8-K/A

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K/A

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 6, 2005

HIGHWOODS PROPERTIES, INC.

(Exact name of registrant specified in its charter)

North Carolina	0-21731	56-1869557
(State of Formation)	(Commission File Number)	(IRS Employer Identification No.)

3100 Smoketree Court

Suite 600

Raleigh, North Carolina 27604

(Address of principal executive offices, zip code)

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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note

The purpose of this amended report is to attach a correct version of exhibit 99.1.

Item 2.02. Results of Operations and Financial Condition

On July 6, 2005, Highwoods Properties, Inc., the general partner of Highwoods Realty Limited Partnership, issued a press release announcing its financial results for the year ended December 31, 2004 and the three months ended March 31, 2005. This press release is attached hereto as Exhibit 99.1. In addition, we posted on our web site supplemental information regarding our financial results for the year ended December 31, 2004 and the three months ended March 31, 2005, a copy of which is attached hereto as Exhibit 99.2.

Exhibit	Description
99.1	Press Release, dated July 6, 2005
99.2	Supplemental financial and operating information of Highwoods Properties, Inc. for the year ended December 31, 2004 and the three months ended March 31, 2005.*

* Previously furnished.

SIGNATURES

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

HIGHWOODS PROPERTIES, INC.
By:	/s/ Terry L. Stevens
	Terry L. Stevens Vice President, Chief Financial Officer and Treasurer

Dated: July 7, 2005

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE Ref: 05-19

Contact:	Tabitha Zane
	Sr. Director, Investor Relations
	919-431-1529

Highwoods Properties Reports First Quarter 2005 Financial Results

Full-Year and Quarterly 2004 and 2003 Restated Financial Results

Also Reported

Raleigh, NC – July 6, 2005 – Highwoods Properties, Inc. (NYSE: HIW), the largest owner and operator of suburban office properties in the Southeast, today reported financial results for the first quarter of 2005, the fourth quarter of 2004 and the full year of 2004. The Company also reported restated financial results for 2003 and the first, second and third quarters of 2004. All financial information presented in this news release is on a restated and consistent basis for all periods.

The Company expects to file its Form 10-K for the year ended December 31, 2004 and its Form 10-Q for the quarter ended March 31, 2005 within the next few weeks. This Form 10-K will include restated financial results for fiscal years 2002 and 2003 and restated quarterly results for 2003 and 2004. The Company expects that Ernst & Young LLP, its independent auditor, will issue an unqualified opinion on the Company’s 2004 and restated 2003 and 2002 consolidated financial statements that will be included in the 2004 Form 10-K.

Ed Fritsch, President and Chief Executive Officer of Highwoods Properties, stated, “We are pleased to report our 2004 year-end and first quarter 2005 financial results. In line with our previously disclosed expectations, the cumulative impact of the restatement on historical net income and Funds from Operations (“FFO”) for this three-year period was $0.06 and $0.08 per diluted share, respectively. These restatement adjustments did not impact cash and relate to transactions or practices that go back a number of years. Going forward, the impact of these non-cash accounting adjustments is expected to reduce annual FFO by $0.02 to $0.03 per diluted share, again in line with our previously disclosed expectations.”

First Quarter 2005 Financial Results

For the three months ended March 31, 2005, the Company reported net income attributable to common stockholders of $12.6 million, or $0.24 per diluted share, compared to a net loss of $2.8 million, or $0.05 per diluted share, for the same quarter last year. Net income in the first quarter of 2005 was impacted by $16.0 million of gains on sales of properties, which included $5.4 million recorded in discontinued operations, offset by $2.6 million of impairment charges on land.

FFO was $36.2 million, or $0.60 per diluted share, for the quarter ended March 31, 2005 compared with first quarter 2004 FFO of $30.1 million, or $0.50 per diluted share. First quarter 2005 net income and FFO benefited from $2.6 million, or $0.04 per diluted share, in lease termination fee income; this was offset by an impairment charge related to land totaling $2.6 million, or $0.04 per diluted share. Financial results for the first quarter 2005 also include revenue from U.S. Airways for the entire three month period, which contributed $0.01 per diluted share to FFO.

Highwoods Properties

July 6, 2005

2004 Financial Results

For the full year ended December 31, 2004, the Company reported net income attributable to common stockholders of $9.1 million, or $0.17 per diluted share. This compares to net income of $15.8 million, or $0.30 per diluted share, for the year ended December 31, 2003. FFO was $126.8 million, or $2.11 per diluted share, for the year ended December 31, 2004, compared with $147.1 million, or $2.46 per diluted share, for 2003. FFO was impacted by a number of charges and credits in 2003 and 2004, as noted in the financial tables that follow.

Restatement Results

As previously disclosed by the Company on May 26, 2005, as a result of the preparation of its 2004 financial statements, the related audit by its independent auditors, Ernst & Young LLP, and the previously disclosed review of its lease accounting practices, the Company identified several adjustments impacting 2004 and prior periods that needed to be recorded by restating prior period results. The restatement adjustments related primarily to 1) lease incentives, 2) depreciation and amortization, 3) straight-line rent expense on a ground lease and 4) capitalization of internal costs.

The effects of these adjustments on previously reported periods are shown in the attached financial tables. The cumulative impact of these adjustments for 2002, 2003 and 2004 reduced aggregate net income by $3.2 million, or $0.06 per diluted share. This represented approximately 1.9% of total net income during this three-year period. The total effect on net income for periods prior to 2002 was approximately $4.9 million, or $0.08 per diluted share.

The cumulative impact of these adjustments for 2002, 2003 and 2004 reduced aggregate FFO by $4.9 million, or $0.08 per diluted share. This represented approximately 1.1% of total FFO during this three-year period. The total effect on FFO for periods prior to 2002 was approximately $3.7 million, or $0.06 per diluted share.

These accounting adjustments on a net basis are not expected to have any material continuing effects on net income in future periods. FFO in future periods is expected to be reduced by approximately $0.02 to $0.03 per diluted share per year, primarily from the reclassification of lease incentive amortization.

Strategic Management Plan Update

Mr. Fritsch stated, “We continue to make strong progress towards achieving the goals outlined in our Strategic Management Plan. A key focus this year is the improvement of our portfolio through the disposition of $100 million to $300 million of non-core assets and we will use the proceeds to strengthen our balance sheet and fund the commencement of new development projects in strategic locations. As of today, the Company has sold or contracted to sell approximately $329 million of assets, including all of our wholly-owned properties in Charlotte. A portion of the sales proceeds received to date were used to pay off a $40.9 million secured loan on April 1, 2005 and we anticipate using a substantial amount of forthcoming net sales proceeds to repurchase and/or redeem some of our outstanding high-coupon preferred stock, pay off a $26.2 million, 8.2% secured loan that is callable on August 15, 2005 and pay down our revolving credit facility. We also expect to close our division office in Charlotte after the sale is closed, which should save approximately $500,000 annually in net general and administrative expenses.”

“On the development front, we anticipate starting $45 million to $50 million of additional new, multi-tenant office development in the second half of this year, as we move towards our three-year goal of $200 million to $300 million of new development starts by the end of 2007.”

2

Highwoods Properties

July 6, 2005

“Our progress at Highwoods Preserve in Tampa has also been extremely gratifying. Over the past 12 months, we have leased or sold 700,000 square feet, or 89% of this campus. This includes our recently announced sale of Buildings II and IV to MetLife, Inc. (NYSE:MET) for $24.5 million which closed on June 30, 2005.”

Outlook

The Company also refined its guidance for 2005, which was originally published on January 5, 2005. At that time the Company announced that it expected FFO per diluted share to be in the range of $2.25 to $2.35. Today, the Company believes FFO per diluted share for 2005 will be in the range of $2.27 to $2.33. This estimate continues to reflect management’s view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels, operating expenses and asset dispositions and acquisitions and excludes any revenue from US Airways from August 2005 through the remainder of the year. This estimate also excludes any asset gains or impairments associated with actual or potential property dispositions, as well as any one-time, non-recurring charges or credits that may occur during the year.

Non-GAAP Information

We believe that FFO and FFO per share are beneficial to management and investors as important indicators of the performance of an equity REIT. FFO and FFO per share can facilitate comparisons of operating performance between periods and between other REITs because they exclude factors, such as depreciation, amortization and gains and losses from sales of real estate assets, which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful life estimates. FFO and FFO per share as disclosed by other REITs may not be comparable to our calculations of FFO and FFO per share. CAD is another useful financial performance measure of an equity REIT. CAD provides an additional basis to evaluate the ability of a REIT to incur and service debt, fund acquisitions and other capital expenditures and pay distributions. CAD does not measure whether cash flow is sufficient to fund all cash needs. FFO, FFO per share and CAD are non-GAAP financial measures and do not represent net income or cash flows from operating, investing or financing activities as defined by GAAP. They should not be considered as alternatives to net income as indicators of our operating performance or to cash flows as measures of liquidity. Furthermore, FFO per share does not depict the amount that accrues directly to the stockholders’ benefit.

FFO is defined by NAREIT as net income or loss, excluding gains or losses from sales of depreciated property, plus operating property depreciation and amortization and adjustments for minority interest and unconsolidated companies on the same basis. As clarified by NAREIT in October 2003, impairment losses on depreciable real estate assets are included in FFO. Our calculation of actual FFO results is consistent with FFO as defined by NAREIT.

Supplemental Information

A copy of the Company’s first quarter 2005 Supplemental Information that includes detailed financial information is available in the “Investor Relations/Quarterly Earnings” section of the Company’s Web site at www.highwoods.com. Detailed operational information for 2004 and first quarter 2005 was previously provided in the Company’s prior Supplemental Information packages which are available on the Company’s website. This current Supplemental, together with this release, has been furnished to the Securities and Exchange Commission on Form 8-K. You may also obtain a copy of all Supplemental Information published by the Company by contacting Highwoods Investor Relations at 919-431-1521 or 800-256-2963 or by e-mail to HIW-IR@highwoods.com. If you would like to receive future Supplemental Information packages by e-mail, please contact the Investor Relations department as noted above or by written request to: Investor Relations Department, Highwoods Properties, Inc., 3100 Smoketree Court, Suite 600, Raleigh, NC 27604.

3

Highwoods Properties

July 6, 2005

Conference Call

Highwoods will conduct a conference call to discuss these financial results at 11:00 a.m. Eastern time today, July 6. For US/Canada callers, dial (888) 202-5268 and international callers dial (706) 643-7509. A live listen-only Web cast can be accessed through the Company’s Web site at www.highwoods.com under the “Investor Relations” section.

Telephone and Web cast replays will be available two hours after the completion of the call. The telephone replay will be available for one week beginning at 2:00 p.m. Eastern time. Dial-in numbers for the replay are (800) 642-1687 US/Canada, (706) 645-9291 international. The conference ID is 7683628.

About the Company

Highwoods Properties, Inc., a member of the S&P MidCap 400 Index, is a fully integrated, self-administered real estate investment trust (“REIT”) that provides leasing, management, development, construction and other customer-related services for its properties and for third parties. As of March 31, 2005, the Company owned or had an interest in 504 in-service office, industrial and retail properties encompassing approximately 39.5 million square feet. Highwoods also owns 1,115 acres of development land. Highwoods is based in Raleigh, North Carolina, and its properties and development land are located in Florida, Georgia, Iowa, Kansas, Maryland, Missouri, North Carolina, South Carolina, Tennessee and Virginia. For more information about Highwoods Properties, please visit our Web site at www.highwoods.com.

Certain matters discussed in this press release, such as the effect of tenant bankruptcies on our operations, anticipated continuing compliance with debt agreements, expected leasing and financing activities and financial and operating performance and the cost and timing of expected development projects and asset dispositions, are forward-looking statements within the meaning of the federal securities laws. These statements are distinguished by use of the words “will”, “expect”, “intends” and words of similar meaning. Although Highwoods believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved.

Factors that could cause actual results to differ materially from Highwoods’ current expectations include, among others, the following: the financial condition of our customers could deteriorate; unwaived defaults, if any, under our debt instruments could result in an acceleration of some of our outstanding debt; speculative development by others could result in excessive supply of office properties relative to customer demand; we may not be able to lease or re-lease space quickly or on as favorable terms as old leases; unexpected difficulties in obtaining additional capital to satisfy our future cash needs or unexpected increases in interest rates would increase our debt service costs; and others detailed in the Company’s amended 2003 Annual Report on Form 10-K and subsequent SEC reports.

Financial Tables Follow

4

Highwoods Properties

July 6, 2005

Net income for 2004 and 2003 on a quarterly basis is shown in the table below:

	1Q			2Q			3Q			4Q			Year
2004
Net income (loss) allocable to Common shareholders – ($000)	$	(2,777	)	$	(2,319	)	$	13,398		$	827		$	9,129
Net income (loss) per diluted share	$	(0.05	)	$	(0.04	)	$	0.25		$	0.02		$	0.17
2003
Net income (loss) allocable to Common shareholders – ($000)	$	(12,091	)	$	775		$	23,909		$	3,227		$	15,820
Net income (loss) per diluted share	$	(0.23	)	$	0.01		$	0.45		$	0.06		$	0.30
FFO for 2004 and 2003 on a quarterly basis is shown in the table below:
	1Q			2Q			3Q			4Q			Year
2004
Funds from Operations - ($000)	$	30,133		$	16,776		$	47,791		$	32,124		$	126,824
Fund from Operations per diluted share	$	0.50		$	0.28		$	0.80		$	0.53		$	2.11
2003
Funds from Operations – ($000)	$	24,391		$	37,224		$	49,683		$	35,849		$	147,147
Fund from Operations per diluted share	$	0.40		$	0.62		$	0.83		$	0.60		$	2.46
Included in FFO for 2004 and 2003 were the following (charges) and credits ($000, except per share amounts):
	1Q			2Q			3Q			4Q			Year
2004
Impairments on depreciable property	$	0		$	(3,856	)	$	(500	)	$	(4,426	)	$	(8,782	)
Retirement package for former CEO		(3,208	)		(1,375	)		0			0			(4,583	)
Debt extinguishment loss (X-POS)		0			(12,457	)		0			0			(12,457	)
WorldCom Settlement		0			0			14,435			0			14,435
G&A costs related to strategic transaction and restatements		0			(235	)		(2,538	)		(1,743	)		(4,516	)
TOTAL	$	(3,208	)	$	(17,923	)	$	11,397		$	(6,169	)	$	(15,903	)
Per diluted share	$	(0.05	)	$	(0.30	)	$	0.19		$	(0.10	)	$	(0.26	)
	1Q			2Q			3Q			4Q			Year
2003
Debt extinguishment loss (MOPPRS)	$	(14,653	)	$	0		$	0		$	0		$	(14,653	)
Impairments on depreciable property		(325	)		0			0			0			(325	)
Gain on extinguishment of financing
Obligation (non-Orlando MG/HIW)		0			0			16,301			0			16,301
TOTAL	$	(14,978	)	$	0		$	16,301		$	0		$	1,323
Per diluted share	$	(0.25	)	$	0.00		$	0.27		$	0.00		$	0.02

5

Highwoods Properties, Inc.

Consolidated Statements of Income

(In thousands, except per share amounts)

	Three Months Ended March 31,						Three Months Ended June 30,						Three Months Ended September 30,						Three Months Ended December 31,						Year Ended December 31,
	2004			2003			2004			2003			2004			2003			2004			2003			2004			2003
Rental and other revenues	$	118,577		$	125,388		$	116,747		$	124,646		$	113,161		$	121,093		$	115,593		$	124,734		$	464,078		$	495,861
Operating expenses:
Rental property and other expenses		43,602			42,488			41,789			43,323			41,437			43,144			41,195			45,900			168,023			174,855
Depreciation and amortization		34,844			35,680			33,904			35,096			33,160			33,535			34,543			34,322			136,451			138,633
Impairment of assets held for use		—			—			—			—			—			—			1,270			—			1,270			—
General and administrative		10,743			4,740			7,945			7,028			10,166			6,818			10,841			6,957			39,695			25,543
Total operating expenses		89,189			82,908			83,638			85,447			84,763			83,497			87,849			87,179			345,439			339,031
Interest expense:
Contractual		27,149			30,121			27,304			30,236			25,564			29,883			25,552			29,051			105,569			119,291
Amortization of deferred financing costs		1,144			897			925			903			782			1,690			826			908			3,677			4,398
Financing obligations		4,724			4,907			1,457			4,191			1,409			4,508			2,533			4,205			10,123			17,811
		33,017			35,925			29,686			35,330			27,755			36,081			28,911			34,164			119,369			141,500
Other income/(expense):
Interest and other income		1,757			1,170			1,497			1,884			1,752			1,431			1,702			1,718			6,708			6,203
Settlement of bankruptcy claim		—			—			—			—			14,435			—			—			—			14,435			—
Loss on debt extinguishments		—			(14,653	)		(12,457	)		—			—			—			—			—			(12,457	)		(14,653	)
Gain on extinguishment of co-venture obligation		—			—			—			—			—			16,301			—			—			—			16,301
		1,757			(13,483	)		(10,960	)		1,884			16,187			17,732			1,702			1,718			8,686			7,851
Income/(loss) before disposition of property, co-venture expense, minority interest and equity in earnings of unconsolidated affiliates		(1,872	)		(6,928	)		(7,537	)		5,753			16,830			19,247			535			5,109			7,956			23,181
Gains on disposition of property, net		1,085			804			14,770			1,613			2,215			5,617			3,445			4,353			21,515			12,387
Co-venture expense		—			(2,086	)		—			(2,169	)		—			(333	)		—			—			—			(4,588	)
Minority interest in the Operating Partnership		712			1,649			(132	)		108			(1,464	)		(1,926	)		180			(400	)		(704	)		(569	)
Equity in earnings of unconsolidated affiliates		1,212			1,084			1,477			1,307			2,555			1,010			2,033			1,272			7,277			4,673
Income/(loss) from continuing operations		1,137			(5,477	)		8,578			6,612			20,136			23,615			6,193			10,334			36,044			35,084
Discontinued operations:
Income from discontinued operations, net of minority interest		363			1,093			273			982			345			576			713			450			1,694			3,101
Gain/(loss) on sale of discontinued operations, net of minority interest		3,436			6			(3,457	)		894			630			7,431			1,634			156			2,243			8,487
		3,799			1,099			(3,184	)		1,876			975			8,007			2,347			606			3,937			11,588
Net income/(loss)		4,936			(4,378	)		5,394			8,488			21,111			31,622			8,540			10,940			39,981			46,672
Dividends on preferred stock		(7,713	)		(7,713	)		(7,713	)		(7,713	)		(7,713	)		(7,713	)		(7,713	)		(7,713	)		(30,852	)		(30,852	)
Net income available for/(loss attributable to) common stockholders	$	(2,777	)	$	(12,091	)	$	(2,319	)	$	775		$	13,398		$	23,909		$	827		$	3,227		$	9,129		$	15,820
Net income/(loss) per common share - basic:
Income/(loss) from continuing operations	$	(0.12	)	$	(0.25	)	$	0.02		$	(0.02	)	$	0.23		$	0.30		$	(0.03	)	$	0.05		$	0.10		$	0.08
Income/(loss) from discontinued operations		0.07			0.02			(0.06	)		0.03			0.02			0.15			0.05			0.01			0.07			0.22
Net Income/(loss)	$	(0.05	)	$	(0.23	)	$	(0.04	)	$	0.01		$	0.25		$	0.45		$	0.02		$	0.06		$	0.17		$	0.30
Weighted average common shares outstanding - basic		53,186			53,150			53,275			52,932			53,400			52,746			53,424			52,976			53,323			52,950
Net Income/(loss) per common share - diluted:
Income/(loss) from continuing operations	$	(0.12	)	$	(0.25	)	$	0.02		$	(0.02	)	$	0.23		$	0.30		$	(0.03	)	$	0.05		$	0.10		$	0.08
Income/(loss) from discontinued operations		0.07			0.02			(0.06	)		0.03			0.02			0.15			0.05			0.01			0.07			0.22
Net income/(loss)	$	(0.05	)	$	(0.23	)	$	(0.04	)	$	0.01		$	0.25		$	0.45		$	0.02		$	0.06		$	0.17		$	0.30
Weighted average common shares outstanding - diluted		53,186			53,150			53,275			59,878			59,991			59,710			60,214			59,889			60,024			59,911

6

Highwoods Properties, Inc.

Funds from Operations

(In thousands, except per share amounts and ratios)

	Three Months Ended March 31,						Three Months Ended June 30,						Three Months Ended September 30,						Three Months Ended December 31,						Year Ended December 31,
	2004			2003			2004			2003			2004			2003			2004			2003			2004			2003
Funds from operations:
Net income/(loss)	$	4,936		$	(4,378	)	$	5,394		$	8,488		$	21,111		$	31,622		$	8,540		$	10,940		$	39,981		$	46,672
Dividends to preferred shareholders		(7,713	)		(7,713	)		(7,713	)		(7,713	)		(7,713	)		(7,713	)		(7,713	)		(7,713	)		(30,852	)		(30,852	)
Net income/(loss) applicable to common shares		(2,777	)		(12,091	)		(2,319	)		775			13,398			23,909			827			3,227			9,129			15,820
Add/(deduct):
Depreciation and amortization of real estate assets		34,166			35,022			33,222			34,421			32,390			32,715			33,874			33,648			133,652			135,806
(Gain)/loss on disposition of depreciable real estate assets		66			(24	)		(16,600	)		(218	)		(1,636	)		(4,550	)		(394	)		(3,956	)		(18,564	)		(8,748	)
Minority interest in income from operations		(712	)		(1,649	)		132			(108	)		1,464			1,926			(180	)		400			704			569
Unconsolidated affiliates:
Depreciation and amortization of real estate assets		2,048			1,912			2,070			1,977			2,441			1,889			2,620			1,776			9,179			7,554
Discontinued operations:
Depreciation and amortization of real estate assets		736			1,198			639			1,146			325			1,154			85			857			1,785			4,355
(Gain)/loss on sale, net of minority interest		(3,436	)		(119	)		(399	)		(894	)		(630	)		(7,431	)		(4,790	)		(156	)		(9,255	)		(8,600	)
Minority interest in income from discontinued operations		42			142			31			125			39			71			82			53			194			391
Funds from operations	$	30,133		$	24,391		$	16,776		$	37,224		$	47,791		$	49,683		$	32,124		$	35,849		$	126,824		$	147,147
Funds from operations per share - diluted:
Net income/(loss) applicable to common shares	$	(0.05	)	$	(0.23	)	$	(0.04	)	$	0.01		$	0.25		$	0.45		$	0.02		$	0.06		$	0.17		$	0.30
Add/(deduct):
Depreciation and amortization of real estate assets		0.57			0.58			0.56			0.57			0.54			0.54			0.56			0.56			2.22			2.26
(Gain)/loss on disposition of depreciable real estate assets		—			—			(0.27	)		—			(0.02	)		(0.08	)		(0.01	)		(0.06	)		(0.31	)		(0.15	)
Unconsolidated affiliates:
Depreciation and amortization of real estate assets		0.03			0.03			0.03			0.03			0.04			0.03			0.04			0.03			0.15			0.12
Discontinued operations:
Depreciation and amortization of real estate assets		0.01			0.02			0.01			0.02			—			0.02			—			0.01			0.03			0.07
(Gain)/loss on sale, net of minority interest		(0.06	)		—			(0.01	)		(0.01	)		(0.01	)		(0.13	)		(0.08	)		—			(0.15	)		(0.14	)
Funds from operations	$	0.50		$	0.40		$	0.28		$	0.62		$	0.80		$	0.83		$	0.53		$	0.60		$	2.11		$	2.46
Dividend payout data:
Dividends paid per common share	$	0.425		$	0.585		$	0.425		$	0.425		$	0.425		$	0.425		$	0.425		$	0.425		$	1.700		$	1.860
Funds from operations		85.0	%		146.3	%		151.8	%		68.5	%		53.1	%		51.2	%		80.2	%		70.8	%		80.5	%		75.6	%
Weighted average shares outstanding - diluted		60,092			60,243			59,794			59,878			59,991			59,710			60,214			59,889			60,024			59,911
Impairment adjustments included in funds from operations	$	—		$	(325	)	$	(3,856	)	$	—		$	(500	)	$	—		$	(4,426	)	$	—		$	(8,782	)	$	(325	)
Impairment adjustments included in funds from operations per share	$	—		$	(0.01	)	$	(0.06	)	$	—		$	(0.01	)	$	—		$	(0.07	)	$	—		$	(0.15	)	$	(0.01	)

7

Highwoods Properties, Inc.

Consolidated Balance Sheets

(In thousands)

	December 31, 2004			December 31, 2003
Assets:
Real estate assets, at cost:
Land and improvements	$	397,840		$	430,199
Buildings and tenant improvements		2,932,756			3,111,537
Development in process		25,171			7,485
Land held for development		188,945			197,064
Furniture, fixtures and equipment		22,187			21,818
		3,566,899			3,768,103
Less-accumulated depreciation		(606,111	)		(550,136	)
Net real estate assets		2,960,788			3,217,967
Property held for sale		32,796			65,724
Cash and cash equivalents		24,482			21,696
Restricted cash		3,875			4,457
Accounts receivable, net		16,748			18,176
Notes receivable		9,672			10,016
Accrued straight-line rents receivable		61,518			59,728
Investment in unconsolidated affiliates		74,432			62,069
Other assets:
Deferred leasing costs		111,121			102,058
Deferred financing costs		16,686			19,286
Prepaid expenses and other		10,618			10,217
		138,425			131,561
Less-accumulated amortization		(62,567	)		(53,010	)
Other assets, net		75,858			78,551
Total Assets	$	3,260,169		$	3,538,384
Liabilities and Stockholders’ Equity:
Mortgages and notes payable	$	1,572,169		$	1,717,765
Accounts payable, accrued expenses and other liabilities		115,003			103,356
Financing obligations		65,309			125,777
Total Liabilities		1,752,481			1,946,898
Minority interest in the Operating Partnership		115,926			126,928
Stockholders’ Equity:
Preferred stock		377,445			377,445
Common stock		538			535
Additional paid-in capital		1,416,855			1,408,779
Distributions in excess of net earnings		(396,151	)		(314,082	)
Accumulated other comprehensive loss		(2,814	)		(3,650	)
Deferred compensation		(4,111	)		(4,469	)
Total Stockholders’ Equity		1,391,762			1,464,558
Total Liabilities and Stockholders’ Equity	$	3,260,169		$	3,538,384

8

Highwoods Properties, Inc.

Consolidated Statements of Income

(In thousands, except per share amounts)

	Three Months Ended March 31,
	2005			2004
Rental and other revenues	$	116,022		$	117,292
Operating expenses:
Rental property and other expenses		41,126			43,404
Depreciation and amortization		35,877			34,563
Impairment of assets held for use		2,614			—
General and administrative		7,423			10,743
Total operating expenses		87,040			88,710
Interest expense:
Contractual		25,585			27,149
Amortization of deferred financing costs		847			1,144
Financing obligations		1,567			4,724
		27,999			33,017
Other income:
Interest and other income		1,684			1,754
		1,684			1,754
Income/(loss) before disposition of property, minority interest and equity in earnings of unconsolidated affiliates		2,667			(2,681	)
Gains on disposition of property, net		10,625			1,085
Minority interest in the Operating Partnership		(829	)		796
Equity in earnings of unconsolidated affiliates		2,216			1,212
Income from continuing operations		14,679			412
Discontinued operations:
Income from discontinued operations, net of minority interest		843			1,088
Gain on sale of discontinued operations, net of minority interest		4,824			3,436
		5,667			4,524
Net income		20,346			4,936
Dividends on preferred stock		(7,713	)		(7,713	)
Net income available for/(loss attributable to) common stockholders	$	12,633		$	(2,777	)
Net income/(loss) per common share - basic:
Income/(loss) from continuing operations	$	0.13		$	(0.14	)
Income from discontinued operations		0.11			0.09
Net income/(loss)	$	0.24		$	(0.05	)
Weighted average common shares outstanding - basic		53,640			53,186
Net income/(loss) per common share - diluted:
Income/(loss) from continuing operations	$	0.13		$	(0.14	)
Income from discontinued operations		0.11			0.09
Net income/(loss)	$	0.24		$	(0.05	)
Weighted average common shares outstanding - diluted		60,182			53,186

9

Highwoods Properties, Inc.

Funds from Operations

(In thousands, except per share amounts and ratios)

	Three Months Ended March 31,
	2005			2004
Funds from operations:
Net income	$	20,346		$	4,936
Dividends to preferred shareholders		(7,713	)		(7,713	)
Net income/(loss) applicable to common shares		12,633			(2,777	)
Add/(deduct):
Depreciation and amortization of real estate assets		35,209			33,885
(Gain)/loss on disposition of depreciable real estate assets		(10,478	)		66
Minority interest in income from operations		829			(796	)
Unconsolidated affiliates:
Depreciation and amortization of real estate assets		2,645			2,048
Discontinued operations:
Depreciation and amortization of real estate assets		138			1,017
(Gain)/loss on sale, net of minority interest		(4,824	)		(3,436	)
Minority interest in income from discontinued operations		94			126
Funds from operations	$	36,246		$	30,133
Funds from operations per share - diluted:
Net income/(loss) applicable to common shares	$	0.24		$	(0.05	)
Add/(deduct):
Depreciation and amortization of real estate assets		0.58			0.57
(Gain)/loss on disposition of depreciable real estate assets		(0.18	)		—
Unconsolidated affiliates:
Depreciation and amortization of real estate assets		0.04			0.03
Discontinued operations:
Depreciation and amortization of real estate assets		—			0.01
(Gain)/loss on sale, net of minority interest		(0.08	)		(0.06	)
Funds from operations	$	0.60		$	0.50
Dividend payout data:
Dividends paid per common share	$	0.425		$	0.425
Funds from operations		70.8	%		85.0	%
Weighted average shares outstanding - diluted		60,182			60,092
Impairment adjustments included in funds from operations	$	(2,614	)	$	—
Impairment adjustments included in funds from operations per share	$	(0.04	)	$	—

10

Highwoods Properties, Inc.

Consolidated Balance Sheets

(In thousands)

	March 31, 2005			December 31, 2004
Assets:
Real estate assets, at cost:
Land and improvements	$	391,768		$	397,840
Buildings and tenant improvements		2,914,253			2,932,756
Development in process		40,581			25,171
Land held for development		179,755			188,945
Furniture, fixtures and equipment		22,509			22,187
		3,548,866			3,566,899
Less-accumulated depreciation		(622,956	)		(606,111	)
Net real estate assets		2,925,910			2,960,788
Property held for sale		27,283			32,796
Cash and cash equivalents		55,166			24,482
Restricted cash		3,711			3,875
Accounts receivable, net		17,035			16,748
Notes receivable		8,304			9,672
Accrued straight-line rents receivable		62,786			61,518
Investment in unconsolidated affiliates		73,723			74,432
Other assets:
Deferred leasing costs		112,873			111,121
Deferred financing costs		16,257			16,686
Prepaid expenses and other		11,847			10,618
		140,977			138,425
Less-accumulated amortization		(64,454	)		(62,567	)
Other assets, net		76,523			75,858
Total Assets	$	3,250,441		$	3,260,169
Liabilities and Stockholders’ Equity:
Mortgages and notes payable	$	1,582,010		$	1,572,169
Accounts payable, accrued expenses and other liabilities		113,282			115,003
Financing obligations		63,096			65,309
Total Liabilities		1,758,388			1,752,481
Minority interest in the Operating Partnership		109,275			115,926
Stockholders’ Equity:
Preferred stock		377,445			377,445
Common stock		540			538
Additional paid-in capital		1,420,055			1,416,855
Distributions in excess of net earnings		(406,437	)		(396,151	)
Accumulated other comprehensive loss		(2,675	)		(2,814	)
Deferred compensation		(6,150	)		(4,111	)
Total Stockholders’ Equity		1,382,778			1,391,762
Total Liabilities and Stockholders’ Equity	$	3,250,441		$	3,260,169

11

Highwoods Properties, Inc.

Summary of Effects of Restatement

Dollars in thousands, except per share amounts

	Years Ended December 31,									Quarter ended 31-Mar-05			Aggregate From 1/1/02 to 3/31/05
	2002			2003			2004
Effects on Net Income — Increases (Decreases):
Depreciation and amortization	$	(1,118	)	$	(1,529	)	$	(1,305	)	$	77		$	(3,875	)
Ground lease straight line rent expense		(251	)		(239	)		(225	)		(54	)	$	(769	)
Internal cost capitalization, net		320			514			416			(28	)	$	1,222
Other		(66	)		(174	)		100			1		$	(139	)
Minority Interest impact		106			156			112			0		$	374
TOTAL	$	(1,009	)	$	(1,272	)	$	(902	)	$	(4	)	$	(3,187	)
Effect on diluted Net Income per share	$	(0.02	)	$	(0.02	)	$	(0.02	)	$	(0.00	)	$	(0.06	)
Net Income, as restated	$	80,868		$	46,672		$	39,981		$	20,346		$	187,867
Net Income, before adjustments	$	81,877		$	47,944		$	40,883		$	20,350		$	191,054
														-1.67	%
Effects on Funds from Operations — Increases (Decreases):
Accounting for lease incentives	$	(643	)	$	(1,016	)	$	(1,309	)	$	(305	)	$	(3,273	)
Ground lease straight line rent expense		(251	)		(239	)		(225	)		(54	)	$	(769	)
Internal cost capitalization		(470	)		(267	)		(304	)		(175	)	$	(1,216	)
Other funds from operations		(66	)		(174	)		100			1		$	(139	)
TOTAL	$	(1,430	)	$	(1,696	)	$	(1,738	)	$	(533	)	$	(5,397	)
Effect on funds from operations per share	$	(0.02	)	$	(0.03	)	$	(0.03	)	$	(0.01	)	$	(0.09	)
Funds from Operations, as restated	$	175,636		$	147,147		$	126,824		$	36,246		$	485,853
Funds from Operations, before adjustments	$	177,066		$	148,843		$	128,562		$	36,779		$	491,250
														-1.10	%

12