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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 September 30, 2000

                        Commission file number: 000-21731


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


              North Carolina                            56-1864557
     (State or other jurisdiction of                 (I.R.S. Employer
      incorporation or organization)              Identification Number)


                 3100 Smoketree Court, Suite 600, Raleigh, N.C.
                     (Address of principal executive office)
                                      27604
                                   (Zip Code)

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




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





       Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes  X  No
                                              ---    ---



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

================================================================================
<PAGE>

                      HIGHWOODS REALTY LIMITED PARTNERSHIP
            QUARTERLY REPORT FOR THE PERIOD ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>

                                TABLE OF CONTENTS

                                                                                                               Page
PART I          FINANCIAL INFORMATION
<S>                                                                                                            <C>
Item 1.         Financial Statements                                                                           3
                Consolidated Balance Sheets as of September 30, 2000 and
                December 31, 1999                                                                              4
                Consolidated Statements of Income for the three and nine
                months ended September 30, 2000 and 1999                                                       5
                Consolidated Statements of Cash Flows for the
                nine months ended September 30, 2000 and 1999                                                  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                                                                           13
                Possible Environmental Liabilities                                                            14
                Impact of Recently Issued Accounting Standards                                                15
                Compliance with the Americans with Disabilities Act                                           15
                Funds From Operations and Cash Available for Distributions                                    16
                Disclosure Regarding Forward-Looking Statements                                               18
                Property Information                                                                          19
                Inflation                                                                                     27
Item 3.         Quantitative and Qualitative Disclosures About Market Risk                                    28
PART II         OTHER INFORMATION
Item 1.         Legal Proceedings                                                                             29
Item 2.         Changes in Securities and Use of Proceeds                                                     29
Item 3.         Defaults Upon Senior Securities                                                               29
Item 4.         Submission of Matters to a Vote of Security Holders                                           29
Item 5.         Other Information                                                                             29
Item 6.         Exhibits and Reports on Form 8-K                                                              29
</TABLE>

                                       2
<PAGE>



                         PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements

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

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

         The aforementioned financial statements should be read in conjunction
with the notes to consolidated financial statements and Management's Discussion
and Analysis of Financial Condition and Results of Operations included herein
and in our 1999 Annual Report on Form 10-K.

                                       3
<PAGE>

<TABLE>
<CAPTION>


                      HIGHWOODS REALTY LIMITED PARTNERSHIP
                           Consolidated Balance Sheets
                             (dollars in thousands)

                                                                          September 30, 2000      December 31, 1999
                                                                             (Unaudited)
Assets
Real estate assets, at cost:
<S>                                                                            <C>                   <C>
    Land and improvements ...........................................          $   400,502           $   468,077
    Buildings and tenant improvements ...............................            2,750,127             3,055,859
    Development in process ..........................................               78,108               186,925
    Land held for development .......................................              152,799               168,396
    Furniture, fixtures and equipment ...............................               10,422                 7,917
                                                                               -----------           -----------
                                                                                 3,391,958             3,887,174
    Less - accumulated depreciation .................................             (262,546)             (238,115)
                                                                               -----------           -----------
    Net real estate assets ..........................................            3,129,412             3,649,059
Property held for sale ..............................................              340,923                48,960
Cash and cash equivalents ...........................................               29,481                33,915
Restricted cash .....................................................                8,998                 1,854
Accounts receivable, net ............................................               23,630                22,127
Advances to related parties .........................................               13,164                15,096
Notes receivable ....................................................               38,251                44,892
Accrued straight-line rents receivable ..............................               39,415                35,951
Investment in unconsolidated affiliates .............................               50,319                33,758
Other assets:
    Deferred leasing costs ..........................................               76,877                66,783
    Deferred financing costs ........................................               40,229                40,125
    Prepaid expenses and other ......................................               11,087                15,612
                                                                               -----------           -----------
                                                                                   128,193               122,520
    Less - accumulated amortization .................................              (45,470)              (36,053)
                                                                               -----------           -----------
    Other assets, net ...............................................               82,723                86,467
                                                                               -----------           -----------
Total Assets ........................................................          $ 3,756,316           $ 3,972,079
                                                                               ===========           ===========
Liabilities and Partners' Capital
Mortgages and notes payable .........................................          $ 1,626,529           $ 1,719,117
Accounts payable, accrued expenses and other liabilities ............              121,044               106,601
                                                                               -----------           -----------
    Total Liabilities ...............................................            1,747,573             1,825,718
Redeemable operating partnership units:
    Class A Common Units outstanding, 8,461,272 at
      September 30, 2000 and 8,809,218 at December 31, 1999 .........              199,898               208,140
    Class B Common Units outstanding, 196,492 at
      September 30, 2000 and December 31, 1999 ......................                4,642                 4,643
    Series A Preferred Units outstanding, 125,000 at
      September 30, 2000 and December 31, 1999 ......................              121,809               121,809
    Series B Preferred Units outstanding, 6,900,000 at
      September 30, 2000 and December 31, 1999 ......................              166,346               166,346
    Series D Preferred Units outstanding, 400,000 at
      September 30, 2000 and December 31, 1999 ......................               96,842                96,842
Partners' Capital
Class A Common Units:
    General partner Common Units outstanding, 694,788 at
      September 30, 2000 and 703,884 at December  31, 1999 ..........               15,059                15,740
      Limited partner Common Units outstanding, 60,322,736
      (includes 3,811,086 units in treasury) at September 30, 2000               1,490,938             1,558,316
      and  60,875,308 (includes 1,150,000 units in treasury)
      at December 31, 1999...........................................
    Less treasury units at cost, 3,811,086 and 1,150,000 at
     September 30, 2000 and December 31, 1999, respectively .........              (86,791)              (25,475)
                                                                               -----------           -----------
       Total Partners' Capital ......................................            1,419,206             1,548,581
                                                                               -----------           -----------
                                                                               $ 3,756,316           $ 3,972,079
                                                                               ===========           ===========
</TABLE>


See accompanying notes to consolidated financial statements.



                                       4
<PAGE>
<TABLE>
<CAPTION>


                      HIGHWOODS REALTY LIMITED PARTNERSHIP
                        Consolidated Statements of Income
              (Unaudited and in thousands except per unit amounts)

                                                                       Three Months Ended               Nine Months Ended
                                                                          September 30,                   September 30,
                                                                    --------------------------       -------------------------
                                                                       2000            1999             2000           1999
                                                                    ----------      ----------       ---------      ----------

Revenue:
<S>                                                                  <C>             <C>             <C>            <C>
    Rental property .........................................        $ 130,727       $ 135,886       $ 403,559      $ 423,021
    Equity in earnings of unconsolidated affiliates .........            1,063             413           2,641            870
    Interest another income .................................            5,874           3,548          15,860         12,797
                                                                     ---------       ---------       ---------      ---------
          Total Revenue .....................................          137,664         139,847         422,060        436,688
Operating expenses:
    Rental property .........................................           39,331          40,902         119,950        130,276
    Depreciation and amortization ...........................           30,104          26,024          87,630         81,753
    Interest expense
      Contractual ...........................................           26,097          24,744          79,143         82,471
      Amortization of deferred financing costs ..............              564             696           1,862          2,208
                                                                     ---------       ---------       ---------      ---------
                                                                        26,661          25,440          81,005         84,679
General and administrative ..................................            5,453           4,701          15,566         16,256
                                                                     ---------       ---------       ---------      ---------
Income before gain/(loss) on disposition of land and
    depreciable assets, net of income tax provision and
    extraordinary item ......................................           36,115          42,780         117,909        123,724
Gain/(loss) on disposition of land and depreciable assets,
    net of income tax provision .............................           10,557             163          (8,559)         2,256
                                                                     ---------       ---------       ---------      ---------
Income before extraordinary item ............................           46,672          42,943         109,350        125,980
   Extraordinary item - loss on early extinguishment
      of debt ...............................................           (3,310)         (4,997)         (4,344)        (5,774)
                                                                     ---------       ---------       ---------      ---------
   Net income ...............................................           43,362          37,946         105,006        120,206
Distributions on preferred units ............................           (8,145)         (8,145)        (24,435)       (24,435)
                                                                     ---------       ---------       ---------      ---------
   Net income available for Class A Common Units ............        $  35,217       $  29,801       $  80,571      $  95,771
                                                                     =========       =========       =========      =========
Net income per Common Unit - basic:
   Income before extraordinary item .........................        $     .58       $     .49       $    1.25      $    1.45
     Extraordinary item - loss on early extinguishment of
         debt ...............................................             (.05)           (.07)           (.06)          (.08)
                                                                     ---------       ---------       ---------      ---------
Net income ..................................................        $     .53       $     .42       $    1.19      $    1.37
                                                                     =========       =========       =========      =========
Net income per Common Unit - diluted:
   Income before extraordinary item .........................        $     .58       $     .49       $    1.25      $    1.45
     Extraordinary item - loss on early extinguishment of
         debt ...............................................             (.05)           (.07)           (.06)          (.08)
                                                                     ---------       ---------       ---------      ---------
Net income ..................................................        $     .53       $     .42       $    1.19      $    1.37
                                                                     =========       =========       =========      =========
Distributions declared per Common Unit ......................        $     .57       $    .555       $    1.68      $   1.635
                                                                     =========       =========       =========      =========
Weighted average Common Units outstanding - basic:
   Class A Common Units:
     General Partner ........................................              657             703             673            699
     Limited Partners .......................................           65,011          69,599          66,620         69,136
   Class B Common Units:
     Limited Partners .......................................              196             196             196            196
                                                                     ---------       ---------       ---------      ---------
   Total ....................................................           65,864          70,498          67,489         70,031
                                                                     =========       =========       =========      =========
     Weighted average Common Units outstanding - diluted:
  Class A Common Units:
     General Partner ........................................              661             706             675            701
     Limited Partners .......................................           65,428          69,902          66,856         69,394
  Class A Common Units:
     Limited Partners .......................................              196             196             196            196
                                                                     ---------       ---------       ---------      ---------
   Total ....................................................           66,285          70,804          67,727         70,291
                                                                     =========       =========       =========      =========
</TABLE>


See accompanying notes to consolidated financial statements.

                                       5
<PAGE>
<TABLE>
<CAPTION>


                      HIGHWOODS REALTY LIMITED PARTNERSHIP
                      Consolidated Statements of Cash Flows
                          (Unaudited and in thousands)

                                                                                                          Nine Months Ended
                                                                                                             September 30,
                                                                                                       ----------------------
                                                                                                          2000         1999
                                                                                                       ----------    ---------
Operating activities:
<S>                                                                                                    <C>           <C>
Net income ....................................................................................        $ 105,006     $ 120,206
Adjustments to reconcile net income to net cash
    provided by operating activities:
    Depreciation and amortization .............................................................           87,630        81,753
    Loss/(Gain)  on  disposition of land and  depreciable  assets,  net of income tax
    provision .................................................................................            8,559        (2,256)
    Changes in operating assets and liabilities ...............................................            5,926       (24,043)
                                                                                                       ---------     ---------
       Net cash provided by operating activities ..............................................          207,121       175,660
                                                                                                       ---------     ---------
Investing activities:
Additions to real estate assets ...............................................................         (223,343)     (428,423)
Proceeds from disposition of assets ...........................................................          339,600       549,337
Repayment of advances from subsidiaries/(advances to subsidiaries) ............................            1,932        (4,005)
Cash paid in exchange for partnership net assets ..............................................               --          (841)
Other .........................................................................................          (10,902)      (29,584)
                                                                                                       ---------     ---------
       Net cash provided by investing activities ..............................................          107,287        86,484
                                                                                                       ---------     ---------
Financing activities:
Distributions paid on Common Units ............................................................         (114,187)     (114,724)
Distributions paid on Preferred Units .........................................................          (24,435)      (24,435)
Borrowings on mortgages and notes payable .....................................................           73,198         4,385
Repayment of mortgages and notes payable ......................................................         (147,286)     (172,568)
Borrowings on revolving loans .................................................................          210,500       279,500
Repayment on revolving loans ..................................................................         (298,000)     (165,000)
Net proceeds from contributed capital .........................................................              836        22,940
Purchase of treasury stock and units ..........................................................          (90,342)           --
Net change in deferred financing costs ........................................................             (104)       (2,280)
Other .........................................................................................            1,978        (5,774)
                                                                                                       ---------     ---------
       Net cash used in financing activities ..................................................         (318,842)     (246,956)
                                                                                                       ---------     ---------
Net (decrease)/increase in cash and cash equivalents ..........................................           (4,434)       15,188
Cash and cash equivalents at beginning of the period ..........................................           33,915        30,696
                                                                                                       ---------     ---------
Cash and cash equivalents at end of the period ................................................        $  29,481     $  45,884
                                                                                                       =========     =========
Supplemental disclosure of cash flow information:
Cash paid for interest ........................................................................        $  93,047     $  90,289
                                                                                                       =========     =========

</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 (1) the net assets contributed by the holders
of Common Units in the Operating Partnership, (2) the change in the net assets
as a result of the reorganization of our Des Moines partnerships and (3) the net
assets acquired subject to mortgage notes payable.
<TABLE>
<CAPTION>

                                                        Nine Months Ended
                                                           September 30,
                                                    ------------------------
                                                       2000           1999
                                                    -------------  ---------
Assets:
<S>                                                  <C>               <C>
Rental property and equipment, net ..............    $(24,656)         $(18,513)
Notes receivable ................................      23,775                --
Liabilities:
Mortgages and notes payable .....................          --           (52,165)
                                                     --------          --------
Net assets ......................................    $   (881)         $ 33,652
                                                     ========          ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       7

<PAGE>


                      HIGHWOODS REALTY LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               September 30, 2000
                                   (Unaudited)

1.       BASIS OF PRESENTATION

         The Operating Partnership is a subsidiary of the Company. At September
30, 2000, the Company owned 88.0% 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. In June, 2000, FASB issued Statement No.
138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities - an amendment of FASB Statement No. 133. Statement No. 133, as
amended by Statement No. 138, 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 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

                                       8
<PAGE>

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 our derivatives is discussed in Item 2.

         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 three and nine months ended September 30, 2000 and 1999.
<TABLE>
<CAPTION>

                                                                     Three Months Ended                  Nine Months Ended
                                                                        September 30,                        September 30,
                                                               -----------------------------       -------------------------------
                                                                   2000             1999              2000                 1999
                                                               -----------       -----------       -----------         -----------
Rental Income:
<S>                                                            <C>               <C>               <C>                 <C>
Office segment ..............................................  $   106,202       $   109,163       $   331,944         $   346,254
Industrial segment ..........................................       11,523            13,842            33,288              39,753
Retail segment ..............................................        8,631             8,597            25,285              24,536
Apartment segment ...........................................        4,371             4,284            13,042              12,478
                                                               -----------       -----------       -----------         -----------
   Total Rental Income ......................................  $   130,727       $   135,886       $   403,559         $   423,021
                                                               ===========       ===========       ===========         ===========
Net Operating Income:
Office segment ..............................................  $    74,132       $    75,764       $   230,555         $   236,693
Industrial segment ..........................................        9,793            11,423            28,026              32,897
Retail segment ..............................................        5,163             5,454            17,464              16,156
Apartment segment ...........................................        2,308             2,343             7,564               6,999
                                                               -----------       -----------       -----------         -----------
   Total Net Operating Income ...............................  $    91,396       $    94,984       $   283,609         $   292,745
                                                               ===========       ===========       ===========         ===========
Reconciliation to income before extraordinary items:
Equity in income of unconsolidated affiliates ...............  $     1,063       $       413       $     2,641         $       870
Gain on disposition of land and depreciable  assets,  net
 of income tax provision ....................................       10,557               163            (8,559)              2,256
Interest and other income ...................................        5,874             3,548            15,860              12,797
Interest expense ............................................      (26,661)          (25,440)          (81,005)            (84,679)
General and administrative expense ..........................       (5,453)           (4,701)          (15,566)            (16,256)
Depreciation and amortization ...............................      (30,104)          (26,024)          (87,630)            (81,753)
                                                               -----------       -----------       -----------         -----------
Income before extraordinary item ............................  $    46,672       $    42,943       $   109,350         $   125,980
                                                               ===========       ===========       ===========         ===========
Total Assets:
Office segment ..............................................  $ 2,813,007       $ 2,997,488       $ 2,813,007         $ 2,997,488
Industrial segment ..........................................      365,217           496,428           365,217             496,428
Retail segment ..............................................      269,865           256,197           269,865             256,197
Apartment segment ...........................................      116,163           119,356           116,163             119,356
Corporate and other .........................................      192,064           210,049           192,064             210,049
                                                               -----------       -----------       -----------         -----------
   Total Assets .............................................  $ 3,756,316       $ 4,079,518       $ 3,756,316         $ 4,079,518
                                                               ===========       ===========       ===========         ===========
</TABLE>


3.       DISPOSITION AND JOINT VENTURE ACTIVITY

         On May 9, 2000, we closed a transaction with Dreilander-Fonds 97/26 and
99/32 ("DLF II") pursuant to which we sold or contributed five in-service office
properties encompassing 570,000 rentable square feet and a 246,000-square-foot
development project valued at approximately $117.0 million to a newly created
limited partnership (the "DLF II Joint Venture"). DLF II contributed $24.0
million in cash for a 40.0% ownership interest in the DLF II Joint Venture and
the DLF II Joint Venture borrowed approximately $60.0 million from third-party
lenders. We initially retained the remaining 60.0% interest in the DLF II Joint
Venture, received net cash proceeds of approximately $74.0 million and are the
sole and exclusive manager and leasing agent of the DLF II Joint Venture's
properties, for which we receive customary management fees and leasing
commissions. On August 31, 2000, DLF II contributed an additional $7.1 million
in cash to the DLF II Joint Venture, which increased its

                                       9
<PAGE>

ownership percentage to 51.0%. It is anticipated that DLF II will exercise its
option to contribute up to an additional $17.0 million in cash to the DLF II
Joint Venture before March 31, 2001 to increase its ownership percentage to
80.0%. We have adopted the equity method of accounting for this joint venture.

         In addition to the properties sold or contributed to the DLF II Joint
Venture, during the nine months ended September 30, 2000, we sold approximately
4.6 million rentable square feet of non-core office and industrial properties
and 192.0 acres of development land for gross proceeds of $339.6 million. We
recorded a loss of $8.6 million related to these dispositions. Included in these
sales were certain properties encompassing 2.0 million square feet sold to an
entity majority-owned by a related party for a selling price of $169.0 million.
Non-core office and industrial properties generally include single buildings or
business parks that do not fit our long-term strategy. Since September 30, 2000,
an additional 55,000 square feet of non-core office and industrial properties,
which are included in property held for sale in the Consolidated Balance Sheet
at September 30, 2000, have been sold for gross proceeds of $6.4 million.

         On August 9, 2000, we agreed to form two joint ventures with an
institutional investor. In the first joint venture, we expect to sell or
contribute 21 in-service office properties encompassing approximately 3.0
million rentable square feet valued at approximately $345.3 million (including
approximately $4.5 million of development land) to a newly created limited
liability company. As part of the formation of the first joint venture, the
institutional investor will contribute approximately $85.0 million in cash for
an 80.0% ownership interest and the joint venture will borrow approximately
$245.0 million from third-party lenders. We will retain the remaining 20.0%
ownership interest and receive net cash proceeds of approximately $311.0
million. In the second joint venture, we will contribute approximately $7.2
million of development land we currently own to a second newly created limited
liability company. The second joint venture expects to develop four properties
encompassing 435,000 rentable square feet with a budgeted cost of approximately
$61.0 million. We will each own 50.0% of the second joint venture. In addition,
we will be the sole and exclusive manager and leasing agent for the properties
in both joint ventures and will receive customary management fees and leasing
commissions. We will be adopting the equity method of accounting for these joint
ventures. These transactions are subject to customary closing conditions,
including the completion of due diligence, the execution of other definitive
agreements and the ability to obtain satisfactory financing, and are expected to
close before the end of 2000. However, we cannot assure you that these
transactions will be consummated or that they will be consummated on the terms
described in this quarterly report.

4.       LEGAL CONTINGENCIES

         On October 2, 1998, John Flake, a former stockholder of J.C. Nichols,
filed a putative class action lawsuit on behalf of himself and the other former
stockholders of J.C. Nichols in the United States District Court for the
District of Kansas against J.C. Nichols, certain of its former officers and
directors and the Company. The complaint 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 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 Securities 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 plaintiff seeks equitable relief and monetary
damages. We believe that the defendants have meritorious defenses to the
plaintiff's allegations and 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 court has granted the plaintiff's motion seeking
certification of the proposed class of plaintiffs with respect to the remaining
claims. Discovery in this matter has now been completed. Plaintiff John Flake
passed away on or about April 2, 2000, and plaintiff's counsel has substituted
his estate as the representative plaintiff in this action. Defendants filed a
summary judgment motion as to all claims asserted by the plaintiff, who opposed
defendants' motion. By order dated August 28, 2000, the court granted
defendants' motion as to plaintiff's claims that J.C. Nichols and the named
directors and officers of J.C. Nichols breached fiduciary duties to members of
the J.C. Nichols Company Employee Stock Ownership Trust. The court also granted
in part and denied in part defendants' summary judgment motion as to the
remaining claims asserted by the plaintiff. Defendants have sought
reconsideration of the court's ruling as to certain of the securities claims as
to which the court denied their summary judgment motion. Due to the inherent
uncertainties of the litigation process and the judicial system, we are not able
to predict the outcome of this litigation. However, at this time, we do not
expect the result of this litigation to have a material adverse effect on our
business, financial condition and results of operations.

                                       10
<PAGE>

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

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

Results of Operations

         Three Months Ended September 30, 2000. Revenues from rental operations
decreased $5.2 million, or 3.8%, from $135.9 million for the three months ended
September 30, 1999 to $130.7 million for the comparable period in 2000. The
decrease is primarily a result of the disposition and contribution of 7.9
million square feet of majority-owned office, industrial and retail properties
offset in part by the acquisition of 700,000 square feet of majority-owned
office, industrial and retail properties and the completion of 4.2 million
square feet of development activity during the last three months of 1999 and the
first nine months of 2000. Our in-service portfolio decreased from 40.8 million
square feet at September 30, 1999 to 37.8 million square feet at September 30,
2000. Same property revenues, which are the revenues of the 461 in-service
properties and 1,885 apartment units owned on July 1, 1999, increased 2.4% for
the three months ended September 30, 2000, compared to the same three months of
1999.

         During the three months ended September 30, 2000, 226 leases
representing 1.5 million square feet of office, industrial and retail space were
executed at an average rate per square foot which was 6.5% higher than the
average rate per square foot on the expired leases.

         Interest and other income increased $2.4 million, or 68.6%, from $3.5
million for the three months ended September 30, 1999 to $5.9 million for the
comparable period in 2000. The increase was a result of an increase in
development fee income in 2000 related to the DLF II Joint Venture.

         Rental operating expenses decreased $1.6 million, or 3.9%, from $40.9
million for the three months ended September 30, 1999 to $39.3 million for the
comparable period in 2000. The decrease is primarily a result of the disposition
and contribution of 7.9 million square feet of majority-owned office, industrial
and retail properties offset in part by the acquisition of 700,000 square feet
of majority-owned office, industrial and retail properties and the completion of
4.2 million square feet of development activity during the last three months of
1999 and the first nine months of 2000. Rental operating expenses as a
percentage of related revenues remained constant at 30.1% for the three months
ended September 30, 1999 and 2000.

         Depreciation and amortization for the three months ended September 30,
2000 and 1999 was $30.1 million and $26.0 million, respectively. The increase of
$4.1 million, or 15.8%, is due to an increase in depreciation on leasing
commissions and tenant improvements, partly offset by a decrease in depreciation
on buildings, due to disposition activity in 1999 and 2000. Interest expense
increased $1.3 million, or 5.1%, from $25.4 million for the three months ended
September 30, 1999 to $26.7 million for the comparable period in 2000. The
increase is attributable to an increase in the weighted average interest rates
from 1999 to 2000. Interest expense for the three months ended September 30,
2000 and 1999 included $564,000 and $696,000, respectively, of amortization of
deferred financing costs and the costs related to our interest rate hedge
contracts. General and administrative expenses increased from 3.4% of total
revenue for the three months ended September 30, 1999 to 4.0 % for the
comparable period in 2000.

         Income before extraordinary item was $46.7 million and $43.0 million
for the three months ended September 30, 2000 and 1999, respectively. The
Operating Partnership recorded $8.1 million in preferred unit distributions for
the three months ended September 30, 2000 and 1999.

         Nine Months Ended September 30, 2000. Revenues from rental operations
decreased $19.4 million, or 4.6%, from $423.0 million for the nine months ended
September 30, 1999 to $403.6 million for the comparable period in 2000. The
decrease is primarily a result of the disposition and contribution of 7.9
million square feet of majority-owned office, industrial and retail properties,
offset in part by the acquisition of 700,000 square feet of majority-owned
office, industrial and retail properties the completion of 4.2 million square
feet of development activity during the last three months of 1999 and the first
nine months of 2000. Our in-service portfolio decreased from 40.8 million square
feet at September 30, 1999 to 37.8 million square feet at September 30, 2000.
Same property revenues, which are the revenues of the 445 in-service properties
and 1,885 apartment units owned on January 1, 1999, increased 3.1% for the nine
months ended September 30, 2000, compared to the same nine months of 1999.

                                       11
<PAGE>

         During the nine months ended September 30, 2000, 743 leases
representing 4.8 million square feet of office, industrial and retail space
commenced at an average rate per square foot which was 6.6% higher than the
average rate per square foot on the expired leases.

         Interest and other income increased $3.1 million, or 24.2%, from $12.8
million for the nine months ended September 30, 1999 to $15.9 million for the
comparable period in 2000. The increase was a result of an increase in interest
income related to a $30.0 million note receivable that was recorded as a result
of certain property dispositions in June 1999, an increase in termination fees
from 1999 to 2000 and an increase in development fee income in 2000 related to
the DLF II Joint Venture.

         Rental operating expenses decreased $10.3 million, or 7.9%, from $130.3
million for the nine months ended September 30 1999 to $120.0 million for the
comparable period in 2000. The decrease is primarily a result of the disposition
and contribution of 7.9 million square feet of majority-owned office, industrial
and retail properties, offset in part by the acquisition of 700,000 square feet
of majority-owned office, industrial and retail properties and the completion of
4.2 million square feet of development activity during the last three months of
1999 and the first nine months of 2000. Rental operating expenses as a
percentage of related revenues decreased from 30.8% for the nine months ended
September 30, 1999 to 29.7% for the comparable period in 2000.

         Depreciation and amortization for the nine months ended September 30,
2000 and 1999 was $87.6 million and $81.8 million, respectively. The increase of
$5.8 million, or 7.1%, is due to an increase in depreciation on leasing
commissions and tenant improvements, partly offset by a decrease in depreciation
on buildings, due to disposition activity in 1999 and 2000. Interest expense
decreased $3.7 million, or 4.5%, from $84.7 million for the nine months ended
September 30, 1999 to $81.0 million for the comparable period in 2000. The
decrease is attributable to the decrease in the outstanding debt for the entire
nine months in 2000. Interest expense for the nine months ended September 30,
2000 and 1999 included $1.9 million and $2.2 million, respectively, of
amortization or deferred financing costs and the costs related to our interest
rate hedge contracts. General and administrative expenses was 3.8% of rental
revenue for the nine months ended September 30, 1999 and 2000.

         Income before extraordinary item was $109.4 million and $126.0 million
for the nine months ended September 30, 2000 and 1999, respectively. The
Operating Partnership recorded $24.4 million in preferred unit distributions for
the nine months ended September 30, 2000 and 1999.

Liquidity and Capital Resources

         Statement of Cash Flows. For the nine months ended September 30, 2000,
cash provided by operating activities increased by $31.4 million, or 17.9%, to
$207.1 million, as compared to $175.7 million for the same period in 1999. The
increase is due to the collection of a $30.0 million note receivable and the
accrual of an $18.0 million liability related to the DLF II Joint Venture during
the nine months ended September 30, 2000. Cash provided by investing activities
was $107.3 million for the first nine months of 2000, as compared to $86.5
million for the same period in 1999. The increase is primarily due to the
decline in acquisition and development activity, offset in part by the decline
in disposition activity during the first nine months of 2000, as compared to the
same period in 1999. Cash used in financing activities was $318.8 million for
the first nine months of 2000, as compared to $247.0 million for the same period
in 1999. The increase is primarily due to the increase in the payments on
mortgages and notes payable and under the revolving loan from 1999 to 2000,
offset in part by the decrease in net proceeds from the sale of Common Stock and
the repurchase of treasury stock and units in 2000. Payments of distributions
decreased by $535,000 to $114.2 million for the first nine months of 2000, as
compared with $114.7 million for the same period in 1999. Preferred unit
distributions were $24.4 million for the first nine months of 2000 and 1999.

         Capitalization. The Operating Partnership's total indebtedness at
September 30, 2000 totaled $1.6 billion and was comprised of approximately
$500.0 million of secured indebtedness with a weighted average interest rate of
7.9% and $1.1 billion of unsecured indebtedness with a weighted average interest
rate of 7.4%. Except as stated below, all of the mortgage and notes payable
outstanding at September 30, 2000 were either fixed rate obligations or variable
rate obligations covered by interest rate hedge contracts. A portion of our
$450.0 million unsecured revolving loan the ("Revolving Loan") and approximately
$37.0 million in floating rate notes payable assumed upon consummation of the
merger with J.C. Nichols in 1998 were not covered by interest rate hedge
contracts on September 30, 2000.

         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

                                       12
<PAGE>

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 September 30, 2000:
<TABLE>
<CAPTION>

                      Notional         Maturity                                        Fixed           Fair Market
  Type of Hedge        Amount             Date                  Reference Rate         Rate              Value
  -------------        ------             ----                  --------------         ----              -----


<S>                    <C>              <C>            <C>                                <C>          <C>
Swap                   $20,006          6/10/02        1-Month LIBOR + 0.75%              6.95%        $ 98
Collar                  80,000         10/15/01        1-Month LIBOR               5.60 - 6.25%         298
Cap                      5,434          6/15/01        1-Month LIBOR                      7.75%         ---
</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.

         Our short-term (within the next 12 months) liquidity needs also
include, among other things, the funding of approximately $125.0 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
              $214.0 million was available as of September 30, 2000);
         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.

                                       13
<PAGE>

Recent Developments

         Stock Repurchase. From January 1, 2000 to November 10, 2000, the
Company repurchased 3.9 million shares of Common stock and Common Units at a
weighted average price of $23.61 per share/unit, for a total purchase price of
$92.7 million.

         Disposition and Joint Venture Activity. On May 9, 2000, we closed a
transaction with Dreilander-Fonds 97/26 and 99/32 ("DLF II") pursuant to which
we sold or contributed five in-service office properties encompassing 570,000
rentable square feet and a 246,000-square-foot development project valued at
approximately $117.0 million to a newly created limited partnership (the "DLF II
Joint Venture"). DLF II contributed $24.0 million in cash for a 40.0% ownership
interest in the DLF II Joint Venture and the DLF II Joint Venture borrowed
approximately $60.0 million from third-party lenders. We initially retained the
remaining 60.0% interest in the DLF II Joint Venture, received net cash proceeds
of approximately $74.0 million and are the sole and exclusive manager and
leasing agent of the DLF II Joint Venture's properties, for which we receive
customary management fees and leasing commissions. On August 31, 2000, DLF II
contributed an additional $7.1 million in cash to the DLF II Joint Venture,
which increased its ownership percentage to 51.0%. It is anticipated that DLF II
will exercise its option to contribute up to an additional $17.0 million in cash
to the DLF II Joint Venture before March 31, 2001 to increase its ownership
percentage to 80.0%.

         In addition to the properties sold or contributed to the DLF II Joint
Venture, during the nine months ended September 30, 2000, we sold approximately
4.6 million rentable square feet of non-core office and industrial properties
and 192.0 acres of development land for gross proceeds of $339.6 million.
Non-core office and industrial properties generally include single buildings or
business parks that do not fit our long-term strategy. Since September 30, 2000,
we have sold an additional 55,000 square feet of non-core office and industrial
properties for gross proceeds of $6.4 million.

         On August 9, 2000, we agreed to form two joint ventures with an
institutional investor. In the first joint venture, we expect to sell or
contribute 21 in-service office properties encompassing approximately 3.0
million rentable square feet valued at approximately $345.3 million (including
approximately $4.5 million of development land) to a newly created limited
liability company. As part of the formation of the first joint venture, the
institutional investor will contribute approximately $85.0 million in cash for
an 80.0% ownership interest and the joint venture will borrow approximately
$245.0 million from third-party lenders. We will retain the remaining 20.0%
ownership interest and receive net cash proceeds of approximately $311.0
million. In the second joint venture, we will contribute approximately $7.2
million of development land we currently own to a second newly created limited
liability company. The second joint venture expects to develop four properties
encompassing 435,000 rentable square feet with a budgeted cost of approximately
$1.0 million. We will each own 50.0% of this second joint venture. In addition,
we will be the sole and exclusive manager and leasing agent for the properties
in both joint ventures and receive customary management fees and leasing
commissions. These transactions are subject to customary closing conditions,
including the completion of due diligence, the execution of other definitive
agreements and the ability to obtain satisfactory financing, and are expected to
close before the end of 2000. However, we cannot assure you that these
transactions will be consummated or that they will be consummated on the terms
described in this quarterly report.

         We expect to use a portion of the net proceeds from our recent and
pending disposition activity to reinvest in tax-deferred exchange transactions
under Section 1031 of the Internal Revenue Code. As of November 19, 2000, we
expect to reinvest up to $25.0 million of the net proceeds from recent
disposition activity to acquire in tax-deferred exchange transactions in-service
properties, development land and development projects located in core markets
and in sub-markets where we have a strong presence. For an exchange to qualify
for tax-deferred treatment under Section 1031, the net proceeds from the sale of
a property must be held by an escrow agent until applied toward the purchase of
real estate qualifying for gain deferral. Given the competition for properties
meeting our investment criteria, there may be some delay in reinvesting such
proceeds. Delays in reinvesting such proceeds will reduce our income from
operations. In addition, the use of net proceeds from dispositions to fund
development activity, either through direct payments or repayment of borrowings
under our revolving loan, will reduce our income from operations until such
development projects are placed in service.

Possible Environmental Liabilities

         In connection with owning or operating our properties, we may be liable
for certain costs due to possible environmental liabilities. Under various laws,
ordinances and regulations, such as the Comprehensive Environmental Response
Compensation and Liability Act, and common law, an owner or operator of real
estate is liable for the costs to remove or remediate certain hazardous or toxic
chemicals or substances on or in the property.

                                       14
<PAGE>

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 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 FASB Statement No. 133,
which stipulates the required adoption date to be all fiscal years beginning
after June 15, 2000. In June, 2000, FASB issued Statement No. 138, Accounting
for Certain Derivative Instruments and Certain Hedging Activities - an amendment
of FASB Statement No. 133. Statement No. 133, as amended by Statement No. 138,
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 our derivatives is
discussed under "Liquidity and Capital Resources."

                                       15
<PAGE>

Compliance with the Americans with Disabilities Act

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

Funds From Operations and Cash Available for Distributions

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

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

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

                                       16
<PAGE>


         FFO and cash available for distribution for the three and nine month
periods ended September 30, 2000 and 1999 are summarized in the following table
(unaudited and in thousands):
<TABLE>
<CAPTION>

                                                                           Three Months Ended               Nine Months Ended
                                                                                September 30,                  September 30,
                                                                      --------------------------        ---------------------------
                                                                         2000             1999             2000            1999
                                                                      ---------        ---------        ---------        ---------
Funds from Operations:
<S>                                                                   <C>              <C>              <C>              <C>
Income before extraordinary item .................................    $  46,672        $  42,943        $ 109,350        $ 125,980
   Add/(Deduct):
   Distributions to preferred unit-holders .......................       (8,145)          (8,145)         (24,435)         (24,435)
   Severance costs and other division Closing costs ..............           --               --               --            1,233
   (Gain)/loss  on  disposition  of land and  depreciable
    assets .......................................................      (10,557)            (163)           8,559           (2,256)
   Gain on disposition of land ...................................        3,288               --            3,288               --
   Depreciation and amortization .................................       30,104           26,024           87,630           81,753
   Depreciation of unconsolidated affiliates .....................        1,657              892            3,444            2,114
                                                                      ---------        ---------        ---------        ---------
   Funds from operations before minority interest ................       63,019           61,551          187,836          184,389
Cash Available for Distribution:
Add/(Deduct):
Rental income from straight-line rents ...........................       (3,657)          (3,436)         (11,452)         (10,945)
Amortization of deferred financing costs .........................          564              696            1,862            2,208
Non-incremental revenue generating capital
    Expenditures (1):
       Building improvements paid ................................       (2,248)          (2,114)          (5,913)          (6,589)
       Second generation tenant improvements paid ................       (7,900)          (7,194)         (17,730)         (17,315)
       Second generation lease commissions paid ..................       (1,859)          (3,000)          (8,668)         (10,613)
                                                                      ---------        ---------        ---------        ---------
Cash available for distribution ..................................    $  47,919        $  46,503        $ 145,935        $ 141,135
                                                                      =========        =========        =========        =========
Weighted average Common Units Outstanding - Basic ................       65,864           70,498           67,489           70,031
                                                                      =========        =========        =========        =========
Weighted average Common Units Outstanding - Diluted . ............       66,285           70,804           67,727           70,291
                                                                      =========        =========        =========        =========
Dividend payout ratio - Diluted:
Funds from operations ............................................         60.0%            63.8%            60.6%            62.3%
                                                                      =========        =========        =========        =========
Cash available for distribution ..................................         78.8%            84.5%            78.0%            81.4%
                                                                      =========        =========        =========        =========
</TABLE>
----------

(1) Amounts represent cash expenditures.


                                       17
<PAGE>


Disclosure Regarding Forward-Looking Statements

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

         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,
              reinvestment, 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.

                                       18
<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 September 30, 2000 and 1999:

<TABLE>
<CAPTION>

                                                              Rentable         Percent Leased/
September 30, 2000                                           Square Feet          Pre-Leased
------------------                                           -----------       --------------
In-Service:
<S>                                                           <C>                      <C>
   Office.............................................        25,984,000               94%
   Industrial.........................................        10,204,000               95%
   Retail.............................................         1,569,000               94%
                                                              ----------            ------
     Total or Weighted Average........................        37,757,000               94%
                                                              ==========            ======
Development:
Completed - Not Stabilized
   Office.............................................           759,000               79%
   Industrial.........................................                --               --%
   Retail.............................................            81,000               90%
                                                              ----------            ------
     Total or Weighted Average........................           840,000               80%
                                                              ==========            ======
In Process
   Office.............................................         1,709,000               55%
   Industrial.........................................           395,000               87%
   Retail.............................................                --                --
                                                              ----------            ------
     Total or Weighted Average........................         2,104,000               61%
                                                              ==========            ======
Total:
   Office.............................................        28,452,000
   Industrial.........................................        10,599,000
   Retail.............................................         1,650,000
                                                              ----------
     Total or Weighted Average........................        40,701,000
                                                              ==========
September 30, 1999
------------------
In-Service:
   Office.............................................        27,293,000               94%
   Industrial.........................................        11,805,000               91%
   Retail.............................................         1,676,000               91%
                                                              ----------            ------
     Total or Weighted Average........................        40,774,000               93%
                                                              ==========            ======
Development:
Completed - Not Stabilized
   Office.............................................         2,174,000               74%
   Industrial.........................................           383,000               55%
   Retail.............................................           119,000               97%
                                                              ----------            ------
   Total or Weighted Average..........................         2,676,000               72%
                                                              ==========            ======
In Process
   Office.............................................         2,350,000               78%
   Industrial.........................................           282,000               10%
   Retail.............................................            81,000               82%
                                                              ----------            ------
     Total or Weighted Average........................         2,713,000               71%
                                                              ==========            ======
Total:
   Office.............................................        31,817,000
   Industrial.........................................        12,470,000
   Retail.............................................         1,876,000
                                                              ----------
   Total or Weighted Average..........................        46,163,000
                                                              ==========
</TABLE>

                                       19
<PAGE>



         The following table sets forth certain information with respect to our
properties under development as of September 30, 2000 ($ in thousands):

In-Process
<TABLE>
<CAPTION>

                                            Rentable                                 Pre-Leasing                    Estimated
                                             Square      Estimated       Cost at     Percentage     Estimated     Stabilization
            Name                Market        Feet         Cost          9/30/00         (1)       Completion          (2)
            ----                ------      --------     ---------       -------     -----------   ----------     -------------
<S>                           <C>               <C>         <C>         <C>              <C>          <C>              <C>
Office:
ECPI Build-to-suit            Piedmont
                              Triad             30,000      $ 3,020     $    2,998       100%          4Q00            4Q00
Deerfield III                 Atlanta           54,000        5,276          2,356       100%          4Q00            3Q01
Highwoods Plaza               Tampa             66,000        7,505          5,183        20%          4Q00            3Q01
Intermedia Building 5         Tampa            185,000       27,633          6,298       100%          3Q01            3Q01
Met Life Building at
  Brookfield                  Greenville       118,000       13,220             21        67%          3Q01            4Q01
Shadow Creek                  Memphis           80,000        8,989          4,472        86%          4Q00            4Q01
380 Park Place                Tampa             82,000        9,675          2,590        47%          1Q01            4Q01
kforce.com                    Tampa            128,000       18,582            284       100%          4Q01            4Q01
Maplewood                     Research
                              Triangle          36,000        3,901          1,703       100%          1Q01            1Q02
Situs III                     Research
                              Triangle          39,000        4,543            782        94%          1Q01            1Q02
Highwoods Centre @
  Peachtree Corners III       Atlanta           54,000        5,140          1,333         0%          2Q01            2Q02
Cool Springs II               Nashville        205,000       22,718          8,950        19%          2Q01            2Q02
Highwoods Tower II            Research
                              Triangle         167,000       25,134         12,722        72%          1Q01            2Q02
ParkWest One                  Research
                              Triangle          46,000        4,364            127         0%          1Q01            1Q02
ParkWest Two                  Research                        4,544
                              Triangle          48,000                         137         0%          1Q01            1Q02
Centre Green Two              Research
                              Triangle          97,000       11,596          1,055         0%          2Q01            2Q02
Hickory Trace                 Nashville         52,000        5,933          1,511         0%          3Q01            3Q02
Stony Point III               Richmond         106,000       11,425          2,546        43%          2Q01            3Q02
North Shore Commons           Richmond         116,000       13,084          2,030        53%          2Q01            3Q02
                                            ----------    ---------   ------------      -----

In-Process Office Total or
  Weighted Average                           1,709,000     $206,282     $  57,098         55%
                                             ---------     --------     ----------      -----

Industrial:
Jones Apparel Expansion       Piedmont
                              Triad            209,000      $ 6,071     $    4,241       100%          4Q00            4Q00
Holden Road                   Piedmont
                              Triad             64,000        2,014          1,032        40%          1Q01            3Q01
Tradeport Place III           Atlanta          122,000        4,780          2,659        90%          4Q00            4Q01
                                            ----------    ---------  -------------      -----

In-Process Industrial Total
  or Weighted Average                          395,000    $  12,865     $   7,932         87%
                                            ----------    ---------     ----------      -----

Total or Weighted Average
  of all In-Process
  Development Projects                       2,104,000     $219,147       $ 65,030        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 95.0% occupied or one
    year from the date of completion.

                                       20
<PAGE>
<TABLE>
<CAPTION>


Completed -
Not Stabilized
                                                    Rentable                             Pre-Leasing                   Estimated
                                                     Square      Estimated   Cost at      Percentage    Estimated    Stabilization
         Name                   Market                Feet         Cost      9/30/00          (1)      Completion         (2)
    -------------               ------             ---------    ----------   --------   ------------  ------------   -------------
Office:
<S>                                                 <C>           <C>        <C>            <C>          <C>             <C>
Mallard Creek V              Charlotte               118,000       12,262      11,294         70%          4Q99            4Q00
Valencia Place               Kansas City             241,000       34,850      35,237         90%          1Q00            4Q00
Centre Green One             Research Triangle        97,000       11,246       6,856         92%          3Q00            3Q01
Capital Plaza                Orlando                 303,000       53,000      44,740         69%          1Q00            4Q01
                                                   ---------    ----------   --------      ------          ----            ----
Completed-Not Stabilized
  Office Total or Weighted
  Average                                            759,000     $111,358    $ 98,127         79%
                                                   ---------    ----------   --------      ------
Retail:
Valencia Place               Kansas City              81,000     $ 16,650    $ 14,842         90%          1Q00            4Q00
                                                   ---------    ----------   --------      ------
Completed-Not Stabilized
  Retail Total or Weighted
    Average
                                                      81,000     $ 16,650    $ 14,842         90%
                                                   ---------    ----------   --------      ------
Total or Weighted Average
  of all Completed-Not
  Stabilized Development
  Projects                                           840,000     $128,008    $112,969         80%
                                                   ---------    ----------   --------      ------
Total or Weighted Average
  of all Development
  Projects                                         2,944,000     $347,155    $177,999         66%
                                                   =========    ==========   ========      ======
</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 95.0% occupied or one
    year from the date of completion.

                                       21
<PAGE>
<TABLE>
<CAPTION>



                                                               Rentable
                                                                Square       Estimated       Pre-Leasing
Development Analysis                                             Feet          Costs        Percentage (1)
                                                             -------------- ------------- -------------------
                                                                          (in thousands)
Summary by Estimated Stabilization Date:
<S>                                                            <C>              <C>                 <C>
   Fourth Quarter 2000.................................        679,000      $   72,853              90%
   First Quarter 2001..................................             --              --              --
   Second Quarter 2001.................................             --              --              --
   Third Quarter 2001..................................        466,000          53,674              79%
   Fourth Quarter 2001.................................        833,000         108,246              76%
   First Quarter 2002..................................        169,000          17,352              43%
   Second Quarter 2002.................................        523,000          64,588              30%
   Third Quarter 2002..................................         274,000         30,442              39%
                                                             ----------     ----------             ----
     Total or Weighted Average.........................      2,944,000      $  347,155              66%
                                                             =========      ==========             ====

Summary by Market:
   Atlanta.............................................        230,000      $   15,196              71%
   Charlotte...........................................        118,000          12,262              70%
   Greenville..........................................        118,000          13,220              67%
   Kansas City.........................................        322,000          51,500              90%
   Memphis.............................................         80,000           8,989              86%
   Nashville...........................................        257,000          28,651              15%
   Orlando.............................................        303,000          53,000              69%
   Piedmont Triad......................................        303,000          11,105              87%
   Research Triangle...................................        530,000          65,328              53%
   Richmond............................................        222,000          24,509              48%
   Tampa...............................................         461,000         63,395              79%
                                                             ----------     ----------             ----
     Total or Weighted Average.........................      2,944,000      $  347,155              66%
                                                             =========      ==========             ====


     Build-to-Suit.....................................        552,000      $   55,306             100%
     Multi-Tenant......................................      2,392,000         291,849              58%
                                                             ---------      ----------            -----
     Total or Weighted Average.........................      2,944,000      $  347,155              66%
                                                             =========      ==========            =====

                                                             Average
                                                             Rentable       Average
                                                              Square        Estimated        Pre-Leasing
                                                               Feet           Costs         Percentage (1)
                                                             -------------- ------------- -------------------
                                                                          (in thousands)
Per Property Type:
   Office..............................................        107,304      $   13,810              62%
   Industrial..........................................        131,667           4,288              87%
   Retail..............................................         81,000          16,650              90%
                                                             -----------    -----------           -----
   All.................................................         109,037     $   12,858              66%
                                                             ==========     ==========            =====
</TABLE>

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

                                       22
<PAGE>


         The following tables set forth certain information about our leasing
activities at our majority-owned in service properties (excluding apartment
units) for the three months ended September 30, June 30, and March 31, 2000 and
December 31, 1999.
<TABLE>
<CAPTION>

                                                                   Office Leasing Statistics
                                                                      Three Months Ended
                                       ---------------------------------------------------------------------------------------------
                                            9/30/00        6/30/00                3/31/00             12/31/99            Average
                                            -------        -------                -------             --------            -------

<S>                                              <C>                <C>                 <C>                 <C>                <C>
Net Effective Rents Related to
  Re-Leased Space:
Number of lease transactions
  (signed leases)                                174                221                 207                 251                213
Rentable square footage leased             1,056,239            990,663             931,686           1,337,611          1,079,050
Average per rentable square foot
  over the lease term:
     Base rent                          $      15.23     $        18.43     $         17.04     $         17.28     $        17.00
     Tenant improvements                       (1.21)             (1.39)              (1.07)              (0.90)             (1.14)
     Leasing commissions                       (0.40)             (0.57)              (0.40)              (0.36)             (0.43)
     Rent concessions                          (0.03)             (0.05)              (0.04)              (0.04)             (0.04)
                                        ------------        -----------        ------------        ------------        -----------
     Effective rent                            13.59              16.42               15.53               15.98              15.39
     Expense stop (1)                          (4.03)             (5.37)              (5.00)              (5.09)             (4.87)
                                        ------------        -----------        ------------        ------------        -----------
     Equivalent effective net rent      $       9.56     $        11.05     $         10.53     $         10.89     $        10.52
                                        ============        ===========        ============        ============        ===========
Average term in years                              5                  5                   4                   5                  5
                                        ============        ===========        ============        ============        ===========
Capital Expenditures Related to
  Released Space:
Tenant Improvements:
  Total dollars committed under
     signed leases                      $  6,676,576        $ 5,510,054        $  4,756,023        $  6,224,907        $ 5,791,890
  Rentable square feet                     1,056,239            930,663             931,686           1,337,611          1,079,050
                                        ------------        -----------        ------------        ------------        -----------
  Per rentable square foot              $       6.32     $         5.92     $          5.10     $          4.65     $         5.37
                                        ============        ===========        ============        ============        ===========
Leasing Commissions:
  Total dollars committed under
     signed leases                      $  1,910,278        $ 2,392,441        $  1,505,559        $  2,151,399        $ 1,989,919
  Rentable square feet                     1,056,239            990,663             931,686           1,337,611          1,079,050
                                        ------------        -----------        ------------        ------------        -----------
  Per rentable square foot              $       1.81        $      2.41     $          1.62     $          1.61     $         1.84
                                        ============        ===========        ============        ============        ===========
Total:
  Total dollars committed under
     signed leases                      $  8,586,853        $ 7,902,495        $  6,261,582        $  8,376,306        $ 7,781,809
  Rentable square feet                     1,056,239            990,663             931,686           1,337,611          1,079,050
                                        ------------        -----------        ------------        ------------        -----------
  Per rentable square foot              $       8.13     $         7.98     $          6.72     $          6.26     $         7.21
                                        ============        ===========        ============        ============        ===========
Rental Rate Trends:
  Average final rate with expense
     pass throughs                      $      14.30     $        16.59     $         15.79     $         16.96     $        15.91
  Average first year cash rental
     rate                               $      14.96     $        17.58     $         16.76     $         17.16     $        16.62
                                        ------------        -----------        ------------        ------------        -----------
  Percentage increase                           4.61%              6.02%               6.11%               1.16%              4.43%
                                        ============        ===========        ============        ============        ===========
</TABLE>

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

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

                                       23
<PAGE>
<TABLE>
<CAPTION>


                                                                  Industrial Leasing Statistics
                                                                       Three Months Ended
                                      ----------------------------------------------------------------------------------------------
                                            9/30/00         6/30/00             03/31/00            12/31/99            Average
                                            -------         -------             --------            --------            -------

<S>                                               <C>               <C>                  <C>                  <C>                <C>
Net Effective Rents Related to
   Re-Leased Space:
Number of lease transactions
   (signed leases)                                31                46                  66                  64                 52
Rentable square footage leased               349,079           362,521           1,305,697             543,522            640,205
Average per rentable square foot
   over the lease term:
     Base rent                           $      4.54        $     5.14        $       4.34        $       5.85        $      4.97
     Tenant improvements                       (0.32)            (0.28)              (0.19)              (0.38)             (0.29)
     Leasing commissions                       (0.15)            (0.12)              (0.11)              (0.11)             (0.12)
     Rent concessions                           0.00             (0.01)               0.00               (0.01)             (0.01)
                                         -----------        ----------        ------------        ------------        -----------
     Effective rent                             4.07              4.73                4.04                5.35               4.55
     Expense stop (1)                          (0.23)            (0.48)              (0.14)              (0.39)             (0.31)
                                         -----------        ----------        ------------        ------------        -----------
     Equivalent effective net rent       $      3.84        $     4.25        $       3.90        $       4.96        $      4.24
                                         ===========        ==========        ============        ============        ===========
Average term in years                              4                 4                   5                   4                  4
                                         ===========        ==========        ============        ============        ===========
Capital Expenditures Related to
   Re-leased Space:
Tenant Improvements:
   Total dollars committed under
     signed leases                       $   510,520        $  389,592        $    966,338        $  1,042,852        $   727,325
   Rentable square feet                      349,079           362,521           1,305,697             543,522            640,205
                                         -----------        ----------        ------------        ------------        -----------
   Per rentable square foot              $      1.46        $     1.07        $       0.74        $       1.92        $      1.14
                                         ===========        ==========        ============        ============        ===========
Leasing Commissions:
   Total dollars committed under
     signed leases                       $   167,772        $  185,028        $    671,182        $    222,728        $   311,678
   Rentable square feet                      349,079           362,521           1,305,697             543,522            640,205
                                         -----------        ----------        ------------        ------------        -----------
   Per rentable square foot              $      0.48        $     0.51        $       0.51        $       0.41        $      0.49
                                         ===========        ==========        ============        ============        ===========
Total:
   Total dollars committed under
     signed leases                       $   678,292        $  574,620        $  1,637,520        $  1,265,580        $ 1,039,003

   Rentable square feet                      349,079           362,521           1,305,697             543,522            640,205
                                         -----------        ----------        ------------        ------------        -----------
   Per rentable square foot              $      1.94        $     1.59        $       1.25        $       2.33        $      1.62
                                         ===========        ==========        ============        ============        ===========
Rental Rate Trends:
Average final rate with expense
   pass throughs                         $      4.11        $     4.44        $       3.91        $       5.50        $      4.49
Average first year cash rental rate      $      4.51        $     4.72        $       4.19        $       5.66        $      4.77
                                         -----------        ----------        ------------        ------------        -----------
Percentage increase                             9.55%             6.35%               6.98%               2.84%              6.15%
                                         ===========        ==========        ============        ============        ===========
</TABLE>

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

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

                                       24

<PAGE>
<TABLE>
<CAPTION>


                                                                          Retail Leasing Statistics
                                                                             Three Months Ended
                                          ------------------------------------------------------------------------------------
                                          9/30/00          6/30/00             3/31/00            12/31/99            Average
                                        ---------       ------------          ---------         ------------        ----------

<S>                                           <C>                  <C>                <C>     <C>                  <C>
Net Effective Rents Related to
   Re-Leased Space:
Number of lease transactions
   (signed leases)                            21                 15                 20                   28                 21
Rentable square footage leased            53,217             37,036             37,556               85,476             53,321
Average per rentable square foot
   over the lease term:
     Base rent                          $  22.26        $     21.84           $  19.81          $     14.54          $   19.61
     Tenant improvements                   (1.26)             (1.97)             (0.60)               (1.51)             (1.34)
     Leasing commissions                   (0.58)             (0.57)             (0.76)               (0.59)             (0.63)
     Rent concessions                      (0.03)              0.00               0.00                 0.00               0.01
                                        ---------       ------------          ---------         ------------        ----------
     Effective rent                        20.39              19.30              18.45                12.44              17.65
     Expense stop (1)                       0.00              (0.12)              0.00                 0.00              (0.03)
                                        ---------       ------------          ---------         ------------        ----------
     Equivalent effective net rent      $  20.39        $     19.18           $  18.45          $     12.44          $   17.62
                                        =========       ============          =========         ============        ==========
Average term in years                          8                  8                  5                    8                  7
                                        =========       ============          =========         ============        ==========
Capital Expenditures Related to
   Re-leased Space:
Tenant Improvements:
   Total dollars committed under
     signed leases                      $600,136        $   914,200           $ 82,365          $ 1,119,000          $ 678,925
   Rentable square feet                   53,217             37,036             37,556               85,476             53,321
                                        ---------       ------------          ---------         ------------        ----------
   Per rentable square foot             $  11.28        $     24.68           $   2.19          $     13.09          $   12.73
                                        =========       ============          =========         ============        ==========
Leasing Commissions:
   Total dollars committed under
     signed leases                      $143,269        $   175,122           $145,060          $   397,123          $ 215,144
   Rentable square feet                   53,217             37,036             37,556               85,476             53,321
                                        ---------       ------------          ---------         ------------        ----------
   Per rentable square foot             $   2.69        $      4.73           $   3.86          $      4.65          $    4.03
                                        =========       ============          =========         ============        ==========
Total:
   Total dollars committed under
     signed leases                      $743,406        $ 1,089,322           $227,425          $ 1,516,123          $ 894,069
   Rentable square feet                   53,217             37,036             37,556               85,476             53,321
                                        ---------       ------------          ---------         ------------        ----------
   Per rentable square foot             $  13.97        $     29.41           $   6.06          $     17.74          $   16.77
                                        =========       ============          =========         ============        ==========
Rental Rate Trends:
Average final rate with expense
   pass throughs                        $  13.85        $     16.60           $  15.20          $      8.87          $   13.63
Average first year cash rental rate     $  19.40        $     19.06           $  18.68          $     12.41          $   17.39
                                        ---------       ------------          ---------         ------------        ----------
Percentage increase                        40.08%             14.82%             22.83%               39.86%             27.54%
                                        =========       ============          =========         ============        ==========
</TABLE>

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

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

                                       25

<PAGE>


         The following tables set forth scheduled lease expirations for executed
leases at our majority-owned in-service properties (excluding apartment units)
as of September 30, 2000 assuming no tenant exercises renewal options.

 Office Properties:
<TABLE>
<CAPTION>
                                                    Percentage of                                            Percentage of
                                                    Leased Square      Annual Rents       Average Annual      Leased Rents
                                Total Rentable         Footage        Under Expiring     Rental Rate Per      Represented
 Year of Lease      Number of     Square Feet      Represented by       Leases (1)       Square Foot for      by Expiring
  Expiration          Leases       Expiring        Expiring Leases    (in thousands)     Expirations (1)        Leases
 -----------------  ---------   --------------     ---------------    ---------------    ---------------      -----------
<S>                 <C>         <C>                <C>                <C>                <C>                   <C>
 Remainder of 2000      353        1,289,187                5.2%          $  21,133          $   16.39               5.1%
     2001               560        3,016,085               12.2%             52,317              17.35              12.7%
     2002               584        3,152,157               12.8%             52,861              16.77              12.8%
     2003               531        3,716,010               15.1%             63,796              17.17              15.4%
     2004               386        2,853,841               11.6%             50,191              17.59              12.1%
     2005               348        2,916,045               11.8%             48,548              16.65              11.7%
     2006                75        1,766,871                7.2%             29,222              16.54               7.1%
     2007                46        1,074,372                4.4%             16,590              15.44               4.0%
     2008                48        1,341,127                5.4%             20,352              15.18               4.9%
     2009                21          724,305                2.9%             11,480              15.85               2.8%
     2010 and
     thereafter         106        2,815,087               11.4%             46,996              16.69              11.4%
                   --------       ----------          ---------           ---------          ---------           --------
                      3,058       24,665,087              100.0%          $ 413,486          $   16.76             100.0%
                   ========       ==========          =========           =========          =========           ========

  Industrial Properties:

                                                 Percentage of                                              Percentage of
                                                 Leased Square        Annual Rents      Average Annual      Leased Rents
                              Total Rentable         Footage         Under Expiring     Rental Rate Per      Represented
 Year of Lease    Number of     Square Feet      Represented by        Leases (1)       Square Foot for      by Expiring
  Expiration       Leases        Expiring       Expiring Leases      (in thousands)     Expirations (1)         Leases
----------------  ---------   --------------     ---------------     --------------     ---------------     -------------
 Remainder
  of 2000               48        660,609                6.9%           $  3,093             $ 4.68               6.9%
     2001              101      1,598,748               16.6%              7,227               4.52              16.1%
     2002              101      1,637,433               17.0%              7,180               4.38              16.0%
     2003               77      1,293,892               13.4%              6,211               4.80              13.8%
     2004               58      2,110,324               21.9%              8,583               4.07              19.0%
     2005               35        513,612                5.3%              2,812               5.47               6.3%
     2006               11        356,062                3.7%              2,278               6.40               5.1%
     2007               12        526,748                5.5%              2,946               5.59               6.6%
     2008                4        196,045                2.0%              1,301               6.64               2.9%
     2009                6        268,813                2.8%              1,806               6.72               4.0%
     2010 and
     thereafter         13         468,199               4.9%              1,492               3.19               3.3%
                      ----      ----------           --------            -------          ---------            -------
                       466       9,630,485             100.0%            $44,929          $    4.67             100.0%
                      ====      ==========           ========            =======          =========            =======
</TABLE>

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

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

                                       26
<PAGE>
<TABLE>
<CAPTION>


Retail Properties:
                                              Percentage of
                                                  Leased
                                                  Square       Annual Rents    Average Annual    Percentage of
                                   Total         Footage          Under            Rental         Leased Rents
    Year of                      Rentable      Represented       Expiring         Rate Per       Represented by
     Lease        Number of     Square Feet    by Expiring      Leases (1)    Square Foot for       Expiring
  Expiration        Leases        Expiring       Leases       (in thousands)  Expirations (1)          Leases
  ----------      ---------     -----------  --------------   --------------  ---------------    --------------
<S>               <C>           <C>           <C>             <C>              <C>               <C>
 Remainder
  of 2000             26           111,244          7.3%         $ 1,223            $10.99              4.0%
     2001             43            97,113          6.4%           2,748             28.30              8.9%
     2002             35            85,947          5.7%           1,826             21.25              5.9%
     2003             41           104,379          6.9%           2,282             21.86              7.4%
     2004             36           213,861         14.1%           2,657             12.42              8.6%
     2005             34            82,735          5.5%           2,284             27.61              7.4%
     2006             23            80,498          5.3%           1,902             23.63              6.2%
     2007             15            65,683          4.3%           1,181             17.98              3.8%
     2008             16           108,901          7.2%           3,613             33.18             11.7%
     2009             21           169,286         11.2%           3,177             18.77             10.3%
     2010 and
     thereafter       29           397,014         26.1%           7,908             19.92             25.8%
                    -------    -----------       -------       ---------           -------           -------
                      319        1,516,661        100.0%         $30,801            $20.31            100.0%
                   ======       ==========        ======         =======            ======            ======

Total:

                                              Percentage of
                                                  Leased
                                                  Square       Annual Rents    Average Annual    Percentage of
                                   Total         Footage          Under            Rental         Leased Rents
    Year of                      Rentable      Represented       Expiring         Rate Per       Represented by
     Lease        Number of     Square Feet    by Expiring      Leases (1)    Square Foot for       Expiring
  Expiration        Leases        Expiring       Leases       (in thousands)  Expirations (1)          Leases
  ----------      ---------     -----------  --------------   --------------  ---------------    --------------
<S>               <C>           <C>           <C>             <C>              <C>               <C>
 Remainder
  of 2000            427         2,061,040         5.8%        $  25,449            $12.35              5.2%
     2001            704         4,711,946        13.2%           62,292             13.22             12.7%
     2002            720         4,875,537        13.6%           61,867             12.69             12.6%
     2003            649         5,114,281        14.2%           72,289             14.13             14.8%
     2004            480         5,178,026        14.4%           61,431             11.86             12.6%
     2005            417         3,512,392         9.8%           53,644             15.27             11.0%
     2006            109         2,203,431         6.2%           33,402             15.16              6.8%
     2007             73         1,666,803         4.7%           20,717             12.43              4.2%
     2008             68         1,646,073         4.6%           25,266             15.35              5.2%
     2009             48         1,162,404         3.2%           16,463             14.16              3.4%
     2010 and
     thereafter       148        3,680,300        10.3%           56,396             15.32             11.5%
                   ------      -----------      -------       ----------           -------          --------
                   3,843        35,812,233       100.0%         $489,216            $13.66            100.0%
                   =====        ==========       ======         ========            ======            ======
</TABLE>

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

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

Inflation

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

                                       27
<PAGE>

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

         The effects of potential changes in interest rates are discussed below.
Our market risk discussion includes `forward-looking statements" and represents
an estimate of possible changes in fair value or future earnings that would
occur assuming hypothetical future movements in interest rates 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 Financial Condition and Results of Operations - Liquidity and
Capital Resources" for a description of our accounting policies and other
information related to these financial instruments.

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

         Certain Variable Rate Debt. As of September 30, 2000, the Operating
Partnership had approximately $155.5 million of variable rate debt outstanding
that was not protected by interest rate hedge contracts. If the weighted average
interest rate on this variable rate debt is 100 basis points higher or lower
during the 12 months ended September 30, 2001, our interest expense would be
increased or decreased approximately $1.6 million. In addition, as of September
30, 2000, we had $80.0 million of additional variable rate debt outstanding that
was protected by an interest rate collar that effectively keeps the interest
rate within a range of 65 basis points. We do not believe that a 100 basis point
increase or decrease in interest rates would materially affect our interest
expense with respect to this $80.0 million of debt.

         Interest Rate Hedge Contracts. For a discussion of our interest rate
hedge contracts in effect at September 30, 2000, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources - Capitalization." If interest rates increase by 100 basis
points, the aggregate fair market value of these interest rate hedge contracts
as of September 30, 2000 would increase by approximately $1.0 million. If
interest rates decrease by 100 basis points, the aggregate fair market value of
these interest rate hedge contracts as of September, 2000 would decrease by
approximately $667,000.

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

                                       28
<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 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 Securities 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 plaintiff seeks equitable relief and monetary
damages. We believe that the defendants have meritorious defenses to the
plaintiff's allegations and 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 court has granted the plaintiff's motion seeking
certification of the proposed class of plaintiffs with respect to the remaining
claims. Discovery in this matter has now been completed. Plaintiff John Flake
passed away on or about April 2, 2000, and plaintiff's counsel has substituted
his estate as the representative plaintiff in this action. Defendants filed a
summary judgment motion as to all claims asserted by the plaintiff, who opposed
defendants' motion. By order dated August 28, 2000, the court granted
defendants' motion as to plaintiff's claims that J.C. Nichols and the named
directors and officers of J.C. Nichols breached fiduciary duties to members of
the J.C. Nichols Company Employee Stock Ownership Trust. The court also granted
in part and denied in part defendants' summary judgment motion as to the
remaining claims asserted by the plaintiff. Defendants have sought
reconsideration of the court's ruling as to certain of the securities claims as
to which the court denied their summary judgment motion. Due to the inherent
uncertainties of the litigation process and the judicial system, we are not able
to predict the outcome of this litigation. However, at this time, we do not
expect the result of this litigation to have a material adverse effect on our
business, financial condition and results of operations.

Item 2.    Changes in Securities and Use of Proceeds - NA

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

Exhibit No.       Description

        2   (1)   Agreement to Form Limited Liability Companies, entered
                  into as of August 9, 2000, by and among Miller Global Fund
                  III, L.P., MGA Development Associates, L.P., Highwoods Realty
                  Limited Partnership and Highwoods/Florida Holdings, L.P.

      27          Financial Data Schedule

----------

(1) Filed as part of our Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000 and incorporated by reference herein.

(b) Reports on Form 8-K- None

                                       29

<PAGE>
                                 SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                             HIGHWOODS 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:  November 14, 2000

                                       30