--------------------------------------------------------------------------------
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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549





                                   FORM 10-Q


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

                 For the quarterly period ended June 30, 1999


                       Commission file number: 000-21731




                     HIGHWOODS REALTY LIMITED PARTNERSHIP
            (Exact name of registrant as specified in its charter)




<TABLE>
<CAPTION>
            NORTH CAROLINA                     56-1864557
<S>                                     <C>
   (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






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

                      HIGHWOODS REALTY LIMITED PARTNERSHIP


              QUARTERLY REPORT FOR THE PERIOD ENDED JUNE 30, 1999


                               TABLE OF CONTENTS



<TABLE>
<CAPTION>
                                                                                   PAGE
PART I.        FINANCIAL INFORMATION                                              -----
<S>            <C>                                                                <C>
  Item 1.      Financial Statements                                                 3
               Consolidated Balance Sheets as of June 30, 1999 and
               December 31, 1998                                                    4
               Consolidated Statements of Income for the three and six months
               ended June 30, 1999 and 1998                                         5
               Consolidated Statements of Cash Flows for the six months ended
               June 30, 1999 and 1998                                               6
               Notes to consolidated financial statements                           8
  Item 2.      Management's Discussion and Analysis of Financial Condition and
               Results of Operations                                               11
               Results of Operations                                               11
               Liquidity and Capital Resources                                     12
               Recent Developments                                                 14
               Year 2000                                                           15
               Possible Environmental Liabilities                                  16
               Impact of Recently Issued Accounting Standards                      17
               Compliance with the Americans with Disabilities Act                 17
               Funds From Operations and Cash Available for Distributions          17
               Disclosure Regarding Forward-Looking Statements                     19
               Property Information                                                20
               Inflation                                                           28
  Item 3.      Quantitative and Qualitative Disclosures About Market Risk          29
  PART II.     OTHER INFORMATION
  Item 1.      Legal Proceedings                                                   30
  Item 2.      Changes in Securities and Use of Proceeds                           30
  Item 3.      Defaults Upon Senior Securities                                     30
  Item 4.      Submission of Matters to a Vote of Security Holders                 30
  Item 5.      Other Information                                                   30
  Item 6.      Exhibits and Reports on Form 8-K                                    30
</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 operations 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
our 1998 Annual Report on Form 10-K.


                                       3
<PAGE>

                      HIGHWOODS REALTY LIMITED PARTNERSHIP


                          CONSOLIDATED BALANCE SHEETS


                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                          JUNE 30, 1999     DECEMBER 31, 1998
                                                                         ---------------   ------------------
                                                                           (UNAUDITED)
<S>                                                                      <C>               <C>
ASSETS
Real estate assets, at cost:
  Land and improvements ..............................................     $  458,062          $  538,814
  Buildings and tenant improvements ..................................      2,862,300           3,173,825
  Development in process .............................................        173,077             189,465
  Land held for development ..........................................        152,143             150,622
  Furniture, fixtures and equipment ..................................          7,155               7,665
                                                                           ----------          ----------
                                                                            3,652,737           4,060,391
  Less -- accumulated depreciation ...................................       (196,600)           (168,508)
                                                                           ----------          ----------
  Net real estate assets .............................................      3,456,137           3,891,883
Property held for sale ...............................................        202,698             131,262
Cash and cash equivalents ............................................         94,229              30,696
Restricted cash ......................................................         11,969              24,263
Accounts receivable ..................................................         22,711              27,644
Advances to related parties ..........................................         14,251              10,420
Notes receivable .....................................................         44,125              12,865
Accrued straight line rents receivable ...............................         29,527              27,194
Investment in unconsolidated affiliates ..............................         27,884              15,234
Other assets:
  Deferred leasing costs .............................................         54,006              45,785
  Deferred financing costs ...........................................         42,903              38,750
  Prepaid expenses and other .........................................         15,983              15,162
                                                                           ----------          ----------
                                                                              112,892              99,697
  Less -- accumulated amortization ...................................        (28,782)            (23,458)
                                                                           ----------          ----------
                                                                               84,110              76,239
                                                                           ----------          ----------
                                                                            3,987,641          $4,247,700
                                                                           ==========          ==========
LIABILITIES AND PARTNERS' CAPITAL
Mortgages and notes payable ..........................................      1,727,370          $1,906,216
Accounts payable, accrued expenses and other liabilities .............         94,883             125,168
                                                                           ----------          ----------
  Total liabilities ..................................................      1,822,253           2,031,384
Redeemable operating partnership units:
  Class A Common Units outstanding, 8,722,369 at June 30, 1999 and
   10,111,978 at December 31, 1998 ...................................        239,342             260,383
  Class B Common Units outstanding, 196,496 at June 30, 1999 and
   291,756 at December 31, 1998 ......................................          5,391               7,513
  Series A Preferred Units outstanding, 125,000 at June 30, 1999 and
   December 31, 1998 .................................................        121,809             121,809
  Series B Preferred Units outstanding, 6,900,000 at June 30, 1999 and
   December 31, 1998 .................................................        166,346             166,346
  Series D Preferred Units outstanding, 400,000 at June 30, 1999 and
   December 31, 1998 .................................................         96,842              96,842
Partners' capital:
  Class A Common Units:
   General partner Common Units outstanding, 699,294 at
     June 30, 1999 and 690,955 at December 31, 1998 ..................         15,357              15,634
   Limited partner Common Units outstanding, 60,507,766 at June 30,
     1999 and 58,292,597 at December 31, 1998 ........................      1,520,301           1,547,789
                                                                           ----------          ----------
     Total Partners' capital .........................................      1,535,658           1,563,423
                                                                           ----------          ----------
                                                                           $3,987,641          $4,247,700
                                                                           ==========          ==========
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       4
<PAGE>

                      HIGHWOODS REALTY LIMITED PARTNERSHIP


                       CONSOLIDATED STATEMENTS OF INCOME


                     (IN THOUSANDS EXCEPT PER UNIT AMOUNTS)



<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED               SIX MONTHS ENDED
                                                                        JUNE 30,                        JUNE 30,
                                                              -----------------------------   ----------------------------
                                                                   1999            1998            1999           1998
                                                              -------------   -------------   -------------   ------------
                                                               (UNAUDITED)     (UNAUDITED)     (UNAUDITED)     (UNAUDITED)
<S>                                                           <C>             <C>             <C>             <C>
REVENUE:
  Rental property .........................................     $141,267        $113,079        $ 287,135      $ 213,410
  Equity in earnings of unconsolidated affiliates .........          336              --              457             --
  Interest and other income ...............................        4,652           2,321            9,249          4,374
                                                                --------        --------        ---------      ---------
                                                                 146,255         115,400          296,891        217,784
OPERATING EXPENSES:
  Rental property .........................................       44,082          35,827           89,374         65,555
  Depreciation and amortization ...........................       27,655          20,268           55,729         37,381
  Interest expense:
   Contractual ............................................       27,882          17,221           57,727         34,383
   Amortization of deferred financing costs ...............          734             616            1,512          1,232
                                                                --------        --------        ---------      ---------
                                                                  28,616          17,837           59,239         35,615
  General and administrative ..............................        5,762           4,386           11,555          8,170
                                                                --------        --------        ---------      ---------
  Income before gain on disposition of assets, net of
   income tax provision and extraordinary item ............       40,140          37,082           80,944         71,063
  Gain on disposition of assets, net of income tax
   provision ..............................................        1,524              --            2,093             --
                                                                --------        --------        ---------      ---------
  Income before extraordinary item ........................       41,664          37,082           83,037         71,063
EXTRAORDINARY ITEM -- LOSS ON EARLY EXTINGUISHMENT OF
  DEBT ....................................................         (777)             --             (777)           (46)
                                                                --------        --------        ---------      ---------
  Net income ..............................................       40,887          37,082           82,260         71,017
Dividends on preferred units ..............................       (8,145)         (7,656)         (16,290)       (13,801)
                                                                --------        --------        ---------      ---------
  Net income available for Class A Common Units ...........     $ 32,742        $ 29,426        $  65,970      $  57,216
                                                                ========        ========        =========      =========
NET INCOME/(LOSS) PER COMMON UNIT -- BASIC:
  Income before extraordinary item ........................     $    .48        $    .47        $     .95      $     .94
  Extraordinary item -- loss on early extinguishment of
   debt ...................................................        ( .01)             --            ( .01)            --
                                                                --------        --------        ---------      ---------
  Net income ..............................................     $    .47        $    .47        $     .94      $     .94
                                                                ========        ========        =========      =========
NET INCOME/(LOSS) PER COMMON UNIT -- DILUTED:
  Income before extraordinary item ........................     $    .48        $    .47        $     .95      $     .94
  Extraordinary item -- loss on early extinguishment of
   debt ...................................................        ( .01)             --            ( .01)            --
                                                                ========        ========        =========      =========
  Net income ..............................................     $    .47        $    .47        $     .94      $     .94
                                                                ========        ========        =========      =========
Distributions declared per Common Unit ....................     $   0.54        $   0.51        $    1.08      $    1.02
                                                                ========        ========        =========      =========
Weighted average Common Units outstanding -- basic:
  Class A Common Units:
   General Partner ........................................          698             623              696            606
   Limited Partners .......................................       69,062          61,723           68,925         59,998
  Class B Common Units:
   Limited Partners .......................................          196             292              196            280
                                                                --------        --------        ---------      ---------
  Total ...................................................       69,956          62,638           69,817         60,884
                                                                ========        ========        =========      =========
Weighted average Common Units outstanding -- diluted:
  Class A Common Units:
   General Partner ........................................          698             627              696            611
   Limited Partners .......................................       69,084          62,110           68,938         60,498
  Class B Common Units:
   Limited Partners .......................................          196             292              196            280
                                                                --------        --------        ---------      ---------
  Total ...................................................       69,978          63,029           69,830         61,389
                                                                ========        ========        =========      =========
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       5
<PAGE>

                      HIGHWOODS REALTY LIMITED PARTNERSHIP


                     CONSOLIDATED STATEMENTS OF CASH FLOWS


                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                                     SIX MONTHS ENDED JUNE 30,
                                                                                    ----------------------------
                                                                                         1999           1998
                                                                                    -------------   ------------
                                                                                     (UNAUDITED)     (UNAUDITED)
<S>                                                                                 <C>             <C>
OPERATING ACTIVITIES:
Net income ......................................................................    $   82,260      $   71,017
Adjustments to reconcile net income to net cash provided by operating activities:
  Depreciation and amortization .................................................        55,729          37,381
  Loss on early extinguishment of debt ..........................................           777              46
  Gain on disposition of assets, net of income tax provision ....................        (2,093)             --
  Changes in operating assets and liabilities ...................................       (40,370)          2,008
                                                                                     ----------      ----------
   Net cash provided by operating activities ....................................        96,303         110,452
                                                                                     ----------      ----------
INVESTING ACTIVITIES:
Additions to real estate assets .................................................      (244,575)       (646,510)
Proceeds from disposition of assets .............................................       502,737              --
Cash from contributed net assets ................................................            --              --
Repayment of advances from subsidiaries .........................................        (3,831)         (2,341)
Cash paid in exchange for partnership net assets ................................          (697)        (20,601)
Other ...........................................................................       (33,326)         (6,853)
                                                                                     ----------      ----------
   Net cash provided by/(used in) investing activities ..........................       220,308        (676,305)
                                                                                     ----------      ----------
FINANCING ACTIVITIES:
Distributions paid on Common Units ..............................................       (76,147)        (62,158)
Distributions paid on Preferred Units ...........................................       (16,290)        (13,801)
Payment of prepayment penalties .................................................          (777)            (46)
Borrowings on mortgages and notes payable .......................................         4,385         521,941
Repayment of mortgages and notes payable ........................................       (22,700)       (118,120)
Borrowings on revolving loans ...................................................       210,500         535,000
Repayment on revolving loans ....................................................      (362,500)       (582,500)
Net proceeds from contributed capital ...........................................        14,945         290,603
Net change in deferred financing costs ..........................................        (4,494)         (5,950)
                                                                                     ----------      ----------
   Net cash (used in)/provided by financing activities ..........................      (253,078)        564,969
                                                                                     ----------      ----------
Net increase/(decrease) in cash and cash equivalents ............................        63,533            (884)
Cash and cash equivalents at beginning of the period ............................        30,696           8,816
                                                                                     ----------      ----------
Cash and cash equivalents at end of the period ..................................    $   94,229      $    7,932
                                                                                     ==========      ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest ..........................................................    $   73,670      $   36,277
                                                                                     ==========      ==========
</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 summarizes (i) the net assets contributed by the holders of
Common Units in the Operating Partnership, (ii) the change in the net assets as
a result of the reorganization of our ownership in the Des Moines properties
(see Note 5) and (iii) the net assets acquired subject to mortgage notes
payable.



<TABLE>
<CAPTION>
                                                     SIX MONTHS ENDED
                                                         JUNE 30,
                                                --------------------------
                                                     1999          1998
                                                -------------   ----------
<S>                                             <C>             <C>
ASSETS:
Rental property and equipment, net ..........     $ (25,879)     $93,979
LIABILITIES:
Mortgages and notes payable assumed .........     $ (52,165)     $73,821
                                                  ---------      -------
   Net assets ...............................     $  26,286      $20,158
                                                  =========      =======
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       7
<PAGE>

                      HIGHWOODS REALTY LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                 JUNE 30, 1999
                                  (UNAUDITED)


1. BASIS OF PRESENTATION

     The Operating Partnership is a subsidiary of the Company. At June 30,
1999, the Company owned 87% of the Common Units in the Operating Partnership.

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

     The Operating Partnership's 125,000 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.

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES, which is required to be adopted in fiscal years beginning after
June 15, 1999. In June 1999, FASB issued Statement No. 137, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES -- DEFERRAL OF THE EFFECTIVE DATE
OF FASB STATEMENT NO. 133, which stipulates the required adoption date to be
all fiscal years beginning after June 15, 2000. Statement No. 133 requires us
to recognize all derivatives on the balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the
fair value of derivatives will either be offset against the change in fair
value of the hedged assets, liabilities or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in



                                       8
<PAGE>

earnings. The ineffective portion of a derivative's change in fair value will
be immediately recognized in earnings. The fair market value of the Operating
Partnership derivatives is discussed in Item 2.

     The "Year 2000" issue is a general term used to describe the various
problems that may result from the improper processing of dates and calculations
involving years by many computers throughout the world as the Year 2000 is
approached and reached. We have reviewed the impact of Year 2000 issues and do
not expect Year 2000 issues to be material to our business, operations, or
financial condition. The Year 2000 issue is discussed more fully in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."


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.

     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 quarter ended June 30, 1999 and 1998.


<TABLE>
<CAPTION>
                                                        FOR THREE MONTHS ENDED               FOR SIX MONTHS ENDED
                                                   ---------------------------------   --------------------------------
                                                    JUNE 30, 1999     JUNE 30, 1998     JUNE 30, 1999     JUNE 30, 1998
                                                   ---------------   ---------------   ---------------   --------------
<S>                                                <C>               <C>               <C>               <C>
RENTAL INCOME:
Office segment .................................        116,233           103,002           237,995           194,398
Industrial segment .............................         12,783            10,077            25,006            19,012
Retail segment .................................          8,156                --            15,940                --
Apartment segment ..............................          4,095                --             8,194                --
                                                        -------           -------           -------           -------
                                                     $  141,267        $  113,079        $  287,135        $  213,410
                                                     ==========        ==========        ==========        ==========
NET OPERATING INCOME:
Office segment .................................         78,607            68,878           161,554           132,097
Industrial segment .............................         10,645             8,374            20,846            15,758
Retail segment .................................          5,561                --            10,704                --
Apartment segment ..............................          2,372                --             4,657                --
                                                     ----------        ----------        ----------        ----------
                                                         97,185            77,252           197,761           147,855
                                                     ----------        ----------        ----------        ----------
RECONCILIATION TO INCOME BEFORE
  EXTRAORDINARY ITEMS:
Equity in income of uncons affiliates ..........            336                --               457                --
Gain on disposition of assets, net of income tax
  provision ....................................          1,524                --             2,093                --
Interest and other income ......................          4,652             2,321             9,249             4,374
Interest expense ...............................        (28,616)          (17,837)          (59,239)          (35,615)
General and admin expense ......................         (5,762)           (4,386)          (11,555)           (8,170)
Depreciation and amortization ..................        (27,655)          (20,268)          (55,729)          (37,381)
                                                     ----------        ----------        ----------        ----------
  Income before Minority Interest and
    Extraordinary Item..........................     $   41,664        $   37,082        $   83,037        $   71,063
                                                     ==========        ==========        ==========        ==========
TOTAL ASSETS:
Office segment .................................      2,914,562         3,070,914         2,914,562         3,070,914
Industrial segment .............................        454,023           310,534           454,023           310,534
Retail segment .................................        250,534                --           250,534                --
Apartment segment ..............................        119,868                --           119,868                --
Corporate and other ............................        248,654            74,032           248,654            74,032
                                                     ----------        ----------        ----------        ----------
Total Assets ...................................     $3,987,641        $3,455,480        $3,987,641        $3,455,480
                                                     ==========        ==========        ==========        ==========
</TABLE>

                                       9
<PAGE>

3. JOINT VENTURE ACTIVITY

     On March 15, 1999, we closed a transaction with Schweiz-Deutschland-USA
Dreilander Beteiligung Objekt-DLF 98/29-Walker Fink-KG ("DLF"), pursuant to
which we sold or contributed certain office properties valued at approximately
$142 million to a newly created limited partnership (the "Joint Venture"). DLF
contributed approximately $55 million for a 77.19% interest in the Joint
Venture, and the Joint Venture borrowed approximately $71 million from
third-party lenders. We retained the remaining 22.81% interest in the Joint
Venture, received net cash proceeds of approximately $124 million, and are the
sole and exclusive manager and leasing agent of the Joint Venture's properties,
for which we receive customary management fees and leasing commissions. We used
the cash proceeds received in the transaction to fund existing development
activity either through direct payments or repayment of borrowings under the
Revolving Loan.


4. LEGAL CONTINGENCIES

     On October 2, 1998, John Flake, a former stockholder of J.C. Nichols
Company, filed a putative class action lawsuit on behalf of himself and the
other former stockholders of J.C. Nichols in the United States District Court
for the District of Kansas against J.C. Nichols, certain of its former officers
and directors and the Company. The complaint alleges, among other things, that
in connection with the merger of J.C. Nichols and the Company (1) J.C. Nichols
and the named directors and officers of J.C. Nichols breached their fiduciary
duties to J.C. Nichols' stockholders, (2) J.C. Nichols and the named directors
and officers of J.C. Nichols breached their fiduciary duties to members of the
J.C. Nichols Company Employee Stock Ownership Trust, (3) all defendants
participated in the dissemination of a proxy statement containing materially
false and misleading statements and omissions of material facts in violation of
Section 14(a) of the Exchange Act of 1934 and (4) the Company filed a
registration statement with the SEC containing materially false and misleading
statements and omissions of material facts in violation of Sections 11 and
12(2) of the Securities Act of 1933. The plaintiffs seek equitable relief and
monetary damages. We believe that the defendants have meritorious defenses to
the plaintiffs' allegations. We intend to vigorously defend this litigation. By
order dated June 18, 1999, the court granted in part and denied in part our
motion to dismiss. The plaintiff has filed a motion seeking certification of
the proposed class of plaintiffs. All defendants will oppose that motion, which
remains pending. Discovery in this matter is proceeding. Due to the inherent
uncertainties of the litigation process, we are not able to predict the outcome
of this litigation. If this litigation is not resolved in our favor, it could
have a material adverse effect on our business, financial condition and results
of operations.

     In addition, we are a party to a variety of legal proceedings arising in
the ordinary course of our business. We believe we are adequately covered by
insurance and indemnification agreements. Accordingly, none of such proceedings
are expected to have a material adverse affect on our business, financial
condition and results of operations.


5. DES MOINES PARTNERSHIPS

     In connection with our merger with J.C. Nichols in July 1998, we succeeded
to the interests of J.C. Nichols in a strategic alliance with R&R Investors,
Ltd. pursuant to which R&R Investors manages and leases certain co-venture
properties located in the Des Moines area. As a result of the merger, we
acquired an ownership interest of 50% or more in a series of nine co-ventures
with R&R Investors. Certain of these properties were previously included in our
consolidated financial statements. On June 2, 1999, we agreed with R&R
Investors to reorganize our respective ownership interests in the Des Moines
properties such that each would own a 50% interest in the properties in the Des
Moines area. Accordingly, we have adopted the equity method of accounting for
our investment in each of the Des Moines properties as a result of such
reorganization. The impact of the reorganization was immaterial to the
consolidated financial statements of the Operating Partnership.


6. DISPOSITION ACTIVITY

     On June 7, 1999, we sold approximately 3.3 million rentable square feet of
non-core office and industrial properties and 49 acres of development land in
the South Florida area for gross proceeds of approximately $323.0 million. In
addition, during the six months ended June 30, 1999, we sold approximately 1.6
million rentable square feet of non-core office and industrial properties in
the Baltimore area and certain other non-core office and industrial properties
for gross proceeds of $108.9 million. We recorded a gain, net of income tax
provision,


                                       10
<PAGE>

of $2.1 million related to these dispositions. Non-core office and industrial
properties generally include single buildings or business parks that do not fit
our long-term strategy.

     In addition, we have entered into various agreements to sell approximately
2.8 million rentable square feet of non-core office and industrial properties
for gross proceeds of $220.0 million. These transactions are subject to
customary closing conditions, including due diligence and documentation, and
are expected to close during the third and fourth quarters of 1999. However, we
can provide no assurance that all or parts of these transactions will be
consummated.


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. The following
discussion is based primarily on the consolidated financial statements of the
Operating Partnership.


RESULTS OF OPERATIONS

     THREE MONTHS ENDED JUNE 30, 1999. Revenues from rental operations
increased $28.2 million, or 24.9%, from $113.1 million for the three months
ended June 30, 1998 to $141.3 million for the comparable period in 1999. The
increase is primarily a result of our acquisition of 4.2 million square feet of
majority owned office, industrial and retail properties and 2,326 apartment
units and the completion of 1.6 million square feet of development activity
during the last six months of 1998 and the first six months of 1999, slightly
offset by the disposition and removal of 6.6 million square feet of majority
owned office, industrial and retail properties and 418 apartment units
(including the removal of certain properties from our consolidated financial
statements as a result of the reorganization of the Des Moines Partnerships).
Our in-service portfolio decreased from 40.7 million square feet at June 30,
1998 to 39.9 million square feet at June 30, 1999. Same property revenues,
which are the revenues of the 490 in-service properties owned on April 1, 1998,
increased 3.1% for the three months ended June 30, 1999, compared to the same
three months of 1998.

     During the three months ended June 30, 1999, 382 leases representing 2.1
million square feet of office, industrial and retail space commenced at an
average rate per square foot which was 6.4% higher than the average rate per
square foot on the expired leases.

     Interest and other income increased $2.4 million, or 104.3%, from $2.3
million for the three months ended June 30, 1998 to $4.7 million for the
comparable period in 1999. The increase was a result of higher cash balances in
1999 and additional income generated from management fees, development fees
and leasing commissions. The Operating Partnership generated $274,000 in
auxiliary income (vending and parking) as a result of acquiring multifamily
communities in the merger with J.C. Nichols.

     Rental operating expenses increased $8.3 million, or 23.2%, from $35.8
million for the three months ended June 30, 1998 to $44.1 million for the
comparable period in 1999. The increase is a result of our addition of 5.8
million square feet of majority owned office, industrial and retail space and
2,326 apartment units through a combination of acquisitions and developments
during the last six months of 1998 and the first six months of 1999, slightly
offset by the disposition and removal of 6.6 million square feet of majority
owned office, industrial and retail properties and 418 apartment units
(including the removal of certain properties from our consolidated financial
statements as a result of the reorganization of the Des Moines partnerships).
Rental operating expenses as a percentage of related revenues decreased from
31.7% for the three months ended June 30, 1998 to 31.2% for the comparable
period in 1999.

     Depreciation and amortization for the three months ended June 30, 1999 and
1998 was $27.7 million and $20.3 million, respectively. The increase of $7.4
million, or 36.5%, is due to an increase in depreciable assets over the prior
year. Interest expense increased $10.8 million, or 60.7%, from $17.8 million
for the three months ended June 30, 1998 to $28.6 million for the comparable
period in 1999. The increase is attributable to the increase in the outstanding
debt for the entire quarter. Interest expense for the three months ended June
30, 1999 and 1998 included $734,000 and $616,000, respectively, of amortization
of deferred financing costs and the costs related to our interest rate hedge
contracts. General and administrative expenses increased from 3.9% of rental
revenue for the three months ended June 30, 1998 to 4.1% for the comparable
period in 1999.


                                       11
<PAGE>

     Net income before extraordinary item equaled $41.7 million and $37.1
million for the three months ended June 30, 1999 and 1998, respectively. The
Operating Partnership recorded $8.1 million and $7.7 million in preferred unit
dividends for the three months ended June 30, 1999 and 1998, respectively.

     SIX MONTHS ENDED JUNE 30, 1999. Revenues from rental operations increased
$73.7 million, or 34.5%, from $213.4 million for the six months ended June 30,
1998 to $287.1 million for the comparable period in 1999. The increase is
primarily a result of our acquisition of 4.2 million square feet of majority
owned office, industrial and retail properties and 2,326 apartment units and
the completion of 1.6 million square feet of development activity during the
last six months of 1998 and the first six months of 1999, slightly offset by
the disposition and removal of 6.6 million square feet of majority owned
office, industrial and retail properties and 418 apartment units (including
the removal of certain properties from our consolidated financial statements as
a result of the reorganization of the Des Moines partnerships). Our in-service
portfolio decreased from 40.7 million square feet at June 30, 1998 to 39.9
million square feet at June 30, 1999. Same property revenues, which are the
revenues of the 440 in-service properties owned on January 1, 1998, increased
3.2% for the six months ended June 30, 1999, compared to the same six months of
1998.

     During the six months ended June 30, 1999, 755 leases representing 4.4
million square feet of office, industrial and retail space commenced at an
average rate per square foot which was 5.7% higher than the average rate per
square foot on the expired leases.

     Interest and other income increased $4.8 million, or 109.1%, from $4.4
million for the six months ended June 30, 1998 to $9.2 million for the
comparable period in 1999. The increase was a result of higher cash balances in
1999, and additional income generated from management fees, development fees
and leasing commissions. The Operating Partnership generated $587,000 in
auxiliary income (vending and parking) as a result of acquiring multifamily
communities in the merger with J.C. Nichols.

     Rental operating expenses increased $23.8 million, or 36.3%, from $65.6
million for the six months ended June 30, 1998 to $89.4 million for the
comparable period in 1999. The increase is a result of our addition of 5.8
million square feet of majority owned office, industrial and retail space and
2,326 apartment units through a combination of acquisitions and developments
during the last six months of 1998 and the first six months of 1999, slightly
offset by the disposition and removal of 6.6 million square feet of majority
owned office, industrial and retail properties and 418 apartment units
(including the removal of certain properties from our consolidated financial
statements as a result of the reorganization of the Des Moines partnerships).
Rental operating expenses as a percentage of related revenues increased from
30.7% for the six months ended June 30, 1998 to 31.1% for the comparable period
in 1999.

     Depreciation and amortization for the six months ended June 30, 1999 and
1998 was $55.7 million and $37.4 million, respectively. The increase of $18.3
million, or 48.9%, is due to an increase in depreciable assets over the prior
year. Interest expense increased $23.6 million, or 66.3%, from $35.6 million for
the six months ended June 30, 1998 to $59.2 million for the comparable period in
1999. The increase is attributable to the increase in the outstanding debt for
the entire quarter. Interest expense for the six months ended June 30, 1999 and
1998 included $1,512,000 and $1,232,000, respectively, of amortization of
deferred financing costs and the costs related to our interest rate hedge
contracts. General and administrative expenses increased from 3.8% of rental
revenue for the six months ended June 30, 1998 to 4.0% for the comparable period
in 1999.

     Net income before extraordinary item equaled $83.0 million and $71.1
million for the six months ended June 30, 1999 and 1998, respectively. The
Operating Partnership recorded $16.3 million and $13.8 million in preferred
unit dividends for the six months ended June 30, 1999 and 1998, respectively.


LIQUIDITY AND CAPITAL RESOURCES

     STATEMENT OF CASH FLOWS. For the six months ended June 30, 1999, cash
provided by operating activities decreased by $14.1 million, or 12.8%, to $96.3
million, as compared to $110.4 million for the same period in 1998. The
decrease is primarily due to the payment of real estate taxes due in the first
quarter of 1999 offset by the increase in net income resulting from our
property acquisitions in 1998 and 1999. Cash provided by investing activities
was $220.3 million for the first six months of 1999, as compared to $676.3 used
in investing activities for the same period in 1998. The increase is primarily
due to the disposition of certain properties during the first six months of
1999 and the decline in acquisition activity during the first six months of
1999, as


                                       12
<PAGE>

compared to the same period in 1998. Cash used in financing activities was
$253.1 million for the first six months of 1999, as compared to $565.0 provided
by investing activities for the same period in 1998. The decrease is primarily
due to the decrease in the borrowings on mortgages, notes payable and revolving
loans as well as a decrease net proceeds from contributed capital in the first
six months of 1999, as compared to the same period in 1998. Payments of
distributions increased by $14.0 million to $76.1 million for the first six
months of 1999, as compared with $62.1 million for the same period in 1998. The
increase is due to the greater number of Common Units outstanding and a 6.0%
increase in the distribution rate. Payment of preferred unit distributions
increased by $2.5 million to $16.3 million for the first six months of 1999, as
compared to $13.8 million for the same period in 1998. The increase is due to
the issuance of Preferred Series D Units in the first quarter of 1998.

     CAPITALIZATION. The Operating Partnership's total indebtedness at June 30,
1999 totaled $1.7 billion and was comprised of $533 million of secured
indebtedness with a weighted average interest rate of 7.8% and $1.2 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 June 30, 1999
were either fixed rate obligations or variable rate obligations covered by
interest rate hedge contracts. A portion of our $600 million unsecured revolving
loan (the "Revolving Loan") and approximately $43.7 million in floating rate
notes payable assumed upon consummation of the merger with J.C. Nichols were not
covered by interest rate hedge contracts on June 30, 1999.

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

     The following table sets forth information regarding our interest rate
hedge contracts as of June 30, 1999:



<TABLE>
<CAPTION>
                    NOTIONAL     MATURITY                                  FIXED        FAIR MARKET
TYPE OF HEDGE        AMOUNT        DATE      REFERENCE RATE                 RATE           VALUE
----------------   ----------   ----------   -----------------------   -------------   ------------
                               (DOLLARS IN THOUSANDS)
<S>                <C>          <C>          <C>                       <C>             <C>
 Treasury Lock      $100,000      10/1/99    10-Year Treasury          5.725%             $  486
 Treasury Lock       100,000       7/1/99    10-Year Treasury          5.674                 782
 Swap                100,000      10/1/99    3-Month LIBOR             4.970                 281
 Swap                 20,828      6/10/02    1-Month LIBOR + 0.75%     7.700                (945)
 Collar               80,000     10/15/01    1-Month LIBOR             5.40 - 6.25           175
</TABLE>

     We enter into swaps, collars and caps to limit our exposure to an increase
in variable interest rates, particularly with respect to amounts outstanding
under our Revolving Loan. The interest rate on all of our variable rate debt is
adjusted at one and three-month intervals, subject to settlements under these
contracts. We also enter into treasury lock agreements from time to time in
order to limit our exposure to an increase in interest rates with respect to
future debt offerings.

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

     CURRENT AND FUTURE CASH NEEDS. Historically, rental revenue has been the
principal source of funds to pay operating expenses, debt service, stockholder
distributions and capital expenditures, excluding nonrecurring 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.


                                       13
<PAGE>

     Our short-term (within the next 12 months) liquidity needs also include,
among other things, the funding of approximately $210 million of our existing
development activity. We expect to fund our short-term liquidity needs through
a combination of:

   o additional borrowings under our Revolving Loan (approximately $318.5
     million was available as of June 30, 1999);

   o the issuance of secured debt;

   o the selective disposition of non-core assets; and

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

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

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


RECENT DEVELOPMENTS

     On June 7, 1999, we sold approximately 3.3 million rentable square feet of
non-core office and industrial properties and 49 acres of development land in
the South Florida area for gross proceeds of approximately $323.0 million. In
addition, during the six months ended June 30, 1999, we sold approximately 1.6
million rentable square feet of non-core office and industrial properties in
the Baltimore area and certain other non-core office and industrial properties
for gross proceeds of approximately $108.9 million. The Operating Partnership
recorded a gain, net of income tax provision, of $2.1 million related to these
dispositions. Non-core office and industrial properties generally include
single buildings or business parks that do not fit our long-term strategy.

     In addition, we have entered into various agreements to sell approximately
2.8 million rentable square feet of non-core office and industrial properties
for gross proceeds of $220.0 million. These transactions are subject to
customary closing conditions, including due diligence and documentation, and
are expected to close during the third and fourth quarters of 1999. However, we
can provide no assurance that all or parts of these transactions will be
consummated.

     We intend to use the net proceeds from our recent and pending disposition
activity to reinvest in tax-deferred exchange transactions under Section 1031
of the Internal Revenue Code and to fund existing development activity, either
through direct payments or repayment of borrowings under our Revolving Loan. We
expect to reinvest up to $72 million of the net proceeds from recent
disposition activity and up to $123 million of the net proceeds from pending
disposition activity to acquire in tax-deferred exchange transactions
in-service properties, development land and development projects located in
core markets and in sub-markets where we have a strong presence. For an
exchange to qualify for tax-deferred treatment under Section 1031, the net
proceeds from the sale of a property must be held by an escrow agent until
applied toward the purchase of real estate qualifying for gain deferral. Given
the competition for properties meeting our investment criteria, there may be
some delay in reinvesting such proceeds. Delays in reinvesting such proceeds
will reduce our income from operations. In addition, the use of net proceeds
from dispositions to fund development activity, either through direct payments


                                       14
<PAGE>

or repayment of borrowings under our Revolving Loan, will reduce our income
from operations until such development projects are placed in service.


YEAR 2000
     BACKGROUND. The Year 2000 compliance issue refers to the inability of
computer systems and computer software to correctly process any date after
1999. The date change to the new millennium may be a problem because some
computer hardware and software was designed to use only two digits to represent
a year. As a result, some systems may interpret 1/1/00 to be the year 1900. In
addition, some systems may not recognize that the Year 2000 is a leap year.
Both problems could result in system failure or miscalculations, which may
cause disruptions of operations.

     The Year 2000 issue, if not corrected, could result in the failure of the
information technology ("IT") systems that we use in our business operations,
such as computer programs related to property management, leasing, financial
reporting, employee benefits, asset management and energy management. In
addition, computerized systems and microprocessors are embedded in a variety of
products used in our operations and properties, such as HVAC controls, lights,
power generators, elevators, life safety systems, phones and security systems.

     APPROACH AND STATUS. Our Year 2000 compliance efforts are divided into two
areas -- "operations level" and "property level." Operations level includes
those information technology systems used in our corporate and division offices
to perform real estate, accounting and human resources functions. Property
level includes the non-information technology systems at our individual
properties. Our Year 2000 remediation plan at both the operations and property
levels has three phases:

     o assessment (inventory and testing of computer systems),

     o renovation (repairing and or replacing non-compliant systems), and

     o validation (testing of repaired or replaced systems).

     Our Information Technology Department is overseeing our operations level
compliance program. With respect to our operations level IT software, we have
completed all three phases of our Year 2000 remediation plan. As part of a
standardization of our technology infrastructure in 1998, computer software
that was not Year 2000 compliant was upgraded or replaced. These software
upgrades were off-the-shelf Year 2000 compliant packages. Additionally, we
successfully upgraded and tested a Year 2000 compliant version of our corporate
accounting and property management software in December 1998. With respect to
our operations level IT hardware, we have completed the assessment phase of our
remediation plan and are 95% complete (in terms of labor) with the renovation
and validation phases of the plan. We expect to complete the renovation and
validation phases with respect to our operations level hardware by the end of
the third quarter of 1999.

     Our Chief Operating Officer is overseeing our property level compliance
program. We are near completing our inventory of all of our properties'
non-information technology systems. This assessment process is 100% complete.
As part of the inventory process, we requested appropriate vendors and
manufacturers to certify that their products are Year 2000 compliant. Most
indicated that their products are Year 2000 compliant. We are approximately 90%
complete (in terms of labor) with the renovation and validation phases of our
remediation plan at the property level. We expect to complete both phases in
the third quarter of 1999.

     With respect to Year 2000 issues relating to our customer base, we have
not sought representations from our tenants with respect to their Year 2000
readiness because no one tenant represents more than 3% of our annualized
rental revenue. With respect to suppliers and vendors, our material purchases
are generally from those in competitive fields where others will be able to
meet any of our needs unmet by suppliers or vendors with Year 2000
difficulties. (Although we have no reason to expect a significant interruption
of utility services for our properties, we have not received (nor sought)
written assurances from utility providers that Year 2000 issues will not cause
an interruption in service.)

     COSTS. To date, the costs directly associated with our Year 2000 efforts
have not been material, and we estimate our future costs to be immaterial as
well.

     RISKS ASSOCIATED WITH THE YEAR 2000 ISSUE. We do not expect Year 2000
failures to have a material adverse effect on our results of operations or
liquidity because:


                                       15
<PAGE>

   o we do not rely on a small number of tenants for a significant portion of
     our rental revenue;

   o we stand ready to switch vendors or suppliers whose Year 2000 failures
     adversely affect their products or services; and

   o our remediation plan is expected to be complete prior to the Year 2000.

As a result, we do not expect to develop a contingency plan for Year 2000
   failures.

     Our assessment of the likely impact of Year 2000 issues on us, which is a
forward-looking statement, depends on numerous factors, such as the continued
provision of utility services, and we remain exposed to the risk of Year 2000
failures. See " -- Disclosure Regarding Forward-Looking Statements."

     Our disclosures and announcements concerning our Year 2000 programs are
intended to constitute "Year 2000 Readiness Disclosures" as defined in the
recently-enacted Year 2000 Information and Readiness Disclosure Act. The Act
provides added protection from liability for certain public and private
statements concerning an entity's Year 2000 readiness and the Year 2000
readiness of its products and services. The Act also potentially provides added
protection from liability for certain types of Year 2000 disclosures made after
January 1, 1996, and before the date of enactment of the Act.

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 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


                                       16
<PAGE>

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.


IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES, which is required to be adopted in fiscal years beginning after
June 15, 1999. In June 1999, the FASB issued Statement No. 137, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES -- DEFERRAL OF THE EFFECTIVE DATE
OF FASB STATEMENT NO. 133, which stipulates the required adoption date to be
all fiscal years beginning after June 15, 2000. Statement No. 133 requires us
to recognize all derivatives on the balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the
fair value of derivatives will either be offset against the change in fair
value of the hedged assets, liabilities or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will
be immediately recognized in earnings. The fair market value of the Company's
derivatives is discussed in Item 2.


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 means net income (computed in accordance with generally accepted
accounting principles) excluding gains (or losses) from debt restructuring and
sales of property, 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. The 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. 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.


                                       17
<PAGE>

     FFO and cash available for distribution for the three month periods ended
June 30, 1999 and 1998 are summarized in the following table (in thousands):



<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED        SIX MONTHS ENDED
                                                                               JUNE 30,                 JUNE 30,
                                                                        ----------------------- -------------------------
                                                                            1999        1998        1999         1998
                                                                        ----------- ----------- ------------ ------------
<S>                                                                     <C>         <C>         <C>          <C>
FUNDS FROM OPERATIONS:
Income before extraordinary item ......................................  $ 41,664    $ 37,082    $  83,037    $  71,063
Add (deduct):
  Dividends to preferred unitholders...................................    (8,145)     (7,656)     (16,290)     (13,801)
  Severance costs and other division closing costs: ...................     1,233          --        1,233           --
   Gain on disposition of assets, net of income tax provision .........    (1,524)         --       (2,093)          --
   Depreciation and amortization ......................................    27,655      20,268       55,729       37,381
   Depreciation on unconsolidated affiliates ..........................       745                    1,222
                                                                         --------    --------    ---------    ---------
   FUNDS FROM OPERATIONS BEFORE MINORITY INTEREST .....................    61,628      49,694      122,838       94,643
CASH AVAILABLE FOR DISTRIBUTION:
Add (deduct):
  Rental income from straight-line rents ..............................    (3,524)     (2,976)      (7,509)      (6,092)
  Amortization of deferred financing costs ............................       734         616        1,512        1,232
  Non-incremental revenue generating capital expenditures (1):
   Building improvements paid .........................................    (2,957)     (1,678)      (4,475)      (2,697)
   Second generation tenant improvements paid .........................    (4,112)     (4,868)     (10,121)      (7,304)
   Second generation lease commissions paid ...........................    (4,082)     (1,785)      (7,613)      (3,511)
                                                                         --------    --------    ---------    ---------
     CASH AVAILABLE FOR DISTRIBUTION ..................................  $ 47,687    $ 39,003    $  94,632    $  76,271
                                                                         ========    ========    =========    =========
Weighted average Common Units outstanding -- Basic ....................    69,956      62,638       69,817       60,884
Weighted average Common Units outstanding -- Diluted ..................    69,978      63,029       69,830       61,389
                                                                         ========    ========    =========    =========
DIVIDEND PAYOUT RATIO -- DILUTED:
  Funds from operations ...............................................      61.3%       64.7%        61.4%        66.2%
                                                                         ========    ========    =========    =========
  Cash available for distribution .....................................      79.2%       82.4%        79.7%        82.1%
                                                                         ========    ========    =========    =========
</TABLE>

----------
(1) Amounts represent cash expenditures.

                                       18
<PAGE>

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

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

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

   o the financial condition of our tenants could deteriorate;

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

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

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

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

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

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

   o we could lose key executive officers; and

   o 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.


                                       19
<PAGE>

PROPERTY INFORMATION

     The following table sets forth certain information with respect to our
majority owned in-service and development properties (excluding apartment
units) as of June 30, 1999 and 1998:



<TABLE>
<CAPTION>
                                  RENTABLE       NUMBER OF     PERCENT LEASED/
JUNE 30, 1999                   SQUARE FEET     PROPERTIES       PRE-LEASED
----------------------------   -------------   ------------   ----------------
<S>                            <C>             <C>            <C>
IN-SERVICE:
 Office ....................    26,666,000          397               94%
 Industrial ................    11,497,000          193               90%
 Retail ....................     1,790,000           19               91%
                                ----------          ---               --
  Total ....................    39,953,000          609               93%
                                ==========          ===               ==
DEVELOPMENT:
 COMPLETED -- NOT STABILIZED
 Office ....................     1,951,000           18               78%
 Industrial ................       476,000            4               78%
 Retail ....................       119,000            1               97%
                                ----------          ---               --
  Total ....................     2,546,000           23               79%
                                ==========          ===               ==
IN PROCESS
 Office ....................     3,065,000           24               69%
 Industrial ................       472,000            4               17%
 Retail ....................        81,000            1               53%
                                ----------          ---               --
  Total ....................     3,618,000           29               61%
                                ==========          ===               ==
TOTAL:
 Office ....................    31,682,000          439
 Industrial ................    12,445,000          201
 Retail ....................     1,990,000           21
                                ----------          ---
  Total ....................    46,117,000          661
                                ==========          ===
JUNE 30, 1998
-----------------------------
IN-SERVICE:
 Office ....................    28,850,000          382               94%
 Industrial ................    11,863,000          148               94%
 Retail ....................            --           --               --
                                ----------          ---               --
  Total ....................    40,713,000          530               94%
                                ==========          ===               ==
DEVELOPMENT:
 COMPLETED -- NOT STABILIZED
 Office ....................        N/A             N/A             N/A
 Industrial ................        N/A             N/A             N/A
 Retail ....................        N/A             N/A             N/A
                                ----------          ---             ----
  Total ....................        N/A             N/A             N/A
                                ==========          ===             ====
IN PROCESS
 Office ....................     3,261,000           27               44%
 Industrial ................       705,000            5               43%
 Retail ....................            --           --               --
                                ----------          ---             ----
  Total ....................     3,966,000           32               44%
                                ==========          ===             ====
TOTAL:
 Office ....................    32,111,000          409
 Industrial ................    12,568,000          153
 Retail ....................            --           --
                                ----------          ---
  Total ....................    44,679,000          562
                                ==========          ===
</TABLE>

                                       20
<PAGE>

     The following table sets forth certain information with respect to our
properties under development as of June 30, 1999 (dollars in thousands):



<TABLE>
<CAPTION>
                                                   RENTABLE
                                                    SQUARE     ESTIMATED    COST AT      PRE-LEASING     ESTIMATED     ESTIMATED
             NAME               LOCATIONS            FEET        COST      6/30/99    PERCENTAGE (1)   COMPLETION  STABILIZATION (2)
------------------------------ ----------------- ------------ ----------- ----------- ---------------- ------------ ----------------
          IN-PROCESS
<S>                            <C>               <C>          <C>         <C>         <C>              <C>          <C>
OFFICE:
C N A Maitland III             Orlando               78,000    $  9,885    $  7,731          100%         3Q99             3Q99
Capital One Bldg 2             Richmond              44,000       5,359       5,240          100%         3Q99             3Q99
Highwoods Center II @
 Tradeport                     Atlanta               53,000       4,825       2,527           56%         3Q99             4Q99
Capital One Bldg 3             Richmond             126,000      15,046      10,267          100%         4Q99             4Q99
Eastshore I                    Richmond              68,000       7,535         457          100%         4Q99             4Q99
Lakepoint II                   Tampa                225,000      34,106      16,153           52%         4Q99             4Q99
Deerfield I                    Atlanta               72,000       6,994       2,312           62%         3Q99             1Q00
Deerfield II                   Atlanta               45,000       4,382       3,120           --          3Q99             1Q00
Westwood South                 Nashville            125,000      13,530       9,582           90%         3Q99             1Q00
3737 Glenwood Ave.             Research Triangle    107,000      16,700      11,096           80%         3Q99             1Q00
Eastshore III                  Richmond              80,000       8,580         452          100%         1Q00             1Q00
Intermedia Building 1          Tampa                200,000      27,040       5,219          100%         1Q00             1Q00
Intermedia Building 2          Tampa                 30,000       4,056         439          100%         1Q00             1Q00
Intermedia Building 3          Tampa                170,000      22,984       5,754          100%         1Q00             1Q00
Belfort Park C1                Jacksonville          54,000       4,830       2,196           --          3Q99             2Q00
Belfort Park C2                Jacksonville          31,000       2,730       2,241           --          3Q99             2Q00
Caterpillar Financial Center   Nashville            313,000      54,000      22,400           79%         1Q00             2Q00
4101 Research Commons          Research Triangle     73,000       9,311       6,052           35%         3Q99             2Q00
Peachtree Corner               Atlanta              109,000       9,238       3,869           33%         3Q99             3Q00
Intermedia Building 4          Tampa                200,000      29,219       1,909          100%         3Q00             3Q00
Mallard Creek V                Charlotte            118,000      12,262       7,575           --          4Q99             4Q00
Valencia Place                 Kansas City          241,000      34,020      21,400           47%         1Q00             4Q00
Intermedia Building 5          Tampa                200,000      29,219       1,473          100%         3Q01             3Q01
Capital Plaza                  Orlando              303,000      53,000      27,554           30%         1Q00             4Q01
                                                    -------    --------    --------          ---
In-Process Office Total or
 Weighted Average                                 3,065,000    $418,851    $177,018           69%
                                                  =========    ========    ========          ===
INDUSTRIAL:
Newpoint II                    Atlanta              131,000       5,167       4,141           43%         3Q99             2Q00
Air Park South Warehouse
 III                           Piedmont Triad       120,000       3,626         668           --          4Q99             2Q00
Air Park South Warehouse
 IV                            Piedmont Triad        86,000       2,750       1,754           28%         4Q99             3Q00
Bluegrass Valley I             Atlanta              135,000       5,664          71           --          2Q00             4Q00
                                                  ---------    --------    --------          ---
In-Process Industrial Total
 or Weighted Average                                472,000    $ 17,207    $  6,634           17%
                                                  =========    ========    ========          ===
RETAIL:
Valencia Place                 Kansas City           81,000      14,362       7,193           53%         1Q00             4Q00
                                                  ---------    --------    --------          ---
In-Process Retail Total or
 Weighted Average                                    81,000    $ 14,362    $  7,193           53%
                                                  =========    ========    ========          ===
Total or Weighted Average
 of all In-Process
 Development Projects                             3,618,000    $450,420    $190,845           61%
                                                  =========    ========    ========          ===
</TABLE>

----------
(1) Includes the effect of letters of intent.
(2) We generally consider a development project to be stabilized upon the
    earlier of the first date such project is at least 95% occupied or one
    year from the date of completion.


                                       21
<PAGE>


<TABLE>
<CAPTION>
                                                  RENTABLE
                                                   SQUARE     ESTIMATED   COST AT     PRE-LEASING     ESTIMATED       ESTIMATED
           PROPERTY              LOCATION           FEET        COST      6/30/99    PERCENTAGE (1)   COMPLETION   STABILIZATION (2)
----------------------------- ----------------- ------------ ----------- ----------- ---------------- ------------ -----------------
 COMPLETED -- NOT STABILIZED
<S>                           <C>               <C>          <C>         <C>         <C>              <C>          <C>
OFFICE:
Patewood VI                   Greenville          107,000    $ 11,400    $ 12,223            96%         3Q98             3Q99
Lakeview Ridge III            Nashville           131,000      13,100       9,883            88%         2Q99             3Q99
Highwoods Centre              Research Triangle    76,000       8,300       8,627           100%         4Q98             3Q99
Overlook                      Research Triangle    97,000      10,500      10,162           100%         4Q98             3Q99
Red Oak                       Research Triangle    65,000       6,000       5,978            90%         4Q98             3Q99
Situs II                      Research Triangle    59,000       6,300       6,648            94%         3Q98             3Q99
Interstate Corporate Center   Tampa               342,000      19,100      17,856            99%         1Q99             3Q99
Ridgefield III                Asheville            57,000       5,500       5,185            53%         3Q98             4Q99
10 Glenlakes                  Atlanta             254,000      35,100      29,735            82%         1Q99             4Q99
Parkway Plaza 11              Charlotte            32,000       2,600       2,354            66%         1Q99             4Q99
Highwoods Centre              Hampton Roads       103,000       9,925       8,501            66%         4Q98             4Q99
Southwind Building D          Memphis              64,000       6,800       5,017            85%         2Q99             4Q99
Cool Springs I                Nashville           153,000      16,800      15,552            66%         3Q98             4Q99
Stony Point II                Richmond            136,000      13,881      10,554            58%         2Q99             4Q99
Parkway Plaza 12              Charlotte            22,000       1,800       1,445            67%         1Q99             1Q00
Parkway Plaza 14              Charlotte            90,000       7,690       5,569            58%         2Q99             1Q00
Lakefront Plaza I             Hampton Roads        77,000       7,477       6,502            32%         2Q99             1Q00
Concourse Center One          Piedmont Triad       86,000       8,400       6,708            32%         2Q99             1Q00
                                                  -------    --------    --------           ---
Completed -- Not Stabilized
  Office Total or Weighted
  Average                                       1,951,000    $190,673    $168,499            78%
                                                =========    ========    ========           ===
INDUSTRIAL:
Tradeport 1                   Atlanta              87,000    $  3,100    $  2,989            82%         3Q98             3Q99
Tradeport 2                   Atlanta              87,000       3,100       3,146            86%         3Q98             3Q99
Air Park South Warehouse II   Piedmont Triad      136,000       4,200       3,293           100%         4Q98             3Q99
HIW Distribution Center       Richmond            166,000       5,764       5,663            53%         1Q99             4Q99
                                                ---------    --------    --------           ---
Completed -- Not Stabilized
  Industrial Total or
  Weighted Average                                476,000    $ 16,164    $ 15,091            78%
                                                =========    ========    ========           ===
RETAIL:
Seville Square                Kansas City         119,000    $ 32,100    $ 30,190            97%         2Q99             1Q00
                                                ---------    --------    --------           ---
Completed -- Not Stabilized
  Retail Total or Weighted
  Average                                         119,000    $ 32,100    $ 30,190            97%
                                                =========    ========    ========           ===
Total or Weighted Average
  of all Completed -- Not
  Stabilized Development
  Projects                                      2,546,000    $238,937    $213,780            79%
                                                =========    ========    ========           ===
Total or Weighted Average
  of
  all Development Projects                      6,164,000    $689,357    $404,625            69%
                                                =========    ========    ========           ===
</TABLE>

----------
(1) Includes the effect of letters of intent.

(2) We generally consider a development project to be stabilized upon the
    earlier of the first date such project is at least 95% occupied or one
    year from the date of completion.


                                       22
<PAGE>


<TABLE>
<CAPTION>
                                             RENTABLE
                                              SQUARE
                                               FEET            ESTIMATED COST          PRE-LEASING
DEVELOPMENT ANALYSIS                       ------------   ------------------------   ---------------
                                                           (DOLLARS IN THOUSANDS)     PERCENTAGE (1)
                                                          ------------------------   ---------------
<S>                                        <C>            <C>                        <C>
SUMMARY BY ESTIMATED STABILIZATION DATE:
Third Quarter 1999 .....................      967,000             $ 81,244                  94%
Fourth Quarter 1999 ....................    1,334,000              147,957                  69%
First Quarter 2000 .....................    1,146,000              154,256                  81%
Second Quarter 2000 ....................      722,000               79,664                  46%
Third Quarter 2000 .....................      395,000               41,207                  66%
Fourth Quarter 2000 ....................      575,000               66,308                  27%
Third Quarter 2001 .....................      200,000               29,219                 100%
Fourth Quarter 2001 ....................      303,000               53,000                  30%
Held for Sale ..........................      522,000               36,502                  83%
                                            ---------             --------                 ---
   Total or Weighted Average ...........    6,164,000             $689,357                  69%
                                            =========             ========                 ===
SUMMARY BY MARKET:
 Asheville .............................       57,000             $  5,500                  53%
 Atlanta ...............................      973,000               77,570                  54%
 Charlotte .............................      262,000               24,352                  34%
 Greenville ............................      107,000               11,400                  96%
 Jacksonville ..........................       85,000                7,560                  --
 Kansas City ...........................      441,000               80,482                  62%
 Memphis ...............................       64,000                6,800                  85%
 Nashville .............................      722,000               97,430                  80%
 Orlando ...............................      381,000               62,885                  44%
 Piedmont Triad ........................      428,000               18,976                  44%
 Research Triangle .....................      477,000               57,111                  83%
 Richmond ..............................      620,000               56,165                  78%
 Tampa .................................    1,025,000              146,624                  89%
 Held for Sale .........................      522,000               36,502                  83%
                                            ---------             --------                 ---
   Total or Weighted Average ...........    6,164,000             $689,357                  69%
                                            =========             ========                 ===
   Build-to-Suit .......................    1,196,000             $158,923                 100%
   Multi-tenant ........................    4,446,000              493,932                  59%
   Held for Sale .......................      522,000               36,502                  83%
                                            ---------             --------                 ---
   Total or Weighted Average ...........    6,164,000             $689,357                  69%
                                            =========             ========                 ===
</TABLE>


<TABLE>
<CAPTION>
                                             RENTABLE
                                              SQUARE
                                               FEET          ESTIMATED COST          PRE-LEASING
                                            ---------   ------------------------   ---------------
                                                         (DOLLARS IN THOUSANDS)
                                                        ------------------------    PERCENTAGE (1)
<S>                                         <C>         <C>                        <C>
PER PROPERTY TYPE:
 Office Weighted Average ................    115,231             $14,693                 71%
 Industrial Weighted Average ............    118,500               4,171                 48%
 Retail Weighted Average ................    100,000              23,231                 79%
 Held for Sale Weighted Average .........    174,000              12,167                 83%
                                             -------             -------                 --
 Total Weighted Average .................    118,538             $13,257                 69%
                                             =======             =======                 ==
</TABLE>

----------
(1) Includes the effect of letters of intent.

                                       23
<PAGE>

     The following tables set forth certain information about leasing
activities at our majority-owned in-service properties (excluding apartment
units) for the three months ended June 30, 1999 and March 31, 1999 and December
31 and September 30, 1998:



<TABLE>
<CAPTION>
                                                                      OFFICE LEASING STATISTICS
                                                                         THREE MONTHS ENDED
                                         -----------------------------------------------------------------------------------
                                             6/30/99          3/31/99         12/31/98          9/30/98           AVERAGE
                                         --------------   --------------   --------------   ---------------   --------------
<S>                                      <C>              <C>              <C>              <C>               <C>
NET EFFECTIVE RENTS RELATED TO
  RE-LEASED SPACE:
Number of lease transactions (signed
  leases)                                         290              276              308               326              300
Rentable square footage leased              1,326,838        1,406,170        1,291,297         1,645,913        1,417,555
Average per rentable square foot over
  the lease term:
   Base rent                               $    15.60       $    14.84       $    16.54       $     16.18       $    15.79
   Tenant improvements                         ( 0.84)          ( 0.84)          ( 0.85)           ( 0.71)          ( 0.81)
   Leasing commissions                         ( 0.38)          ( 0.42)          ( 0.38)           ( 0.42)          ( 0.40)
   Rent concessions                            ( 0.03)          ( 0.01)          ( 0.03)           ( 0.02)          ( 0.02)
                                           ----------       ----------       ----------       -----------       ----------
   Effective rent                               14.35            13.57            15.28             15.03            14.56
   Expense stop (1)                            ( 4.21)          ( 3.55)          ( 3.96)           ( 4.45)          ( 4.04)
                                           ----------       ----------       ----------       -----------       ----------
   Equivalent effective net rent           $    10.14       $    10.02       $    11.32       $     10.58       $    10.52
                                           ==========       ==========       ==========       ===========       ==========
Average term in years                               4                5                4                 5                5
                                           ==========       ==========       ==========       ===========       ==========
CAPITAL EXPENDITURES RELATED TO
  RE-LEASED SPACE:
Tenant Improvements:
  Total dollars committed under
   signed leases                           $5,073,153       $6,848,279       $4,886,517       $ 6,754,100       $5,890,512
  Rentable square feet                      1,326,838        1,406,170        1,291,297         1,645,913        1,417,555
                                           ----------       ----------       ----------       -----------       ----------
  Per rentable square foot                 $     3.82       $     4.87       $     3.78       $      4.10       $     4.16
                                           ==========       ==========       ==========       ===========       ==========
Leasing Commissions:
  Total dollars committed under
   signed leases                           $2,230,915       $3,047,978       $2,005,094       $ 3,694,473       $2,744,615
  Rentable square feet                      1,326,838        1,406,170        1,291,297         1,645,913        1,417,555
                                           ----------       ----------       ----------       -----------       ----------
  Per rentable square foot                 $     1.68       $     2.17       $     1.55       $      2.24       $     1.94
                                           ==========       ==========       ==========       ===========       ==========
Total:
  Total dollars committed under
   signed leases                           $7,304,068       $9,896,257       $6,891,611       $10,448,573       $8,635,127
  Rentable square feet                      1,326,838        1,406,170        1,291,297         1,645,913        1,417,555
                                           ----------       ----------       ----------       -----------       ----------
  Per rentable square foot                 $     5.50       $     7.04       $     5.34       $      6.35       $     6.09
                                           ==========       ==========       ==========       ===========       ==========
RENTAL RATE TRENDS:
Average final rate with expense pass
  throughs                                 $    15.20       $    14.28       $    13.57       $     14.51       $    14.39
Average first year cash rental rate        $    15.61       $    15.01       $    14.47       $     15.43       $    15.13
                                           ----------       ----------       ----------       -----------       ----------
Percentage increase                             2.70%            5.11%            6.63%             6.34%            5.14%
                                           ==========       ==========       ==========       ===========       ==========
</TABLE>

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


                                       24
<PAGE>


<TABLE>
<CAPTION>
                                                                         INDUSTRIAL LEASING STATISTICS
                                                                               THREE MONTHS ENDED
                                                  ----------------------------------------------------------------------------
                                                      6/30/99          3/31/99        12/31/98        9/30/98        AVERAGE
                                                  --------------   --------------   ------------   ------------   ------------
<S>                                               <C>              <C>              <C>            <C>            <C>
NET EFFECTIVE RENTS RELATED TO RE-LEASED
  SPACE:
Number of lease transactions (signed leases)                63               72             44             56             59
Rentable square footage leased                         589,835          837,616        582,758        314,549        581,190
Average per rentable square foot over the
  lease term:
   Base rent                                        $     5.55       $     5.12       $   4.71       $   6.59       $   5.49
   Tenant improvements                                   (0.37)           (0.22)         (0.20)         (0.23)         (0.26)
   Leasing commissions                                   (0.22)           (0.10)         (0.09)         (0.09)         (0.13)
   Rent concessions                                       0.00             0.00           0.00           0.00           0.00
                                                    ----------       ----------       --------       --------       --------
   Effective rent                                         4.96             4.80           4.42           6.27           5.11
   Expense stop (1)                                      (0.28)           (0.28)         (0.25)         (0.44)         (0.31)
                                                    ----------       ----------       --------       --------       --------
   Equivalent effective net rent                    $     4.68       $     4.52       $   4.17       $   5.83       $   4.80
                                                    ==========       ==========       ========       ========       ========
  Average term in years                                      4                4              3              4              4
                                                    ==========       ==========       ========       ========       ========
CAPITAL EXPENDITURES RELATED TO RE-LEASED
  SPACE:
Tenant Improvements:
  Total dollars committed under signed leases       $1,064,618       $  821,654       $712,108       $248,359       $711,685
  Rentable square feet                                 589,835          837,616        582,758        314,549        581,190
                                                    ----------       ----------       --------       --------       --------
  Per rentable square foot                          $     1.80       $     0.98       $   1.22       $   0.79       $   1.22
                                                    ==========       ==========       ========       ========       ========
Leasing Commissions:
  Total dollars committed under signed leases       $  527,815       $  315,101       $173,017       $ 99,574       $278,877
  Rentable square feet                                 589,835          837,616        582,758        314,549        581,190
                                                    ----------       ----------       --------       --------       --------
  Per rentable square foot                          $     0.89       $     0.38       $   0.30       $   0.32       $   0.48
                                                    ==========       ==========       ========       ========       ========
Total:
  Total dollars committed under signed leases       $1,592,433       $1,136,755       $885,125       $347,933       $990,561
  Rentable square feet                                 589,835          837,616        582,758        314,549        581,190
                                                    ----------       ----------       --------       --------       --------
  Per rentable square foot                          $     2.70       $     1.36       $   1.52       $   1.11       $   1.70
                                                    ==========       ==========       ========       ========       ========
RENTAL RATE TRENDS:
Average final rate with expense pass throughs       $     5.17       $     4.91       $   4.62       $   5.40       $   5.03
Average first year cash rental rate                 $     5.62       $     4.91       $   4.72       $   5.54       $   5.20
                                                    ----------       ----------       --------       --------       --------
Percentage increase                                       8.70%            0.00%          2.16%          2.59%          3.38%
                                                    ==========       ==========       ========       ========       ========
</TABLE>

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


                                       25
<PAGE>


<TABLE>
<CAPTION>
                                                                           RETAIL LEASING STATISTICS
                                                                               THREE MONTHS ENDED
                                                  ----------------------------------------------------------------------------
                                                      6/30/99         3/31/99       12/31/98        9/30/98         AVERAGE
                                                  --------------   ------------   ------------   ------------   --------------
<S>                                               <C>              <C>            <C>            <C>            <C>
NET EFFECTIVE RENTS RELATED TO RE-LEASED
  SPACE:
Number of lease transactions (signed leases)                29             25             15             11               20
Rentable square footage leased                         159,484         62,638         29,706         37,258           72,272
Average per rentable square foot over the
  lease term:
   Base rent                                        $    14.48       $  15.37       $  16.34       $  13.59       $    14.95
   Tenant improvements                                  ( 1.46)        ( 0.45)        ( 1.66)        ( 0.14)          ( 0.93)
   Leasing commissions                                  ( 0.39)        ( 0.39)        ( 0.76)        ( 0.44)          ( 0.50)
   Rent concessions                                       0.00           0.00           0.00           0.00             0.00
                                                    ----------       --------       --------       --------       ----------
   Effective rent                                        12.63          14.53          13.92          13.01            13.52
   Expense stop (1)                                       0.00          (0.27)        ( 1.79)        ( 0.09)          ( 0.54)
                                                    ----------       --------       --------       --------       ----------
   Equivalent effective net rent                    $    12.63       $  14.26       $  12.13       $  12.92       $    12.98
                                                    ----------       --------       --------       --------       ----------
  Average term in years                                      6              6              5              6                6
                                                    ==========       ========       ========       ========       ==========
CAPITAL EXPENDITURES RELATED TO RE-LEASED
  SPACE:
Tenant Improvements:
  Total dollars committed under signed leases       $2,784,277       $248,531       $319,620       $ 21,000       $  843,357
  Rentable square feet                                 159,484         62,638         29,706         37,258           72,272
                                                    ----------       --------       --------       --------       ----------
  Per rentable square foot                          $    17.46       $   3.97       $  10.76           0.56       $    11.67
                                                    ==========       ========       ========       ========       ==========
Leasing Commissions:
  Total dollars committed under signed leases       $  393,991       $153,872       $123,047       $ 99,268       $  192,544
  Rentable square feet                                 159,484         62,638         29,706         37,258           72,272
                                                    ----------       --------       --------       --------       ----------
  Per rentable square foot                          $     2.47       $   2.46       $   4.14       $   2.66       $     2.66
                                                    ==========       ========       ========       ========       ==========
Total:
  Total dollars committed under signed leases       $3,178,268       $402,403       $442,667       $120,268       $1,035,901
  Rentable square feet                                 159,484         62,638         29,706         37,258           72,272
                                                    ----------       --------       --------       --------       ----------
  Per rentable square foot                          $    19.93       $   6.42       $  14.90       $   3.23       $    14.33
                                                    ==========       ========       ========       ========       ==========
RENTAL RATE TRENDS:
Average final rate with expense pass throughs       $     9.91       $  10.92       $  15.91       $   8.55       $    11.32
Average first year cash rental rate                 $    14.20       $  16.22       $  18.16       $  10.53       $    14.78
                                                    ----------       --------       --------       --------       ----------
Percentage increase                                      43.29%         48.53%         14.14%         23.16%           30.51%
                                                    ==========       ========       ========       ========       ==========
</TABLE>

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


                                       26
<PAGE>

     The following tables set forth scheduled lease expirations for executed
leases at our majority owned in-service properties (excluding apartment units)
as of June 30, 1999 assuming no tenant exercises renewal options.


OFFICE PROPERTIES:



<TABLE>
<CAPTION>
                                                                                               AVERAGE
                                                                           ANNUAL RENTS         ANNUAL       PERCENTAGE OF
                                       TOTAL          PERCENTAGE OF            UNDER         RENTAL RATE     LEASED RENTS
        YEAR OF                       RENTABLE    LEASED SQUARE FOOTAGE      EXPIRING         PER SQUARE      REPRESENTED
         LEASE          NUMBER OF   SQUARE FEET       REPRESENTED BY        LEASES (1)         FOOT FOR       BY EXPIRING
      EXPIRATION          LEASES      EXPIRING       EXPIRING LEASES      (IN THOUSANDS)   EXPIRATIONS (1)      LEASES
---------------------- ----------- ------------- ----------------------- ---------------- ----------------- --------------
<S>                    <C>         <C>           <C>                     <C>              <C>               <C>
  Remainder of 1999         589      2,009,187              7.7%             $ 31,033         $  15.45             7.6%
         2000               753      3,410,864             13.1%               54,052            15.85            13.3%
         2001               700      4,015,449             15.5%               64,456            16.05            15.8%
         2002               637      3,928,971             15.1%               62,292            15.85            15.3%
         2003               500      3,857,956             14.9%               62,079            16.09            15.2%
         2004               260      2,573,684              9.9%               40,959            15.91            10.0%
         2005                88      1,305,799              5.0%               19,881            15.23             4.9%
         2006                51      1,394,041              5.4%               21,553            15.46             5.3%
         2007                29        761,892              2.9%               12,278            16.12             3.0%
         2008                50      1,572,359              6.1%               21,975            13.98             5.4%
 2009 and thereafter         42      1,136,541              4.4%               17,220            15.15             4.2%
                            ---      ---------            -----              --------         --------           -----
                          3,699     25,966,743            100.0%             $407,778         $  15.70           100.0%
                          =====     ==========            =====              ========         ========           =====
</TABLE>

INDUSTRIAL PROPERTIES:



<TABLE>
<CAPTION>
                                                                                              AVERAGE
                                                                                               ANNUAL       PERCENTAGE OF
                                      TOTAL          PERCENTAGE OF        ANNUAL RENTS      RENTAL RATE     LEASED RENTS
                                     RENTABLE    LEASED SQUARE FOOTAGE   UNDER EXPIRING      PER SQUARE      REPRESENTED
    YEAR OF LEASE      NUMBER OF   SQUARE FEET       REPRESENTED BY        LEASES (1)         FOOT FOR       BY EXPIRING
      EXPIRATION         LEASES      EXPIRING       EXPIRING LEASES      (IN THOUSANDS)   EXPIRATIONS (1)      LEASES
--------------------- ----------- ------------- ----------------------- ---------------- ----------------- --------------
<S>                   <C>         <C>           <C>                     <C>              <C>               <C>
 Remainder of 1999        157       1,230,655             12.2%              $ 6,146          $ 4.99             12.3%
          2000            178       2,121,760             21.0%               10,700            5.04             21.3%
          2001            156       1,916,091             18.9%                9,075            4.74             18.1%
          2002            112       1,380,531             13.6%                6,635            4.81             13.3%
          2003             57         773,676              7.6%                4,276            5.53              8.6%
          2004             42       1,653,829             16.4%                6,526            3.95             13.1%
          2005             12         191,086              1.9%                1,224            6.41              2.4%
          2006              6         312,099              3.1%                1,500            4.81              3.0%
          2007              2          39,125              0.4%                  488           12.47              1.0%
          2008              6         247,737              2.4%                1,981            8.00              4.0%
2009 and thereafter         5         247,876              2.5%                1,447            5.84              2.9%
                          ---       ---------            -----               -------          ------            -----
                          733      10,114,465            100.0%              $49,998          $ 4.94            100.0%
                          ===      ==========            =====               =======          ======            =====
</TABLE>

----------
(1) Includes operating expense pass throughs and excludes the effect of future
contractual rent increases.

                                       27
<PAGE>

RETAIL PROPERTIES:



<TABLE>
<CAPTION>
                                                                                               AVERAGE
                                                                           ANNUAL RENTS         ANNUAL       PERCENTAGE OF
                                       TOTAL          PERCENTAGE OF            UNDER         RENTAL RATE     LEASED RENTS
        YEAR OF                       RENTABLE    LEASED SQUARE FOOTAGE      EXPIRING         PER SQUARE      REPRESENTED
         LEASE          NUMBER OF   SQUARE FEET       REPRESENTED BY        LEASES (1)         FOOT FOR       BY EXPIRING
      EXPIRATION          LEASES      EXPIRING       EXPIRING LEASES      (IN THOUSANDS)   EXPIRATIONS (1)      LEASES
---------------------- ----------- ------------- ----------------------- ---------------- ----------------- --------------
<S>                    <C>         <C>           <C>                     <C>              <C>               <C>
  Remainder of 1999         55         192,916              9.2%              $ 2,004         $  10.39             7.3%
         2000               74         273,325             13.0%                3,159            11.56            11.5%
         2001               60         233,221             11.2%                3,292            14.12            12.0%
         2002               48         185,497              8.8%                2,425            13.07             8.8%
         2003               49         217,203             10.3%                3,334            15.35            12.1%
         2004               23         196,052              9.3%                1,618             8.25             5.9%
         2005               13          57,731              2.8%                1,090            18.88             4.0%
         2006               15         120,367              5.7%                1,352            11.23             4.9%
         2007                9          67,092              3.2%                  985            14.68             3.6%
         2008               14         107,352              5.1%                2,365            22.03             8.6%
 2009 and thereafter        26         447,832             21.4%                5,866            13.10            21.3%
                            --         -------            -----               -------         --------           -----
                           386       2,098,588            100.0%              $27,490         $  13.10           100.0%
                           ===       =========            =====               =======         ========           =====
</TABLE>

TOTAL:



<TABLE>
<CAPTION>
                                                                                              AVERAGE
                                                                                               ANNUAL       PERCENTAGE OF
                                      TOTAL          PERCENTAGE OF        ANNUAL RENTS      RENTAL RATE     LEASED RENTS
                                     RENTABLE    LEASED SQUARE FOOTAGE   UNDER EXPIRING      PER SQUARE      REPRESENTED
    YEAR OF LEASE      NUMBER OF   SQUARE FEET       REPRESENTED BY        LEASES (1)         FOOT FOR       BY EXPIRING
      EXPIRATION         LEASES      EXPIRING       EXPIRING LEASES      (IN THOUSANDS)   EXPIRATIONS (1)      LEASES
--------------------- ----------- ------------- ----------------------- ---------------- ----------------- --------------
<S>                   <C>         <C>           <C>                     <C>              <C>               <C>
 Remainder of 1999         801      3,432,758              9.0%             $ 39,183         $  11.41             8.1%
          2000           1,005      5,805,949             15.2%               67,911            11.70            14.0%
          2001             916      6,164,761             16.1%               76,823            12.46            15.8%
          2002             797      5,494,999             14.4%               71,352            12.98            14.7%
          2003             606      4,848,835             12.7%               69,689            14.37            14.4%
          2004             325      4,423,565             11.6%               49,103            11.10            10.1%
          2005             113      1,554,616              4.1%               22,195            14.28             4.6%
          2006              72      1,826,507              4.8%               24,405            13.36             5.0%
          2007              40        868,109              2.3%               13,751            15.84             2.8%
          2008              70      1,927,448              5.0%               26,321            13.66             5.4%
2009 and thereafter         73      1,832,249              4.8%               24,533            13.39             5.1%
                         -----      ---------            -----              --------         --------           -----
                         4,818     38,179,796            100.0%             $485,266         $  12.71           100.0%
                         =====     ==========            =====              ========         ========           =====
</TABLE>

----------
(1) Includes operating expense pass throughs and excludes the effect of future
contractual rent increases.


INFLATION

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


                                       28
<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 OR 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 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 June 30, 1999, the Operating Partnership
had approximately $102.7 million of variable rate debt outstanding that was not
protected by interest rate hedge contracts. If the weighted average interest
rate on this variable rate debt is 100 basis points higher or lower during the
12 months ended June 30, 2000, our interest expense would be increased or
decreased approximately $1.0 million. In addition, as of June 30, 1999, we had
$80 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 85 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 million of debt.

     INTEREST RATE HEDGE CONTRACTS. For a discussion of our interest rate hedge
contracts in effect at June 30, 1999, 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
June 30, 1999 would increase by approximately $16.4 million. If interest rates
decrease by 100 basis points, the aggregate fair market value of these interest
rate hedge contracts as of June 30, 1999 would decrease by approximately $18.0
million.

     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.


                                       29
<PAGE>

                          PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
       On October 2, 1998, John Flake, a former stockholder of J.C. Nichols,
       filed a putative class action lawsuit on behalf of himself and the other
       former stockholders of J.C. Nichols in the United States District Court
       for the District of Kansas against J.C. Nichols, certain of its former
       officers and directors and the Company. The complaint alleges, among
       other things, that in connection with the merger of J.C. Nichols and the
       Company (1) J.C. Nichols and the named directors and officers of J.C.
       Nichols breached their fiduciary duties to J.C. Nichols' stockholders,
       (2) J.C. Nichols and the named directors and officers of J.C. Nichols
       breached their fiduciary duties to members of the J.C. Nichols Company
       Employee Stock Ownership Trust, (3) all defendants participated in the
       dissemination of a proxy statement containing materially false and
       misleading statements and omissions of material facts in violation of
       Section 14(a) of the Exchange Act of 1934 and (4) the Company filed a
       registration statement with the SEC containing materially false and
       misleading statements and omissions of material facts in violation of
       Sections 11 and 12(2) of the Securities Act of 1933. The plaintiffs seek
       equitable relief and monetary damages. We believe that the defendants
       have meritorious defenses to the Plaintiffs' allegations. We intend to
       vigorously defend this litigation. By order dated June 18, 1999, the
       court granted in part and denied in part our motion to dismiss. The
       plaintiff has filed a motion seeking certification of the proposed class
       of plaintiffs. All defendants will oppose that motion, which remains
       pending. Discovery in this matter is proceeding. Due to the inherent
       uncertainties of the litigation process, we are not able to predict the
       outcome of this litigation. If this litigation is not resolved in our
       favor, it could have a material adverse effect on our business,
       financial condition and results of operations.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
       (c) In connection with the acquisition of real estate, the Operating
         Partnership frequently issues Common Units to sellers of real estate
         in reliance on exemptions from registration under the Securities Act.
         During the six months ended June 30, 1999, the Operating Partnership
         issued 88,668 Common Units in offerings exempt from the registration
         requirements of the Securities Act. The Operating Partnership
         exercised reasonable care to assure that each of the offerees of
         Common Units during the six months ended June 30, 1999 were "accredited
         investors" under Rule 501 of the Securities Act and that the investors
         were not purchasing the Common Units with a view to their
         distribution. Specifically, the Operating Partnership relies on the
         exemptions provided by Section 4(2) of the Securities Act or Rule 506
         under the Securities Act.

Item 3. Defaults Upon Senior Securities -- NA

Item 4. Submission of Matters to a Vote of Security Holders -- NA

Item 5. Other Information -- NA

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits



<TABLE>
<CAPTION>
  EXHIBIT NO.   DESCRIPTION
--------------- -------------------------------------------------------------------------------------
<S>             <C>
       10.1(1)  Purchase and Sale Agreement dated March 22, 1999, by and among Highwoods/Florida
                Holdings, L.P. and America's Capital Partners, LLC, as amended by First Amendment to
                Purchase and Sale Agreement Agreement dated April 21, 1999.
       10.2(1)  Purchase and Sale Agreement dated March 22, 1999, by and among Highwoods/Florida
                Holdings, L.P. and America's Capital Partners, LLC, as amended by First Amendment to
                Purchase and Sale Agreement Agreement dated April 21, 1999.
         27     Financial Data Schedule
</TABLE>

(b) Reports on Form 8-K -- None
----------
(1) Filed as part of the Operating Partnership's Quarterly Report on Form 10-Q
    for the quarter ended March 31, 1999 and incorporated herein by reference.



                                       30
<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

                                      /s/          CARMAN J. LIUZZO
                                      ----------------------------------------
                                                   CARMAN J. LIUZZO
                                               CHIEF FINANCIAL OFFICER
                                            (PRINCIPAL ACCOUNTING OFFICER)

Date: August 16, 1999

                                       31