Highwoods Properties
Annual Report 2000

Plain-text annual report

Highwoods Properties, Inc. 3100 Smoketree Court, Suite 600 Raleigh, North Carolina 27604 (919) 872-4924 www.highwoods.com 0 0 0 2 R A E Y T H E P O W E R O F P L A C E T H E P O W E R O F P L A C E H i g h w o o d s P r o p e r t i e s 2 0 0 0 A N N U A L R E P O R T HIGHWOODS PROPERTIES 11 CORE MARKETS 591 PROPERTIES 46.2 MILLION SQUARE FEET OF SPACE 5,000 CUSTOMERS 1,800 ACRES OF DEVELOPMENT LAND $3.71 $3.45 $3.22 $2.71 $2.32 $2.19 $2.25 $2.10 $1.98 $1.78 2 1 3 2 1 80.2% 73.0% 65.2% 64.3% 60.6% 80 60 40 20 0 1996 1997 1998 1999 2000 1996 1997 1998 1999 2000 1996 1997 1998 1999 2000 PER DILUTED SHARE Funds from Operations PER SHARE Dividends PERCENTAGE OF FFO Dividend Payout Ratio Highwoods Properties, Inc. 3100 Smoketree Court, Suite 600 Raleigh, North Carolina 27604 (919) 872-4924 www.highwoods.com 0 0 0 2 R A E Y T H E P O W E R O F P L A C E T H E P O W E R O F P L A C E H i g h w o o d s P r o p e r t i e s 2 0 0 0 A N N U A L R E P O R T HIGHWOODS PROPERTIES 11 CORE MARKETS 591 PROPERTIES 46.2 MILLION SQUARE FEET OF SPACE 5,000 CUSTOMERS 1,800 ACRES OF DEVELOPMENT LAND $3.71 $3.45 $3.22 $2.71 $2.32 $2.19 $2.25 $2.10 $1.98 $1.78 2 1 3 2 1 80.2% 73.0% 65.2% 64.3% 60.6% 80 60 40 20 0 1996 1997 1998 1999 2000 1996 1997 1998 1999 2000 1996 1997 1998 1999 2000 PER DILUTED SHARE Funds from Operations PER SHARE Dividends PERCENTAGE OF FFO Dividend Payout Ratio 2000 TO-DO-LIST Increase Return on Invested Capital Divest and/or Joint Venture $650 Million of assets Start at least $200 million of new development Fund 10 million share repurchase program Maintain a conservative balance sheet Increase investor awareness Continue to provide highest possible level of service to our customers Aggressively reduce costs 2001 TO-DO-LIST Continue to provide highest possible level of service to our customers Self fund at least $170 million of franchise enhancing development in core markets Divest and/or Joint Venture at least $200 million of assets Increase Return on Invested Capital Continue to repurchase undervalued shares Grow same property net operating income by 2.0–2.5% Maintain portfolio occupancy at 94% SHAREHOLDER INFORMATION Shareholder Contact For shareholder mailings and Company information: Highwoods Properties, Inc. Attention: Investor Relations 3100 Smoketree Court, Suite 600 Raleigh, North Carolina 27604 T F (919) 872-4924 (800) 939-7311 (919) 876-6929 E websitemail@highwoods.com Annual Meeting May 15, 2001, at 11:00 a.m. Marriott Crabtree Valley 4500 Marriott Drive Raleigh, North Carolina (919) 781-7000 T Corporate Address 3100 Smoketree Court, Suite 600 Raleigh, North Carolina 27604 T (919) 872-4924 (919) 873-0088 w www.highwoods.com F Transfer Agent For information regarding change of address or other matters concerning your shareholder account, please contact the transfer agent at: First Union National Bank Shareholder Services Group 1525 West W.T. Harris Boulevard, 3C2 Charlotte, North Carolina 28288-1153 T F (800) 829-8432 (704) 590-0394 Dividend Reinvestment Plan As provided by the terms of the Dividend Reinvestment and Stock Purchase Plan (the “Plan”), eligible shareholders are able to reinvest all or a portion of their dividends in shares of the Company’s stock. Shareholders are also able to make optional cash payments for the purchase of additional shares. No brokerage commissions or fees will be charged under either option. For assistance or questions about the Plan, please contact Highwoods’ Investor Relations Coordinator at the Corporate Office. THIS IS THE HIGHWOODS PROPERTIES 2000 ANNUAL REPORT. THIS ANNUAL REPORT IS COMPLETE ONLY IF FORM 10-K IS ATTACHED TO THIS DOCUMENT. The Common Stock has been traded on the New York Stock Exchange (“NYSE”) under the symbol HIW since the Company’s initial public offering. The following table sets forth the quarterly high and low sales prices per share as reported on the NYSE for the periods indicated and distributions paid per share during each such period. QUARTER ENDED March 31 June 30 September 30 December 31 HIGH $ 23.50 25.94 27.19 24.94 Market Information 2000 LOW DISTRIBUTION HIGH $ 20.25 $ 0.555 $ 25.69 27.69 26.88 25.63 21.31 23.50 21.25 0.555 0.57 0.57 1999 LOW DISTRIBUTION $ 22.25 $ 0.54 0.54 0.555 0.555 22.75 22.25 20.25 On February 23, 2001, the last reported sale price of the Common Stock on the NYSE was $24.03 per share. On February 23, 2001, the Company had 1,381 stockholders of record. 2000 TO-DO-LIST Increase Return on Invested Capital Divest and/or Joint Venture $650 Million of assets Start at least $200 million of new development Fund 10 million share repurchase program Maintain a conservative balance sheet Increase investor awareness Continue to provide highest possible level of service to our customers Aggressively reduce costs 2001 TO-DO-LIST Continue to provide highest possible level of service to our customers Self fund at least $170 million of franchise enhancing development in core markets Divest and/or Joint Venture at least $200 million of assets Increase Return on Invested Capital Continue to repurchase undervalued shares Grow same property net operating income by 2.0–2.5% Maintain portfolio occupancy at 94% SHAREHOLDER INFORMATION Shareholder Contact For shareholder mailings and Company information: Highwoods Properties, Inc. Attention: Investor Relations 3100 Smoketree Court, Suite 600 Raleigh, North Carolina 27604 T F (919) 872-4924 (800) 939-7311 (919) 876-6929 E websitemail@highwoods.com Annual Meeting May 15, 2001, at 11:00 a.m. Marriott Crabtree Valley 4500 Marriott Drive Raleigh, North Carolina (919) 781-7000 T Corporate Address 3100 Smoketree Court, Suite 600 Raleigh, North Carolina 27604 T (919) 872-4924 (919) 873-0088 w www.highwoods.com F Transfer Agent For information regarding change of address or other matters concerning your shareholder account, please contact the transfer agent at: First Union National Bank Shareholder Services Group 1525 West W.T. Harris Boulevard, 3C2 Charlotte, North Carolina 28288-1153 T F (800) 829-8432 (704) 590-0394 Dividend Reinvestment Plan As provided by the terms of the Dividend Reinvestment and Stock Purchase Plan (the “Plan”), eligible shareholders are able to reinvest all or a portion of their dividends in shares of the Company’s stock. Shareholders are also able to make optional cash payments for the purchase of additional shares. No brokerage commissions or fees will be charged under either option. For assistance or questions about the Plan, please contact Highwoods’ Investor Relations Coordinator at the Corporate Office. THIS IS THE HIGHWOODS PROPERTIES 2000 ANNUAL REPORT. THIS ANNUAL REPORT IS COMPLETE ONLY IF FORM 10-K IS ATTACHED TO THIS DOCUMENT. The Common Stock has been traded on the New York Stock Exchange (“NYSE”) under the symbol HIW since the Company’s initial public offering. The following table sets forth the quarterly high and low sales prices per share as reported on the NYSE for the periods indicated and distributions paid per share during each such period. QUARTER ENDED March 31 June 30 September 30 December 31 HIGH $ 23.50 25.94 27.19 24.94 Market Information 2000 LOW DISTRIBUTION HIGH $ 20.25 $ 0.555 $ 25.69 27.69 26.88 25.63 21.31 23.50 21.25 0.555 0.57 0.57 1999 LOW DISTRIBUTION $ 22.25 $ 0.54 0.54 0.555 0.555 22.75 22.25 20.25 On February 23, 2001, the last reported sale price of the Common Stock on the NYSE was $24.03 per share. On February 23, 2001, the Company had 1,381 stockholders of record. Highwoods Properties, Inc. 3100 Smoketree Court, Suite 600 Raleigh, North Carolina 27604 (919) 872-4924 www.highwoods.com 0 0 0 2 R A E Y T H E P O W E R O F P L A C E T H E P O W E R O F P L A C E H i g h w o o d s P r o p e r t i e s 2 0 0 0 A N N U A L R E P O R T HIGHWOODS PROPERTIES 11 CORE MARKETS 591 PROPERTIES 46.2 MILLION SQUARE FEET OF SPACE 5,000 CUSTOMERS 1,800 ACRES OF DEVELOPMENT LAND $3.71 $3.45 $3.22 $2.71 $2.32 $2.19 $2.25 $2.10 $1.98 $1.78 2 1 3 2 1 80.2% 73.0% 65.2% 64.3% 60.6% 80 60 40 20 0 1996 1997 1998 1999 2000 1996 1997 1998 1999 2000 1996 1997 1998 1999 2000 PER DILUTED SHARE Funds from Operations PER SHARE Dividends PERCENTAGE OF FFO Dividend Payout Ratio 2000 TO-DO-LIST Increase Return on Invested Capital Divest and/or Joint Venture $650 Million of assets Start at least $200 million of new development Fund 10 million share repurchase program Maintain a conservative balance sheet Increase investor awareness Continue to provide highest possible level of service to our customers Aggressively reduce costs 2001 TO-DO-LIST Continue to provide highest possible level of service to our customers Self fund at least $170 million of franchise enhancing development in core markets Divest and/or Joint Venture at least $200 million of assets Increase Return on Invested Capital Continue to repurchase undervalued shares Grow same property net operating income by 2.0–2.5% Maintain portfolio occupancy at 94% SHAREHOLDER INFORMATION Shareholder Contact For shareholder mailings and Company information: Highwoods Properties, Inc. Attention: Investor Relations 3100 Smoketree Court, Suite 600 Raleigh, North Carolina 27604 T F (919) 872-4924 (800) 939-7311 (919) 876-6929 E websitemail@highwoods.com Annual Meeting May 15, 2001, at 11:00 a.m. Marriott Crabtree Valley 4500 Marriott Drive Raleigh, North Carolina (919) 781-7000 T Corporate Address 3100 Smoketree Court, Suite 600 Raleigh, North Carolina 27604 T (919) 872-4924 (919) 873-0088 w www.highwoods.com F Transfer Agent For information regarding change of address or other matters concerning your shareholder account, please contact the transfer agent at: First Union National Bank Shareholder Services Group 1525 West W.T. Harris Boulevard, 3C2 Charlotte, North Carolina 28288-1153 T F (800) 829-8432 (704) 590-0394 Dividend Reinvestment Plan As provided by the terms of the Dividend Reinvestment and Stock Purchase Plan (the “Plan”), eligible shareholders are able to reinvest all or a portion of their dividends in shares of the Company’s stock. Shareholders are also able to make optional cash payments for the purchase of additional shares. No brokerage commissions or fees will be charged under either option. For assistance or questions about the Plan, please contact Highwoods’ Investor Relations Coordinator at the Corporate Office. THIS IS THE HIGHWOODS PROPERTIES 2000 ANNUAL REPORT. THIS ANNUAL REPORT IS COMPLETE ONLY IF FORM 10-K IS ATTACHED TO THIS DOCUMENT. The Common Stock has been traded on the New York Stock Exchange (“NYSE”) under the symbol HIW since the Company’s initial public offering. The following table sets forth the quarterly high and low sales prices per share as reported on the NYSE for the periods indicated and distributions paid per share during each such period. QUARTER ENDED March 31 June 30 September 30 December 31 HIGH $ 23.50 25.94 27.19 24.94 Market Information 2000 LOW DISTRIBUTION HIGH $ 20.25 $ 0.555 $ 25.69 27.69 26.88 25.63 21.31 23.50 21.25 0.555 0.57 0.57 1999 LOW DISTRIBUTION $ 22.25 $ 0.54 0.54 0.555 0.555 22.75 22.25 20.25 On February 23, 2001, the last reported sale price of the Common Stock on the NYSE was $24.03 per share. On February 23, 2001, the Company had 1,381 stockholders of record. 2000 HIGHLIGHTS Our 2000 operating results showcase our growth this year and the accom- plishments of our outstanding team: Sold or Joint Ventured $801 million of assets Return on invested capital increased to 9.9% from 9.6% in 1999 TO OUR FELLOW SHAREHOLDERS Funds From Operations per share grew 7.5% Delivered $272 million of new development 90% pre-leased Cash available for distribution per share grew 10.0% Same properties net operating income grew 3.1% Started $232 million of new franchise enhancing development It is a pleasure to report to our shareholders another year of success at Highwoods. We met or exceded all our major operating and management goals for the year, which leaves our Company well positioned to prosper in the years to come. Completing the asset repo- sitioning program that we began in early 1999 on time and as promised was only one of our major accomplishments in 2000. Importantly, we continued to grow funds rom operations per share (FFO), increase our return on invested capital and increase our dividend. From a portfolio perspective, we continued to execute on our core market straten, exiting rom thin, weaker markets while reinvesting and strengthening our ranchise in our 11 core markets. Today, Highwoods has a newer, higher qualiy and more strategically focused portfolio in growing markets. Our extraordinary local market professionals, premier properties, diversi0ed customer base and land inventory are all strategically positioned to fuel continued growth. While anticipating and adapting to change and building for the future, Repurchased 4.2 million shares and units at an average price of $23.69 Secured new $300 million credit facility on favorable terms Highwoods performance during 2000 continued our history of strong operational results. FFO per share grew 7.5 percent to $3.71. `is continued our unbroken streak of FFO per share growth since the Company went public in 1994. `e appeal of our properties and talent of our leasing teams were demonstrated as we leased 10.5 million square fet of space and maintained overall portfolio occupancy at 94 percent. We delivered 2.4 million square fet of newly developed space with initial leasing of 90 percent. `e sale or joint venture of $801 million in properties during 2000 provided the funding for the repurchase of 4.2 million of our shares and operating partnership units, the reduction of our outstanding debt and costs associated with our development activities. Given a less certain economic outlook, the total budgeted cost of development in process was reduced rom $579 million at year end 1999 to $336 million at year end 2000. In addition, successful renewal of our credit faciliy in advance of its maturiy provided Highwoods Properties 2000 Annual Report 1 2 the Company with an improved faciliy for our anticipated neds on more favorable terms. Joint ventures are an important element of our core market straten. While sharing risks with other partners, Highwoods has accomplished a number of diferent goals — enhancing our dominant core market portfolios; earning market rate leasing, management and development fes; moving development land into service; reing capital for share repurchase and debt reduction; and funding the development of new properties to add to our portfolio. As anticipated, the maturation of our early joint ventures has begun to provide substantial management, leasing and development income streams while the more recent ventures are quickly building momentum. Operational changes at the Company during the year were implemented to both improve e2ciency as well as enhance our customers’ experience. Our accounting, service and reporting functions were enhanced with the installation of a new sofware platform that is both easier to use as well as more adaptive to specialized management reporting and strategic planning requirements. Our axention to detail throughout the year resulted in same property operating expense growth of only a modest 1.4 percent over the level experienced in 1999. Our already strong board was pleased to add to its roster the considerable talents of Lawrence S. Kaplan. Mr. Kaplan joined the board in October ater a carer that propelled him to the position of senior real estate partner for Ernst & Young LLP’s global real estate practice. His experience and judgement are highly sought and we are thankful that he chose to join the Highwoods team. Ater disappointing shareholder return in 1999, 2000 proved to be a good year for REIT investors. `e S&P REIT composite index ranked among the best of all market sector indices as investors re-evaluated the securiy and income characteristics of REIT shares. For the year 2000, the S&P REIT Composite Index return of 19.5 percent was far superior to the S&P 500 index loss of 9.1 percent. `e S&P Technolon Sector Index, which had performed so well in recent years, demonstrated the di2culties in the technolon sector recording a 40.0 percent loss for 2000. Like our market sector, Highwoods shares performed well for the year producing a total return of 16.0 percent. Our plan for 2001 and beyond is to enhance the ranchise we have built in our core markets by continuing to provide superior products, locations and service to our customers. Along with our strong development pipeline, we intend to more amressively sek opportunities to utilize our proven development and real estate operating skills in additional creative and profitable ways. Speci0cally, we intend to increase our build-to-suit activiy, develop properties in collaboration with our joint venture partners, and pursue opportunities to internalize tenant improvement construction and third-pary management opportunities. In 2000 we began a concerted efort to ofer value-added services to our customers through strategic relationships with other companies. We made an amressive push to ofer a variey of telecommunications and Internet connectiviy options for our customers, including several portfolio- wide relationships. Seking additional revenue sources through providing amenities to our customers will remain a focus in the upcoming year. Our participation with the O2ce Technolon Consortium provides us with an unparalleled means by which to evaluate such opportunities while also allowing us to collaborate on best-practice e2ciencies that would be more di2cult to obtain on our own. `e success of the past year and our prospects for the future are the result of the creativiy and hard work of the hundreds of individuals that make Highwoods Properties the premier o2ce and industrial Company serving the southeastern United States. Our team’s dedication is exceptional and most appreciated. `e expert guidance of our board of directors is a resource that cannot be overstated. `eir willingness to unsel0shly share their insights and experience has played a pivotal role in shaping our Company. It is an honor to work with them. Finally, to our shareholders and customers, our most valued supporters, thank you. It is on your behalf that all of us at Highwoods strive every day to improve the Company’s abiliy to provide superior investment returns and exceptional value in our products and services. We look forward to sharing our progress with you throughout the coming year. 3 O. Temple Sloan, Jr. Chairman of the Board Ronald P. Gibson President and Chief Executive Officer Highwoods Properties 2000 Annual Report T H E P O W E R O F P L A C E P O R T F O L I O 25 4 S T R E N G T H T H R O U G H D I V E R S I T Y 80 TODAY, HIGHWOODS HAS A NEWER, HIGHER QUALITY AND MORE STRATEGICALLY FOCUSED PORTFOLIO IN GROWING MARKETS. The diversification of the Highwoods portfolio across seven states and 11 core markets insulates the Company from economic dislocations that could occur. These cities are among the fastest growing in the country and are major economic hubs in states that contained 18 percent of the nation’s population, yet accounted for 27 percent of the nation’s growth according to the 2000 US Census. The diverse economic drivers within our core markets add to the stability of our overall portfolio. From high tech research and development in the Research Triangle to service centers in Tampa, distribution in the Piedmont Triad and financial services in Richmond, our local market economies base their strength on a variety of economic engines. Faster, more resilient growth is a distinguishing characteristic of Highwoods markets. Over the five years ended December 2000, the National Bureau of Labor Statistics reported that employment grew 11.6 percent in the United States. The appeal of our 11 core markets is demonstrated by their average employment growth of 15.9 percent over the same period, outpacing the national averages by 37.1 percent. Our markets have also demonstrated that their growth is more resilient in tougher economic times. During the recession in the early 1990s, employment in Highwoods’ markets recovered to their peak levels in an average of 24 months. Nationally, it took 35 months for employment to re-attain its prior peak level. The cities of New York, Boston, Chicago, San Francisco and San Jose took an average of 80 months to recover to their prior employment levels. 35 PERCENT OF TOTAL ANNUALIZED RENTAL REVENUE % 8 . 4 1 y t i C s a s n a K % 8 . 3 1 % 5 . 3 1 a t n a l t A a p m a T % 0 . 3 1 e l g n a i r T h c r a e s e R % 0 . 1 1 d a i r T t n o m d e i P % 5 . 9 e l l i v h s a N % 8 . 7 d n o m h c i R % 3 . 5 e t t o l r a h C % 3 . 3 s i h p m e M % 3 . 3 e l l i v n e e r G % 0 . 2 o d n a l r O HIGHWOODS MARKETS 35 70 KANSAS CITY 57 70 55 75 65 77 81 64 RICHMOND 85 95 NASHVILLE 40 PIEDMONT TRIAD RESEARCH TRIANGLE 40 MEMPHIS CHARLOTTE GREENVILLE 5 65 24 85 ATLANTA 26 20 55 16 40 20 10 10 95 75 ORLANDO TAMPA Includes Highwoods share of joint venture revenues Highwoods Properties 2000 Annual Report T H E P O W E R O F P L A C E C O R E M A R K E T S ATLANTA CHARLOTTE GREENVILLE SC KANSAS CITY MO MEMPHIS NASHVILLE 400 29 29 70 40 29 40 75 85 277 85 ATLANTA 285 485 146 385 GREENVILLE 276 CHARLOTTE 16 35 435 71 KANSAS CITY 40 177 MEMPHIS 240 40 40 705 440 NASHVILLE 31 75 N N N N 78 N N 65 N 155 24 N $523 MILLION OF PROPERTIES OWNED AND OPERATED 5-YEAR EMPLOYMENT GROWTH 20% Atlanta Georgia 16% D I V I S I O N O F F I C E R Gene Anderson 26 years experience $199 MILLION OF PROPERTIES OWNED AND OPERATED 5-YEAR EMPLOYMENT GROWTH 14% Charlotte North Carolina 12% D I V I S I O N O F F I C E R Tom Cochran 23 years experience $113 MILLION OF PROPERTIES OWNED AND OPERATED 5-YEAR EMPLOYMENT GROWTH 11% Greenville South Carolina 13% D I V I S I O N O F F I C E R Tom Cochran 23 years experience $507 MILLION OF PROPERTIES OWNED AND OPERATED 5-YEAR EMPLOYMENT GROWTH 13% Kansas City Missouri 9% D I V I S I O N O F F I C E R Barry Brady 24 years experience $126 MILLION OF PROPERTIES OWNED AND OPERATED 5-YEAR EMPLOYMENT GROWTH 11% Memphis Tennessee 7% D I V I S I O N O F F I C E R Mike Harris 26 years experience $313 MILLION OF PROPERTIES OWNED AND OPERATED 5-YEAR EMPLOYMENT GROWTH 13% Nashville Tennessee 7% D I V I S I O N O F F I C E R Brian Reames 13 years experience 9 office and industrial parks * feet of office space industrial space office and industrial portfolio in Atlanta 3.1 million square 3.0 million square feet of Highwoods owns the third largest * * * * space 4 office parks * 8% market share * 1.5 million square feet of office * space 2 office parks. * 15% market share * 1.1 million square feet of office 1 office park * * space Plaza sub-market * 1.0 million square feet of office largest owner of for-lease space in the * space 1 office park * 12% market share * 1.1 million square feet of office * space 5 office parks. * 20% market share * 2.8 million square feet of office 6 S U B - M A R K E T D O M I N A N C E THE KEY TO OUR STRENGTH 441 As a market leader, Highwoods sets the standard for space and product opportunities in our select locations. Our properties are clustered in office and industrial parks in the key sub-mar- kets of each of our cities. The clustering of our properties offers advantages to both our customers and our shareholders. By locating in a Highwoods park, where we control both the available space and development land, we can readily accom- modate our customers’ changing and growing needs. Clustering facilitates the high level of service that our customers have learned to expect from Highwoods. From maintenance to cleaning, the diminution of travel time between prop- erties means faster response time for service calls and more efficient delivery of management services. ORLANDO PIEDMONT TRIAD RESEARCH TRIANGLE RICHMOND TAMPA 7 17 92 50 ORLANDO 4 421 40 WINSTON-SALEM 150 52 220 GREENSBORO DURHAM 70 RESEARCH TRIANGLE PARK 40 540 RALEIGH 1 64 295 19 197 RICHMOND 580 60 275 HIGH POINT 85 311 1 CARY 40 440 76 N N N N $305 MILLION OF PROPERTIES OWNED AND OPERATED 5-YEAR EMPLOYMENT GROWTH 29% Orlando Florida 19% D I V I S I O N O F F I C E R Mike Beale 20 years experience $432 MILLION OF PROPERTIES OWNED AND OPERATED 5-YEAR EMPLOYMENT GROWTH 10% Piedmont Triad North Carolina 12% D I V I S I O N O F F I C E R Mark Shumaker 15 years experience $503 MILLION OF PROPERTIES OWNED AND OPERATED 5-YEAR EMPLOYMENT GROWTH 19% Research Triangle North Carolina 12% D I V I S I O N O F F I C E R Marcus Jackson 15 years experience $265 MILLION OF PROPERTIES OWNED AND OPERATED 5-YEAR EMPLOYMENT GROWTH 13% Richmond Virginia 13% D I V I S I O N O F F I C E R Paul Kreckman 26 years experience * space 5 office parks * 15% market share * 1.6 million square feet of office 16 office and industrial parks * * feet office of space million square feet of industrial space industrial market share * 30% office market share * 2.4 million square * 6.0 31% * space 12 office parks * 18% market share * 3.7 million square feet of office Highwoods Properties 2000 Annual Report * space 4 office parks * 15% market share * 2.3 million square feet of office 95 N TAMPA 19 41 75 N $502 MILLION OF PROPERTIES OWNED AND OPERATED 5-YEAR EMPLOYMENT GROWTH 23% Tampa Florida 19% D I V I S I O N O F F I C E R Steve Meyers 25 years experience * space 5 office parks * 17% market share * 4.0 million square feet of office T H E P O W E R O F P L A C E S U B - M A R K E T S PIEDMONT TRIAD AIRPORT AND WINSTON-SALEM NORTH 67 52 67 WINSTON-SALEM NORTH 311 421 40 WINSTON-SALEM 52 150 8 P I E D M O N T T R I A D A I R P O R T A N D W I N S T O N - S A L E M N O R T H N OFFICE AND INDUSTRIAL CROSSROADS A natural crossroads, the Piedmont Triad has 14 distinct sub-markets for both office as well as industrial space. For office users, Highwoods is the market leader in the Piedmont Triad Airport and Winston-Salem North sub-markets with 46 percent and 54 percent shares respectively. Long known as a manufacturing center, Winston-Salem has experienced significant growth in the financial and service sectors and is now the 11th largest banking center in the country and is home to a large and growing health care community. Greensboro is a natural distribution center with more than half the national population within 600 miles. The area offers strong road, rail and air infrastructure that provides competitive transportation options to business and industry. Highwoods enjoys a market-leading 31 percent share of for-lease industrial space. Two sub-markets, Piedmont Triad Airport and Winston-Salem North comprise 31 percent of the total industrial space in the Triad area. Highwoods domi- nates both with market-leading 39 percent and 53 percent shares respectively. 68 PIEDMONT TRIAD AIRPORT 220 GREENSBORO BRENTWOOD/COOLSPRINGS 40 85 HIGH POINT 311 BRENTWOOD/COOL SPRINGS 155 40 705 440 NASHVILLE 31 65 24 N NORTHWEST RICHMOND 295 33 NORTHWEST RICHMOND 95 301 250 64 150 301 RICHMOND 195 Highwoods Properties 2000 Annual Report N B R E N T W O O D / C O O L S P R I N G S NASHVILLE’S BUSINESS LOCATION Travel 10 miles south on I-65 from downtown Nashville and you will find yourself in the Brentwood/Cool Springs sub-market. With more class A office space than Nashville’s central business district, this is the place for business in the greater Nashville area. Over the last five years, this sub-market accounted for more than one-half of the total office space absorbed in Nashville. Surrounded by a variety of residential, shopping and entertainment options, the area consis- tently has some of the lowest vacancy rates in the Nashville market. Highwoods is the dominant landlord in the market with a 20 percent share of the suburban markets and a 26 percent share of the for-lease space available in the Brentwood/Cool Springs sub-market. This dominance allows us to meet a wide range of customer needs. 9 N O R T H W E S T R I C H M O N D INNSBROOK CORPORATE CENTER Ranked eleventh among America’s 50 hottest cities for business by Expansion Management magazine in January 2001, Richmond, conveniently located midway between Boston and Atlanta, is a regional financial and legal center. The northwest sub-market is the dominant sub-market in Richmond; Innsbrook is the dominant park in that sub-market, and; Highwoods is the dominant owner of for-lease space and development land in Innsbrook. With a 19 percent share of the northwest sub-market that is 98 percent leased, Highwoods is the market leader in northwest Richmond office space. T H E P O W E R O F P L A C E D E V E L O P M E N T AMENITIES AT GLENLAKE R E Z O N E , A C Q U I R E , D E V E L O P GLENLAKE HIGHWOODS CONTINUES TO R E S I D E N T I A L BUILD ON ITS REPUTATION AS A QUALITY DEVELOPER. 75' BUFFER Highwoods continues to build on its reputation as a quality developer. For example, in Raleigh we are starting an exciting project we have named GlenLake. From the first 158,000 square foot building currently under way, GlenLake will grow into a nine-building, 875,000 square foot office park. Located just outside I-440, six miles from downtown and 14 miles from Research Triangle Park, the site was Raleigh’s most sought after in-fill location. It is adjacent to the 1.3 million- square foot Crabtree Valley Mall, Eastern North Carolina’s premier shopping destination. Surrounding the remainder of the site are dense residential neighbor- hoods. Highwoods acquired this highly prized parcel despite strong competition from rival suitors. The owners knew our history of responsible development and were confident that our plans would be the best use of their land. Like all of our development projects, GlenLake was subject to the rigorous scrutiny of our capital allocation process. Highwoods’ local market experts generate project ideas based on their unique knowledge of their markets conditions. Our investment committee of five board members then analyzes each project. Capital is allocated to the best proposals while others are declined. This combination of local market expertise with a disciplined capital allocation process has been a key element in the long-term success of our development activities. 1 0 D A O R L M I L S D R D W A E R E S I D E N T I A L G L E N E D E N D R I V 4 PA R K I N G D E C K 7 5 ' B U F F E R P U B L I C S C H O O L 1 5 PA R K I N G D E C K C E N T R A L P L A Z A 2 R E F F U B ' 5 7 PA R K I N G D E C K 3 PA R K I N G D E C K 6 PA R K I N G D E C K R E S I D E N T I A L 8 7 LAKE LAKE R E F F U 5 ' B 7 PA R K I N G D E C K 9 LAKE Surrounding a central plaza with gardens and a fountain, GlenLake offers a unique blend of office park amenities in an in-fill location. Close to retail, residential and entertainment, customers will enjoy an office environment unlike anything else in Raleigh. E R O A D I D G E R 40 E U B L R E S I D E N T I A L N Highwoods Properties 2000 Annual Report FITNESS TRAIL G L E N L A K E S C H E M AT I C M A S T E R P L A N VICINITY RTP 70 R E S I D E N T I A L 540 70 RALEIGH R E S I D E N T I A L 40 D U R A L E I G H CARY 440 R D Shopping Center Shopping Mall G L E N W O O D A V GlenLake E 440 GLEN EDEN RD D D G I E R Offices E R Shopping Center U B L LAKE BOONE TR R E S I D E N T I A L Offices D E R G RID WADE AVE ED W ARDS MILL RD Hospital D R E G D I R E U L B Offices 40 Arena 440 N Nine-building campus to accom- modate 875,000 square feet Front and rear lobbies plus two side entries Flexible floor plans for large and small users Telecommunications conduit systems to allow “hardwiring” from building to building Expansive central plaza area to include extensive landscaping, fountain and outdoor study garden Covered parking Fitness trail, showers and locker facilities Access to interstate system via Edwards Mill Road Centrally located to Raleigh, Durham and Chapel Hill Premier shopping – within walking distance to mall with more than 180 stores Surrounded by exclusive residential communities 1 1 Close proximity to area’s finest hotels and major financial institutions CATERPILLAR FINANCIAL CENTER T H E P O W E R O F P L A C E C U S T O M E R B U I L D - T O - S U I T FROM DIRT TO DONE For customers desiring to own their facility, Highwoods offers a comprehensive package of services to meet their needs. From fully entitled land in great locations through needs assessment, design consultations, cost estimates, construction management and ongoing property management and maintenance services, Highwoods delivers for our customers. Partnering with Highwoods brings the experience and abilities of one of the largest office and industrial developers to the project. Customers can be confident that their quality project will be completed on time, within budget and as promised. The same diligence applies regardless of whether their needs call for a 100,000 square foot industrial building or a 800,000 square foot multi-building campus. 1 3 CATERPILLAR FINANCIAL CENTER 312,500 SQUARE FEET “Our experience with Highwoods during the construction of the Caterpillar Financial Center in Nashville, Tennesse was extremely positive. Highwoods dedicated tremendous efort in helping us work through the many details required of a project of this magnitude. `ey understood our neds and worked diligently with the design and construction team to deliver a building for us that is both striking in appearance and functional for our business. `e Highwoods personnel have ben professionals in every phase of the project. `ey worked many hours with our building team to coordinate the design and construction process, while always taking time to address any issues or concerns. In fact, we fondly think of them as part of the Caterpillar Financial family today!” JAMES S. BEARD Vice President, Caterpillar Financial Highwoods Properties 2000 Annual Report 1 2 FROM DIRT TO DONE Highwoods development history is unmatched in the Southeast. Since Initial Public Offering: $1.2 billion starts 123 projects 12% stabilized yield $350 million value created Current Development Pipeline: $336 million budgeted cost 26 projects under way 9 markets 60% pre-leased 45% funded Internet Internet-based purchasing and leasing save time and money for both our customers and Highwoods. 1 4 HVAC Centralized monitoring and control of heating and cooling systems allows us to respond to special needs more quickly and cost effectively. Power Planning for Uninterruptible Power Supply systems is a normal part of our new building design process. T H E P O W E R O F P L A C E O P E R A T I O N S Lighting 30,000 light fixtures keep our buildings bright. TECHNOLOGY Highwoods continues to expand its use of technology to enhance our customer’s experience. Centralized monitoring and control of heating, ventilation, and air conditioning systems. Planning for uninterruptible power supply systems and expanded telephony is a normal part of our new building design. Internet-based purchasing and leasing save time and money. MAINTENANCE During the course of a year, Highwoods maintains and preserves: 2.5 million square yards of carpet 500 acres of grounds 4,000 restrooms 1 5 Telephony Planning for expanded telephony systems is a normal part of our building design process. Carpeting During the course of a year, Highwoods sees to it that 2.5 million yards of carpeting are vaccuumed. O P E R A T I O N S CHANGES TO IMPROVE EFFICIENCY AS WELL AS ENHANCE OUR CUSTOMERS’ EXPERIENCE. Highwoods operates our premier properties with the client in mind. Weekly divi- sional meetings keep local personnel current with the latest developments in their markets. Monthly, a group meeting of senior management reviews progress on companywide initiatives. Twice a year, senior management conducts meetings with all employees to discuss company goals and objectives. These formal meetings serve as an idea swap and information sharing venue to ensure that the best ideas for serving our clients are utilized across our platform. Technology plays an ever-increasing role in all our lives. Highwoods continues to expand our use of technology to enhance our customers’ experience. Centralized monitoring and control of heating and cooling systems allows us to respond to special needs more quickly and cost-effectively. Planning for uninterruptible power supply systems and expanded telephony is a normal part of our new building design process. Internet-based purchasing and leasing continues to grow, saving both time and money for Highwoods and our customers. Keeping it clean and fresh looking is no small task when you own 40 million square feet of space. Nearly 200 maintenance and service employ- ees pride themselves on providing our customers with properties maintained like no others. During the course of a year, Highwoods sees to it that approximately 2.5 million yards of carpeting is vacuumed, 500 acres of grass and grounds are maintained and all the other details required to keep our properties looking fresh are attended to in a professional manner. Our leasing professionals are on the front line of meeting our customers’ space needs. Their experience, train- ing and professionalism are second to none. They assist customers in understanding the market, evaluating space options and attending to the Highwoods Properties 2000 Annual Report details of moving into new space. With many customers in multiple buildings and markets, consistent quality and service delivery are assured by our corporate host program which partners one Highwoods leasing professional with all of a customers locations. Highwoods supports the notion that real estate is an inherently local business. That is not to say that centralization of some functions is without merit. Where we touch the customer most often – leasing, asset management, build-to-suit projects and a myriad of other tasks – people and decision authority are local. Where centralization makes sense – financial management, lease accounting, tax accounting, benefits management and capital allocation – we have centralized functions in our Raleigh headquarters to maximize the effec- tiveness and minimize the cost of these functions. BOARD OF DIRECTORS SENIOR OFFICERS Thomas W. Adler Managing Partner for NewGar, Ltd. Gene H. Anderson Kay N. Callison Edward J. Fritsch Senior Vice President Former Director of J.C. Nichols Company and Community Volunteer Executive Vice President, Chief Operating Officer and Secretary 1 6 Ronald P. Gibson William E. Graham, Jr. Lawrence S. Kaplan L. Glenn Orr, Jr. President and Chief Executive Officer Senior Counsel, Hunton & Williams and Past Vice Chairman of Carolina Power and Light Past Partner of Ernst and Young LLP Director and Past Chairman, President and Chief Executive Officer of Southern National Corporation O. Temple Sloan, Jr. Willard H. Smith Jr. John L. Turner Chairman of the Board of Directors Chairman of the Board of Directors of General Parts, Inc. Past Managing Director of Merrill Lynch Chief Investment Officer and Vice Chairman of the Board of Directors Ronald P. Gibson* President, Chief Executive Officer and Director John L. Turner* Chief Investment Officer and Vice Chairman of the Board of Directors Edward J. Fritsch* Executive Vice President, Chief Operating Officer, Director and Secretary Gene H. Anderson* Senior Vice President and Director Michael F. Beale* Senior Vice President Barrett Brady Senior Vice President Thomas F. Cochran Senior Vice President Michael E. Harris* Senior Vice President Marcus H. Jackson* Senior Vice President Paul W. Kreckman Vice President Carman J. Liuzzo* Vice President, Chief Financial Officer and Treasurer Stephen A. Meyers Vice President Scott I. Peek, Jr. Vice President Mack D. Pridgen III* Vice President, General Counsel and Assistant Secretary W. Brian Reames Vice President W. Mark Shumaker Vice President *Officers subject to the reporting require- ments of Section 16 of the Securities Exchange Act of 1934. . c n I , s e i t r e p o r P s d o o w h g i H 1 0 0 2 © C N , h g i e l a R , n g i s e D y e n r u B y b d e n g i s e D Highwoods Properties, Inc. 3100 Smoketree Court, Suite 600 Raleigh, North Carolina 27604 (919) 872-4924 www.highwoods.com 0 0 0 2 R A E Y T H E P O W E R O F P L A C E T H E P O W E R O F P L A C E H i g h w o o d s P r o p e r t i e s 2 0 0 0 A N N U A L R E P O R T HIGHWOODS PROPERTIES 11 CORE MARKETS 591 PROPERTIES 46.2 MILLION SQUARE FEET OF SPACE 5,000 CUSTOMERS 1,800 ACRES OF DEVELOPMENT LAND $3.71 $3.45 $3.22 $2.71 $2.32 $2.19 $2.25 $2.10 $1.98 $1.78 2 1 3 2 1 80.2% 73.0% 65.2% 64.3% 60.6% 80 60 40 20 0 1996 1997 1998 1999 2000 1996 1997 1998 1999 2000 1996 1997 1998 1999 2000 PER DILUTED SHARE Funds from Operations PER SHARE Dividends PERCENTAGE OF FFO Dividend Payout Ratio 

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