<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, 1996
                      Commission file number: 333-3890-01
                     HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
             (Exact name of registrant as specified in its charter)
<TABLE>
<S>                                                        <C>
                     NORTH CAROLINA                                            56-1869557
             (State or other jurisdiction of                                (I.R.S. Employer
             incorporation or organization)                              Identification Number)
</TABLE>
 
                 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/FORSYTH LIMITED PARTNERSHIP
            QUARTERLY REPORT FOR THE PERIOD ENDED SEPTEMBER 30, 1996
                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
 PART I.   FINANCIAL INFORMATION                                                                           PAGE
<S>        <C>                                                                                             <C>
Item 1.    Financial Statements                                                                              3
           Balance Sheets of Highwoods/Forsyth Limited Partnership as of September 30, 1996 and December     4
           31, 1995
           Statements of Income of Highwoods/Forsyth Limited Partnership for the three and nine month        5
           periods ended September 30, 1996 and 1995
           Statements of Cash Flows of Highwoods/Forsyth Limited Partnership for the nine months ended       6
           September 30, 1996 and 1995
           Notes to the Financial Statements of Highwoods/Forsyth Limited Partnership                        8
           Pro Forma Financial Information                                                                  10
           Pro Forma Condensed Consolidated Statement of Operations of Highwoods/Forsyth Limited            11
           Partnership for the nine months ended September 30, 1996
           Notes to Pro Forma Condensed Statement of Operations of Highwoods/Forsyth Limited Partnership    12
           for the nine months ended September 30, 1996
           Pro Forma Condensed Consolidated Statement of Operations of Highwoods/Forsyth Limited            14
           Partnership for the year ended December 31, 1995
           Notes to Pro Forma Condensed Consolidated Statement of Operations of Highwoods/Forsyth           15
           Limited Partnership for the year ended December 31, 1995
Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations            17
           Results of Operations                                                                            17
           Liquidity and Capital Resources                                                                  18
           Acquisition of Crocker Realty Trust, Inc.                                                        19
           Disclosure Regarding Forward Looking Statements                                                  20
           Funds From Operations and Cash Available for Distribution                                        20
           Property Information                                                                             22
           Third-Party Service Operations                                                                   24
           Inflation                                                                                        24
PART II.   OTHER INFORMATION
Item 1.    Legal Proceedings                                                                                25
Item 2.    Changes in Securities                                                                            25
Item 3.    Defaults Upon Senior Securities                                                                  25
Item 4.    Submission of Matters to a Vote of Security Holders                                              25
Item 5.    Other Information                                                                                25
Item 6.    Exhibits and Reports on Form 8-K                                                                 25
</TABLE>
 
                                       2
 
<PAGE>
                        PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
     The information furnished in the accompanying balance sheets, statements of
operations and statements of cash flows reflect all adjustments that are, in the
opinion of management, necessary for a fair presentation of the aforementioned
financial statements for the interim period.
                                       3
 
<PAGE>
                     HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
                                 BALANCE SHEETS
                     (IN THOUSANDS EXCEPT UNIT INFORMATION)
<TABLE>
<CAPTION>
                                                                            SEPTEMBER 30, 1996    DECEMBER 31, 1995
<S>                                                                         <C>                   <C>
                                                                               (UNAUDITED)
ASSETS
Real estate assets, at cost:
  Land...................................................................       $  238,014            $ 106,955
  Buildings..............................................................        1,063,729              491,581
  Development in process.................................................           37,656               15,508
  Furniture, fixtures and equipment......................................            1,888                1,288
                                                                                 1,341,287              615,332
  Less -- accumulated depreciation                                                 (33,988)             (22,266)
     Rental property, net................................................        1,307,299              593,066
Cash and cash equivalents................................................           18,384                6,838
Restricted Cash..........................................................           11,532                   --
Accounts and notes receivable............................................            7,043                6,338
Notes receivable from service subsidiaries...............................            1,404                1,274
Accrued straight line rents receivable...................................            4,957                3,407
Other assets:
  Deferred leasing costs.................................................            5,869                4,253
  Deferred financing costs and interest rate caps........................           11,968                8,268
  Prepaid expenses and other.............................................            3,696                1,521
                                                                                    21,533               14,042
  Less -- accumulated amortization.......................................           (5,908)              (3,831)
                                                                                    15,625               10,211
                                                                                $1,366,244            $ 621,134
LIABILITIES AND PARTNERS' CAPITAL
Mortgages and notes payable..............................................       $  597,734            $ 182,736
Accounts payable, accrued expenses and other liabilities.................           28,694               11,052
  Total liabilities......................................................          626,428              193,788
Redeemable operating partnership units outstanding, 4,374,528 at
  September 30, 1996 and 3,731,000 at December 31, 1995..................          132,876              105,401
Partners' capital:
General partner units outstanding, 356,732 at September 30, 1996 and
  231,368 at December 31, 1995...........................................            6,070                3,219
Limited partner units outstanding, 30,941,914 at September 30, 1996 and
  19,174,455 at December 31, 1995........................................          600,870              318,726
  Total partners' capital................................................          606,940              321,945
                                                                                $1,366,244            $ 621,134
</TABLE>
 
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                       4
 
<PAGE>
                     HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
                              STATEMENTS OF INCOME
              (UNAUDITED AND IN THOUSANDS EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED      NINE MONTHS ENDED
                                                                    SEPTEMBER 30,           SEPTEMBER 30,
                                                                  1996         1995       1996         1995
<S>                                                              <C>          <C>        <C>          <C>
REVENUE:
  Rental property.............................................   $29,186      $19,673    $79,476      $49,644
  Interest and other income...................................     3,695          887      4,602        1,280
                                                                  32,881       20,560     84,078       50,924
OPERATING EXPENSES:
  Rental property.............................................     7,898        4,666     21,093       11,917
  Depreciation and amortization...............................     4,724        3,069     12,556        7,612
  Interest expense:
     Contractual..............................................     4,468        3,812     12,715        8,720
     Amortization of deferred financing costs and interest
       rate cap...............................................       428          385      1,255        1,215
                                                                   4,896        4,197     13,970        9,935
  General and administrative..................................     1,653          689      3,787        1,813
     Income before extraordinary item.........................    13,710        7,939     32,672       19,647
  Extraordinary item -- loss on early extinguishment of
     debt.....................................................    (2,432)          --     (2,432)      (1,068)
     Net income...............................................   $11,278      $ 7,939    $30,240      $18,579
NET INCOME PER UNIT:
  Income before extraordinary item............................   $  0.39      $  0.39    $  1.19      $  1.14
  Extraordinary item -- loss on early extinguishment of
     debt.....................................................   $ (0.07)     $    --    $ (0.09)     $ (0.06)
  Net income..................................................   $  0.32      $  0.39    $  1.10      $  1.07
  Weighted average units outstanding..........................    35,406       20,512     27,421       17,301
NET INCOME PER UNIT:
  General partner.............................................   $  0.32      $  0.39    $  1.10      $  1.07
  Limited partner.............................................   $  0.32      $  0.39    $  1.10      $  1.07
WEIGHTED AVERAGE UNITS OUTSTANDING:
  General partner.............................................       354          205        274          173
  Limited partner.............................................    35,052       20,307     27,147       17,128
                                                                  35,406       20,512     27,421       17,301
</TABLE>
 
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                       5
 
<PAGE>
                     HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
                            STATEMENTS OF CASH FLOWS
                          (UNAUDITED AND IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                             NINE MONTHS ENDED
                                                                                               SEPTEMBER 30,
                                                                                             1996        1995
<S>                                                                                        <C>         <C>
OPERATING ACTIVITIES:
Net income..............................................................................   $ 30,240    $  18,579
Adjustments to reconcile net income to net cash provided by operating activities:
  Depreciation and amortization.........................................................     13,811        8,827
  Loss on early extinguishment of debt..................................................      2,432        1,068
  Changes in operating assets and liabilities...........................................        114        1,104
     Net cash provided by operating activities..........................................     46,597       29,578
INVESTING ACTIVITIES:
Additions to real estate assets.........................................................   (112,574)     (73,097)
Proceeds from disposition of real estate assets.........................................        900           --
Cash from contributed net assets........................................................     20,711          549
Cash advanced to Cedar Acquisition Corporation..........................................   (322,276)          --
Cash paid in exchange for partnership net assets........................................         --       (6,539)
Other...................................................................................     (2,858)      (1,539)
     Net cash used in investing activities..............................................   (416,097)     (80,626)
FINANCING ACTIVITIES:
Distributions paid......................................................................    (38,153)     (19,508)
Repayment of mortgages and notes payable................................................   (184,858)    (200,794)
Borrowings on mortgages and notes payable...............................................    307,500      121,500
Net proceeds from contributed capital...................................................    298,818      220,055
Payment of prepayment penalties.........................................................     (1,184)      (1,068)
Payment of deferred financing costs.....................................................     (1,077)        (519)
     Net cash provided by financing activities..........................................    381,046      119,666
Net increase in cash and cash equivalents...............................................     11,546       68,618
Cash and cash equivalents at beginning of the period....................................      6,838        6,258
Cash and cash equivalents at end of the period..........................................   $ 18,384    $  74,876
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest..................................................................   $ 12,816    $   3,841
</TABLE>
 
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                       6
 
<PAGE>
                     HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
                            STATEMENT OF CASH FLOWS
                          (UNAUDITED AND IN THOUSANDS)
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
     The following summarizes the net assets contributed by the unit holders of
the Operating Partnership or acquired subject to mortgage notes payable:
<TABLE>
<CAPTION>
                                                                                           NINE MONTHS ENDED
                                                                                             SEPTEMBER 30,
                                                                                           1996          1995
<S>                                                                                      <C>           <C>
ASSETS:
Rental property and equipment, net....................................................   $614,329      $241,468
Restricted cash.......................................................................     11,476             0
Deferred financing costs, net.........................................................      3,871           842
Accounts receivable and other.........................................................      1,653         6,290
  Total assets........................................................................    631,329       248,600
LIABILITIES:
Mortgages and notes payable assumed...................................................    292,356       194,182
  Accounts payable, accrued expenses and other liabilities............................     19,142            --
  Total liabilities...................................................................    311,498       194,182
     Net assets.......................................................................   $319,831      $ 54,418
</TABLE>
 
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
                                       7
 
<PAGE>
                     HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1996
1. ORGANIZATION AND FORMATION OF THE OPERATING PARTNERSHIP
     Highwoods/Forsyth Limited Partnership (the "Operating Partnership,"
formerly Highwoods Realty Limited Partnership), commenced operations on June 14,
1994 when Highwoods Properties, Inc. (the "Company") completed an initial public
offering (the "Initial Public Offering") and issued 7.4 million shares of common
stock (plus 1.1 million shares subsequently issued pursuant to the underwriters'
over-allotment option).
     The following transactions (the "Formation Transactions") occurred in
connection with the Initial Public Offering:
     (Bullet) The Company consummated various purchase agreements to acquire
              certain interests in 41 properties, including 27 properties which
              were not owned by the predecessor to the Company and the Operating
              Partnership (the "Highwoods Group") prior to the Initial Public
              Offering.
              For the 14 properties previously owned by the Highwoods Group,
              negative net assets of approximately $9,272,000 were contributed
              to the Operating Partnership at their historical cost.
              Approximately $8,400,000 was distributed to non-continuing
              partners of the Highwoods Group for their partnership interest in
              the 14 properties. For the 27 properties not owned by the
              Highwoods Group, the Operating Partnership issued approximately
              $4,200,000 of limited partner interests ("Units"), assumed
              $54,164,000 of debt and paid $82,129,000 in cash. These 27
              properties were recorded at their purchase price using the
              purchase method of accounting.
     (Bullet) The Company became the sole general partner of the Operating
              Partnership by contributing its ownership interests in the 41
              properties and its third-party fee business and all but
              $10,400,000 of the net proceeds of the Initial Public Offering in
              exchange for an approximate 88.3% interest in the Operating
              Partnership.
     (Bullet) The Operating Partnership executed various option and purchase
              agreements whereby it paid approximately $81,352,000 in cash,
              issued 1,054,664 redeemable Units in the Operating Partnership and
              assumed approximately $118,111,000 of indebtedness in exchange for
              fee simple interests in the 41 properties and the development
              land.
     (Bullet) The Operating Partnership contributed the third-party management
              and development business and the third-party leasing business to
              Highwoods Services, Inc. (formerly Highwoods Realty Services, Inc.
              and Highwoods Leasing Company) in exchange for 100% of each
              company's non-voting common stock and 1% of their voting common
              stock.
     As a result of common stock offerings and subsequent contributions of
capital to the Operating Partnership by the Company, the Company owns
approximately 88% of the Units in the Operating Partnership as of September 30,
1996 (including its 1% general partnership interest in the Operating
Partnership). These Units are classified as general partners' capital and
limited partners' capital in the accompanying Statements of partners' capital.
The Company's capital accounts are adjusted to reflect the 1% general partner
interest with the adjustments at book value.
     Generally one year after issuance (the "lock-up period"), the Operating
Partnership is obligated to redeem each Unit at the request of the holder
thereof for cash, provided that the Company at its option may elect to acquire
any such Unit presented for redemption by exchanging one share of Common Stock
for the Unit or cash at the fair market value. When a Unit holder redeems a Unit
for a share of Common Stock or cash, the minority interest will be reduced and
the Company's share in the Operating Partnership will be increased. The
Company's general and limited partner Units are not redeemable for cash. At
September 30, 1996, the one-year lock-up period had expired with respect to
3,623,699 of the 4,374,528 Units issued.
                                       8
 
<PAGE>
                     HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. BASIS OF PRESENTATION
     The Operating Partnership's investments in Highwoods Services, Inc. and
Forsyth Properties Services, Inc. (the "Service Companies") are accounted for
using the equity method of accounting. All significant intercompany balances and
transactions have been eliminated in the financial statements.
     The extraordinary loss represents the write-off of loan origination fees
and prepayments penalties paid on the early extinguishment of debt.
                                       9
 
<PAGE>
                     HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
                        PRO FORMA FINANCIAL INFORMATION
     The accompanying unaudited Pro Forma Condensed Consolidated Statements of
Operations for the year ended December 31, 1995 assume that the following
transactions all occurred as of January 1, 1995: (i) the merger with Forsyth
Properties, Inc. and its affiliates (the "Forsyth Transaction"), (ii) the
acquisition of the Research Commons Properties, (iii) the issuance of 5,640,000
shares of common stock of the Company at a price of $20.75 per share (the
"February 1995 Offering"), (iv) the issuance of 4,774,989 shares of common stock
of the Company at a price of $24.50 per share (the "August 1995 Offering"), (v)
acquisitions of a total of 77 Properties and 68 acres of Development Land (the
"Other 1995 Acquisitions"), (vi) the merger with Eakin & Smith, Inc. and its
affiliates (the "Eakin & Smith Transaction"), (vii) the issuance of 11,500,000
and 250,000 shares of common stock of the Company at per share prices of $26.875
and $27.375, respectively (the "Summer 1996 Offerings") and (viii) the merger
with Crocker Realty Trust, Inc. (the "Crocker Merger"). The pro forma operating
data for the nine months ended September 30, 1996 assumes that (i) this
Offering, (ii) the Eakin & Smith Transaction, (iii) the Summer 1996 Offerings
and (iv) the Crocker Merger occurred as of January 1, 1995. These unaudited
statements should be read in conjunction with the respective financial
statements and notes thereto of the Operating Partnership and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included herein. In the opinion of management, the pro forma condensed
consolidated financial information provides all adjustments necessary to reflect
the effects of the aforementioned transactions.
     The pro forma condensed consolidated financial information is unaudited and
is not necessarily indicative of the consolidated results which would have
occurred if the transactions had been consummated in the periods presented, or
on any particular date in the future, nor does it purport to represent the
financial position, results of operations or changes in cash flows for future
periods.
                                       10
 
<PAGE>
                     HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
             PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
                           (UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
                                                               PRE-ACQUISITION RESULTS
                                                                       CROCKER       CROCKER
                                         HISTORICAL   EAKIN & SMITH   HISTORICAL   ACQUISITIONS    PRO FORMA
                                            (A)            (B)           (C)           (D)        ADJUSTMENTS    PRO FORMA
<S>                                      <C>          <C>             <C>          <C>            <C>            <C>
REVENUE:
  Rental property.......................  $ 79,476       $ 3,000       $ 51,262        $520         $   900(E)   $135,158
  Other income..........................     4,602            --          2,959          12          (5,217)(F)     2,356
                                            84,078         3,000         54,221         532          (4,317)      137,514
OPERATING EXPENSES:
  Rental property.......................    21,093           957         18,287         179          (1,640)(G)    38,876
  Depreciation and amortization.........    12,556           526          9,317         108             351(H)     22,858
  Interest expense:
     Contractual........................    12,715           739         16,126         215          (1,754)(I)    28,041
     Amortization of deferred financing
       costs............................     1,255            --            849          --            (475)(J)     1,629
                                            13,970           739         16,975         215          (2,229)       29,670
  General and administrative............     3,787           153          4,113          --          (3,816)(K)     4,237
     Income before extraordinary item...  $ 32,672       $   625       $  5,529        $ 30         $ 3,017      $ 41,873
     Net income per unit................                                                                         $   1.18
  Weighted average units................                                                                           35,432
</TABLE>
 
       See Notes to Pro Forma Condensed Combining Statement of Operations
                                       11
 
<PAGE>
                     HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
         NOTES TO PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
                           (UNAUDITED, IN THOUSANDS)
     (A.) Reflects the Operating Partnership's historical statement of
operations contained in its Quarterly Report on form 10-Q for the nine months
ended September 30, 1996.
     (B.) Reflects the historical statement of operations of Eakin & Smith, Inc.
for the three months ended March 31, 1996, which was acquired by the Operating
Partnership on April 1, 1996.
     (C.) Represents the historical statement of operations of Crocker Realty
Trust, Inc. ("Crocker") for the period from January 1, 1996 to September 5,
1996.
     (D.) Reflects the historical operations of the Towermarc properties, which
were acquired by Crocker on January 16, 1996, adjusted on a pro forma basis for
interest and depreciation expense, for the period from January 1, 1996 to
January 16, 1996, the date of the acquisition of Towermarc. Depreciation expense
is calculated on the purchase price allocated to buildings, site improvements
and tenant improvements with depreciation calculated on a straight-line basis
over useful lives of 40 years, 15 years and the life of the respective leases,
respectively.
     (E.) Reflects incremental rental income from a supplemental lease agreement
entered into in connection with the Crocker Merger. The lease agreement was a
condition of the Crocker Merger.
     (F.) Reflects the elimination of certain third-party leasing and property
management income of Crocker not retained by the Operating Partnership ($1,824),
the elimination of interest income on short-term investments advanced to a
wholly owned subsidiary of the Company (the "Merger Subsidiary") in connection
the Crocker Merger ($2,219) and the elimination of interest on advances to
affiliates in connection with the Crocker Merger ($1,174).
     (G.) Reflects the net adjustment to rental property expenses to eliminate
the costs related to certain assets (primarily land held for development) which
were retained by the prior shareholders of Crocker ($800) and to eliminate
certain other property operating costs (primarily personnel and office costs for
duplicative property management operations) which have been eliminated upon the
completion of the Crocker Merger ($840).
     (H.) Represents the net adjustment to depreciation expense based upon an
assumed allocation of the purchase price to land, buildings and development in
process and building depreciation computed on a straight-line basis using an
estimated life of 40 years for buildings and 7 years for furniture, fixtures and
equipment as follows:
<TABLE>
<S>                                             <C>
Eakin & Smith Transaction....................   $ (73)
Crocker Merger...............................     424
       Total.................................   $(351)
</TABLE>
 
     (I.) Represents the net adjustment to interest expense to reflect interest
costs on the net incremental borrowings related to the Eakin & Smith
Transaction, the Crocker Merger (including effects of refinancing of certain
Crocker mortgage debt with borrowings under the Operating Partnership's $280
million revolving loan (the "Revolving Loan")) and the issuance of 11,750,000
shares of common stock by the Company. The adjustments are as follows:
<TABLE>
<S>                                           <C>
Eakin & Smith Transaction (1)..............   $   468
Crocker Merger (2).........................    (2,222)
       Total...............................   $(1,754)
</TABLE>
 
     (1) $26,600  in  incremental  borrowing in the  Eakin  &  Smith
         Transaction at an average rate under the Revolving Loan of 7% for three
         months.
                                       12
 
<PAGE>
                     HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
         NOTES TO PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
          FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 -- (CONTINUED)
     (2) The incremental effect of refinancing mortgage debt with an average
         outstanding balance of $104,000 and an average rate of 10% with
         borrowings under the Revolving Loan with an average rate of 7% for the
         for period from January 1, 1996 to September 30, 1996.
     (J.) Represents the incremental adjustment to amortization to reflect the
commitment fee on the Revolving Loan and the reduction in the amortization to
reflect the Crocker mortgage loans repaid.
     (K.) Represents the net adjustment to general administrative expense to
reflect the estimated incremental costs (primarily salaries) to the Operating
Partnership of operating a Nashville division and to reflect the elimination of
certain costs (primarily executive salaries, administrative costs, the expenses
incurred to generate third-party revenue and the expenses to operate the public
entity) of Crocker not expected to be incurred by the Operating Partnership as
follows (in thousands):
<TABLE>
<S>                                           <C>
Eakin & Smith Transaction..................   $    47
Crocker Merger.............................    (3,863)
       Total...............................   $(3,816)
</TABLE>
 
      See Notes to Pro Forma Condensed Combining Statements of Operations.
                                       13
 
<PAGE>
                     HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
             PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 1995
                  (UNAUDITED, IN THOUSANDS, EXCEPT UNIT DATA)
<TABLE>
<CAPTION>
                                                              EAKIN &       CROCKER TRANSACTION
                                                 1995          SMITH       CROCKER        PRE-
                                HISTORICAL   TRANSACTIONS   TRANSACTION   HISTORICAL   ACQUISITION    PRO FORMA
                                   (A)           (B)            (C)          (D)       RESULTS (E)   ADJUSTMENTS    PRO FORMA
<S>                             <C>          <C>            <C>           <C>          <C>           <C>            <C>
REVENUE:
  Rental property.............   $ 71,217      $ 17,020       $ 9,222      $ 42,489      $23,985       $ 1,200(F)   $165,133
  Other income................      2,305            50           411         1,777        2,380        (2,628)(G)     4,295
                                   73,522        17,070         9,633        44,266       26,365        (1,428)      169,428
OPERATING EXPENSES:
  Rental property.............     17,049         4,426         2,977        13,601        9,619        (2,030)(H)    45,642
  Depreciation and
     amortization.............     11,082         2,868         1,956         6,772        4,881          (972)(I)    26,587
  Interest expense:
     Contractual..............     12,101         2,876         2,161        16,212        5,689           387(J)     39,426
     Amortization of deferred
       financing costs........      1,619            46            --           594           --           312(K)      2,571
                                   13,720         2,922         2,161        16,806        5,689           699        41,997
  General and
     administrative...........      2,737           181           763         2,813        2,376        (4,652)(L)     4,218
     Income before
       extraordinary item.....   $ 28,934      $  6,673       $ 1,776      $  4,274      $ 3,800       $ 5,527      $ 50,984
     Net income (loss) per
       unit...................                                                                                      $   1.44
     Weighted average units...                                                                                        35,432
</TABLE>
 
      See Notes to Pro Forma Condensed Combining Statements of Operations.
                                       14
 
<PAGE>
                     HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
       NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 1995
                  (UNAUDITED, IN THOUSANDS, EXCEPT UNIT DATA)
     (A.) Represents the Operating Partnership's historical statement of
operations contained in its Annual Report on Form 10-K for the year ended
December 31, 1995.
     (B.) Reflects the February 1995 Offering and the August 1995 Offering and
the historical operations of Forsyth Properties, Inc. and its affiliates, the
Research Commons Properties and the Other 1995 Acquisitions, adjusted on a pro
forma basis for interest and depreciation expense, for the period of time during
1995 prior to their acquisition by the Operating Partnership.
     (C.) Represents the historical statement of operations of Eakin & Smith for
the year ended December 31, 1995.
     (D.) Represents the historical statement of operations of Crocker contained
in its Annual Report on Form 10-K for the year ended December 31, 1995.
     (E.) Reflects the historical operations of Crocker Realty Investors, Inc.,
Crocker & Sons, Inc., Crocker Realty Management Services, Inc., the Sabal
properties and the Towermarc properties, adjusted on a pro forma basis for
interest and depreciation expense, for the period of time during 1995 prior to
their acquisition by Crocker. Interest expense reflects incremental indebtedness
of approximately $97,400 for the first half of 1996 at an average rate of 9.94%
and $57,800 for the second half of 1996 at an average rate of 9.70% plus loan
cost amortization of $292. Historical indebtedness was also reduced by $20,000
which was prepaid on December 28, 1995 using the proceeds of a private
placement. The $20,000 had a fixed rate of interest of 11.5%. Depreciation is
calculated using the respective purchase prices allocated to buildings, site
improvements and tenant improvements with depreciation calculated on a
straight-line basis over useful lives of 40 years, 15 years, and the life of the
respective leases, respectively.
     (F.) Reflects incremental rental income from a supplemental lease agreement
entered into in connection with the Crocker Merger. This agreement was a
condition of the Crocker Merger.
     (G.) Reflects the elimination of certain third-party leasing and property
management income of Crocker not retained by the Operating Partnership.
     (H.) Reflects the net adjustment to rental property expenses to eliminate
the costs related to certain assets (primarily land held for development)
distributed to the stockholders of Crocker ($800) and for other property
operating costs (primarily personnel and office expenses related to duplicative
property management operations) eliminated upon the completion of the Crocker
Merger ($1,230).
     (I.) Represents the net adjustment to depreciation expense based upon an
assumed allocation of the purchase price to land, buildings, furniture, fixtures
and equipment and development in process and building depreciation computed on a
straight-line basis using an estimated life of 40 years for buildings and 7
years for furniture, fixtures and equipment as follows (in thousands):
<TABLE>
<S>                                             <C>
Eakin & Smith Transaction....................   $(145)
Crocker Merger...............................    (827)
       Total.................................   $(972)
</TABLE>
 
     (J.) Represents the net adjustment to interest expense to reflect interest
costs on borrowings under the Revolving Loan at an assumed rate of 7.0% capped
(the effective interest rate based on a 30-day LIBOR rate of 5.50% plus 1.50%)
and assumed debt as follows (in thousands):
<TABLE>
<S>                                           <C>
Eakin & Smith Transaction (1)..............   $ 2,667
Crocker Merger (2).........................    (2,280)
       Total...............................   $   387
</TABLE>
 
                                       15
 
<PAGE>
                     HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
       NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
              FOR THE YEAR ENDED DECEMBER 31, 1995 -- (CONTINUED)
     (1) $26,653 of borrowings under the Revolving Loan at 7% plus $10,075 of
         assumed debt at 8.0%.
     (2) The incremental effect of $10,231 of borrowings under the Revolving
         Loan at 7% and the effect of refinancing mortgage debt with an
         outstanding balance of $100,000 and an average rate of 10% with
         borrowings under the Revolving Loan with an average rate of 7%.
     (K.) Represents the amortization of the commitment fee ($937) on the
Revolving Loan over the 36-month period.
     (L.) Represents the net adjustment to general administrative expense to
reflect the estimated incremental costs to the Operating Partnership of
operating a Nashville division (primarily salaries) and to reflect the
elimination of certain costs (primarily executive salaries ($1,020),
administrative costs ($1,875), the expenses incurred to generate third-party
revenue ($994) and the expenses of operating as a public entity ($800) of
Crocker not expected to be incurred by the Operating Partnership as follows (in
thousands):
<TABLE>
<S>                                           <C>
Eakin & Smith Transaction..................   $    37
Crocker Merger.............................    (4,689)
       Total...............................   $(4,652)
</TABLE>
 
                                       16
 
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
     The following discussion and analysis of the financial condition and
results of operations of the Operating Partnership for the three and nine months
ended September 30, 1996 should be read in conjunction with all of the financial
statements and notes thereto appearing elsewhere in the report. The following
discussion is based primarily on the financial statements of Highwoods/Forsyth
Limited Partnership.
RESULTS OF OPERATIONS
  THREE MONTHS ENDED SEPTEMBER 30, 1996
     Revenues from rental operations increased $9.5 million, or 48%, from $19.7
million for the three months ended September 30, 1995 to $29.2 million for the
three months ended September 30, 1996. The increase is a result of the
properties acquired in subsequent periods in 1995 as well as the April 1, 1996,
acquisition of the 848,000-square foot Eakin & Smith portfolio in Nashville,
Tennessee (the "Eakin & Smith Transaction"). The Crocker Merger did not
materially impact revenues for the quarter because the closing occurred at the
end of the quarter.
     During the three months ended September 30, 1996, 137 leases representing
981,436 square feet of office and industrial space commenced at an average rate
per square foot 8.0% higher than the average rate per square foot on the expired
leases. Interest and other income increased $2.8 million from $900,000 in 1995
to $3.7 million in 1996. The increase is related to an increase in cash
available for investment from the Summer 1996 Offerings.
     Rental operating expenses increased $3.2 million, or 68%, from $4.7 million
for the three months ended September 30, 1995 to $7.9 million for the three
months ended September 30, 1996. The increase is a result of additional
properties acquired in 1995 and 1996. Rental operating expenses as a percentage
of related revenues increased from 23.9% for the three months ended September
30, 1995 to 27.1% for the three months ended September 30, 1996. This increase
is a result of an increase in the percentage of office properties in the
portfolio, which have fewer "triple net" leases.
     Depreciation and amortization for the three months ended September 30, 1996
and 1995 was $4.7 million and $3.1 million, respectively. The increase of $1.6
million, or 52%, is due to an increase in depreciable assets. Interest expense
increased $700,000, or 17%, from $4.2 million for the three months ended
September 30, 1995 to $4.9 million for the three months ended September 30,
1996. The increase is attributable to the increase in outstanding indebtedness
related to the Operating Partnership's acquisition and development activities.
Interest expense for the three months ended September 30, 1996 and 1995 included
$428,000 and $385,000, respectively, of amortization of non-cash deferred
financing costs and the costs related to the Operating Partnership's interest
rate protection agreement. General and administrative expenses increased from
3.5% of rental revenue in 1995 to 5.7% in 1996. The increase is attributable to
the addition of two regional offices as a result of acquisitions in Richmond and
Nashville. The duplication of personnel during the integration of Crocker also
contributed to the increase in general and administrative expenses. Such
duplicative costs are expected to be eliminated in the fourth quarter of 1996 as
the Operating Partnership realizes the planned synergies from the Crocker
Merger.
     Net income before extraordinary item equaled $13.7 million and $7.9 million
for the three-month periods ended September 30, 1996 and 1995, respectively. The
extraordinary item consisted of prepayment penalties incurred in connection with
the extinguishment of certain debt assumed in the Crocker Merger.
  NINE MONTHS ENDED SEPTEMBER 30, 1996
     Revenue from rental operations increased $29.9 million, or 60%, from $49.6
million for the first nine months of 1995 to $79.5 million for the first nine
months of 1996. The increase is a result of the properties acquired during
February 1995, which only contributed partially to revenue in 1995, as well as
the acquisitions made in subsequent periods in 1995 and during the nine months
ended September 30, 1996. In total, 147 properties encompassing 6.5 million
square feet were added to the portfolio during the first nine months of 1995,
and 89 properties encompassing 7.5 million square feet were added during the
first nine months of 1996.
                                       17
 
<PAGE>
     During the nine months ended September 30, 1996, 390 leases representing
2.4 million square feet of office and industrial space commenced at an average
rate per square foot 6.2% higher than the average rate per square foot on the
expired leases. Interest and other income increased $3.3 million from $1.3
million for the first nine months of 1995 to $4.6 million for the first nine
months of 1996. The increase is related to an increase in cash available for
investment for the nine months ended September 30, 1996 from the June and July
1996 equity offerings.
     Rental operating expenses increased $9.2 million, or 77%, from $11.9
million for the first nine months of 1995 to $21.1 million for the first nine
months of 1996. Rental expenses as a percentage of related rental revenues
increased from 24.0% for the nine months ended September 30, 1995 to 26.5% for
the nine months ended September 30, 1996. The increase is a result of an
increase in the percentage of office properties in the portfolio, which have
fewer "triple net" leases, and approximately $300,000 in additional expenses
relating to snow removal and the severe winter weather in 1996.
     Depreciation and amortization for the nine months ended September 30, 1996
and 1995 was $12.6 million and $7.6 million, respectively. The increase of $5.0
million, or 66%, is due to the increase in depreciable assets noted above.
Interest expense increased $4.1 million, or 41%, from $9.9 million for the nine
months ended September 30, 1995 to $14.0 million for the nine months ended
September 30, 1996. The increase is attributable to the increase in outstanding
debt related to the Operating Partnership's acquisition and development
activities. Interest expense for the nine months ended September 30, 1996 and
1995 included $1.3 million and $1.2 million, respectively, of amortization of
non-cash deferred financing costs and of the costs related to the Operating
Partnership's interest rate protection agreements. General and administrative
expenses increased from 3.7% of total rental revenue for the nine months ended
September 30, 1995 to 4.8% for the nine months ended September 30, 1996. This
increase is attributable to the addition of two regional offices associated with
the Richmond and Nashville acquisitions. The duplication of certain personnel
costs during the acquisition of Crocker also contributed to higher general and
administrative expenses for the nine months ended September 30, 1996. Such
duplicative costs are expected to be eliminated in the fourth quarter of 1996 as
the Operating Partnership realizes the planned synergies from the Crocker
Merger.
     Net income before extraordinary item equaled $32.7 million and $19.6
million for the nine-month periods ended September 30, 1996 and 1995,
respectively. The extraordinary item consisted of prepayment penalties incurred
in connection with the extinguishment of certain debt assumed in the Crocker
Merger.
LIQUIDITY AND CAPITAL RESOURCES
     The Operating Partnership generated $46.6 million in cash flow from
operating activities and $381.0 million in cash flow from financing activities
for the nine months ended September 30, 1996. The cash flow from financing
activities is a result of the 11.75 million share stock offerings, which closed
in June and July 1996. The Operating Partnership utilized $416.1 million of this
cash flow to invest in real property assets, primarily development in process
and an acquisition of additional rental property through the Eakin & Smith
Transaction, and the advancement of funds to the Merger Subsidiary for the
acquisition of Crocker.
  CAPITALIZATION
     The Operating Partnership's total indebtedness at September 30, 1996
totaled $597.7 million and was comprised of $300.7 million of conventional fixed
rate mortgage indebtedness with an average rate of 8.19%, $47.0 million
outstanding under variable rate mortgages (see below for a discussion of
interest rate protection agreements), $245.0 million under the Operating
Partnership's $280 million unsecured revolving loan (the "Revolving Loan") and a
9%, $5.0 million unsecured note.
     The Revolving Loan requires monthly payments of interest only, with the
balance of all principal and accrued but unpaid interest due on October 31,
1999. The initial interest rate on the Revolving Loan is LIBOR plus 150 basis
points and will adjust based on the Operating Partnership's senior unsecured
credit rating within a range of LIBOR plus 100 basis points to LIBOR plus 175
basis points. At September 30, 1996, one-month LIBOR was 5.43%.
                                       18
 
<PAGE>
     To protect the Operating Partnership from increases in interest expense due
to fluctuations in its variable rate mortgages and Revolving Loan, the Operating
Partnership: (i) purchased an interest rate collar limiting its exposure to an
increase in one-month LIBOR to 5.4% with respect to $80 million of the $280
million Revolving Loan, and (ii) in connection with the $47.0 million variable
rate mortgages, entered into interest rate swaps that limit its exposure to an
increase in the interest rates to 7.45%, and (iii) entered into three separate
forward-starting interest rate swap agreements in the aggregate amount of $125
million to limit its exposure to rising interest rates in connection with the
offering of $200 million unsecured, non-convertible debt securities of the
Operating Partnership (the "Offering") in the fourth quarter of 1996. It is the
Operating Partnership's intent to terminate these agreements at the time of the
Offering in order to effectively lock the interest rate on the underlying seven
and ten-year treasury notes at approximately 6.75% and 6.72%, respectively. The
interest rate on the Operating Partnership's variable rate debt is adjusted at
monthly intervals, subject to the Operating Partnership's interest rate
protection program. The Operating Partnership is exposed to certain losses in
the event of non-performance by the counterparties under the collar and swap
arrangements. The counterparties are major financial institutions and are
expected to fully perform under the agreements. However, if they were to default
on their obligations under the arrangements, the Operating Partnership could be
required to pay the full rate under the Revolving Loan and the variable rate
mortgages, even if such rate were in excess of the rate in the collar and swap
agreements. In addition, the Operating Partnership may incur other variable rate
indebtedness in the future. Increases in interest rates on its indebtedness
could increase the Operating Partnership's interest expense and could adversely
affect the Operating Partnership's cash flow.
     Historically, rental revenue has been the principal source of funds to pay
operating expenses, debt service and capital expenditures, excluding
non-recurring capital expenditures. In addition, construction management,
maintenance, leasing and management fees have provided sources of cash flow. The
Operating Partnership presently has no plans for major capital improvements to
its developed properties, other than normal recurring non-revenue-enhancing
expenditures. The Operating Partnership expects to meet its short-term liquidity
requirements generally through its working capital and net cash provided by
operating activities along with the Revolving Loan. The Operating Partnership
expects to meet certain of its financing requirements through long-term secured
and unsecured borrowings and the issuance of debt securities or additional
equity securities of the Operating Partnership. In addition, the Operating
Partnership anticipates utilizing the Revolving Loan to fund construction and
development activities. The Operating Partnership does not intend to reserve
funds to retire indebtedness under the Revolving Loan upon maturity. Instead,
the Operating Partnership will seek to refinance such debt at maturity or retire
such debt through the issuance of additional equity or debt securities. The
Operating Partnership anticipates that its 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 the capital and liquidity
needs of the Operating Partnership in both the short and long-term.
     During the quarter, the Company, which is the general partner and (as of
September 30, 1996) an 88% owner of the Operating Partnership, completed the
sale of an additional 250,000 shares to several underwriters who participated in
the Company's June 20, 1996 offering of 11.5 million shares. The net proceeds of
$6.9 million were contributed to the Operating Partnership in exchange for
250,000 Units. The proceeds from the offering were used to fund a portion of the
purchase price of Crocker.
ACQUISITION OF CROCKER REALTY TRUST, INC.
     On September 20, 1996, the Company acquired Crocker Realty Trust, Inc.
through a merger (the "Crocker Merger"). Agreement on the terms of the Crocker
Merger was reached on April 29, 1996. At that time, the Company and the Merger
Subsidiary entered into a Stock Purchase Agreement with certain controlling
shareholders of Crocker (the "Sellers") to purchase all of the Sellers' shares
of common stock of Crocker (the "Shares"). The Company and the Merger Subsidiary
also entered into an Agreement and Plan of Merger with Crocker (the "Merger
Agreement"). The Merger Agreement provided that the Merger Subsidiary would be
merged into Crocker, with Crocker as the surviving entity.
     On September 6, 1996, the Company closed the acquisition of the Shares. The
purchase price was $249.1 million ($11.05 per Share) and included, as
contemplated by the Stock Purchase Agreement, the $1.1 million purchase of
1,056,000 options to purchase shares of Crocker owned by the Sellers.
                                       19
 
<PAGE>
     The Crocker Merger was consummated on September 20, 1996 following its
approval at a special meeting of the shareholders of Crocker. All shares of
common stock of Crocker (other than those held by the Company) were converted
into and represented a right to receive $11.05243 per share. Following the
Crocker Merger, the Company entered into various restructuring transactions
culminating in the contribution by the Company of Crocker's assets and
liabilities to the Operating Partnership. As a result of the Crocker Merger and
subsequent transactions, substantially all of the assets and liabilities of
Crocker at the time of the Crocker Merger are the assets and liabilities of the
Operating Partnership. The total cost of the acquisition of all of the
outstanding shares of Crocker was approximately $565.8 million, which included
the assumption of $243 million of Crocker debt discussed below.
     Other than a $140 million mortgage note (the "Mortgage Note"), all of the
debt assumed in the Crocker Merger was repaid by the Operating Partnership using
funds available under the Revolving Loan. The Mortgage Note is secured by 46 of
the Crocker Properties (the "Mortgage Note Properties"), which are held by AP
Southeast Portfolio Partners, L.P. (the "Financing Partnership"). The Operating
Partnership has a 99.99% economic interest in the Financing Partnership, which
is managed, indirectly, by the Company. The Mortgage Note is a conventional,
monthly pay, first mortgage note in the principal amount of $140 million issued
by the Financing Partnership. The Mortgage Note is a limited recourse obligation
of the Financing Partnership as to which, in the event of a default under the
indenture or the mortgage, recourse may be had only against the Mortgage Note
Properties and other assets that have been pledged as security therefor. The
Mortgage Note was issued to Kidder Peabody Acceptance Corporation I pursuant to
an indenture, dated March 1, 1994 (the "Mortgage Note Indenture"), among the
Financing Partnership, Bankers Trust Company of California, N.A., and Bankers
Trust Company.
     The Mortgage Note bears interest on its outstanding principal balance at
the rate of 7.88% per annum, subject to increase in the event of a default in
the payment of any amount due, and matures on January 3, 2001. The Mortgage Note
provides for scheduled monthly payments of interest only, which are due on the
first business day of each calendar month.
     The Mortgage Note Indenture provides for a lockout period that prohibits
optional redemption payments in respect of principal of the Mortgage Note (other
than a $7 million premium-free redemption payment) prior to November 22, 1998.
Thereafter, the Financing Partnership may make optional redemption payments in
respect of principal of the Mortgage Note on any distribution date, subject to
the payment of a yield maintenance charge in connection with such payments made
prior to August 1, 2000.
     Under the terms of the purchase agreement relating to the Mortgage Note
Properties, the Financing Partnership may be obligated to pay NationsBank, N.A.
a deferred contingent purchase price. This contingent payment, which will in no
event exceed $4.4 million, is due on April 1, 1998 if the actual four-year
cumulative cash flow of such Properties exceeds the projected four-year
cumulative cash flow. Based on the estimates of future operations, the Operating
Partnership does not believe that any deferred contingent purchase price will be
payable.
FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTIONS
     The Operating Partnership considers 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. Funds from
Operations does not represent net income or cash flows from operations as
defined by GAAP, and FFO should not be considered as an alternative to net
income as an indicator of the Operating Partnership's operating performance or
as an alternative to cash flows as a measure of liquidity. Funds from Operations
does not measure whether cash flow is sufficient to fund all of the Operating
Partnership's cash needs including principal amortization, capital improvements
and distributions to shareholders. Funds from Operations does not represent cash
flows from operating, investing or financing activities as defined by GAAP.
Further, FFO as disclosed by other REITs may not be comparable to the Operating
Partnership's calculation of FFO, as described below.
     Funds from operations is defined as net income (computed in accordance with
generally accepted accounting principles) excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation of real estate assets,
and after adjustments for unconsolidated partnerships and joint ventures. In
                                       20
 
<PAGE>
March 1995, NAREIT issued a clarification of the definition of FFO. The
clarification provides that the 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. Cash available for distribution is defined as funds
from operations reduced by non-revenue enhancing capital expenditures for
building improvements and tenant improvements and lease commissions related to
second generation space.
     Funds from operations and cash available for distribution for the three and
nine months ended September 30, 1996 and 1995 are summarized in the following
table (in thousands):
<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED    NINE MONTHS ENDED
                                                                         SEPTEMBER 30,         SEPTEMBER 30,
                                                                        1996       1995       1996       1995
<S>                                                                    <C>        <C>        <C>        <C>
FUNDS FROM OPERATIONS:
Income before extraordinary item....................................   $13,710    $ 7,939    $32,672    $19,647
Add (deduct):
  Depreciation and amortization.....................................     4,724      3,069     12,556      7,612
  Third-party service company cash flow.............................        75        (45)       330        (60)
     FUNDS FROM OPERATIONS..........................................    18,509     10,963     45,558     27,199
CASH AVAILABLE FOR DISTRIBUTION:
Add (deduct):
  Rental income from straight-line rents............................      (837)      (368)    (1,752)      (898)
  Amortization of deferred financing costs..........................       428        385      1,255      1,215
  Non-incremental revenue generating capital expenditures (1):
     Building improvements paid.....................................      (818)      (297)    (2,018)      (838)
     Second generation tenant improvements paid.....................      (864)      (475)    (2,172)    (1,388)
     Second generation lease commissions paid.......................      (477)      (314)    (1,056)      (746)
       CASH AVAILABLE FOR DISTRIBUTION..............................   $15,941    $ 9,894    $39,815    $24,544
Weighted average units outstanding..................................    35,406     20,512     27,421     17,301
DIVIDEND PAYOUT RATIO:
  Funds from operations.............................................      91.8%      84.2%      84.9%      82.7%
  Cash available for distribution...................................     106.6%      93.3%      97.1%      91.6%
</TABLE>
 
(1) Amounts represent cash expenditures.
     On November 4, 1996, the Company's Board of Directors declared a dividend
of $.48 per share ($1.92 on an annualized basis) payable on November 22, 1996 to
stockholders of record on November 14, 1996. Such distribution will be funded by
a pro rata distribution of $.48 per Unit by the Operating Partnership.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
     This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements are identified by
words such as "expect," "anticipate," "should" and words of similar import.
Forward-looking statements are inherently subject to risks and uncertainties,
many of which cannot be predicted with accuracy and some of which might not even
be anticipated. Future events and actual results, financial and otherwise, may
differ materially from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in this "Management's Discussion and Analysis of Results of
Operations and Financial Condition."
                                       21
 
<PAGE>
PROPERTY INFORMATION
     The following table sets forth certain information with respect to the
Operating Partnership's properties as of September 30, 1996:
<TABLE>
<CAPTION>
                                                                         RENTABLE      NUMBER OF    PERCENT LEASED/
                                                                        SQUARE FEET    PROPERTIES     PRE-LEASED
<S>                                                                     <C>            <C>          <C>
IN-SERVICE:
  Office.............................................................    11,721,000       170              93%
  Industrial.........................................................     5,015,000       110              89%
     Total...........................................................    16,736,000       280              91%
UNDER DEVELOPMENT:
  Office.............................................................       967,000        14              55%
  Industrial.........................................................       286,000         3              29%
     Total...........................................................     1,253,000        17              49%
TOTAL:
  Office.............................................................    12,688,000       184
  Industrial.........................................................     5,301,000       113
     Total...........................................................    17,989,000       297
</TABLE>
 
     The following table sets forth certain information with respect to the
Operating Partnership's properties under development as of September 30, 1996
(dollars in thousands):
<TABLE>
<CAPTION>
                                                           RENTABLE                  COST                  ESTIMATED
                                                            SQUARE     ESTIMATED   INCURRED   PRE-LEASING  COMPLETION
                                           LOCATION          FEET        COST      TO DATE    PERCENTAGE      DATE
<S>                                    <C>                 <C>         <C>         <C>        <C>          <C>
OFFICE PROPERTIES:
Highwoods Plaza I....................  Nashville, TN         103,000   $ 11,500    $ 6,759            80%     4Q 96
Center Point II......................  Columbia, SC           81,000      7,600      4,856            46      4Q 96
MSA..................................  Research Triangle      55,000      6,200      3,741           100      4Q 96
Hewlett Packard......................  Charlotte, NC          35,000      3,100        939            41      4Q 96
Inacom...............................  Piedmont Triad         13,000        900        541           100      4Q 96
One Shockoe Plaza....................  Richmond, VA          118,000     15,400     13,388           100      1Q 97
North Park...........................  Research Triangle      43,000      4,000        542            38      1Q 97
Sycamore.............................  Research Triangle      70,000      6,400        776            --      2Q 97
Two AirPark East.....................  Piedmont Triad         57,000      4,600        409            --      2Q 97
AirPark East-Simplex.................  Piedmont Triad         12,000        900         10            60      2Q 97
Center Point V.......................  Columbia, SC           19,000      1,700        279            35      2Q 97
Highwoods Plaza II...................  Nashville, TN         102,000     10,300      1,774            --      3Q 97
Highwoods Two........................  Richmond, VA           74,000      7,000         14            --      3Q 97
Clintrials...........................  Research Triangle     185,000     21,500         --           100      2Q 98
OFFICE TOTAL OR WEIGHTED
  AVERAGE............................                        967,000   $101,100    $34,028            55%
INDUSTRIAL PROPERTIES:
Regency Two..........................  Piedmont Triad         96,000      2,800      1,849            40      4Q 96
Highwoods Airport Center.............  Richmond              145,000      5,500      1,368            --      2Q 97
R.F. Micro Devices...................  Piedmont Triad         45,000      7,000         --           100      4Q 97
INDUSTRIAL TOTAL OR WEIGHTED
  AVERAGE............................                        286,000   $ 15,300    $ 3,217            29%
  TOTAL OR WEIGHTED AVERAGE..........                      1,253,000   $116,400    $37,245            49%*
</TABLE>
 
* Improves to 65% when letters of intent for space are included.
                                       22
 
<PAGE>
     The following tables set forth certain information about the Operating
Partnership's leasing activities for the three and nine months ended September
30, 1996.
<TABLE>
<CAPTION>
                                                                 OFFICE                          INDUSTRIAL
                                                     THREE MONTHS      NINE MONTHS     THREE MONTHS      NINE MONTHS
                                                         ENDED            ENDED            ENDED            ENDED
                                                     SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,
                                                         1996             1996             1996             1996
<S>                                                  <C>              <C>              <C>              <C>
NET EFFECTIVE RENTS RELATED TO RE-LEASED SPACE:
Number of lease transactions (signed leases)......             77              213              60               177
Rentable square footage leased....................        276,916          687,993         704,520         1,758,024
Average per rentable square foot over the lease
  term:
  Base rent.......................................          14.80            14.91            4.16              4.36
  Tenant improvements.............................          (1.21)           (0.97)          (0.08)            (0.12)
  Leasing commissions.............................          (0.32)           (0.32)          (0.07)            (0.10)
  Rent concessions................................             --               --              --                --
  Effective rent..................................    $     13.27      $     13.62       $    4.01       $      4.14
  Expense stop....................................          (3.30)           (3.28)          (0.46)            (0.37)
  Equivalent effective net rent...................    $      9.97      $     10.34       $    3.55       $      3.77
Average term in years.............................              4                4               2                 2
RENTAL RATE TRENDS:
Average final rate with expense pass
  throughs........................................    $     13.21      $     13.54       $    3.85       $      4.20
Average first year cash rental rate...............    $     14.34      $     14.43       $    4.13       $      4.44
Percentage increase...............................          8.56%            6.59%           7.24%             5.65%
CAPITAL EXPENDITURES RELATED TO RE-LEASED OFFICE
  SPACE:
Tenant Improvements:
  Total dollars committed under signed
     leases.......................................    $ 1,357,220      $ 2,716,600       $ 104,958       $   380,862
  Rentable square feet............................        276,916          687,993         704,520         1,758,024
  Per rentable square foot........................    $      4.90      $      3.95       $    0.15       $      0.22
Leasing Commissions:
  Total dollars committed under signed
     leases.......................................    $   363,859      $   891,751       $  92,701       $   328,924
  Rentable square feet............................        276,916          687,993         704,520         1,758,024
  Per rentable square foot........................    $      1.31      $      1.30       $    0.13       $      0.19
Total:
  Total dollars committed under signed
     leases.......................................    $ 1,721,079      $ 3,608,351       $ 197,659       $   709,786
  Rentable square feet............................        276,916          687,993         704,520         1,758,024
  Per rentable square foot........................    $      6.22      $      5.24       $    0.28       $      0.40
</TABLE>
 
                                       23
 
<PAGE>
     The following tables set forth scheduled lease expirations for executed
leases as of September 30, 1996 assuming no tenant exercises renewal options.
OFFICE PROPERTIES:
<TABLE>
<CAPTION>
                                                                                                                    AVERAGE ANNUAL
                                      TOTAL            PERCENTAGE OF                             PERCENTAGE OF       RENTAL RATE
                                    RENTABLE       LEASED SQUARE FOOTAGE      ANNUAL RENTS       LEASED RENTS            (1)
  YEAR OF LEASE      NUMBER OF     SQUARE FEET        REPRESENTED BY         UNDER EXPIRING     REPRESENTED BY           FOR
    EXPIRATION        LEASES        EXPIRING          EXPIRING LEASES          LEASES (1)       EXPIRING LEASES      EXPIRATIONS
<S>                  <C>           <C>             <C>                       <C>                <C>                 <C>
Remainder of 1996         95           266,697                2.5%            $  3,739,449              2.4%            $14.02
       1997              328         1,346,719               12.5               19,166,912             12.2              14.23
       1998              285         1,909,516               17.7               26,665,888             16.9              13.96
       1999              293         1,583,010               14.7               23,548,608             15.0              14.88
       2000              241         1,665,840               15.5               24,925,928             15.8              14.96
       2001              172         1,559,002               14.5               24,788,254             15.7              15.90
       2002               57           770,511                7.1               11,768,912              7.5              15.27
       2003               35           653,604                6.1                9,894,721              6.3              15.14
       2004               11           137,094                1.3                2,034,102              1.3              14.84
       2005               13           400,936                3.7                4,240,284              2.7              10.58
    Thereafter            17           480,525                4.4                6,575,076              4.2              13.68
 Total or average      1,547        10,773,454              100.0%            $157,348,134            100.0%            $14.61
</TABLE>
 
INDUSTRIAL PROPERTIES:
<TABLE>
<CAPTION>
                                                                                                                    AVERAGE ANNUAL
                                      TOTAL            PERCENTAGE OF                             PERCENTAGE OF       RENTAL RATE
                                    RENTABLE       LEASED SQUARE FOOTAGE      ANNUAL RENTS       LEASED RENTS            (1)
  YEAR OF LEASE      NUMBER OF     SQUARE FEET        REPRESENTED BY         UNDER EXPIRING     REPRESENTED BY           FOR
    EXPIRATION        LEASES        EXPIRING          EXPIRING LEASES          LEASES (1)       EXPIRING LEASES      EXPIRATIONS
<S>                  <C>           <C>             <C>                       <C>                <C>                 <C>
Remainder of 1996        56           503,210                11.2%            $  2,668,287              9.7%            $ 5.30
       1997             151         1,135,819                25.2                6,318,761             24.8               5.56
       1998             112           691,557                15.3                4,509,234             17.7               6.52
       1999             106           878,278                19.5                4,670,979             18.3               5.32
       2000              39           574,849                12.8                3,839,827             15.1               6.68
       2001              32           278,510                 6.2                1,937,708              7.6               6.96
       2002               3           283,962                 6.3                  901,263              3.5               3.17
       2003               1             3,375                 0.1                   18,428              0.1               5.46
       2004               2             2,569                 0.1                   21,891              0.1               8.52
       2005               3            23,722                 0.5                  203,041              0.8               8.56
    Thereafter            1           127,600                 2.8                  575,476              2.3               4.51
 Total or average       506         4,503,451               100.0%            $ 25,664,895            100.0%            $ 5.70
</TABLE>
 
(1) Includes operating expense pass throughs and excludes the effect of future
    contractual rent increases.
THIRD-PARTY SERVICE OPERATIONS
     The Operating Partnership, through the Service Companies and Forsyth-Carter
Brokerage L.L.C., provides brokerage services as well as management,
development, construction and other related services for properties owned by
third parties. The Operating Partnership currently provides third-party
management services for 34 buildings totaling approximately 2.6 million rentable
square feet and exclusive leasing services for 37 buildings, totaling
approximately 3.4 million rentable square feet.
INFLATION
     Historically inflation has not had a significant impact on the Operating
Partnership's operations because of the relatively low inflation rate in the
Operating Partnership's 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 the Operating Partnership's 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 the Operating Partnership to
replace existing leases with new leases at a higher base rent if rents on the
existing leases are below the market rate.
                                       24
 
<PAGE>
                          PART II -- OTHER INFORMATION
<TABLE>
<S>       <C>
Item 1.   Legal Proceedings -- None
Item 2.   Changes in Securities -- None
Item 3.   Defaults Upon Senior Securities -- None
Item 4.   Submission of Matters to a Vote of Security Holders
 
Item 5.   Other Information -- None
Item 6.   Exhibits and Reports on Form 8-K
          (a) Exhibits
</TABLE>
 
<TABLE>
<CAPTION>
           EXHIBIT NO.                                                    DESCRIPTION
<S>      <C>                   <C>      <C>                                                                               <C>
         10.1                           Credit Agreement among Highwoods/Forsyth Limited Partnership, Highwoods
                                        Properties, Inc., NationsBank, N.A., First Union National Bank and the other
                                        lenders named therein dated as of September 27, 1996 (incorporated by reference
                                        to the Operating Partnership's 8-K dated September 27, 1996).

         27                             Financial Data Schedule
</TABLE>

          (b) Reports on Form 8-K
     The Operating Partnership filed a Current Report on Form 8-K dated
September 27, 1996, which reported the closing of the acquisition of Crocker
under item 5. (The acquisition had been previously reported under item 2 upon
entering into the acquisition agreements.)
                                       25
 
<PAGE>
                                   SIGNATURES
     Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
                                          HIGHWOODS/FORSYTH LIMITED PARTNERSHIP
                                          By: Highwoods Properties, Inc.,
                                             its general partner
                                          /s/         RONALD P. GIBSON
                                                     RONALD P. GIBSON
                                           PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                          /s/         CARMAN J. LIUZZO
                                                     CARMAN J. LIUZZO
                                                  CHIEF FINANCIAL OFFICER
                                              (PRINCIPAL ACCOUNTING OFFICER)
Date: November 14, 1996
                                       26