----

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|   | Maryland                                                      | 001-13100               | 56-1871668                             |   |
|--------|---------------------------------------------------------------|-------------------------|----------------------------------------|--------|
|   | (State or other jurisdictionof incorporation or organization) | (CommissionFile Number) | (I.R.S. EmployerIdentification Number) |   |

|   | North Carolina                                                | 000-21731               | 56-1869557                             |   |
|--------|---------------------------------------------------------------|-------------------------|----------------------------------------|--------|
|   | (State or other jurisdictionof incorporation or organization) | (CommissionFile Number) | (I.R.S. EmployerIdentification Number) |   |

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TABLE OF CONTENTS

| PART I – FINANCIAL INFORMATION                                                                                       |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                       |   |
| ITEM 1.    FINANCIAL STATEMENTS                                                                        | 2      |
|                                                                                                                       |   |
| HIGHWOODS PROPERTIES, INC.:                                                                                                |   |
|                                                                                                                       |   |
| Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009                                 | 3      |
|                                                                                                                       |   |
| Consolidated Statements of Income for the three months ended March 31, 2010 and 2009                             | 4      |
|                                                                                                                       |   |
| Consolidated Statements of Equity for the three months ended March 31, 2010 and 2009                             | 5      |
|                                                                                                                       |   |
| Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2009                         | 6      |
|                                                                                                                       |   |
| Notes to Consolidated Financial Statements                                                                                 | 8      |
|                                                                                                                       |   |
| HIGHWOODS REALTY LIMITED PARTNERSHIP:                                                                                      |   |
|                                                                                                                       |   |
| Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009                                 | 22     |
|                                                                                                                       |   |
| Consolidated Statements of Income for the three months ended March 31, 2010 and 2009                             | 23     |
|                                                                                                                       |   |
| Consolidated Statements of Capital for the three months ended March 31, 2010 and 2009                       | 24     |
|                                                                                                                       |   |
| Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2009                         | 25     |
|                                                                                                                       |   |
| Notes to Consolidated Financial Statements                                                                                 | 27     |
|                                                                                                                       |   |
| ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 39     |
|                                                                                                                       |   |
| Disclosure Regarding Forward-Looking Statements                                                                            | 39     |
|                                                                                                                       |   |
| Executive Summary                                                                                                          | 40     |
|                                                                                                                       |   |
| Results of Operations                                                                                                      | 40     |
|                                                                                                                       |   |
| Liquidity and Capital Resources                                                                                            | 42     |
|                                                                                                                       |   |
| Critical Accounting Estimates                                                                                              | 45     |
|                                                                                                                       |   |
| Funds From Operations                                                                                                      | 45     |
|                                                                                                                       |   |
| ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                  | 48     |
|                                                                                                                       |   |
| ITEM 4.    CONTROLS AND PROCEDURES                                                                     | 48     |
|                                                                                                                       |   |
| PART II – OTHER INFORMATION                                                                                          |   |
|                                                                                                                       |   |
| ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                 | 49     |
|                                                                                                                       |   |
| ITEM 6.    EXHIBITS                                                                                    | 49     |

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(Table of Contents)

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

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(Table of Contents)

Consolidated Balance Sheets

|                                                                                                                                   |   | March 31,2010 |      | December 31,2009 |   |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------|-----------------------|--------|
| Assets:                                                                                                                                |   |               |      |                  |   |   |
| Real estate assets, at cost:                                                                                                           |   |               |      |                  |   |   |   |
| Land                                                                                                                                   |   | $                  | 348,955   |                  | $      | 350,537 |   |
| Buildings and tenant improvements                                                                                                      |   |               | 2,882,442 |                  |   | 2,880,632 |   |
| Land held for development                                                                                                              |   |               | 104,148   |                  |   | 104,148 |   |
|                                                                                                                                   |   |               | 3,335,545 |                  |   | 3,335,317 |   |
| Less-accumulated depreciation                                                                                                          |   |               | (799,755  | )                     |   | (781,073 | ) |
| Net real estate assets                                                                                                                 |   |               | 2,535,790 |                  |   | 2,554,244 |   |
| For-sale residential condominiums                                                                                                      |   |               | 11,162    |                  |   | 12,933 |   |
| Real estate and other assets, net, held for sale                                                                                       |   |               | 1,229     |                  |   | 5,031 |   |
| Cash and cash equivalents                                                                                                              |   |               | 14,338    |                  |   | 23,699 |   |
| Restricted cash                                                                                                                        |   |               | 6,301     |                  |   | 6,841 |   |
| Accounts receivable, net of allowance of $4,061 and $2,810, respectively                                                               |   |               | 22,792    |                  |   | 21,069 |   |
| Notes receivable, net of allowance of $732 and $698, respectively                                                                      |   |               | 3,084     |                  |   | 3,143 |   |
| Accrued straight-line rents receivable, net of allowance of $2,523 and $2,443, respectively                                            |   |               | 83,927    |                  |   | 82,600 |   |
| Investment in unconsolidated affiliates                                                                                                |   |               | 65,760    |                  |   | 66,077 |   |
| Deferred financing and leasing costs, net of accumulated amortization of $54,314 and $52,129, respectively                             |   |               | 72,534    |                  |   | 73,517 |   |
| Prepaid expenses and other assets                                                                                                      |   |               | 38,443    |                  |   | 37,947 |   |
| Total Assets                                                                                                                           |   | $                  | 2,855,360 |                  | $      | 2,887,101 |   |
|                                                                                                                                   |   |               |      |                  |   |   |   |
| Liabilities, Noncontrolling Interests in the Operating Partnership and Equity:                                                         |   |               |      |                  |   |   |   |
| Mortgages and notes payable                                                                                                            |   | $                  | 1,466,441 |                  | $      | 1,469,155 |   |
| Accounts payable, accrued expenses and other liabilities                                                                               |   |               | 110,514   |                  |   | 117,328 |   |
| Financing obligations                                                                                                                  |   |               | 33,574    |                  |   | 37,706 |   |
| Total Liabilities                                                                                                                      |   |               | 1,610,529 |                  |   | 1,624,189 |   |
| Commitments and contingencies                                                                                                          |   |               |      |                  |   |   |   |
| Noncontrolling interests in the Operating Partnership                                                                                  |   |               | 120,515   |                  |   | 129,769 |   |
| Equity:                                                                                                                                |   |               |      |                  |   |   |   |
| Preferred Stock, $.01 par value, 50,000,000 authorized shares;                                                                         |   |               |      |                  |   |   |   |
| 8.625% Series A Cumulative Redeemable Preferred Shares (liquidation preference $1,000 per share), 29,092 shares issued and outstanding |   |               | 29,092    |                  |   | 29,092 |   |
| 8.000% Series B Cumulative Redeemable Preferred Shares (liquidation preference $25 per share), 2,100,000 shares issued and outstanding |   |               | 52,500    |                  |   | 52,500 |   |
| Common stock, $.01 par value, 200,000,000 authorized shares;                                                                           |   |               |      |                  |   |   |   |
| 71,602,057 and 71,285,303 shares issued and outstanding, respectively                                                                  |   |               | 716       |                  |   | 713 |   |
| Additional paid-in capital                                                                                                             |   |               | 1,762,752 |                  |   | 1,751,398 |   |
| Distributions in excess of net income available for common stockholders                                                                |   |               | (722,584  | )                     |   | (701,932 | ) |
| Accumulated other comprehensive loss                                                                                                   |   |               | (3,353    | )                     |   | (3,811 | ) |
| Total Stockholders’ Equity                                                                                                       |   |               | 1,119,123 |                  |   | 1,127,960 |   |
| Noncontrolling interests in consolidated affiliates                                                                                    |   |               | 5,193     |                  |   | 5,183 |   |
| Total Equity                                                                                                                           |   |               | 1,124,316 |                  |   | 1,133,143 |   |
| Total Liabilities, Noncontrolling Interests in the Operating Partnership and Equity                                                    |   | $                  | 2,855,360 |                  | $      | 2,887,101 |   |

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Consolidated Statements of Income

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | Three Months EndedMarch 31, |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | 2010                             |    | 2009 |   |
| Rental and other revenues                                                                                                                            |   | $                                | 115,818 |   | $ | 113,220 |   |
| Operating expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                             |    |   |   |   |   |
| Rental property and other expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                             | 42,096  |   |   | 40,689 |   |
| Depreciation and amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                             | 32,912  |   |   | 32,884 |   |
| General and administrative                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                             | 8,507   |   |   | 8,315 |   |
| Total operating expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                             | 83,515  |   |   | 81,888 |   |
| Interest expense:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                             |    |   |   |   |   |
| Contractual                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                             | 21,802  |   |   | 20,579 |   |
| Amortization of deferred financing costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                             | 835     |   |   | 662 |   |
| Financing obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                             | 476     |   |   | 735 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                             | 23,113  |   |   | 21,976 |   |
| Other income:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                             |    |   |   |   |   |
| Interest and other income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                             | 1,700   |   |   | 1,007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                             | 1,700   |   |   | 1,007 |   |
| Income from continuing operations before disposition of property and condominiums and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                             |    |   |   |   |   |
| equity in earnings of unconsolidated affiliates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                             | 10,890  |   |   | 10,363 |   |
| Gains on disposition of property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                             | 19      |   |   | 19 |   |
| Gains on for-sale residential condominiums                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                             | 190     |   |   | 347 |   |
| Equity in earnings of unconsolidated affiliates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                             | 795     |   |   | 1,300 |   |
| Income from continuing operations                                                                                                                    |   |                             | 11,894  |   |   | 12,029 |   |
| Discontinued operations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                             |    |   |   |   |   |
| Income from discontinued operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                             | 14      |   |   | 1,098 |   |
| Net gains on disposition of discontinued operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                             | 174     |   |   | 73 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                             | 188     |   |   | 1,171 |   |
| Net income                                                                                                                                           |   |                             | 12,082  |   |   | 13,200 |   |
| Net (income) attributable to noncontrolling interests in the Operating Partnership                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                             | (520    | ) |   | (694 | ) |
| Net (income) attributable to noncontrolling interests in consolidated affiliates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                             | (214    | ) |   | (18 | ) |
| Dividends on preferred stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                             | (1,677  | ) |   | (1,677 | ) |
| Net income available for common stockholders                                                                                                         |   | $                                | 9,671   |   | $ | 10,811 |   |
| Earnings per common share – basic:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                             |    |   |   |   |   |
| Income from continuing operations available for common stockholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | $                                | 0.14    |   | $ | 0.15 |   |
| Income from discontinued operations available for common stockholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                             | — |   |   | 0.02 |   |
| Net income available for common stockholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | $                                | 0.14    |   | $ | 0.17 |   |
| Weighted average common shares outstanding – basic                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                             | 71,414  |   |   | 63,631 |   |
| Earnings per common share – diluted:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                             |    |   |   |   |   |
| Income from continuing operations available for common stockholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | $                                | 0.14    |   | $ | 0.15 |   |
| Income from discontinued operations available for common stockholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                             | — |   |   | 0.02 |   |
| Net income available for common stockholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | $                                | 0.14    |   | $ | 0.17 |   |
| Weighted average common shares outstanding – diluted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                             | 75,397  |   |   | 67,705 |   |
| Dividends declared and paid per common share                                                                                                         |   | $                                | 0.425   |   | $ | 0.425 |   |
| Net income available for common stockholders:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                             |    |   |   |   |   |
| Income from continuing operations available for common stockholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | $                                | 9,493   |   | $ | 9,711 |   |
| Income from discontinued operations available for common stockholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                             | 178     |   |   | 1,100 |   |
| Net income available for common stockholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | $                                | 9,671   |   | $ | 10,811 |   |

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Consolidated Statements of Equity

|                                                                               |   | Number of Common Shares |   | Common Stock |    | Series A Preferred |   | Series B Preferred |   | Additional Paid-In Capital |    | Accumulated Other Compre- hensiveLoss |   | Non-Controlling Interests inConsolidated Affiliates |   | Distributions in Excess of Net Earnings |    | Total  |   |
|------------------------------------------------------------------------------------|--------|------------------------------|--------|--------------|---------|--------------------|--------|--------------------|--------|----------------------------|---------|---------------------------------------|--------|-----------------------------------------------------|--------|-----------------------------------------|---------|--------|--------|
| Balance at December 31, 2009                                             |   | 71,285,303                   |   | $            | 713     |               | $      | 29,092             |   | $                          | 52,500  |                                  | $      | 1,751,398                                           |   | $                                       | (3,811  | )      | $      | 5,183 |   | $ | (701,932 | ) | $ | 1,133,143 |   |
| Issuances of Common Stock, net                                                     |   | 68,886                       |   |         | 1       |               |   | —            |   |                       | — |                                  |   | 1,141                                               |   |                                    | — |   |   | — |   |   | — |   |   | 1,142 |   |
| Conversion of Common Units to Common Stock                                         |   | 92,971                       |   |         | 1       |               |   | —            |   |                       | — |                                  |   | 2,924                                               |   |                                    | — |   |   | — |   |   | — |   |   | 2,925 |   |
| Dividends on Common Stock                                                          |   | —                      |   |         | — |               |   | —            |   |                       | — |                                  |   | —                                             |   |                                    | — |   |   | — |   |   | (30,323 | ) |   | (30,323 | ) |
| Dividends on Preferred Stock                                                       |   | —                      |   |         | — |               |   | —            |   |                       | — |                                  |   | —                                             |   |                                    | — |   |   | — |   |   | (1,677 | ) |   | (1,677 | ) |
| Adjustment of noncontrolling interests in the Operating Partnership to fair value  |   | —                      |   |         | — |               |   | —            |   |                       | — |                                  |   | 5,235                                               |   |                                    | — |   |   | — |   |   | — |   |   | 5,235 |   |
| Distributions to noncontrolling interests in consolidated affiliates               |   | —                      |   |         | — |               |   | —            |   |                       | — |                                  |   | —                                             |   |                                    | — |   |   | (204 | ) |   | — |   |   | (204 | ) |
| Issuances of restricted stock, net                                                 |   | 154,897                      |   |         | — |               |   | —            |   |                       | — |                                  |   | —                                             |   |                                    | — |   |   | — |   |   | — |   |   | — |   |
| Share-based compensation expense                                                   |   | —                      |   |         | 1       |               |   | —            |   |                       | — |                                  |   | 2,054                                               |   |                                    | — |   |   | — |   |   | — |   |   | 2,055 |   |
| Net (income) attributable to noncontrolling interests in the Operating Partnership |   | —                      |   |         | — |               |   | —            |   |                       | — |                                  |   | —                                             |   |                                    | — |   |   | — |   |   | (520 | ) |   | (520 | ) |
| Net (income) attributable to noncontrolling interests in consolidated affiliates   |   | —                      |   |         | — |               |   | —            |   |                       | — |                                  |   | —                                             |   |                                    | — |   |   | 214 |   |   | (214 | ) |   | — |   |
| Comprehensive income:                                                              |   |                         |   |         |    |               |   |               |   |                       |    |                                  |   |                                                |   |                                    |    |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                         |   | —                      |   |         | — |               |   | —            |   |                       | — |                                  |   | —                                             |   |                                    | — |   |   | — |   |   | 12,082 |   |   | 12,082 |   |
| Other comprehensive income                                                         |   | —                      |   |         | — |               |   | —            |   |                       | — |                                  |   | —                                             |   |                                    | 458     |   |   | — |   |   | — |   |   | 458 |   |
| Total comprehensive income                                                         |   |                         |   |         |    |               |   |               |   |                       |    |                                  |   |                                                |   |                                    |    |   |   |   |   |   |   |   |   | 12,540 |   |
| Balance at March 31, 2010                                                |   | 71,602,057                   |   | $            | 716     |               | $      | 29,092             |   | $                          | 52,500  |                                  | $      | 1,762,752                                           |   | $                                       | (3,353  | )      | $      | 5,193 |   | $ | (722,584 | ) | $ | 1,124,316 |   |

|                                                                               |   | Number of Common Shares |   | Common Stock |    | Series A Preferred |   | Series B Preferred |   | Additional Paid-In Capital |    | Accumulated Other Compre- hensiveLoss |   | Non-Controlling Interests inConsolidated Affiliates |   | Distributions in Excess of Net Earnings |    | Total  |   |
|------------------------------------------------------------------------------------|--------|------------------------------|--------|--------------|---------|--------------------|--------|--------------------|--------|----------------------------|---------|---------------------------------------|--------|-----------------------------------------------------|--------|-----------------------------------------|---------|--------|--------|
| Balance at December 31, 2008                                             |   | 63,571,705                   |   | $            | 636     |               | $      | 29,092             |   | $                          | 52,500  |                                  | $      | 1,616,093                                           |   | $                                       | (4,792  | )      | $      | 6,176 |   | $ | (639,281 | ) | $ | 1,060,424 |   |
| Issuances of Common Stock, net                                                     |   | (38,109                      | )      |         | — |               |   | —            |   |                       | — |                                  |   | (895                                                | )      |                                    | — |   |   | — |   |   | — |   |   | (895 | ) |
| Dividends on Common Stock                                                          |   | —                      |   |         | — |               |   | —            |   |                       | — |                                  |   | —                                             |   |                                    | — |   |   | — |   |   | (26,965 | ) |   | (26,965 | ) |
| Dividends on Preferred Stock                                                       |   | —                      |   |         | — |               |   | —            |   |                       | — |                                  |   | —                                             |   |                                    | — |   |   | — |   |   | (1,677 | ) |   | (1,677 | ) |
| Adjustment of noncontrolling interests in the Operating Partnership to fair value  |   | —                      |   |         | — |               |   | —            |   |                       | — |                                  |   | 23,136                                              |   |                                    | — |   |   | — |   |   | — |   |   | 23,136 |   |
| Distribution to noncontrolling interests in consolidated affiliates                |   | —                      |   |         | — |               |   | —            |   |                       | — |                                  |   | —                                             |   |                                    | — |   |   | (4 | ) |   | — |   |   | (4 | ) |
| Issuances of restricted stock, net                                                 |   | 228,979                      |   |         | — |               |   | —            |   |                       | — |                                  |   | —                                             |   |                                    | — |   |   | — |   |   | — |   |   | — |   |
| Share-based compensation expense                                                   |   | —                      |   |         | 2       |               |   | —            |   |                       | — |                                  |   | 1,840                                               |   |                                    | — |   |   | — |   |   | — |   |   | 1,842 |   |
| Net (income) attributable to noncontrolling interests in the Operating Partnership |   | —                      |   |         | — |               |   | —            |   |                       | — |                                  |   | —                                             |   |                                    | — |   |   | — |   |   | (694 | ) |   | (694 | ) |
| Net (income) attributable to noncontrolling interests in consolidated affiliates   |   | —                      |   |         | — |               |   | —            |   |                       | — |                                  |   | —                                             |   |                                    | — |   |   | 18 |   |   | (18 | ) |   | — |   |
| Comprehensive income:                                                              |   |                         |   |         |    |               |   |               |   |                       |    |                                  |   |                                                |   |                                    |    |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                         |   | —                      |   |         | — |               |   | —            |   |                       | — |                                  |   | —                                             |   |                                    | — |   |   | — |   |   | 13,200 |   |   | 13,200 |   |
| Other comprehensive income                                                         |   | —                      |   |         | — |               |   | —            |   |                       | — |                                  |   | —                                             |   |                                    | 94      |   |   | — |   |   | — |   |   | 94 |   |
| Total comprehensive income                                                         |   |                         |   |         |    |               |   |               |   |                       |    |                                  |   |                                                |   |                                    |    |   |   |   |   |   |   |   |   | 13,294 |   |
| Balance at March 31, 2009                                                |   | 63,762,575                   |   | $            | 638     |               | $      | 29,092             |   | $                          | 52,500  |                                  | $      | 1,640,174                                           |   | $                                       | (4,698  | )      | $      | 6,190 |   | $ | (655,435 | ) | $ | 1,068,461 |   |

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Consolidated Statements of Cash Flows

|                                                                              |   | Three Months Ended March 31, |    |
|-----------------------------------------------------------------------------------|--------|-----------------------------------|---------|
|                                                                              |   | 2010                              |    | 2009 |   |
| Operating activities:                                                             |   |                              |    |   |   |   |   |
| Net income                                                                        |   | $                                 | 12,082  |   | $ | 13,200 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |                              |    |   |   |   |   |
| Depreciation and amortization                                                     |   |                              | 32,912  |   |   | 33,424 |   |
| Amortization of lease incentives                                                  |   |                              | 261     |   |   | 298 |   |
| Share-based compensation expense                                                  |   |                              | 2,055   |   |   | 1,842 |   |
| Additions to allowance for doubtful accounts                                      |   |                              | 1,331   |   |   | 1,015 |   |
| Amortization of deferred financing costs                                          |   |                              | 835     |   |   | 662 |   |
| Amortization of past cash-flow hedges                                             |   |                              | 239     |   |   | (70 | ) |
| Gains on disposition of property                                                  |   |                              | (193    | ) |   | (92 | ) |
| Gains on disposition of for-sale residential condominiums                         |   |                              | (190    | ) |   | (347 | ) |
| Equity in earnings of unconsolidated affiliates                                   |   |                              | (795    | ) |   | (1,300 | ) |
| Changes in financing obligations                                                  |   |                              | 52      |   |   | 335 |   |
| Distributions of earnings from unconsolidated affiliates                          |   |                              | 681     |   |   | 1,257 |   |
| Changes in operating assets and liabilities:                                      |   |                              |    |   |   |   |   |
| Accounts receivable                                                               |   |                              | (3,928  | ) |   | 3,693 |   |
| Prepaid expenses and other assets                                                 |   |                              | (509    | ) |   | 161 |   |
| Accrued straight-line rents receivable                                            |   |                              | (1,407  | ) |   | (1,726 | ) |
| Accounts payable, accrued expenses and other liabilities                          |   |                              | (3,676  | ) |   | (6,731 | ) |
| Net cash provided by operating activities                                         |   |                              | 39,750  |   |   | 45,621 |   |
| Investing activities:                                                             |   |                              |    |   |   |   |   |
| Additions to real estate assets and deferred leasing costs                        |   |                              | (16,814 | ) |   | (36,923 | ) |
| Net proceeds from disposition of real estate assets                               |   |                              | — |   |   | 195 |   |
| Net proceeds from disposition of for-sale residential condominiums                |   |                              | 1,943   |   |   | 3,180 |   |
| Distributions of capital from unconsolidated affiliates                           |   |                              | 730     |   |   | 594 |   |
| Net repayments of notes receivable                                                |   |                              | 59      |   |   | 155 |   |
| Contributions to unconsolidated affiliates                                        |   |                              | (36     | ) |   | (500 | ) |
| Changes in restricted cash and other investing activities                         |   |                              | 596     |   |   | (1,540 | ) |
| Net cash used in investing activities                                             |   |                              | (13,522 | ) |   | (34,839 | ) |
| Financing activities:                                                             |   |                              |    |   |   |   |   |
| Dividends on Common Stock                                                         |   |                              | (30,323 | ) |   | (26,965 | ) |
| Dividends on Preferred Stock                                                      |   |                              | (1,677  | ) |   | (1,677 | ) |
| Distributions to noncontrolling interests in the Operating Partnership            |   |                              | (1,614  | ) |   | (1,717 | ) |
| Distributions to noncontrolling interests in consolidated affiliates              |   |                              | (204    | ) |   | (4 | ) |
| Net proceeds from the issuance of Common Stock                                    |   |                              | 1,142   |   |   | (895 | ) |
| Borrowings on revolving credit facility                                           |   |                              | 4,000   |   |   | 91,000 |   |
| Repayments of revolving credit facility                                           |   |                              | (4,000  | ) |   | (57,000 | ) |
| Borrowings on mortgages and notes payable                                         |   |                              | — |   |   | 36,551 |   |
| Repayments of mortgages and notes payable                                         |   |                              | (2,725  | ) |   | (55,964 | ) |
| Additions to deferred financing costs                                             |   |                              | (188    | ) |   | (111 | ) |
| Net cash used in financing activities                                             |   |                              | (35,589 | ) |   | (16,782 | ) |
| Net decrease in cash and cash equivalents                                         |   |                              | (9,361  | ) |   | (6,000 | ) |
| Cash and cash equivalents at beginning of the period                              |   |                              | 23,699  |   |   | 13,757 |   |
| Cash and cash equivalents at end of the period                                    |   | $                                 | 14,338  |   | $ | 7,757 |   |

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|                                                                                                                                                                     |   | Three Months EndedMarch 31, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|--------|
|                                                                                                                                                                     |   | 2010                             |   | 2009 |   |
| Cash paid for interest, net of amounts capitalized (excludes cash distributions to owners of sold properties accounted for as financings of $126 and $110, respectively) |   | $                                | 23,541 |   | $ | 24,695 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | Three Months EndedMarch 31, |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | 2010                             |    | 2009 |   |
| Unrealized gains on cash-flow hedges                                                                                                                     |   | $                                | — |   | $ | 198 |   |
| Conversion of Common Units to Common Stock                                                                                                               |   | $                                | 2,925   |   | $ | — |   |
| Changes in accrued capital expenditures                                                                                                                  |   | $                                | (3,456  | ) | $ | (5,807 | ) |
| Write-off of fully depreciated real estate assets                                                                                                        |   | $                                | 10,194  |   | $ | 7,966 |   |
| Write-off of fully amortized deferred financing and leasing costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | $                                | 2,652   |   | $ | 2,842 |   |
| Unrealized gains/(losses) on marketable securities held in our non-qualified deferred compensation plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                                | 204     |   | $ | (351 | ) |
| Settlement of financing obligation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | $                                | 4,184   |   | $ | — |   |
| Adjustment of noncontrolling interests in the Operating Partnership to fair value                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | $                                | (5,235  | ) | $ | (23,136 | ) |
| Unrealized gain/(loss) on tax increment financing bond                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $                                | 219     |   | $ | (34 | ) |

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Notes To Consolidated Financial Statements

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|                                                |   | Three Months EndedMarch 31, |   |
|-----------------------------------------------------|--------|-----------------------------|--------|
|                                                |   | 2010                        |   | 2009 |   |
| Income Statements:                                  |   |                        |   |   |   |   |   |
| Revenues                                            |   | $                           | 35,588 |   | $ | 38,869 |   |
| Expenses:                                           |   |                        |   |   |   |   |   |
| Rental property and other expenses                  |   |                        | 17,167 |   |   | 18,640 |   |
| Depreciation and amortization                       |   |                        | 9,600  |   |   | 8,872 |   |
| Interest expense                                    |   |                        | 8,565  |   |   | 8,975 |   |
| Total expenses                                      |   |                        | 35,332 |   |   | 36,487 |   |
| Net income                                          |   | $                           | 256    |   | $ | 2,382 |   |
| Our share of:                                       |   |                        |   |   |   |   |   |
| Net income (1)                                      |   | $                           | 795    |   | $ | 1,300 |   |
| Depreciation and amortization of real estate assets |   | $                           | 3,341  |   | $ | 3,250 |   |
| Interest expense                                    |   | $                           | 3,423  |   | $ | 3,578 |   |

| (1) | Our share of net income differs from our weighted average ownership percentage in the joint ventures’ net income due to our purchase accounting and other adjustments related primarily to management and leasing fees. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | March 31,2010 |    | December 31,2009 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|------------------|--------|
| Deferred financing costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $                  | 16,917  |             | $      | 16,811 |   |
| Less accumulated amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |               | (5,311  | )                |   | (4,549 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               | 11,606  |             |   | 12,262 |   |
| Deferred leasing costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |               | 109,931 |             |   | 108,835 |   |
| Less accumulated amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |               | (49,003 | )                |   | (47,580 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               | 60,928  |             |   | 61,255 |   |
| Deferred financing and leasing costs, net                                                                                               |   | $                  | 72,534  |             | $      | 73,517 |   |

|                                                                               |   | Three Months EndedMarch 31, |   |
|------------------------------------------------------------------------------------|--------|----------------------------------|--------|
|                                                                               |   | 2010                             |   | 2009 |   |
| Amortization of deferred financing costs                                           |   | $                                | 835    |   | $ | 662 |   |
| Amortization of deferred leasing costs (included in depreciation and amortization) |   | $                                | 3,766  |   | $ | 3,866 |   |
| Amortization of lease incentives (included in rental and other revenues)           |   | $                                | 261    |   | $ | 298 |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |   |   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
|   | March 31, 2010 through December 31, 2010                                                                                                 |   | $      | 13,466 |   |   |   |   |
|   | 2011                                                                                                                                                         |   |   | 15,371 |   |   |   |   |
|   | 2012                                                                                                                                                         |   |   | 12,705 |   |   |   |   |
|   | 2013                                                                                                                                                         |   |   | 8,955  |   |   |   |   |
|   | 2014                                                                                                                                                         |   |   | 6,480  |   |   |   |   |
|   | Thereafter                                                                                                                                                   |   |   | 15,557 |   |   |   |   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $      | 72,534 |   |   |   |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | March 31,2010 |      | December 31,2009 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------|------------------|--------|
| Secured mortgage loans                                                                                                       |   | $                  | 717,984   |             | $      | 720,727 |   |
| Unsecured loans                                                                                                              |   |               | 748,457   |             |   | 748,428 |   |
| Total                                                                                                                                                      |   | $                  | 1,466,441 |             | $      | 1,469,155 |   |

|                                                                                      |   | Three Months EndedMarch 31, |    |
|-------------------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                                      |   | 2010                             |    | 2009 |   |
| Derivatives Designated as Cash-flow Hedges:                                               |   |                             |    |   |   |   |   |
| Amount of unrealized gain recognized in AOCL on derivatives (effective portion):          |   |                             |    |   |   |   |   |
| Interest rate swaps                                                                       |   | $                                | — |   | $ | 198 |   |
|                                                                                      |   |                             |    |   |   |   |   |
| Amount of loss/(gain) reclassified out of AOCL into interest expense (effective portion): |   |                             |    |   |   |   |   |
| Interest rate swaps                                                                       |   | $                                | 239     |   | $ | (70 | ) |

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|                                                                              |   | Three Months EndedMarch 31, |    |
|-----------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                              |   | 2010                             |    | 2009 |   |
| Beginning noncontrolling interests in the Operating Partnership                   |   | $                                | 129,769 |   | $ | 111,278 |   |
| Adjustment of noncontrolling interests in the Operating Partnership to fair value |   |                             | (5,235  | ) |   | (23,136 | ) |
| Conversion of Common Units to Common Stock                                        |   |                             | (2,925  | ) |   | — |   |
| Net income attributable to noncontrolling interests in the Operating Partnership  |   |                             | 520     |   |   | 694 |   |
| Distributions to noncontrolling interests in the Operating Partnership            |   |                             | (1,614  | ) |   | (1,717 | ) |
| Total noncontrolling interests in the Operating Partnership                       |   | $                                | 120,515 |   | $ | 87,119 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | Three Months EndedMarch 31, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 2010                             |   | 2009 |   |
| Net income available for common stockholders                                                                                                            |   | $                                | 9,671  |   | $ | 10,811 |   |
| Increase in equity from conversion of Common Units to Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                             | 2,925  |   |   | — |   |
| Change from net income available for common stockholders and transfers from noncontrolling interests                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | $                                | 12,596 |   | $ | 10,811 |   |

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|                                                                                |   |               |    | Level 1                                           |   | Level 3                       |   |
|-------------------------------------------------------------------------------------|--------|--------------------|---------|---------------------------------------------------|--------|-------------------------------|--------|
|                                                                                |   | March 31,2010 |    | Quoted Prices inActive Marketsfor IdenticalAssets |   | SignificantUnobservableInputs |   |
| Assets:                                                                             |   |               |    |                                              |   |                          |   |   |   |   |
| Marketable securities (in prepaid expenses and other assets)                        |   | $                  | 3,879   |                                              | $      | 3,879                         |   | $ | — |   |
| Tax increment financing bond (in prepaid expenses and other assets)                 |   |               | 17,090  |                                              |   | —                       |   |   | 17,090 |   |
| Total Assets                                                                        |   | $                  | 20,969  |                                              | $      | 3,879                         |   | $ | 17,090 |   |
|                                                                                |   |               |    |                                              |   |                          |   |   |   |   |
| Noncontrolling Interests in the Operating Partnership                               |   | $                  | 120,515 |                                              | $      | 120,515                       |   | $ | — |   |
|                                                                                |   |               |    |                                              |   |                          |   |   |   |   |
| Liabilities:                                                                        |   |               |    |                                              |   |                          |   |   |   |   |
| Deferred compensation (in accounts payable, accrued expenses and other liabilities) |   | $                  | 4,459   |                                              | $      | 4,459                         |   | $ | — |   |
| SF-Harborview Plaza, LP financing obligation                                        |   |               | 12,396  |                                              |   | —                       |   |   | 12,396 |   |
| Total Liabilities                                                                   |   | $                  | 16,855  |                                              | $      | 4,459                         |   | $ | 12,396 |   |

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|                                                                                |   |                  |    | Level 1                                           |   | Level 3                       |   |
|-------------------------------------------------------------------------------------|--------|-----------------------|---------|---------------------------------------------------|--------|-------------------------------|--------|
|                                                                                |   | December 31,2009 |    | Quoted Prices inActive Marketsfor IdenticalAssets |   | SignificantUnobservableInputs |   |
| Assets:                                                                             |   |                  |    |                                              |   |                          |   |   |   |   |
| Marketable securities (in prepaid expenses and other assets)                        |   | $                     | 6,135   |                                              | $      | 6,135                         |   | $ | — |   |
| Tax increment financing bond (in prepaid expenses and other assets)                 |   |                  | 16,871  |                                              |   | —                       |   |   | 16,871 |   |
| Impaired real estate assets                                                         |   |                  | 32,000  |                                              |   | —                       |   |   | 32,000 |   |
| Total Assets                                                                        |   | $                     | 55,006  |                                              | $      | 6,135                         |   | $ | 48,871 |   |
|                                                                                |   |                  |    |                                              |   |                          |   |   |   |   |
| Noncontrolling Interests in the Operating Partnership                               |   | $                     | 129,769 |                                              | $      | 129,769                       |   | $ | — |   |
|                                                                                |   |                  |    |                                              |   |                          |   |   |   |   |
| Liabilities:                                                                        |   |                  |    |                                              |   |                          |   |   |   |   |
| Deferred compensation (in accounts payable, accrued expenses and other liabilities) |   | $                     | 6,898   |                                              | $      | 6,898                         |   | $ | — |   |
| SF-Harborview Plaza, LP financing obligation                                        |   |                  | 12,230  |                                              |   | —                       |   |   | 12,230 |   |
| Total Liabilities                                                                   |   | $                     | 19,128  |                                              | $      | 6,898                         |   | $ | 12,230 |   |

|                                                 |   | Three Months EndedMarch 31, |   |
|------------------------------------------------------|--------|----------------------------------|--------|
|                                                 |   | 2010                             |   | 2009 |   |
| Asset:                                               |   |                             |   |   |   |   |   |
| Tax Increment Financing Bond                         |   |                             |   |   |   |   |   |
| Beginning balance                                    |   | $                                | 16,871 |   | $ | 17,468 |   |
| Unrealized gain (in AOCL)                            |   |                             | 219    |   |   | (34 | ) |
| Ending balance                                       |   | $                                | 17,090 |   | $ | 17,434 |   |
|                                                 |   |                             |   |   |   |   |   |
| Liability:                                           |   |                             |   |   |   |   |   |
| SF-Harborview Plaza, LP Financing Obligation         |   |                             |   |   |   |   |   |
| Beginning balance – gross financing obligation |   | $                                | 12,718 |   | $ | 13,879 |   |
| Principal repayments                                 |   |                             | (126   | ) |   | (110 | ) |
| Interest expense on financing obligation             |   |                             | 166    |   |   | 440 |   |
| Unrealized loss                                      |   |                             | (40    | ) |   | (880 | ) |
| Ending balance – gross financing obligation    |   |                             | 12,718 |   |   | 13,329 |   |
| Valuation allowance, net                             |   |                             | 4,279  |   |   | 3,605 |   |
| Net financing obligation                             |   | $                                | 16,997 |   | $ | 16,934 |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | CarryingAmount |      | Fair Value |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|-----------|------------|--------|
| March 31, 2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |           |      |       |   |   |   |
| Cash and cash equivalents                                                                                                     |   | $              | 14,338    |       | $      | 14,338 |   |
| Restricted cash                                                                                                               |   | $              | 6,301     |       | $      | 6,301 |   |
| Accounts and notes receivable                                                                                                 |   | $              | 25,876    |       | $      | 25,876 |   |
| Marketable securities (in prepaid expenses and other assets)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | $              | 3,879     |       | $      | 3,879 |   |
| Tax increment financing bond (in prepaid expenses and other assets)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | $              | 17,090    |       | $      | 17,090 |   |
| Mortgages and notes payable                                                                                                   |   | $              | 1,466,441 |       | $      | 1,486,103 |   |
| Financing obligations                                                                                                         |   | $              | 33,574    |       | $      | 27,326 |   |
| Deferred compensation (in accounts payable, accrued expenses and other liabilities)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | $              | 4,459     |       | $      | 4,459 |   |
| Noncontrolling interests in the Operating Partnership                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $              | 120,515   |       | $      | 120,515 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |           |      |       |   |   |   |
| December 31, 2009                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |           |      |       |   |   |   |
| Cash and cash equivalents                                                                                                     |   | $              | 23,699    |       | $      | 23,699 |   |
| Restricted cash                                                                                                               |   | $              | 6,841     |       | $      | 6,841 |   |
| Accounts and notes receivable                                                                                                 |   | $              | 24,212    |       | $      | 24,212 |   |
| Marketable securities (in prepaid expenses and other assets)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | $              | 6,135     |       | $      | 6,135 |   |
| Tax increment financing bond (in prepaid expenses and other assets)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | $              | 16,871    |       | $      | 16,871 |   |
| Mortgages and notes payable                                                                                                   |   | $              | 1,469,155 |       | $      | 1,440,317 |   |
| Financing obligations                                                                                                         |   | $              | 37,706    |       | $      | 31,664 |   |
| Deferred compensation (in accounts payable, accrued expenses and other liabilities)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | $              | 6,898     |       | $      | 6,898 |   |
| Noncontrolling interests in the Operating Partnership                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $              | 129,769   |       | $      | 129,769 |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | Three Months EndedMarch 31, |    |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 2010                        |    | 2009 |   |
| Net income                                                                                                          |   | $                           | 12,082  |   | $ | 13,200 |   |
| Other comprehensive income:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                        |    |   |   |   |   |
| Unrealized gain/(loss) on tax increment financing bond                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                        | 219     |   |   | (34 | ) |
| Unrealized gains on cash-flow hedges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                        | — |   |   | 198 |   |
| Amortization of past cash-flow hedges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                        | 239     |   |   | (70 | ) |
| Total other comprehensive income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                        | 458     |   |   | 94 |   |
| Total comprehensive income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | $                           | 12,540  |   | $ | 13,294 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | March 31,2010 |   | December 31,2009 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|--------|------------------|--------|
| Tax increment financing bond                                                                                                       |   | $                  | 2,147  |             | $      | 2,366 |   |
| Past cash-flow hedges                                                                                                              |   |               | 1,206  |             |   | 1,445 |   |
| Total accumulated other comprehensive loss                                                                                                                       |   | $                  | 3,353  |             | $      | 3,811 |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | Three Months EndedMarch 31, |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 2010                        |    | 2009 |   |
| Rental and other revenues                                                                                                                |   | $                           | 15      |   | $ | 2,744 |   |
| Operating expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                        |    |   |   |   |   |
| Rental property and other expenses                                                                                                                                     |   |                        | 1       |   |   | 1,106 |   |
| Depreciation and amortization                                                                                                                                          |   |                        | — |   |   | 540 |   |
| Total operating expenses                                                                                                                                                                             |   |                        | 1       |   |   | 1,646 |   |
| Income before gains on disposition of discontinued operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                        | 14      |   |   | 1,098 |   |
| Net gains on disposition of discontinued operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                        | 174     |   |   | 73 |   |
| Total discontinued operations                                                                                                            |   | $                           | 188     |   | $ | 1,171 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | March 31,2010 |    | December 31,2009 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|------------------|--------|
| Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |               |    |             |   |   |   |
| Land                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | $                  | — |             | $      | 867 |   |
| Buildings and tenant improvements                                                                                                  |   |               | — |             |   | 3,876 |   |
| Land held for development                                                                                                          |   |               | 1,197   |             |   | 1,197 |   |
| Accumulated depreciation                                                                                                           |   |               | — |             |   | (1,484 | ) |
| Net real estate assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |               | 1,197   |             |   | 4,456 |   |
| Deferred leasing costs, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |               | — |             |   | 209 |   |
| Accrued straight line rents receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |               | — |             |   | 289 |   |
| Prepaid expenses and other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |               | 32      |             |   | 77 |   |
| Real estate and other assets, net, held for sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | $                  | 1,229   |             | $      | 5,031 |   |
| Liabilities of real estate and other assets, net, held for sale (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                  | 12      |             | $      | 12 |   |

| (1) | Included in accounts payable, accrued expenses and other liabilities. |
|-----|-----------------------------------------------------------------------|

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|                                                                                                                                                          |   | Three Months EndedMarch 31, |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|---------|
|                                                                                                                                                          |   | 2010                        |    | 2009 |   |
| Earnings per common share – basic:                                                                                                                      |   |                        |    |   |   |   |   |
| Numerator:                                                                                                                                                    |   |                        |    |   |   |   |   |
| Income from continuing operations                                                                                                                             |   | $                           | 11,894  |   | $ | 12,029 |   |
| Net (income) attributable to noncontrolling  interests in the Operating Partnership from continuing operations                                      |   |                        | (510    | ) |   | (623 | ) |
| Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations                                                   |   |                        | (214    | ) |   | (18 | ) |
| Dividends on preferred stock                                                                                                                                  |   |                        | (1,677  | ) |   | (1,677 | ) |
| Income from continuing operations available for common stockholders                                                                                           |   |                        | 9,493   |   |   | 9,711 |   |
| Income from discontinued operations                                                                                                                           |   |                        | 188     |   |   | 1,171 |   |
| Net (income) attributable to noncontrolling interests in the Operating Partnership from discontinued operations                                               |   |                        | (10     | ) |   | (71 | ) |
| Income from discontinued operations available for common stockholders                                                                                         |   |                        | 178     |   |   | 1,100 |   |
| Net income available for common stockholders                                                                                                                  |   | $                           | 9,671   |   | $ | 10,811 |   |
| Denominator:                                                                                                                                                  |   |                        |    |   |   |   |   |
| Denominator for basic earnings per Common Share – weighted average shares                                                                               |   |                        | 71,414  |   |   | 63,631 |   |
| Earnings per common share – basic:                                                                                                                      |   |                        |    |   |   |   |   |
| Income from continuing operations available for common stockholders                                                                                           |   | $                           | 0.14    |   | $ | 0.15 |   |
| Income from discontinued operations available for common stockholders                                                                                         |   |                        | — |   |   | 0.02 |   |
| Net income available for common stockholders                                                                                                                  |   | $                           | 0.14    |   | $ | 0.17 |   |
| Earnings per common share – diluted:                                                                                                                    |   |                        |    |   |   |   |   |
| Numerator:                                                                                                                                                    |   |                        |    |   |   |   |   |
| Income from continuing operations                                                                                                                             |   | $                           | 11,894  |   | $ | 12,029 |   |
| Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations                                                   |   |                        | (214    | ) |   | (18 | ) |
| Dividends on preferred stock                                                                                                                                  |   |                        | (1,677  | ) |   | (1,677 | ) |
| Income from continuing operations available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership |   |                        | 10,003  |   |   | 10,334 |   |
| Income from discontinued operations available for common stockholders                                                                                         |   |                        | 188     |   |   | 1,171 |   |
| Net income available for common stockholders before net (income) attributable to noncontrolling interests in the Operating Partnership                        |   | $                           | 10,191  |   | $ | 11,505 |   |
| Denominator:                                                                                                                                                  |   |                        |    |   |   |   |   |
| Denominator for basic earnings per Common Share –weighted average shares                                                                                |   |                        | 71,414  |   |   | 63,631 |   |
| Add:                                                                                                                                                          |   |                        |    |   |   |   |   |
| Stock options using the treasury method                                                                                                                       |   |                        | 164     |   |   | 7 |   |
| Noncontrolling interests partnership units                                                                                                                    |   |                        | 3,819   |   |   | 4,067 |   |
| Denominator for diluted earnings per Common Share – adjusted weighted average shares and assumed conversions (1)                                        |   |                        | 75,397  |   |   | 67,705 |   |
| Earnings per common share – diluted:                                                                                                                    |   |                        |    |   |   |   |   |
| Income from continuing operations available for common stockholders                                                                                           |   | $                           | 0.14    |   | $ | 0.15 |   |
| Income from discontinued operations available for common stockholders                                                                                         |   |                        | — |   |   | 0.02 |   |
| Net income available for common stockholders                                                                                                                  |   | $                           | 0.14    |   | $ | 0.17 |   |

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| (1) | Options and warrants aggregating approximately 0.7 million and 1.4 million shares were outstanding during the three months ended March 31, 2010 and 2009, respectively, but were not included in the computation of diluted earnings per share because the impact of including such shares would be anti-dilutive. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | Three Months EndedMarch 31, |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | 2010                        |    | 2009 |   |
| Rental and Other Revenues: (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                        |    |   |   |   |   |
| Office:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                        |    |   |   |   |   |
| Atlanta, GA                                                                                                                                                                                          |   | $                           | 12,133  |   | $ | 11,500 |   |
| Greenville, SC                                                                                                                                                                                       |   |                        | 3,677   |   |   | 3,638 |   |
| Kansas City, MO                                                                                                                                                                                      |   |                        | 3,708   |   |   | 3,747 |   |
| Memphis, TN                                                                                                                                                                                          |   |                        | 7,869   |   |   | 7,032 |   |
| Nashville, TN                                                                                                                                                                                        |   |                        | 15,110  |   |   | 15,175 |   |
| Orlando, FL                                                                                                                                                                                          |   |                        | 3,006   |   |   | 2,950 |   |
| Piedmont Triad, NC                                                                                                                                                                                   |   |                        | 6,425   |   |   | 6,409 |   |
| Raleigh, NC                                                                                                                                                                                          |   |                        | 18,762  |   |   | 18,212 |   |
| Richmond, VA                                                                                                                                                                                         |   |                        | 11,794  |   |   | 11,711 |   |
| Tampa, FL                                                                                                                                                                                            |   |                        | 17,943  |   |   | 16,540 |   |
| Total Office Segment                                                                                                                                                                                                               |   |                        | 100,427 |   |   | 96,914 |   |
| Industrial:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                        |    |   |   |   |   |
| Atlanta, GA                                                                                                                                                                                          |   |                        | 3,975   |   |   | 3,940 |   |
| Piedmont Triad, NC                                                                                                                                                                                   |   |                        | 3,300   |   |   | 4,375 |   |
| Total Industrial Segment                                                                                                                                                                                                           |   |                        | 7,275   |   |   | 8,315 |   |
| Retail:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                        |    |   |   |   |   |
| Kansas City, MO                                                                                                                                                                                      |   |                        | 7,692   |   |   | 7,613 |   |
| Piedmont Triad, NC                                                                                                                                                                                   |   |                        | — |   |   | 56 |   |
| Raleigh, NC                                                                                                                                                                                          |   |                        | 45      |   |   | 30 |   |
| Total Retail Segment                                                                                                                                                                                                               |   |                        | 7,737   |   |   | 7,699 |   |
| Residential:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                        |    |   |   |   |   |
| Kansas City, MO                                                                                                                                                                                      |   |                        | 379     |   |   | 292 |   |
| Total Residential Segment                                                                                                                                                                                                          |   |                        | 379     |   |   | 292 |   |
| Total Rental and Other Revenues                                                                                                          |   | $                           | 115,818 |   | $ | 113,220 |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | Three Months EndedMarch 31, |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 2010                             |    | 2009 |   |
| Net Operating Income: (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                             |    |   |   |   |   |
| Office:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                             |    |   |   |   |   |
| Atlanta, GA                                                                                                                                                                                     |   | $                                | 7,640   |   | $ | 6,978 |   |
| Greenville, SC                                                                                                                                                                                  |   |                             | 2,281   |   |   | 2,285 |   |
| Kansas City, MO                                                                                                                                                                                 |   |                             | 2,213   |   |   | 2,245 |   |
| Memphis, TN                                                                                                                                                                                     |   |                             | 5,278   |   |   | 4,019 |   |
| Nashville, TN                                                                                                                                                                                   |   |                             | 9,862   |   |   | 9,731 |   |
| Orlando, FL                                                                                                                                                                                     |   |                             | 1,614   |   |   | 1,572 |   |
| Piedmont Triad, NC                                                                                                                                                                              |   |                             | 3,847   |   |   | 4,054 |   |
| Raleigh, NC                                                                                                                                                                                     |   |                             | 12,702  |   |   | 12,112 |   |
| Richmond, VA                                                                                                                                                                                    |   |                             | 7,952   |   |   | 7,996 |   |
| Tampa, FL                                                                                                                                                                                       |   |                             | 10,821  |   |   | 9,879 |   |
| Total Office Segment                                                                                                                                                                                                          |   |                             | 64,210  |   |   | 60,871 |   |
| Industrial:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                             |    |   |   |   |   |
| Atlanta, GA                                                                                                                                                                                     |   |                             | 2,770   |   |   | 3,059 |   |
| Piedmont Triad, NC                                                                                                                                                                              |   |                             | 2,215   |   |   | 3,551 |   |
| Total Industrial Segment                                                                                                                                                                                                      |   |                             | 4,985   |   |   | 6,610 |   |
| Retail:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                             |    |   |   |   |   |
| Atlanta, GA (2)                                                                                                                                                                                 |   |                             | (5      | ) |   | (6 | ) |
| Kansas City, MO                                                                                                                                                                                 |   |                             | 4,366   |   |   | 4,850 |   |
| Piedmont Triad, NC                                                                                                                                                                              |   |                             | — |   |   | 43 |   |
| Raleigh, NC                                                                                                                                                                                     |   |                             | 16      |   |   | 2 |   |
| Total Retail Segment                                                                                                                                                                                                          |   |                             | 4,377   |   |   | 4,889 |   |
| Residential:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                             |    |   |   |   |   |
| Kansas City, MO                                                                                                                                                                                 |   |                             | 238     |   |   | 170 |   |
| Raleigh, NC (2)                                                                                                                                                                                 |   |                             | (88     | ) |   | (9 | ) |
| Total Residential Segment                                                                                                                                                                                                     |   |                             | 150     |   |   | 161 |   |
| Total Net Operating Income                                                                                                          |   |                             | 73,722  |   |   | 72,531 |   |
| Reconciliation to income from continuing operations before disposition of property and condominiums and equity in earnings of unconsolidated affiliates:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                             |    |   |   |   |   |
| Depreciation and amortization                                                                                                                                     |   |                             | (32,912 | ) |   | (32,884 | ) |
| General and administrative expense                                                                                                                                |   |                             | (8,507  | ) |   | (8,315 | ) |
| Interest expense                                                                                                                                                  |   |                             | (23,113 | ) |   | (21,976 | ) |
| Interest and other income                                                                                                                                         |   |                             | 1,700   |   |   | 1,007 |   |
| Income from continuing operations before disposition of property and condominiums and equity in earnings of unconsolidated affiliates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | $                                | 10,890  |   | $ | 10,363 |   |

| (1) | Net of discontinued operations. |
|-----|---------------------------------|

| (2) | Negative NOI with no corresponding revenues represents expensed real estate taxes and other carrying costs associated with land held for development that is currently zoned for the respective product type. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Consolidated Balance Sheets

|                                                                                                         |   | March 31,2010 |      | December 31,2009 |   |
|--------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------|-----------------------|--------|
| Assets:                                                                                                      |   |               |      |                  |   |   |
| Real estate assets, at cost:                                                                                 |   |               |      |                  |   |   |   |
| Land                                                                                                         |   | $                  | 348,955   |                  | $      | 350,537 |   |
| Buildings and tenant improvements                                                                            |   |               | 2,882,442 |                  |   | 2,880,632 |   |
| Land held for development                                                                                    |   |               | 104,148   |                  |   | 104,148 |   |
|                                                                                                         |   |               | 3,335,545 |                  |   | 3,335,317 |   |
| Less-accumulated depreciation                                                                                |   |               | (799,755  | )                     |   | (781,073 | ) |
| Net real estate assets                                                                                       |   |               | 2,535,790 |                  |   | 2,554,244 |   |
| For-sale residential condominiums                                                                            |   |               | 11,162    |                  |   | 12,933 |   |
| Real estate and other assets, net, held for sale                                                             |   |               | 1,229     |                  |   | 5,031 |   |
| Cash and cash equivalents                                                                                    |   |               | 14,324    |                  |   | 23,519 |   |
| Restricted cash                                                                                              |   |               | 6,301     |                  |   | 6,841 |   |
| Accounts receivable, net of allowance of $4,061 and $2,810, respectively                                     |   |               | 22,792    |                  |   | 21,069 |   |
| Notes receivable, net of allowance of $732 and $698, respectively                                            |   |               | 3,084     |                  |   | 3,143 |   |
| Accrued straight-line rents receivable, net of allowance of $2,523 and $2,443, respectively                  |   |               | 83,927    |                  |   | 82,600 |   |
| Investment in unconsolidated affiliates                                                                      |   |               | 64,605    |                  |   | 64,894 |   |
| Deferred financing and leasing costs, net of accumulated amortization of $54,314 and $52,129, respectively   |   |               | 72,534    |                  |   | 73,517 |   |
| Prepaid expenses and other assets                                                                            |   |               | 38,390    |                  |   | 37,947 |   |
| Total Assets                                                                                                 |   | $                  | 2,854,138 |                  | $      | 2,885,738 |   |
|                                                                                                         |   |               |      |                  |   |   |   |
| Liabilities, Redeemable Operating Partnership Units and Equity:                                              |   |               |      |                  |   |   |   |
| Mortgages and notes payable                                                                                  |   | $                  | 1,466,441 |                  | $      | 1,469,155 |   |
| Accounts payable, accrued expenses and other liabilities                                                     |   |               | 110,516   |                  |   | 117,331 |   |
| Financing obligations                                                                                        |   |               | 33,574    |                  |   | 37,706 |   |
| Total Liabilities                                                                                            |   |               | 1,610,531 |                  |   | 1,624,192 |   |
| Commitments and contingencies                                                                                |   |               |      |                  |   |   |   |
| Redeemable Operating Partnership Units:                                                                      |   |               |      |                  |   |   |   |
| Common Units, 3,798,150 and 3,891,121 outstanding, respectively                                              |   |               | 120,515   |                  |   | 129,769 |   |
| Series A Preferred Units (liquidation preference $1,000 per unit), 29,092 shares issued and outstanding |   |               | 29,092    |                  |   | 29,092 |   |
| Series B Preferred Units (liquidation preference $25 per unit), 2,100,000 shares issued and outstanding      |   |               | 52,500    |                  |   | 52,500 |   |
| Total Redeemable Operating Partnership Units                                                                 |   |               | 202,107   |                  |   | 211,361 |   |
| Equity:                                                                                                      |   |               |      |                  |   |   |   |
| Common Units:                                                                                                |   |               |      |                  |   |   |   |
| General partner Common Units, 749,914 and 747,676 outstanding, respectively                                  |   |               | 10,394    |                  |   | 10,485 |   |
| Limited partner Common Units, 70,443,334 and 70,128,818 outstanding, respectively                            |   |               | 1,029,266 |                  |   | 1,038,328 |   |
| Accumulated other comprehensive loss                                                                         |   |               | (3,353    | )                     |   | (3,811 | ) |
| Noncontrolling interests in consolidated affiliates                                                          |   |               | 5,193     |                  |   | 5,183 |   |
| Total Equity                                                                                                 |   |               | 1,041,500 |                  |   | 1,050,185 |   |
| Total Liabilities, Redeemable Operating Partnership Units and Equity                                         |   | $                  | 2,854,138 |                  | $      | 2,885,738 |   |

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Consolidated Statements of Income

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | Three Months EndedMarch 31, |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 2010                             |    | 2009 |   |
| Rental and other revenues                                                                                                                               |   | $                                | 115,818 |   | $ | 113,220 |   |
| Operating expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                             |    |   |   |   |   |
| Rental property and other expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                             | 41,776  |   |   | 40,533 |   |
| Depreciation and amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                             | 32,912  |   |   | 32,884 |   |
| General and administrative                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                             | 8,827   |   |   | 8,471 |   |
| Total operating expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                             | 83,515  |   |   | 81,888 |   |
| Interest expense:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                             |    |   |   |   |   |
| Contractual                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                             | 21,802  |   |   | 20,579 |   |
| Amortization of deferred financing costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                             | 835     |   |   | 662 |   |
| Financing obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                             | 476     |   |   | 735 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                             | 23,113  |   |   | 21,976 |   |
| Other income:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                             |    |   |   |   |   |
| Interest and other income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                             | 1,700   |   |   | 1,007 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                             | 1,700   |   |   | 1,007 |   |
| Income from continuing operations before disposition of property and condominiums and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                             |    |   |   |   |   |
| equity in earnings of unconsolidated affiliates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                             | 10,890  |   |   | 10,363 |   |
| Gains on disposition of property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                             | 19      |   |   | 19 |   |
| Gains on for-sale residential condominiums                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                             | 190     |   |   | 347 |   |
| Equity in earnings of unconsolidated affiliates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                             | 801     |   |   | 1,263 |   |
| Income from continuing operations                                                                                                                       |   |                             | 11,900  |   |   | 11,992 |   |
| Discontinued operations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                             |    |   |   |   |   |
| Income from discontinued operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                             | 14      |   |   | 1,098 |   |
| Net gains on disposition of discontinued operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                             | 174     |   |   | 73 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                             | 188     |   |   | 1,171 |   |
| Net income                                                                                                                                              |   |                             | 12,088  |   |   | 13,163 |   |
| Net (income) attributable to noncontrolling interests in consolidated affiliates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                             | (214    | ) |   | (18 | ) |
| Distributions on preferred units                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                             | (1,677  | ) |   | (1,677 | ) |
| Net income available for common unitholders                                                                                                             |   | $                                | 10,197  |   | $ | 11,468 |   |
| Earnings per common unit - basic:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                             |    |   |   |   |   |
| Income from continuing operations available for common unitholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | $                                | 0.14    |   | $ | 0.15 |   |
| Income from discontinued operations available for common unitholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                             | — |   |   | 0.02 |   |
| Net income available for common unitholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                                | 0.14    |   | $ | 0.17 |   |
| Weighted average common units outstanding - basic                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                             | 74,824  |   |   | 67,289 |   |
| Earnings per common unit - diluted:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                             |    |   |   |   |   |
| Income from continuing operations available for common unitholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | $                                | 0.14    |   | $ | 0.15 |   |
| Income from discontinued operations available for common unitholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                             | — |   |   | 0.02 |   |
| Net income available for common unitholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                                | 0.14    |   | $ | 0.17 |   |
| Weighted average common units outstanding - diluted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                             | 74,988  |   |   | 67,296 |   |
| Distributions declared and paid per common unit                                                                                                         |   | $                                | 0.425   |   | $ | 0.425 |   |
| Net income available for common unitholders:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                             |    |   |   |   |   |
| Income from continuing operations available for common unitholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | $                                | 10,009  |   | $ | 10,297 |   |
| Income from discontinued operations available for common unitholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                             | 188     |   |   | 1,171 |   |
| Net income available for common unitholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                                | 10,197  |   | $ | 11,468 |   |

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Consolidated Statements of Capital

|                                                                                                            |   | Common Units   |    |           |   |                              |   |                                             |    |         |
|-----------------------------------------------------------------------------------------------------------------|--------|----------------|---------|----------------|--------|-----------------------------------|--------|--------------------------------------------------|---------|--------------|
|                                                                                                            |   | GeneralPartner |    | LimitedPartner |   | AccumulatedOtherComprehensiveLoss |   | NoncontrollingInterests inConsolidatedAffiliates |    | TotalCapital |   |
| Balance at December 31, 2009                                                                                    |   | $              | 10,485  |           | $      | 1,038,328                         |   | $                                                | (3,811  | )            | $ | 5,183 |   | $ | 1,050,185 |   |
| Issuance of Common Units, net                                                                                   |   |           | 11      |           |   | 1,131                             |   |                                             | — |         |   | — |   |   | 1,142 |   |
| Distributions on Common Units                                                                                   |   |           | (317    | )              |   | (31,446                           | )      |                                             | — |         |   | — |   |   | (31,763 | ) |
| Distributions on Preferred Units                                                                                |   |           | (17     | )              |   | (1,660                            | )      |                                             | — |         |   | — |   |   | (1,677 | ) |
| Share-based compensation expense                                                                                |   |           | 21      |           |   | 2,034                             |   |                                             | — |         |   | — |   |   | 2,055 |   |
| Distribution to noncontrolling interests in consolidated affiliates                                             |   |           | — |           |   | —                           |   |                                             | — |         |   | (204 | ) |   | (204 | ) |
| Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner |   |           | 92      |           |   | 9,124                             |   |                                             | — |         |   | — |   |   | 9,216 |   |
| Net (income) attributable to noncontrolling interests in consolidated affiliates                                |   |           | (2      | )              |   | (212                              | )      |                                             | — |         |   | 214 |   |   | — |   |
| Comprehensive income:                                                                                           |   |           |    |           |   |                              |   |                                             |    |         |   |   |   |   |   |   |
| Net income                                                                                                      |   |           | 121     |           |   | 11,967                            |   |                                             | — |         |   | — |   |   | 12,088 |   |
| Other comprehensive income                                                                                      |   |           | — |           |   | —                           |   |                                             | 458     |         |   | — |   |   | 458 |   |
| Total comprehensive income                                                                                      |   |           |    |           |   |                              |   |                                             |    |         |   |   |   |   | 12,546 |   |
| Balance at March 31, 2010                                                                             |   | $              | 10,394  |           | $      | 1,029,266                         |   | $                                                | (3,353  | )            | $ | 5,193 |   | $ | 1,041,500 |   |

|                                                                                                            |   | Common Units   |    |           |   |                              |   |                                             |    |         |
|-----------------------------------------------------------------------------------------------------------------|--------|----------------|---------|----------------|--------|-----------------------------------|--------|--------------------------------------------------|---------|--------------|
|                                                                                                            |   | GeneralPartner |    | LimitedPartner |   | AccumulatedOtherComprehensiveLoss |   | NoncontrollingInterests inConsolidatedAffiliates |    | TotalCapital |   |
| Balance at December 31, 2008                                                                                    |   | $              | 9,759   |           | $      | 966,378                           |   | $                                                | (4,792  | )            | $ | 6,176 |   | $ | 977,521 |   |
| Issuance of Common Units, net                                                                                   |   |           | (9      | )              |   | (886                              | )      |                                             | — |         |   | — |   |   | (895 | ) |
| Distributions on Common Units                                                                                   |   |           | (285    | )              |   | (28,223                           | )      |                                             | — |         |   | — |   |   | (28,508 | ) |
| Distributions on Preferred Units                                                                                |   |           | (17     | )              |   | (1,660                            | )      |                                             | — |         |   | — |   |   | (1,677 | ) |
| Share-based compensation expense                                                                                |   |           | 18      |           |   | 1,824                             |   |                                             | — |         |   | — |   |   | 1,842 |   |
| Distribution to noncontrolling interests in consolidated affiliates                                             |   |           | — |           |   | —                           |   |                                             | — |         |   | (4 | ) |   | (4 | ) |
| Adjustment of Redeemable Common Units to fair value and contributions/distributions from/to the General Partner |   |           | 240     |           |   | 23,783                            |   |                                             | — |         |   | — |   |   | 24,023 |   |
| Net (income) attributable to noncontrolling interests  in consolidated affiliates                     |   |           | — |           |   | (18                               | )      |                                             | — |         |   | 18 |   |   | — |   |
| Comprehensive income:                                                                                           |   |           |    |           |   |                              |   |                                             |    |         |   |   |   |   |   |   |
| Net income                                                                                                      |   |           | 131     |           |   | 13,032                            |   |                                             | — |         |   | — |   |   | 13,163 |   |
| Other comprehensive income                                                                                      |   |           | — |           |   | —                           |   |                                             | 94      |         |   | — |   |   | 94 |   |
| Total comprehensive income                                                                                      |   |           |    |           |   |                              |   |                                             |    |         |   |   |   |   | 13,257 |   |
| Balance at March 31, 2009                                                                             |   | $              | 9,837   |           | $      | 974,230                           |   | $                                                | (4,698  | )            | $ | 6,190 |   | $ | 985,559 |   |

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Consolidated Statements of Cash Flows

|                                                                              |   | Three Months Ended March 31, |    |
|-----------------------------------------------------------------------------------|--------|-----------------------------------|---------|
|                                                                              |   | 2010                              |    | 2009 |   |
| Operating activities:                                                             |   |                              |    |   |   |   |   |
| Net income                                                                        |   | $                                 | 12,088  |   | $ | 13,163 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |                              |    |   |   |   |   |
| Depreciation and amortization                                                     |   |                              | 32,912  |   |   | 33,424 |   |
| Amortization of lease incentives                                                  |   |                              | 261     |   |   | 298 |   |
| Share-based compensation expense                                                  |   |                              | 2,055   |   |   | 1,842 |   |
| Additions to allowance for doubtful accounts                                      |   |                              | 1,331   |   |   | 1,015 |   |
| Amortization of deferred financing costs                                          |   |                              | 835     |   |   | 662 |   |
| Amortization of past cash-flow hedges                                             |   |                              | 239     |   |   | (70 | ) |
| Gains on disposition of property                                                  |   |                              | (193    | ) |   | (92 | ) |
| Gains on disposition of for-sale residential condominiums                         |   |                              | (190    | ) |   | (347 | ) |
| Equity in earnings of unconsolidated affiliates                                   |   |                              | (801    | ) |   | (1,263 | ) |
| Changes in financing obligations                                                  |   |                              | 52      |   |   | 335 |   |
| Distributions of earnings from unconsolidated affiliates                          |   |                              | 657     |   |   | 1,253 |   |
| Changes in operating assets and liabilities:                                      |   |                              |    |   |   |   |   |
| Accounts receivable                                                               |   |                              | (3,928  | ) |   | 3,693 |   |
| Prepaid expenses and other assets                                                 |   |                              | (456    | ) |   | 209 |   |
| Accrued straight-line rents receivable                                            |   |                              | (1,407  | ) |   | (1,726 | ) |
| Accounts payable, accrued expenses and other liabilities                          |   |                              | (3,675  | ) |   | (6,729 | ) |
| Net cash provided by operating activities                                         |   |                              | 39,780  |   |   | 45,667 |   |
| Investing activities:                                                             |   |                              |    |   |   |   |   |
| Additions to real estate assets and deferred leasing costs                        |   |                              | (16,814 | ) |   | (36,923 | ) |
| Net proceeds from disposition of real estate assets                               |   |                              | — |   |   | 195 |   |
| Net proceeds from disposition of for-sale residential condominiums                |   |                              | 1,943   |   |   | 3,180 |   |
| Distributions of capital from unconsolidated affiliates                           |   |                              | 730     |   |   | 594 |   |
| Net repayments of notes receivable                                                |   |                              | 59      |   |   | 155 |   |
| Contributions to unconsolidated affiliates                                        |   |                              | (36     | ) |   | (500 | ) |
| Changes in restricted cash and other investing activities                         |   |                              | 596     |   |   | (1,540 | ) |
| Net cash used in investing activities                                             |   |                              | (13,522 | ) |   | (34,839 | ) |
| Financing activities:                                                             |   |                              |    |   |   |   |   |
| Distributions on Common Units                                                     |   |                              | (31,763 | ) |   | (28,508 | ) |
| Distributions on Preferred Units                                                  |   |                              | (1,677  | ) |   | (1,677 | ) |
| Distributions to noncontrolling interests in consolidated affiliates              |   |                              | (204    | ) |   | (4 | ) |
| Net proceeds from the issuance of Common Units                                    |   |                              | 1,142   |   |   | (895 | ) |
| Borrowings on revolving credit facility                                           |   |                              | 4,000   |   |   | 91,000 |   |
| Repayments of revolving credit facility                                           |   |                              | (4,000  | ) |   | (57,000 | ) |
| Borrowings on mortgages and notes payable                                         |   |                              | — |   |   | 36,551 |   |
| Repayments of mortgages and notes payable                                         |   |                              | (2,725  | ) |   | (55,964 | ) |
| Additions to deferred financing costs                                             |   |                              | (226    | ) |   | (247 | ) |
| Net cash used in financing activities                                             |   |                              | (35,453 | ) |   | (16,744 | ) |
| Net decrease in cash and cash equivalents                                         |   |                              | (9,195  | ) |   | (5,916 | ) |
| Cash and cash equivalents at beginning of the period                              |   |                              | 23,519  |   |   | 13,649 |   |
| Cash and cash equivalents at end of the period                                    |   | $                                 | 14,324  |   | $ | 7,733 |   |

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|                                                                                                                                                                     |   | Three Months EndedMarch 31, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|--------|
|                                                                                                                                                                     |   | 2010                             |   | 2009 |   |
| Cash paid for interest, net of amounts capitalized (excludes cash distributions to owners of sold properties accounted for as financings of $126 and $110, respectively) |   | $                                | 23,541 |   | $ | 24,695 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | Three Months EndedMarch 31, |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | 2010                             |    | 2009 |   |
| Unrealized gains on cash-flow hedges                                                                                                                     |   | $                                | — |   | $ | 198 |   |
| Changes in accrued capital expenditures                                                                                                                  |   | $                                | (3,456  | ) | $ | (5,807 | ) |
| Write-off of fully depreciated real estate assets                                                                                                        |   | $                                | 10,194  |   | $ | 7,966 |   |
| Write-off of fully amortized deferred financing and leasing costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | $                                | 2,652   |   | $ | 2,842 |   |
| Settlement of financing obligation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | $                                | 4,184   |   | $ | — |   |
| Unrealized gains/(losses) on marketable securities held in our non-qualified deferred compensation plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                                | 204     |   | $ | (351 | ) |
| Adjustment of Redeemable Common Units to fair value                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $                                | (9,254  | ) | $ | (24,159 | ) |
| Unrealized gain/(loss) on tax increment financing bond                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $                                | 219     |   | $ | (34 | ) |

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Notes To Consolidated Financial Statements

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|                                                |   | Three Months EndedMarch 31, |   |
|-----------------------------------------------------|--------|-----------------------------|--------|
|                                                |   | 2010                        |   | 2009 |   |
| Income Statements:                                  |   |                        |   |   |   |   |   |
| Revenues                                            |   | $                           | 34,569 |   | $ | 37,493 |   |
| Expenses:                                           |   |                        |   |   |   |   |   |
| Rental property and other expenses                  |   |                        | 16,527 |   |   | 18,100 |   |
| Depreciation and amortization                       |   |                        | 9,231  |   |   | 8,454 |   |
| Interest expense                                    |   |                        | 8,367  |   |   | 8,762 |   |
| Total expenses                                      |   |                        | 34,125 |   |   | 35,316 |   |
| Income before disposition of property               |   | $                           | 444    |   | $ | 2,177 |   |
| Our share of:                                       |   |                        |   |   |   |   |   |
| Net income (1)                                      |   | $                           | 801    |   | $ | 1,263 |   |
| Depreciation and amortization of real estate assets |   | $                           | 3,302  |   | $ | 3,204 |   |
| Interest expense                                    |   | $                           | 3,398  |   | $ | 3,551 |   |

| (1) | Our share of net income differs from our weighted average ownership percentage in the joint ventures’ net income due to our purchase accounting and other adjustments related primarily to management and leasing fees. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | March 31,2010 |    | December 31,2009 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|------------------|--------|
| Deferred financing costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $                  | 16,917  |             | $      | 16,811 |   |
| Less accumulated amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |               | (5,311  | )                |   | (4,549 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               | 11,606  |             |   | 12,262 |   |
| Deferred leasing costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |               | 109,931 |             |   | 108,835 |   |
| Less accumulated amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |               | (49,003 | )                |   | (47,580 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               | 60,928  |             |   | 61,255 |   |
| Deferred financing and leasing costs, net                                                                                               |   | $                  | 72,534  |             | $      | 73,517 |   |

|                                                                               |   | Three Months EndedMarch 31, |   |
|------------------------------------------------------------------------------------|--------|----------------------------------|--------|
|                                                                               |   | 2010                             |   | 2009 |   |
| Amortization of deferred financing costs                                           |   | $                                | 835    |   | $ | 662 |   |
| Amortization of deferred leasing costs (included in depreciation and amortization) |   | $                                | 3,766  |   | $ | 3,866 |   |
| Amortization of lease incentives (included in rental and other revenues)           |   | $                                | 261    |   | $ | 298 |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |   |   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
|   | March 31, 2010 through December 31, 2010                                                                                                 |   | $      | 13,466 |   |   |   |   |
|   | 2011                                                                                                                                                         |   |   | 15,371 |   |   |   |   |
|   | 2012                                                                                                                                                         |   |   | 12,705 |   |   |   |   |
|   | 2013                                                                                                                                                         |   |   | 8,955  |   |   |   |   |
|   | 2014                                                                                                                                                         |   |   | 6,480  |   |   |   |   |
|   | Thereafter                                                                                                                                                   |   |   | 15,557 |   |   |   |   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $      | 72,534 |   |   |   |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | March 31,2010 |      | December 31,2009 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------|------------------|--------|
| Secured mortgage loans                                                                                                       |   | $                  | 717,984   |             | $      | 720,727 |   |
| Unsecured loans                                                                                                              |   |               | 748,457   |             |   | 748,428 |   |
| Total                                                                                                                                                      |   | $                  | 1,466,441 |             | $      | 1,469,155 |   |

|                                                                                      |   | Three Months EndedMarch 31, |    |
|-------------------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                                      |   | 2010                             |    | 2009 |   |
| Derivatives Designated as Cash-flow Hedges:                                               |   |                             |    |   |   |   |   |
| Amount of unrealized gain recognized in AOCL on derivatives (effective portion):          |   |                             |    |   |   |   |   |
| Interest rate swaps                                                                       |   | $                                | — |   | $ | 198 |   |
|                                                                                      |   |                             |    |   |   |   |   |
| Amount of loss/(gain) reclassified out of AOCL into interest expense (effective portion): |   |                             |    |   |   |   |   |
| Interest rate swaps                                                                       |   | $                                | 239     |   | $ | (70 | ) |

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|                                                                                |   |               |   | Level 1                                           |   | Level 3                       |   |
|-------------------------------------------------------------------------------------|--------|--------------------|--------|---------------------------------------------------|--------|-------------------------------|--------|
|                                                                                |   | March 31,2010 |   | Quoted Prices inActive Marketsfor IdenticalAssets |   | SignificantUnobservableInputs |   |
| Assets:                                                                             |   |               |   |                                              |   |                          |   |   |   |   |
| Marketable securities (in prepaid expenses and other assets)                        |   | $                  | 3,879  |                                              | $      | 3,879                         |   | $ | — |   |
| Tax increment financing bond (in prepaid expenses and other assets)                 |   |               | 17,090 |                                              |   | —                       |   |   | 17,090 |   |
| Total Assets                                                                        |   | $                  | 20,969 |                                              | $      | 3,879                         |   | $ | 17,090 |   |
|                                                                                |   |               |   |                                              |   |                          |   |   |   |   |
| Liabilities:                                                                        |   |               |   |                                              |   |                          |   |   |   |   |
| Deferred compensation (in accounts payable, accrued expenses and other liabilities) |   | $                  | 4,459  |                                              | $      | 4,459                         |   | $ | — |   |
| SF-Harborview Plaza, LP financing obligation                                        |   |               | 12,396 |                                              |   | —                       |   |   | 12,396 |   |
| Total Liabilities                                                                   |   | $                  | 16,855 |                                              | $      | 4,459                         |   | $ | 12,396 |   |

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|                                                                                |   |                  |   | Level 1                                           |   | Level 3                       |   |
|-------------------------------------------------------------------------------------|--------|-----------------------|--------|---------------------------------------------------|--------|-------------------------------|--------|
|                                                                                |   | December 31,2009 |   | Quoted Prices inActive Marketsfor IdenticalAssets |   | SignificantUnobservableInputs |   |
| Assets:                                                                             |   |                  |   |                                              |   |                          |   |   |   |   |
| Marketable securities (in prepaid expenses and other assets)                        |   | $                     | 6,135  |                                              | $      | 6,135                         |   | $ | — |   |
| Tax increment financing bond (in prepaid expenses and other assets)                 |   |                  | 16,871 |                                              |   | —                       |   |   | 16,871 |   |
| Impaired real estate assets                                                         |   |                  | 32,000 |                                              |   | —                       |   |   | 32,000 |   |
| Total Assets                                                                        |   | $                     | 55,006 |                                              | $      | 6,135                         |   | $ | 48,871 |   |
|                                                                                |   |                  |   |                                              |   |                          |   |   |   |   |
| Liabilities:                                                                        |   |                  |   |                                              |   |                          |   |   |   |   |
| Deferred compensation (in accounts payable, accrued expenses and other liabilities) |   | $                     | 6,898  |                                              | $      | 6,898                         |   | $ | — |   |
| SF-Harborview Plaza, LP financing obligation                                        |   |                  | 12,230 |                                              |   | —                       |   |   | 12,230 |   |
| Total Liabilities                                                                   |   | $                     | 19,128 |                                              | $      | 6,898                         |   | $ | 12,230 |   |

|                                           |   | Three Months EndedMarch 31, |   |
|------------------------------------------------|--------|----------------------------------|--------|
|                                           |   | 2010                             |   | 2009 |   |
| Asset:                                         |   |                             |   |   |   |   |   |
| Tax Increment Financing Bond                   |   |                             |   |   |   |   |   |
| Beginning balance                              |   | $                                | 16,871 |   | $ | 17,468 |   |
| Unrealized gain (in AOCL)                      |   |                             | 219    |   |   | (34 | ) |
| Ending balance                                 |   | $                                | 17,090 |   | $ | 17,434 |   |
|                                           |   |                             |   |   |   |   |   |
| Liability:                                     |   |                             |   |   |   |   |   |
| SF-Harborview Plaza, LP Financing Obligation   |   |                             |   |   |   |   |   |
| Beginning balance - gross financing obligation |   | $                                | 12,718 |   | $ | 13,879 |   |
| Principal repayments                           |   |                             | (126   | ) |   | (110 | ) |
| Interest expense on financing obligation       |   |                             | 166    |   |   | 440 |   |
| Unrealized loss                                |   |                             | (40    | ) |   | (880 | ) |
| Ending balance - gross financing obligation    |   |                             | 12,718 |   |   | 13,329 |   |
| Valuation allowance, net                       |   |                             | 4,279  |   |   | 3,605 |   |
| Net financing obligation                       |   | $                                | 16,997 |   | $ | 16,934 |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | CarryingAmount |      | Fair Value |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|-----------|------------|--------|
| March 31, 2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |           |      |       |   |   |   |
| Cash and cash equivalents                                                                                                     |   | $              | 14,324    |       | $      | 14,324 |   |
| Restricted cash                                                                                                               |   | $              | 6,301     |       | $      | 6,301 |   |
| Accounts and notes receivable                                                                                                 |   | $              | 25,876    |       | $      | 25,876 |   |
| Marketable securities (in prepaid expenses and other assets)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | $              | 3,879     |       | $      | 3,879 |   |
| Tax increment financing bond (in prepaid expenses and other assets)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | $              | 17,090    |       | $      | 17,090 |   |
| Mortgages and notes payable                                                                                                   |   | $              | 1,466,441 |       | $      | 1,486,103 |   |
| Financing obligations                                                                                                         |   | $              | 33,574    |       | $      | 27,326 |   |
| Deferred compensation (in accounts payable, accrued expenses and other liabilities)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | $              | 4,459     |       | $      | 4,459 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |           |      |       |   |   |   |
| December 31, 2009                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |           |      |       |   |   |   |
| Cash and cash equivalents                                                                                                     |   | $              | 23,519    |       | $      | 23,519 |   |
| Restricted cash                                                                                                               |   | $              | 6,841     |       | $      | 6,841 |   |
| Accounts and notes receivable                                                                                                 |   | $              | 24,212    |       | $      | 24,212 |   |
| Marketable securities (in prepaid expenses and other assets)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | $              | 6,135     |       | $      | 6,135 |   |
| Tax increment financing bond (in prepaid expenses and other assets)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | $              | 16,871    |       | $      | 16,871 |   |
| Mortgages and notes payable                                                                                                   |   | $              | 1,469,155 |       | $      | 1,440,317 |   |
| Financing obligations                                                                                                         |   | $              | 37,706    |       | $      | 31,664 |   |
| Deferred compensation (in accounts payable, accrued expenses and other liabilities)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | $              | 6,898     |       | $      | 6,898 |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | Three Months EndedMarch 31, |    |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 2010                        |    | 2009 |   |
| Net income                                                                                                          |   | $                           | 12,088  |   | $ | 13,163 |   |
| Other comprehensive income:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                        |    |   |   |   |   |
| Unrealized gain/(loss) on tax increment financing bond                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                        | 219     |   |   | (34 | ) |
| Unrealized gains on cash-flow hedges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                        | — |   |   | 198 |   |
| Amortization of past cash-flow hedges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                        | 239     |   |   | (70 | ) |
| Total other comprehensive income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                        | 458     |   |   | 94 |   |
| Total comprehensive income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | $                           | 12,546  |   | $ | 13,257 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | March 31,2010 |   | December 31,2009 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|--------|------------------|--------|
| Tax increment financing bond                                                                                                       |   | $                  | 2,147  |             | $      | 2,366 |   |
| Past cash-flow hedges                                                                                                              |   |               | 1,206  |             |   | 1,445 |   |
| Total accumulated other comprehensive loss                                                                                                                       |   | $                  | 3,353  |             | $      | 3,811 |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | Three Months EndedMarch 31, |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 2010                        |    | 2009 |   |
| Rental and other revenues                                                                                                                |   | $                           | 15      |   | $ | 2,744 |   |
| Operating expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                        |    |   |   |   |   |
| Rental property and other expenses                                                                                                                                     |   |                        | 1       |   |   | 1,106 |   |
| Depreciation and amortization                                                                                                                                          |   |                        | — |   |   | 540 |   |
| Total operating expenses                                                                                                                                                                             |   |                        | 1       |   |   | 1,646 |   |
| Income before gains on disposition of discontinued operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                        | 14      |   |   | 1,098 |   |
| Net gains on disposition of discontinued operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                        | 174     |   |   | 73 |   |
| Total discontinued operations                                                                                                            |   | $                           | 188     |   | $ | 1,171 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | March 31,2010 |    | December 31,2009 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|------------------|--------|
| Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |               |    |             |   |   |   |
| Land                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | $                  | — |             | $      | 867 |   |
| Buildings and tenant improvements                                                                                                  |   |               | — |             |   | 3,876 |   |
| Land held for development                                                                                                          |   |               | 1,197   |             |   | 1,197 |   |
| Accumulated depreciation                                                                                                           |   |               | — |             |   | (1,484 | ) |
| Net real estate assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |               | 1,197   |             |   | 4,456 |   |
| Deferred leasing costs, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |               | — |             |   | 209 |   |
| Accrued straight line rents receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |               | — |             |   | 289 |   |
| Prepaid expenses and other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |               | 32      |             |   | 77 |   |
| Real estate and other assets, net, held for sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | $                  | 1,229   |             | $      | 5,031 |   |
| Liabilities of real estate and other assets, net, held for sale (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                  | 12      |             | $      | 12 |   |

| (1) | Included in accounts payable, accrued expenses and other liabilities. |
|-----|-----------------------------------------------------------------------|

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|                                                                                                                 |   | Three Months EndedMarch 31, |    |
|----------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|---------|
|                                                                                                                 |   | 2010                        |    | 2009 |   |
| Earnings per common unit - basic:                                                                                    |   |                        |    |   |   |   |   |
| Numerator:                                                                                                           |   |                        |    |   |   |   |   |
| Income from continuing operations                                                                                    |   | $                           | 11,900  |   | $ | 11,992 |   |
| Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations          |   |                        | (214    | ) |   | (18 | ) |
| Distributions on preferred units                                                                                     |   |                        | (1,677  | ) |   | (1,677 | ) |
| Income from continuing operations available for common unitholders                                                   |   |                        | 10,009  |   |   | 10,297 |   |
| Income from discontinued operations available for common unitholders                                                 |   |                        | 188     |   |   | 1,171 |   |
| Net income available for common unitholders                                                                          |   | $                           | 10,197  |   | $ | 11,468 |   |
| Denominator:                                                                                                         |   |                        |    |   |   |   |   |
| Denominator for basic earnings per Common Unit – weighted average units                                        |   |                        | 74,824  |   |   | 67,289 |   |
| Earnings per common unit - basic:                                                                                    |   |                        |    |   |   |   |   |
| Income from continuing operations available for common unitholders                                                   |   | $                           | 0.14    |   | $ | 0.15 |   |
| Income from discontinued operations available for common unitholders                                                 |   |                        | — |   |   | 0.02 |   |
| Net income available for common unitholders                                                                          |   | $                           | 0.14    |   | $ | 0.17 |   |
| Earnings per common unit - diluted:                                                                                  |   |                        |    |   |   |   |   |
| Numerator:                                                                                                           |   |                        |    |   |   |   |   |
| Income from continuing operations                                                                                    |   | $                           | 11,900  |   | $ | 11,992 |   |
| Net (income) attributable to noncontrolling interests in consolidated affiliates from continuing operations          |   |                        | (214    | ) |   | (18 | ) |
| Distributions on preferred units                                                                                     |   |                        | (1,677  | ) |   | (1,677 | ) |
| Income from continuing operations available for common unitholders                                                   |   |                        | 10,009  |   |   | 10,297 |   |
| Income from discontinued operations available for common unitholders                                                 |   |                        | 188     |   |   | 1,171 |   |
| Net income available for common unitholders                                                                          |   | $                           | 10,197  |   | $ | 11,468 |   |
| Denominator:                                                                                                         |   |                        |    |   |   |   |   |
| Denominator for basic earnings per Common Unit –weighted average units                                         |   |                        | 74,824  |   |   | 67,289 |   |
| Add:                                                                                                                 |   |                        |    |   |   |   |   |
| Stock options using the treasury method                                                                              |   |                        | 164     |   |   | 7 |   |
| Denominator for diluted earnings per Common Unit – adjusted weighted average units and assumed conversions (1) |   |                        | 74,988  |   |   | 67,296 |   |
| Earnings per common unit - diluted:                                                                                  |   |                        |    |   |   |   |   |
| Income from continuing operations available for common unitholders                                                   |   | $                           | 0.14    |   | $ | 0.15 |   |
| Income from discontinued operations available for common unitholders                                                 |   |                        | — |   |   | 0.02 |   |
| Net income available for common unitholders                                                                          |   | $                           | 0.14    |   | $ | 0.17 |   |

| (1) | Options and warrants aggregating approximately 0.7 million and 1.4 million shares were outstanding during the three months ended March 31, 2010 and 2009, respectively, but were not included in the computation of diluted earnings per share because the impact of including such shares would be anti-dilutive. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | Three Months EndedMarch 31, |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | 2010                        |    | 2009 |   |
| Rental and Other Revenues: (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                        |    |   |   |   |   |
| Office:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                        |    |   |   |   |   |
| Atlanta, GA                                                                                                                                                                                          |   | $                           | 12,133  |   | $ | 11,500 |   |
| Greenville, SC                                                                                                                                                                                       |   |                        | 3,677   |   |   | 3,638 |   |
| Kansas City, MO                                                                                                                                                                                      |   |                        | 3,708   |   |   | 3,747 |   |
| Memphis, TN                                                                                                                                                                                          |   |                        | 7,869   |   |   | 7,032 |   |
| Nashville, TN                                                                                                                                                                                        |   |                        | 15,110  |   |   | 15,175 |   |
| Orlando, FL                                                                                                                                                                                          |   |                        | 3,006   |   |   | 2,950 |   |
| Piedmont Triad, NC                                                                                                                                                                                   |   |                        | 6,425   |   |   | 6,409 |   |
| Raleigh, NC                                                                                                                                                                                          |   |                        | 18,762  |   |   | 18,212 |   |
| Richmond, VA                                                                                                                                                                                         |   |                        | 11,794  |   |   | 11,711 |   |
| Tampa, FL                                                                                                                                                                                            |   |                        | 17,943  |   |   | 16,540 |   |
| Total Office Segment                                                                                                                                                                                                               |   |                        | 100,427 |   |   | 96,914 |   |
| Industrial:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                        |    |   |   |   |   |
| Atlanta, GA                                                                                                                                                                                          |   |                        | 3,975   |   |   | 3,940 |   |
| Piedmont Triad, NC                                                                                                                                                                                   |   |                        | 3,300   |   |   | 4,375 |   |
| Total Industrial Segment                                                                                                                                                                                                           |   |                        | 7,275   |   |   | 8,315 |   |
| Retail:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                        |    |   |   |   |   |
| Kansas City, MO                                                                                                                                                                                      |   |                        | 7,692   |   |   | 7,613 |   |
| Piedmont Triad, NC                                                                                                                                                                                   |   |                        | — |   |   | 56 |   |
| Raleigh, NC                                                                                                                                                                                          |   |                        | 45      |   |   | 30 |   |
| Total Retail Segment                                                                                                                                                                                                               |   |                        | 7,737   |   |   | 7,699 |   |
| Residential:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                        |    |   |   |   |   |
| Kansas City, MO                                                                                                                                                                                      |   |                        | 379     |   |   | 292 |   |
| Total Residential Segment                                                                                                                                                                                                          |   |                        | 379     |   |   | 292 |   |
| Total Rental and Other Revenues                                                                                                          |   | $                           | 115,818 |   | $ | 113,220 |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | Three Months EndedMarch 31, |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 2010                             |    | 2009 |   |
| Net Operating Income: (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                             |    |   |   |   |   |
| Office:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                             |    |   |   |   |   |
| Atlanta, GA                                                                                                                                                                                     |   | $                                | 7,673   |   | $ | 6,993 |   |
| Greenville, SC                                                                                                                                                                                  |   |                             | 2,291   |   |   | 2,290 |   |
| Kansas City, MO                                                                                                                                                                                 |   |                             | 2,223   |   |   | 2,250 |   |
| Memphis, TN                                                                                                                                                                                     |   |                             | 5,301   |   |   | 4,028 |   |
| Nashville, TN                                                                                                                                                                                   |   |                             | 9,905   |   |   | 9,752 |   |
| Orlando, FL                                                                                                                                                                                     |   |                             | 1,621   |   |   | 1,575 |   |
| Piedmont Triad, NC                                                                                                                                                                              |   |                             | 3,864   |   |   | 4,063 |   |
| Raleigh, NC                                                                                                                                                                                     |   |                             | 12,756  |   |   | 12,138 |   |
| Richmond, VA                                                                                                                                                                                    |   |                             | 7,987   |   |   | 8,013 |   |
| Tampa, FL                                                                                                                                                                                       |   |                             | 10,868  |   |   | 9,900 |   |
| Total Office Segment                                                                                                                                                                                                          |   |                             | 64,489  |   |   | 61,002 |   |
| Industrial:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                             |    |   |   |   |   |
| Atlanta, GA                                                                                                                                                                                     |   |                             | 2,782   |   |   | 3,066 |   |
| Piedmont Triad, NC                                                                                                                                                                              |   |                             | 2,225   |   |   | 3,559 |   |
| Total Industrial Segment                                                                                                                                                                                                      |   |                             | 5,007   |   |   | 6,625 |   |
| Retail:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                             |    |   |   |   |   |
| Atlanta, GA (2)                                                                                                                                                                                 |   |                             | (5      | ) |   | (6 | ) |
| Kansas City, MO                                                                                                                                                                                 |   |                             | 4,385   |   |   | 4,860 |   |
| Piedmont Triad, NC                                                                                                                                                                              |   |                             | — |   |   | 43 |   |
| Raleigh, NC                                                                                                                                                                                     |   |                             | 16      |   |   | 2 |   |
| Total Retail Segment                                                                                                                                                                                                          |   |                             | 4,396   |   |   | 4,899 |   |
| Residential:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                             |    |   |   |   |   |
| Kansas City, MO                                                                                                                                                                                 |   |                             | 238     |   |   | 170 |   |
| Raleigh, NC (2)                                                                                                                                                                                 |   |                             | (88     | ) |   | (9 | ) |
| Total Residential Segment                                                                                                                                                                                                     |   |                             | 150     |   |   | 161 |   |
| Total Net Operating Income                                                                                                          |   |                             | 74,042  |   |   | 72,687 |   |
| Reconciliation to income from continuing operations before disposition of property and condominiums and equity in earnings of unconsolidated affiliates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                             |    |   |   |   |   |
| Depreciation and amortization                                                                                                                                     |   |                             | (32,912 | ) |   | (32,884 | ) |
| General and administrative expense                                                                                                                                |   |                             | (8,827  | ) |   | (8,471 | ) |
| Interest expense                                                                                                                                                  |   |                             | (23,113 | ) |   | (21,976 | ) |
| Interest and other income                                                                                                                                         |   |                             | 1,700   |   |   | 1,007 |   |
| Income from continuing operations before disposition of property and condominiums and equity in earnings of unconsolidated affiliates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | $                                | 10,890  |   | $ | 10,363 |   |

| (1) | Net of discontinued operations. |
|-----|---------------------------------|

| (2) | Negative NOI with no corresponding revenues represents expensed real estate taxes and other carrying costs associated with land held for development that is currently zoned for the respective product type. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Disclosure Regarding Forward-Looking Statements

|   | · | the financial condition of our customers could deteriorate; |
|--------|--------|-------------------------------------------------------------|

|   | · | we may not be able to lease or release second generation space, defined as previously occupied space that becomes available for lease, quickly or on as favorable terms as old leases; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | we may not be able to lease our newly constructed buildings as quickly or on as favorable terms as originally anticipated; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------|

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

|   | · | development activity by our competitors in our existing markets could result in an excessive supply of office, industrial and retail properties relative to customer demand; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our Southeastern and Midwestern United States markets may suffer declines in economic growth; |
|--------|--------|-----------------------------------------------------------------------------------------------|

|   | · | unanticipated increases in interest rates could increase our debt service costs; |
|--------|--------|----------------------------------------------------------------------------------|

|   | · | we may not be able to meet our liquidity requirements or obtain capital on favorable terms to fund our working capital needs and growth initiatives or to repay or refinance outstanding debt upon maturity; and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the Company could lose key executive officers. |
|--------|--------|------------------------------------------------|

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Executive Summary

|   | · | owning high-quality, differentiated real estate assets in the best submarkets in our primary markets; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------|

|   | · | maintaining a conservative, flexible balance sheet with ample liquidity to meet our funding needs. |
|--------|--------|----------------------------------------------------------------------------------------------------|

Results of Operations

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Liquidity and Capital Resources

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | Three Months EndedMarch 31, |    |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | 2010                             |    | 2009   |   | Change |   |
| Cash Provided By Operating Activities                                                                                           |   | $                                | 39,750  |   | $      | 45,621 |   | $ | (5,871 | ) |
| Cash (Used In) Investing Activities                                                                                             |   |                             | (13,522 | )      |   | (34,839 | ) |   | 21,317 |   |
| Cash (Used In) Financing Activities                                                                                             |   |                             | (35,589 | )      |   | (16,782 | ) |   | (18,807 | ) |
| Total Cash Flows                                                                                                                |   | $                                | (9,361  | )      | $      | (6,000 | ) | $ | (3,361 | ) |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | March 31,2010 |      | December 31,2009 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------|------------------|--------|
| Mortgages and notes payable, at recorded book value                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | $                  | 1,466,441 |             | $      | 1,469,155 |   |
| Financing obligations                                                                                                              |   | $                  | 33,574    |             | $      | 37,706 |   |
| Preferred Stock, at liquidation value                                                                                              |   | $                  | 81,592    |             | $      | 81,592 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |               |      |             |   |   |   |
| Common Stock outstanding                                                                                                           |   |               | 71,602    |             |   | 71,285 |   |
| Common Units outstanding (not owned by the Company)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |               | 3,798     |             |   | 3,891 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |               |      |             |   |   |   |
| Per share stock price at period end                                                                                                |   | $                  | 31.73     |             | $      | 33.35 |   |
| Market value of Common Stock and Common Units                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | $                  | 2,392,442 |             | $      | 2,507,120 |   |
| Total market capitalization with debt and obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | $                  | 3,974,049 |             | $      | 4,095,573 |   |

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|   | · | cash flow from operating activities; |
|--------|--------|--------------------------------------|

|   | · | borrowings under our credit facilities; |
|--------|--------|-----------------------------------------|

|   | · | the issuance of unsecured debt; |
|--------|--------|---------------------------------|

|   | · | the issuance of secured debt; |
|--------|--------|-------------------------------|

|   | · | the issuance of equity securities by the Company or the Operating Partnership; and |
|--------|--------|------------------------------------------------------------------------------------|

|   | · | the disposition of non-core assets. |
|--------|--------|-------------------------------------|

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Critical Accounting Estimates

Funds From Operations

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|   | · | Net income/(loss) computed in accordance with GAAP; |
|--------|--------|-----------------------------------------------------|

|   | · | Less dividends to holders of Preferred Stock and less excess of Preferred Stock redemption cost over carrying value; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------|

|   | · | Less net income attributable to noncontrolling interests; |
|--------|--------|-----------------------------------------------------------|

|   | · | Plus depreciation and amortization of real estate assets; |
|--------|--------|-----------------------------------------------------------|

|   | · | Less gains, or plus losses, from sales of depreciable operating properties (but excluding impairment losses) and excluding items that are classified as extraordinary items under GAAP; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Plus or minus adjustments for unconsolidated partnerships and joint ventures (to reflect funds from operations on the same basis); and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Plus or minus adjustments for depreciation and amortization and gains/(losses) on sales related to discontinued operations. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------|

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | Three Months Ended March 31, |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | 2010                         |    | 2009 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | Amount                       |    | PerShare |   | Amount |   | PerShare |   |
| Funds from operations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                         |    |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                                     |   | $                            | 12,082  |   |   |   |   | $ | 13,200 |   |   |   |   |
| Net income attributable to noncontrolling interests in the Operating Partnership                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                         | (520    | ) |   |   |   |   | (694 | ) |   |   |   |
| Net income attributable to noncontrolling interests in consolidated affiliates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                         | (214    | ) |   |   |   |   | (18 | ) |   |   |   |
| Dividends on preferred stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                         | (1,677  | ) |   |   |   |   | (1,677 | ) |   |   |   |
| Net income available for common stockholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                         | 9,671   |   | $ | 0.14 |   |   | 10,811 |   | $ | 0.17 |   |
| Add/(Deduct):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                         |    |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization of real estate assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                         | 32,492  |   |   | 0.43 |   |   | 32,441 |   |   | 0.47 |   |
| (Gains) on disposition of depreciable properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                         | (19     | ) |   | — |   |   | (19 | ) |   | — |   |
| Net income attributable to noncontrolling interests in the OperatingPartnership                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                         | 520     |   |   | — |   |   | 694 |   |   | — |   |
| Unconsolidated affiliates:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                         |    |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization of real estate assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                         | 3,341   |   |   | 0.04 |   |   | 3,250 |   |   | 0.05 |   |
| Discontinued operations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                         |    |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization of real estate assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                         | — |   |   | — |   |   | 540 |   |   | 0.01 |   |
| (Gains) on disposition of depreciable properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                         | (174    | ) |   | — |   |   | (73 | ) |   | — |   |
| Funds from operations                                                                                          |   | $                            | 45,831  |   | $ | 0.61 |   | $ | 47,644 |   | $ | 0.70 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                         |    |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                         | 75,397  |   |   |   |   |   | 67,705 |   |   |   |   |

| (1) | Includes assumed conversion of all potentially dilutive Common Stock equivalents. |
|-----|-----------------------------------------------------------------------------------|

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4.  CONTROLS AND PROCEDURES

|   | · | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect transactions and dispositions of assets; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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(Table of Contents)

PART II - OTHER INFORMATION

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 6.  EXHIBITS

| ExhibitNumber | Description                                                      |
|---------------|------------------------------------------------------------------|
|          |                                                             |
| 12.1          | Statement re: Computation of Ratios of the Company               |
| 12.2          | Statement re: Computation of Ratios of the Company               |
| 12.3          | Statement re: Computation of Ratios of the Operating Partnership |
| 12.4          | Statement re: Computation of Ratios of the Operating Partnership |
| 31.1          | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act  |
| 31.2          | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act  |
| 31.3          | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act  |
| 31.4          | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act  |
| 32.1          | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act  |
| 32.2          | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act  |
| 32.3          | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act  |
| 32.4          | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act  |

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|   |   | Highwoods Properties, Inc.  |
|--------|--------|----------------------------------|
|   |   | By:                         |  /s/ Terry L. Stevens |
|   |   |                             | Terry L. Stevens |
|   |   |                             | Senior Vice President and Chief Financial Officer |
|   |   |                             |   |

|   |   | Highwoods Realty Limited Partnership                      |
|--------|--------|----------------------------------------------------------------|
|   |   | By: Highwoods Properties, Inc., its sole general partner  |
|   |   | By:                                                       |  /s/ Terry L. Stevens |
|   |   |                                                           | Terry L. Stevens |
|   |   |                                                           | Senior Vice President and Chief Financial Officer |
|   |   |                                                           |   |

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