<PAGE>
June 16, 1998
Dear J.C. Nichols Shareholder:
You recently received a proxy statement that describes in detail the proposed
merger between Highwoods and the J.C. Nichols Company. Please keep in mind that
the Securities and Exchange Commission requires the extensive detail in the
proxy document, and each and every fact must be documented by the Company.
We know the proxy is long and complicated. Therefore, we would like to explain
what we view as the key points. We've also included with this letter answers to
questions many of you have raised.
THE J.C. NICHOLS BOARD BELIEVES THE HIGHWOODS OFFER IS IN THE BEST INTERESTS OF
ALL SHAREHOLDERS
Your Board of Directors believes there are three key reasons to vote for the
J.C. Nichols/Highwoods merger: the transaction offers superior value to all J.C.
Nichols shareholders, with the certainty that shareholders will receive that
value as quickly as possible; the Highwoods offer is the best offer, and it is
the only offer; and Highwoods has made important commitments that will assure
that J.C. Nichols maintains its unique role in the life of Kansas City.
1. SUPERIOR VALUE FOR YOUR J.C. NICHOLS SHARES, NOW
You are being offered $65 in cash, Highwoods stock, or a combination of the two,
for your shares in J.C. Nichols.1 You must fill out the cash election form you
have received in order to indicate the percentages of cash and stock you would
like in exchange for your shares. If you hold your stock in street name, you
probably did not receive a cash election form. Instead, your stock broker should
contact you and ask you for your election. Once the votes are counted and we
determine what percentages of stock and cash were elected, we will be able to
determine how much of each you will get. You will, however, receive at least 40%
cash if you and all shareholders were to elect to receive all cash.
o To the extent that you receive cash, you will receive $65 a share in
cash. To the extent that you receive Highwoods stock, you will receive
between 1.84 and 2.03 shares of Highwoods stock, depending on the
average price of Highwoods for the 20 days prior to closing of the
merger. The agreement is structured to help ensure that those receiving
Highwoods stock will get approximately $65 for each
- - --------
1 Subject to the terms outlined in the proxy statement.
<PAGE>
share of J.C. Nichols. For more information, please see pages 10, 11
and 14 of the proxy and the attached questions and answers.
o This $65 per share offer represents a tripling in the value of J.C.
Nichols shares since first quarter 1996 when your new Board of
Directors and management team began our efforts to restore the Company
to a sound foundation. This chart illustrates how shareholder value
increased over the past three years:
Value of J.C. Nichols Shares $
---------------------------- -
First Q1/1/95 $ 9.38
First Q1/1/96 $20.00
First Q1/1/97 $29.00
Merger Value $65.00(2)
o To the extent that you receive Highwoods stock you become a
shareholder in Highwoods, a $3 billion real estate investment trust
("REIT"). Highwoods is a dynamic, fast-growing company with a history
of growing dividend payments, and is actively traded on the New York
Stock Exchange.
2. HIGHWOODS IS THE BEST PARTNER
In looking for a strategic partner, your Board of Directors focused on receiving
superior value for J.C. Nichols shareholders. In addition, it looked for three
other critical qualifications:
1. That the partner have the proven track record and experience necessary
to take J.C. Nichols to its next stage of growth and development.
2. That the partner have the necessary financial strength and sound
balance sheet necessary to complete a transaction of this magnitude.
3. That the partner be prepared to make commitments to preserve J.C.
Nichols' unique role as a corporate citizen of Kansas City.
Highwoods is the best partner under all of these criteria. Highwoods' $3 billion
balance sheet and strong credit rating will enable it to increase its investment
in existing J.C. Nichols properties and to develop new locations. Highwoods
believes that J.C. Nichols, Kansas City, and the central Midwest offer
significant opportunities for growth.
Highwoods also has an enviable track record of delivering value to shareholders.
As of March 31, 1998, Highwoods had generated a total return to shareholders of
112% since its initial public offering in June 1994, and had generated an
average annual total return
- - --------
2 Subject to the terms outlined in the proxy statement.
<PAGE>
to shareholders of 22%, although it is important to add that past performance is
not necessarily an indication of future performance.
3. HIGHWOODS IS THE BEST AND ONLY OFFER
The Highwoods offer is the ONLY offer. There is no other offer.
o The J.C. Nichols Board and its investment bankers contacted several
possible strategic merger partners in 1997; Highwoods was the only one
to make a definitive offer for the Company.
o Two other large, prominent real estate companies asked to review J.C.
Nichols records after the Highwoods offer was announced. They reviewed
our records, and then indicated they had decided NOT to pursue a
transaction.
o A little-known company called Intell has said if shareholders don't
approve the merger with Highwoods that Intell MIGHT consider making an
offer for J.C. Nichols. Intell would have no obligation to make an
offer -- AT ANY PRICE.
o Your Board of Directors can make no assurances as to the market price
at which the Company's stock would trade at any future time if the
Highwoods merger is not approved.
4. HIGHWOODS IS COMMITTED TO KANSAS CITY
Highwoods met our final requirement in a strategic partner because it has a
proven reputation for demonstrating its commitment to the locations in which it
operates. Highwoods recognizes J.C. Nichols' unique place in the life of Kansas
City and has made several important commitments to preserve J.C. Nichols' place
as a contributing corporate citizen. Specifically:
o Highwoods fully supports J.C. Nichols' planned $240 million investment
in the expansion and renovation of the Country Club Plaza, the
country's first suburban shopping center.
o Highwoods will continue to provide marketing support for our tenants,
which has always included sponsoring the renowned Christmas Plaza
lights display.
o Highwoods will continue J.C. Nichols' charitable giving in the Kansas
City metropolitan area at, or above, current levels.
Your Board of Directors regards these promises as vital commitments to the
community that has supported the Company's development throughout its history
and will be a major source of its future growth.
WE URGE YOU TO VOTE YOUR SHARES IN FAVOR OF THE HIGHWOODS MERGER
<PAGE>
For all of these reasons, your Board of Directors believes the merger with
Highwoods is in the best interests of all J.C. Nichols shareholders, including
you. It represents a significant premium for your shares, the potential to
receive cash or participate in continued value creation by a strong company with
an excellent track record, and it provides a vital commitment to our community.
Your vote is very important. Under Missouri law, 66 2/3 % of the outstanding
shares must support the merger in order for it to pass. Therefore, we urge you
to please sign, date, and return the blue proxy card today indicating your
support for the merger of J.C. Nichols and Highwoods. Remember: Not voting is
the same as a vote against the merger.
If you have any questions, or if you have not yet received your proxy statement,
please call Innisfree, our proxy firm, which has established a toll-free
Helpline at 1(888)750-5834.
Thank you on behalf of the Board of Directors,
William K. Hoskins
Chairman of the Board
<PAGE>
FREQUENTLY ASKED QUESTIONS AND ANSWERS
Following are questions received from many of you over the past several weeks.
We believe these answers will help to clarify the issues.
1. Q. I've received lots of pieces of paper that are very legally
oriented. How do I know what they all mean?
A. You can call, toll-free 1(888) 750-5834 to Innisfree, our proxy
solicitation firm, who will answer your questions and assist you in voting your
shares.
2. Q. What process will be involved in voting on the merger?
A. We have set the special shareholders meeting for July 1 and have
previously sent to you proxy materials. Since Missouri law requires that 66 2/3%
of J.C. Nichols shareholders support the Highwoods merger in order for it to
pass, we urge you to vote in favor of the merger as soon as possible. To ensure
your vote is counted, your proxy card must be received before the special
meeting.
3. Q. What kind of company is Highwoods?
A. Highwoods is a very large real estate company. The value of
Highwoods' assets is currently $3 billion, and Highwoods is a company with a
very strong balance sheet. Highwoods' management is also very experienced and
has an excellent real estate track record. Your Board of Directors believes that
Highwoods is the best partner to assist J.C. Nichols' growth and development.
4. Q. What exactly will I get for my J.C. Nichols shares?
A. You will receive 1) $65 in cash, or 2) between 1.84 and 2.03 shares
of Highwoods common stock, or 3) a combination of cash and Highwoods stock.
If the election to receive Highwoods stock is made, you will receive
between 1.84 and 2.03 shares of Highwoods stock, depending on the average price
of Highwoods stock for 20 days prior to closing of the merger transaction. For
example, if the average price is between $32 and $35.35, you will receive
whatever number of Highwoods shares equates to $65 in value based on the 20 day
average. If the 20 day average price is below $32,
<PAGE>
you will receive 2.03 Highwoods shares. If the 20 day average price is above
$35.35, you will receive 1.84 shares.
If the election to receive cash is made, you will receive $65 in cash.
However, no more than 40% of the total merger consideration will be paid in
cash. This means that if shareholders representing more than 40% of the total
shares elect cash, you will receive a pro-rata amount of cash with the remainder
in Highwoods stock.
5. Q. How do regular shareholders choose cash v. stock?
A. Regular (non-ESOP participants) should complete the yellow Election
Form received with proxy materials and return it to the Exchange Agent no later
than June 24, 1998. If you hold your Company stock in street name, your stock
broker may have decided not to send to you the yellow cash election form.
Instead, you should be contacted by your broker in order to make your cash or
stock election.
6. Q. If I receive stock, can I convert it to cash? If so, how fast?
A. If you receive stock, you can sell it through your broker once you
receive the shares. Highwoods is a very large company, listed on the New York
Stock Exchange. Its stock trades actively and its stock price is quoted every
day in The Wall Street Journal.
7. Q. How is the 20-day moving average of Highwoods' share price
calculated?
A. The calculation will be based upon the average of the daily averages
of the high and low sales prices for each of the 20 trading days prior to the
closing. (See pgs. 10-11 of the proxy.)
8. Q. Will I have to pay taxes in connection with the transaction?
A. To the extent you receive cash, you will recognize gain. If you
receive Highwoods stock, you will not pay taxes on that stock amount until you
sell the Highwoods stock. The general tax consequences are outlined in the proxy
on pages 45-56. We urge you to consult with a tax or investment advisor.
9. Q. How do I know that $65 is a fair price? Were other offers
received that were higher than $65?
<PAGE>
A. Morgan Stanley & Co., J.C. Nichols' independent financial advisor,
has advised the Board that this is a fair price. The price represents a tripling
in value of J.C. Nichols shares since our new management team arrived.
It is also important to understand that there are no higher
offers. Two solid, highly respected companies did ask to look at our
books after expressing their interest in making an offer. We invited
them to examine our records. After doing so, they chose not to make any
offer. Intell, a little known company, has hinted that it might make a
higher offer. If the Highwoods offer is voted down, Intell would be
under no obligation to make an offer at any price.
We also understand that a company called Bosfield made its
interest known to the ESOT Trustee, however, we do not know how the
Trustee responded. No offer was ever made to the Company or its Board
of Directors.
10. Q. have read that Intell will not make an offer because of the
so-called "break up fee."
A. "Break up fees" are customary in merger agreements. Therefore, we
would not expect this provision to impede a serious bidder from making a higher
offer.
11. Q. If the merger is not approved, what will happen?
A. J.C. Nichols does not have sufficient cash on hand to meet its
anticipated cash needs beyond 1998. If the merger is not approved, the Company
will have to move quickly to raise capital or borrow funds to meet its cash
needs. In the event J.C. Nichols were to sell common stock to generate cash, it
may be forced to do so at a price below $65 a share.
