             ======       ===========            =======      ===========           =========          ======
</TABLE>

Industrial Properties:

<TABLE>
<CAPTION>
                                                            Percentage of                                        Percentage of
                                                            Leased Square     Annual Rents     Average Annual    Leased Rents
         Year of                         Total Rentable        Footage            Under        Rental Rate Per    Represented
          Lease              Number       Square Feet      Represented by       Expiring       Square Foot for    by Expiring
       Expiration           of Leases       Expiring       Expiring Leases      Leases(1)      Expirations(1)       Leases
       -----------          ---------       --------       ---------------      ---------      --------------       ------
                                                                             (in thousands)
<S>                         <C>           <C>                  <C>          <C>                 <C>                <C>
Remainder of 2001 .......          37          442,918              4.6%        $    2,070           $  4.67             4.5%
2002 ....................         122        2,339,745             24.3%             9,960              4.26            21.7%
2003 ....................         107        1,189,986             12.4%             6,317              5.31            13.8%
2004 ....................          81        2,167,998             22.5%             9,177              4.23            20.0%
2005 ....................          42          740,121              7.7%             4,303              5.81             9.4%
2006 ....................          31          627,930              6.5%             3,897              6.21             8.5%
2007 ....................          14        1,093,166             11.4%             4,530              4.14             9.9%
2008 ....................           7          241,961              2.5%             1,501              6.20             3.3%
2009 ....................           6          268,813              2.8%             1,865              6.94             4.1%
2010 ....................           4          182,746              1.9%             1,063              5.82             2.3%
2011 and thereafter .....          11          331,074              3.4%             1,145              3.46             2.5%
                                -----       ----------            ------        ----------           -------          ------
                                  462        9,626,458            100.0%        $   45,828           $  4.76           100.0%
                                =====       ==========            ======        ==========           =======          ======
</TABLE>
______________

(1) Annualized Rental Revenue is September 2001 rental revenue (base rent plus
operating expense pass throughs) multiplied by 12.

                                       26

<PAGE>

Retail Properties:

<TABLE>
<CAPTION>
                                                       Percentage of                                     Percentage of
                                                       Leased Square    Annual Rents   Average Annual     Leased Rents
       Year of                       Total Rentable       Footage           Under      Rental Rate Per     Represented
        Lease              Number     Square Feet     Represented by      Expiring     Square Foot for     by Expiring
     Expiration          of Leases      Expiring      Expiring Leases     Leases(1)     Expirations(1)        Leases
     ----------          ---------      --------      ---------------     ---------     --------------        ------
                                                                       (in thousands)
<S>                      <C>         <C>              <C>              <C>             <C>               <C>
Remainder of 2001 .....        9          32,506            2.1%           $   327          $ 10.06            0.9%
2002 ..................       36          77,424            5.0%             1,645            21.25            4.6%
2003 ..................       47         149,431            9.7%             2,997            20.06            8.3%
2004 ..................       34         152,448            9.9%             2,171            14.24            6.0%
2005 ..................       49         157,307           10.2%             3,085            19.61            8.6%
2006 ..................       28          86,546            5.6%             2,195            25.36            6.1%
2007 ..................       23          83,888            5.4%             1,847            22.02            5.1%
2008 ..................       23         100,444            6.5%             3,429            34.14            9.5%
2009 ..................       17         138,829            9.0%             2,823            20.33            7.8%
2010 ..................       20         125,470            8.1%             3,195            25.46            8.9%
2011 and thereafter ...       41         438,556           28.5%            12,274            27.99           34.2%
                            ----       ---------          -----            -------          -------          -----
                             327       1,542,849          100.0%           $35,988          $ 23.33          100.0%
                            ====       =========          =====            =======          =======          =====
</TABLE>

Total:

<TABLE>
<CAPTION>
                                                       Percentage of                                     Percentage of
                                                       Leased Square    Annual Rents   Average Annual     Leased Rents
       Year of                       Total Rentable       Footage           Under      Rental Rate Per     Represented
        Lease              Number     Square Feet     Represented by      Expiring     Square Foot for     by Expiring
     Expiration          of Leases      Expiring      Expiring Leases     Leases(1)     Expirations(1)        Leases
     ----------          ---------      --------      ---------------     ---------     --------------        ------
                                                                       (in thousands)
<S>                      <C>         <C>              <C>              <C>             <C>               <C>
Remainder of 2001 .....      270        1,131,533           3.3%          $ 12,955          $ 11.45            2.7%
2002 ..................      712        5,432,096          15.7%            62,645            11.53           13.0%
2003 ..................      727        5,056,838          14.7%            72,364            14.31           14.9%
2004 ..................      558        5,116,573          14.8%            61,034            11.93           12.6%
2005 ..................      502        4,028,646          11.7%            61,723            15.32           12.8%
2006 ..................      354        3,385,512           9.8%            51,981            15.35           10.8%
2007 ..................       93        1,980,371           5.8%            19,268             9.73            4.0%
2008 ..................      107        2,153,084           6.3%            32,204            14.96            6.7%
2009 ..................       46        1,466,512           4.3%            23,244            15.85            4.8%
2010 ..................       64        1,801,360           5.2%            31,879            17.70            6.6%
2011 and thereafter ...      149        2,883,655           8.4%            53,864            18.68           11.1%
                           -----       ----------         -----           --------          -------          -----
                           3,582       34,436,180         100.0%          $483,161          $ 14.03          100.0%
                           =====       ==========         =====           ========          =======          =====
</TABLE>

___________

(1)  Annualized Rental Revenue is September 2001 rental revenue (base rent plus
     operating expense pass throughs) multiplied by 12.

Inflation

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

                                       27

<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

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

     Certain Variable Rate Debt. As of September 30, 2001, the Company had
approximately 66.5 million of variable rate debt outstanding that was not
protected by interest rate hedge contracts. If the weighted average interest
rate on this variable rate debt is 100 basis points higher or lower during the
12 months ended September 30, 2002, our interest expense would be increased or
decreased approximately $665,000. In addition, as of September 30, 2001, we had
$80.0 million of additional variable rate debt outstanding that was protected by
an interest rate collar that effectively keeps the interest rate within a range
of 65 basis points. We do not believe that a 100 basis point increase or
decrease in interest rates would materially affect our interest expense with
respect to this $80.0 million of debt.

     Interest Rate Hedge Contracts. For a discussion of our interest rate hedge
contracts in effect at September 30, 2001, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources--Capitalization." If interest rates increase by 100 basis points, the
aggregate fair market value of these interest rate hedge contracts as of
September 30, 2001 would increase by approximately $130,403. If interest rates
decrease by 100 basis points, the aggregate fair market value of these interest
rate hedge contracts as of September 30, 2001 would decrease by approximately
$132,269.

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

                                       28

<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 REALTY LIMITED PARTNERSHIP

                                       By:  Highwoods Properties, Inc.,
                                            its general partner

                                        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: November 14, 2001

                                       29