424B5
FILE NUMBER: 333-31183
PROSPECTUS SUPPLEMENT
- ---------------------
(To Prospectus dated January 22, 1998)
428,572 Shares
(HIGHWOODS PROPERTIES symbol appears here)
HIGHWOODS PROPERTIES, INC.
Common Stock
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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 December
31, 1997, the Company owned 481 properties (the "Properties") encompassing
approximately 30.7 million rentable square feet located in 19 markets in North
Carolina, Florida, Tennessee, Georgia, Virginia, South Carolina, Maryland and
Alabama. The Properties consist of 342 office properties and 139 industrial
(including 73 service center) properties and are leased to approximately 3,100
tenants. As of December 31, 1997, the Properties were 94% 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 March 25, 1998, the last reported sale price
of the Common Stock on the NYSE was $35. See "Price Range of Common Stock and
Distribution History."
See "Risk Factors" beginning on page 3 in the accompanying Prospectus for
certain factors relevant to an investment in the Common Stock.
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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.
---------------
J.C. Bradford & Co., L.L.C. (the "Underwriter") has agreed to purchase the
shares of Common Stock from the Company at a price of $33.25 per share,
resulting in aggregate proceeds to the Company of $14,250,019 before payment of
expenses by the Company estimated at $50,000, subject to the terms and
conditions of the Underwriting Agreement. The Underwriter intends to sell the
shares of Common Stock to the sponsor of a newly-formed unit investment trust
(the "Trust") at an aggregate purchase price of $14,475,019, resulting in an
aggregate underwriting discount of $225,000. See "Underwriting." Such sponsor
intends to deposit the shares of Common Stock into the Trust in exchange for
units in the Trust. The units of the Trust will be sold to investors at a price
based upon the net asset value of the securities in the Trust. For purposes of
this calculation, the value of the Common Stock as of the evaluation time for
units of the Trust on March 25, 1998 was $35 per share of Common Stock.
The shares of Common Stock are being offered by the Underwriter, subject
to prior sale, when, as and if delivered to and accepted by the Underwriter,
subject to approval of certain legal matters by Andrews & Kurth, L.L.P.,
counsel for the Underwriter. It is expected that delivery of the shares of
Common Stock will be made in New York, New York on or about March 30, 1998.
---------------
J.C . Bradford &Co.
The date of this Prospectus Supplement is March 25, 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
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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 342 office and 139 industrial (including 73 service
center) properties owned by the Company as of December 31, 1997. All
information regarding the Properties excludes the 41 properties acquired after
December 31, 1997 and the two properties placed in service after such date.
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. Following its initial public offering
(the "IPO") in 1994, the Company established itself as one of the largest
owners and operators of suburban office and industrial properties in the
Southeast. As of December 31, 1997, the Company owned 481 properties located in
19 markets in North Carolina, Florida, Tennessee, Georgia, Virginia, South
Carolina, Maryland and Alabama.
The Properties consist of 342 office properties and 139 industrial
(including 73 service center) properties, contain an aggregate of approximately
30.7 million rentable square feet and are leased to approximately 3,100
tenants. At December 31, 1997, the Properties were 94% leased. An additional 33
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 899 acres (and has agreed to purchase an additional 386 acres) of land for
future development (collectively, the "Development Land"). The Development Land
is zoned and available for office and/or industrial development; substantially
all of the Development Land has utility infrastructure already in place.
Operating Strategy
The Company believes that it will continue to benefit from the following
factors:
Diversification. Since its IPO in 1994, the Company has significantly
reduced its dependence on any particular market, property type or tenant. At
the time of the IPO, the Company's portfolio consisted almost exclusively of
office properties in the Raleigh-Durham, North Carolina area (the "Research
Triangle"). As of December 31, 1997, the Company's in-service portfolio had
expanded from 41 North Carolina properties (40 of which were in the area) to
481 properties in 19 markets concentrated in the Southeast. Based on December
1997 results, approximately 32% of the rental revenue from the Properties is
derived from properties in North Carolina (18% in the Research Triangle).
In October 1997, the Company significantly expanded its Florida operations
through its business combination with Associated Capital Properties, Inc.
("ACP"). In February 1997, the Company made a significant investment in the
suburban Atlanta market with the acquisition of the Century Center Office Park
and
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a business combination with Anderson Properties, Inc. The Company first entered
the Atlanta market, as well as four markets in Florida and six other markets,
through its September 1996 merger with Crocker Realty Trust, Inc ("Crocker").
Prior to its merger with Crocker, the Company expanded into Winston-Salem/
Greensboro, North Carolina (the "Piedmont Triad") and Charlotte, North Carolina
through a merger with Forsyth Properties, Inc. ("Forsyth") and also completed
significant business combinations in Richmond, Virginia and Nashville,
Tennessee. The Company has focused on markets that, like the Research Triangle,
have strong demographic and economic characteristics.
The Company's strategy has been to assemble a portfolio of properties that
enables the Company to offer buildings with a variety of cost, tenant finish
and amenity choices that satisfy the facility needs of a wide range of tenants
seeking commercial space. This strategy led, in part, to the Company's
combination with Forsyth in February 1995, which added industrial and service
center properties (as well as additional office properties) to its suburban
office portfolio. Today, based on December 1997 results, approximately 91% of
the Company's rental revenue is derived from office properties and 9% is
derived from industrial properties.
The Company has also reduced its dependence on any particular tenant or
tenants in any particular industry. Its tenants represent a diverse
cross-section of the economy. As of December 31, 1997, the 20 largest tenants
of the Properties represented approximately 21.3% of the combined rental
revenue from the Properties, and the largest single tenant accounted for
approximately 3.7% of such revenue. See "The Properties."
Acquisition and Development Opportunities. The Company seeks to acquire
suburban office and industrial properties at prices below replacement cost that
offer attractive returns, including acquisitions of underperforming, high
quality properties in situations offering opportunities for the Company to
improve such properties' operating performance. The Company will also continue
to engage in the selective development of office and industrial projects,
primarily in suburban business parks, and intends to focus on build-to-suit
projects and projects where the Company has identified sufficient demand. In
build-to-suit development, the buildings are significantly pre-leased to one or
more tenants prior to construction. Build-to-suit projects often foster strong
long-term relationships between the Company and the tenant, creating future
development opportunities as the facility needs of the tenant increase.
The Company believes that it has several advantages over many of its
competitors in pursuing development and acquisition opportunities. The Company
has the flexibility to fund acquisitions and development projects from numerous
sources, including the private and public debt markets, proceeds from its
private and public equity offerings, its $430 million aggregate amount of
unsecured revolving loans, other bank and institutional borrowings and the
issuance of common partnership interests ("Common Units") in the Operating
Partnership. Frequently, the Company acquires properties through the exchange
of Common Units for the property owner's equity in the acquired properties.
Each Common Unit received by these property owners is redeemable for cash from
the Operating Partnership or, at the Company's option, shares of Common Stock.
In connection with these transactions, the Company may also assume outstanding
indebtedness associated with the acquired properties. The Company believes that
this acquisition method may enable it to acquire properties at attractive
prices from property owners wishing to enter into tax-deferred transactions. To
date, Common Units have constituted all or part of the consideration for 236
properties comprising 16.5 million rentable square feet and only 1,200 Common
Units have been redeemed for cash, totaling $35,000.
Another advantage is the Company's commercially zoned and unencumbered
Development Land in existing business parks. The Company owns 899 acres (and
has agreed to purchase an additional 386 acres) of Development Land,
substantially all of which has utility infrastructure already in place.
The Company's development and acquisition activities also benefit from its
local market presence and knowledge. The Company's property-level officers have
on average over 18 years of real estate experience in their respective markets.
Because of this experience, the Company is in a better position to evaluate
acquisition and development opportunities. In addition, the Company's
relationships with its tenants and
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<PAGE>
those tenants at properties for which it conducts third-party fee based
services may lead to development projects when these tenants or their
affiliates seek new space. Also, its relationships with other property owners
for whom it provides third-party management services generate acquisition
opportunities.
Managed Growth Strategy. The Company's strategy has been to focus its real
estate activities in markets where it believes its extensive local knowledge
gives it a competitive advantage over other real estate developers and
operators. As the Company has expanded into new markets, it has continued to
maintain this localized approach by combining with local real estate operators
with many years of development and management experience in their respective
markets. Also, in making its acquisitions, the Company has sought to employ
those property-level managers who are experienced with the real estate
operations and the local market relating to the acquired properties, so that
approximately three-quarters of the rentable square footage of the Properties
was either developed by the Company or is managed on a day-to-day basis by
personnel that previously managed, leased and/or developed those Properties
prior to their acquisition by the Company.
Efficient, Customer Service-Oriented Organization. The Company provides a
complete line of real estate services to its tenants and third parties. The
Company believes that its in-house development, acquisition, construction
management, leasing and management services allow it to respond to the many
demands of its existing and potential tenant base, and enable it to provide its
tenants cost-effective services such as build-to-suit construction and space
modification, including tenant improvements and expansions. In addition, the
breadth of the Company's capabilities and resources provides it with market
information not generally available. The Company believes that the operating
efficiencies achieved through its fully integrated organization also provide a
competitive advantage in setting its lease rates and pricing other services.
Flexible and Conservative Capital Structure. The Company is committed to
maintaining a flexible and conservative capital structure that: (i) allows
growth through development and acquisition opportunities; (ii) provides access
to the private and public equity and debt markets on favorable terms; and (iii)
promotes future earnings growth.
The Company and the Operating Partnership have demonstrated a strong and
consistent ability to access the private and public equity and debt markets.
Since the IPO, the Company has completed eight public offerings and two private
placements of its Common Stock, one public offering of 8 5/8% Series A
Cumulative Redeemable Preferred Shares (the "Series A Preferred Shares") and
one public offering of 8% Series B Cumulative Redeemable Preferred Shares (the
"Series B Preferred Shares"), raising total net proceeds of approximately $1.3
billion, which were contributed to the Operating Partnership in exchange for
additional partnership interests as required by the Operating Partnership
Agreement. On December 2, 1996, the Operating Partnership issued $100 million
of 6 3/4% notes due December 1, 2003 and $110 million of 7% notes due December
1, 2006. On February 2, 1998, the Operating Partnership issued $125 million of
6.835% MandatOry Par Put Remarketed Securities ("MOPPRS") due February 1, 2013
and $100 million of 7 1/8% notes due February 1, 2008.
On June 24, 1997, a trust formed by the Operating Partnership sold $100
million of X-POSSM, 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 due June 15, 2011 issued by the
Operating Partnership (the "Put Option Notes"). The X-POSSM 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.
In addition, the Company has two unsecured revolving lines of credit
aggregating $430 million (the "Revolving Loans") with a syndicate of lenders.
Interest accrues on borrowings under a $280 million Revolving Loan at an
average interest rate of LIBOR plus 100 basis points and under a $150 million
Revolving Loan at an average interest rate of LIBOR plus 90 basis points. As of
March 20, 1998, interest on the outstanding balance on the Revolving Loans was
payable monthly at a weighted average interest rate of 6.67%.
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<PAGE>
RECENT DEVELOPMENTS
Recent Acquisitions
Business Combination with Associated Capital Properties, Inc. In October
of 1997, the Company completed a business combination with ACP (the "ACP
Transaction") and acquired a portfolio of 84 office properties located in
Florida (the "ACP Properties"). The ACP Transaction involved 84 office
properties encompassing 6.4 million rentable square feet and approximately 50
acres of land for development with a build-out capacity of 1.9 million square
feet. At December 31, 1997, the ACP Properties were approximately 92% leased to
approximately 1,100 tenants including IBM, the state of Florida, Prudential,
Price Waterhouse, AT&T, GTE, Prosource, Lockheed Martin, NationsBank and
Accustaff. Seventy-nine of the ACP Properties are located in suburban
submarkets, with the remaining properties located in the central business
districts of Orlando, Jacksonville and West Palm Beach.
The cost of the ACP Transaction was valued at $617 million and consisted
of the issuance of 2,955,238 Common Units (valued at $32.50 per Common Unit),
the assumption of approximately $481 million of mortgage debt ($391 million of
which was paid off by the Company on the date of closing), the issuance of
117,617 shares of Common Stock (valued at $32.50 per share), a capital expense
reserve of $11 million and a cash payment of approximately $24 million. All
Common Units and Common Stock issued in the transaction are subject to
restrictions on transfer or redemption that will expire over a three-year
period. All lockup restrictions on the transfer of such Common Units or Common
Stock issued to ACP and its affiliates expire in the event of a change of
control of the Company or a material adverse change in the financial condition
of the Company. Such restrictions also expire if James R. Heistand, the former
president of ACP, is not appointed or elected as a director of the Company by
October 7, 1998. Also in connection with the ACP Transaction, the Company
issued to certain affiliates of ACP warrants to purchase 1,479,290 shares of
the Common Stock at $32.50 per share, exercisable after October 1, 2002.
Upon completion of the ACP Transaction, Mr. Heistand became a regional
vice president of the Company responsible for its Florida operations and became
an advisory member of the Company's investment committee. Mr. Heistand is
expected to join the Company's Board of Directors and become a voting member of
the investment committee this year. Mr. Heistand has over 19 years of
commercial real estate experience in Florida. Over 100 employees of ACP have
joined the Company, including the two other members of ACP's senior management
team, Allen C. de Olazarra and Dale Johannes.
Riparius Transaction. In closings on December 23, 1997 and January 8,
1998, the Company completed a business combination with Riparius Development
Corporation in Baltimore, Maryland involving the acquisition of a portfolio of
five office properties encompassing 369,000 square feet, two office development
projects encompassing 235,000 square feet, 11 acres of development land and 101
additional acres of development land to be acquired over the next three years
(the "Riparius Transaction"). As of December 31, 1997, the in-service
properties acquired in the Riparius Transaction were 99% leased. The cost of
the Riparius Transaction consisted of a cash payment of $43.6 million. In
addition, the Company has assumed the two office development projects with an
anticipated cost of $26.2 million expected to be paid in 1998, and will pay out
$23.9 million over the next three years for the 101 additional acres of
development land.
Garcia Transaction. On February 4, 1998, the Company acquired substantially
all of a portfolio consisting of 28 office properties encompassing 787,000
rentable square feet, seven service center properties encompassing 471,000
square feet and 66 acres of development land in Tampa, Florida (the "Garcia
Transaction"). As of December 31, 1997, the properties acquired in the Garcia
Transaction were 92% leased. The cost of the Garcia Transaction consists of a
cash payment of approximately $87 million and the assumption of approximately
$24 million in secured debt. The Company expects to close on the one remaining
property by April 4, 1998.
Other Recent Acquisitions. In addition to the properties acquired in the
ACP Transaction, the Riparius Transaction and the Garcia Transaction, the
Company acquired 21 office properties encompassing approximately 1.9 million
rentable square feet and one office re-development project comprising 309,000
square
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feet for an aggregate of $196.0 million during the fourth quarter of 1997 and
seven office properties encompassing approximately 940,000 rentable square feet
for an aggregate of $130.3 million since December 31, 1997.
Pending Acquisitions
Business Combination with J.C. Nichols Company. On December 22, 1997, the
Company entered into a merger agreement (the "Merger Agreement") with J.C.
Nichols Company, a publicly traded Kansas City real estate operating company
("J.C. Nichols"), pursuant to which the Company would acquire J.C. Nichols with
the view that the Operating Partnership would combine its property operations
with J.C. Nichols (the "J.C. Nichols Transaction"). J.C. Nichols is subject to
the information requirements of the Securities Exchange Act of 1934, as
amended, and, in accordance therewith, files reports and other information with
the Securities and Exchange Commission.
J.C. Nichols owns or has an ownership interest in 27 office properties
encompassing approximately 1.5 million rentable square feet, 13 industrial
properties encompassing approximately 337,000 square feet, 33 retail properties
encompassing approximately 2.5 million rentable square feet and 16 multifamily
communities with 1,816 apartment units in Kansas City, Missouri and Kansas.
Additionally, J.C. Nichols has an ownership interest in 21 office properties
encompassing approximately 1.3 million rentable square feet, one industrial
property encompassing approximately 200,000 rentable square feet and one
multifamily community with 418 apartment units in Des Moines, Iowa. As of
December 31, 1997, the properties to be acquired in the J.C. Nichols
Transaction were 95% leased.
Consummation of the J.C. Nichols Transaction is subject, among other
things, to the approval of 66 2/3% of the shareholders of J.C. Nichols. Under
the terms of the Merger Agreement, the Company would acquire all of the
outstanding common stock, $.01 par value, of J.C. Nichols ("J.C. Nichols Common
Stock"). Under the Merger Agreement, J.C. Nichols shareholders may elect to
receive either 1.84 shares of Common Stock or $65 in cash for each share of
J.C. Nichols Common Stock. However, the cash payment to J.C. Nichols
shareholders cannot exceed 40% of the total consideration and the Company may
limit the amount of Common Stock issued to 75% of the total consideration. The
exchange ratio is fixed and reflects the average closing price of the Common
Stock over the 20 trading days preceding the effective date of the Merger
Agreement. The cost of the J.C. Nichols Transaction under the Merger Agreement
is approximately $570 million, including assumed debt of approximately $250
million, net of cash of approximately $65 million. If J.C. Nichols enters into
a business combination with a third party or otherwise terminates the J.C.
Nichols Transaction, such third party or J.C. Nichols may be required to pay
the Company a break-up fee of up to $14.7 million plus expenses of $2.5
million. Under certain other circumstances, if the J.C. Nichols Transaction is
terminated, the terminating party may be required to pay expenses of $2.5
million to the non-terminating party.
No assurance can be given that all or part of the J.C. Nichols Transaction
will be consummated or that, if consummated, it will follow the terms set forth
in the Merger Agreement. As of the date hereof, certain third parties have
expressed an interest to J.C. Nichols and/or certain of its shareholders in
purchasing all or a portion of the outstanding J.C. Nichols Common Stock at a
price in excess of $65 per share. No assurance can be given that a third party
will not make an offer to J.C. Nichols or its shareholders to purchase all or a
portion of the outstanding J.C. Nichols Common Stock at a price in excess of
$65 per share or that the board of directors of J.C. Nichols would reject any
such offer. The Company and/or J.C. Nichols may terminate the Merger Agreement
if the J.C. Nichols Transaction is not consummated by June 30, 1998.
The properties to be acquired in the J.C. Nichols Transaction include the
Country Club Plaza in Kansas City, which covers 15 square blocks and includes
1.0 million square feet of retail space, 1.1 million square feet of office
space and 462 apartment units. As of December 31, 1997, the Country Club Plaza
was approximately 96% leased. The Country Club Plaza is presently undergoing a
$62 million expansion and restoration expected to add 800,000 square feet of
retail, office, hotel and residential space. Additionally, the Company intends
to implement an additional $240 million of development in the Country Club
Plaza previously planned by J.C. Nichols.
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Assuming completion of the J.C. Nichols Transaction, the Company and the
Operating Partnership would succeed to the interests of J.C. Nichols in a
strategic alliance with Kessinger/Hunter & Company, Inc. ("Kessinger/Hunter")
pursuant to which Kessinger/Hunter manages and leases the office, industrial
and retail properties presently owned by J.C. Nichols in the greater Kansas
City metropolitan area. J.C. Nichols currently has a 30% ownership interest in
the strategic alliance with Kessinger/Hunter and has two additional options to
acquire up to a 65% ownership in the strategic alliance. Assuming completion of
the J.C. Nichols Transaction, the Company and the Operating Partnership would
also succeed to the interests of J.C. Nichols in a strategic alliance with R&R
Investors, Ltd. pursuant to which R&R Investors, Ltd. manages and leases the
properties in which J.C. Nichols has an ownership interest in Des Moines. J.C.
Nichols has an ownership interest of 50% or more in each of the properties in
Des Moines with R&R Investors, Ltd. or its principal.
Assuming completion of the J.C. Nichols Transaction, J.C. Nichols would
retain its name and operate as a division, Barrett Brady, president and chief
executive officer of J.C. Nichols, would become a senior vice president of the
Company responsible for its Midwest operations and approximately 100 employees
of J.C. Nichols would be expected to join the Company. In addition, the Company
would expand its board of directors to include one independent director
selected by J.C. Nichols.
Easton-Babcock Transaction. The Company has entered into an agreement with
The Easton-Babcock Companies, a real estate operating company in Miami, Florida
("Easton-Babcock"), pursuant to which the Company will combine its property
operations with Easton-Babcock and acquire a portfolio of 11 industrial
properties encompassing 1.8 million rentable square feet, three office
properties encompassing 197,000 rentable square feet and 110 acres of land for
development, of which 88 acres will be acquired over a three-year period (the
"Easton-Babcock Transaction"). As of December 31, 1997, the industrial
properties to be acquired in the Easton-Babcock Transaction were 88% leased and
the office properties to be acquired in the Easton-Babcock Transaction were 50%
leased. The cost of the Easton-Babcock Transaction is $143 million and will
consist of an undetermined combination of the issuance of Common Units, the
assumption of mortgage debt and a cash payment. Also in connection with the
Easton-Babcock Transaction, the Company will issue to certain affiliates of
Easton-Babcock warrants to purchase 926,000 shares of Common Stock at $35.50
per share.
Other Acquisition Activity. The Company's investment committee continually
evaluates potential acquisition opportunities in both its existing markets and
in new markets. Accordingly, at any particular time, the Company is likely to
be involved in negotiations (at various stages) to acquire one or more
properties or portfolios.
Financing Activities and Liquidity
Set forth below is a summary description of the recent financing
activities of the Company and the Operating Partnership:
February 1998 Common Stock Offerings. On February 12, 1998, the Company
sold an aggregate of 1,553,604 shares of Common Stock in two underwritten
public offerings (the "February 1998 Common Stock Offerings") for net proceeds
of approximately $51.2 million.
February 1998 Debt Offering. On February 2, 1998, the Operating
Partnership sold $125 million of 6.835% MandatOry Par Put Remarketed Securities
("MOPPRS") due February 1, 2013 and $100 million of 7 1/8% notes due February
1, 2008 (the "February 1998 Debt Offering").
January 1998 Offering. On January 27, 1998, the Company sold 2,000,000
shares of Common Stock in an underwritten public offering (the "January 1998
Offering") for net proceeds of approximately $68.2 million.
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October 1997 Offering. On October 1, 1997, the Company sold 7,500,000
shares of Common Stock in an underwritten public offering for net proceeds of
approximately $249 million. The underwriters exercised a portion of their
over-allotment option for 1,000,000 shares of Common Stock on October 6, 1997,
raising additional net proceeds of $33.2 million (together with the sale on
October 1, 1997, the "October 1997 Offering.")
Quarterly and Yearly 1997 Results
On February 27, 1998, the Company announced results for the quarter ended
December 31, 1997. Revenues for the quarter ended December 31, 1997 totaled
$91.3 million, an 82% increase over the $50.2 million for the same period in
1996. Funds from operations totaled $41.2 million, or $0.72 per basic share
($0.72 per diluted share), for the quarter ended December 31, 1997, compared
with $23.7 million, or $0.64 per basic share ($0.64 per diluted share), for the
same period in 1996.
Revenues for the year ended December 31, 1997 totaled $274.5 million, a
99% increase over the $137.9 million for the year ended December 31, 1996.
Funds from operations totaled $127.0 million, or $2.73 per basic share ($2.71
per diluted share), for the year ended December 31, 1997, compared with $70.6
million, or $2.34 per basic share ($2.32 per diluted share), for the year ended
1996.
The following table sets forth certain summary selected financial
information about the Company:
<TABLE>
<CAPTION>
Unaudited Unaudited Unaudited
-------------- -------------- --------------
Three Months Three Months Year Year
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
-------------- -------------- -------------- -------------
(dollars in thousands except per share amounts)
Operating Data:
<S> <C> <C> <C> <C>
Total revenue ................................................... $ 91,256 $ 50,160 $ 274,470 $ 137,926
Rental property operating expenses (1) .......................... 27,748 13,103 76,743 35,313
General and administrative ...................................... 3,522 1,900 10,216 5,666
Interest expense ................................................ 12,623 11,536 47,394 26,610
Depreciation and amortization ................................... 16,482 8,738 47,533 22,095
----------- ----------- ----------- -----------
Income before minority interest ................................. 30,881 14,883 92,584 48,242
Minority interest ............................................... (5,234) (1,577) (15,106) (6,782)
----------- ----------- ----------- -----------
Income before extraordinary item ................................ 25,647 13,306 77,478 41,460
Extraordinary item-loss on early extinguishment of debt ......... (1,134) -- (5,799) (2,140)
----------- ----------- ----------- -----------
Net income ...................................................... 24,513 13,306 71,679 39,320
Dividends on preferred stock .................................... (6,145) -- (13,117) --
----------- ----------- ----------- -----------
Net income available for common stockholders .................... $ 18,368 $ 13,306 $ 58,562 $ 39,320
=========== =========== =========== ===========
Net income per common share -- Basic (2) ........................ $ 0.39 $ 0.41 $ 1.51 $ 1.51
=========== =========== =========== ===========
Net income per common share -- Diluted (2) ...................... $ 0.39 $ 0.40 $ 1.50 $ 1.50
=========== =========== =========== ===========
Balance Sheet Data
(at end of period):
Real estate, net of accumulated depreciation .................... $ 2,614,654 $ 1,377,874 $ 2,614,654 $ 1,377,874
Total assets .................................................... 2,722,306 1,443,440 2,722,306 1,443,440
Total mortgages and notes payable ............................... 978,558 555,876 978,558 555,876
Other Data:
FFO (3) ......................................................... 41,218 23,691 127,000 70,620
Number of in-service properties ................................. 481 292 481 292
Total rentable square feet ...................................... 30,721,000 17,455,000 30,721,000 17,455,000
</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 "Recent Developments -- FASB Statement No.
128" and the Appendix hereto.
(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
S-9
<PAGE>
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.
FASB Statement No. 128
In 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings Per Share," which is effective for financial
statements for periods ended after December 15, 1997. FASB Statement No. 128
requires the restatement of prior period earnings per share and requires the
disclosure of additional supplemental information detailing the calculation of
earnings per share. A copy of the restatement of prior period earnings per
share is included in the Appendix hereto. See "Index to Appendix."
FASB Statement No. 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. It is computed using the weighted average number of shares of Common
Stock and the dilutive effect of options, warrants and convertible securities
outstanding, using the "treasury stock" method. Earnings per share data is
required for all periods for which an income statement or summary of earnings
is presented, including summaries outside the basic financial statements. In
the Appendix hereto, all earnings per share amounts for all periods have been
presented and, where appropriate, restated, to conform to the FASB Statement
128 requirements.
S-10
<PAGE>
Recent Development Activity
The Company has 33 properties under development in 11 markets totaling
approximately 3.6 million rentable square feet. The following table summarizes
these Development Projects:
<TABLE>
<CAPTION>
Rentable Estimated Cost at Pre-Leasing Estimated
Name Location Square Feet Costs 12/31/97 Percentage* Completion
- -------------------------------- ------------------- ------------- ----------- ---------- ------------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Office Properties:
Ridgefield III Asheville 57,000 $ 5,485 $ 1,638 26% 2Q98
2400 Century Center Atlanta 135,000 16,195 6,527 0 2Q98
10 Glenlakes Atlanta 254,000 35,135 3,360 0 4Q98
Automatic Data Processing Baltimore 110,000 12,400 3,367 100 3Q98
Riparius Center at Owings
Mills Baltimore 125,000 13,800 2,393 0 2Q99
BB&T** Greenville 70,908 5,851 4,703 100 2Q98
Patewood VI Greenville 107,000 11,360 5,202 15 2Q98
Colonnade Memphis 89,000 9,400 5,592 93 2Q98
Southwind C Memphis 73,703 7,657 1,245 67 4Q98
Harpeth V Nashville 65,300 6,900 3,108 66 1Q98
Lakeview Ridge II Nashville 61,300 6,000 2,879 79 1Q98
Southpointe Nashville 103,700 10,878 4,254 61 2Q98
Caterpillar Financial Center Nashville 313,000 54,000 -- 62 1Q00
CNA Orlando 180,000 24,408 -- 95 1Q99
Hard Rock Orlando 63,000 7,000 -- 100 4Q98
Concourse Center One Piedmont Triad 85,500 8,415 -- 0 1Q99
RMIC Piedmont Triad 90,000 7,650 3,971 100 2Q98
Clintrials Research Triangle 178,000 21,490 12,034 100 2Q98
Situs II Research Triangle 59,300 5,857 1,218 0 2Q98
Highwoods Centre Research Triangle 76,000 8,327 960 36 3Q98
Overlook Research Triangle 97,000 10,307 1,083 0 4Q98
Red Oak Research Triangle 65,000 6,394 568 0 3Q98
Markel-American Richmond 106,200 10,650 5,226 55 2Q98
Highwoods V Richmond 67,200 6,620 1,096 100 2Q98
Interstate Corporate Center** Tampa 309,000 15,600 7,040 26 4Q98
Intermedia (Sabal) Phase I Tampa 120,500 12,500 1,331 100 4Q98
Intermedia (Sabal) Phase II Tampa 120,500 13,000 662 100 1Q00
------- -------- ------- ---
Office Total or Weighted
Average 3,182,111 $353,279 $79,457 52%
========= ======== ======= ===
Industrial Properties:
Chastain II & III Atlanta 122,000 $ 4,686 $ 1,359 14% 3Q98
Tradeport 1 Atlanta 87,000 3,070 1,608 0 1Q98
Tradeport 2 Atlanta 87,000 3,070 1,608 0 1Q98
Air Park South Warehouse I Piedmont Triad 100,000 2,929 545 80 1Q98
Airport Center II Richmond 70,200 3,197 2,732 100 1Q98
--------- -------- ------- ---
Industrial Total or
Weighted Average 466,200 $ 16,952 $ 7,852 36%
========= ======== ======= ===
Total or Weighted
Average of all
Development Projects 3,648,311 $370,231 $87,309 50%
========= ======== ======= ===
Summary By Estimated
Completion Date:
First Quarter 1998 470,800 $ 25,166 $12,480 51%
Second Quarter 1998 1,063,308 111,436 51,461 60
Third Quarter 1998 373,000 31,807 6,254 41
Fourth Quarter 1998 917,203 88,199 14,059 34
First Quarter 1999 265,500 32,823 -- 64
Second Quarter 1999 125,000 13,800 2,393 0
First Quarter 2000 433,500 67,000 662 73
--------- -------- ------- ---
3,648,311 $370,231 $87,309 50%
========= ======== ======= ===
</TABLE>
- ----------
* Includes letters of intent
** Redevelopment projects
S-11
<PAGE>
THE PROPERTIES
General
As of December 31, 1997, the Company owned 342 office properties and 139
industrial properties located in 19 markets concentrated in the Southeast. The
office properties are generally mid-rise and single-story suburban office
buildings. The industrial properties include 66 warehouse and bulk distribution
facilities and 73 service center properties. The service center properties have
varying amounts of office finish (usually at least 33%) and their rents vary
accordingly. The service center properties are suitable for office, retail,
light industrial and warehouse uses. In the aggregate, management developed 171
of the 481 Properties. The Company provides management and leasing services for
461 of the 481 Properties.
The following table sets forth certain information about the Properties at
December 31, 1997 in each of the Company's 19 markets:
<TABLE>
<CAPTION>
Percent of
Rentable Total Annualized Percent of
Office Industrial Total Square Rentable Rental Total Annualized
Properties Properties (1) Properties Feet Square Feet Revenue (2) Rental Revenue
------------ ---------------- ------------ ------------ ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Research
Triangle, NC ....... 69 4 73 4,686,120 15.2% $ 65,314,092 17.9%
Atlanta, GA .......... 39 31 70 4,824,831 15.5 44,200,033 12.2
Tampa, FL ............ 42 -- 42 2,904,587 9.5 41,772,977 11.4
Piedmont Triad,
NC ................. 34 79 113 4,738,992 15.3 36,779,925 10.0
South Florida ........ 27 -- 27 2,384,044 7.8 36,511,089 10.0
Nashville, TN ........ 15 3 18 1,821,485 5.9 27,183,735 7.4
Orlando, FL .......... 30 -- 30 1,990,148 6.5 23,756,539 6.5
Jacksonville, FL ..... 16 -- 16 1,465,139 4.8 17,367,432 4.7
Charlotte, NC ........ 15 16 31 1,428,590 4.7 15,158,758 4.1
Richmond, VA ......... 20 2 22 1,278,726 4.2 14,348,878 3.9
Greenville, SC ....... 8 2 10 1,001,641 3.3 11,051,150 3.0
Memphis, TN .......... 9 -- 9 606,549 2.0 10,033,045 2.7
Baltimore, MD ........ 5 -- 5 364,434 1.2 7,837,121 2.1
Columbia, SC ......... 7 -- 7 423,738 1.4 5,553,603 1.5
Tallahassee, FL ...... 1 -- 1 244,676 0.8 3,372,355 0.9
Norfolk, VA .......... 2 1 3 265,857 0.9 2,843,389 0.8
Birmingham, AL........ 1 -- 1 115,289 0.4 1,795,236 0.5
Asheville, NC ........ 1 1 2 124,177 0.4 1,180,068 0.3
Ft. Myers, FL ........ 1 -- 1 51,831 0.2 509,720 0.1
-- -- --- --------- ----- ------------ -----
Total ........... 342 139 481 30,720,854 100.0% $366,569,145 100.0%
=== === === ========== ===== ============ =====
</TABLE>
<TABLE>
<CAPTION>
Office Properties Industrial Properties (1) Total or Weighted Average
------------------- --------------------------- --------------------------
<S> <C> <C> <C>
Total Annualized Rental Revenue (2) .......... $331,936,875 $34,632,270 $ 366,569,145
Total rentable square feet ................... 23,841,565 6,879,289 30,720,854
Percent leased ............................... 94%(3) 93%(4) 94%
Weighted average age (years) ................. 12.2(5) 11.4 12.0
</TABLE>
- ----------
(1) Includes 73 service center properties.
(2) Annualized Rental Revenue is December 1997 rental revenue (base rent plus
operating expense pass throughs) multiplied by 12.
(3) Includes 47 single-tenant properties comprising 3.4 million rentable square
feet and 378,000 rentable square feet leased but not occupied.
(4) Includes 24 single-tenant properties comprising 1.6 million rentable square
feet and 27,000 rentable square feet leased but not occupied.
(5) Excludes the Comeau Building, which is a historical building constructed in
1926 and renovated in 1996.
S-12
<PAGE>
Tenants
As of December 31, 1997, the Properties were leased to approximately 3,100
tenants, which engage in a wide variety of businesses. The following table sets
forth information concerning the 20 largest tenants of the Properties as of
December 31, 1997:
<TABLE>
<CAPTION>
Percent of Total
Number Annualized Annualized
Tenant of Leases Rental Revenue (1) Rental Revenue
- -------------------------------------------------------- ----------- -------------------- -----------------
<S> <C> <C> <C>
1. IBM ............................................... 13 $13,546,185 3.7%
2. Federal Government ................................ 45 12,059,353 3.3
3. AT&T .............................................. 16 6,985,351 1.9
4. Bell South ........................................ 45 6,340,084 1.7
5. State of Florida .................................. 22 5,215,070 1.4
6. GTE ............................................... 6 2,995,422 0.8
7. NationsBank ....................................... 21 2,953,191 0.8
8. First Citizens Bank & Trust ....................... 8 2,887,811 0.8
9. Bluecross & Blue Shield of South Carolina ......... 10 2,554,517 0.7
10. MCI ............................................... 10 2,458,637 0.7
11. Prudential ........................................ 13 2,412,640 0.7
12. Jacobs-Sirrene Engineers, Inc. .................... 1 2,235,550 0.6
13. Price Waterhouse .................................. 3 2,047,953 0.6
14. US Airways ........................................ 4 2,033,940 0.6
15. Alex Brown & Sons ................................. 1 1,943,070 0.5
16. H.L.P. Health Plan of Florida ..................... 2 1,913,005 0.5
17. The Martin Agency, Inc. ........................... 1 1,863,504 0.5
18. Northern Telecom Inc. ............................. 2 1,849,118 0.5
19. BB&T .............................................. 4 1,845,501 0.5
20. Clintrials ........................................ 4 1,812,206 0.5
-- ----------- ----
Total ............................................ 231 $77,952,108 21.3%
=== =========== ====
</TABLE>
- ----------
(1) Annualized Rental Revenue is December 1997 rental revenue (base rent plus
operating expense pass throughs) multiplied by 12.
Lease Expirations of the Properties
The following table sets forth scheduled lease expirations for leases in
place at the Properties as of December 31, 1997, for each of the next 10 years
beginning with the year ended December 31, 1998, assuming no tenant exercises
renewal options or is terminated due to default:
<TABLE>
<CAPTION>
Percentage of
Rentable Total Leased Percentage of
Square Feet Square Feet Annualized Total Annualized
Number Subject to Represented by Rental Revenue Rental Revenue
of Leases Expiring Expiring Under Expiring Represented by
Lease Expiring Expiring Leases Leases Leases (1) Expiring Leases
- -------------------- ----------- ------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
1998 ............... 1,107 5,472,375 19.1% $ 66,586,351 18.1%
1999 ............... 766 4,359,990 15.3 53,830,301 14.7
2000 ............... 807 4,755,495 16.7 61,416,484 16.8
2001 ............... 471 3,674,386 12.9 50,688,383 13.8
2002 ............... 464 4,291,018 15.1 52,199,700 14.2
2003 ............... 95 1,327,060 4.7 18,953,266 5.2
2004 ............... 60 1,085,193 3.8 17,442,729 4.8
2005 ............... 43 851,618 3.0 10,790,905 2.9
2006 ............... 29 1,044,053 3.7 12,819,041 3.5
2007 ............... 18 535,012 1.9 7,273,331 2.0
Thereafter ......... 26 1,078,579 3.8 14,568,654 4.0
----- --------- ----- ------------ -----
Total .............. 3,886 28,474,779 100.0% $366,569,145 100.0%
===== ========== ===== ============ =====
</TABLE>
- ----------
(1) Annualized Rental Revenue is December 1997 rental revenue (base rent plus
operating expense pass throughs) multiplied by 12.
S-13
<PAGE>
USE OF PROCEEDS
The net cash proceeds to the Company from the sale of the shares of Common
Stock offered in the Offering are approximately $14.2 million. The Company
intends to use all of the net proceeds of the Offering to pay down a portion of
the approximately $251 million of indebtedness currently outstanding on its
Revolving Loans.
PRICE RANGE OF COMMON STOCK AND DISTRIBUTION HISTORY
The Common Stock has been traded on the NYSE under the symbol "HIW" since
its initial public offering in June 1994. The following table sets forth the
high and low closing sales prices per share reported on the NYSE for the
periods indicated and the distributions paid per share for each such period.
<TABLE>
<CAPTION>
Closing Price
Per Share
------------------------ Distributions
Period or Quarter High Low Per Share
- ------------------------------------------------ ----------- ---------- --------------
<S> <C> <C> <C>
June 7, 1994 through June 30, 1994 ............. $ 21 1/2 $19 7/8 $ .075(1)
Third Quarter 1994.............................. 21 20 .425
Fourth Quarter 1994 ............................ 21 5/8 18 3/4 .425
First Quarter 1995 ............................. 22 20 .425
Second Quarter 1995 ............................ 25 1/2 21 1/4 .450
Third Quarter 1995.............................. 26 7/8 23 7/8 .450
Fourth Quarter 1995 ............................ 28 3/8 25 1/2 .450
First Quarter 1996 ............................. 30 1/2 27 3/4 .450
Second Quarter 1996 ............................ 30 1/4 26 7/8 .480
Third Quarter 1996.............................. 30 3/8 27 .480
Fourth Quarter 1996 ............................ 33 3/4 28 1/2 .480
First Quarter 1997 ............................. 35 1/2 33 .480
Second Quarter 1997 ............................ 33 1/2 30 .510
Third Quarter 1997.............................. 35 13/16 31 1/16 .510
Fourth Quarter 1997 ............................ 37 3/8 33 .510
January 1, 1998 through March 25, 1998 ......... 37 7/16 32 1/4 --
</TABLE>
- ----------
(1) No distribution was paid during this period. The accrued distribution of
$.075 per share was paid on November 16, 1994 at the time the Company paid
its initial distribution for the period from inception to September 30,
1994.
On March 25, 1998, the last reported sale price of the Common Stock on the
NYSE was $35 per share. On March 25, 1998, the Company had 1,012 stockholders
of record.
The Company intends to continue to declare quarterly distributions on its
Common Stock. However, no assurances can be given as to the amounts of future
distributions as such distributions are subject to the Company's cash flow from
operations, earnings, financial condition, capital requirements and such other
factors as the Company's Board of Directors deems relevant. The Company has
determined that 100% of the per share distribution for 1994, 93% of the per
share distribution for 1995, 81% of the per share distribution for 1996 and 70%
of the per share distribution for 1997 represented ordinary income to the
stockholders for income tax purposes. No assurance can be given that such
percentage will not change in future years.
The Company has adopted a program for the reinvestment of distributions
under which holders of Common Stock may elect automatically to reinvest
distributions in additional Common Stock. The Company may, from time to time,
repurchase Common Stock in the open market for purposes of fulfilling its
obligations under this distribution reinvestment program or may elect to issue
additional Common Stock.
S-14
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997 and on a pro forma basis assuming (i) the issuance and sale
of the 428,572 shares of Common Stock offered hereby and the use of the net
proceeds therefrom as described in "Use of Proceeds," (ii) the October 1997
Offering, (iii) the ACP Transaction, (iv) the Selected Fourth Quarter 1997
Transactions (as defined in "Selected Financial Data"), (v) the Garcia
Transaction, (vi) the January 1998 Offering, (vii) the February 1998 Debt
Offering and (viii) the February 1998 Common Stock Offerings all occurred as of
September 30, 1997. The capitalization table should be read in conjunction with
the Company's historical financial statements and notes thereto incorporated by
reference herein and the pro forma financial statements and notes thereto
included in the Company's Current Report on Form 8-K dated January 22, 1998
incorporated by reference herein.
<TABLE>
<CAPTION>
September 30, 1997
-------------------------------
Historical Pro Forma
-------------- --------------
(in thousands)
<S> <C> <C>
Debt:
Revolving Loans ........................................................... $ 59,000 $ --
Mortgage notes ............................................................ 280,188 401,561
6 3/4% Notes due 2003 ..................................................... 100,000 100,000
7% Notes due 2006 ......................................................... 110,000 110,000
7 1/8% Notes due 2008 ..................................................... -- 100,000
6.835% Mandatory Par Put Remarketed Securities due 2013 ................... -- 125,000
Exercisable Put Option Notes due 2011 (1) ................................. 100,000 100,000
---------- ----------
Total debt ............................................................... 649,188 936,561
---------- ----------
Minority interest in the Operating Partnership .............................. 174,913 280,924
Stockholders' equity:
Preferred Stock, $.01 par value; 10,000,000 authorized
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
Common Stock, $.01 par value; 100,000,000 authorized, 37,948,435 shares
and 50,548,228 shares, respectively, issued and outstanding (2) .......... 379 505
Additional paid-in capital ................................................ 839,912 1,259,486
Accumulated deficit ....................................................... (23,279) (23,279)
---------- ----------
Total stockholders' equity ............................................... 1,114,512 1,534,212
---------- ----------
Total capitalization ..................................................... $1,938,613 $2,751,697
========== ==========
</TABLE>
- ----------
(1) On June 24, 1997, a trust formed by the Operating Partnership sold $100
million of Exercisable Put Option Securities ("X-POSSM"), 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 due June 15, 2011 issued by the Operating Partnership (the
"Put Option Notes"). The X-POSSM 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) Excludes (a) 7,083,996 (historical) and 10,551,053 (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, including
the ACP Transaction, (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) 1,839,290 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-15
<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, 1996 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, 1996: (i) the merger with Eakin & Smith, Inc. and
its affiliates, (ii) the issuance of 11,500,000 and 250,000 shares of Common
Stock (the "Summer 1996 Offerings"), (iii) the merger with Crocker, (iv) the
issuance of the 6 3/4% notes due 2003 and the 7% notes due 2006, (v) the
issuance of 2,587,500, 611,626, 344,732 and 137,198 shares of Common Stock (the
"December 1996 Offerings"), (vi) the acquisition of Century Center Office Park
and an affiliated property portfolio (the "Century Center Transaction"), (vii)
the merger with Anderson Properties, Inc. and its affiliates (the "Anderson
Transaction"), (viii) the issuance of 125,000 Series A Preferred Shares (the
"Series A Preferred Offering"), (ix) the X-POS Offering, (x) the issuance of
1,800,000 shares of Common Stock (the "August 1997 Offering"), (xi) the ACP
Transaction, (xii) the Series B Preferred Offering, (xiii) the October 1997
Offering, (xiv) the Selected Fourth Quarter 1997 Transactions, (xv) the Garcia
Transaction, (xvi) the January 1998 Offering and (xvii) the February 1998 Debt
Offering. The pro forma balance sheet data as of September 30, 1997 has been
derived by the application of pro forma adjustments to the Company's unaudited
consolidated financial statements incorporated herein by reference and assumes
that the ACP Transaction, the October 1997 Offering, the Selected Fourth
Quarter 1997 Transactions, the Garcia Transaction, the January 1998 Offering
and the February 1998 Debt Offering occurred as of September 30, 1997. The pro
forma operating data for the nine months ended September 30, 1997 has been
derived by the application of pro forma adjustments to the Company's unaudited
consolidated financial statements incorporated herein by reference and assumes
that the Century Center Transaction, the Anderson Transaction, the Series A
Preferred Offering, the X-POS Offering, the August 1997 Offering, the ACP
Transaction, the Series B Preferred Offering, the October 1997 Offering, the
Selected Fourth Quarter 1997 Transactions, the Garcia Transaction, the January
1998 Offering and the February 1998 Debt Offering occurred as of January 1,
1996. The pro forma information is based upon certain assumptions that are set
forth in the notes hereto included herein and in the pro forma financial
statements incorporated by reference herein. 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 the financial
statements and notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" incorporated by reference
herein, the pro forma financial statements and notes thereto included in the
Company's Current Report on Form 8-K dated January 22, 1998 incorporated by
reference herein and the restatement of prior period earnings per share
contained in the Appendix hereto.
S-16
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Nine Months Ended
--------------- September 30,
Nine Months
Ended
September 30,
1997 1997 1996
--------------- -------------- --------------
(dollars in thousands except per share
amounts)
<S> <C> <C> <C>
Operating Data:
Total revenue .................................. $ 271,822 $ 183,214 $ 87,766
Rental property operating expenses (1) ......... 86,053 48,995 22,210
General and administrative ..................... 6,694 6,694 3,766
Interest expense ............................... 51,154 34,771 15,074
Depreciation and amortization .................. 44,154 31,051 13,357
----------- ----------- -----------
Income before minority interest ................ 83,767 61,703 33,359
Minority interest .............................. (14,994) (9,872) (5,205)
----------- ----------- -----------
Income before extraordinary item ............... 68,773 51,831 28,154
Extraordinary item-loss on early
extinguishment of debt ........................ -- (4,665) (2,140)
----------- ----------- -----------
Net income ..................................... 68,773 47,166 26,014
Dividends on preferred stock ................... (18,436) (6,972) --
----------- ----------- -----------
Net income available for common
stockholders .................................. $ 50,337 $ 40,194 $ 26,014
=========== =========== ===========
Net income per common
share -- Basic (2) ............................ $ 1.04 $ 1.12 $ 1.10
=========== =========== ===========
Net income per common
share -- Diluted (2) .......................... $ 1.04 $ 1.11 $ 1.09
=========== =========== ===========
Balance Sheet Data
(at end of period):
Real estate, net of accumulated
depreciation .................................. $2,610,643 $1,730,906 $1,320,758
Total assets ................................... 2,740,768 1,980,178 1,380,910
Total mortgages and notes payable .............. 936,561 649,188 597,734
Other Data:
FFO (3) ........................................ 109,485 85,782 46,929
Number of in-service properties ................ 501 369 280
Total rentable square feet ..................... 31,979,000 21,904,000 16,700,000
<CAPTION>
Pro Forma
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1996 1996 1995
-------------- -------------- -------------
(dollars in thousands except per share
amounts)
<S> <C> <C> <C>
Operating Data:
Total revenue .................................. $ 320,677 $ 137,926 $ 73,522
Rental property operating expenses (1) ......... 119,774 35,313 17,049
General and administrative ..................... 6,137 5,666 2,737
Interest expense ............................... 62,705 26,610 13,720
Depreciation and amortization .................. 53,835 22,095 11,082
---------- ----------- ---------
Income before minority interest ................ 78,226 48,242 28,934
Minority interest .............................. (14,002) (6,782) (4,937)
---------- ----------- ---------
Income before extraordinary item ............... 64,224 41,460 23,997
Extraordinary item-loss on early
extinguishment of debt ........................ -- (2,140) (875)
---------- ----------- ---------
Net income ..................................... 64,224 39,320 23,122
Dividends on preferred stock ................... (24,581) -- --
---------- ----------- ---------
Net income available for common
stockholders .................................. $ 39,643 $ 39,320 $ 23,122
========== =========== =========
Net income per common
share -- Basic (2) ............................ $ 0.82 $ 1.51 $ 1.49
========== =========== =========
Net income per common
share -- Diluted (2) .......................... $ 0.82 $ 1.50 $ 1.48
========== =========== =========
Balance Sheet Data
(at end of period):
Real estate, net of accumulated
depreciation .................................. $ -- $1,377,874 $ 593,066
Total assets ................................... -- 1,443,440 621,134
Total mortgages and notes payable .............. -- 555,876 182,736
Other Data:
FFO (3) ........................................ 107,753 70,620 40,016
Number of in-service properties ................ 501 292 191
Total rentable square feet ..................... 31,979,000 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 "Recent Developments -- FASB Statement No.
128" and the Appendix hereto.
(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-17
<PAGE>
UNDERWRITING
Pursuant to the terms and subject to the conditions of the terms agreement
and the related underwriting agreement (together, the "Underwriting
Agreement"), among the Company, the Operating Partnership and J.C. Bradford &
Co., L.L.C. (the "Underwriter"), the Underwriter has agreed to purchase from
the Company, and the Company has agreed to sell to the Underwriter, 428,572
shares of Common Stock.
The Underwriter intends to sell the shares of Common Stock to Nike
Securities L.P., which intends to deposit such shares, together with shares of
common stock of other entities also acquired from the Underwriter, into a
newly-formed unit investment trust (the "Trust") registered under the
Investment Company Act of 1940, as amended, in exchange for units in the Trust.
The Underwriter is not an affiliate of Nike Securities L.P. or the Trust. The
Underwriter intends to sell the shares of Common Stock to Nike Securities L.P.
at an aggregate purchase price of $14,475,019. It is anticipated that the
Underwriter will also participate as sole underwriter in the distribution of
units of the Trust and will receive compensation therefor.
Pursuant to the Underwriting Agreement, the Company and the Operating
Partnership have 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.
Until the distribution of the shares of Common Stock is completed, rules
of the Securities and Exchange Commission may limit the ability of the
Underwriter to bid for and purchase shares of Common Stock. As an exception to
these rules, the Underwriter is permitted to engage in certain transactions
that stabilize the price of the Common Stock. Such transactions consist of bids
or purchases for the purpose of pegging, fixing or maintaining the price of the
Common Stock. It is not currently anticipated that the Underwriter will engage
in any such transactions in connection with this Offering.
If the Underwriter creates a short position in the Common Stock in
connection with this Offering, i.e., if it sells more shares of Common Stock
than are set forth on the cover page of this Prospectus Supplement, the
Underwriter may reduce that short position by purchasing shares in the open
market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither the Company nor the Underwriter makes any representations or
prediction as to the direction or magnitude of any effect that the transactions
described above might have on the price of the shares. In addition, neither the
Company nor the Underwriter makes any representation that the Underwriter will
engage in such transactions or that such transactions, once commenced will not
be discontinued without notice.
In the ordinary course of business, the Underwriter and its affiliates
have engaged, and may in the future engage, in investment banking transactions
with the Company.
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 Andrews & Kurth L.L.P., Washington,
D.C.
S-18
<PAGE>
INDEX TO APPENDIX
<TABLE>
<CAPTION>
Description Page
- ------------------------------------------------------------------------------------------ -----
<S> <C>
Selected financial data from the 1996 Annual Report on Form 10-K of Highwoods
Properties, Inc.,
restated to reflect the adoption of FASB Statement No. 128 .............................. A-2
Selected quarterly financial data from footnote 13 to the consolidated financial
statements filed as
part of the 1996 Annual Report on Form 10-K of Highwoods Properties, Inc., restated to
reflect the
adoption of FASB Statement No. 128 ...................................................... A-3
Additional FASB Statement No. 128 disclosures for Highwoods Properties, Inc. for the
years
ended December 31, 1996, 1995 and 1994 .................................................. A-4
Earnings per share information for each of the first three quarters of 1997 and 1996 for
Highwoods
Properties, Inc., restated to reflect the adoption of FASB Statement No. 128 ............ A-5
Additional FASB Statement No. 128 disclosures for Highwoods Properties, Inc. for each of
the
first three quarters of 1997 and 1996 ................................................... A-6
</TABLE>
A-1
<PAGE>
RESTATED SELECTED FINANCIAL INFORMATION
The table below contains selected financial data from the 1996 Annual
Report on Form 10-K of Highwoods Properties, Inc., restated to reflect the
adoption of FASB Statement No. 128 (amounts in thousands, except per share
data):
<TABLE>
<CAPTION>
June 14, 1994
(comencement
of operations)
through
December 31,
1996 1995 1994
------------- ------------ ---------------
<S> <C> <C> <C>
Statement of Income Data:
Total revenues $ 137,926 $ 73,522 $ 19,442
Interest expense $ 26,610 $ 13,720 $ 3,220
Net income $ 39,320 $ 23,122 $ 5,614
========= ======== ========
Net income per share -- Basic $ 1.51 $ 1.49 $ .63
========= ======== ========
Net income per share -- Diluted $ 1.50 $ 1.48 $ .63
========= ======== ========
Weighted average shares outstanding -- Basic 26,111 15,487 8,936
========= ======== ========
Weighted average shares outstanding -- Diluted 30,442 18,801 9,991
========= ======== ========
Other Data:
Funds from operations before minority interest $ 70,620 $ 40,016 $ 10,302
Funds from operations per share -- Basic $ 2.34 $ 2.14 $ 1.03
Funds from operations per share -- Diluted $ 2.32 $ 2.13 $ 1.03
</TABLE>
A-2
<PAGE>
RESTATED SELECTED FINANCIAL INFORMATION
The table below contains selected quarterly financial data from footnote
13 to the consolidated financial statements filed as part of the 1996 Annual
Report on Form 10-K of Highwoods Properties, Inc., restated to reflect the
adoption of FASB Statement No. 128 (dollars in thousands, except per share
data):
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------------
March 31 June 30 September 30 December 31
------------ ------------ -------------- ------------
<S> <C> <C> <C> <C>
1996
Total revenue $ 23,757 $ 27,680 $ 36,329 $ 50,160
Net income $ 7,431 $ 8,381 $ 10,202 $ 13,306
Funds from operations before minority interest $ 12,868 $ 14,421 $ 19,640 $ 23,842
Net income per share -- Basic $ .38 $ .42 $ .32 $ .41
Net income per share -- Diluted $ .38 $ .42 $ .32 $ .40
Funds from operations per share -- Basic $ .56 $ .60 $ .55 $ .64
Funds from operations per share -- Diluted $ .55 $ .59 $ .54 $ .64
1995
Total revenue $ 12,846 $ 17,518 $ 20,560 $ 22,598
Net income $ 3,204 $ 5,559 $ 6,558 $ 7,801
Funds from operations before minority interest $ 6,800 $ 9,542 $ 10,963 $ 12,817
Net income per share -- Basic $ .29 $ .38 $ .39 $ .40
Net income per share -- Diluted $ .28 $ .38 $ .38 $ .40
Funds from operations per share -- Basic $ .51 $ .53 $ .53 $ .55
Funds from operations per share -- Diluted $ .51 $ .53 $ .53 $ .55
</TABLE>
A-3
<PAGE>
ADDITIONAL FASB STATEMENT NO. 128 DISCLOSURE FOR 1996, 1995 AND 1994
The table below contains the additional FASB Statement No. 128 disclosures
for Highwoods Properties, Inc. for the years ended December 31, 1996 and 1995
and the period June 14, 1994 (commencement of operations) through December 31,
1994 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
June 14, 1994
(commencement
of operations)
Year Ended Year Ended through
Dec. 31, 1996 Dec. 31, 1995 December 31, 1994
--------------- --------------- ------------------
<S> <C> <C> <C>
Basic Earnings Per Share
Denominator 26,111 15,487 8,936
====== ====== =====
Numerator $ 39,320 $ 23,122 $ 5,614
======== ======== =======
Per share amount $ 1.51 $ 1.49 $ .63
======== ======== =======
Diluted Earnings Per Share
Denominator for Basic Earnings Per Share 26,111 15,487 8,936
Partnership units converted 4,109 3,210 1,055
Dilution for Amended and Restated
1994 Stock Option Plan 190 90 --
Dilution for warrants 32 14 --
-------- -------- -------
Denominator 30,442 18,801 9,991
======== ======== =======
Numerator $ 45,810 $ 27,866 $ 6,273
======== ======== =======
Per share amount $ 1.50 $ 1.48 $ .63
======== ======== =======
</TABLE>
A-4
<PAGE>
RESTATED EARNINGS PER SHARE FOR EACH OF
THE FIRST THREE QUARTERS OF 1997 AND 1996
The table below contains the earnings per share information for each of
the first three quarters of 1997 and 1996 for Highwoods Properties, Inc.,
restated to reflect the adoption of FASB Statement No. 128 (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
Weighted Average
Funds From Denominator for
Earnings Operations Basic Earnings
Per Share Per Share Per Share
----------- ------------ -----------------
<S> <C> <C> <C>
BASIC
First Quarter Form 10-Q
Three Months Ended March 31, 1997 $ .33 $ .66 35,250
Three Months Ended March 31, 1996 $ .38 $ .56 19,406
Second Quarter Form 10-Q
Three Months Ended June 30, 1997 $ .41 $ .67 35,824
Three Months Ended June 30, 1996 $ .42 $ .60 20,022
Six Months Ended June 30, 1997 $ .74 $ 1.34 35,375
Six Months Ended June 30, 1996 $ .80 $ 1.16 19,714
Third Quarter Form 10-Q
Three Months Ended September 30, 1997 $ .38 $ .69 36,582
Three Months Ended September 30, 1996 $ .32 $ .55 31,763
Nine Months Ended September 30, 1997 $ 1.12 $ 2.03 35,777
Nine Months Ended September 30, 1996 $ 1.10 $ 1.71 23,730
</TABLE>
<TABLE>
<CAPTION>
Funds From Denominator for
Earnings Operations Diluted Earnings
Per Share Per Share Per Share
----------- ------------ -----------------
<S> <C> <C> <C>
DILUTED
First Quarter Form 10-Q
Three Months Ended March 31, 1997 $ .33 $ .65 35,612
Three Months Ended March 31, 1996 $ .38 $ .55 19,611
Second Quarter Form 10-Q
Three Months Ended June 30, 1997 $ .40 $ .67 36,090
Three Months Ended June 30, 1996 $ .42 $ .59 24,408
Six Months Ended June 30, 1997 $ .74 $ 1.33 35,755
Six Months Ended June 30, 1996 $ .79 $ 1.15 19,922
Third Quarter Form 10-Q
Three Months Ended September 30, 1997 $ .38 $ .69 36,964
Three Months Ended September 30, 1996 $ .32 $ .54 31,968
Nine Months Ended September 30, 1997 $ 1.11 $ 2.01 36,248
Nine Months Ended September 30, 1996 $ 1.09 $ 1.70 23,937
</TABLE>
A-5
<PAGE>
ADDITIONAL FASB STATEMENT NO. 128 DISCLOSURES FOR EACH OF
THE FIRST THREE QUARTERS OF 1997
The tables below contain the additional FASB Statement No. 128 disclosures
for Highwoods Properties, Inc. for each of the first three quarters of 1997 and
1996 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1997 March 31, 1996
---------------- ---------------
<S> <C> <C>
FIRST QUARTER FORM 10-Q
Basic Earnings Per Share
Denominator 35,250 19,406
====== ======
Numerator $ 11,681 $ 7,431
======== ========
Per share amount $ .33 $ .38
======== ========
Diluted Earnings Per Share
Denominator for Basic Earnings Per Share 35,250 19,406
Partnership units converted (a) -- --
Dilution for Amended and Restated
1994 Stock Option Plan 294 177
Dilution for warrants 68 28
-------- --------
Denominator 35,612 19,611
======== ========
Numerator (a) $ 11,681 $ 7,431
======== ========
Per share amount $ .33 $ .38
======== ========
</TABLE>
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
SECOND QUARTER FORM 10-Q
Basic Earnings Per Share
Denominator 35,824 20,022 35,375 19,714
====== ====== ====== ======
Numerator $ 14,605 $ 8,381 $ 26,286 $ 15,812
======== ======= ======== ========
Per share amount $ .41 $ .42 $ .74 $ .80
======== ======= ======== ========
Diluted Earnings Per Share
Denominator for Basic Earnings Per Share 35,824 20,022 35,375 19,714
Partnership units converted (b) -- 4,184 -- --
Dilution for Amended and Restated
1994 Stock Option Plan 216 172 321 179
Dilution for warrants 50 30 59 29
-------- ------- -------- --------
Denominator 36,090 24,408 35,755 19,922
======== ======= ======== ========
Numerator (b) $ 14,605 $10,134 $ 26,286 $ 15,812
======== ======= ======== ========
Per share amount $ .40 $ .42 $ .74 $ .79
======== ======= ======== ========
</TABLE>
(continued on next page)
A-6
<PAGE>
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
THIRD QUARTER FORM 10-Q
Basic Earnings Per Share
Denominator 36,582 31,763 35,777 23,730
====== ====== ====== ======
Numerator $ 13,908 $ 10,202 $ 40,194 $ 26,014
======== ======== ======== ========
Per share amount $ .38 $ .32 $ 1.12 $ 1.10
======== ======== ======== ========
Diluted Earnings Per Share
Denominator for Basic Earnings Per Share 36,582 31,763 35,777 23,730
Partnership units converted (c) -- -- -- --
Dilution for Amended and Restated
1994 Stock Option Plan 322 176 412 177
Dilution for warrants 60 29 59 30
-------- -------- -------- --------
Denominator 36,964 31,968 36,248 23,937
======== ======== ======== ========
Numerator (c) $ 13,908 $ 10,202 $ 40,194 $ 26,014
======== ======== ======== ========
Per share amount $ .38 $ .32 $ 1.11 $ 1.09
======== ======== ======== ========
</TABLE>
- ----------
(a) 6,508 and 3,733 units for the three months ended March 31, 1997 and 1996,
respectively, were not assumed to be converted as the effect would be
anti-dilutive. Accordingly, $3,129 and $1,571 in minority interest and
($636) and $0 in minority interest's portion of the extraordinary item for
the three months ended March 31, 1997 and 1996, respectively, were
included in the numerator for dilutive Earnings Per Share due to the
associated units not being converted.
(b) 6,926 units for the three months ended June 30, 1997 were not assumed to be
converted as the effect would be anti-dilutive. Accordingly, $3,295 in
minority interest and ($636) in minority interest's portion of the
extraordinary item for the three months ended June 30, 1997 was included
in the numerator for dilutive Earnings Per Share due to the associated
units not being converted. In addition, 6,385 and 3,714 for the six months
ended June 30, 1997 and 1996, respectively, were not assumed to be
converted as the effect would be anti-dilutive. Accordingly, $6,424 and
$3,324 in minority interest and ($636) and $0 in minority interest's
portion of the extraordinary item for the six months ended June 30, 1997
and 1996, respectively, were included in the numerator for dilutive
Earnings Per Share due to the associated units not being converted.
(c) 6,968 and 4,132 units for the three months ended September 30, 1997 and
1996, respectively, were not assumed to be converted as the effect would
be anti-dilutive. Accordingly, $3,448 and $1,881 in minority interest and
($233) and ($292) in minority interest's portion of the extraordinary item
for the three months ended September 30, 1997 and 1996, respectively, was
included in the numerator for dilutive Earnings Per Share due to the
associated units not being converted. In addition, 6,411 and 3,691 units
for the nine months ended September 30, 1997 and 1996, respectively, were
not assumed to be converted as the effect would be anti-dilutive.
Accordingly, $9,872 and $5,205 in minority interest and ($869) and ($292)
of minority interest's portion of the extraordinary item for the nine
months ended September 30, 1997 and 1996, respectively, were included in
the numerator for dilutive Earnings Per Share due to the associated units
not being converted.
A-7
<PAGE>
===============================================================================
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-3
Recent Developments .......................... S-6
The Properties ............................... S-12
Use Of Proceeds .............................. S-14
Price Range of Common Stock and
Distribution History ...................... S-14
Capitalization ............................... S-15
Selected Financial Data ...................... S-16
Underwriting ................................. S-18
Legal Matters ................................ S-18
Index to Appendix ............................ A-1
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>
===============================================================================
===============================================================================
428,572 Shares
HIGHWOODS
PROPERTIES, INC.
(HIGHWOODS PROPERTIES, INC. symbol appears here)
Common Stock
-----------------------------------
PROSPECTUS SUPPLEMENT
-----------------------------------
J.C. Bradford &Co.
March 25, 1998
