Highwoods Properties Reports Third Quarter Results $0.62 FFO per Share

Highwoods Properties, Inc. (NYSE: HIW), the largest owner
and operator of suburban office properties in the Southeast and NAIOP's
2009 Developer of the Year, today reported results for the three and
nine months ended September 30, 2009.

Ed Fritsch, President and CEO, stated, "We are pleased to enter the
fourth quarter with a strong and healthy balance sheet that gives us a
competitive leasing advantage and boosts our ability to pursue
acquisition and build-to-suit development opportunities. We have
zero drawn on our $450 million credit facility, no debt maturities
during the remainder of 2009 and 2010 and $54 million of available cash."

"Our third quarter FFO results of $0.62 per share were solid. Occupancy
in our wholly-owned portfolio was 87.8%, compared to 88.0% in the second
quarter, and occupancy in our office portfolio, 88.6% at quarter end,
continues to outperform overall market occupancy, excluding the Triad.
We continue to focus on leasing and operating our existing portfolio of
high-quality, differentiated assets as effectively and efficiently as
possible. While economic conditions are choppy, by leveraging our
ability to fund tenant improvements and leasing commissions, we are
winning more than our fair share of deals," added Mr. Fritsch.

The Company also raised and narrowed its 2009 Funds from Operations
("FFO") guidance range from $2.52 to $2.60 per diluted share to $2.59 to
$2.62 per diluted share.

Third Quarter and Nine Month Financial Results

For the third quarter of 2009, the Company reported net income available
for common stockholders of $10.3 million, or $0.14 per diluted share.
Net income available for common stockholders for the third quarter of
2008 was $12.2 million, or $0.21 per diluted share. Net income per
diluted share in the third quarter of 2009 included $0.02 from gain on
the early extinguishment of debt and the favorable cash settlement of a
real estate-related legal claim. These gains were offset by $0.01 per
diluted share relating to impairment charges on non-core depreciable
assets. Net income per diluted share in the third quarter of 2008
included $0.05 from gains on sales of depreciable assets and $0.03 of
land sale gains. The Company reported no impairment charges in the third
quarter of 2008.

For the nine months ended September 30, 2009, net income available for
common stockholders was $54.3 million, or $0.81 per diluted share. For
the nine months ended September 30, 2008, net income available for
common stockholders was $37.1 million, or $0.64 per diluted share. Net
income per diluted share in the first nine months of 2009 included $0.31
from gains on sales of depreciable assets, $0.02 from gains on debt
extinguishments and $0.01 relating to the favorable legal settlement
mentioned in the preceding paragraph. Net income per diluted share in
the first nine months of 2008 included $0.19 from gains on sales of
depreciable assets and $0.03 of land sale gains.

FFO for the third quarter of 2009 was $46.4 million, or $0.62 per
diluted share, compared to $44.6 million, or $0.71 per diluted share,
for the third quarter of 2008. For the nine months ended September 30,
2009, FFO was $143.3 million, or $2.02 per diluted share, compared to
FFO of $130.3 million, or $2.10 per diluted share, for the nine months
ended September 30, 2008. The Company noted that diluted shares for the
three- and nine-month periods ended September 30, 2009 were higher than
the same periods a year ago due to the Company's recent equity offerings.

The following items were included in the determination of net income for
the three and nine months ended September 30, 2009 and 2008:

                                                                3 Months Ended               3 Months Ended
                                                                9/30/09                      9/30/08
                                                                      (000)   Per Share            (000)   Per Share
Land sale gains, net of impairments                             $     15      $     0.00     $     1,727   $     0.03
Lease termination income                                              124           0.00           436           0.01
Straight line rental income                                           535           0.01           967           0.02
Capitalized interest                                                  1,154         0.02           2,106         0.03
Gains on for-sale residential condos, net of partner's interest
                                                                      160           0.00     -             -
Preferred stock redemption/repurchase charges                   -             -                    (108)         0.00
Gains on sales of depreciable assets                                  19            0.00           3,155         0.05
Gain on debt extinguishment                                           657           0.01     -             -
Gain on settlement of legal claim                                     1,050         0.01     -             -
Impairments of depreciable assets (1)                                 (576)         (0.01)   -             -
                                                                9 Months Ended               9 Months Ended
                                                                9/30/09                      9/30/09
                                                                      (000)   Per Share            (000)   Per Share
Land sale gains, net of impairments                             $     139     $     0.00     $     1,816   $     0.03
Lease termination income                                              1,433         0.02           2,362         0.04
Straight line rental income                                           2,787         0.04           5,263         0.08
Capitalized interest                                                  3,975         0.06           6,912         0.11
Gains on for-sale residential condos, net of partner's interest
                                                                      1,005         0.01     -             -
Preferred stock redemption/repurchase charges                   -             -                    (108)         0.00
Gains on sales of depreciable assets (2)                              21,905        0.31           11,926        0.19
Gains on debt extinguishments                                         1,287         0.02     -             -
Gain on settlement of legal claim                                     1,050         0.01     -             -
Impairments of depreciable assets (1)                                 (576)         (0.01)   -             -
(1) 2009 amounts include $199,000 representing the Company's share
of an impairment recorded by an unconsolidated joint venture.
(2) 2009 amounts include $781,000, or $0.01 per share,
representing the Company's share of a gain recorded by an
unconsolidated joint venture.

Third Quarter 2009 Highlights

--
Average in-place cash rental rates across the Company's total
portfolio grew 3.6% compared to the third quarter of 2008. Average
in-place cash rental rates across the Company's office portfolio
increased 2.9% from the same period a year ago.

--
Same property net operating income from continuing operations,
excluding straight line rent and termination fee income, for the
three- and nine months ended September 30, 2009, decreased 3.2% and
2.9%, respectively, from the corresponding periods of 2008. Excluding
the impact from customers in Raleigh who moved within our portfolio
from same properties to RBC Plaza, with 78% more square feet leased,
same property net operating income would have decreased by 2.3% and
2.0%, respectively, for the three and nine month periods of 2009.

--
On August 6, the Company closed two secured loans totaling $162.3
million. These financings consisted of a $115.0 million, 6.5-year
secured loan at a fixed rate of 6.875%, secured by a pool of 10
assets, and a $47.3 million, 7-year secured loan at a fixed rate of
7.5%, secured by the office portion of RBC Plaza. The Company used a
portion of the proceeds to pay off in full the $91 million then
outstanding under its $450 million unsecured credit facility. There
are currently no amounts drawn under the facility.

--
$75 million of office development was placed into service; the FBI
build-to-suit field office in Jackson, Mississippi, and GlenLake Six
and CentreGreen V, both in Raleigh. On a weighted average dollar
basis, these three properties were 83% pre-leased.

--
The Company sold seven RBC Plaza condominiums in the third quarter and
another six units subsequent to September 30, 2009. Since receiving
the first certificate of occupancy on October 13, 2008, the Company
has sold 91 units, or 65% of the total available for sale, for $37.1
million of total proceeds and a $5.5 million gain. Six units are
currently under contract.

Funds from Operations Outlook

For 2009, the Company now expects FFO per diluted share to be in the
range of $2.59 to $2.62. This estimate reflects management's view of
current and future market conditions, including assumptions with respect
to rental rates, occupancy levels, operating and general and
administrative expenses, interest rates, gains from land and condominium
sales and the timing and impact of development deliveries and includes
dilution from completed and potential property dispositions during 2009.
FFO guidance excludes any gains or impairments associated with
depreciable properties or joint venture interests, as well as unusual
charges or credits that may occur during the remainder of the year. FFO
guidance is based on 72.0 million diluted shares outstanding for full
year 2009. Factors that could cause actual 2009 FFO results to differ
materially from Highwoods' current expectations are discussed below and
are also detailed in the Company's 2008 Annual Report on Form 10-K.

Management's outlook for 2009 is based on the following operating
assumptions:

                                                   Low        High
Year End Occupancy                                   87.5  %    88.0  %
Total Cash NOI Growth                                +1.0  %    +1.5  %
G&A Expenses (1)                                   $ 35.0M    $ 36.0M
Lease Termination Income                           $ 1.4M     $ 1.5M
Gains from Land and Residential Condominium Sales  $ 1.4M     $ 1.7M
Straight Line Rental Income                        $ 3.2M     $ 3.6M
Dispositions                                       $ 69M      $ 85M
Acquisitions                                       $ 0M       $ 100M
Development Starts                                 $ 4.6M     $ 4.6M

(1) Includes $1.3 million in deferred compensation expense due to a
projected increase in the value of third party mutual funds held by the
Company in its nonqualified deferred compensation plan for 2009. Any
such change in G&A expenses is fully offset by an increase in "Other
Income" and has no net impact on FFO.

Supplemental Information

A copy of the Company's third quarter 2009 Supplemental Information that
includes financial, leasing and operational statistics is available in
the "Investor Relations/Financial Supplementals" section of the
Company's Web site at www.highwoods.com.
You may also obtain a copy of all Supplemental Information published by
the Company by contacting Highwoods Investor Relations at 919-431-1529/
800-256-2963 or by e-mail to HIW-IR@highwoods.com.
If you would like to receive future Supplemental Information packages by
e-mail, please contact the Investor Relations department as noted above
or by written request to: Investor Relations Department, Highwoods
Properties, Inc., 3100 Smoketree Court, Suite 600, Raleigh, NC 27604.

Conference Call

Tomorrow, Thursday, October 29, at 10:00 a.m. Eastern time, Highwoods
will host a teleconference call to discuss the matters outlined in this
press release. For US/Canada callers, dial (800) 891-6979. A live,
listen-only Web cast can be accessed through the Company's Web site at www.highwoods.com
under the "Investor Relations" section.

Non-GAAP Information

Funds from Operations ("FFO"): We believe that FFO and FFO per share are
beneficial to management and investors and are important indicators of
the performance of any equity real estate investment trust ("REIT").
Because FFO and FFO per share calculations exclude such factors as
depreciation and amortization of real estate assets and gains or losses
from sales of operating real estate assets (which can vary among owners
of identical assets in similar conditions based on historical cost
accounting and useful life estimates), they facilitate comparisons of
operating performance between periods and between other REITs. Our
management believes that historical cost accounting for real estate
assets in accordance with GAAP implicitly assumes that the value of real
estate assets diminishes predictably over time. Since real estate values
have historically risen or fallen with market conditions, many industry
investors and analysts have considered the presentation of operating
results for real estate companies that use historical cost accounting to
be insufficient by themselves. As a result, management believes that FFO
and FFO per share, together with the required GAAP presentations,
provide a more complete understanding of our performance relative to our
competitors and a more informed and appropriate basis on which to make
decisions involving operating, financing and investing activities.

FFO and FFO per share as disclosed by other REITs may not be comparable
to our calculation of FFO and FFO per share as described below. FFO and
FFO per share are non-GAAP financial measures and therefore do not
represent net income or net income per share as defined by GAAP. Net
income and net income per share as defined by GAAP are the most relevant
measures in determining our operating performance because FFO and FFO
per share include adjustments that investors may deem subjective, such
as adding back expenses such as depreciation and amortization.
Furthermore, FFO per share does not depict the amount that accrues
directly to the stockholders' benefit. Accordingly, FFO and FFO per
share should never be considered as alternatives to net income or net
income per share as indicators of our operating performance.

FFO as defined by NAREIT is calculated as follows:

--
Net income (loss) computed in accordance with GAAP;

--
Less dividends to holders of preferred stock and less excess of
preferred stock redemption cost over carrying value;

--
Plus depreciation and amortization of assets uniquely significant to
the real estate industry;

--
Less gains, or plus losses, from sales of depreciable operating
properties (but excluding impairment losses) and excluding items that
are classified as extraordinary items under GAAP;

--
Plus or minus adjustments for unconsolidated partnerships and joint
ventures (to reflect Funds from Operations on the same basis); and

--
Plus or minus adjustments for depreciation and amortization and
gains/(losses) on sales

In calculating FFO, the Company adds back net income attributable to
non-controlling interests in its operating partnership, which we believe
is consistent with standard industry practice for REITs that operate
through an UPREIT structure. The Company believes that it is important
to present FFO on an as-converted basis since all of the operating
partnership units not owned by the Company are redeemable on a
one-for-one basis for shares of the Company's common stock. The
Company's FFO calculations are reconciled to net income in a table
included with this release.

Net operating income from continuing operations ("NOI"): The Company
defines NOI as "Rental and other revenues" from continuing operations
less "Rental property and other expenses" from continuing operations.
Management believes that NOI is a useful supplemental measure of the
Company's property operating performance because it provides a
performance measure of the revenues and expenses directly involved in
owning real estate assets, and provides a perspective not immediately
apparent from net income or FFO. Other REITs may use different
methodologies to calculate NOI and accordingly the Company's NOI may not
be comparable to other REITs. The Company's NOI calculations are
reconciled to "Income before disposition of property and condominiums
and equity in earnings of unconsolidated affiliates" and to "Rental and
other revenues" and "Rental property and other expenses" in a table
included with this release.

Same property NOI from continuing operations: The Company defines same
property NOI as NOI for the Company's in-service properties included in
continuing operations that were wholly-owned during the entirety of the
periods presented (from January 1, 2008 to September 30, 2009). The
Company's same property NOI calculations are reconciled to NOI in a
table included with this release.

About the Company

Highwoods Properties, Inc., a member of the S&P MidCap 400 Index, is a
fully integrated, self-administered real estate investment trust
("REIT") that provides leasing, management, development, construction
and other customer-related services for its properties and for third
parties. At September 30, 2009, the Company owned or had an interest in
380 in-service office, industrial and retail properties encompassing
approximately 35.4 million square feet. Highwoods also owned 580 acres
of development land. Highwoods is based in Raleigh, North Carolina, and
its properties and development land are located in Florida, Georgia,
Iowa, Missouri, Mississippi, North Carolina, South Carolina, Tennessee
and Virginia. For more information about Highwoods Properties, please
visit our Web site at www.highwoods.com.

Certain matters discussed in this press release, such as expected 2009
financial and operational results and the related assumptions underlying
our expected results and the timing and impact of anticipated financing
and investment activity, are forward-looking statements within the
meaning of the federal securities laws. These statements are
distinguished by use of the words "will", "expect", "intend" and words
of similar meaning. Although Highwoods believes that the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, it can give no assurance that its expectations will be
achieved.

Factors that could cause actual results to differ materially from
Highwoods' current expectations include, among others, the following:
the financial condition of our customers could deteriorate; speculative
development by others could result in excessive supply of properties
relative to customer demand; development, acquisition, reinvestment,
disposition or joint venture projects may not be completed as quickly or
on as favorable terms as anticipated; we may not be able to lease or
re-lease space as quickly as anticipated or on as favorable terms as old
leases; difficulties in obtaining additional capital to satisfy our
future cash needs or increases in interest rates could adversely impact
our ability to fund important business initiatives and increase our debt
service costs; our Southeastern and Midwestern markets may suffer
declines in economic growth; our banking and joint venture partners may
suffer financial difficulties that adversely impact their ability to
satisfy their contractual obligations to us; and others detailed in the
Company's 2008 Annual Report on Form 10-K and subsequent SEC reports.

Highwoods Properties, Inc.
Consolidated Statements of
Income
(Unaudited and in thousands, except per share
amounts)
                                                                       Three Months Ended            Nine Months Ended
                                                                       September 30,                 September 30,
                                                                       2009           2008           2009           2008
Rental and other revenues                                              $  114,229     $  112,755     $  340,508     $  336,054
Operating expenses:
Rental property and other expenses                                        42,939         40,911         123,114        118,976
Depreciation and amortization                                             32,637         31,458         98,443         92,405
General and administrative                                                9,485          8,885          27,286         29,362
Total operating expenses                                                  85,061         81,254         248,843        240,743
Interest expenses:
Contractual                                                               20,001         22,995         60,525         69,803
Amortization of deferred financing costs                                  627            714            1,978          2,038
Financing obligations                                                     706            783            2,151          2,287
                                                                          21,334         24,492         64,654         74,128
Other income:
Interest and other income                                                 3,324          1,017          6,615          3,406
Gains on debt extinguishments                                             657            -              1,287          -
                                                                          3,981          1,017          7,902          3,406
Income from continuing operations before disposition of
property and condominiums and equity in earnings of unconsolidated
affiliates
                                                                          11,815         8,026          34,913         24,589
Gains on disposition of property                                          34             1,745          247            1,852
Gains on for-sale residential condominiums                                187            -              823            -
Equity in earnings of unconsolidated affiliates                           682            1,214          3,844          4,723
Income from continuing operations                                         12,718         10,985         39,827         31,164
Discontinued operations:
Income from discontinued operations                                       232            1,602          2,381          5,417
Net gains/(losses) from discontinued operations                           (377    )      3,137          20,639         11,890
                                                                          (145    )      4,739          23,020         17,307
Net income                                                                12,573         15,724         62,847         48,471
Net (income) attributable to noncontrolling interests in the              (591    )      (812    )      (3,339  )      (2,544  )
Operating Partnership
Net (income) attributable to noncontrolling interests in                  (24     )      (201    )      (158    )      (590    )
consolidated affiliates
Dividends on preferred stock                                              (1,677  )      (2,451  )      (5,031  )      (8,127  )
Excess of preferred stock redemption/repurchase cost over carrying        -              (108    )      -              (108    )
value
Net income available for common stockholders                           $  10,281      $  12,152      $  54,319      $  37,102
Earnings per common share - basic:
Income from continuing operations available for common stockholders    $  0.15        $  0.13        $  0.49        $  0.36
Income from discontinued operations available for common stockholders     -              0.08           0.32           0.28
Net income available for common stockholders                           $  0.15        $  0.21        $  0.81        $  0.64
Weighted average common shares outstanding - basic                        70,902         58,998         66,912         57,893
Earnings per common share - diluted:
Income from continuing operations available for common stockholders    $  0.14        $  0.13        $  0.49        $  0.36
Income from discontinued operations available for common stockholders     -              0.08           0.32           0.28
Net income available for common stockholders                           $  0.14        $  0.21        $  0.81        $  0.64
Weighted average common shares outstanding - diluted                      75,072         63,228         71,024         62,176
Net income available for common stockholders:
Income from continuing operations available for common stockholders    $  10,418      $  7,711       $  32,642      $  20,910
Income/(loss) from discontinued operations available for common           (137    )      4,441          21,677         16,192
stockholders
Net income available for common stockholders                           $  10,281      $  12,152      $  54,319      $  37,102

Highwoods Properties, Inc.
Consolidated Balance Sheets
(Unaudited
and in thousands)
                                                                    September 30,        December 31,
                                                                    2009                 2008
Assets:
Real estate assets, at cost:
Land                                                                $    344,052         $    346,889
Buildings and tenant improvements                                        2,815,800            2,811,810
Development in process                                                   62,075               61,938
Land held for development                                                99,206               98,946
                                                                         3,321,133            3,319,583
Less-accumulated depreciation                                            (762,068  )          (712,597  )
Net real estate assets                                                   2,559,065            2,606,986
For sale residential condominiums                                        17,094               24,284
Real estate and other assets, net, held for sale                         13,779               14,447
Cash and cash equivalents                                                42,069               13,757
Restricted cash                                                          17,995               2,258
Accounts receivable, net of allowance of $2,776 and $1,281,              19,847               23,687
respectively
Notes receivable, net of allowance of $578 and $459, respectively        3,246                3,602
Accrued straight-line rents receivable, net of allowance of $2,573
and $2,082, respectively
                                                                         81,896               79,597
Investment in unconsolidated affiliates                                  66,207               67,723
Deferred financing and leasing costs, net of accumulated
amortization of $51,929 and $52,434, respectively
                                                                         70,259               72,783
Prepaid expenses and other                                               38,308               37,046
Total Assets                                                        $    2,929,765       $    2,946,170
Liabilities, Noncontrolling Interests in the Operating
Partnership and Equity:
Mortgages and notes payable                                         $    1,472,585       $    1,604,685
Accounts payable, accrued expenses and other liabilities                 129,477              135,609
Financing obligations                                                    35,043               34,174
Total Liabilities                                                        1,637,105            1,774,468
Noncontrolling interests in the Operating Partnership                    124,705              111,278
Equity:
Preferred stock                                                          81,592               81,592
Common stock                                                             711                  636
Additional paid-in capital                                               1,753,276            1,616,093
Distributions in excess of net earnings                                  (669,183  )          (639,281  )
Accumulated other comprehensive loss                                     (3,979    )          (4,792    )
Total Stockholders' Equity                                               1,162,417            1,054,248
Noncontrolling interests in consolidated affiliates                      5,538                6,176
Total Equity                                                             1,167,955            1,060,424
Total Liabilities, Noncontrolling Interests in the Operating        $    2,929,765       $    2,946,170
Partnership and Equity

Highwoods Properties, Inc.
Funds from Operations
(Unaudited
and in thousands, except per share amounts)
                                                                   Three Months Ended             Nine months Ended
                                                                   September 30,                  September 30,
                                                                   2009           2008            2009          2008
Funds from operations:
Net income                                                         $   12,573     $   15,724      $  62,847     $  48,471
Net (income) attributable to noncontrolling interests in the           (591   )       (812   )       (3,339  )     (2,544  )
Operating Partnership
Net (income) attributable to noncontrolling interests in               (24    )       (201   )       (158    )     (590    )
consolidated affiliates
Dividends on preferred stock                                           (1,677 )       (2,451 )       (5,031  )     (8,127  )
Excess of preferred stock redemption/repurchase cost over carrying     -              (108   )       -             (108    )
value
Net income available for common stockholders                           10,281         12,152         54,319        37,102
Add/(deduct):
Depreciation and amortization of real estate assets                    32,131         30,987         97,003        90,933
(Gains) on disposition of depreciable properties                       (19    )       (18    )       (108    )     (36     )
Net (income) attributable to noncontrolling interests in the           591            812            3,339         2,544
Operating Partnership
Unconsolidated affiliates:                                                                           -             -
Depreciation and amortization of real estate assets                    3,352          3,136          9,825         9,466
(Gains) on disposition of depreciable properties                       -              -              (781    )     -
Discontinued operations:                                                                             -             -
Depreciation and amortization of real estate assets                    52             652            756           2,187
(Gains) on disposition of depreciable properties                       -              (3,137 )       (21,016 )     (11,890 )
Funds from operations                                              $   46,388     $   44,584      $  143,337    $  130,306
Funds from operations per share - diluted:
Net income available for common stockholders                       $   0.14       $   0.21        $  0.81       $  0.64
Add/(deduct):
Depreciation and amortization of real estate assets                    0.43           0.49           1.37          1.46
(Gains) on disposition of depreciable properties                       -              -              -             -
Unconsolidated affiliates:
Depreciation and amortization of real estate assets                    0.05           0.05           0.14          0.15
(Gains) on disposition of depreciable properties                       -              -              (0.01   )     -
Discontinued operations:
Depreciation and amortization of real estate assets                    -              0.01           0.01          0.04
(Gains) on disposition of depreciable properties                       -              (0.05  )       (0.30   )     (0.19   )
Funds from operations per share - diluted                          $   0.62       $   0.71        $  2.02       $  2.10
Weighted average shares outstanding - diluted                          75,072         63,228         71,024        62,176

Highwoods Properties, Inc.
Net Operating Income
Reconcilation
(Unaudited and in thousands)
                                                                   Three Months Ended               Nine Months Ended
                                                                   September 30,                    September 30,
                                                                   2009            2008             2009          2008
Income before disposition of property and condominiums and equity
in earnings of unconsolidated affiliates
                                                                   $   11,815      $   8,026        $  34,913     $  24,589
Other income/(expense)                                                 (3,981  )       (1,017  )       (7,902  )     (3,406  )
Interest expense                                                       21,334          24,492          64,654        74,128
General and administrative expense                                     9,485           8,885           27,286        29,362
Depreciation and amortization expense                                  32,637          31,458          98,443        92,405
Net operating income from continuing operations                        71,290          71,844          217,394       217,078
Less - non same property and other net operating income                7,942           5,337           22,720        12,712
Total same property net operating income from continuing           $   63,348      $   66,507       $  194,674    $  204,366
operations
Rental and other revenues                                          $   114,229     $   112,755      $  340,508    $  336,054
Rental property and other expenses                                     42,939          40,911          123,114       118,976
Total net operating income from continuing operations                  71,290          71,844          217,394       217,078
Less - non same property and other net operating income                7,942           5,337           22,720        12,712
Total same property net operating income from continuing           $   63,348      $   66,507       $  194,674    $  204,366
operations

SOURCE: Highwoods Properties, Inc.

Highwoods Properties, Inc. 
Tabitha Zane 
Vice President, Investor Relations 
919-431-1529

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