HIGHWOODS PROPERTIES INC
424B5, 1998-04-17
REAL ESTATE INVESTMENT TRUSTS
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<PAGE>
                                                Filed Pursuant to Rule 424(b)(5)
                                                File Number 333-31183


PROSPECTUS SUPPLEMENT
- ---------------------
(To Prospectus dated January 22, 1998)


                                 441,176 Shares

                       HIGHWOODS PROPERTIES, INC. (logo)

                                   Common Stock
                                 ---------------

     Highwoods Properties, Inc. (the "Company") is a self-administered and
self-managed equity real estate investment trust ("REIT") that began operations
through a predecessor in 1978. The Company is one of the largest owners and
operators of office and industrial properties in the Southeast. As of March 31,
1998, the Company owned 530 properties (the "Properties") encompassing
approximately 33.9 million rentable square feet located in 19 markets in North
Carolina, Florida, Tennessee, Georgia, Virginia, South Carolina, Maryland and
Alabama. The Properties consist of 382 office properties and 148 industrial
(including 80 service center) properties and are leased to approximately 3,400
tenants. As of March 31, 1998, the Properties were 93% leased.

     All of the shares of common stock, par value $.01 per share, of the
Company (the "Common Stock") offered hereby (the "Offering") are being sold by
the Company. The Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol "HIW." On April 16, 1998, the last reported sale price
of the Common Stock on the NYSE was $33 1/8.


     See "Risk Factors" beginning on page 3 in the accompanying Prospectus for
certain factors relevant to an investment in the Common Stock.
                                ---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
             REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
                                ---------------
     Legg Mason Wood Walker, Incorporated (the "Underwriter") has agreed to
purchase the Common Stock offered hereby from the Company at a price of $32.30
per share, resulting in aggregate proceeds to the Company of $14,199,984.80
after deducting estimated expenses of $50,000 payable by the Company, subject
to the terms and conditions set forth in the Underwriting Agreement. The
Underwriter intends to sell the Common Stock to Van Kampen American Capital
Distributors, Inc. ("Van Kampen American Capital") for an aggregate price of
$14,399,984.64, subject to adjustment. Van Kampen American Capital intends to
deposit the Common Stock, together with the common stock of other entities also
acquired from the Underwriter, with the Trustee of the Van Kampen American
Capital REIT Income and Growth Trust, Series 2 (the "Trust"), in exchange for
Units in the Trust. The Company has agreed to indemnify the Underwriter against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."

     The Common Stock offered by this Prospectus Supplement is offered by the
Underwriter, subject to prior sale, when, as and if delivered to and accepted
by the Underwriter and subject to its right to reject orders in whole or in
part. It is expected that delivery of the Common Stock offered hereby will be
made at the offices of Legg Mason Wood Walker, Incorporated, Baltimore,
Maryland, on or about April 21, 1998.


                                ---------------
                             Legg Mason Wood Walker
                                  Incorporated


                                ---------------
           The date of this Prospectus Supplement is April 16, 1998.
 
<PAGE>

     Unless the context otherwise requires, the terms (i) "Company" shall mean
Highwoods Properties, Inc., predecessors of Highwoods Properties, Inc., and
those entities owned or controlled by Highwoods Properties, Inc., including
Highwoods/Forsyth Limited Partnership (the "Operating Partnership") and (ii)
"Properties" shall mean the 382 office and 148 industrial (including 80 service
center) properties owned by the Company as of March 31, 1998.

     Certain matters discussed in this Prospectus Supplement, the attached
Prospectus and the information incorporated by reference herein and therein,
including, without limitation, strategic initiatives, may constitute
forward-looking statements for purposes of the Securities Act of 1933, as
amended (the "Securities Act"), and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and as such may involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company and the Operating Partnership to be materially
different from future results, performance or achievements expressed or implied
by such forward-looking statements. Important factors that could cause the
actual results, performance or achievements of the Company and the Operating
Partnership to differ materially from the Company's and the Operating
Partnership's expectations are disclosed or incorporated by reference in this
Prospectus Supplement and the attached Prospectus ("Cautionary Statements"),
including, without limitation, those statements made in conjunction with the
forward-looking statements included herein. All forward-looking statements
attributable to the Company and the Operating Partnership are expressly
qualified in their entirety by the Cautionary Statements.


                                  THE COMPANY

General

     The Company is a self-administered and self-managed equity REIT that began
operations through a predecessor in 1978. The Company is one of the largest
owners and operators of office and industrial properties in the Southeast. As
of March 31, 1998, the Company owned a diversified portfolio of 530 in-service
office and industrial properties encompassing approximately 33.9 million
rentable square feet located in 19 markets in North Carolina, Florida,
Tennessee, Georgia, Virginia, South Carolina, Maryland and Alabama. The
Properties consist of 382 office properties and 148 industrial (including 80
service center) properties and are leased to approximately 3,400 tenants. At
March 31, 1998, the Properties were 93% leased. An additional 32 properties
(the "Development Projects"), which will encompass approximately 3.6 million
rentable square feet, are under development in North Carolina, Florida,
Virginia, Tennessee, Georgia, Maryland and South Carolina. The Company also
owns 718 acres (and has agreed to purchase an additional 567 acres) of land for
future development (the "Development Land"). The Development Land is zoned and
available for office and/or industrial development, substantially all of which
has utility infrastructure already in place.

     The Company conducts substantially all of its activities through, and
substantially all of its properties are held directly or indirectly by, the
Operating Partnership. The Operating Partnership is controlled by the Company,
as its sole general partner, which owns approximately 83% of the common
partnership interests (the "Common Units") in the Operating Partnership. The
remaining Common Units are owned by limited partners (including certain
officers and directors of the Company). Other than Common Units held by the
Company, each Common Unit may be redeemed by the holder thereof for the cash
value of one share of common stock of the Company, $.01 par value (the "Common
Stock"), or, at the Company's option, one share (subject to certain
adjustments) of Common Stock. With each such exchange, the number of Common
Units owned by the Company and, therefore, the Company's percentage interest in
the Operating Partnership, will increase.

     In addition to owning the Properties, the Development Projects and the
Development Land, the Company provides leasing, property management, real
estate development, construction and miscellaneous tenant services for its
properties as well as for third parties. The Company conducts its third-party
fee-based services through Highwoods Tennessee Properties, Inc., a wholly owned
subsidiary of the Company, and Highwoods Services, Inc., a subsidiary of the
Operating Partnership.

     The Company was formed in North Carolina in 1994. The Company's executive
offices are located at 3100 Smoketree Court, Suite 600, Raleigh, North Carolina
27604, and its telephone number is (919) 872-4924. The Company also maintains
regional offices in Winston-Salem, Greensboro and Charlotte, North Carolina;
Richmond, Virginia; Baltimore, Maryland; Nashville and Memphis, Tennessee;
Atlanta, Georgia; and Tampa, Boca Raton, Tallahassee and Jacksonville, Florida;
and South Florida.


                                      S-2
<PAGE>

                              RECENT DEVELOPMENTS

     Set forth below is a summary description of the recent financing
activities of the Company and the Operating Partnership:


Concurrent Series D Preferred Offering

     On April 16, 1998, the Company entered into an agreement to sell 4,000,000
Depositary Shares (the "Depositary Shares"), each representing  1/10 of a share
of the Company's 8% Series D Cumulative Redeemable Preferred Shares, par value
$.01 per share (the "Series D Preferred Shares"), for net proceeds of
approximately $96.7 million (the "Concurrent Series D Preferred Offering").
Dividends on the Series D Preferred Shares represented by the Depositary Shares
will be cumulative from the date of original issuance and will be payable
quarterly on or about the last day of January, April, July and October of each
year, commencing on July 31, 1998, at the rate of 8% of the liquidation
preference per annum (equivalent to $2.00 per annum per Depositary Share). The
Series D Preferred Shares and the Depositary Shares representing such Series D
Preferred Shares are not redeemable prior to April 23, 2003. The Series D
Preferred Shares are thereafter subject to redemption by the Company, in whole
or in part, at a redemption price of $250 per share (equivalent to $25 per
Depositary Share), plus accrued and unpaid dividends, if any, thereon. The
redemption price (other than the portion thereof consisting of accrued and
unpaid dividends) is payable solely out of the sale proceeds of other capital
stock of the Company, which may include other series of preferred stock, and
from no other source.

     With respect to the payment of dividends and amounts upon liquidation, the
Series D Preferred Shares will rank pari passu with the Company's 8 5/8% Series
A Cumulative Redeemable Preferred Shares (the "Series A Preferred Shares") and
8% Series B Cumulative Redeemable Preferred Shares (the "Series B Preferred
Shares") and any other equity securities of the Company the terms of which
provide that such equity securities rank on a parity with the Series D
Preferred Shares and rank senior to the Common Stock and any other equity
securities of the Company that by their terms rank junior to the Series D
Preferred Shares. Dividends on the Series D Preferred Shares will accrue
whether or not the Company has earnings, whether or not there are funds legally
available for the payment of such dividends and whether or not such dividends
are declared. The Series D Preferred Shares have a liquidation preference of
$250 per share (equivalent to $25 per Depositary Share), plus an amount equal
to any accrued and unpaid dividends.

     The preceding discussion of the Depositary Shares and the Series D
Preferred Shares is in all respects subject to and qualified in its entirety by
reference to the applicable provisions of the Company's prospectus supplement
regarding the Concurrent Series D Preferred Offering filed with the Securities
and Exchange Commission pursuant to Rule 424(b) of the Securities Act.


Concurrent Debt Offering

     On April 15, 1998, the Operating Partnership entered into an agreement to
sell $200 million of 7 1/2% notes due April 15, 2015 (the "Notes") in an
underwritten public offering for net proceeds of approximately $197.4 million
(the "Concurrent Debt Offering"). Interest on the Notes will be payable
semi-annually on April 15 and October 15 of each year. The Concurrent Debt
Offering is expected to close April 20, 1995.

     The preceding discussion of the Notes is in all respects subject to and
qualified in its entirety by reference to the applicable provisions of the
Operating Partnership's prospectus supplement regarding the Concurrent Debt
Offering filed with the Securities and Exchange Commission pursuant to Rule
424(b) of the Securities Act.


                                USE OF PROCEEDS

     The net cash proceeds to the Company from the sale of the shares of Common
Stock offered in the Offering are expected to be approximately $14.2 million.
The Company intends to use the net proceeds of the Offering, together with the
net proceeds of the Concurrent Series D Preferred Offering and the Concurrent
Debt Offering, to pay down approximately $301.9 million of indebtedness
currently outstanding on its $430 million aggregate amount of revolving lines
of credit (the "Revolving Loans") and to pay approximately $6.4 million to
settle a treasury lock agreement. As of April 16, 1998, approximately $344
million of indebtedness was outstanding on the Revolving Loans, which bore
interest at a weighted average interest rate of 6.79%.


                                      S-3
<PAGE>

                                 CAPITALIZATION

     The following table sets forth the capitalization of the Company as of
December 31, 1997 and on a pro forma basis assuming that each of the following
occurred as of December 31, 1997: (i) the issuance and sale of the 441,176
shares of Common Stock offered hereby and the application of the net proceeds
therefrom as described under "Use of Proceeds," (ii) the Concurrent Series D
Preferred Offering, (iii) the Concurrent Debt Offering, (iv) the sale of
428,572 shares of Common Stock on March 30, 1998 for net proceeds of
approximately $14.2 million (the "March 1998 Offering"), (v) the sale of an
aggregate of 1,553,604 shares of Common Stock on February 12, 1998 for net
proceeds of approximately $51.2 million (the "February 1998 Common Stock
Offerings"), (vi) the sale by the Operating Partnership on February 2, 1998 of
$125 million of 6.835% MandatOry Par Put Remarketed Securities(SM)
("MOPPRS(SM)") due February 1, 2013 and $100 million of 7 1/8% notes due
February 1, 2008 (the "February 1998 Debt Offering"), (vii) the sale of
2,000,000 shares of Common Stock on January 27, 1998 for net proceeds of
approximately $68.2 million (the "January 1998 Offering") and (viii) the
acquisition of the Garcia portfolio (the "Garcia Transaction"). The
capitalization table should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" incorporated by
reference herein and the Company's financial statements and notes thereto
incorporated by reference herein.

<TABLE>
<CAPTION>
                                                                                        December 31, 1997
                                                                                 -------------------------------
                                                                                   Historical        Pro Forma
                                                                                 --------------   --------------
                                                                                         (in thousands)
<S>                                                                              <C>              <C>
Debt:
  Revolving Loans ............................................................     $  314,500       $       --
  Mortgage notes .............................................................        354,058          378,058
  6 3/4% Notes due 2003 ......................................................        100,000          100,000
  7% Notes due 2006 ..........................................................        110,000          110,000
  Exercisable Put Option Notes due 2011 (1) ..................................        100,000          100,000
  7 1/8% Notes due 2008 ......................................................             --          100,000
  6.835% MOPPRS(SM) due 2013 .................................................             --          125,000
  7 1/2% Notes due 2018 ......................................................             --          200,000
                                                                                   ----------       ----------
   Total debt ................................................................        978,558        1,113,058
                                                                                   ----------       ----------
Minority interest in the Operating Partnership ...............................        287,186          287,186
Stockholders' equity: ........................................................
  Preferred Stock, $.01 par value; 10,000,000 authorized (2)
   8 5/8% Series A Cumulative Redeemable Preferred Shares (liquidation
    preference $1,000 per share), 125,000 shares issued and outstanding.......        125,000          125,000
   8% Series B Cumulative Redeemable Preferred Shares (liquidation
    preference $25 per share), 6,900,000 shares issued and outstanding........        172,500          172,500
   8% Series D Cumulative Redeemable Preferred Shares (liquidation
    preference $250 per share), 0 shares and 400,000 shares, respectively,
    issued and outstanding ...................................................             --          100,000
  Common Stock, $.01 par value; 100,000,000 authorized, 46,838,600 shares
   and 51,261,952 shares, respectively, issued and outstanding (3) ...........            468              513
  Additional paid-in capital .................................................      1,132,100        1,276,590
  Accumulated deficit ........................................................        (28,627)         (28,627)
                                                                                   ----------       ----------
   Total stockholders' equity ................................................      1,401,441        1,645,976
                                                                                   ----------       ----------
   Total capitalization ......................................................     $2,667,185       $3,046,220
                                                                                   ==========       ==========
Cash and cash equivalents ....................................................     $   10,146       $  267,446
                                                                                   ==========       ==========
</TABLE>

- ----------
 (1) On June 24, 1997, a trust formed by the Operating Partnership sold $100
     million of Exercisable Put Option Securities ("X-POS(SM)"), which represent
     fractional undivided beneficial interests in the trust. The assets of the
     trust consist of, among other things, $100 million of Exercisable Put
     Option Notes (the "Put Option Notes"). The X-POS(SM) bear an interest rate
     of 7.19% and mature on June 15, 2004, representing an effective borrowing
     cost of 7.09%, net of a related put option and certain interest rate
     protection agreement costs. Under certain circumstances, the Put Option
     Notes could also become subject to early maturity on June 15, 2004.

 (2) The Company's Amended and Restated Articles of Incorporation have
     classified and designated 1,000,000 shares of Series C Junior
     Participating Preferred Stock, none of which is currently issued or
     outstanding, in connection with the Company's Shareholders' Rights Plan.
     See "Description of Common Stock -- Certain Provisions Affecting Change in
     Control" in the accompanying Prospectus.

 (3) Excludes (a) 10,449,197 (historical) and 10,449,197 (pro forma) shares of
     Common Stock that may be issued upon redemption of Common Units (which are
     redeemable by the holder for cash or, at the Company's option, shares of
     Common Stock on a one-for-one basis) issued in connection with the
     formation of the Company and subsequent property acquisitions, (b)
     2,500,000 shares of Common Stock reserved for issuance upon exercise of
     options granted pursuant to the Amended and Restated 1994 Stock Option
     Plan, (c) 1,729,290 shares of Common Stock that may be issued upon the
     exercise of outstanding warrants granted to certain officers in connection
     with certain property acquisitions, (d) 354,000 shares of Common Stock
     that may be issued upon redemption of Common Units that may be issued in
     connection with certain property acquisitions and (e) 40,542 shares of
     Common Stock that may be issued pursuant to earn-out provisions in an
     acquisition agreement.


                                      S-4
<PAGE>

                            SELECTED FINANCIAL DATA

     The following table sets forth selected financial and operating data for
the Company on a historical and a pro forma basis. The pro forma operating data
for the year ended December 31, 1997 has been derived by the application of pro
forma adjustments to the Company's audited consolidated financial statements
incorporated herein by reference and assumes that the following transactions
all occurred as of January 1, 1997: (i) the acquisition of Century Center
Office Park and an affiliated property portfolio, (ii) the merger with Anderson
Properties, Inc. and its affiliates, (iii) the issuance of 125,000 Series A
Preferred Shares, (iv) the issuance of the X-POS(SM), (v) the issuance of
1,800,000 shares of Common Stock in August 1997, (vi) the merger with ACP,
(vii) the issuance of 8,500,000 shares of Common Stock in October 1997, (viii)
the issuance of 6,900,000 Series B Preferred Shares, (ix) the Selected Fourth
Quarter 1997 Transactions (as defined herein), (x) the Garcia Transaction, (xi)
the January 1998 Offering, (xii) the February 1998 Debt Offering, (xiii) the
February 1998 Common Stock Offerings, (xiv) the March 1998 Offering, (xv) the
Concurrent Debt Offering, (xvi) the Concurrent Series D Preferred Offering and
(xvii) this Offering. The pro forma balance sheet as of December 31, 1997
assumes that the Garcia Transaction, the January 1998 Offering, the February
1998 Debt Offering, the February 1998 Common Stock Offerings, the March 1998
Offering, the Concurrent Debt Offering, the Concurrent Series D Preferred
Offering and this Offering all occurred as of December 31, 1997. The pro forma
financial information is unaudited and is not necessarily indicative of what
the financial position and results of operations of the Company would have been
as of and for the periods indicated, nor does it purport to represent the
future financial position and results of operations for future periods.

     "Selected Fourth Quarter 1997 Transactions" include the Riparius
Transaction and the following property acquisitions: (i) Winners Circle in
Nashville, TN; (ii) the Shelton portfolio in the Piedmont Triad; (iii)
NationsBank Plaza in Greenville, SC; (iv) Exchange Plaza in Atlanta, GA; (v)
Cypress West in Tampa, FL; (vi) Marnier Square in Tampa, FL; (vii) Zurn in
Tampa, FL; and (viii) Avion in Ft. Lauderdale, FL.

     The following information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
incorporated by reference herein and the Company's financial statements and
notes thereto incorporated by reference herein.

                                      S-5
<PAGE>


<TABLE>
<CAPTION>
                                                               Pro forma
                                                          -------------------     Year Ended      Year Ended       Year Ended
                                                               Year Ended        December 31,    December 31,     December 31,
                                                           December 31, 1997         1997            1996             1995
                                                          -------------------   -------------   --------------   -------------
                                                                    (dollars in thousands except per share amounts)
<S>                                                       <C>                   <C>             <C>              <C>
Operating Data:
 Total revenue ........................................       $   363,078        $   274,470     $   137,926      $   73,522
 Rental property operating expenses (1) ...............           113,801             76,743          35,313          17,049
 General and administrative ...........................            10,216             10,216           5,666           2,737
 Interest expense .....................................            66,260             47,394          26,610          13,720
 Depreciation and amortization ........................            60,636             47,533          22,095          11,082
                                                              -----------        -----------     -----------      ----------
 Income before minority interest ......................           112,165             92,584          48,242          28,934
 Minority interest ....................................           (18,646)           (15,106)         (6,782)         (4,937)
                                                              -----------        -----------     -----------      ----------
 Income before extraordinary item .....................            93,519             77,478          41,460          23,997
 Extraordinary item-loss on early
  extinguishment of debt ..............................            (5,799)            (5,799)         (2,140)           (875)
                                                              -----------        -----------     -----------      ----------
 Net income ...........................................            87,720             71,679          39,320          23,122
 Dividends on Preferred Shares ........................           (32,581)           (13,117)             --              --
 Net income available for common stockholders .........       $    55,139        $    58,562     $    39,320      $   23,122
                                                              -----------        -----------     -----------      ----------
 Net income per common share -- Basic (2) .............       $      1.28        $      1.51     $      1.51      $     1.49
                                                              ===========        ===========     ===========      ==========
 Net income per common share -- Diluted (2) ...........       $      1.27        $      1.50     $      1.50      $     1.48
                                                              ===========        ===========     ===========      ==========
Balance Sheet Data
 (at end of period):
 Real estate, net of accumulated depreciation .........       $ 2,725,654        $ 2,614,654     $ 1,377,874      $  593,066
 Total assets .........................................         3,101,341          2,722,306       1,443,440         621,134
 Total mortgages and notes payable ....................         1,113,058            978,558         555,876         182,736
Other Data:
 FFO(3) ...............................................           140,220            127,000          70,620          40,016
 Number of in-service properties ......................               530                481             292             191
 Total rentable square feet ...........................        33,931,000         30,721,000      17,455,000       9,215,000
</TABLE>

- ----------
 (1) Rental property operating expenses include salaries, real estate taxes,
     insurance, repairs and maintenance, property management, security,
     utilities, leasing, development and construction expenses.

 (2) Net income per share has been calculated using the methodology prescribed
     by FASB Statement No. 128. See "Management's Discussion and Analysis of
     Financial Condition and Results of Operations -- FASB Statement No. 128"
     incorporated by reference herein.

 (3) Funds From Operations ("FFO") is defined as net income, computed in
     accordance with generally accepted accounting principles ("GAAP"),
     excluding gains (losses) from debt restructuring and sales of property,
     plus depreciation and amortization and after adjustments for
     unconsolidated partnerships and joint ventures. Management generally
     considers FFO to be a useful financial performance measurement of an
     equity REIT because, together with net income and cash flows, FFO provides
     investors with an additional basis to evaluate the ability of a REIT to
     incur and service debt and to fund acquisitions and other capital
     expenditures. FFO does not represent net income or cash flows from
     operating, investing or financing activities as defined by GAAP. It should
     not be considered as an alternative to net income as an indicator of the
     Company's operating performance or to cash flows as a measure of
     liquidity. FFO does not measure whether cash flow is sufficient to fund
     all cash needs including principal amortization, capital improvements and
     distributions to stockholders. Further, funds from operations statistics
     as disclosed by other REITs may not be comparable to the Company's
     calculation of FFO.


                                      S-6
<PAGE>

                   CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

     A summary of the federal income tax considerations relating to the
Company's REIT status and to the Operating Partnership is set forth in the
accompanying Prospectus. The following summary supplements the discussion of
the federal income tax considerations set forth in the accompanying Prospectus.
It is based on current law, is for general purposes only, and is not tax
advice.

     EACH INVESTOR OF THE COMMON STOCK IS ADVISED TO CONSULT HIS OR HER OWN TAX
ADVISOR REGARDING THE TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE, OWNERSHIP
AND SALE OF THE COMMON STOCK, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP AND SALE OF THE COMMON STOCK
AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.


Termination Payments if J.C. Nichols Transaction Fails to Occur

     On December 22, 1997, the Company entered into a merger agreement (the
"Merger Agreement") with J.C. Nichols Company ("J.C. Nichols") pursuant to
which J.C. Nichols, under certain circumstances, may be required to pay the
Company a termination fee and expenses of up to an aggregate of $17.2 million
if J.C. Nichols enters into an acquisition proposal other than the Merger
Agreement. All or a portion of the termination fee and expense reimbursement
received by the Company pursuant to the Merger Agreement may be non-qualifying
income under the 95% and 75% gross income tests and could adversely effect the
Company's ability to satisfy the REIT qualification tests in the event that the
total amount of non-qualifying income received by the Company exceeds the
permissible thresholds. See "Federal Income Tax Considerations -- Requirements
for Qualification --  Income Tests" in the accompanying Prospectus. Management
believes that based on the Company's estimated gross income for the year that
will end December 31, 1998, the receipt of these amounts would not result in a
violation of either the 95% or the 75% gross income test.


Proposed Legislation

     Under current law, the Company cannot own more than 10% of the outstanding
voting securities (other than those securities includible in the 75% asset
test) of any one issuer and qualify for taxation as a REIT. See "Federal Income
Tax Considerations -- Requirements for Qualification -- Asset Tests." For
example, the Operating Partnership owns 100% of the nonvoting stock and 1% of
the voting stock of Highwoods Services, Inc., ("Highwoods Services") and, by
virtue of its ownership of Common Units, the Company is considered to own its
pro rata share of such stock. Neither the Company nor the Operating
Partnership, however, own more than 1% of the voting securities of Highwoods
Services and the 10% test is satisfied.

     The Company conducts certain of its third-party fee-based services (i.e.,
leasing, property management, real estate development, construction and other
miscellaneous services) through Highwoods Services. The President's Budget
Proposal for Fiscal Year 1999 (the "Budget Proposal") includes a provision to
restrict these types of activities conducted by REITs under current law by
expanding the ownership limitation from no more than 10% of the voting
securities of an issuer to no more than 10% of the vote or value of all classes
of the issuer's stock. The Company, therefore, could not own stock (either
directly or indirectly through the Operating Partnership) possessing more than
10% of the vote or value of all classes of any issuer's stock.

     The Budget Proposal would be effective only with respect to stock directly
or indirectly acquired by the Company on or after the date of first committee
action. To the extent that the Company's stock ownership in Highwoods Services
is grandfathered by virtue of this effective date, that grandfathered status
will terminate if Highwoods Services engages in a trade or business that it is
not engaged in on the date of first committee action or acquires substantial
new assets on or after that date. Such restriction would adversely affect the
ability to expand the business of Highwoods Services.


                                  UNDERWRITING

     Subject to the terms and conditions contained in an Underwriting Agreement
dated April 16, 1998 (the "Underwriting Agreement") between the Company, the
Operating Partnership and Legg Mason Wood Walker, Incorporated (the
"Underwriter"), the Company has agreed to sell to the Underwriter, and the
Underwriter has agreed to purchase from the Company, 441,176 shares of Common
Stock. The Underwriting Agreement provides


                                      S-7
<PAGE>

that the Underwriter's obligation to purchase the Common Stock is subject to
the satisfaction of certain conditions, including the receipt of certain legal
opinions. The nature of the Underwriter's obligation is such that it is
committed to purchase all of the shares of Common Stock if any shares are
purchased.

     The Underwriter intends to sell the Common Stock to Van Kampen American
Capital, which intends to deposit the Common Stock, along with the common stock
of other entities purchased from the Underwriter, with the Trustee of the Trust
in exchange for Units in the Trust. The Underwriter is not an affiliate of Van
Kampen American Capital or the Trust. The Underwriter intends to sell the
Common Stock to Van Kampen American Capital for an aggregate price of
$14,399,984.64, subject to adjustment. It is anticipated that the Underwriter
will also participate in the distribution of the units in the Trust and will
receive compensation of 3.25% of the public offering price of the Units sold by
it.

     Pursuant to the Underwriting Agreement, the Company has agreed to
indemnify the Underwriter against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments the Underwriter may be
required to make in respect thereof.

     In the ordinary course of business, the Underwriter may from time to time
provide investment banking, financial advisory and commercial banking services
to the Company and its affiliates for which customary compensation will be
received.


                                 LEGAL MATTERS

     Certain legal matters will be passed upon for the Company by Alston & Bird
LLP, Raleigh, North Carolina. Certain legal matters related to the Offering
will be passed upon for the Underwriter by Hunton & Williams, Richmond,
Virginia.


                                      S-8
<PAGE>

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  No dealer, salesperson or other person has been authorized to give any
information or make any representations other than those contained or
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus in connection with the offer contained herein, and, if given or
made, such information or representations must not be relied upon as having
been authorized by the Company or the Underwriter. This Prospectus Supplement
and the accompanying Prospectus do not constitute an offer to sell, or a
solicitation of an offer to buy, the Shares in any state to any person to whom
it is not lawful to make such offer in such state. The delivery of this
Prospectus Supplement and the accompanying Prospectus at any time does not
imply that the information herein and therein is correct as of any time
subsequent to its date.


                      -----------------------------------
                               TABLE OF CONTENTS



<TABLE>
<CAPTION>
                                                       Page
                                                      -----
<S>                                                   <C>
                     Prospectus Supplement
The Company .......................................    S-2
Recent Developments ...............................    S-3
Use Of Proceeds ...................................    S-3
Capitalization ....................................    S-4
Selected Financial Data ...........................    S-5
Certain Federal Income Tax Considerations .........    S-7
Underwriting ......................................    S-7
Legal Matters .....................................    S-8
                 Prospectus
Available Information .............................    2
Incorporation Of Certain Documents By
   Reference ......................................    2
The Company And The Operating
   Partnership ....................................    3
Risk Factors ......................................    3
Use Of Proceeds ...................................    7
Ratios Of Earnings To Combined Fixed
   Charges And Preferred Stock Dividends ..........    8
Description Of Debt Securities ....................    8
Description Of Preferred Stock ....................   20
Description Of Series A Preferred Shares ..........   25
Description Of Series B Preferred Shares ..........   26
Description Of Depositary Shares ..................   26
Description Of Common Stock .......................   30
Federal Income Tax Considerations .................   33
Plan Of Distribution ..............................   43
Experts ...........................................   44
Legal Matters .....................................   45
</TABLE>

                                 441,176 Shares




                                   HIGHWOODS
                                PROPERTIES, INC.
                                     (logo)

                        
 
                                 Common Stock





                      -----------------------------------
                   P R O S P E C T U S   S U P P L E M E N T
                      -----------------------------------
                             Legg Mason Wood Walker
                                 Incorporated
                                        
                                        
                                        
                                        
                                 April 16, 1998

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