Highwoods Properties Inc – ‘S-4’ on 6/1/98

As of:  Monday, 6/1/98   ·   Accession #:  950168-98-1826   ·   File #:  333-55725

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Registration of Securities Issued in a Business-Combination Transaction   —   Form S-4
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-4         Highwoods Properties, Inc. S-4                       211   1.38M 
 2: EX-5        Exhibit 5.1                                            1      8K 
 3: EX-8        Exhibit 8.1                                            7     36K 
 4: EX-8        Exhibit 8.2                                            6     32K 
 5: EX-8        Exhibit 8.3                                            9     60K 
 6: EX-23       Exhibit 23.3                                           1      9K 
 7: EX-23       Exhibit 23.4                                           1      7K 
 8: EX-23       Exhibit 23.5                                           1      7K 
 9: EX-23       Exhibit 23.6                                           1      6K 

S-4   —   Highwoods Properties, Inc. S-4
Document Table of Contents

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SECURITIES AND EXCHANGE COMMISSION  
WASHINGTON, DC 20549  

FORM S-4  
REGISTRATION STATEMENT  
UNDER THE 
SECURITIES ACT OF 1933  
--------------- 
Highwoods Properties, Inc.  
(Exact Name of Registrant as Specified in its Charter)  

                                                                [Download Table]

       Maryland                        6798                  56-1871668    
                                                                           
(State of Incorporation)  (Primary Standard Industrial    (I.R.S. Employer 
                           Classification Code Number)  Identification No.)

3100 Smoketree Court, Suite 600 
Raleigh, North Carolina 27604 
(919) 872-4924  
(Address, including zip code, and telephone number, including 
area code, of registrant's principal executive offices) 

--------------- 

                                                                [Download Table]
                                                                   
                                            With Copies to:        
  RONALD P. GIBSON, President            BRAD S. MARKOFF, Esq.     
   Highwoods Properties, Inc.              Alston & Bird LLP       
3100 Smoketree Court, Suite 600     3605 Glenwood Avenue, Suite 310
 Raleigh, North Carolina 27604       Raleigh, North Carolina 27612 
           (919) 872-4924                    (919) 420-2210        

(Name, address, including zip code, and telephone number, including 
area code, of agent for service)  

  Approximate date of commencement of proposed sale to the public: As soon
as practicable after the Effective Date of the Registration Statement           

If the securities being registered on this Form are being offered in  
connection with the formation of a holding company and there is compliance with 
General Instruction G, check the following box. [ ]                             

 If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and   
list the Securities Act registration statement number of the earlier effective  
registration statement for the same offering. [ ]                               

  If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act   
registration statement number of the earlier effective registration statement   
for the same offering. [ ]                                                      
--------------- 
CALCULATION OF REGISTRATION FEE 
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                                                        [Enlarge/Download Table]

                                                  Proposed Maximum  Proposed Maximum                      
     Title of Each Class of        Amount to Be    Offering Price      Aggregate           Amount of      
   Securities to be Registered    Registered (1)    Per Unit (2)     Offering Price   Registration Fee (3)
                                                                                                          
Common Stock ................... 9,860,496            $ 31.78         $313,366,563          $37,121       

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(1) Represents the maximum number of shares of common stock, par value $.01 per 
share ("Highwoods Common"), issuable by the registrant upon consummation
of the merger of J.C. Nichols Company ("JCN") with and into a subsidiary
of registrant.                                                          

(2) Pursuant to Rules 457(f)(1) and 457(c), the registration fee was computed   
on the basis of the average of the high and low prices of a share of    
common stock, par value $.01, of JCN as of May 29, 1998.                

(3) Excludes a registration fee of $57,839 paid in connection with the filing   
by JCN of a preliminary proxy statement on Schedule 14A, which is a part
of this Registration Statement.                                         

  The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant      
shall file a further amendment which specifically states that this Registration 
Statement shall thereafter become effective in accordance with Section 8(a) of  
the Securities Act of 1933 or until the Registration Statement shall become     
effective on such date as the Commission, acting pursuant to said Section 8(a), 
may determine.                                                                  
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CROSS REFERENCE SHEET 

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                    Item Number/Caption                                    Headings in Proxy Statement/Prospectus              
------------------------------------------------------------ ------------------------------------------------------------------
                                                                                                                               
A.   Information About the Transaction                                                                                         
      1.   Forepart of the Registration Statement and                                                                          
           Outside Front Cover Page of Prospectus .......... Facing Page of the Registration Statement; Cross Reference Sheet; 
                                                             Outside Front Cover Page of Proxy Statement/Prospectus.           
      2.   Inside Front and Outside Back Cover Pages                                                                           
           of Prospectus ................................... Available Information; Incorporation of Certain Documents by      
                                                             Reference; Table of Contents.                                     
      3.   Risk Factors, Ratio of Earnings to Fixed                                                                            
           Charges and Other Information ................... Summary; Risk Factors; Comparative Per Share Data;                
                                                             Comparative Share Prices; Incorporation of Certain Documents by   
                                                             Reference.                                                        
      4.   Terms of the Transaction ........................ Summary; The Merger.                                              
      5.   Pro Forma Financial Information ................. Highwoods Pro Forma Combined Financial Information;               
                                                             Incorporation of Certain Documents by Reference.                  
      6.   Material Contracts With the Company                                                                                 
           Being Acquired .................................. Summary; Risk Factors; The Merger; Incorporation of Certain       
                                                             Documents by Reference                                            
      7.   Additional Information Required for                                                                                 
           Reoffering by Persons and Parties Deemed                                                                            
           to be Underwriters .............................. Not applicable.                                                   
      8.   Interests of Named Experts and Counsel .......... Experts; Legal Matters.                                           
      9.   Disclosure of Commission Position on                                                                                
           Indemnification ................................. The Merger.                                                       
B.   Information About the Registrant                                                                                          
     10.   Information With Respect to S-3                                                                                     
           Registrants ..................................... Summary; The Merger; Highwoods Pro Forma Combined                 
                                                             Financial Information; Incorporation of Certain Documents by      
                                                             Reference; Available Information.                                 
     11.   Incorporation of Certain Information by                                                                             
           Reference ....................................... Experts; Highwoods Pro Forma Combined Financial Information;      
                                                             Incorporation of Certain Documents by Reference.                  
     12.   Information With Respect to S-2 or S-3                                                                              
           Registrants ..................................... Not applicable.                                                   
     13.   Incorporation of Certain Information by                                                                             
           Reference ....................................... Not applicable.                                                   
     14.   Information With Respect to Registrants                                                                             
           Other than S-2 or S-3 Registrants ............... Not applicable.                                                   
C.   Information about the Company Being Acquired                                                                              
     15.   Information With Respect to S-3                                                                                     
           Companies ....................................... Summary; The Merger; Experts; Highwoods Pro Forma Combined        
                                                             Financial Information; Incorporation of Certain Documents by      
                                                             Reference; Available Information.                                 
     16.   Information With Respect to S-2 or S-3                                                                              
           Companies ....................................... Not applicable.                                                   
     17.   Information With Respect to Companies                                                                               
           Other than S-2 or S-3 Companies ................. Not applicable.                                                   
D.   Voting and Management Information                                                                                         
     18.   Information if Proxies, Consents or                                                                                 
           Authorizations are to be Solicited .............. Summary; The Special Meeting; The Merger; Management and          
                                                             Operation of Highwoods after the Merger; Comparison of Rights     
                                                             of Stockholders; Incorporation of Certain Documents by            
                                                             Reference; Available Information.                                 
     19.   Information if Proxies, Consents or                                                                                 
           Authorizations are not to be Solicited, or in                                                                       
           an Exchange Offer ............................... Not applicable.                                                   

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(J.C. NICHOLS COMPANY LOGO) 

                                                                  June 1, 1998

Dear Fellow Shareholder:                                                        

   You are cordially invited to attend a special meeting of the shareholders
of the J.C. Nichols Company ("JCN"), to be held at The Ritz-Carlton Hotel,      
Kansas City, Missouri, on July 1, 1998, at 10:00 a.m. Central Time (the         
"Special Meeting"). At this important meeting, you will be asked to approve a   
strategic business combination involving JCN and Highwoods Properties, Inc.     
("Highwoods").                                                                  

   Under the terms of the proposed Agreement and Plan of Merger (as amended,
the "Merger Agreement"), for each JCN share you own, you will have the          
opportunity to receive: (i) $65 in cash, or (ii) shares of Highwoods common     
stock, or (iii) a combination of the two. If you elect to receive Highwoods     
common stock, you will receive between 1.84 and 2.03 shares of Highwoods common 
stock for each share of JCN common stock you own. The number of shares of       
Highwoods common stock you will receive will be determined by its trading price 
during the 20 trading days prior to the closing of the proposed transaction     
(the "Merger"). The exact number of shares you will receive will not be known   
until the closing date. The enclosed Proxy Statement/Prospectus details the     
terms and background of the Merger. We urge you to read these materials         
carefully.                                                                      

 YOUR BOARD OF DIRECTORS HAS CAREFULLY REVIEWED AND CONSIDERED THE TERMS
AND CONDITIONS OF THE MERGER AGREEMENT AND BELIEVES THAT THE MERGER IS FAIR TO  
AND IN THE BEST INTERESTS OF JCN AND ITS SHAREHOLDERS.                          

    THE BOARD RECOMMENDS THAT YOU VOTE "FOR" ADOPTION OF THE MERGER AGREEMENT.

 Because the affirmative vote of two-thirds of the outstanding shares of
JCN's common stock is required to approve the Merger Agreement, your vote is    
important, no matter how many shares you hold. Under Missouri law, failure to   
vote will have the same effect as a vote cast against approval of the Merger    
Agreement.                                                                      

  To ensure that your vote is counted, I urge you to sign, date and return
your proxy card in the enclosed postage-paid envelope. If you attend the        
Special Meeting, you may vote in person if you wish, even though you previously 
have returned your proxy card. The JCN Board of Directors will not use any      
proxies voted against the Merger for any adjournment or postponement of the     
Special Meeting intended to permit further solicitation.                        

   You are also being asked to indicate on a separate form whether you would
prefer to receive Highwoods' common stock or cash after adoption of the Merger  
Agreement. Please complete the enclosed green Form of Election and return it as 
instructed.                                                                     

Please do not send your share certificates with your proxy card. After
adoption of the Merger Agreement by JCN's shareholders, you will receive a      
transmittal form and instructions for the delivery and exchange of your shares. 

                                    On Behalf of the Board of Directors,

                      /s/ William K. Hoskins
                  WILLIAM K. HOSKINS
                     Chairman of the Board

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THE J.C. NICHOLS COMPANY  
----------------------------------------  
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS 
To Be Held on July 1, 1998
----------------------------------------  
Notice is hereby given that a special meeting of the shareholders (the
"Special Meeting") of the J.C. Nichols Company, a Missouri corporation ("JCN"), 
will be held at The Ritz-Carlton Hotel, Kansas City, Missouri, on July 1, 1998, 
at 10:00 a.m. Central Time, for the following purposes:                         

   1. To consider and vote upon an Agreement and Plan of Merger (as amended,
the "Merger Agreement"), providing for the merger of JCN into Jackson           
Acquisition Corp., a wholly owned subsidiary of Highwoods Properties, Inc.      
("Highwoods"), pursuant to which each outstanding share of JCN's common stock   
will be converted into the right to receive between 1.84 and 2.03 shares of     
Highwoods common stock or $65 in cash or a combination of the two, at the       
election of the holder thereof (subject to the limitations described in the     
Merger Agreement); and                                                          

    2. To transact such other business as may properly come before the Special
Meeting or any adjournments or postponements thereof. The JCN Board of          
Directors will not use any proxies voted against the Merger for adjournment or  
postponement of the Special Meeting intended to permit further solicitation.    

  Shareholders of record as of the close of business on April 27, 1998 are
entitled to notice of, and to vote at, the Special Meeting and any adjournments 
or postponements thereof. You are requested to complete, sign and mail the      
enclosed form of proxy in the enclosed envelope, whether or not you plan to     
attend the Special Meeting. The proxy will not be used if you attend and vote   
at the Special Meeting in person.                                               

  Shareholders are entitled to assert dissenters' rights under the General
and Business Corporation Law of Missouri. A copy of the relevant section of the 
Missouri statute is attached to and described in the enclosed Proxy             
Statement/Prospectus.                                                           

                                  BY ORDER OF THE BOARD OF DIRECTORS

                  /s/ Price A. Sloan
              PRICE A. SLOAN
         Secretary

Dated: June 1, 1998                                                             

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(A redherring appears on the left-hand side of this page, rotated 90 degrees.   
Text follows.)                                                                  

Information contained herein is subject to completion or amendment. A           
registration statement relating to these securities has been filed with the     
Securities and Exchange Commission. These securities may not be sold nor may    
offers to buy be accepted prior to the time the registration statement becomes  
effective. This prospectus shall not constitute an offer to sell or the         
solicitation of an offer to buy nor shall there be any sale of these securiteis 
in any state in which such offer, solicitation or sale would be unlawful prior  
to registration or qualification under the securities laws of any such state.   

SUBJECT TO COMPLETION DATED JUNE 1, 1998  

J.C. NICHOLS COMPANY  
PROXY STATEMENT 

---------------   
HIGHWOODS PROPERTIES, INC.  
PROSPECTUS

---------------   
   This Proxy Statement/Prospectus is being furnished to the shareholders of
J.C. Nichols Company, a Missouri real estate operating company ("JCN"), in      
connection with the solicitation of proxies on behalf of the Board of Directors 
of JCN ("JCN Board of Directors") for use at a special meeting of the holders   
of common stock, $.01 par value per share, of JCN ("JCN Common") to be held on  
July 1, 1998 and at any adjournments or postponements thereof (the "Special     
Meeting"). The JCN Board of Directors will not use any proxies voted against    
the Merger for adjournment or postponement of the Special Meeting intended to   
permit further solicitation. At the Special Meeting, holders of JCN Common      
("JCN Shareholders") will be asked to approve the merger (the "Merger") of JCN  
into Jackson Acquisition Corp. ("Jackson"), a wholly owned subsidiary of        
Highwoods Properties, Inc., a Maryland corporation ("Highwoods"), formed for    
the sole purpose of effecting the Merger, pursuant to an Agreement and Plan of  
Merger dated as of December 22, 1997 (as amended as of April 29, 1998) by and   
among JCN, Jackson and Highwoods (as amended, the "Merger Agreement"). A JCN    
Shareholder who elects to receive stock pursuant to the Merger will not know,   
at the time the shareholder votes on the Merger, or at the time by which such   
election must be made, the value of the Highwoods common stock to be received   
for his shares of JCN Common. Cash consideration paid to JCN Shareholders       
pursuant to the Merger will be limited to 40% of the aggregate consideration    
paid to all JCN Shareholders. As a result, a JCN Shareholder electing to        
receive cash with respect to some or all of his or her shares of JCN Common may 
instead receive some Highwoods common stock for such shares. A copy of the      
Merger Agreement, including the amendment, is attached hereto as Appendix A.    

In considering whether to approve the Merger, JCN Shareholders should 
consider, in addition to the other information in the Proxy                     
Statement/Prospectus, the matters discussed under "Risk Factors" beginning on   
page 20.                                                                        

This Proxy Statement/Prospectus also relates to a maximum of up to    
9,860,496 shares of Highwoods common stock, par value $.01 per share ("Highwoods
Common"), that may be issued to the JCN Shareholders upon consummation of the   
Merger. Based on the last reported sales price of a share of Highwoods Common on
the New York Stock Exchange (the "NYSE") on May 29, 1998, up to approximately   
9.57 million shares of Highwoods Common (valued at approximately $315.8 million)
may be issued to JCN Shareholders upon consummation of the Merger. As of May 29,
1998, the last reported sales price of a share of JCN Common on the             
over-the-counter market was $64.50.                                             

This Proxy Statement/Prospectus and the form of proxy are first being 
mailed to all JCN Shareholders on or about June   , 1998.                       
--------------- 
THE SECURITIES TO WHICH THIS PROXY STATEMENT/PROSPECTUS RELATE HAVE 
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE 
COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE  
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES  
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS 
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION  
TO THE CONTRARY IS A CRIMINAL OFFENSE.  

The date of this Proxy Statement/Prospectus is June   , 1998. 

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AVAILABLE INFORMATION 

Highwoods has filed a registration statement on Form S-4 (the         
"Registration Statement") under the Securities Act of 1933, as amended          
("Securities Act"), with the Securities and Exchange Commission (the            
"Commission") covering the shares of Highwoods Common to be issued in           
connection with the Merger. As permitted by the rules and regulations of the    
Commission, this Proxy Statement/Prospectus omits certain information, exhibits 
and undertakings contained in the Registration Statement. For further           
information pertaining to the securities offered hereby, reference is made to   
the Registration Statement, including the exhibits filed as a part thereof.     

Highwoods and JCN are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and, in           
accordance therewith, file reports, proxy statements and other information with 
the Commission. Highwoods/Forsyth Limited Partnership, a North Carolina limited 
partnership through which Highwoods conducts substantially all of its business, 
is also subject to the informational requirements of the Exchange Act and, in   
accordance therewith, files reports and other information with the Commission.  
Such reports, proxy statements and other information can be inspected and       
copied at the public reference facilities maintained by the Commission at 450   
Fifth Street, N.W., Washington, D.C. 20549; and at its Regional Offices located 
at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and Seven      
World Trade Center, Suite 1300, New York, New York 10048. Copies of such        
material can be obtained from the Public Reference Section of the Commission,   
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The        
Commission maintains a Web site that contains reports, proxy and other          
information regarding registrants that file electronically with the Commission. 
The address of the Commission's Web site is: http://www.sec.gov. Highwoods      
Common is currently listed on the NYSE and such reports, proxy statements and   
other information concerning Highwoods can be inspected at the offices of the   
NYSE, 20 Broad Street, New York, New York 10005.                                

No person is authorized to give any information or to make any        
representation not contained in this Proxy Statement/                           
Prospectus, or incorporated in it by reference, and, if given or made, such     
information or representation should not be relied upon as having been          
authorized. This Proxy Statement/Prospectus does not constitute an offer to     
sell, or a solicitation of an offer to purchase, the securities offered by this 
Proxy Statement/Prospectus, or the solicitation of a proxy, in any jurisdiction 
where or from any person to whom it is unlawful to make such offer, or          
solicitation of an offer, or proxy solicitation. Neither the delivery of this   
Proxy Statement/Prospectus nor any distribution of the securities offered       
pursuant to this Proxy Statement/Prospectus shall, under any circumstances,     
create an implication that there has been no change in the affairs of Highwoods 
or JCN since the date of this Proxy Statement/Prospectus.                       

   This Proxy Statement/Prospectus incorporates documents by reference which
are not presented herein or delivered herewith. All documents that are          
incorporated by reference in this Proxy Statement/Prospectus but which are not  
delivered herewith are available without charge (other than exhibits to such    
documents that are not specifically incorporated by reference therein) upon     
request from 3100 Smoketree Court, Suite 600, Raleigh, North Carolina 27604,    
Attention: Mack D. Pridgen, III, telephone (919) 872-4924. In order to insure   
timely delivery of the documents, any request should be made by June 20, 1998.  
Documents will be sent by first class mail within one business day upon receipt 
of a request.                                                                   

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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 

    The following documents filed with the Commission by Highwoods pursuant to
the Exchange Act are hereby incorporated in this Proxy Statement/Prospectus by  
reference:                                                                      

a.  Highwoods' annual report on Form 10-K for the year ended December 31, 
1997 (as amended on April 29, 1998 and May 19, 1998);             

b.  Highwoods' quarterly report on Form 10-Q for the quarter ended March  
31, 1998;                                                         

c.  Highwoods' current reports on Form 8-K, dated January 9, 1997 (as     
     amended on February 7, 1997, March 10, 1997 and April 28, 1998), August
    27, 1997 (as amended on September 23, 1997), October 1, 1997, November
    17, 1997, January 22, 1998, February 2, 1998, April 20, 1998 and April
29, 1998;                                                         

d.  Highwoods' definitive Proxy Statement relating to its Annual Meeting  
of Shareholders dated May 14, 1998; and                           

 e.  The description of Highwoods Common included in Highwoods' registration
statement on Form 8-A dated May 16, 1994.                         

 All other documents filed by Highwoods pursuant to Section 13(a), 14 or
15(a) of the Exchange Act subsequent to the date of this Proxy                  
Statement/Prospectus and prior to the date of the Special Meeting shall be      
deemed incorporated by reference herein and made a part hereof from the dates   
of filing such reports and documents. Any statement contained herein or in a    
document incorporated by reference or deemed to be incorporated by reference    
herein shall be deemed to be modified or superseded for purposes of this Proxy  
Statement/Prospectus to the extent that a statement contained in this Proxy     
Statement/Prospectus or in any other subsequently filed document that also is   
or is deemed to be incorporated by reference in this Proxy Statement/Prospectus 
modifies or supersedes such statement. Any such statement so modified or        
superseded shall not be deemed, except as so modified or superseded, to         
constitute a part of this Proxy Statement/Prospectus.                           

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TABLE OF CONTENTS 

                                                        [Enlarge/Download Table]
                                                                                            
SUMMARY .................................................................................  7
 Parties to the Merger ..................................................................  7
 Summary Risk Factors ................................................................... 10
 Consideration to be Received in the Merger ............................................. 10
 Reasons for the Merger; Recommendations of the JCN Board of Directors .................. 11
 Opinion of Financial Advisor ........................................................... 11
 Correspondence from Intell Management and Investment Company ........................... 12
 Interests of Certain Persons ........................................................... 12
 Effective Time of the Merger and Closing Date .......................................... 12
 Conditions to the Merger ............................................................... 12
 Regulatory Matters ..................................................................... 13
 Appraisal Rights ....................................................................... 13
 Federal Income Tax Consequences of Merger .............................................. 13
 Termination ............................................................................ 13
 Termination Fees and Expenses .......................................................... 13
 Anticipated Accounting Treatment ....................................................... 13
 No Solicitation of Other Transactions .................................................. 14
 Terms of the Merger; Exchange of Certificates .......................................... 14
 The Special Meeting .................................................................... 14
HIGHWOODS PRO FORMA COMBINED FINANCIAL INFORMATION ...................................... 16
COMPARATIVE PER SHARE DATA .............................................................. 17
COMPARATIVE SHARE PRICES ................................................................ 18
 Highwoods .............................................................................. 18
 JCN .................................................................................... 19
RISK FACTORS ............................................................................ 20
 Possible Reduction in Consideration Received by JCN Shareholders ....................... 20
 Limit on Cash Consideration ............................................................ 20
 Conflicts of Interest of Certain JCN Officers and Directors ............................ 20
 Potential Decrease in Price of Highwoods Common Resulting from Future Highwoods          21
 Offerings                                                                                  
 Dilution of the Ownership Percentage of Holders of JCN Common .......................... 21
 Potential Adverse Effects of Combining the Companies ................................... 21
 Dependence of Highwoods Operating Performance on Southeastern Markets .................. 21
 Potential Adverse Effects of Expanding into New Geographic Areas and Property Types .... 21
 Conflicts of Interest in the Business of Highwoods ..................................... 22
 Potential Anti-Takeover Effect of Certain Provisions of Maryland Law and                   
   Highwoods' Governing Documents ....................................................... 22
 Adverse Consequences on Distributions of Highwoods' Failure to Qualify as a REIT ....... 22
 Factors that Could Cause Poor Operating Performance of the Highwoods Properties ........ 23
 Potential Problems in Development, Construction and Acquisition Activities ............. 24
 Potential Adverse Effect of Incurrence of Debt ......................................... 24
 Possible Environmental Liabilities ..................................................... 24
 Rights of Holders of Highwoods Common may be Less Favorable than Rights of JCN           25
 Shareholders                                                                               
THE SPECIAL MEETING ..................................................................... 26
 Purpose ................................................................................ 26
 Record Date; Vote Required ............................................................. 26
 Solicitation and Revocation of Proxies ................................................. 26
THE MERGER .............................................................................. 26
 Terms of the Merger .................................................................... 26
 Background of the Merger ............................................................... 27
 Reasons for the Merger; Recommendation of the JCN Board of Directors ................... 31

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                                                                [Download Table]
                                                                        
 Opinion of Financial Advisor ...................................... 34 
 Effective Time of the Merger ...................................... 37 
 Representations and Warranties; Conditions to the Merger .......... 37 
 Appraisal Rights .................................................. 38 
 Regulatory Matters ................................................ 39 
 No Solicitation of Other Transactions ............................. 39 
 Termination Provisions ............................................ 39 
 Termination Fee and Expenses ...................................... 39 
 Conversion of Shares .............................................. 40 
 Cash Election ..................................................... 40 
 Appointment of Exchange Agent ..................................... 41 
 Exchange of Certificates .......................................... 41 
 Conduct of Business Pending the Merger ............................ 42 
 Waiver and Amendment .............................................. 42 
 Stock Exchange Listing ............................................ 43 
 Extraordinary Dividend ............................................ 43 
 Indemnification ................................................... 43 
 Continued Activities .............................................. 44 
 Interests of Certain Persons ...................................... 44 
 Anticipated Accounting Treatment .................................. 45 
 Shares Available for Resale ....................................... 45 
FEDERAL INCOME TAX CONSIDERATIONS .................................. 45 
 Federal Income Tax Consequences of Merger ......................... 45 
 Taxation of Highwoods as a REIT ................................... 46 
 Federal Income Taxation of Highwoods .............................. 47 
 Requirements for Qualification .................................... 47 
 Annual Distribution Requirements .................................. 50 
 Failure to Qualify ................................................ 51 
 Taxation of U.S. Shareholders ..................................... 51 
 Special Tax Considerations for Non-U.S. Shareholders .............. 53 
 Information Reporting Requirements and Backup Withholding Tax ..... 54 
 Tax Aspects of the Highwoods Operating Partnership ................ 54 
 Other Tax Considerations .......................................... 55 
 State and Local Tax ............................................... 56 
 Proposed Legislation .............................................. 56 
DESCRIPTION OF HIGHWOODS ........................................... 57 
 General ........................................................... 57 
 Operating Strategy ................................................ 57 
DESCRIPTION OF JCN ................................................. 59 
 General ........................................................... 59 
 Business Strategy ................................................. 60 
 Recent Developments ............................................... 60 
 Competition ....................................................... 60 
 Regulation and Legislation ........................................ 61 
 General Conditions ................................................ 61 
 Reliance on Customers or Tenants .................................. 61 
 Employees ......................................................... 61 
 Properties ........................................................ 61 
 Valencia Place .................................................... 67 
 Seville Square .................................................... 67 
 Luxury Apartments ................................................. 67 
 Legal Proceedings ................................................. 67 
 Submission of Matters to a Vote of Security Holders ............... 69 

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                                                        [Enlarge/Download Table]
                                                                                              
 Market for JCN Common and Related Shareholder Matters ..................................  70 
 Issuances of JCN Common ................................................................  70 
 Dividend Policy ........................................................................  70 
 Selected Financial Data ................................................................  71 
 Management's Discussion and Analysis of Financial Condition and Results of Operations ..  71 
 Results of Operations ..................................................................  72 
 Liquidity and Capital Resources ........................................................  76 
 Earnings Before Interest, Taxes Depreciation and Amortization ..........................  78 
 Year 2000 Compliance ...................................................................  80 
 Impact of Recently Issued Accounting Standards .........................................  80 
 Directors and Executive Officers .......................................................  81 
 Section 16(a) Beneficial Ownership Reporting Compliance ................................  82 
 Officer Compensation ...................................................................  83 
 Outside Director Compensation ..........................................................  84 
 Options and Stock Appreciation Rights ..................................................  84 
 Employment Agreements ..................................................................  84 
 Change in Control Agreements ...........................................................  85 
 Stock Option Plan ......................................................................  86 
 Compensation Committee Report on Executive Compensation ................................  86 
 Performance of JCN Common ..............................................................  87 
 Security Ownership of Certain Beneficial Owners and Management .........................  88 
 Certain Relationships and Related Transactions .........................................  89 
MANAGEMENT AND OPERATION OF HIGHWOODS AFTER THE MERGER ..................................  90 
ANTICIPATED EFFECTS OF THE MERGER ON RESULTS OF OPERATIONS, LIQUIDITY AND                     
 CAPITAL RESOURCES ......................................................................  90 
COMPARISON OF RIGHTS OF SHAREHOLDERS ....................................................  91 
 Election of Directors ..................................................................  91 
 Removal of Directors ...................................................................  91 
 Indemnification and Liability of Directors and Officers ................................  91 
 General Provisions Affecting Change of Control .........................................  92 
 Voting Rights of Control Shares ........................................................  92 
 Business Combinations with Interested Shareholders .....................................  93 
 Ownership Limitations and Restrictions on Transfers ....................................  93 
 Operating Partnership Agreement ........................................................  94 
 Shareholders' Rights Plan ..............................................................  95 
 Dissenters' Rights of Appraisal ........................................................  95 
 Dividends ..............................................................................  95 
 Special Meetings .......................................................................  95 
 Amendment of Articles of Incorporation .................................................  96 
 Shareholder Proposal Procedures ........................................................  96 
LEGAL MATTERS ...........................................................................  96 
EXPERTS .................................................................................  96 
AUDITORS ................................................................................  97 
SHAREHOLDER PROPOSALS ...................................................................  97 
GLOSSARY ................................................................................  97 
INDEX TO THE FINANCIAL STATEMENTS ....................................................... F-1 
APPENDIX A -- AGREEMENT AND PLAN OF MERGER .............................................. A-1 
APPENDIX A-1 -- AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER ......................... A-41
APPENDIX B -- OPINION OF MORGAN STANLEY ................................................. B-1 
APPENDIX C -- GBCL SEC. 351.455 APPRAISAL RIGHTS ........................................ C-1 

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Unless the context otherwise requires, the terms (i) "Highwoods" 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 "Highwoods Operating Partnership") 
and (ii) "Highwoods Properties" shall mean the 382 office and 148 industrial    
(including 80 service center) properties owned by Highwoods as of March 31,     
1998.                                                                           

SUMMARY 

  The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. Reference is made to, and this summary is      
qualified in its entirety by, the more detailed information and financial       
statements contained in this Proxy Statement/Prospectus, the Appendices hereto  
and the documents incorporated by reference herein.                             

Parties to the Merger                                                           

  Highwoods. Highwoods is a self-administered and self-managed real estate
investment trust ("REIT") that began operations through a predecessor in 1978.  
As of March 31, 1998, Highwoods owned, through its interest in the Highwoods    
Operating Partnership, a portfolio of 382 office and 148 industrial (including  
80 service center) properties. The Highwoods Properties encompass an aggregate  
of approximately 33.9 million rentable square feet and were 93% leased to       
approximately 3,400 tenants at March 31, 1998. An additional 32 properties (the 
"Highwoods Development Projects"), which will encompass approximately 3.6       
million rentable square feet, were under development as of March 31, 1998.      
Highwoods also owned as of March 31, 1998, 895 acres (and has agreed to         
purchase an additional 395 acres) of land for future development (collectively, 
the "Highwoods Development Land"). The Highwoods Properties are located in 19   
markets in North Carolina, Florida, Tennessee, Georgia, Virginia, South         
Carolina, Maryland and Alabama.                                                 

Highwoods conducts substantially all of its activities through, and   
substantially all of its interests in its properties are held directly or       
indirectly by the Highwoods Operating Partnership. Highwoods is the sole        
general partner of the Highwoods Operating Partnership and as of March 31,      
1998, owned approximately 83% of the common partnership interests (the "Common  
Units") in the Highwoods Operating Partnership. The remaining Common Units are  
owned by limited partners (including certain officers and directors of          
Highwoods). Each Common Unit may be redeemed by the holder thereof for the cash 
value of one share of Highwoods Common or, at Highwoods' option, one share      
(subject to certain adjustments) of Highwoods Common. With each such exchange,  
the number of Common Units owned by Highwoods and, therefore, Highwoods'        
percentage interest in the Highwoods Operating Partnership, will increase.      

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    The following chart illustrates the relationship between Highwoods and the
Highwoods Operating Partnership and their significant subsidiaries as of March  
31, 1998:                                                                       

A large box in the upper left hand corner entitled "HIGHWOODS" has four         
arrows radiating from it. The first leads to an oval entitled "Highwoods        
Operating Partnership (312 Properties)," and along the arrow are two legends,   
"82% LP(1)" and "1% GP." The words "Limited Partners" are to the right of the   
oval, and an arrow leads them to the oval. Along the arrow is the legend "17%." 

The second arrow radiating from the "HIGHWOODS" box bears the legend ".01%(3)   
GP" and leads to an oval entitled "AP Southeast Portfolio Partners, L.P.        
(46 Properties)." This oval has another arrow leading to it emanating from      
the "Highwoods Operating Partnership (312 Properties)" oval which bears         
the legend "99.99%(4) LP."                                                      

The third arrow radiating from the "HIGHWOODS" box bears the legend ".01%(2)    
GP" and leads to an oval entitled "Highwoods/Florida Holdings, L.P. (148        
Properties)". This oval has another arrow leading to it emanating from the      
"Highwoods Operating Partnership (312 Properties)" oval which bears the         
legend "99.99% LP."                                                             

The fourth arrow radiating from the "HIGHWOODS" box bears the legend ".01%(2)   
GP" and leads to an oval entitled "Highwoods/Tennessee Holdings, L.P. (24       
Properties)." This oval has another arrow leading to it emanating from the      
"Highwoods Operating Partnership (312 Properties)" oval bearing the legend      
"99.99% LP."                                                                    

(1) In addition, Highwoods owns preferred partnership interests in the          
Highwoods Operating Partnership with economic terms similar to those of 
Highwoods' outstanding preferred stock.                                 

(2) Interest is held indirectly through a wholly owned subsidiary of Highwoods. 

(3) Interest is held indirectly through a wholly owned subsidiary of Highwoods, 
which holds a 1% general partner interest in a limited partnership that 
  has a 1% general partner interest in AP Southeast Portfolio Partners, L.P.

(4) Ownership interests consist of a 99% limited partner interest in AP         
 Southeast Portfolio Partners, L.P. and a 99% limited partnership interest
in the 1% general partner of AP Southeast Portfolio Partners, L.P. (see 
footnote 3 above).                                                      

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  Highwoods is a Maryland corporation; the Highwoods Operating Partnership
is a North Carolina limited partnership. Their executive offices are located at 
3100 Smoketree Court, Suite 600, Raleigh, North Carolina 27604, and their       
telephone number is (919) 872-4924.                                             

    JCN. JCN is a Missouri corporation headquartered in Kansas City, Missouri.
JCN is engaged in the acquisition, development, ownership and management of     
income-producing properties located primarily in the Kansas City, Missouri      
metropolitan area. These properties include retail centers, apartments, office  
buildings, industrial properties and mixed-use projects. JCN is also engaged in 
the development and sale of land for residential and commercial use. As of      
December 31, 1997, JCN and its consolidated subsidiaries owned 16 retail        
centers consisting of approximately 2,500,000 square feet of retail space       
(including basement space) occupied by approximately 400 tenants, 14 apartment  
communities (including a majority interest in a partnership owning a Des        
Moines, Iowa area apartment complex) with approximately 2,300 residential       
apartment units, 31 office properties (including majority interests in          
partnerships owning seven Des Moines, Iowa area office buildings) consisting of 
approximately 1,462,000 square feet of office space occupied by over 500        
tenants, two industrial and warehouse properties consisting of approximately    
337,000 square feet of space occupied by 48 tenants, three residential          
developments containing approximately 168 lots available for sale, and over     
1,000 acres available for residential and commercial development, as well as    
complete or partial ownership in several other minor properties. JCN also owns  
six unsold units of its Alameda Towers condominium project in Kansas City.      

   JCN also owns an equity interest in 11 active entities whose holdings are
not consolidated with the financial statements of JCN. The largest of these     
holdings are JCN's approximately 50% interest in six partnerships that own      
properties in the Des Moines, Iowa area. At December 31, 1997, these            
partnerships owned 15 buildings consisting of 936,000 square feet of offices,   
200,000 square feet of industrial space, 26 acres currently under development   
or ground lease, and approximately 80 acres to be developed. In addition to the 
Des Moines, Iowa area properties, one of JCN's 11 unconsolidated affiliates is  
a 40% interest in J.C. Nichols Real Estate, a residential sales and brokerage   
business in Kansas City. J.C. Nichols Real Estate also has an interest in an    
entity that owns a mortgage origination company. The principal executive        
offices of JCN are located at 310 Ward Parkway, Kansas City, Missouri 64112,    
and its telephone number is (816) 561-3456.                                     

 Jackson. Jackson is a wholly owned subsidiary of Highwoods. Jackson was
incorporated in Maryland for the sole purpose of effecting the Merger and the   
transactions contemplated by the Merger Agreement. Jackson has engaged in no    
other business activities. Pursuant to the Merger Agreement, JCN will be merged 
into Jackson.                                                                   

Merger Structure. The following chart summarizes the transactions that
would be effected to consummate the Merger:                                     

A rectangle in the lower right hand corner is entitled "J.C. Nichols Company,"  
and it has an arrow leading from it to, and an arrow leading to it from, a      
rectangle on the left-hand side of the chart entitled "Jackson Acquisition      
Corp." The arrow leading to "Jackson Acquisition Corp." bears the legend "JCN   
assets and liabilities," and the other bears the legend "Combination of         
Highwoods Common and cash." Beneath these arrows a large legend in bold reads   
"STEP ONE."                                                                     

Above the rectangle entitled Jackson Acquisition Corp. is a rectangle entitled  
"Highwoods Properties, Inc.," and an arrow pointing at "Highwoods Properties,   
Inc." links the two. This arrow bears a legend to its right reading "JCN        
assets and liabilities" and a large, bold legend to its left reading "STEP      
TWO."                                                                           

To the right of, and slightly below, the "Highwoods Properties, Inc."           
rectangle is a rectangle entitled "Highwoods/Forsyth Limited Partnership."      
Two arrows link the rectangles, one pointing towards each. The arrow pointing   
at the "Highwoods Properties, Inc." rectangle bears the legend "Common Units,"  
and the arrow pointing towards the "Highwoods/Forsyth Limited Partnership"      
rectangle bears the legend "JCN assets and liabilities." Above and to the       
right of these arrows is the large, bold legend "STEP THREE."                   

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In Step One, as a result of the merger of JCN with and into Jackson,  
Jackson will receive all of the assets and liabilities of JCN in exchange for   
shares of Highwoods Common and cash. See "The Merger -- Terms of the Merger."   
In Step Two, Jackson will merge with and into Highwoods. Lastly, in Step Three, 
Highwoods will contribute to the Highwoods Operating Partnership all of the     
assets and liabilities of JCN that were acquired from Jackson in exchange for   
the number of Common Units equal to (i) the number of shares of Highwoods       
Common issued in the Merger and (ii) the number of Common Units obtained by     
dividing the cash component of the Merger consideration by the value of a share 
of Highwoods Common as of the effective date of the Merger.                     

Summary Risk Factors                                                            

In considering whether to approve the Merger, JCN Shareholders should 
consider, in addition to the other information in this Proxy                    
Statement/Prospectus, the matters discussed under "Risk Factors." Such matters  
include:                                                                        

o The possible change in share prices of Highwoods Common and JCN Common prior  
to the time the Merger becomes effective so that at the time of the Merger  
the value of a share of Highwoods Common compared with a share of JCN Common
may be less than such value at the time a JCN Shareholder votes on the      
Merger or makes his or her election as to the form of the consideration to  
be received in the Merger.                                                  

o The risk that a JCN Shareholder who elects to receive cash in the Merger with 
respect to some or all of his or her shares of JCN Common ("Cash Election   
Shares") may instead receive shares of Highwoods Common with respect to some
Cash Election Shares.                                                       

o Certain officers and directors of JCN have interests in the Merger and        
related transactions that conflict with the interests of JCN Shareholders   
generally.                                                                  

o The potential adverse impact on the share price of Highwoods Common resulting 
from subsequent Highwoods offerings.                                        

o Dilution of the ownership percentage of a JCN Shareholder who receives        
Highwoods Common in the Merger.                                             

o Possible difficulty of successfully integrating Highwoods and JCN.            

o Dependence of Highwoods after the Merger on southeastern economic and real    
estate conditions.                                                          

o Highwoods' unfamiliarity with JCN's geographic markets, retail and            
multifamily properties and single-family subdivisions.                      

o Members of Highwoods' management and its board of directors have different    
interests than its stockholders regarding the sale or refinancing of a      
property.                                                                   

o Differences in governing law and organizational documents of Highwoods and    
JCN which may make a change of control of Highwoods more difficult than a   
change of control of JCN.                                                   

o Possible failure of Highwoods to qualify as a REIT.                           

o Environmental liabilities at the Highwoods Properties.                        

o Rights of holders of Highwoods Common being less favorable than those of JCN  
Shareholders as a result of differences in governing law and the            
organizational documents of the respective companies.                       

Consideration to be Received in the Merger                                      

The Merger Agreement provides that, upon satisfaction or waiver of the
conditions set forth therein, JCN will be merged into Jackson, a wholly owned   
subsidiary of Highwoods formed for the sole purpose of effecting the Merger.    
The board of directors of Highwoods (the "Highwoods Board of Directors") and    
the JCN Board of Directors have each approved the Merger upon the terms and     
conditions set forth in the Merger Agreement.                                   

JCN Shareholders may elect to receive, upon consummation of the Merger
(the "Effective Time"), between 1.84 and 2.03 shares of Highwoods Common or $65 
in cash or a combination of the two for each share of JCN Common. A JCN         
Shareholder who elects to receive Highwoods Common pursuant to the Merger will  
not know at the time such shareholder votes on the Merger or at the time by     
which such election must be made the value of the Highwoods Common to be        
received for such shareholder's shares of JCN Common. Moreover, although a JCN  
Shareholder may elect to receive cash pursuant to the Merger for some or all of 
his or her shares of JCN Common, such shareholder may receive shares of         
Highwoods Common with respect to some of such Cash Election Shares. Cash        
consideration paid to JCN Shareholders pursuant to the Merger will be limited   
to 40% of the aggregate consideration paid to all JCN Shareholders. JCN         
Shareholders electing to                                                        

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receive Highwoods Common in the Merger may, under certain circumstances,        
receive Highwoods Common valued at a price different than $65 per share. To the 
extent the average of the daily average of the high and low sale price for the  
20 trading days preceding the Effective Time (the "Value") of a share of        
Highwoods Common is $35.36 or higher, JCN Shareholders may receive Highwoods    
Common worth more than $65 per share of JCN Common; to the extent the Value of  
a share of Highwoods Common is under $32.00, JCN Shareholders may receive       
Highwoods Common worth less than $65 per share of JCN Common transferred in the 
Merger. Assuming a Value of a share of Highwoods Common of $33 (the closing     
price on the NYSE on May 29, 1998), a JCN Shareholder electing to receive       
shares of Highwoods Common would receive 1.97 shares of Highwoods Common for    
each share of JCN Common. See "The Merger -- Conversion of Shares" and "The     
Merger -- Cash Election."                                                       

    At the Effective Time, approximately one percent of the outstanding shares
of Highwoods Common will be beneficially owned by affiliates of Highwoods       
(assuming that no outstanding options to purchase shares of Highwoods Common    
are exercised and that no Common Units are redeemed for shares of Highwoods     
Common).                                                                        

Reasons for the Merger; Recommendations of the JCN Board of Directors           

    The JCN Board of Directors believes that the Merger is fair to, and in the
best interests of, JCN and the JCN Shareholders. The JCN Board of Directors     
approved the Merger, and the transactions contemplated thereby, and recommends  
that the JCN Shareholders vote FOR the Merger.                                  

  JCN has begun an ambitious plan to redevelop its most significant retail
and office development, which consists currently of approximately 1.1 million   
square feet of retail space in Kansas City, Missouri and is known as the Country
Club Plaza (the "Plaza"). As a result of the anticipated expense of redeveloping
the Plaza, JCN management currently projects that it does not have sufficient   
cash on hand to meet its anticipated cash requirements beyond 1998. Accordingly,
if the Merger is not approved, JCN will have to move quickly to raise capital or
borrow the funds necessary to facilitate redevelopment of the Plaza and finance 
other cash needs of JCN. In the event JCN were to sell JCN Common to generate   
cash, it may be forced to do so at a price below $65 per share.                 

  In making its determination with respect to the Merger, the JCN Board of
Directors considered, among other things, the following advantages: (a) the     
amount of consideration offered to JCN Shareholders, which represented a        
premium over prior closing prices of JCN; (b) Highwoods' regular quarterly      
dividend and the liquidity of Highwoods Common; (c) the ability of JCN          
Shareholders to participate in the future growth of Highwoods (including the    
growth resulting from acquisition of JCN); (d) the financial condition and      
business reputation of Highwoods; (e) the companies' respective financial       
condition, results of operations and anticipated future results; (f) Highwoods' 
significant resources and lower cost of capital, which may enable more rapid    
implementation of JCN's long-term growth plans; and (g) that the Merger is      
structured to qualify as a tax-free reorganization under the Internal Revenue   
Code of 1986, as amended (the "Code"). The JCN Board of Directors also received 
the written opinions of Morgan Stanley & Co. Incorporated ("Morgan Stanley"),   
dated December 22, 1997 and May 15, 1998, to the effect that, as of such dates  
and based upon certain assumptions and considerations set forth therein, the    
consideration to be received by JCN Shareholders pursuant to the Merger was     
fair from a financial point of view to such holders.                            

The JCN Board of Directors also considered (a) the possible change in 
share prices of Highwoods Common and JCN Common prior to the time the Merger    
becomes effective; (b) the risk that some JCN Shareholders will not receive the 
form of consideration that they elected for their shares of JCN Common; (c) the 
potential adverse tax consequences of the Merger for those JCN Shareholders     
receiving cash; (d) the potential adverse impact on the share price of          
Highwoods Common resulting from subsequent Highwoods offerings; (e) the         
dilution of the ownership percentage of a JCN Shareholder who receives          
Highwoods Common in the Merger; (f) the possible failure of Highwoods to        
qualify in the future as a REIT; (g) that proposed Federal legislation          
affecting REITs could limit Highwoods' ability to expand certain business       
activities; (h) the possibility that Highwoods will not maintain the growth     
rate that it has experienced since 1994; (i) the possible difficulty of         
successfully integrating Highwoods and JCN; (j) the dependence of Highwoods     
after the Merger on southeastern economic and real estate conditions; and (k)   
Highwoods' unfamiliarity with JCN's markets and with retail and multifamily     
properties and single-family subdivisions. See "Risk Factors," "The Merger --   
Reasons for the Merger; Recommendation of the JCN Board of Directors" and "The  
Merger -- Opinion of Financial Advisor."                                        

Opinion of Financial Advisor                                                    

   At the meeting of the JCN Board of Directors on December 21, 1997, Morgan
Stanley delivered its written opinion to the JCN Board of Directors, which was  
subsequently updated and confirmed in writing on December 22, 1997, that as of  

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such date and based upon the assumptions made, matters considered and the       
limits of its review, as set forth in such opinion, the proposed consideration  
to be received by JCN Shareholders pursuant to the Merger was fair to such      
shareholders from a financial point of view. Morgan Stanley delivered a May 15, 
1998 update to its prior opinion, confirming that as of such date and based     
upon the assumptions made, matters considered and the limits of its review, as  
set forth in such opinion, the proposed consideration to be received by JCN     
Shareholders pursuant to the Merger, as such consideration was amended pursuant 
to the amendment to the Merger Agreement, was fair to such shareholders from a  
financial point of view. No limitations were imposed by the JCN Board of        
Directors upon Morgan Stanley with respect to the investigations made or        
procedures followed by it in rendering its opinions. See "The Merger -- Opinion 
of Financial Advisor."                                                          

Correspondence from Intell Management and Investment Company                    

  On January 28, 1998, Intell Management and Investment Company ("Intell")
expressed an interest in a merger with JCN pursuant to which JCN Shareholders   
would receive $75 per share in cash. In a February 11, 1998 letter to JCN,      
Intell indicated that it did not feel it appropriate to pursue a transaction    
with JCN until such time as JCN Shareholders had an opportunity to vote on the  
Merger. Intell further indicated its then-current intention, in the event the   
Merger was not approved by JCN Shareholders and subject to a number of          
conditions, to pursue an acquisition of JCN that would provide to JCN           
Shareholders $75 per share in cash, less an adjustment that would include any   
amounts due to Highwoods pursuant to the Merger Agreement. Although this        
information was not available to the JCN Board of Directors when the Original   
Merger Agreement was approved, this information was subsequently considered by  
the JCN Board of Directors.                                                     

Interests of Certain Persons                                                    

Certain officers and directors of JCN have interests in the Merger and
related transactions that conflict with the interests of JCN Shareholders       
generally. From January 1996 through September 1997, JCN entered into           
employment agreements with its executive officers to permit JCN to attract and  
retain talented managers capable of providing continuity to, and enhancing the  
operations of, JCN. One such agreement provides Mr. Brady with certain benefits 
upon the occurrence of a change of control not supported by Mr. Brady and other 
agreements would provide several other officers with certain benefits upon the  
occurrence of a change of control and upon the occurrence of various triggering 
events subsequent to a transaction such as the Merger. Accordingly, Messrs.     
Brady, Cook, de Avila, Dixon, Fox, Peterson, Sloan, Stephenson, and Teaney and  
Ms. Marietti may be entitled to the accelerated receipt of cash, stock, or      
combined cash and stock consideration from Highwoods, in approximate amounts of 
$6,215,783, $222,721, $1,019,610, $218,005, $214,210, $618,260, $618,260,       
$326,814, $1,016,171 and $196,231, respectively, which totals in the aggregate  
approximately $10.7 million (not taking into account obligations related to     
certain of such individuals' personal taxes), a portion of which may or may not 
be deductible to JCN or Highwoods. A full explanation of the triggering events  
for such payments is set forth under "Description of JCN -- Change in Control   
Agreements." As of the date of this Proxy Statement/Prospectus, Highwoods has   
not entered into any agreement with such officers that would avoid or reduce    
the amount of any consideration to which they might otherwise be entitled.      

Effective Time of the Merger and Closing Date                                   

   The closing of the Merger will take place at 10:00 a.m. on the date to be
specified by Highwoods and JCN, which will be no later than the second business 
day after satisfaction or waiver of the conditions set forth in the Merger      
Agreement (the "Closing Date"), at the offices of Alston & Bird LLP, 3605       
Glenwood Avenue, Suite 310, Raleigh, North Carolina 27612, unless another date  
or place is agreed to in writing by the parties. The Merger will become         
effective when the Articles of Merger have been accepted for filing by the      
appropriate authorities in Missouri and Maryland, or at such other time as      
Highwoods and JCN agree should be specified in the Articles of Merger. It is    
currently anticipated that the Merger will become effective upon filing of the  
Articles of Merger, which Articles are expected to be filed promptly following  
approval of the Merger by the JCN Shareholders.                                 

Conditions to the Merger                                                        

   The obligations of Highwoods and JCN to consummate the Merger are subject
to the satisfaction or waiver of certain conditions, including, among others,   
(i) obtaining the requisite approval of the JCN Shareholders, (ii) the absence  
of any material adverse change in the financial condition, business or          
operations of JCN or Highwoods, (iii) the receipt of certain legal opinions,    
including opinions with respect to the tax consequences of the Merger and (iv)  
the receipt of certain consents, orders and approvals of a governmental agency  
and third parties. Each of Highwoods and JCN has the right to waive certain     
conditions to its obligations to consummate the Merger. See "The Merger --      
Representations and Warranties; Conditions to the Merger."                      

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Regulatory Matters                                                              

   Except for the registration of Highwoods Common under the Securities Act,
Highwoods and JCN believe that the Merger is not subject to any governmental or 
regulatory approvals. See "The Merger -- Regulatory Matters."                   

Appraisal Rights                                                                

    JCN Shareholders are entitled to dissenting shareholders' appraisal rights
under Missouri law with respect to the Merger. A copy of the appropriate        
section of Missouri law is included herein as Appendix C. If a JCN Shareholder  
files with JCN a written objection to the Merger Agreement prior to or at the   
Special Meeting and does not vote in favor of the Merger Agreement, the         
shareholder is entitled to the fair value of his shares from Highwoods. If the  
dissenting shareholder and Highwoods do not agree on the fair value of the      
dissenting shareholder's shares of JCN Common, the dissenting shareholder may   
file a petition with the court of Jackson County, Missouri, asking for a        
finding and determination of the fair value of his or her shares. Because       
dissenting shareholders must comply with all applicable statutory procedures to 
receive the value of their shares, any JCN Shareholder considering exercising   
appraisal rights is encouraged to read "The Merger -- Appraisal Rights."        

Federal Income Tax Consequences of Merger                                       

Consummation of the Merger is conditioned on the receipt by JCN of an 
opinion of Blackwell Sanders Peper Martin LLP that the Merger will qualify as a 
tax-free reorganization within the meaning of Section 368(a) of the Code and as 
to the tax consequences of the Merger to the JCN Shareholders. A copy of such   
opinion is included as Exhibit 8.1 to the Registration Statement. If the Merger 
does so qualify, no gain or loss will be recognized by Highwoods, JCN or        
Jackson as a consequence of the Merger. No gain or loss will be recognized by   
any JCN Shareholder upon the receipt of Highwoods Common in exchange for shares 
of JCN Common. Gain recognition, if any, will not be in excess of the amount of 
cash received. Subject to the provisions and limitations of Section 302 of the  
Code, gain or loss will be recognized by a JCN Shareholder upon the receipt of  
cash in lieu of fractional shares, upon exercise of appraisal rights relating   
to the transaction, or pursuant to an election by the JCN Shareholder to        
receive cash with respect to any of such holder's JCN Common. Subject to the    
provisions and limitations of Section 302 of the Code, gain (but not loss) will 
be recognized by a JCN Shareholder upon the receipt of cash and Highwoods       
Common pursuant to an election by the JCN Shareholder to receive cash with      
respect to only a portion of such holder's JCN Common. See "Federal Income Tax  
Considerations."                                                                

  EACH HOLDER OF JCN COMMON IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE MERGER IN LIGHT OF 
HIS OR HER PARTICULAR CIRCUMSTANCES, INCLUDING THE EFFECT OF STATE, LOCAL AND   
FOREIGN TAX LAWS, AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.              

Termination                                                                     

   The Merger Agreement provides that it may be terminated under a number of
circumstances at any time prior to the Effective Time, whether before or after  
the approval of the Merger by JCN Shareholders. See "The Merger -- Termination  
Provisions."                                                                    

Termination Fees and Expenses                                                   

   The Merger Agreement provides for payment by JCN of a termination fee and
expenses of up to $17.2 million if JCN enters into an acquisition proposal      
other than the Merger Agreement and certain other conditions are met. JCN       
Shareholders are urged to read the description of the termination fee           
provisions at "The Merger -- Termination Fees and Expenses." The failure of the 
JCN Shareholders to approve the Merger, however, will not trigger the payment   
of a termination fee, except for a fee of $2.5 million if, among other things,  
JCN completes another acquisition proposal before December 22, 1998.            

Anticipated Accounting Treatment                                                

The Merger will be treated as a purchase in accordance with Accounting
Principles Board Opinion No. 16.                                                

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No Solicitation of Other Transactions                                           

JCN has agreed that it (and its subsidiaries) will not permit its     
officers, directors, agents or financial advisors to solicit or encourage any   
inquiries or the making or implementation of any proposal or offer (including,  
without limitation, any proposal or offer to its shareholders) with respect to  
a merger, acquisition, tender offer, exchange offer, consolidation, sale of     
assets or similar transaction involving all or any significant portion of the   
assets or any equity securities of JCN or any of its subsidiaries, other than   
the transactions contemplated by the Merger Agreement. The Merger Agreement     
does not, however, prohibit JCN from entering into discussions with respect to  
an unsolicited proposal if the JCN Board of Directors determines in good faith  
that the failure to take such action would constitute a breach of its fiduciary 
duties to JCN Shareholders under applicable law.                                

Terms of the Merger; Exchange of Certificates                                   

    The Merger Agreement provides that, upon satisfaction or waiver of certain
conditions, JCN will be merged into Jackson, a wholly owned subsidiary of       
Highwoods formed for the sole purpose of effecting the Merger.                  

 As a result of the Merger, each JCN Shareholder will receive, at his or
her election, between 1.84 and 2.03 shares of Highwoods Common (the "Per Share  
Stock Consideration") or $65 in cash (the "Per Share Cash Consideration") or a  
combination of the two, subject to the limitation that Highwoods will not pay   
more than 40% of the total Merger consideration in cash. A JCN Shareholder may  
elect to receive shares of Highwoods Common for all or some of his or her       
shares of JCN Common.                                                           

   With respect to each share of JCN Common for which its holder has elected
to receive shares of Highwoods Common, the number of shares of Highwoods Common 
to be received in the Merger will vary depending on the Value of a share of     
Highwoods Common as follows:                                                    

                                                                [Download Table]

            Value of a share                    Consideration to be received       
          of Highwoods Common                      per share of JCN Common         
---------------------------------------  ------------------------------------------
                                                                                   
      equal to or greater than $35.36    1.84 shares of Highwoods Common           
      between $35.36 and $32.00          that number of shares of Highwoods Common 
                                         determined by dividing $65 by the Value   
                                         of a share of Highwoods Common            
      equal to or under $32.00           2.03 shares of Highwoods Common           

 With respect to those shares of JCN Common for which its holder (or the
beneficial owner, as the case may be) has elected to receive cash and does not  
dissent (the "Cash Election Shares"), the Merger consideration will be $65 in   
cash. To the extent, however, that the number of Cash Election Shares and the   
shares of JCN Common as to which the holder thereof seeks to exercise appraisal 
rights (the "Dissenting Shares") exceeds 40% of the outstanding shares of JCN   
Common, then a portion of the Cash Election Shares (spread proportionately      
among all of such shares) will be converted into a right to receive Highwoods   
Common as specified above. The number of Cash Election Shares to be so          
converted will be the minimum necessary to ensure that the cash component of    
the total Merger consideration does not exceed 40%.                             

  All shares of JCN Common, when converted pursuant to the Merger, will no
longer be outstanding and will automatically be canceled and retired and each   
holder of a certificate representing shares of JCN Common will cease to have    
any rights with respect thereto, except the right to receive certificates       
representing shares of Highwoods Common or cash, as applicable, as well as any  
distributions declared with respect thereto with a record date after the        
Effective Time. JCN Shareholders should not tender their certificates           
representing shares of JCN Common with their proxies. As promptly as            
practicable after the Effective Time, First Union National Bank, as the         
exchange agent ("Exchange Agent"), will mail to the JCN Shareholders            
transmittal materials for use in exchanging certificates representing shares of 
JCN Common for certificates evidencing shares of Highwoods Common or cash. See  
"The Merger -- Exchange of Certificates."                                       

The Special Meeting                                                             

    A special meeting of the JCN Shareholders will be held at The Ritz-Carlton
Hotel, Kansas City, Missouri, on July 1, 1998, at 10:00 a.m. Central Time (the  
"Special Meeting"), for the purpose of considering and voting upon the Merger   
Agreement.                                                                      

    Only holders of record of JCN Common at the close of business on April 27,
1998 will be entitled to notice of and to vote at the Special Meeting. At the   
Special Meeting, each holder of JCN Common will be entitled to one vote for     
each share                                                                      

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held, and the affirmative vote of at least two-thirds of the outstanding shares 
of JCN entitled to vote is required to approve the Merger Agreement.            
Abstentions and failures to vote will have the same effect as votes cast        
against approval of the Merger Agreement.                                       

 On April 16, 1998, directors and executive officers of JCN beneficially
owned 411,802 shares of JCN Common, or approximately 8.9% of the shares of JCN  
Common outstanding. The directors and executive officers of JCN have indicated  
that they intend to vote the JCN Common they own "FOR" approval of the Merger   
and the Merger Agreement. Shares of JCN Common held by the J.C. Nichols Company 
Employee Stock Ownership Trust are excluded from both of the foregoing          
statements.                                                                     

If the Merger is completed, Jackson will acquire all of the assets and
liabilities of JCN, and each outstanding share of JCN Common will be converted, 
at the election of the holder thereof, into the right to receive between 1.84   
and 2.03 shares of Highwoods Common or $65 in cash or a combination of the two, 
subject to the limitations described herein.                                    

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HIGHWOODS PRO FORMA COMBINED FINANCIAL INFORMATION  

 The following table sets forth the summary unaudited pro forma combined
financial data for Highwoods, assuming the Merger had occurred on the dates     
indicated herein, and reflecting the pro forma adjustments described in the     
notes to the unaudited pro forma financial statements included elsewhere in the 
Proxy Statement/Prospectus.                                                     

  The summary unaudited pro forma combined operating data are presented as
if the Merger had been consummated at the beginning of the period presented.    

   The summary unaudited pro forma combined balance sheet is presented as if
the Merger had occurred on March 31, 1998. The Merger has been accounted for    
under the purchase method of accounting in accordance with Accounting           
Principles Board Opinion No. 16. In the opinion of Highwoods' management, all   
significant adjustments necessary to reflect the effects of the Merger have     
been made.                                                                      

   The summary pro forma financial information should be read in conjunction
with, and is qualified in its entirety by, the historical financial statements  
and notes thereto for Highwoods incorporated by reference into the Proxy        
Statement/  Prospectus, and for JCN set forth elsewhere in this Proxy           
Statement/Prospectus and the unaudited pro forma financial statements and notes 
thereto included elsewhere in the Proxy Statement/Prospectus.                   

The summary unaudited pro forma operating and balance sheet data are  
presented for comparative purposes only and are not necessarily indicative of   
what the actual combined results of Highwoods and JCN would have been for the   
periods and dates presented. Nor does such data purport to represent the        
results of future periods.                                                      

                                                        [Enlarge/Download Table]

                                            Pro Forma         Three Months Ended        
                                         --------------           March 31,             
                                          Three Months                                  
                                              Ended                                     
                                            March 31,                                   
                                              1998            1998           1997       
                                         -------------- --------------- --------------  
                                            (dollars in thousands except per share      
                                                           amounts)                     
Operating Data:                                                                         
                                                                                        
 Total revenue:                           $   124,580     $   102,488    $    58,321    
 Rental property operating                                                              
  expenses(1) ..........................       38,290          29,728         15,342    
 General and administration ............        5,629           3,784          2,080    
 Interest expense ......................       23,391          17,778         12,035    
 Depreciation and amortization .........       19,710          17,161          9,310    
                                          -----------     -----------    -----------    
 Income before minority interest .......       37,560          34,037         19,554    
 Minority interest .....................       (5,634)         (5,608)        (3,129)   
                                          -----------     -----------    -----------    
 Income before extraordinary item ......       31,926          28,429         16,425    
 Extraordinary item -- loss on early                                                    
  extinguishment of debt ...............          (46)            (46)        (3,337)   
                                          -----------     -----------    -----------    
 Net income ............................       31,880          28,383         13,088    
 Dividends on preferred stock ..........       (8,145)         (6,145)        (1,407)   
                                          -----------     -----------    -----------    
 Net income available for common                                                        
  shareholders .........................  $    23,735     $    22,238    $    11,681    
                                          ===========     ===========    ===========    
 Net income per common                                                                  
  share -- basic .......................  $       .39     $       .45    $       .33    
                                          ===========     ===========    ===========    
 Net income per common                                                                  
  share -- diluted .....................  $       .39     $       .45    $       .33    
                                          ===========     ===========    ===========    
Balance Sheet Data                                                                      
 (at the end of period):                                                                
 Real estate, net of accumulated                                                        
  depreciation .........................  $ 3,508,345     $ 2,998,539    $ 1,598,747    
 Total assets ..........................    3,774,631       3,131,732      1,666,113    
 Total mortgages and notes payable .....    1,443,503       1,231,099        589,053    
Other Data:                                                                             
 FFO(2) ................................       49,125          45,043         27,457    
 Cash flow provided by (used in):                                                       
    Operating activities ...............       57,270          51,971         28,851    
    Investing activities ...............     (283,077)       (325,844)       (34,162)   
    Financing activities(3) ............      295,977         295,977          2,487    
 Number of in-service properties .......          643             530            345    
 Total rentable square feet ............   39,805,000      33,930,000     21,002,000    


                                            Pro Forma                                   
                                         --------------                                 
                                              Year                                      
                                              Ended        Year Ended      Year Ended   
                                          December 31,    December 31,    December 31,  
                                              1997            1997            1996      
                                         -------------- --------------- --------------- 
                                         (dollars in thousands except per share amounts)
             Operating Data:                                                            
                                                                                        
 Total revenue:                           $    455,612    $   274,470     $   137,926   
 Rental property operating                                                              
  expenses(1) ..........................       150,979         76,743          35,313   
 General and administration ............        17,692         10,216           5,666   
 Interest expense ......................        88,593         47,394          26,610   
 Depreciation and amortization .........        70,832         47,533          22,095   
                                          ------------    -----------     -----------   
 Income before minority interest .......       127,516         92,584          48,242   
 Minority interest .....................       (19,128)       (15,106)         (6,782)  
                                          ------------    -----------     -----------   
 Income before extraordinary item ......       108,388         77,478          41,460   
 Extraordinary item -- loss on early                                                    
  extinguishment of debt ...............        (5,799)        (5,799)         (2,140)  
                                          ------------    -----------     -----------   
 Net income ............................       102,589         71,679          39,320   
 Dividends on preferred stock ..........       (32,581)       (13,117)             --   
                                          ------------    -----------     -----------   
 Net income available for common                                                        
  shareholders .........................  $     70,008    $    58,562     $    39,320   
                                          ============    ===========     ===========   
 Net income per common                                                                  
  share -- basic .......................  $       1.15    $      1.51     $      1.51   
                                          ============    ===========     ===========   
 Net income per common                                                                  
  share -- diluted .....................  $       1.14    $      1.50     $      1.50   
                                          ============    ===========     ===========   
Balance Sheet Data                                                                      
 (at the end of period):                                                                
 Real estate, net of accumulated                                                        
  depreciation .........................  $         --    $ 2,614,654     $ 1,377,874   
 Total assets ..........................            --      2,722,306       1,443,440   
 Total mortgages and notes payable .....            --        978,558         555,876   
Other Data:                                                                             
 FFO(2) ................................       165,767        127,000          70,620   
 Cash flow provided by (used in):                                                       
 Operating activities ..................            --        130,192          71,317   
 Investing activities ..................            --       (524,283)        419,782   
 Financing activities(3) ...............            --        393,167        (486,867)  
 Number of in-service properties .......           643            481             292   
 Total rentable square feet ............    39,805,000     30,721,000      17,455,000   

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

(2) 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 of Highwoods 
generally considers FFO to be a useful financial performance measurement
because, together with net income and cash flows, FFO provides investors
  with an additional basis to evaluate its ability 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 Highwoods' 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       
shareholders. Further, funds from operations statistics as disclosed by 
other REITs may not be comparable to Highwoods' calculation of FFO.     

(3) Reflects Highwoods' cash flows and pro forma cash flows from operating,     
investing and financing activities. Pro forma cash flows from operating 
activities represents net income plus depreciation of rental properties 
  and amortization of deferred expenses, line of credit fees and the cost of
unwinding certain interest rate swap agreements. There are no pro forma 
  adjustments for changes in working capital items. This pro forma cash flow
data is not necessarily indicative of what actual cash flows would have 
 been assuming the transactions described in the introduction to the table
had been completed as of the beginning of each of the periods presented,
 nor does it purport to represent cash flows from operating, investing and
financing activities for future periods.                                

COMPARATIVE PER SHARE DATA  

 The following summary presents selected comparative unaudited per share
information for Highwoods and JCN on a historical basis and for Highwoods and   
JCN on a pro forma combined basis assuming the combination had been effective   
throughout the periods presented. JCN pro forma equivalent per share amounts    
reflected below show the amount of net income, cash distribution and            
shareholders' equity that would have been allocable to one share of JCN Common, 
multiplied by 2.03 which is the number of shares of Highwoods Common that would 
be received for each share of JCN Common assuming a Value of a share of         
Highwoods Common of $32.0197.                                                   

                                                        [Enlarge/Download Table]

                                                              HIGHWOODS                         JCN                 
                                                       ----------------------- -------------------------------------
                                                        Historical   Proforma     Historical     Equivalent Proforma
                                                       ------------ ---------- ---------------- --------------------
                                                                                                                    
Book value per share:                                                                                               
 March 31, 1998 ......................................   $  30.13    $  32.03     $  (4.27)           $  65.02      
 December 31, 1997 ...................................      29.92          --        (5.76)                 --      
Basic income per share from continuing operations:                                                                  
 Three Months Ended March 31, 1998 ...................        .45         .39          .46 (1)             .79      
 Twelve Months Ending December 31, 1997 ..............       1.51        1.15         4.63 (1)            2.33      
Cash dividends per share:                                                                                           
 Three Months Ended March 31, 1998 ...................        .51         .41           --                 .83      
 Twelve Months Ending December 31, 1997 ..............       1.98        1.26           --                2.56      

---------                                                                       
(1) JCN Historical column reflects basic income per share from continuing       
operations after income tax expense (benefit).                                  

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COMPARATIVE SHARE PRICES  

Highwoods                                                                       

 The Highwoods Common has been traded on the NYSE under the symbol "HIW"
since June 7, 1994. The following table sets forth the quarterly high and low   
sales prices per share of Highwoods Common reported on the NYSE, the average    
daily trading volume on the NYSE during the quarter and the quarterly           
distributions declared per share of Highwoods Common, from June 7, 1994 through 
May 29, 1998.                                                                   

                                                        [Enlarge/Download Table]

                                                     Closing Price          Average Daily    Distributions
                                                       Per Share           Trading Volume      Per Share  
                                                ------------------------  ----------------  --------------
Period or Quarter                                   High          Low                                     
----------------------------------------------  -----------   ----------                                  
                                                                                                          
  June 7, 1994 through June 30, 1994 .........   $  21 1/2     $ 19 7/8        192,453           .075(1)  
  Third Quarter 1994 .........................      21           20             16,922           .425     
  Fourth Quarter 1994 ........................      21 5/8       18 3/4         17,931           .425     
  First Quarter 1995 .........................      22           20             58,080           .425     
  Second Quarter 1995 ........................      25 1/2       21 1/4         41,335           .450     
  Third Quarter 1995 .........................      26 7/8       23 7/8         75,770           .450     
  Fourth Quarter 1995 ........................      28 3/8       25 1/2         38,523           .450     
  First Quarter 1996 .........................      30 1/2       27 3/4         45,319           .450     
  Second Quarter 1996 ........................      30 1/4       26 7/8        131,286           .480     
  Third Quarter 1996 .........................      30 3/8       27             72,058           .480     
  Fourth Quarter 1996 ........................      33 3/4       28 1/2        129,931           .480     
  First Quarter 1997 .........................      35 1/2       33             98,025           .480     
  Second Quarter 1997. .......................      33 1/2       30            107,450           .510     
  Third Quarter 1997 .........................      35 13/16     31 1/16       156,188           .510     
  Fourth Quarter 1997 ........................      37 3/8           33        204,803           .510     
  First Quarter 1998 .........................      37 7/16      32 1/4        174,520           .510     
  April 1, 1998 through May 29, 1998 .........      35 5/16      32 3/8        200,176             --     

---------                                                                       
(1) No distribution was paid during this period. The accrued distribution of    
$.075 per share was paid on November 16, 1994 at the time Highwoods paid
its initial distribution for the period from inception to September 30, 
1994.                                                                   

On May 29, 1998, the last reported sale price of a share of Highwoods 
Common on the NYSE was $33 per share. On December 22, 1997, the last full       
trading day prior to the public announcement of the Merger, the last reported   
sales price of a share of Highwoods Common on the NYSE was $34 1/16 per share.  
As of May 29, 1998, Highwoods had 1,063 shareholders of record.                 

 Highwoods intends to continue to declare quarterly distributions on the
Highwoods Common. However, no assurances can be given as to the amounts of      
future distributions as such distributions are subject to Highwoods' cash flow  
from operations, earnings, financial condition, capital requirements and such   
other factors as the Highwoods Board of Directors deems relevant. Highwoods 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 its       
shareholders for income tax purposes. The remaining distributions constituted a 
return of capital. No assurance can be given that such percentage will not      
change in future years.                                                         

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JCN                                                                             

  The JCN Common has been traded over-the-counter under the symbol "NCJC."
The following table sets forth the quarterly high and low sales prices per      
share of JCN Common reported on the over-the-counter market, the average daily  
trading volume on the over-the-counter market during the quarter and the        
quarterly distributions declared per share of JCN Common, from January 1, 1996  
through May 29, 1998.                                                           

                                                        [Enlarge/Download Table]

                                                     Closing Price          Average Daily    Distributions
                                                       Per Share           Trading Volume      Per Share  
                                               -------------------------  ----------------  --------------
Period or Quarter                                  High          Low                                      
---------------------------------------------  -----------   -----------                                  
                                                                                                          
 First Quarter 1996 .........................   $  21.06      $  20.00            186             --      
 Second Quarter 1996 ........................      36.50         32.00            266             --      
 Third Quarter 1996 .........................      34.00         28.13             77             --      
 Fourth Quarter 1996 ........................      31.06         27.00            376             --      
 First Quarter 1997 .........................      34.00         29.00            307             --      
 Second Quarter 1997 ........................      35.50         28.25          5,313             --      
 Third Quarter 1997 .........................      56.00         37.25         18,756             --      
 Fourth Quarter 1997 ........................      70.00         51.00            160             --      
 First Quarter 1998 .........................      74.00         62.00            281             --      
 April 1, 1998 through May 29, 1998 .........      66.00         64.00            340             --      

   On May 29, 1998, the last reported sale price of a share of JCN Common on
the over-the-counter market was $64.50 per share. On December 22, 1997, the     
last full trading day prior to the public announcement of the Merger, the last  
reported sale price of a share of JCN Common on the over-the-counter market was 
$52. As of May 29, 1998, JCN had 148 shareholders of record.                    

BECAUSE THE EXCHANGE RATIO IS FIXED WITHIN A SPECIFIED RANGE AND THE  
MARKET PRICE OF HIGHWOODS COMMON IS SUBJECT TO FLUCTUATION, THE MARKET VALUE OF 
HIGHWOODS COMMON THAT JCN SHAREHOLDERS WILL RECEIVE IN THE MERGER MAY INCREASE  
OR DECREASE PRIOR TO AND FOLLOWING THE MERGER. JCN SHAREHOLDERS ARE URGED TO    
OBTAIN CURRENT MARKET QUOTATIONS FOR HIGHWOODS COMMON.                          

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RISK FACTORS  

   Certain statements in the Summary and under captions "Risk Factors," "The
Merger -- Reasons for the Merger; Recommendation of the JCN Board of            
Directors," "The Merger -- Opinion of Financial Advisor" and elsewhere in this  
Proxy Statement/Prospectus (including the documents incorporated by reference   
herein) constitute "forward-looking statements" within the meaning of the       
Private Securities Litigation Reform Act of 1995. Such forward-looking          
statements involve known and unknown risks, uncertainties and other factors     
that may cause the actual results, performance or achievements of Highwoods or  
JCN to be materially different from any future results, performance or          
achievements expressed or implied by such forward-looking statements. Such      
factors include, among others, those discussed below.                           

In considering whether to approve the Merger, JCN Shareholders should 
consider, in addition to the other information in this Proxy                    
Statement/Prospectus, the matters described below.                              

Possible Reduction in Consideration Received by JCN Shareholders                

In considering whether to approve the Merger, JCN Shareholders should 
consider the risks associated with a potential change in the relative prices of 
Highwoods Common and JCN Common prior to the Effective Time due to changes in   
the business, operations and prospects of Highwoods or JCN, market assessments  
of the likelihood that the Merger will be consummated and the timing thereof,   
general market and economic conditions and other factors. At the time of the    
Merger, the value of a share of Highwoods Common as compared with a share of    
JCN Common may be less than such value at the time a JCN Shareholder votes on   
the Merger or makes his or her election as to the form of the consideration to  
be received in the Merger. Any decrease in the Value of a share of Highwoods    
Common below $32.00 will result in a decrease in the value of the non-cash      
component of the Merger consideration.                                          

Limit on Cash Consideration                                                     

Although a JCN Shareholder may elect to receive cash pursuant to the  
Merger with respect to some or all of his or her shares of JCN Common, such     
shareholders may instead receive shares of Highwoods Common with respect to     
some of such Cash Election Shares. Cash consideration paid to JCN Shareholders  
pursuant to the Merger will be limited to 40% of the aggregate consideration    
paid to all JCN Shareholders. See "The Merger -- Terms of the Merger."          

Conflicts of Interest of Certain JCN Officers and Directors                     

Certain officers and directors of JCN have interests in the Merger and
related transactions that conflict with the interests of JCN Shareholders       
generally. From January 1996 through September 1997, JCN entered into           
employment agreements with its executive officers to permit JCN to attract and  
retain talented managers capable of providing continuity to, and enhancing the  
operations of, JCN. One such agreement provides Mr. Brady with certain benefits 
upon the occurrence of a change of control not supported by Mr. Brady, and      
other agreements would provide several other officers with certain benefits     
upon the occurrence of a change of control and upon the occurrence of various   
triggering events subsequent to a transaction such as the Merger. Accordingly,  
Messrs. Brady, Cook, de Avila, Dixon, Fox, Peterson, Sloan, Stephenson and      
Teaney and Ms. Marietti may be entitled to the accelerated receipt of cash,     
stock, or combined cash and stock consideration from Highwoods, in approximate  
amounts of $6,215,783, $222,721, $1,019,610, $218,005, $214,210, $618,260,      
$618,260, $326,814, $1,016,171 and $196,231, respectively, which totals in the  
aggregate approximately $10.7 million (not taking into account obligations      
related to certain of such individuals' personal taxes), a portion of which may 
not be deductible to JCN or Highwoods. A full explanation of the triggering     
events for such payments is set forth under "Description of JCN -- Change in    
Control Agreements." As of the date of this Proxy Statement/Prospectus,         
Highwoods has not entered into any agreement with such officers that would      
avoid or reduce the amount of any consideration to which they might otherwise   
be entitled.                                                                    

    Mr. Barrett Brady, Chief Executive Officer of JCN, is the only employee of
JCN who is a member of the JCN Board of Directors. Mr. Brady abstained from the 
vote taken by the JCN Board of Directors to approve the Merger, and the JCN     
Board of Directors was aware of the potential conflict of interest resulting    
from Mr. Brady's status as an employee of JCN with an agreement providing       
benefits upon the occurrence of a change of control.                            

  Mr. C. Q. Chandler, III, a member of the JCN Board of Directors, is also
chairman of the board of directors and a significant shareholder of INTRUST     
Bank, N.A. ("INTRUST"), the trustee of JCN's Employee Stock Ownership Trust     
(the "ESOT"). INTRUST received payments of fees from the ESOT totaling $114,480 
during 1997, and Highwoods has indicated its intention to terminate the ESOT    
upon consummation of the Merger. As a result of the perception that the         
interest                                                                        

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of Mr. Chandler in INTRUST may result in a conflict of interest with his duties 
as a member of the JCN Board of Directors, Mr. Chandler abstained from the vote 
taken by the JCN Board of Directors to approve the Merger, and the JCN Board of 
Directors was aware of the potential conflict of interest resulting from his    
interests in INTRUST. Mr. Chandler and Mr. Brady expressed no objection to the  
Merger Agreement.                                                               

Potential Decrease in Price of Highwoods Common Resulting from Future           
Highwoods' Offerings                                                            

    Highwoods from time to time sells additional shares of Highwoods Common in
public or private offerings to fund pending acquisition and development         
activity, pay down indebtedness associated with its revolving loans and for     
general working capital purposes. Such offerings may affect the market price of 
Highwoods Common. Sales of substantial amounts of Highwoods Common or the       
perception that such sales could occur could adversely affect the prevailing    
market price for Highwoods Common. No assurances can be given that Highwoods    
will not undertake any material public or private offering of Highwoods Common  
in the near future.                                                             

Dilution of the Ownership Percentage of Holders of JCN Common                   

   Because the aggregate value of the outstanding shares of Highwoods Common
is greater than that of the outstanding shares of JCN Common, the percentage of 
Highwoods that a holder of JCN Common will own as a result of the Merger will   
be smaller than such holder's ownership percentage in JCN prior to the Merger.  
As a result, holders of JCN Common may have less influence over the affairs of  
Highwoods than their current influence over the affairs of JCN.                 

Potential Adverse Effects of Combining the Companies                            

Highwoods and JCN are large enterprises with operations in a number of
different states. There can be no assurance that costs or other factors         
associated with the integration of the two companies would not adversely affect 
future combined results of operations. Highwoods may not be able to achieve     
cost savings expected to result from the Merger or may not be able to realize   
such savings as quickly as planned.                                             

Dependence of Highwoods' Operating Performance on Southeastern Markets          

  Highwoods' revenues and the value of its properties may be affected by a
number of factors, including the local economic climate (which may be adversely 
impacted by business layoffs or downsizing, industry slowdowns, changing        
demographics and other factors) and local real estate conditions (such as       
oversupply of or reduced demand for office, industrial and other competing      
commercial properties). The Highwoods Properties are located in 19 markets in   
North Carolina, Florida, Tennessee, Georgia, Virginia, South Carolina, Maryland 
and Alabama. Based on March 1998 results, approximately 35% of the rental       
revenue from the Highwoods Properties is derived from properties in Florida and 
approximately 33% of such revenue is derived from properties in North Carolina. 
Highwoods' performance and its ability to make distributions to shareholders is 
particularly dependent on the economic and real estate conditions in the        
Southeast and in its Florida and North Carolina markets in particular. There    
can be no assurance as to the continued growth of the economy in Highwoods'     
southeastern markets or the potential benefits to Highwoods of its investment   
in the Midwest through its acquisition of JCN.                                  

Potential Adverse Effects of Expanding into New Geographic Areas and Property   
Types                                                                           

 Although Highwoods has limited its development, acquisition, management
and leasing business primarily to markets and property types with which         
management is familiar, Highwoods may expand its business to new geographic     
areas and property types. Management believes that much of its past success has 
been a result of its local expertise in the Southeast and its experience in the 
ownership, management and development of suburban office and industrial         
properties. Highwoods may not initially possess the same level of familiarity   
with new geographic areas and property types to develop, acquire, manage or     
lease newly acquired properties as profitably as it does for its existing       
properties.                                                                     

  As a result of the Merger, Highwoods will enter new markets in Missouri,
Kansas and Iowa. Highwoods' management is not as familiar with these geographic 
markets as with its existing southeastern markets. Furthermore, Highwoods would 
acquire different property types, such as retail properties, multifamily        
communities and single-family subdivisions, with which its management is not as 
familiar. Although Highwoods intends to retain the existing management of JCN   
upon completion of the Merger, there can be no assurance as to the successful   
integration of the properties acquired in the Merger into the existing          
Highwoods' property portfolio. Failure to integrate such properties successfully
could adversely affect Highwoods' results of operations.                        

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Conflicts of Interest in the Business of Highwoods                              

  Potential Adverse Tax Consequences upon Sale or Refinancing of Highwoods
Properties. Holders of Common Units in the Highwoods Operating Partnership may  
suffer adverse tax consequences upon the sale or refinancing of any of          
Highwoods' properties; therefore, such holders, including certain of Highwoods' 
officers and directors, and Highwoods may have different objectives regarding   
the appropriate pricing and timing of any sale or refinancing of such           
properties. Although Highwoods, as the sole general partner of the Highwoods    
Operating Partnership, has the exclusive authority to determine whether and on  
what terms to sell or refinance an individual property, those members of        
Highwoods' management and the Highwoods Board of Directors who hold Common      
Units may influence Highwoods not to sell or refinance certain properties even  
though such sale or refinancing might otherwise be financially advantageous to  
Highwoods.                                                                      

Potential Inability to Eliminate Conflicts of Interests. Highwoods has
adopted certain policies relating to conflicts of interest. These policies      
include a bylaw provision requiring all transactions in which executive         
officers or directors have a conflicting interest to be approved by a majority  
of the independent directors of Highwoods or a majority of the shares of        
capital stock held by disinterested shareholders. There can be no assurance     
that Highwoods' policies will be successful in eliminating the influence of     
such conflicts, and if they are not successful, decisions could be made that    
might fail to reflect fully the interests of all shareholders.                  

Potential Anti-Takeover Effect of Certain Provisions of Maryland Law and        
Highwoods' Governing Documents                                                  

Limitation on Ownership of Highwoods Common. The Amended and Restated 
Articles of Incorporation of Highwoods (the "Highwoods Articles") prohibit      
ownership of more than 9.8% of the outstanding capital stock of Highwoods by    
any person or entity. Such restriction is likely to have the effect of          
delaying, deferring or precluding an acquisition of control of Highwoods by a   
third party without consent of the Highwoods Board of Directors even if a       
change in control were in the best interest of shareholders.                    

 Required Consent of the Highwoods Operating Partnership for Significant
Corporate Action. Highwoods may not engage in certain change of control         
transactions without the approval of the holders of a majority of the           
outstanding Common Units. Should Highwoods ever own less than a majority of the 
outstanding Common Units, this voting requirement might delay, defer or         
preclude an acquisition or change in the control of Highwoods. As of March 31,  
1998, Highwoods owned approximately 83% of the Common Units.                    

    Difficulty in Removing Current Directors. The Highwoods Board of Directors
has three classes of directors, the terms of which will expire in 1999, 2000    
and 2001. Directors for each class are generally chosen for a three-year term.  
The staggered terms for directors may affect the shareholders' ability to       
change control of Highwoods even if a change in control were in the             
shareholders' best interest. (JCN also has a staggered board of directors.)     

 Anti-Takeover Protections of Highwoods Operating Partnership Agreement.
The Highwoods Operating Partnership Agreement has been amended to clarify the   
provisions relating to limited partners' redemption rights in the event of      
certain changes of control of Highwoods. Because these provisions require an    
acquiror to make provision under certain circumstances to maintain the          
Highwoods Operating Partnership structure and maintain a limited partner's      
right to continue to hold Common Units with future redemption rights, the       
amendment could have the effect of discouraging a third party from making an    
acquisition proposal for Highwoods.                                             

Dilutive Effect of Shareholders' Rights Plan. On October 4, 1997, the 
Highwoods Board of Directors adopted a Shareholders' Rights Plan and declared a 
distribution of one preferred share purchase right (a "Right") for each         
outstanding share of Highwoods Common. The Rights were issued on October 16,    
1997 to each shareholder of record on such date. The Rights have certain        
anti-takeover effects. The Rights will cause substantial dilution to a person   
or group that attempts to acquire Highwoods on terms not approved by the        
Highwoods Board of Directors. The Rights should not interfere with any merger   
or other business combination approved by the Highwoods Board of Directors      
since the Rights may be redeemed by Highwoods for $.01 per Right prior to the   
time that a person or group has acquired beneficial ownership of 15% or more of 
the Highwoods Common. (JCN has also adopted a shareholder rights plan. See      
"Comparison of Rights of Shareholders -- Shareholders' Rights Plans.")          

Adverse Consequences on Distributions of Highwoods' Failure to Qualify as a     
REIT                                                                            

  Highwoods and the Highwoods Operating Partnership intend to operate in a
manner so as to permit Highwoods to remain qualified as a REIT under the Code.  
Although Highwoods believes that it will operate in such a manner, no assurance 
can be given that Highwoods will remain qualified as a REIT. If in any taxable  
year Highwoods were to fail to qualify                                          

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as a REIT, Highwoods would not be allowed a deduction for distributions to      
shareholders in computing taxable income and would be subject to Federal income 
tax (including any applicable alternative minimum tax) on its taxable income at 
regular corporate rates.                                                        

Factors that Could Cause Poor Operating Performance of the Highwoods Properties 

Reliance on Performance of Properties. Real property investments are  
subject to varying degrees of risk. The yields available from equity            
investments in real estate depend in large part on the amount of income         
generated and expenses incurred. If Highwoods' properties do not generate       
revenues sufficient to meet operating expenses, including debt service, tenant  
improvements, leasing commissions and other capital expenditures, Highwoods'    
ability to make distributions to its shareholders and the Highwoods Operating   
Partnership's ability to make payments of interest and principal on any debt    
securities may be adversely affected.                                           

Highwoods' revenues and the value of its properties may be adversely  
affected by a number of factors, including the national economic climate, the   
local economic climate, local real estate conditions, the perceptions of        
prospective tenants of the attractiveness of each property, the ability of      
Highwoods to provide adequate management, maintenance and insurance, and        
increased operating costs (including real estate taxes and utilities). In       
addition, real estate values and income from properties are also affected by    
such factors as applicable laws, including tax laws, interest rate levels and   
the availability of financing.                                                  

    Potential Adverse Effect of Competition on Operating Performance. Numerous
office and industrial properties compete with Highwoods' properties in          
attracting tenants to lease space. Some of these competing properties are newer 
or better located than some of Highwoods' properties. Significant development   
of office or industrial properties in a particular area could have a material   
adverse effect on Highwoods' ability to lease space in its properties and on    
the rents charged.                                                              

  Bankruptcy or Weak Financial Condition of Tenants. At any time, a tenant
of Highwoods' properties may seek the protection of the bankruptcy laws, which  
could result in the rejection and termination of such tenant's lease and        
thereby cause a reduction in the cash flow available for distribution by        
Highwoods. Although Highwoods has not experienced material losses from tenant   
bankruptcies, no assurance can be given that tenants will not file for          
bankruptcy protection in the future or, if any tenants file, that they will     
affirm their leases and continue to make rental payments in a timely manner. In 
addition, a tenant from time to time may experience a downturn in its business, 
which may weaken its financial condition and result in the failure to make      
rental payments when due. If tenant leases are not affirmed following           
bankruptcy or if a tenant's financial condition weakens, Highwoods' income and  
its shareholder distributions may be adversely affected.                        

    Uncertainty in Renewal of Leases and Reletting of Space. Highwoods will be
subject to the risks that upon expiration of leases for space located in its    
properties, the leases may not be renewed, the space may not be relet or the    
terms of renewal or reletting (including the cost of required renovations) may  
be less favorable than current lease terms. If Highwoods were unable to relet   
or renew promptly the leases for all or a substantial portion of this space or  
if the rental rates upon such renewal or reletting were significantly lower     
than expected rates, then Highwoods' cash flow and ability to make expected     
distributions to shareholders may be adversely affected.                        

   Illiquidity of Real Estate. Equity real estate investments are relatively
illiquid. Such illiquidity will tend to limit the ability of Highwoods to vary  
its portfolio promptly in response to changes in economic or other conditions.  
In addition, the Code limits Highwoods' ability to sell properties held for     
fewer than four years, which may affect Highwoods' ability to sell properties   
without adversely affecting its financial performance or at a time that would   
otherwise be in the best interest of its shareholders.                          

   Potential Adverse Effect on Results of Operations Due to Changes in Laws.
Because increases in income, service or transfer taxes are generally not passed 
through to tenants under leases, such increases may adversely affect Highwoods' 
cash flow and its ability to make distributions to shareholders. Highwoods'     
properties are also subject to various Federal, state and local regulatory      
requirements, such as requirements of the Americans with Disabilities Act and   
state and local fire and life safety requirements. Failure to comply with these 
requirements could result in the imposition of fines by governmental            
authorities or awards of damages to private litigants. Highwoods believes that  
the Highwoods Properties comply in all material respects with such regulatory   
requirements. However, there can be no assurance that these requirements will   
not be changed or that new requirements will not be imposed which would require 
significant unanticipated expenditures by Highwoods and could have an adverse   
effect on Highwoods' cash flow and expected distributions.                      

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Potential Problems in Development, Construction and Acquisition Activities      

  Highwoods intends to continue development and construction of office and
industrial properties, including development on the Highwoods Development Land  
and the completion of the Highwoods Development Projects. Risks associated with 
Highwoods' development and construction activities, including activities        
relating to the Highwoods Development Land and the Highwoods Development        
Projects, may include: abandonment of development opportunities; construction   
costs of a property exceeding original estimates, possibly making the property  
uneconomical; occupancy rates and rents at a newly completed property may not   
be sufficient to make the property profitable; financing may not be available   
on favorable terms for development of a property; and construction and lease-up 
may not be completed on schedule, resulting in increased debt service expense   
and construction costs. In addition, new development activities, regardless of  
whether or not they are ultimately successful, typically require a substantial  
portion of management's time and attention. Development activities are also     
subject to risks relating to the inability to obtain, or delays in obtaining,   
all necessary zoning, land-use, building, occupancy, and other required         
governmental permits and authorizations. These risks may adversely affect       
Highwoods' results of operations and ability to make distributions to its       
shareholders.                                                                   

    Highwoods intends to continue to acquire office and industrial properties.
Acquisitions of office and industrial properties entail risks that investments  
will fail to perform in accordance with expectations, adversely affecting       
operations and shareholder distributions. Estimates of the costs of             
improvements to bring an acquired property up to standards established for the  
market position intended for that property may prove inaccurate.                

Potential Adverse Effect of Incurrence of Debt                                  

Potential Inflexibility of Debt Financing. Highwoods and the Highwoods
Operating Partnership are subject to the risks associated with debt financing,  
including the risk that the cash provided by operating activities will be       
insufficient to meet required payments of principal and interest, the risk of   
rising interest rates on floating rate debt, the risk that Highwoods and the    
Highwoods Operating Partnership will not be able to prepay or refinance         
existing indebtedness (which generally will not have been fully amortized at    
maturity) or that the terms of such refinancing will not be as favorable as the 
terms of existing indebtedness. If refinancing of such indebtedness could not   
be secured on acceptable terms, Highwoods might be forced to dispose of         
properties upon disadvantageous terms, which might result in losses and might   
adversely affect the cash flow available for distribution to equity holders or  
debt service. An inability to secure refinancing could also cause Highwoods to  
issue equity securities when its valuation is low, which could adversely affect 
the market price of such securities. In addition, if a property or properties   
are mortgaged to secure payment of indebtedness and Highwoods is unable to meet 
mortgage payments, the mortgage securing the property could be foreclosed upon  
by, or the property could be otherwise transferred to, the mortgagee with a     
consequent loss of income and asset value to Highwoods and potential adverse    
effect on shareholder distributions.                                            

   Adverse Effect of Potential Increases in Market Interest Rates. Highwoods
and the Highwoods Operating Partnership have incurred and expect in the future  
to incur variable rate indebtedness in connection with the acquisition and      
development of properties, as well as for other purposes. Also, additional      
indebtedness that Highwoods and the Highwoods Operating Partnership may incur   
under the existing revolving credit facilities will bear interest at variable   
rates. Accordingly, increases in interest rates would increase interest costs   
(to the extent that the related indebtedness was not protected by interest rate 
protection arrangements), which could adversely affect Highwoods' results of    
operations and its ability to pay expected distributions to shareholders.       

Possible Environmental Liabilities                                              

  Under various Federal, state and local laws, ordinances and regulations,
such as the Comprehensive Environmental Response Compensation and Liability Act 
or "CERCLA," and common laws, an owner or operator of real estate is liable for 
the costs of removal or remediation of certain hazardous or toxic substances on 
or in such property as well as certain other costs, including governmental      
fines and injuries to persons and property. Such laws often impose such         
liability without regard to whether the owner or operator knew of, or was       
responsible for, the presence of such hazardous or toxic substances. The        
presence of such substances, or the failure to remediate such substances        
properly, may adversely affect the owner's or operator's ability to sell or     
rent such property or to borrow using such property as collateral. Persons who  
arrange for the disposal or treatment of hazardous or toxic substances may also 
be liable for the costs of removal or remediation of such substances at a       
disposal or treatment facility, whether or not such facility is owned or        
operated by such person. Certain environmental laws impose liability for        
release of asbestos-containing materials ("ACM"), and third parties may seek    
recovery from owners or operators of real property for personal injuries        
associated with ACM. A number of the Highwoods Properties contain ACM or        
material that is presumed to be ACM. In connection with the ownership and       
operation of its                                                                

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properties, Highwoods may be liable for such costs. In addition, it is not      
unusual for property owners to encounter on-site contamination caused by        
off-site sources, and the presence of hazardous or toxic substances at a site   
in the vicinity of a property could require the property owner to participate   
in remediation activities in certain cases or could have an adverse affect on   
the value of such property. Contamination from adjacent properties has migrated 
onto at least three properties owned by Highwoods; however, based on current    
information, management of Highwoods does not believe that any significant      
remedial action is necessary at these affected sites.                           

    As of the date hereof, 99% of the Highwoods Properties have been subjected
to a Phase I environmental assessment. These assessments have not revealed, nor 
is management of Highwoods aware of, any environmental liability that it        
believes would have a material adverse effect on Highwoods' financial position, 
operations or liquidity taken as a whole. This projection, however, could prove 
to be incorrect depending on certain factors. For example, Highwoods'           
assessments may not reveal all environmental liabilities or may underestimate   
the scope and severity of environmental conditions observed, with the result    
that there may be material environmental liabilities of which Highwoods is      
unaware, or material environmental liabilities may have arisen after the        
assessments were performed of which Highwoods is unaware. In addition,          
assumptions regarding groundwater flow and the existence and source of          
contamination are based on available sampling data, and there are no assurances 
that the data is reliable in all cases. Moreover, there can be no assurance     
that (i) future laws, ordinances or regulations will not impose any material    
environmental liability or (ii) the current environmental condition of the      
Highwoods Properties will not be affected by tenants, by the condition of land  
or operations in the vicinity of the Highwoods Properties, or by third parties  
unrelated to Highwoods.                                                         

  Some tenants use or generate hazardous substances in the ordinary course
of their respective businesses. These tenants are required under their leases   
to comply with all applicable laws and are responsible to Highwoods for any     
damages resulting from the tenants' use of the property. Highwoods is not aware 
of any material environmental problems resulting from tenants' use or           
generation of hazardous substances. There are no assurances, however, that all  
tenants will comply with the terms of their leases or remain solvent and that   
Highwoods may not at some point be responsible for contamination caused by such 
tenants.                                                                        

Rights of Holders of Highwoods Common may be Less Favorable than Rights of JCN  
Shareholders                                                                    

    JCN is governed by the law of Missouri as well as by its charter (the "JCN
Articles") and bylaws (the "JCN Bylaws"); Highwoods is governed by the law of   
Maryland, the rules of the NYSE, the Highwoods Articles and its bylaws (the     
"Highwoods Bylaws"). The different laws governing the two corporations,         
together with the different provisions in the respective corporate articles and 
bylaws of JCN and Highwoods, create differences in the rights of the            
shareholders of the two corporations. As a result of these differences, in some 
cases, the rights of a holder of Highwoods Common may be considered less        
favorable than those of a holder of JCN Common. This is especially true with    
respect to differences in the provisions affecting change of control            
transactions and those governing the Board of Directors, which differences are  
summarized below. A detailed comparison of the rights of holders of JCN Common  
versus those of holders of Highwoods Common is set forth at "Comparison of      
Rights of Shareholders."                                                        

   Difficulty in Changing Control of Highwoods. It may be more difficult for
a third party to acquire control of Highwoods than JCN. Frequently, a change of 
control transaction involves a premium for the shares of the target over        
then-current market prices, and the statutory, charter and bylaw provisions     
governing Highwoods may reduce the likelihood that its shareholders would enjoy 
the possible benefits of a change of control transaction.                       

JCN Shareholders may have Lesser Control over Affairs of Highwoods.   
Minority shareholders are less likely to be able to secure representation on    
the Highwoods Board of Directors than on the JCN Board of Directors because,    
unlike JCN, Highwoods does not elect its directors by cumulative vote. With     
respect to the removal of directors, it is more difficult to remove a Highwoods 
director than a JCN director, even when the removal of a director would be in   
the best interest of the shareholders.                                          

In addition, the governing provisions regarding the liability and     
indemnification of directors are more favorable for directors of Highwoods than 
directors of JCN. As a result, directors of JCN may be more motivated than      
directors of Highwoods to perform their duties at the highest standard of care. 

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THE SPECIAL MEETING 

Purpose                                                                         

This Proxy Statement/Prospectus is furnished to JCN Shareholders in   
connection with the solicitation of proxies by and on behalf of the JCN Board   
of Directors for use at the Special Meeting. This Proxy Statement/Prospectus is 
first being mailed to JCN Shareholders on or about June   , 1998.               

Record Date; Vote Required                                                      

The affirmative vote of the holders of at least two-thirds of the     
outstanding shares of JCN Common is required to approve the Merger Agreement.   
Only holders of JCN Common of record as of the close of business on April 27,   
1998 (the "Record Date") are entitled to vote at the Special Meeting. At the    
close of business on the Record Date, 4,619,039 shares of JCN Common were       
outstanding. Holders of shares of JCN Common are entitled to one vote for each  
share held on the Record Date.                                                  

   THE JCN BOARD OF DIRECTORS HAS APPROVED THE TERMS OF THE MERGER AGREEMENT
AND THE CONSUMMATION OF THE MERGER CONTEMPLATED THEREBY, AND RECOMMENDS THAT    
JCN SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.                   

Solicitation and Revocation of Proxies                                          

  The Special Meeting will be held at The Ritz-Carlton Hotel, Kansas City,
Missouri on July 1, 1998, at 10:00 a.m. Central Time. At the Special Meeting,   
JCN Shareholders will be asked to consider and vote upon the approval of the    
Merger Agreement. Any proxy given may be revoked at any time before it is       
exercised, by delivery of a later-dated proxy or by notifying the Secretary of  
JCN, Mr. Price A. Sloan, in person or in writing of an intention to revoke a    
proxy.                                                                          

    All shares represented by a proxy given pursuant to this solicitation will
be voted as specified thereon at the Special Meeting. If no specification is    
given, such shares will be voted in favor of the proposal to approve the Merger 
Agreement. The JCN Board of Directors will not use any proxies voted against    
the Merger for adjournment or postponement of the Special Meeting intended to   
permit further solicitation.                                                    

Proxies are being solicited by and on behalf of the JCN Board of      
Directors. In addition to solicitation by mail, JCN may cause proxies to be     
solicited in person or by telephone or telegram by JCN's officers, directors    
and employees. These persons will receive no additional compensation for        
solicitation of proxies, but may be reimbursed for reasonable out-of-pocket     
expenses in connection with such solicitations. JCN has also arranged for       
brokerage firms, banks, custodians, nominees and fiduciaries to forward proxy   
solicitation materials to owners of the JCN Common held of record by such       
persons. The cost of solicitation of proxies for the Special Meeting will be    
borne by JCN.                                                                   

  JCN has retained Innisfree M & A Incorporated ("Innisfree") to assist in
the solicitation of proxies for the Special Meeting. For these services,        
Innisfree will receive an initial fee of $10,000, plus reimbursement for its    
out-of-pocket disbursements. If requested to contact individual registered      
holders, nonobjecting beneficial holders and ESOT beneficiaries, Innisfree will 
charge a modest per contact fee, which fee includes related telephone expenses. 
JCN estimates the total cost of the services to JCN to be less than $40,000.    

THE MERGER  

    The description of the Merger contained in this Proxy Statement/Prospectus
is qualified in its entirety by reference to the Agreement and Plan of Merger   
among Highwoods, Jackson and JCN dated December 22, 1997 (the "Original Merger  
Agreement") and Amendment No. 1 to the Agreement and Plan of Merger dated as of 
April 29, 1998 (the "Amendment"), the full texts of which are attached as       
Appendix A, and are incorporated herein by reference.                           

Terms of the Merger                                                             

    The Merger Agreement provides that, upon satisfaction or waiver of certain
conditions, JCN will be merged into Jackson, a wholly owned subsidiary of       
Highwoods formed for the sole purpose of effecting the Merger.                  

 As a result of the Merger, each JCN Shareholder will receive, at his or
her election, shares of Highwoods Common or cash or a combination of the two,   
subject to the limitation that Highwoods will not pay more than 40% of the      
total Merger consideration in cash. A JCN Shareholder may elect to receive      
shares of Highwoods Common for all or some of his or her shares of JCN Common.  

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   With respect to each share of JCN Common for which its holder has elected
to receive shares of Highwoods Common, the number of shares of Highwoods Common 
to be received in the Merger (the "Exchange Ratio") will vary depending on the  
Value of a share of Highwoods Common as follows:                                

                                                                [Download Table]

          Value of a share of                   Consideration to be received       
            Highwoods Common                       per share of JCN Common         
---------------------------------------  ------------------------------------------
                                                                                   
      equal to or greater than $35.36    1.84 shares of Highwoods Common           
      between $35.36 and $32.00          that number of shares of Highwoods Common 
                                         determined by dividing $65 by the Value   
                                         of a share of Highwoods Common            
      equal to or under $32.00           2.03 shares of Highwoods Common           

    No fractional shares of Highwoods Common will be issued in connection with
the Merger. In lieu thereof, holders of JCN Common will receive cash (without   
interest) in an amount equal to such fractional part of a share of Highwoods    
Common multiplied by the Exchange Ratio. No such holder will be entitled to     
dividends, voting rights, or any other rights as a shareholder in respect of    
any fractional shares.                                                          

    With respect to the Cash Election Shares, the Merger consideration will be
$65 in cash. To the extent, however, that the number of Cash Election Shares    
and Dissenting Shares exceeds 40% of the outstanding shares of JCN Common, then 
a portion of the Cash Election Shares (spread proportionately among all of such 
shares) will be converted into a right to receive Highwoods Common as specified 
above. The number of Cash Election Shares to be so converted will be the        
minimum number necessary to keep the cash component of the total Merger         
consideration (including cash paid for Dissenting Shares) below 40%.            

The following table illustrates the cash versus stock component of the
Merger consideration for each Cash Election Share under various JCN Shareholder 
voting scenarios:                                                               

                                                                [Download Table]

                                                 Components of    
                                                      Merger      
                                                   Consideration  
                    Percentage of Shares       per Cash Election  
                        of JCN Stock                   Share      
               -------------------------------   -----------------
                    Perfecting       Electing            Highwoods
                Dissenters' Rights     Cash       Cash    Common  
               -------------------- ----------   ------ ----------
                                                                  
Scenario 1             25%             60%        25%      75%    
Scenario 2             25%             30%        50%      50%    
Scenario 3             25%             15%       100%       0%    

Scenario 4             10%             75%        40%      60%    
Scenario 5             10%             50%        60%      40%    
Scenario 6             10%             30%       100%       0%    

Background of the Merger                                                        

  In July 1997, the JCN Board of Directors requested that Morgan Stanley &
Co. Incorporated ("Morgan Stanley"), an internationally recognized investment   
banking firm, review various capital planning and strategic alternatives        
available to JCN. This analysis was requested because management of JCN had     
identified significant development projects and outlined a strategy for growth  
with which it was prepared to proceed. The JCN Board of Directors and Morgan    
Stanley believed that certain capital raising alternatives were available,      
pursuant to which JCN could finance its growth and provide liquidity to JCN     
Shareholders, and management of JCN believed such alternatives could also cause 
the value of the JCN Common to increase and better reflect the JCN Board of     
Directors' assessment of JCN's value. (At that time, JCN Common was trading at  
approximately $40 per share.) Morgan Stanley presented information to the JCN   
Board of Directors at a meeting on August 27, 1997 that outlined the following  
four options: (i) a private issuance of convertible preferred stock; (ii) a     
private issuance of JCN Common; (iii) a public offering of JCN Common; or (iv)  
a strategic combination with a public real estate company or a public real      
estate investment trust.                                                        

   The JCN Board of Directors identified the private issuance of convertible
preferred stock as the preferred method of satisfying the identified            
objectives. However, the JCN Board of Directors solicited and was unable to     
obtain the support of the trustee of the JCN Employee Stock Ownership Trust     
(the "ESOT"), INTRUST Bank, N.A. ("INTRUST"), which support was viewed as       
necessary to amend the JCN Articles in order to authorize the issuance of such  
securities. The trustee's support was viewed as necessary because the ESOT      
holds approximately 30.5% of the outstanding shares of JCN Common,              

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and the support of a majority of JCN Shareholders, as is required to amend the  
JCN Articles, seemed uncertain without the support of INTRUST. Accordingly, the 
JCN Board of Directors determined to pursue simultaneously what it perceived as 
the two most viable remaining options, the private issuance of JCN Common or a  
strategic merger with a public real estate company or a public real estate      
investment trust. In September 1997, the JCN Board of Directors authorized      
Morgan Stanley to canvass parties that it considered most likely to enter into  
either of the foregoing transactions with JCN and to present any resulting      
proposals to the JCN Board of Directors for consideration.                      

   During the period beginning June 1997 and extending through October 1997,
management and representatives of JCN had numerous discussions with INTRUST to  
address a number of concerns expressed by INTRUST, including the liquidity      
needs of the ESOT. During the course of those discussions, JCN understands that 
INTRUST was approached by Bosfield, L.L.C., an Indiana limited liability        
corporation ("Bosfield"), with an offer to purchase at $59 per share all of the 
shares of JCN Common held by the ESOT. INTRUST entered into an agreement with   
Bosfield, dated as of September 24, 1997, pursuant to which INTRUST agreed to   
sell to Bosfield all of the JCN Common then owned by the ESOT and "provide      
reasonable assistance" to Bosfield in any effort by Bosfield to acquire an      
additional 700,000 shares of JCN Common. The JCN Board of Directors met with    
the principals of Bosfield and was told of Bosfield's desire to obtain control  
of JCN. The JCN Board of Directors requested on more than one occasion, but was 
never provided, specific steps to which Bosfield would commit that would        
protect the interest of the minority shareholders of JCN subsequent to any      
acquisition by Bosfield of control of JCN. The JCN Board of Directors concluded 
that alternatives existed that would provide better value to all JCN            
Shareholders, including the ESOT, and would meet the objectives previously      
outlined by the JCN Board of Directors. Accordingly, the JCN Board of Directors 
urged Morgan Stanley to continue its preliminary discussions with parties as    
described above.                                                                

Morgan Stanley, together with JCN in certain instances, proceeded to  
contact four investors to determine their interest in purchasing JCN Common in  
amounts necessary to finance JCN's growth strategy. In addition, Morgan         
Stanley, together with JCN in certain instances, contacted eight public real    
estate companies and real estate investment trusts that it perceived as most    
likely to be interested in a strategic merger with JCN. As a result of such     
conversations, the JCN Board of Directors evaluated two specific proposals for  
consideration. One such proposal contemplated an issuance by JCN, at a price    
below $65 per share, of a significant (but not controlling) percentage of JCN   
Common to a prospective investor. The other was a proposed strategic merger     
with Highwoods. Highwoods expressed interest in a strategic merger with JCN, in 
writing, indicating a range of perceived values it would expect to pay, subject 
to due diligence, provided that JCN negotiated exclusively with Highwoods       
during such period. At a November 19, 1997 meeting, the JCN Board of Directors  
had an extensive discussion as to the advantages and disadvantages of each      
option.                                                                         

    At a November 24, 1997 meeting, the JCN Board of Directors voted to pursue
a strategic merger with Highwoods and established a Negotiating Committee of    
the JCN Board of Directors consisting of Messrs. Hoskins, Morgan and Brady to   
work with JCN counsel to negotiate an acceptable letter of intent with          
Highwoods and subsequently negotiate terms of a proposed definitive agreement   
for consideration by the JCN Board of Directors. The JCN Board of Directors     
determined that a strategic merger, such as the Merger, was at that time the    
most viable option for JCN because, in the view of the JCN Board of Directors,  
it would provide access to relatively low cost capital, permit pursuit of JCN's 
existing business strategy, provide tax deferral for those JCN Shareholders     
seeking that benefit, and provide greater liquidity to JCN Shareholders. The    
JCN Board of Directors believed that alternatives then available to it could    
not as effectively provide such benefits.                                       

  The letter of intent first offered by Highwoods indicated their interest
in pursuing a transaction at a price between $62 and $64 per share of JCN       
Common. The draft letter of intent required a period of exclusivity extending   
until December 20, 1997, during which time JCN could not solicit proposals or   
discuss an acquisition with any party other than Highwoods. The draft letter of 
intent also sought payment to Highwoods by JCN of a termination fee of 5% of    
the aggregate transaction value in the event that Highwoods made an offer to    
acquire all of the stock of JCN at a price at least equal to $64 per share. JCN 
refused to agree to such terms. As a result of negotiations between the         
Negotiating Committee and Mr. O. Temple Sloan, Jr., Chairman of the Board of    
Highwoods, Mr. Mack D. Pridgen, III, Vice President and General Counsel of      
Highwoods, and outside counsel to Highwoods, the letter of intent was revised   
to delete the requested termination fee. Representatives of Highwoods, however, 
insisted on retaining the period of exclusivity set forth in the letter of      
intent and indicated they would be unwilling to go forward with discussions if  
they were not granted the period of exclusivity. The letter of intent,          
providing for a period of exclusivity, was then signed on November 24, 1997.    

 From December 2, 1997 through December 20, 1997, Highwoods, J.P. Morgan
Securities Inc. ("J.P. Morgan") (the investment banking firm serving as         
financial advisor to Highwoods), and outside counsel to Highwoods conducted     
extensive due diligence of the assets and properties of JCN. Highwoods first    
provided to JCN a draft of the merger agreement (as executed on December 22,    
1997, the "Original Merger Agreement") during the week of December 8, 1997.     

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On December 14, 1997, members of the Negotiating Committee, Mr. Price 
Sloan, the General Counsel of JCN, individuals from Morgan Stanley, and outside 
counsel to JCN held a telephone conference with officers of Highwoods and       
outside counsel to Highwoods to discuss the proposed terms of the Original      
Merger Agreement. During this conference, representatives of JCN made a number  
of comments on the proposed Original Merger Agreement, noting in particular     
their objection to: (i) the amount of a proposed termination fee and the        
circumstances under which such fee would be payable to Highwoods; (ii) the      
request by Highwoods that JCN enter into a stock option agreement granting      
Highwoods an option to purchase from JCN shares of JCN Common representing up   
to 10% of the issued and outstanding JCN Common (the "Ten Percent Option");     
(iii) the provisions that set the stock portion of the consideration at a fixed 
exchange rate rather than a fixed dollar amount; and (iv) the numerous          
conditions to the obligation of Highwoods to close the transaction. At that     
time, Highwoods had not completed sufficient due diligence to be in a position  
to commit to a specific price.                                                  

While working with the Negotiating Committee, Highwoods sought to     
negotiate with representatives of the extended Nichols family (who, through     
individual share holdings and shares held in trust, own approximately 26% of    
the JCN Common) and with INTRUST agreements that would commit the Nichols       
family and INTRUST to support any agreement that might ultimately have been     
entered into with JCN. Although both the Nichols family and INTRUST appeared    
supportive of the proposed transaction, Highwoods was unable to obtain such     
agreements on terms it deemed acceptable. Highwoods was also unable to obtain   
from the Negotiating Committee a commitment to waive application of JCN's       
Shareholder Rights Plan to a proposed purchase by Highwoods of all of the JCN   
Common held by the Nichols family and the ESOT.                                 

    On December 16, 1997, Messrs. Temple Sloan, Pridgen, and Carman J. Liuzzo,
Vice President and Chief Financial Officer of Highwoods, J.P. Morgan, and       
outside counsel to Highwoods met with the Negotiating Committee, Mr. Price      
Sloan, Morgan Stanley, and outside counsel to JCN and indicated their           
willingness to commit to a transaction at $64 per share of JCN Common.          
Highwoods continued to insist on a termination fee totaling $19.2 million and   
continued to seek the Ten Percent Option. After substantial negotiations and    
discussion, it was agreed that the termination fee would be reduced to $16.5    
million and Highwoods would forego the Ten Percent Option. The Negotiating      
Committee agreed that the stock portion of the consideration could be set at a  
fixed exchange ratio. At that time and in subsequent conversations, the         
Negotiating Committee continued to refuse requests by Highwoods to waive        
application of JCN's Shareholder Rights Plan to permit Highwoods to purchase    
shares of JCN Common held by the Nichols family and the ESOT.                   

The JCN Board of Directors met on December 19, 1997 to obtain a full  
report on the status of negotiations with Highwoods. At that time, outside      
counsel to JCN described the status of negotiations and the issues remaining    
open in the discussions with Highwoods. Counsel to JCN advised the JCN Board of 
Directors of its fiduciary duties and provided advice on the reasonableness of  
certain provisions, including the Ten Percent Option and the termination fee,   
that had been requested by Highwoods. By the following morning, each member of  
the JCN Board of Directors received for review a revised version of the         
Original Merger Agreement, proposed resolutions for approval by the JCN Board   
of Directors in the event the proposed terms of the Original Merger Agreement   
were considered satisfactory, an executive summary of the Original Merger       
Agreement, and a written report prepared by Morgan Stanley. By the end of the   
day on December 20, 1997, all aspects of the Original Merger Agreement had been 
negotiated to conclusion except for the termination fee and the conditions to   
closing.                                                                        

 The JCN Board of Directors met again on December 21, 1997 to receive an
additional presentation from counsel to JCN, a review of the written material   
from, and the oral opinion of, Morgan Stanley (which opinion was subsequently   
updated and confirmed by delivery of a written opinion dated December 22, 1997) 
to the effect that, as of December 21, 1997, and based upon and subject to      
certain matters stated in such opinion, the proposed transaction was fair, from 
a financial point of view, to the JCN Shareholders. The JCN Board of Directors  
then provided guidance to the Negotiating Committee on the two open issues and  
determined that, subject to agreement on the open issues in a manner consistent 
with the guidance provided by the JCN Board of Directors, the terms of the      
Original Merger Agreement and the transaction contemplated thereby were fair to 
and in the best interests of JCN and the JCN Shareholders. Subject to the       
foregoing, the JCN Board of Directors members present at the meeting (other     
than Mr. Brady and Mr. Chandler, each of whom abstained as a result of the      
perception of a potential conflict) approved the Original Merger Agreement and  
resolved to recommend that the JCN Shareholders vote for the approval and       
adoption of the Original Merger Agreement at a special meeting of the JCN       
Shareholders to be held for that purpose.                                       

    The Negotiating Committee, Mr. Price Sloan, and outside counsel to JCN met
with Messrs. Ronald P. Gibson, President and Chief Executive Officer of         
Highwoods, Liuzzo, and Pridgen of Highwoods and outside counsel to Highwoods    
the evening of December 21, 1997 to negotiate the conditions to closing the     
proposed transaction and the amount of the termination fee and the              
circumstances under which such fee would be payable. At that time, Highwoods    
offered to increase its offer to $65 per share of JCN Common in exchange for    
concessions on the termination fee. The parties ended discussions               

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on the evening of December 21 without reaching agreement. On the morning of     
December 22, 1997, after each member of the JCN Board of Directors had been     
contacted and told it did not appear as though the Original Merger Agreement    
could be negotiated on terms outlined by the JCN Board of Directors the         
previous day, the Negotiating Committee and representatives of Highwoods        
resumed their discussions. As a result of those discussions, Highwoods agreed   
to pay $65 per share of JCN Common, JCN agreed to a maximum payment on          
termination of $17.2 million, and Highwoods agreed to a reduced termination fee 
in the event the JCN Board of Directors continued to recommend to JCN           
Shareholders the transaction with Highwoods. The parties further agreed to      
limit the conditions to closing so that, most importantly, the transaction      
would be contingent on Highwoods obtaining the consent of a limited number of   
lenders to JCN.                                                                 

Late in the afternoon of December 22, 1997, after the JCN Board of    
Directors had been notified that an agreement had been reached on terms         
consistent with the instructions of the JCN Board of Directors from the prior   
day, the Original Merger Agreement was executed. The parties issued separate    
press releases announcing the Original Merger Agreement before the markets      
opened on December 23, 1997.                                                    

 On January 6, 1998, JCN received an unsolicited expression of interest,
made jointly by Duke Realty Investments, Inc. and Simon DeBartolo Group, Inc.   
("Duke/Simon"), indicating their preliminary belief that the value of JCN       
Common was at least $75 per share. On January 9, 1998, JCN received a letter    
from Intell in which it expressed the presumption that the value of JCN Common  
was "in the range of $65-75 per share." At that time, neither Duke/Simon nor    
Intell had undertaken a detailed review of the books and records of JCN. The    
JCN Board of Directors agreed to permit both Duke/Simon and Intell to conduct a 
thorough investigation of JCN to confirm their assessments of value and         
determine their willingness to propose an alternative transaction to the        
Merger. Both Duke/Simon and Intell then proceeded to conduct a due diligence    
investigation of JCN. On January 28, 1998, JCN received a letter from           
Duke/Simon indicating that they had elected not to propose a transaction with   
JCN. Also on January 28, 1998, Intell expressed an interest in a merger with    
JCN pursuant to which JCN Shareholders would receive $75 per share in cash. In  
a February 11, 1998 letter to JCN, Intell indicated it did not feel it          
appropriate to pursue a transaction with JCN until such time as JCN             
Shareholders had an opportunity to vote on the Merger. Intell further indicated 
its then-current intent, in the event the Merger was not approved by JCN        
Shareholders and subject to a number of conditions, to pursue an acquisition of 
JCN that would provide to JCN Shareholders $75 per share in cash, less an       
adjustment that would include any amounts due to Highwoods pursuant to the      
Original Merger Agreement.                                                      

   In light of the February 11, 1998 letter from Intell and certain publicly
filed statements from certain significant shareholders of JCN expressing        
dissatisfaction with the value of the consideration to be received by JCN       
shareholders pursuant to the Merger, management of JCN requested that Highwoods 
meet with the Company to discuss the status of the Merger. Accordingly, on      
February 16, 1998, members of JCN's management, Morgan Stanley and outside      
counsel to JCN met with members of Highwoods management, J.P. Morgan and        
outside counsel to Highwoods to discuss whether Highwoods would consider        
improving the consideration to be given to the shareholders of JCN in the       
Merger. Highwoods indicated that it would entertain such discussions if it      
could obtain certainty that the Merger would be consummated. The structure to   
achieve the requisite degree of certainty contemplated by those present at the  
meeting included a purchase by Highwoods of the ESOT shares, the waiver by      
Highwoods of a number of conditions to the Merger, the granting to Highwoods of 
a proxy to vote approximately 22% of the JCN Common shares in favor of the      
Merger by certain members of the Nichols family and the approval of the JCN     
Board of Directors so that the structure would not be prohibited by JCN's       
Shareholders Rights Plan. Highwoods asked representatives of JCN to facilitate  
such negotiations among Highwoods, JCN, INTRUST and the Nichols family and such 
representatives agreed to do so.                                                

    On March 2 and March 3, 1998, at the request of JCN, members of management
of Highwoods and outside counsel to Highwoods met with members of management of 
JCN, officers of INTRUST and representatives of the Nichols family and their    
respective outside counsel to discuss draft agreements reflecting the           
contemplated structure and the various open issues between the parties,         
including consideration. At these meetings, the parties had various discussions 
and engaged in negotiations concerning the terms of Highwoods' offer to the     
shareholders of JCN, including the amount of increased consideration to be      
paid, the relevant exchange ratio and the elimination of the limitation on the  
amount of Highwoods stock available for exchange. Highwoods reaffirmed to JCN,  
INTRUST and the Nichols family representatives that it had no interest in       
increasing the terms of its offer in the Merger unless the other parties were   
willing to adopt the structure to achieve certainty referred to above and       
certain other outstanding issues were resolved to Highwoods' satisfaction,      
including matters relating to certain existing lawsuits involving JCN and the   
ESOT and any potential liabilities under such suits. The lawsuits that were of  
primary concern to Highwoods were the Petula Litigation and the continuing      
Medina Litigation. Those lawsuits, and the claims made therein, are described   
in detail in "Description of JCN -- Litigation." While Highwoods expressed a    
willingness to modify the terms of the Merger, including significantly          
improving the level of consideration to                                         

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be received by JCN Shareholders, and JCN, INTRUST and the representatives of    
the Nichols family expressed their willingness to assure Highwoods that the     
Merger would be consummated, Highwoods determined at the March 3, 1998 meeting  
that it needed more information with respect to pending lawsuits and potential  
liabilities before proceeding to attempt to come to terms as to the level of    
consideration and on the various other open issues. The parties then ended the  
meeting without reaching agreement on modifying the terms or structure of the   
Merger. Subsequently, Highwoods advised JCN that it had determined not to       
increase the Merger consideration and the parties ceased discussions related to 
the contemplated structure.                                                     

    In January 1998, the Internal Revenue Service adopted new regulations that
made it possible for the parties to simplify significantly the procedure        
outlined in the Original Merger Agreement for allocating among shareholders the 
cash and stock consideration to be received in the Merger. As a result,         
beginning in late January and continuing through April 29, 1998, Highwoods and  
JCN engaged with varying intensity in a series of discussions that resulted in  
execution of an amendment to the Original Merger Agreement (the "Amendment").   
In addition to addressing the simplification resulting from the new IRS         
regulations, the parties also discussed: (i) the ability of JCN Shareholders to 
obtain all of the consideration in the Merger in the form of Highwoods Common;  
(ii) the willingness of Highwoods to fix at $65 per share the per share stock   
consideration to be received by JCN Shareholders; and (iii) the desire of JCN   
to obtain from Highwoods a waiver of the condition to closing that JCN obtain   
the consent of a lender with which it is currently in litigation. At its March  
25, 1998 meeting, the JCN Board of Directors authorized the Negotiating         
Committee to negotiate and finalize the Amendment within guidelines and on      
terms established by the JCN Board of Directors.                                

At various times from January through April the negotiations were     
undertaken between Messrs. Brady and Gibson, between Messrs. Sloan and Pridgen, 
between outside counsel to the two parties, and between the investment bankers  
for the two parties. Those varying discussions were finalized on April 29, 1998 
when the Amendment was executed. The Amendment revises the Original Merger      
Agreement to provide, among other things: (i) that JCN Shareholders have the    
right to receive the entire Merger consideration in the form of Highwoods       
Common; (ii) simplification of the elections to be made by those JCN            
Shareholders electing to receive shares of Highwoods Common; (iii) increases    
the likelihood that JCN Shareholders electing to receive Highwoods Common in    
the Merger will receive at least $65 in value; and (iv) waiver from Highwoods   
of the requirement that JCN obtain the consent of its most significant lender   
prior to the Effective Time. In considering the Amendment, the JCN Board of     
Directors was aware that: (i) JCN Shareholders electing to receive shares of    
Highwoods Common would not know, at the time of the Special Meeting, the value  
of the consideration to be received for their shares of JCN Common, and (ii)    
that JCN Shareholders electing to receive cash may instead receive shares of    
Highwoods Common.                                                               

Reasons for the Merger; Recommendation of the JCN Board of Directors            

    The JCN Board of Directors believes that the terms of the Merger Agreement
are fair to, and in the best interest of, JCN and the JCN Shareholders. In      
considering the terms and conditions of the Merger Agreement, the JCN Board of  
Directors considered the material factors identified below:                     

Shareholder Benefits of the Merger                                    

  (1) Reports from members of the JCN Board of Directors, management and
legal advisors on the specific terms of the Merger Agreement and other    
matters, including the fact that the Merger is structured to qualify as a 
tax-free reorganization under the Code, which the JCN Board of Directors  
viewed as beneficial to JCN Shareholders;                                 

    (2) The companies' respective financial condition, results of operations
and anticipated future results; current financial market conditions       
(including that the investment community seemed more receptive to real    
estate operations structured as real estate investment trusts) and        
historical market prices; trading information for JCN Common and Highwoods
Common; and the consideration to be received by JCN Shareholders in the   
Merger, all of which the JCN Board of Directors viewed as positive;       

(3) The amount of consideration offered to JCN Shareholders, which  
represents a premium of 12%, 30%, and 83% over the closing prices for the 
 30th day, the 90th day, and the 180th day, respectively, preceding December
21, 1997, which the JCN Board of Directors viewed as beneficial to JCN    
Shareholders;                                                             

(4) The financial and other analyses presented by Morgan Stanley,   
including the oral opinion of Morgan Stanley (subsequently confirmed in   
writing) that the merger consideration was fair to JCN Shareholders from a
 financial point of view as of the date of such opinion, which the JCN Board
of Directors viewed as positive;                                          

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   (5) The ability of JCN Shareholders to participate in the future growth
of Highwoods (including the growth resulting from acquisition of JCN)     
through ownership of Highwoods Common, which the JCN Board of Directors   
viewed as beneficial to JCN Shareholders;                                 

  (6) Limitations on JCN's access to low cost capital and the perception
that Highwoods' significant resources and lower cost of capital would     
provide a competitive advantage and enable more rapid implementation of   
JCN's long-term growth plans, which the JCN Board of Directors believed   
would benefit JCN Shareholders;                                           

   (7) The geographic concentration of JCN's properties and the relatively
greater geographic diversity of the properties owned by Highwoods, which  
diversity the JCN Board of Directors believed would benefit JCN           
Shareholders;                                                             

 (8) The fact that the Merger Agreement does not preclude JCN from (i)
 participating in negotiations with, and furnishing information (pursuant to
 a customary confidentiality agreement) to, persons or entities that seek to
engage in discussions or negotiations, or that request information, in    
 connection with a bona fide written or publicly announced takeover proposal
 if the JCN Board of Directors determines, in good faith based on the advice
of outside counsel, that it is necessary to do so in order to comply with 
its fiduciary duties, or (ii) terminating the Merger Agreement under      
certain circumstances specified in the Merger Agreement (such termination 
being subject to the payment of up to $2.5 million of Highwoods'          
out-of-pocket expenses and a $14.7 million termination fee), all of which 
the JCN Board of Directors viewed as positive;                            

    (9) The financial condition and business reputation of Highwoods and the
ability of Highwoods to complete the Merger in a timely manner, which the 
JCN Board of Directors viewed as positive;                                

     (10) The absence of any term or condition in the Merger Agreement that in
the view of the JCN Board of Directors is unduly onerous or could         
 materially impede or impair the consummation of the Merger, the support for
the Merger from the Nichols family and the satisfaction expressed by      
 INTRUST at the time the general terms of the Merger were first presented on
November 25, 1997, all of which suggested that consummation of the Merger 
was likely (although INTRUST has not expressed whether it currently       
supports the Merger) and which the JCN Board of Directors viewed as       
positive; and                                                             

    (11) The fact that JCN Common is not actively traded and JCN is not in a
position to pay dividends, while Highwoods pays a regular quarterly       
dividend, and the Merger would provide JCN Shareholders with highly liquid
Highwoods Common.                                                         

  Additional Benefits of the Merger. The JCN Board of Directors considered
the social and economic effect of the Merger on the employees and tenants of    
JCN and on the metropolitan Kansas City area. In particular, the JCN Board of   
Directors considered that Highwoods has agreed to: (i) honor JCN's existing     
obligations to its current and former employees, (ii) continue charitable       
giving in the Kansas City metropolitan area at least at the level undertaken    
historically by JCN, (iii) continue marketing support for tenants, (iv) pursue  
the Plaza development plan, and (v) permit the JCN Board of Directors to        
designate one member of the Highwoods Board of Directors. The expertise and     
reputation of Highwoods' management in the real estate business further         
supported the decision of the JCN Board of Directors to approve the Merger and  
the Merger Agreement.                                                           

    The Amendment. The JCN Board of Directors considered the following factors
in authorizing the Amendment:                                                   

  (1) The opportunity for JCN Shareholders to elect to receive Highwoods
Common for all of their shares of JCN Common because of elimination of the
prior limitation on Per Share Stock Consideration, which the JCN Board of 
Directors viewed as beneficial to JCN Shareholders;                       

     (2) The fact that the financial interests of JCN Shareholders electing to
receive shares of Highwoods Common would receive some protection in the   
event the Value of Highwoods Common was below $35.36, which the JCN Board 
of Directors viewed as positive;                                          

    (3) The increased certainty of consummating the Merger that results from
Highwoods' waiver of the need for JCN to obtain the consent of Principal  
Mutual Insurance Company, which consent was required under the Original   
Merger Agreement, which the JCN Board of Directors viewed as beneficial to
JCN Shareholders;                                                         

   (4) The benefit to Highwoods of the manner in which the Value was to be
calculated, which the JCN Board of Directors viewed as positive; and      

   (5) The correspondence from Intell, to which the JCN Board of Directors
did not attach great significance in light of the expressed conditions and
uncertainties.                                                            

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   In addition, the JCN Board of Directors received confirmation from Morgan
Stanley that, from a financial point of view, the terms of the Merger Agreement 
subsequent to the Amendment continued to be fair. Furthermore, the Amendment    
did not diminish any of the benefits of the Original Merger Agreement. In       
considering the Amendment, the JCN Board of Directors was aware that JCN        
Shareholders would not know, at the time of the Special Meeting, the value of   
the consideration to be received for their shares of JCN Common.                

Risks of the Merger. The JCN Board of Directors also considered:      

(1) The possible change in share prices of Highwoods Common and JCN 
Common prior to the time the Merger becomes effective;                    

(2) The risk that some JCN Shareholders will not receive the form of
consideration that they elected for their shares of JCN Common;           

  (3) The potential adverse tax consequences of the Merger for those JCN
Shareholders receiving cash;                                              

   (4) The potential adverse impact on the share price of Highwoods Common
resulting from subsequent Highwoods offerings;                            

(5) Dilution of the ownership percentage of a JCN Shareholder who   
receives Highwoods Common in the Merger;                                  

(6) The possible failure of Highwoods to qualify as a REIT;         

(7) That proposed Federal legislation affecting REITs could limit   
Highwoods' ability to expand certain business activities;                 

     (8) The possibility that Highwoods will not maintain the growth rate that
it has experienced since 1994;                                            

 (9) The possible difficulty of successfully integrating Highwoods and
JCN;                                                                      

(10) The dependence of Highwoods after the Merger on southeastern   
economic and real estate conditions; and                                  

(11) Highwoods' unfamiliarity with JCN's markets and with retail and
multifamily properties and single-family subdivisions.                    

    In view of the variety of factors considered in relation to its evaluation
of the Merger Agreement and the Merger, the JCN Board of Directors did not find 
it practicable to, and did not, quantify or assign relative weights to the      
specific factors considered in reaching its determination. In addition,         
individual members of the JCN Board of Directors may have given different       
weight to different factors.                                                    

Consequences of Failure to Approve Merger. In the event the JCN       
Shareholders do not approve the Merger, the JCN Board of Directors may receive  
one or more subsequent proposals to acquire JCN. Any such proposal may or may   
not provide consideration to JCN Shareholders in an amount in excess of that    
provided by the Merger. The JCN Board of Directors received a letter on         
February 11, 1998 from Intell Management and Investment Company ("Intell")      
indicating its then-current intention, if the Merger is not approved, to pursue 
a transaction to acquire JCN for cash consideration of $75 per share of JCN     
Common, less an adjustment that would include any amounts due to Highwoods      
pursuant to the Merger Agreement. Even if such proposal is made, it may not be  
endorsed by the JCN Board of Directors because the JCN Board of Directors has   
indicated previously that JCN is not for sale. Further, the JCN Board of        
Directors has received an indication from holders of approximately 32% of all   
JCN Common (some of whom could be "affiliates" of JCN as such term is defined   
in rules promulgated under the Securities Act and two of whom include members   
of the JCN Board of Directors acting in their capacity as shareholders),        
indicating they are currently unlikely to approve a cash transaction at $75 per 
share of JCN Common because of the tax consequences of such a transaction. The  
JCN Board of Directors has not received a specific proposal from any entity     
expressing a current interest in a strategic transaction such as the Merger.    

    On May 13, 1998, JCN received from INTRUST a request for a special meeting
of JCN Shareholders to consider: (i) a proposal to amend the JCN Bylaws to      
eliminate cumulative voting in the election of directors, and (ii) a proposal   
to remove certain members of the JCN Board of Directors. No date has yet been   
set for any such meeting.                                                       

JCN Common has historically been traded infrequently in the           
over-the-counter market. If the Merger is not approved, it is difficult to      
predict what impact that will have on the market price and liquidity of JCN     
Common. If the market price were to drop and the JCN Common continued its       
infrequent trading history, that could impact adversely the ability and terms   
on which JCN may in the future be able to raise capital.                        

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THE JCN BOARD OF DIRECTORS RECOMMENDS THAT JCN SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT.                                               

Opinion of Financial Advisor                                                    

 JCN retained Morgan Stanley to act as financial advisor. Morgan Stanley
was selected by the JCN Board of Directors to act as JCN's financial advisor    
based on Morgan Stanley's qualifications, expertise and reputation. No          
limitations were imposed by the JCN Board of Directors upon Morgan Stanley with 
respect to the investigations made or the procedures followed by it in          
rendering its fairness opinion.                                                 

On December 22, 1997, Morgan Stanley rendered to the JCN Board of     
Directors its written opinion that, as of such date and based upon and subject  
to the various considerations set forth in the opinion, the consideration to be 
received by the holders of shares of JCN Common pursuant to the Merger          
Agreement was fair from a financial point of view to such holders (other than   
Highwoods and its affiliates). Morgan Stanley subsequently delivered its        
written opinion, dated May 15, 1998 that, as of such date and based upon and    
subject to the various considerations set forth in the opinion, the             
consideration to be received by the holders of shares of JCN Common pursuant to 
the Merger Agreement was fair from a financial point of view to such holders    
(other than Highwoods and its affiliates).                                      

    The full text of Morgan Stanley's opinion, dated as of May 15, 1998, which
sets forth, among other things, assumptions made, procedures followed, matters  
considered and limitations on the review undertaken, is attached as Appendix B  
to this Proxy Statement/Prospectus. JCN Shareholders are urged to, and should,  
read the opinion carefully and in its entirety. Morgan Stanley's opinion is     
directed to the JCN Board of Directors, addresses only the fairness of the      
consideration to be received by holders of JCN Common from a financial point of 
view, and does not address any other aspect of the Merger or constitute a       
recommendation to any JCN Shareholder as to how such shareholder should vote at 
the Special Meeting. The summary of Morgan Stanley's opinion, dated May 15,     
1998, as set forth in this Proxy Statement/Prospectus is qualified in its       
entirety by reference to the full text of such opinion.                         

In connection with rendering its opinion, Morgan Stanley, among other 
things (i) reviewed certain publicly available financial statements and other   
information of JCN and Highwoods, respectively; (ii) reviewed certain internal  
financial statements and other financial and operating data concerning JCN and  
Highwoods prepared by the managements of JCN and Highwoods, respectively; (iii) 
analyzed certain financial projections for JCN and Highwoods prepared by the    
managements of JCN and Highwoods, respectively; (iv) reviewed the reported      
prices and trading activity for JCN Common and Highwoods Common; (v) compared   
the financial performance of JCN and Highwoods and the prices and trading       
activity of JCN Common and Highwoods Common with that of certain other          
comparable publicly traded companies and their securities; (vi) discussed with  
the senior management of JCN and Highwoods their estimates of the synergies and 
cost savings expected to be derived from the Merger; (vii) reviewed the         
financial terms, to the extent publicly available, of certain comparable        
transactions; (viii) reviewed the pro forma impact of the Merger on Highwoods'  
funds from operations per share, consolidated capitalization and financial      
ratios; (ix) participated in discussions and negotiations among representatives 
of JCN and Highwoods and their financial and legal advisors; (x) reviewed the   
Merger Agreement and certain related documents; and (xi) performed such other   
analyses as Morgan Stanley deemed appropriate.                                  

 Morgan Stanley assumed and relied upon without independent verification
the accuracy and completeness of the information supplied or otherwise made     
available to it by JCN and Highwoods for purposes of rendering its opinion.     
With respect to the financial projections, including the estimates of           
synergies, cost savings and other benefits expected to result from the Merger,  
Morgan Stanley assumed that they were reasonably prepared on bases reflecting   
the best currently available estimates and judgments of the future financial    
performance of JCN and Highwoods, respectively. Morgan Stanley did not make any 
independent valuation or appraisal of the assets or liabilities of JCN or       
Highwoods, nor was it furnished with any such appraisals other than the common  
stock valuation prepared by Houlihan Lokey Howard & Zukin as of December 31,    
1996 and furnished to Morgan Stanley by JCN. In addition, Morgan Stanley        
assumed that the Merger would be consummated in accordance with the terms set   
forth in the Merger Agreement. Morgan Stanley's opinion was necessarily based   
on economic, market and other conditions as in effect on, and the information   
made available to Morgan Stanley as of, the respective dates thereof.           

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The following is a brief summary of all of the analyses performed by  
Morgan Stanley and initially reviewed with the JCN Board of Directors on        
December 21, 1997, in connection with Morgan Stanley's presentation and opinion 
to the JCN Board of Directors on such date. Subsequently, and in connection     
with Morgan Stanley's May 15, 1998 opinion, these analyses were updated and are 
described herein.                                                               

Comparable Company Analysis. As part of its analysis, Morgan Stanley  
compared certain financial and operating information of JCN with that of a      
group of publicly traded real estate companies, which included real estate      
investment trusts ("REITs"), that Morgan Stanley deemed relevant, including:    
Glenborough Realty Trust, MGI Properties, Pacific Gulf Properties, Pennsylvania 
REIT and Washington REIT (collectively, the "Comparables"). The Comparables     
were selected primarily on the basis of their possessing general business,      
operating and financial characteristics, primarily market capitalization and    
diversification of property portfolios, similar to that of JCN. The financial   
information analyzed included a review of financial ratios (in each case based  
upon the share price as of May 15, 1998) such as the ratio of total market      
capitalization to earnings before interest, taxes, depreciation and             
amortization ("EBITDA") and the ratio of equity market capitalization to funds  
from operations ("FFO"). Morgan Stanley noted that based on a consensus of FFO  
per share estimates dated May 15, 1998, obtained from First Call, the           
Comparables traded at (i) multiples of total market capitalization to 1998      
estimated EBITDA ("EBITDA Multiple") in the range of 11.2 times to 13.1 times,  
with a mean of 12.0 times, and (ii) multiples of share price to 1998 estimated  
FFO ("FFO Multiple") in the range of 9.8 times to 13.0 times, with a mean of    
11.4 times. Based on the analysis of the financial ratios of the Comparables,   
Morgan Stanley calculated theoretical per share trading values for JCN of       
$59.02 to $75.72 based on EBITDA Multiples and $53.17 to $70.16 based on FFO    
Multiples.                                                                      

   No company considered for purposes of comparison to JCN in the comparable
company analysis is identical to JCN. In evaluating the Comparables, Morgan     
Stanley made judgements and assumptions with regard to industry performance,    
general business, economic, market and financial conditions and other matters.  

Analysis of Selected Precedent Transactions. Morgan Stanley reviewed  
certain recent business combinations in the real estate sector. However, terms  
were not publicly available for certain transactions, particularly involving    
private companies, which would be relevant to the Merger. In addition, most     
transactions in the real estate sector involving public companies have involved 
REITs and not corporations like JCN. Morgan Stanley focused on transactions     
involving mergers of REITs involving companies with total market                
capitalizations reasonably comparable to the proposed Merger of JCN and         
Highwoods. Using publicly available information, Morgan Stanley reviewed the    
financial terms of the following nine publicly announced completed business     
combinations in the real estate sector: Kimco Realty's merger with The Price    
REIT; Camden Property Trust's merger with Oasis Residential; Equity Residential 
Properties Trust's acquisition of Evans Withycombe Residential; Post            
Properties' merger with Columbus Realty Trust; Equity Residential Properties    
Trust's acquisition of Wellsford Residential Property Trust; Camden Property    
Trust's acquisition of Paragon Group, Inc.; United Dominion Realty's            
acquisition of South West Property Trust; Chateau Properties' acquisition of    
ROC Communities; and Highwoods' acquisition of Crocker Realty Trust. For these  
transactions, Morgan Stanley noted that the comparable transactions were        
completed at premiums to the target's highest share price over the preceding 52 
weeks in the range of -6.9% to 7.5% with a mean of -1.2% and a median of -2.8%. 
Morgan Stanley also calculated the premium to "unaffected stock price" for      
these transactions, which is the average stock price for the ten trading days   
ending five days prior to announcement of the transaction. Morgan Stanley noted 
that the selected precedent transactions were completed at premiums to          
unaffected stock price of -2.1% to 20.7% with a mean of 11.2% and a median of   
11.0%. Pursuant to this analysis, Morgan Stanley calculated per share values    
for JCN of $58.10 to $63.24 based on premiums to unaffected share price and     
$58.43 to $64.23 based on premium to the highest price reached in the preceding 
52 weeks. JCN's unaffected stock price and 52 week stock price high are based   
on the period prior to the announcement of the transaction.                     

No transaction considered for purposes of the precedent transaction   
analysis is identical to the Merger. In evaluating the precedent transactions,  
Morgan Stanley made judgements and assumptions with regard to industry          
performance, general business, economic, market and financial conditions and    
other factors.                                                                  

    Discounted Cash Flow Analysis. Morgan Stanley performed several discounted
cash flow analyses of JCN in order to estimate the present value of the         
unleveraged free cash flow that may be generated by JCN. Such discounted cash   
flow analyses were based on certain financial projections provided by the       
management of JCN for the years 1998 to 2001 for JCN as a whole and from 1998   
through 2004 for certain planned development projects of JCN. Unleveraged free  
cash flow was calculated as cash flow from operations less scheduled capital    
expenditures, taxes and certain non-recurring cash items identified by JCN      
management. Additionally, Morgan Stanley performed certain sensitivity analyses 
on management's projections to determine the effect on the present value of     
unleveraged free cash flow if management's projections for JCN were not fully   
realized. Morgan Stanley noted that the compounded annual growth from 1998 to   
2001 of FFO per share and EBITDA implied by management's projections (the       
"Management Case") were 20.3% and 10.7%, respectively, a high rate              

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of growth as compared to real estate companies generally and JCN's recent       
performance. To account for the implied risk in management's projections,       
Morgan Stanley reduced the rate of EBITDA growth in the management case to      
5.0%, resulting in implied compounded annual FFO per share growth of 11.7%      
("Downside Case 1") and to 2.5%, resulting in implied FFO per share growth of   
7.7% ("Downside Case 2)."                                                       

 Morgan Stanley calculated a total discounted cash flow value for JCN by
adding the present values of discounted cash flows of JCN's existing business   
and its planned development projects. For the existing business, Morgan Stanley 
calculated terminal values by applying multiples to EBITDA in 2002 in the range 
of 9.5x to 11.5x. For the development projects, Morgan Stanley calculated       
terminal values by capitalizing projected net operating income in fiscal 2004   
at rates ranging from 8.5% to 10.5%. For the existing business, EBITDA in 2002  
was calculated by increasing fiscal 2001 EBITDA by 2.0%. The cash flow streams  
and terminal values were discounted to the present using discount rates of      
10.0% to 12.0% for the existing business and 12.0% to 14.0% for the development 
projects. Based on this analysis of management's financial projections as well  
as certain sensitivities thereto, Morgan Stanley calculated share prices for    
JCN Common of $60.60 to $91.03 in the Management Case, $47.24 to $74.39 for     
Downside Case 1 and $41.71 to $67.45 for Downside Case 2.                       

   Contribution Analysis. Morgan Stanley analyzed the pro-forma contribution
of JCN to the 1998 FFO and EBITDA of Highwoods. Such analysis was based upon    
(i) certain publicly filed documents of Highwoods, (ii) projections provided by 
Highwoods and (iii) projections provided by the management of JCN. In addition, 
Morgan Stanley made certain assumptions with respect to the transaction,        
including that 60% of the total consideration paid would be in stock. The       
analysis indicated that JCN would provide 11.7% and 13.7% of Highwoods 1998 FFO 
and EBITDA, respectively, on a pro forma basis. In addition, the analysis       
indicated that JCN would represent 8.3% and 13.0% of the equity market and      
total market capitalization of Highwoods, respectively, pro forma for the       
Merger.                                                                         

 Pro Forma Analysis of the Merger. Morgan Stanley analyzed the pro forma
impact of the Merger on Highwoods FFO per share for the fiscal years ended 1998 
and 1999. The analysis was performed utilizing certain financial projections    
based on the Management Case, Downside Case 1 and Downside Case 2,              
incorporating Highwoods' First Call FFO per share estimates and Highwoods'      
estimate of the potential cost savings expected to be realized in the Merger.   
Based on these forecasts, assuming the achievement of the estimated cost        
savings, and assuming that 60% of the total consideration paid would be in      
stock, Morgan Stanley expects the Merger to be accretive to Highwoods' FFO per  
share in the first full fiscal year after the consummation of the Merger under  
both the Management Case and the Downside Case 1 and would be FFO per share     
neutral to Highwoods based on Downside Case 2.                                  

Highwoods Comparable Company Analysis. As part of its analysis, Morgan
Stanley compared certain financial and operating information of Highwoods with  
that of a group of publicly traded REITs specializing in office and industrial  
properties including: Arden Realty Group, Mack-Cali Realty, CarrAmerica Realty  
Corporation, Duke Realty Investments, Kilroy Realty Corp, Prentiss Properties   
Trust, Reckson Associates Realty and Spieker Properties (collectively, the      
"Highwoods Comparables"). The Highwoods Comparables were chosen based on the    
characteristics of their property portfolios such as property type and          
geographic concentration, which are similar in nature to that of Highwoods.     
Morgan Stanley analyzed the EBITDA Multiples, FFO Multiples and adjusted funds  
from operations ("AFFO") multiples of the Highwoods Comparables. Morgan Stanley 
noted that based on estimates of EBITDA, FFO and AFFO compiled from various     
research reports including Realty Stock Review, Green Street Advisors, Inc. and 
First Call, the Comparables traded at (i) EBITDA Multiples based on 1998        
forecasted EBITDA in the range of 8.4x to 13.3x, with a mean of 10.4x, versus   
11.6x for Highwoods, (ii) FFO multiples based on 1998 forecasted FFO in the     
range of 10.1x to 13.4x, with a mean of 11.8x, versus 10.3x for Highwoods, and  
(iii) AFFO multiples based on 1998 forecasted AFFO in the range of 12.5x and    
15.7x, with a mean of 14.0x, versus 12.3x for Highwoods.                        

   In connection with its written opinion dated May 15, 1998, Morgan Stanley
reviewed the analyses used to render its December 22, 1997 opinion by           
performing procedures to update certain of the analyses and by reviewing both   
the assumptions upon which such analyses were based and the factors considered  
in connection therewith.                                                        

The preparation of a fairness opinion is a complex process and is not 
necessarily susceptible to a partial analysis or summary description. In        
arriving at its opinion, Morgan Stanley considered the results of all its       
analyses as a whole and did not attribute any particular weight to any          
particular analysis or factor considered by it. Furthermore, selecting any      
portion of Morgan Stanley's analyses or factors considered by it, without       
considering all analyses and factors, would create an incomplete view of the    
process underlying its opinion. The range of valuations resulting from any      
particular analysis described above should therefore not be taken to be Morgan  
Stanley's view of the actual value of JCN.                                      

   In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and   
other matters, many of which are beyond the control of JCN or Highwoods. The    

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analyses performed by Morgan Stanley are not necessarily indicative of actual   
values or actual future results, which may be significantly more or less        
favorable than suggested by such analyses. Such analyses were prepared solely   
as part of Morgan Stanley's analyses of the fairness from a financial point of  
view of the consideration to be received by the holders of shares of JCN Common 
pursuant to the Merger Agreement and were conducted in connection with the      
delivery of Morgan Stanley's opinions dated December 22, 1997 and May 15, 1998. 
The analyses do not purport to be appraisals or to reflect the prices at which  
businesses actually may be valued in the marketplace.                           

    In addition, as described above, Morgan Stanley's opinion and presentation
to JCN Board was one of many factors taken into consideration by the JCN Board  
of Directors in making its determination to recommend approval of the Merger.   
Consequently, the Morgan Stanley analyses described above should not be viewed  
as determinative of the opinion of the JCN Board of Directors or the view of    
the management of JCN with respect to the value of JCN or of whether the JCN    
Board of Directors would have been willing to agree to a different merger       
consideration. Such consideration was determined through negotiations between   
JCN and Highwoods and were approved by the JCN Board of Directors. Morgan       
Stanley provided advice to JCN during the course of such negotiations; however, 
the decision to enter into the Merger Agreement and to accept the Merger        
consideration was solely that of the JCN Board of Directors.                    

 As part of its investment banking business, Morgan Stanley is regularly
engaged in the valuation of businesses and their securities in connection with  
mergers and acquisitions, negotiated underwritings, competitive bids, secondary 
distributions of listed and unlisted securities, private placements and         
valuation for estate, corporate or other purposes. In the course of its         
market-making and other trading activities, Morgan Stanley may, from time to    
time, have a long or short position in, and buy and sell, securities of JCN or  
Highwoods.                                                                      

Pursuant to a letter agreement dated October 24, 1997, between JCN and
Morgan Stanley, JCN has agreed to pay Morgan Stanley (1) an advisory fee of $1  
million and (2) an additional fee of either (a) $2.7 million, which is payable  
if the Merger is not consummated and another party does not acquire control of  
JCN prior to April 24, 1999, or (b) approximately $3.8 million, which is        
payable upon the consummation of the Merger. Any advisory fee paid may be       
credited against the fee described in (2)(b), if any. JCN has also agreed to    
reimburse Morgan Stanley for its out-of-pocket expenses and to indemnify Morgan 
Stanley and its affiliates, their respective directors, officers, agents and    
employees and each person, if any, controlling Morgan Stanley or any of its     
affiliates against certain liabilities, including liabilities under federal     
securities laws, and expenses, related to Morgan Stanley's engagement.          

Effective Time of the Merger                                                    

  If the Merger is approved by the requisite vote of the JCN Shareholders,
and the other conditions to the Merger are satisfied or waived, the Merger will 
become effective when the Articles of Merger have been accepted for filing by   
the appropriate authorities in Missouri and Maryland, or at such other time as  
Highwoods and JCN agree should be specified in the Articles of Merger. It is    
currently anticipated that the Merger will become effective upon filing of the  
Articles of Merger, which Articles are expected to be filed promptly following  
approval of the Merger by the JCN Shareholders.                                 

Representations and Warranties; Conditions to the Merger                        

   The Merger Agreement contains representations and warranties by Highwoods
and JCN regarding, among other things, their organization and good standing,    
authority to enter into the Merger Agreement and related agreements,            
capitalization, ownership and capitalization of their subsidiaries, filings     
with the Commission, reliability of financial statements, absence of            
undisclosed liabilities and certain changes or events, tax matters,             
environmental matters, compliance with applicable laws and regulations, labor   
relations, employee benefit plans, material contracts, legal proceedings, state 
takeover laws, charter provisions, rights agreements, financial advisors, board 
recommendations and other events, including material adverse changes in the     
parties' businesses, financial condition or results of operations. These        
representations and warranties will not survive the Effective Time.             

  The respective obligations of Highwoods and JCN to effect the Merger are
subject to the following conditions: (i) approval of the Merger Agreement, and  
the transactions contemplated therein, by JCN Shareholders, (ii) approval by    
the NYSE of the listing of the shares of Highwoods Common to be issued in       
connection with the Merger, (iii) that the Registration Statement has not been  
the subject of any stop order or proceeding by the Commission seeking a stop    
order, (iv) the absence of any injunctions or restraints issued by any court of 
competent jurisdiction preventing the consummation of the Merger in effect on   
the Closing Date, (v) receipt of all necessary regulatory permits or            
authorizations and (vi) receipt of all required third-party consents and        
approvals.                                                                      

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The obligations of Highwoods to effect the Merger are subject to the  
following additional conditions: (i) the accuracy of all representations and    
warranties made by JCN in all material respects as of the Closing Date; (ii)    
JCN's performance in all material respects of its obligations under the Merger  
Agreement; (iii) Highwoods' receipt of certificates from JCN with respect to    
certain matters set forth in the Merger Agreement; (iv) Highwoods' receipt of   
an opinion of Blackwell Sanders Matheny Weary & Lombardi LLP, counsel to JCN,   
with respect to certain matters set forth in the Merger Agreement; (v)          
Highwoods' receipt of letters from KPMG Peat Marwick LLP with respect to        
certain matters set forth in the Merger Agreement; (vi) that the Merger         
Agreement has not caused, and consummation of the Merger will not cause, any of 
the rights under the JCN Shareholders' Rights Plan to become non-redeemable or  
exercisable for capital stock of Highwoods or JCN; and (vii) that JCN's         
shareholders' equity as of the Closing Date is not less than JCN's              
shareholders' equity as of March 31, 1997, subject to certain exceptions set    
forth in the Merger Agreement.                                                  

  The obligations of JCN to effect the Merger are subject to the following
additional conditions: (i) the accuracy of all representations and warranties   
made by Highwoods in all material respects as of the Closing Date; (ii)         
Highwoods' performance in all material respects of its obligations under the    
Merger Agreement; (iii) JCN's receipt of certificates from Highwoods with       
respect to certain matters set forth in the Merger Agreement; (iv) JCN's        
receipt of an opinion of Alston & Bird LLP, counsel to Highwoods, with respect  
to certain matters set forth in the Merger Agreement; (v) that JCN has not      
received notice from Morgan Stanley prior to the date hereof, indicating        
withdrawal of its prior opinion that the consideration to be received by JCN    
Shareholders in connection with the Merger is fair, from a financial point of   
view, and that JCN has received an update to such opinion immediately prior to  
the Special Meeting; and (vi) JCN's receipt of a certificate from the Exchange  
Agent as required by the Merger Agreement.                                      

Appraisal Rights                                                                

Under Section 351.455 of the General and Business Corporation Law of  
Missouri (the "GBCL"), any JCN Shareholder who does not wish to accept the Per  
Share Stock Consideration or the Per Share Cash Consideration for shares of JCN 
Common as provided in the Merger Agreement has the right to dissent from the    
Merger Agreement and to receive the value of his or her shares in cash,         
provided that such holder complies with applicable statutory provisions.        

    THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING
TO DISSENTERS' RIGHTS UNDER THE GBCL AND IS QUALIFIED IN ITS ENTIRETY BY THE    
FULL TEXT OF SECTION 351.455 OF THE GBCL, WHICH IS REPRINTED IN ITS ENTIRETY AS 
APPENDIX C TO THIS PROXY STATEMENT/PROSPECTUS. ALL REFERENCES IN SECTION        
351.455 OF THE GBCL AND IN THIS SUMMARY TO A "JCN SHAREHOLDER" OR "HOLDER" ARE  
TO THE RECORD HOLDERS OF DISSENTING SHARES.                                     

 Under Section 351.455 of the GBCL, if a JCN Shareholder files a written
objection to the Merger Agreement with JCN prior to or at the Special Meeting   
and does not vote in favor of the Merger Agreement, and within 20 days such     
holder demands in writing Highwoods' payment of the fair value of his or her    
shares as of the day before the Special Meeting, that holder is entitled to the 
fair value of his or her shares from Highwoods upon surrender of the            
certificate or certificates representing the shares of JCN Common owned by such 
holder. Any JCN Shareholder who fails to make such a demand within the 20-day   
period will be presumed to have consented to the Merger Agreement and to the    
Merger and will be bound by the terms thereof.                                  

If within 30 days after the date on which the Merger was effected the 
dissenting holder and Highwoods agree on the value of the dissenting holder's   
shares of JCN Common, Highwoods must pay the dissenting holder such agreed upon 
amount within 90 days of the effective date of the Merger, provided the holder  
surrenders his or her certificate or certificates representing his shares. Upon 
payment of the agreed value, the dissenting holder will have no further         
interest in the shares or in JCN.                                               

  If within the 30-day period after the Merger was effected the dissenting
holder and Highwoods do not agree on the fair value of the dissenting holder's  
shares of JCN Common, then the dissenting holder may, within 60 days after the  
expiration of the 30-day period, file a petition with the court of Jackson      
County, Missouri, asking for a finding and determination of the fair value of   
his or her shares. The holder will be entitled to judgment against Highwoods    
for the amount of the fair value as of the day prior to the Special Meeting,    
together with interest thereon to the date of the judgment. The judgment will   
be payable only upon and simultaneously with the surrender to Highwoods of the  
certificate or certificates representing the holder's shares of JCN Common. If  
the dissenting holder fails to file the petition within the time prescribed,    
such holder will be conclusively presumed to have approved and ratified the     
Merger and will be bound by the terms thereof.                                  

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Regulatory Matters                                                              

Highwoods and JCN believe that the Merger may be consummated without  
notification being given or certain information being furnished to the Federal  
Trade Commission (the "FTC") or the Antitrust Division of the Department of     
Justice (the "Antitrust Division") pursuant to the Hart-Scott-Rodino Antitrust  
Improvements Act of 1976, as amended ("HSR Act"), and that no waiting period    
requirements under the HSR Act are applicable to the Merger. However, at any    
time before or after the Effective Time, either the Antitrust Division or the   
FTC could take such action under the antitrust laws as it deems necessary or    
desirable in the public interest, or certain other persons could take action    
under the antitrust laws, including seeking to enjoin the Merger. Highwoods and 
JCN believe that consummation of the Merger would not violate any antitrust     
laws. However, there can be no assurance that a challenge to the Merger on      
antitrust grounds will not be made or, if a challenge is made, as to the        
result.                                                                         

No Solicitation of Other Transactions                                           

Neither JCN nor an entity affiliated with JCN (collectively, a "JCN   
Entity") nor any officer or director thereof nor any representatives thereof    
retained by any JCN Entity may directly or indirectly solicit any acquisition   
proposal by any person other than Highwoods or a subsidiary. An acquisition     
proposal includes any tender offer or exchange offer or any proposal for a      
merger, acquisition of all of the stock or assets of, or other business         
combination involving the acquisition of JCN or any of its subsidiaries or the  
acquisition of a substantial equity interest in, or a substantial portion of    
the assets of, JCN or any of its subsidiaries. Except to the extent the JCN     
Board of Directors, after having consulted with and considered the advice of    
outside counsel, reasonably determines in good faith that the failure to take   
such actions would constitute a breach of fiduciary duties of the members of    
the JCN Board of Directors to the JCN Shareholders under applicable law, no JCN 
Entity or any officer or director or representative thereof may furnish any     
non-public information that it is not legally obligated to furnish, negotiate   
with respect to, or enter into any contract with respect to, any acquisition    
proposal. JCN may communicate information about such an acquisition proposal to 
the JCN Shareholders if and to the extent that it is required to do so in order 
to comply with its legal obligations as advised by outside counsel. In          
addition, JCN is obligated to advise Highwoods promptly following the receipt   
of any acquisition proposal or any inquiry concerning a possible acquisition    
proposal and the details thereof, and advise Highwoods of any developments with 
respect to such acquisition proposal or inquiry promptly upon the occurrence    
thereof.                                                                        

Termination Provisions                                                          

    The Merger Agreement provides that it may be terminated by either party if
any of the following events occur: (i) a material breach of a representation or 
covenant that cannot be or is not cured within 30 days, (ii) Highwoods has not  
filed an effective registration statement registering the shares of Highwoods   
Common issuable pursuant to the Merger or is unable to obtain approval for      
listing on the NYSE the Highwoods Common issuable pursuant to the Merger, (iii) 
the failure of JCN Shareholders to approve the Merger, (iv) the failure to      
effect the Merger by June 30, 1998 (although the parties have agreed to waive   
this right to terminate until July 15, 1998), and (v) the withdrawal of the JCN 
Board of Directors of its support of the Merger. The Merger Agreement becomes   
void in the event of a termination except that the provisions described below   
relating to termination fees will survive along with certain confidentiality    
provisions.                                                                     

Termination Fee and Expenses                                                    

 With the exception of the termination fees described below, each of the
parties to the Merger Agreement has agreed to bear the costs incurred by it in  
connection with the transactions contemplated by the Merger Agreement.          

   The Merger Agreement provides that JCN must pay $2.5 million to Highwoods
if (i) the Merger Agreement is terminated because JCN materially breaches a     
representation or covenant set forth in the Merger Agreement which cannot be or 
is not cured within 30 days, (ii) the Merger Agreement is terminated because    
the JCN Board of Directors withdraws its support for the Merger or fails to     
hold the Special Meeting or (iii) the Merger is not consummated because of the  
failure of JCN to satisfy certain conditions to closing. Correspondingly,       
Highwoods must pay JCN $2.5 million if (i) the Merger Agreement is terminated   
because Highwoods materially breaches a representation or covenant set forth in 
the Merger Agreement which cannot be or is not cured within 30 days, or (ii)    
the Merger is not consummated because of the failure of Highwoods to satisfy    
certain conditions to closing.                                                  

  Highwoods may also be entitled to a termination fee if JCN enters into a
business combination with a third party. The termination fee is $14.7 million   
if the business combination occurs within 12 months of any of the following:    
(i) the termination of the Merger Agreement because (a) JCN materially breaches 
a representation or covenant which cannot be or is not                          

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cured within 30 days or (b) the JCN Board of Directors withdraws its support    
for the Merger or fails to hold the Special Meeting or (ii) the failure to      
consummate the Merger because JCN has not satisfied certain conditions to       
closing.                                                                        

   The additional termination fee, however, is only $7.35 million if (i) the
letter of intent or definitive agreement relating to a business combination     
with a third party has not been signed prior to the Special Meeting, (ii) the   
JCN Board of Directors has withdrawn its support for the Merger prior to the    
Special Meeting or fails to hold a Special Meeting and (iii) the business       
combination with a third party occurs within 12 months of the Special Meeting   
or, if no Special Meeting is held, the date that the Merger Agreement is        
terminated as a result of the JCN Board of Directors' failure to hold the       
Special Meeting.                                                                

In addition, Highwoods is entitled to a $2.5 million fee if: (i) the  
Merger Agreement is terminated because the JCN Shareholders have rejected the   
Merger, (ii) at the time of the Special Meeting, there is public knowledge of   
an identifiable third party's financially superior proposal to purchase all of  
the outstanding shares of JCN Common, (iii) the JCN Board of Directors has      
continued to support the Merger through the date of the Special Meeting and     
(iv) the other acquisition proposal is consummated by December 22, 1998.        

   JCN must pay the above termination fees if not first paid by any acquiror
of JCN upon demand.                                                             

Conversion of Shares                                                            

    Subject to the cash election rights set forth in the succeeding paragraph,
each share of JCN Common (including any associated rights to purchase shares of 
JCN Common, but excluding Dissenting Shares issued and outstanding immediately  
prior to the Effective Time will cease to be outstanding and will be converted  
into and exchanged for the right to receive shares of Highwoods Common. The     
number of shares of Highwoods Common to be received in the Merger will vary     
depending on the Value of a share of Highwoods Common as follows:               

                                                                [Download Table]

          Value of a share of                   Consideration to be received       
            Highwoods Common                       per share of JCN Common         
---------------------------------------  ------------------------------------------
                                                                                   
      equal to or greater than $35.36    1.84 shares of Highwoods Common           
      between $35.36 and $32.00          that number of shares of Highwoods Common 
                                         determined by dividing $65 by the Value   
                                         of a share of Highwoods Common            
      equal to or under $32.00           2.03 shares of Highwoods Common           

  Each share of Highwoods Common issued in connection with the Merger upon
conversion of JCN Common will be accompanied by a preferred stock purchase      
right as set forth in the Shareholders Rights Agreement dated October 4, 1997   
between Highwoods and First Union National Bank, as rights agent.               

Cash Election                                                                   

Holders of JCN Common will be provided with an opportunity to elect to
receive cash consideration in lieu of receiving Highwoods Common in the Merger. 
Holders who are to receive cash in lieu of Highwoods Common will receive $65    
per share of JCN Common in cash. The amount determined by multiplying $65 by    
the number of Dissenting Shares is defined herein as the "Dissenting Share      
Amount." The cash portion of the aggregate consideration as elected by JCN      
Shareholders, plus the Dissenting Share Amount, will be limited to 40% of the   
aggregate consideration paid in exchange for shares of JCN Common and is        
defined herein as the "Cash Amount."                                            

    A form for use by JCN Shareholders to elect cash and other appropriate and
customary transmittal material in such form as Highwoods and JCN mutually agree 
("Election Form") will be mailed concurrently with the mailing hereof, or on    
such other date as Highwoods and JCN mutually agree, to each holder of record   
of JCN Common on the Record Date for the JCN Shareholders entitled to vote at   
the Special Meeting.                                                            

  Each Election Form will permit a holder (or the beneficial owner through
appropriate and customary documentation and instructions) of JCN Common to      
elect to receive cash with respect to all or a portion of such holder's JCN     
Common. A JCN Shareholder who elects to receive stock pursuant to the Merger    
will not know, at the time the shareholder votes on the Merger, the value of    
the consideration he will receive for his shares of JCN Common. Although a JCN  
Shareholder may                                                                 

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elect to receive cash pursuant to the Merger with respect to some or all of his 
or her shares of JCN Common, such shareholder may instead receive shares of     
Highwoods Common with respect to some of such Cash Election Shares. Cash        
consideration paid to JCN Shareholders pursuant to the Merger will be limited   
to 40% of the aggregate consideration paid to all JCN Shareholders.             

Any shares of JCN Common with respect to which the holder (or the     
beneficial owner, as the case may be) has not submitted to the Exchange Agent   
an effective, properly completed Election Form on or before 5:00 p.m. on the    
fifth business day prior to the date of the Special Meeting or any adjournment  
thereof (the "Election Deadline") are referred to herein as "No Election        
Shares."                                                                        

  Any of the elections set forth in the foregoing paragraph will have been
properly made only if the Exchange Agent has actually received a properly       
completed Election Form by the Election Deadline. Any Election Form may be      
revoked or changed by the person submitting a subsequent Election Form at or    
prior to the Election Deadline. In the event an Election Form is revoked prior  
to the Election Deadline, the shares of JCN Common represented by such Election 
Form will become No Election Shares. Subject to the terms of the Merger         
Agreement and of the Election Form, the Exchange Agent (as defined herein) will 
have reasonable discretion to determine whether any election, revocation or     
change has been properly or timely made and to disregard immaterial defects in  
the Election Forms. The Exchange Agent will promptly notify JCN of any defect   
in an Election Form other than an immaterial defect disregarded in good faith   
by the Exchange Agent; otherwise, neither Highwoods nor the Exchange Agent will 
be under any obligation to notify any person of any defect in an Election Form. 

Within three business days after the Election Deadline, Highwoods will
cause the Exchange Agent to effect the allocation of Highwoods Common and cash  
among the holders of JCN Common in accordance with the Election Forms, subject  
to the limitation that Highwoods will not pay more than 40% of the total Merger 
consideration in cash.                                                          

   The Merger consideration for Cash Election Shares will be $65 in cash. To
the extent, however, that the number of Cash Election Shares and Dissenting     
Shares exceeds 40% of the outstanding shares of JCN Common, then a portion of   
the Cash Election Shares (spread proportionately among all of such shares) will 
be converted into a right to receive Highwoods Common as specified above. The   
number of Cash Election Shares to be so converted will be the minimum necessary 
to ensure that the cash component of the total Merger consideration does not    
exceed 40%.                                                                     

Highwoods will, at least two business days prior to the date of the   
Special Meeting, communicate to JCN the approximate aggregate allocation of     
stock and cash, the approximate amount of stock and cash going to each JCN      
Shareholder, and the method in which such amounts were calculated.              

Appointment of Exchange Agent                                                   

In order to facilitate the distribution of certificates representing  
shares of Highwoods Common to JCN Shareholders, Highwoods will appoint First    
Union National Bank to act as exchange agent in connection with the Merger. The 
Exchange Agent will enter into an agreement with Highwoods and JCN pursuant to  
which it will agree to act as agent for purposes of distributing the            
certificates representing shares of Highwoods Common to JCN Shareholders.       

Exchange of Certificates                                                        

At or prior to the Effective Time, Highwoods will deposit with the    
Exchange Agent, for the benefit of the holders of certificates theretofore      
representing JCN Common ("Old Certificates"), certificates representing the     
shares of Highwoods Common ("New Certificates") and an estimated amount of cash 
(such cash and New Certificates, together with any dividends or distributions   
with respect thereto (without any interest thereon), being hereinafter referred 
to as the "Exchange Fund") to be paid in exchange for outstanding shares of JCN 
Common.                                                                         

  As promptly as practicable after the Effective Time, Highwoods will send
to each former holder of record of shares of JCN Common (other than holders of  
Cash Election Shares entitled to receive cash, shares of JCN Common held in     
treasury by JCN or Dissenting Shares) transmittal materials for use in          
exchanging such shareholder's Old Certificates for the consideration set forth  
in the Merger Agreement. Highwoods will cause the New Certificates into which   
shares of a shareholder's JCN Common are converted at the Effective Time and/or 
any check in respect of the Per Share Cash Consideration and any fractional     
share interests or dividends or distributions which such person will be         
entitled to receive to be delivered to such shareholder upon delivery to the    
Exchange Agent of Old Certificates (or indemnity reasonably satisfactory to     
Highwoods and the Exchange Agent, if any of such certificates are lost, stolen  
or destroyed) owned by such shareholder. No interest will be paid on any such   
cash to be paid pursuant to the Merger Agreement upon such delivery.            

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   No dividends or other distributions with respect to Highwoods Common with
a record date occurring after the Effective Time will be paid to the holder of  
any unsurrendered Old Certificate representing shares of JCN Common converted   
in the Merger into shares of such Highwoods Common until the holder thereof has 
surrendered such Old Certificate. After the surrender of an Old Certificate,    
the record holder thereof will be entitled to receive any such dividends or     
other distributions, without any interest thereon, which theretofore had become 
payable with respect to shares of Highwoods Common represented by such Old      
Certificates.                                                                   

To the extent permitted by applicable law, any portion of the Exchange
Fund that remains unclaimed by the shareholders of JCN for 12 months after the  
Effective Time will be paid to Highwoods. Any JCN Shareholder who has not       
theretofore complied with the Merger Agreement may thereafter look only to      
Highwoods for payment of the shares of Highwoods Common, cash in lieu of any    
fractional shares and unpaid dividends and distributions on the Highwoods       
Common deliverable in respect of each share of JCN Common such shareholder      
holds as determined pursuant to the Merger Agreement, in each case, without any 
interest thereon.                                                               

  At the Effective Time, the stock transfer books of JCN will be closed as
to holders of JCN Common immediately prior to the Effective Time and no         
transfer of JCN Common by any such holder may thereafter be made or recognized. 
Until surrendered for exchange, each Old Certificate theretofore representing   
shares of JCN Common (other than shares to be canceled) will from and after the 
Effective Time represent for all purposes only the right to receive the         
consideration provided in the Merger Agreement in exchange therefor, subject,   
however, to Jackson's obligation (or Highwoods' obligation following any        
liquidation of Jackson) to pay any dividends or make any other distributions    
with a record date prior to the Effective Time which have been declared or made 
by JCN in respect of such shares of JCN Common in accordance with the terms of  
the Merger Agreement and which remain unpaid at the Effective Time. To the      
extent permitted by applicable law, former shareholders of record of JCN will   
be entitled to vote after the Effective Time at any meeting of Highwoods        
shareholders the number of whole shares of Highwoods Common into which their    
respective shares of JCN Common are converted, regardless of whether such       
holders have exchanged their Old Certificates for New Certificates representing 
Highwoods Common.                                                               

Conduct of Business Pending the Merger                                          

Until either the Merger is completed or the Merger Agreement is       
terminated, Highwoods and JCN have agreed to take no action that would          
adversely affect their ability to obtain consents required for the Merger or to 
perform their obligations under the Merger Agreement. Both have also agreed to  
certain limitations on their ability to engage in material transactions. Among  
those limitations, JCN has agreed, subject to certain exceptions, to refrain    
from:                                                                           

o  amending its articles of incorporation, bylaws or other governing documents; 
o  borrowing more than $250,000 unless such borrowing is in the ordinary course 
of its business and consistent with past practices;                       
o  entering into, modifying, amending or terminating any material contract or   
compromising any material rights or claims unless the action is in the    
ordinary course of business and has received Highwoods' approval, which   
Highwoods cannot unreasonably withhold;                                   
o  engaging in certain transactions relating to its capital structure and       
shares; and                                                               
o  declaring or paying any dividend or other distribution in respect of its     
capital stock.                                                            

    Highwoods generally must continue to conduct its business and the business
of its subsidiaries to maintain its REIT status. It must also take all action   
necessary under the Maryland General Corporation Law ("MGCL") prior to the      
Effective Time for Jackson to enter into and consummate the transactions        
contemplated by the Merger Agreement. Further, Highwoods is restricted from     
amending its Articles or bylaws in any manner adverse to the holders of JCN     
Common as compared to rights of holders of Highwoods Common generally.          
Highwoods is not, however, restricted from acquiring any assets or other        
businesses or from discontinuing or disposing of any of its assets or           
businesses if such action is, in the judgment of Highwoods, in Highwoods' best  
interest.                                                                       

Waiver and Amendment                                                            

The Merger Agreement provides that, at any time prior to the Effective
Time, either party may, to the extent legally allowed and set forth in a        
written instrument signed on behalf of such party, (i) extend the time for the  
performance of any of the obligations or other acts of the other party, (ii)    
waive any inaccuracies in the representations and warranties contained in the   
Merger Agreement or in any document delivered pursuant thereto or (iii) waive   
compliance with any of the agreements or conditions for the benefit of such     
party contained in the Merger Agreement.                                        

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The Merger Agreement provides that it may be amended by the parties in
writing by action taken by the Highwoods Board of Directors and the JCN Board   
of Directors, at any time before or after approval of the Merger and Merger     
Agreement by the JCN Shareholders and prior to the filing of the Articles of    
Merger in the respective jurisdictions. After any such approval by the JCN      
Shareholders, no amendment may be made which reduces or modifies in any         
material respect the consideration to be received by JCN Shareholders.          

Stock Exchange Listing                                                          

  Highwoods will apply to list the Highwoods Common issuable in connection
with the Merger on the NYSE. Approval of the listing of such shares on the      
NYSE, subject to official notice of issuance, is a condition to the obligation  
of JCN to consummate the Merger.                                                

Extraordinary Dividend                                                          

    In the event that the consolidated earnings and profits of JCN (as defined
in Section 312 of the Code) would otherwise exceed $20,000,000 as of the        
Effective Time, the JCN Board of Directors will take all necessary action to    
cause the distribution of an extraordinary dividend to the JCN Shareholders     
prior to the Effective Time in such amount that as of the Effective Time such   
consolidated earnings and profits will be no more than $20,000,000. The amount  
of earnings and profits will be determined by an earnings and profits study to  
be performed by either KPMG Peat Marwick LLP or Ernst & Young, LLP, in          
consultation with the other, including an estimate for the period beginning as  
of the day following the date of the latest available financial statements of   
JCN and ending on the probable Effective Time. The per share amount of the      
extraordinary dividend so distributed, if any, will reduce the value of the JCN 
Common in an equivalent amount, and the Per Share Stock Consideration, the Per  
Share Cash Consideration and the Exchange Ratio shall be proportionately        
adjusted, as appropriate. The JCN Board of Directors does not believe any such  
dividend will be required.                                                      

Indemnification                                                                 

For a period of six years after the Effective Time, Highwoods will    
indemnify, defend and hold harmless the present and former directors, officers, 
employees and agents of the JCN Entities (each, an "Indemnified Party") against 
all liabilities arising out of actions or omissions arising out of the          
Indemnified Party's service or services as directors, officers, employees or    
agents of any JCN Entity or, at any JCN Entity's request, of another            
corporation, partnership, joint venture, trust or other enterprise occurring at 
or prior to the Effective Time (including the transactions contemplated by the  
Merger Agreement) to the fullest extent permitted under the GBCL and by the JCN 
Articles and the JCN Bylaws and any other organizational instruments of the     
applicable JCN Entity as presently in effect, including provisions relating to  
advances of expenses incurred in the defense of any litigation and whether or   
not Highwoods or any of its affiliates is insured against any such matter.      
Without limiting the foregoing, in any case in which approval by Jackson or     
Highwoods is required to effectuate any indemnification, Highwoods will direct, 
at the election of the Indemnified Party, that the determination of any such    
approval be made by independent counsel mutually agreed upon between Highwoods  
and the Indemnified Party.                                                      

  Highwoods will use its reasonable efforts (and JCN shall cooperate prior
to the Effective Time in these efforts) to maintain in effect for a period of   
three years after the Effective Time, JCN's existing directors' and officers'   
liability insurance policy (provided that Highwoods may substitute therefor (i) 
policies of at least the same coverage and amounts containing terms and         
conditions that are substantially no less advantageous or (ii) with the consent 
of JCN given prior to the Effective Time, any other policy) with respect to     
claims arising from facts or events that occurred prior to the Effective Time   
and covering persons who are currently covered by such insurance; provided,     
that neither Highwoods nor Jackson shall be obligated to make aggregate premium 
payments for such three-year period in respect of such policy (or coverage      
replacing such policy) which exceed, for the portion related to JCN's directors 
and officers, 200% of the annual premium payments on JCN's current policy in    
effect as of the date of this Agreement (the "Maximum Amount"). If the amount   
of the premiums necessary to maintain or procure such insurance coverage        
exceeds the Maximum Amount, Highwoods will use its reasonable efforts to        
maintain the most advantageous policies of directors' and officers' liability   
insurance obtainable for a premium equal to the Maximum Amount.                 

   The Highwoods Board of Directors has been advised that, in the opinion of
the Commission, indemnification for liabilities arising under the Securities    
Act or the Exchange Act is contrary to public policy and is therefore           
unenforceable, absent a decision to the contrary by a court of appropriate      
jurisdiction.                                                                   

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Continued Activities                                                            

    Highwoods acknowledges the economic and social significance of the Country
Club Plaza district (the "Plaza") to Kansas City, Missouri and surrounding      
communities, and further acknowledges the importance of the continued           
development and redevelopment of the Plaza by the JCN Entities. From and after  
the Effective Time, Highwoods intends to continue to pursue each portion of the 
Plaza redevelopment plan unless the economics of any single portion of the      
redevelopment plan, or changes in circumstances beyond the reasonable control   
of Highwoods, cause the Highwoods Board of Directors to determine in good       
faith, after consideration of available alternatives, that such redevelopment   
plan or portion thereof is contrary to the best interests of the shareholders   
of Highwoods.                                                                   

  From and after the Effective Time, Highwoods will make annual charitable
contributions and provide community support in the geographic areas in which    
the business of JCN is currently operated, at levels substantially comparable   
to or greater than the levels of charitable contributions and community support 
provided by JCN Entities within such areas during calendar year 1996 and the    
period from January 1, 1997 through the date of the Merger Agreement. From and  
after the Effective Time, Highwoods also will provide annual financial          
assistance and marketing support to merchants relating to properties currently  
owned or operated by any JCN Entity, at levels substantially comparable to or   
greater than the levels of such support provided by JCN Entities during         
calendar year 1996 and the period from January 1, 1997 through the date of the  
Merger Agreement.                                                               

Interests of Certain Persons                                                    

In considering the recommendation of the JCN Board of Directors with  
respect to the Merger Agreement, JCN Shareholders should be aware that certain  
officers and directors of JCN have interests in the Merger and related          
transactions that conflict with the interests of JCN Shareholders generally.    
From January 1996 through September 1997, JCN entered into employment           
agreements with its executive officers to permit JCN to attract and retain      
talented managers capable of providing continuity to, and enhancing the         
operations of, JCN. One such agreement provides Mr. Brady with certain benefits 
upon the occurrence of a change of control not supported by Mr. Brady and other 
agreements would provide several other officers with certain benefits upon the  
occurrence of a change of control and upon the occurrence of various triggering 
events subsequent to a transaction such as the Merger. Accordingly, Messrs.     
Brady, Cook, de Avila, Dixon, Fox, Peterson, Sloan, Stephenson, and Teaney and  
Ms. Marietti may be entitled to the accelerated receipt of cash, stock, or      
combined cash and stock consideration from Highwoods, in approximate amounts of 
$6,215,783, $222,721, $1,019,610, $218,005, $214,210, $618,260, $618,260,       
$326,814, $1,016,171 and $196,231, respectively, which totals in the aggregate  
approximately $10.7 million (not taking into account obligations related to     
certain of such individuals' personal taxes), a portion of which may or may not 
be deductible to JCN or Highwoods. A full explanation of the triggering events  
for such payments is set forth under "Description of JCN -- Officer             
Compensation." As of the date of this Proxy Statement/Prospectus, Highwoods has 
not entered into any agreement with such officers that would avoid or reduce    
the amount of any consideration to which they might otherwise be entitled. In   
addition, Highwoods has agreed, from and after the Effective Time and for a     
period of six years thereafter, to assume the existing obligations to indemnify 
and hold harmless present and former officers and directors of Highwoods in     
respect of acts or omissions occurring at or prior to the Effective Time to the 
extent provided under Missouri law, the JCN Articles and the JCN Bylaws, as in  
effect on the date of the Merger Agreement, and also has agreed to maintain in  
effect after the Effective Time JCN's current policies of directors' and        
officers' liability insurance for a period of three years, but subject to       
maximum aggregate premium cost equal to 200% of the annual premiums previously  
paid by JCN.                                                                    

 Mr. Barrett Brady is the only officer of JCN who also serves on the JCN
Board of Directors, and Mr. Brady abstained from voting when the JCN Board of   
Directors recommended that JCN Shareholders approve the Merger Agreement.       

  Mr. C. Q. Chandler, III is a member of the JCN Board of Directors and is
the chairman of the board of directors and a principal shareholder of INTRUST,  
the trustee of JCN's Employee Stock Ownership Trust. INTRUST received $114,480  
in fees from the ESOT in 1997 for serving in such capacity, and Highwoods has   
indicated its intention to terminate the ESOT upon consummation of the Merger.  
In the event the Merger Agreement is not approved and INTRUST continues to      
serve in such capacity, INTRUST would continue to receive fees from the ESOT.   
Because of the resulting appearance of a potential conflict, Mr. Chandler also  
abstained from voting when the JCN Board of Directors recommended that JCN      
Shareholders approve the Merger Agreement.                                      

    Neither Mr. Brady nor Mr. Chandler expressed any opposition to the Merger.
The JCN Board of Directors was aware of these interests and took these          
interests into account in approving the Merger Agreement and the transactions   
contemplated thereby.                                                           

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Anticipated Accounting Treatment                                                

The Merger will be treated as a purchase in accordance with Accounting
Principles Board Opinion No. 16. Purchase accounting for a merger is the same   
as the accounting treatment used for the acquisition of any group of assets.    
The fair market value of the consideration given by Highwoods in the Merger     
will be used as the valuation basis of the combination. The assets acquired and 
liabilities assumed of JCN will be recorded at their relative fair market       
values as of the Effective Time. The financial statements of Highwoods will     
reflect the combined operations of Highwoods and JCN from the date of the       
Merger.                                                                         

Shares Available for Resale                                                     

  The issuance of Highwoods Common upon consummation of the Merger will be
registered under the Securities Act. Such shares may be traded freely and       
without restriction by those shareholders not deemed to be "affiliates" of JCN  
or Highwoods as that term is defined in the rules and regulations promulgated   
pursuant to the Securities Act. "Affiliates" are generally defined as persons   
who control, are controlled by or are under common control with an issuer. This 
Proxy Statement/Prospectus does not cover any resales of shares of Highwoods    
Common received by affiliates of JCN.                                           

FEDERAL INCOME TAX CONSIDERATIONS 

    The following summary of the material Federal income tax considerations is
based on current law, is for general purposes only, and is not tax advice. The  
summary addresses the material Federal income tax consequences of the Merger to 
Highwoods, JCN and the JCN Shareholders, and the material Federal income tax    
considerations relating to Highwoods' REIT status, including the material       
Federal income tax considerations relating to the Highwoods Operating           
Partnership. The following summary does not address all the Federal income tax  
consequences of the Merger that may be relevant to particular holders of JCN    
Common and holders that are subject to special tax rules including dealers in   
securities, mutual funds, insurance companies, tax-exempt entities, holders who 
do not hold their JCN Common as capital assets, and holders that, for Federal   
income tax purposes, are non-resident alien individuals, foreign corporations,  
foreign partnerships or foreign estates or trusts, including any withholding    
taxes that may apply to the consideration paid to the foreign holders.          

EACH HOLDER OF JCN COMMON OR INVESTOR OF HIGHWOODS COMMON IS URGED TO 
CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO   
HIM OR HER OF THE MERGER IN LIGHT OF HIS OR HER PARTICULAR CIRCUMSTANCES,       
INCLUDING THE EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS, AND OF POTENTIAL     
CHANGES IN APPLICABLE TAX LAWS.                                                 

Federal Income Tax Consequences of Merger                                       

  It is intended that the Merger will qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Code, and as a condition to         
consummation of the Merger, JCN will receive an opinion from Blackwell Sanders  
Peper Martin LLP as to the qualification of the Merger as a tax-free            
reorganization within the meaning of Section 368(a) of the Code and as to the   
tax consequences of the Merger to the JCN Shareholders. Highwoods will receive  
an opinion of Alston & Bird LLP as to the qualification of the Merger as a      
tax-free reorganization within the meaning of Section 368(a) of the Code.       
Copies of such opinions are included as Exhibits 8.1 and 8.2 to the             
Registration Statement. In order to so qualify, various factual matters must be 
true. In this regard, based upon certain factual representations of officers of 
Highwoods and JCN (attached as exhibits to the opinions) and the terms of the   
Merger, such counsel have advised Highwoods and JCN that the Merger qualifies   
as a tax-free reorganization. It is important to note, however, that if such    
representations are untrue or incorrect in any material respects, the           
conclusions reached by Alston & Bird LLP and Blackwell Sanders Peper Martin LLP 
in their respective opinions are jeopardized and may not be relied upon.        

If, as is anticipated, the Merger is treated as a reorganization as   
defined in Section 368(a) of the Code, the material Federal income tax          
consequences would be as follows:                                               

  (i) Each of Highwoods and JCN will be a party to a reorganization within
the meaning of Section 368(b) of the Code.                                      

(ii) No gain or loss will be recognized by Highwoods or JCN as a      
consequence of the Merger.                                                    

(iii) No gain or loss will be recognized by any JCN Shareholder upon the  
  receipt of Highwoods Common solely in exchange for its shares of JCN
Common.                                                           

(iv) If a JCN Shareholder receives both cash and Highwoods Common in      
  exchange for his or her JCN Common because of an election to receive
     cash with respect to only a portion of such a holder's JCN Common, then
gain                                                              

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    (but not loss) will be recognized, but not in an amount in excess of the
   amount of cash received. The general rule is that any such gain will be
treated as capital gain but if the exchange has the effect of a     
  distribution of a dividend, then the amount of gain recognized that is
     not in excess of the JCN Shareholder's ratable share of the undistributed
  earnings and profits of JCN will be treated as a dividend, rather than
     capital gain. The determination of whether the exchange has the effect of
the distribution of a dividend will be made on a shareholder by     
shareholder basis. The exchange will not have the effect of the     
distribution of a dividend, provided that one of the safe-harbors of
Section 302(b) of the Code is met. Most JCN Shareholders electing to
receive cash will likely meet the "substantially disproportionate"  
  safe-harbor of Section 302(b)(2) of the Code, and thus have their gain
treated as capital gain rather than as a dividend. The substantially
disproportionate test will be met if after the transaction the      
shareholder will own less than fifty percent (50%) of all Highwoods 
   Common and if his or her percentage ownership of Highwoods Common after
the transaction is less than eighty percent (80%) of what his or her
percentage ownership of Highwoods Common would have been if no cash 
  elections had been made by the JCN Shareholders in connection with the
  Merger, in each case determined with application of Section 318 of the
Code attributing stock ownership among family members and related   
    entities. JCN Shareholders with attributed ownership or JCN Shareholders
     making the cash election with respect to only a small percentage of their
     stock may not fall within the substantially disproportionate safe-harbor.
     Each JCN Shareholder is urged to consult his or her own tax advisor about
the applicable tax consequences in light of his or her particular   
circumstances.                                                      

 (v) If a JCN Shareholder receives solely cash in exchange for shares of JCN
      Common either because of an election to receive cash with respect to all
     of such holder's JCN Common, or because of the exercise of the right to
  dissent to the transaction, such cash will be treated as having been
   received as a distribution in redemption of the JCN Common subject to
   the provisions of Section 302 of the Code. Where, as a result of such
distribution, the JCN Shareholder owns no Highwoods Common, either
      directly or by reason of the application of Section 318 of the Code, the
    "complete termination of interest" safe-harbor of Section 302(b)(3) of
      the Code will be met, and such cash will be treated as a distribution in
   full payment in exchange for his or her JCN Common. Such shareholders
will recognize gain or loss measured by the difference between the
amount of cash received and the adjusted basis of the JCN Common  
surrendered.                                                      

 (vi) The basis of the Highwoods Common received by a JCN Shareholder in the
   Merger will be the same as the basis of the JCN Common surrendered in
    exchange therefor (less the basis allocated to any fractional share of
Highwoods Common settled by cash payment), decreased by any cash  
     received and increased by the amount, if any, treated as a dividend and
    the amount of the gain recognized by such JCN Shareholder with respect
to the Merger.                                                    

(vii) The holding period of the Highwoods Common received by a JCN          
Shareholder (including the holding period of any fractional share 
     interest) will include the holding period of the JCN Common surrendered
 in exchange therefor, provided the JCN Common was held as a capital
asset on the date of the exchange.                                

(viii) A JCN Shareholder who receives cash in the Merger in lieu of a       
     fractional share interest in Highwoods Common will be treated as having
received cash in redemption of such fractional share interest. The
    receipt of such cash by the JCN Shareholder generally should result in
     capital gain or loss equal to the difference between the amount of cash
      received and the portion of such JCN Shareholder's adjusted basis in the
shares of JCN Common allocable to the fractional share interest.  

If the Merger fails to qualify as a tax-free reorganization for any   
reason, the material Federal income tax consequences would be as follows: (i)   
no gain or loss would be recognized to Highwoods; (ii) gain would be recognized 
to JCN (and the resulting tax borne by Highwoods) equal to the fair market      
value of its assets at the Effective Time less its adjusted basis in the        
assets; (iii) gain or loss would be recognized by the holders of JCN Common     
upon the exchange of such shares in the Merger for shares of Highwoods Common;  
(iv) the tax basis of the Highwoods Common to be received by the holders of the 
JCN Common in the Merger would be the fair market value of such shares of       
Highwoods Common at the Effective Time; and (v) the holding period of such      
shares of Highwoods Common to be received by JCN Shareholders pursuant to the   
Merger would begin the day after the Effective Time.                            

Taxation of Highwoods as a REIT                                                 

General. Commencing with its taxable year ended December 31, 1994,    
Highwoods has elected to be taxed as a real estate investment trust under       
Sections 856 through 860 of the Code. Highwoods believes that, commencing with  
its taxable year ended December 31, 1994, it has been organized and has         
operated in such a manner as to qualify for taxation as a REIT under the Code,  
and Highwoods intends to continue to operate in such a manner, but no assurance 
can be given that it has operated or will operate in a manner so as to qualify  
or remain qualified.                                                            

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    These sections of the Code are highly technical and complex. The following
sets forth the material aspects of the sections that govern the Federal income  
tax treatment of a REIT and its shareholders. This summary is qualified in its  
entirety by the applicable Code provisions, rules and regulations promulgated   
thereunder, and administrative and judicial interpretation thereof.             

    Alston & Bird LLP has acted as tax counsel to Highwoods in connection with
the Merger and Highwoods' election to be taxed as a REIT. Alston & Bird LLP is  
of the opinion that Highwoods has been organized and has operated in conformity 
with the requirements for qualification and taxation as a REIT under the Code   
for its taxable years ended December 31, 1994 through 1997, and that Highwoods  
is in a position to continue its qualification and taxation as a REIT within the
definition of Section 856(a) of the Code for the taxable year that will         
end December 31, 1998. This opinion is based on factual representations of      
Highwoods concerning its business operations and its properties and Alston &    
Bird LLP has not independently verified these facts. In addition, Highwoods'    
qualification and taxation as a REIT at any time during 1998 is dependent, among
other things, upon its meeting the requirements of Section 856(a) of the Code   
throughout the year and for the year as a whole. Accordingly, because Highwoods'
satisfaction of the REIT requirements for such year will depend upon future     
events, including precise terms and facts of proposed transactions, the         
final determination of operational results and the effect of certain provisions 
in the President's Budget Proposal for the Fiscal Year 1999 on Highwoods' REIT  
status, no assurance can be given that the actual results of Highwoods'         
operations for the taxable year that will end December 31, 1998, will satisfy   
the REIT requirements.                                                          

Federal Income Taxation of Highwoods                                            

 If Highwoods qualifies for taxation as a REIT, it generally will not be
subject to Federal corporate income tax on that portion of its ordinary income  
or capital gain that is currently distributed to shareholders. The REIT         
provisions of the Code generally allow a REIT to deduct distributions paid to   
its shareholders, substantially eliminating the Federal "double taxation" on    
earnings (once at the corporate level when earned and once again at the         
shareholder level when distributed) that usually results from investments in a  
corporation. Nevertheless, Highwoods will be subject to Federal income tax as   
follows. First, Highwoods will be taxed at regular corporate rates on its       
undistributed REIT taxable income, including undistributed net capital gains.   
Second, under certain circumstances, Highwoods may be subject to the            
"alternative minimum tax" as a consequence of its items of tax preference.      
Third, if Highwoods has net income from the sale or other disposition of        
"foreclosure property" that is held primarily for sale to customers in the      
ordinary course of business or other non-qualifying income from foreclosure     
property, it will be subject to tax at the highest corporate rate on such       
income. Fourth, if Highwoods has net income from prohibited transactions (which 
are, in general, certain sales or other dispositions of property other than     
foreclosure property held primarily for sale to customers in the ordinary       
course of business), such income will be subject to a 100% tax. Fifth, if       
Highwoods should fail to satisfy either of the 75% or 95% gross income tests    
(discussed below) but has nonetheless maintained its qualification as a REIT    
because certain other requirements have been met, it will be subject to a 100%  
tax on the net income attributable to the greater of the amount by which        
Highwoods fails either the 75% or 95% test, multiplied by a fraction intended   
to reflect Highwoods' profitability. Sixth, if Highwoods fails to distribute    
during each year at least the sum of (i) 85% of its ordinary income for such    
year, (ii) 95% of its capital gain net income for such year, and (iii) any      
undistributed taxable income from prior periods, Highwoods will be subject to a 
4% excise tax on the excess of such required distribution over the amounts      
actually distributed. Seventh, if Highwoods should acquire any asset from a C   
corporation (i.e., a corporation generally subject to full corporate-level tax) 
in a carryover-basis transaction and Highwoods subsequently recognizes gain on  
the disposition of such asset during the 10-year period (the "Recognition       
Period") beginning on the date on which the asset was acquired by Highwoods,    
then, to the extent of the excess of (a) the fair market value of the asset as  
of the beginning of the applicable Recognition Period over (b) Highwoods'       
adjusted basis in such asset as of the beginning of such Recognition Period     
(the "Built-In Gain"), such gain will be subject to tax at the highest regular  
corporate rate, pursuant to guidelines issued by the Internal Revenue Service   
("IRS") (the "Built-In Gain Rules").                                            

Requirements for Qualification                                                  

   To qualify as a REIT, Highwoods must elect to be so treated and must meet
the requirements, discussed below, relating to Highwoods' organization, sources 
of income, and nature of assets.                                                

Organizational Requirements. The Code defines a REIT as a corporation,
trust or association: (i) that is managed by one or more trustees or directors, 
(ii) the beneficial ownership of which is evidenced by transferable shares or   
by transferable certificates of beneficial interest, (iii) that would be        
taxable as a domestic corporation but for the REIT requirements, (iv) that is   
neither a financial institution nor an insurance company subject to certain     
provisions of the Code, (v) the beneficial ownership of which is held by 100 or 
more persons, (vi) during the last half of each taxable year, not more than 50% 
in value of the outstanding stock of which is owned, directly or indirectly,    
through the application of certain attribution rules,                           

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by five or fewer individuals (as defined in the Code to include certain         
entities), (vii) files an election to be taxed as a REIT on its return for each 
taxable year, and (viii) satisfies the 95% and 75% income tests and the 75%,    
25%, 10% , and 5% asset tests, as described below. The Code provides that       
conditions (i) through (iv), inclusive, must be met during the entire taxable   
year and that condition (v) must be met during at least 335 days of a taxable   
year of 12 months or during a proportionate part of a taxable year of less than 
12 months. For purposes of condition (v), certain pension funds and other tax-  
exempt entities are treated as persons. For purposes of condition (vi), the     
beneficiaries of a pension or profit-sharing trust under section 401(a) of the  
Code are treated as REIT shareholders. In addition, the Highwoods Articles      
currently include certain restrictions regarding transfer of its Highwoods      
Common, which restrictions are intended (among other things) to assist          
Highwoods in continuing to satisfy conditions (v) and (vi) above.               

In the case of a REIT that is a partner in a partnership, Treasury    
Regulations provide that the REIT will be deemed to own its proportionate share 
of the assets of the partnership and will be deemed to be entitled to the       
income of the partnership attributable to such share. In addition, the          
character of the assets and gross income of the partnership retain the same     
character in the hands of the REIT for purposes of Section 856 of the Code,     
including satisfying the gross income tests and asset tests. Thus, Highwoods'   
proportionate share of the assets, liabilities, and items of income of the      
Highwoods Operating Partnership (including the Highwoods Operating              
Partnership's share of the assets, liabilities, and items of income with        
respect to any partnership in which it holds an interest) will be treated as    
assets, liabilities, and items of income of Highwoods for purposes of applying  
the requirements described herein.                                              

Income Tests. In order to maintain qualification as a REIT, Highwoods 
annually must satisfy two gross income requirements. First, at least 75% of     
Highwoods' gross income (excluding gross income from prohibited transactions)   
for each taxable year must be derived directly or indirectly from investments   
relating to real property, including investments in other REITs or mortgages on 
real property (including "rents from real property" and, in certain             
circumstances, interest). Second, at least 95% of Highwoods' gross income       
(excluding gross income from prohibited transactions) for each taxable year     
must be derived from such real property investments, dividends, interest, and   
gain from the sale or disposition of stock or securities (or from any           
combination of the foregoing). In addition, for taxable years ended on or       
before December 31, 1997, short-term gain from the sale or other disposition of 
stock or securities, gain from prohibited transactions and gain on the sale or  
other disposition of real property held for less than four years (apart from    
involuntary conversions and sales of foreclosure property) must represent less  
than 30% of Highwoods' gross income (including gross income from prohibited     
transactions). The Taxpayer Relief Act of 1997, enacted August 5, 1997          
("Taxpayer Relief Act"), repeals the 30% gross income test for taxable years    
beginning after August 5, 1997. Accordingly, the 30% gross income test will not 
apply to Highwoods beginning with its taxable year that will end December 31,   
1998.                                                                           

   Rents received by Highwoods will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if     
several conditions are met. First, the amount of rent must not be based in      
whole or in part on the income or profits of any person but can be based on a   
fixed percentage of gross receipts or gross sales. Second, "rents from real     
property" excludes any amount received directly or indirectly from any tenant   
if Highwoods, or an owner of 10% or more of Highwoods, directly or              
constructively, owns 10% or more of such tenant taking into consideration the   
applicable attribution rules (a "Related Party Tenant"). Third, rent            
attributable to personal property is excluded from "rents from real property"   
except where such personal property is leased in connection with a lease of     
real property and the rent attributable to such personal property is less than  
or equal to 15% of the total rent received under the lease. Finally, amounts    
that are attributable to services furnished or rendered in connection with the  
rental of real property, whether or not separately stated, will not constitute  
"rents from real property" unless such services are customarily provided in the 
geographic area. Customary services that are not provided to a particular       
tenant (e.g., furnishing heat and light, the cleaning of public entrances, and  
the collection of trash) can be provided directly by Highwoods. Where, on the   
other hand, such services are provided primarily for the convenience of the     
tenants and are provided to such tenants, such services must be provided by an  
independent contractor. In the event that an independent contractor provides    
such services, Highwoods must adequately compensate the independent contractor, 
Highwoods must not derive any income from the independent contractor, and       
neither the independent contractor nor certain of its shareholders may,         
directly or indirectly, own more than 35% of Highwoods, taking into             
consideration the applicable ownership rules. Pursuant to the Taxpayer Relief   
Act and beginning with Highwoods' taxable year that will end December 31, 1998, 
Highwoods' rental income will not cease to qualify as "rents from real          
property" merely because Highwoods performs a de minimis amount of              
impermissible services to the tenants. For purposes of the preceding sentence,  
(i) the amount of income received from such impermissible services cannot       
exceed one percent of all amounts received or accrued during such taxable year, 
directly or indirectly, by Highwoods with respect to such property and (ii) the 
amount treated as received by Highwoods for such impermissible services cannot  
be less than 150 percent of the direct cost of Highwoods in furnishing or       
rendering such services.                                                        

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   Highwoods does not currently charge and does not anticipate charging rent
that is based in whole or in part on the income or profits of any person.       
Highwoods also does not anticipate either deriving rent attributable to         
personal property leased in connection with real property that exceeds 15% of   
the total rents or receiving rent from Related Party Tenants.                   

The Highwoods Operating Partnership does provide certain services with
respect to the Highwoods Properties. The performance of services by Highwoods   
or the Highwoods Operating Partnership with respect to the Highwoods            
Properties, other than services that are and will be provided directly, that    
are usually or customarily rendered in connection with the rental of space for  
occupancy only, and that are not otherwise rendered to particular tenants       
("customary services"), will cause rents received with respect to the Highwoods 
Properties as to which the non-customary services are provided, to fail to      
qualify as rents from real property. Although some of the services with respect 
to the Highwoods Properties that Highwoods believes may not be provided by      
Highwoods or the Highwoods Operating Partnership directly without jeopardizing  
the qualification of rent as "rents from real property" are and will be         
performed by independent contractors, some of the services are and will be      
performed directly by Highwoods or the Highwoods Operating Partnership.         
Highwoods believes, however, that the aggregate amount of the fees received for 
the performance of non-customary services, the rents received with respect to   
the Highwoods Properties as to which the non-customary services are provided,   
and all other non-qualifying income in any taxable year will not cause          
Highwoods to exceed the limits on non-qualifying income under the 75% or the    
95% gross income tests.                                                         

The Highwoods Operating Partnership and Highwoods receive fees in     
consideration of the performance of property management and brokerage and       
leasing services with respect to certain Highwoods Properties not owned         
entirely by the Highwoods Operating Partnership. Such fees will also not        
qualify under the 75% or the 95% gross income test. In addition, Highwoods      
Operating Partnership also may receive certain other types of income with       
respect to the properties it owns that will not qualify for either of these     
tests. Further, dividends on the Highwoods Operating Partnership's stock in     
Highwoods Services will not qualify under the 75% gross income test. Highwoods  
believes, however, that the aggregate amount of such fees and all other         
non-qualifying income (including fees for the performance of non-customary      
services and associated rents) in any taxable year will not cause Highwoods to  
exceed the limits on non-qualifying income under either the 75% or the 95%      
gross income test.                                                              

  If Highwoods fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for that year 
if it is eligible for relief under a certain provision of the Code. This relief 
provision generally will be available if (i) Highwoods' failure to meet these   
tests was due to reasonable cause and not due to willful neglect, (ii)          
Highwoods attaches a schedule of the nature and amount of each item of income   
to its Federal income tax return and (iii) the inclusion of any incorrect       
information on such schedule is not due to fraud with intent to evade tax. It   
is not possible, however, to state whether in all circumstances Highwoods would 
be entitled to the benefit of this relief provision. For example, if Highwoods  
fails to satisfy the gross income tests because non-qualifying income that      
Highwoods intentionally incurs exceeds the limits on such income, the IRS could 
conclude that Highwoods' failure to satisfy the tests was not due to reasonable 
cause. As discussed above in " -- Federal Income Taxation of Highwoods," even   
if this relief provision applies, a 100% tax would be imposed with respect to   
the portion of Highwoods' taxable income that fails the 75% or 95% gross income 
test.                                                                           

  Asset Tests. At the close of each quarter of its taxable year, Highwoods
also must satisfy four tests relating to the nature and diversification of its  
assets. First, at least 75% of the value of Highwoods' total assets must be     
represented by real estate assets, cash and cash items (including receivables), 
and government securities. Second, no more than 25% of the value of Highwoods'  
total assets may be represented by securities other than those in the 75% asset 
class. Third, not more than 5% of the value of Highwoods' assets may consist of 
securities of any one issuer (other than those securities includible in the 75% 
asset test). Fourth, not more than 10% of the outstanding voting securities of  
any one issuer may be held by Highwoods (other than those securities includible 
in the 75% asset test).                                                         

The 5% test generally must be met for any quarter in which Highwoods  
acquires securities of an issuer. Thus, this requirement must be satisfied not  
only on the date on which Highwoods through the Highwoods Operating Partnership 
acquired the securities of Highwoods Services, but also each time Highwoods     
increases its ownership of its respective securities (including as a result of  
increasing its interest in the Highwoods Operating Partnership as limited       
partners exercise their redemption rights). Although Highwoods plans to take    
steps to ensure that it satisfies the 5% value test for any quarter with        
respect to which retesting is to occur, there can be no assurance that such     
steps will always be successful or will not require a reduction in Highwoods'   
overall interest in Highwoods Services.                                         

  The Highwoods Operating Partnership owns 100% of the nonvoting stock and
1% of the voting stock of Highwoods Services, and by virtue of its ownership of 
Common Units, Highwoods will be considered to own its pro rata share of such    

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stock. Neither Highwoods nor the Highwoods Operating Partnership, however, will 
own more than 1% of the voting securities of Highwoods Services. In addition,   
Highwoods and its senior management do not believe that Highwoods' pro rata     
share of the value of the securities of Highwoods Services exceeds 5% of the    
total value of Highwoods' assets. Highwoods' belief is based in part upon its   
analysis of the estimated value of the securities of Highwoods Services owned   
by the Highwoods Operating Partnership relative to the estimated value of the   
other assets owned by the Highwoods Operating Partnership. No independent       
appraisals will be obtained to support this conclusion, and Alston & Bird LLP,  
in rendering its opinion as to the qualification and taxation of Highwoods as a 
REIT, is relying on the conclusions of Highwoods and its senior management as   
to the value of the securities of Highwoods Services. There can be no           
assurance, however, that the IRS might not contend that the value of such       
securities held by Highwoods (through the Highwoods Operating Partnership)      
exceeds the 5% value limitation.                                                

After initially meeting the asset tests at the close of any quarter,  
Highwoods will not lose its status as a REIT for failure to satisfy the asset   
tests at the end of a later quarter solely by reason of changes in asset        
values. If the failure to satisfy the asset tests results from an acquisition   
of securities or other property during a quarter, the failure can be cured by   
disposition of sufficient non-qualifying assets within 30 days after the close  
of that quarter. Highwoods intends to maintain adequate records of the value of 
its assets to ensure compliance with the asset tests and to take such other     
actions within 30 days after the close of any quarter as may be required to     
cure any noncompliance.                                                         

Annual Distribution Requirements                                                

In order to be taxed as a REIT, Highwoods is required to make         
distributions (other than capital gain distributions) to its shareholders in an 
amount at least equal to (a) the sum of (i) 95% of Highwoods' "REIT taxable     
income" (computed without regard to the dividends-paid deduction and the        
Highwoods' capital gain) and (ii) 95% of the net income, if any, from           
foreclosure property in excess of the special tax on income from foreclosure    
property, minus (b) the sum of certain items of non-cash income. Such           
distributions must be paid in the taxable year to which they relate. Dividends  
paid in the subsequent year, however, will be treated as if paid in the prior   
year for purposes of such prior year's 95% distribution requirement if one of   
the following two sets of criteria are satisfied: (i) the dividends were        
declared in October, November, or December, the dividends were payable to       
shareholders of record on a specified date in such a month, and the dividends   
were actually paid during January of the subsequent year; or (ii) the dividends 
were declared before Highwoods timely files its Federal income tax return for   
such year, the dividends were distributed in the twelve month period following  
the close of the prior year and not later than the first regular dividend       
payment after such declaration, and Highwoods elected on its Federal income tax 
return for the prior year to have a specified amount of the subsequent dividend 
treated as if paid in the prior year. Even if Highwoods satisfies the foregoing 
distribution requirements, Highwoods will be subject to tax thereon at regular  
capital gains or ordinary corporate tax rates to the extent that it does not    
distribute all of its net capital gain or "REIT taxable income" as adjusted.    
Furthermore, if Highwoods should fail to distribute during each calendar year   
at least the sum of (a) 85% of its ordinary income for that year, (b) 95% of    
its capital gain net income for that year, and (c) any undistributed taxable    
income from prior periods, Highwoods would be subject to a 4% excise tax on the 
excess of such required distribution over the amounts actually distributed. In  
addition, during its Recognition Period, if Highwoods disposes of any asset     
subject to the Built-In Gain Rules, Highwoods will be required, pursuant to     
guidance issued by the IRS, to distribute at least 95% of the Built-In Gain     
(after tax), if any, recognized on the disposition of the asset.                

  Highwoods intends to make timely distributions sufficient to satisfy the
annual distribution requirements. In this regard, the Highwoods Operating       
Partnership Agreement authorizes Highwoods, as general partner, to take such    
steps as may be necessary to cause the Highwoods Operating Partnership to       
distribute to its partners an amount sufficient to permit Highwoods to meet     
these distribution requirements.                                                

  It is expected that Highwoods' REIT taxable income will be less than its
cash flow due to the allowance of depreciation and other non-cash charges in    
computing REIT taxable income. Accordingly, Highwoods anticipates that it       
generally will have sufficient cash or liquid assets to enable it to satisfy    
the 95% distribution requirement. It is possible, however, that Highwoods, from 
time to time, may not have sufficient cash or other liquid assets to meet the   
95% distribution requirement or to distribute such greater amount as may be     
necessary to avoid income and excise taxation. In such event, Highwoods may     
find it necessary to arrange for borrowings or, if possible, pay taxable stock  
dividends in order to meet the distribution requirement.                        

In the event that Highwoods is subject to an adjustment to its REIT   
taxable income (as defined in Section 860(d)(2) of the Code) resulting from an  
adverse determination by either a final court decision, a closing agreement     
between Highwoods and the IRS under Section 7121 of the Code, or an agreement   
as to tax liability between Highwoods and an IRS district                       

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director, Highwoods may be able to rectify any resulting failure to meet the    
95% annual distribution requirement by paying "deficiency dividends" to         
shareholders that relate to the adjusted year but that are paid in a subsequent 
year. To qualify as a deficiency dividend, the distribution must be made within 
90 days of the adverse determination and Highwoods also must satisfy certain    
other procedural requirements. If the statutory requirements of Section 860 of  
the Code are satisfied, a deduction is allowed for any deficiency dividend      
subsequently paid by Highwoods to offset an increase in Highwoods' REIT taxable 
income resulting from the adverse determination. Highwoods, however, will be    
required to pay statutory interest on the amount of any deduction taken for     
deficiency dividends to compensate for the deferral of the tax liability.       

Failure to Qualify                                                              

  If Highwoods fails to qualify for taxation as a REIT in any taxable year
and the relief provisions do not apply, Highwoods will be subject to tax        
(including any applicable alternative minimum tax) on its taxable income at     
regular corporate rates. Distributions to shareholders in any year in which     
Highwoods fails to qualify will not be deductible by Highwoods nor will they be 
required to be made. In such event, to the extent of positive current and       
accumulated earnings and profits, all distributions to shareholders will be     
dividends, taxable as ordinary income, except that, subject to certain          
limitations of the Code, corporate distributes may be eligible for the          
dividends-received deduction. Unless Highwoods is entitled to relief under      
specific statutory provisions, Highwoods also will be disqualified from         
taxation as a REIT for the four taxable years following the year during which   
qualification was lost. It is not possible to state whether in all              
circumstances Highwoods would be entitled to such statutory relief. For         
example, if Highwoods fails to satisfy the gross income tests because           
non-qualifying income that Highwoods intentionally incurs exceeds the limit on  
such income, the IRS could conclude that Highwoods' failure to satisfy the      
tests was not due to reasonable cause.                                          

Taxation of U.S. Shareholders                                                   

 As used herein, the term "U.S. Shareholder" means a holder of Highwoods
Common that (for Federal income tax purposes) (a) is a citizen or resident of   
the United States, (b) is a corporation or partnership (including an entity     
treated as a corporation or partnership for United States Federal income tax    
purposes) created or organized in or under the laws of the United States or of  
any political subdivision thereof, (c) is an estate, the income of which is     
subject to Federal income taxation regardless of its source or (d) is any trust 
if a court within the United States is able to exercise primary supervision     
over the administration of the trust, and one or more United States persons     
have the authority to control all substantial decisions of the trust. For any   
taxable year for which Highwoods qualifies for taxation as a REIT, amounts      
distributed to taxable U.S. Shareholders will be taxed as discussed below.      

 Distributions Generally. Distributions to U.S. Shareholders, other than
capital gain dividends discussed below, will constitute dividends up to the     
amount of Highwoods' positive current and accumulated earnings and profits and, 
to that extent, will be taxable to the U.S. Shareholders as ordinary income.    
These distributions are not eligible for the dividends-received deduction for   
corporations. To the extent that Highwoods makes a distribution in excess of    
its positive current and accumulated earnings and profits, the distribution     
will be treated first as a tax-free return of capital, reducing the tax basis   
in the U.S. Shareholder's Highwoods Common, and then the distribution in excess 
of such basis will be taxable as gain realized from the sale of its Highwoods   
Common. Dividends declared by Highwoods in October, November, or December of    
any year payable to a U.S. Shareholder of record on a specified date in any     
such month shall be treated as both paid by Highwoods and received by the       
shareholders on December 31 of the year, provided that the dividends are        
actually paid by Highwoods during January of the following calendar year. U.S.  
Shareholders are not allowed to include on their own Federal income tax returns 
any tax losses of Highwoods.                                                    

Highwoods will be treated as having sufficient earnings and profits to
treat as a dividend any distribution by Highwoods up to the amount required to  
be distributed in order to avoid imposition of the 4% excise tax discussed in " 
-- Federal Income Taxation of Highwoods" above.                                 

 Capital Gain Distributions. Distributions to U.S. Shareholders that are
properly designated by Highwoods as capital gain distributions will be treated  
as long-term capital gains (to the extent they do not exceed Highwoods' actual  
net capital gain) for the taxable year without regard to the period for which   
the U.S. Shareholder has held his or her stock. However, corporate shareholders 
may be required to treat up to 20% of certain capital gain dividends as         
ordinary income. Capital gain dividends are not eligible for the                
dividends-received deduction for corporations.                                  

   Pursuant to the Taxpayer Relief Act and beginning with Highwoods' taxable
year that will end December 31, 1998, Highwoods may elect to retain and pay     
income tax on net long-term capital gain that it received during the tax year.  
If such election is made, (i) the U.S. Shareholders will include in their       
income their proportionate share of the undistributed long-term capital gains   
as designated by Highwoods, (ii) the U.S. Shareholders will be deemed to have   
paid their proportionate                                                        

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share of the tax, which would be credited or refunded to such shareholders, and 
(iii) the basis of the U.S. Shareholders' shares will be increased by the       
amount of the undistributed long-term capital gains (less the amount of capital 
gains tax paid by Highwoods) included in such shareholders' long-term capital   
gains.                                                                          

   As a result of the changes made to the capital gain rates by the Taxpayer
Relief Act (See " -- Certain Disposition of Shares"), the IRS recently issued   
Notice 97-64 outlining (i) when a REIT may designate its dividends as either a  
20% rate gain distribution, an unrecaptured section 1250 gain distribution      
(taxed at 25% as noted in "Certain Disposition of Shares"), or a 28% rate gain  
distribution and (ii) how to calculate the amount of such distributions, which  
may be subject to certain deferral or bifurcation adjustments. When a REIT      
designates a distribution as a capital gain dividend, which is attributable to  
a taxable year ending after May 7, 1997, for purposes of the annual             
distribution requirement, the REIT also may designate such dividend as a 20%    
rate gain distribution, as unrecaptured section 1250 gain distribution, or a    
28% rate gain distribution. Where no such designation is provided, the dividend 
will be treated as a 28% rate gain distribution. These additional designations  
by the REIT are effective only to the extent that they do not exceed certain    
limitations. For example, the maximum amount of each distribution that can be   
classified as either a 20% rate gain distribution, an unrecaptured section 1250 
gain distribution, or a 28% rate gain distribution must be calculated in        
accordance with the Code and the IRS Notice.                                    

  Passive Activity Loss and Investment Interest Limitations. Distributions
from Highwoods and gain from the disposition of Highwoods Common will not be    
treated as passive activity income and, therefore, U.S. Shareholders will not   
be able to apply any "passive losses" against such income. Dividends from       
Highwoods (to the extent they do not constitute a return of capital) generally  
will be treated as investment income for purposes of the investment interest    
limitation. Net capital gain from the disposition of Highwoods Common or        
capital gain dividends generally will be excluded from investment income unless 
the U.S. Shareholder elects to have such gain taxed at ordinary income rates.   

    Certain Dispositions of Shares. In general, U.S. Shareholders will realize
capital gain or loss on the disposition of Highwoods Common equal to the        
difference between (i) the amount of cash and the fair market value of any      
property received on such disposition, and (ii) such shareholders' adjusted     
basis in such Highwoods Common. Losses incurred on the sale or exchange of      
Highwoods Common held for less than six months (after applying certain holding  
period rules) will be deemed long-term capital loss to the extent of any        
capital gain dividends received by the selling U.S. Shareholder from those      
shares. As a result of the Taxpayer Relief Act, the maximum rate of tax on net  
capital gains on individuals, trusts, and estates from the sale or exchange of  
assets held for more than 18 months has been reduced to 20%, and such maximum   
rate is further reduced to 18% for assets acquired after December 31, 2000, and 
held for more than five years. For 15% percent bracket taxpayers, the maximum   
rate on net capital gains is reduced to 10%, and such maximum rate is further   
reduced to 8% for assets sold after December 31, 2000, and held for more than   
five years. The maximum rate for net capital gains attributable to the sale of  
depreciable real property held for more than 18 months is 25% to the extent of  
the deductions for depreciation with respect to such property. Long-term        
capital gain allocated to U.S. Shareholders by Highwoods will be subject to the 
25% rate to the extent that the gain does not exceed depreciation on real       
property sold by Highwoods. The maximum rate of capital gains tax for capital   
assets held more than one year but not more than 18 months remains at 28%. The  
taxation of capital gains of corporations was not changed by the Taxpayer       
Relief Act.                                                                     

 Treatment of Tax-Exempt Shareholders. Distributions from Highwoods to a
tax-exempt employee pension trust or other domestic tax-exempt shareholder      
generally will not constitute "unrelated business taxable income" ("UBTI")      
unless the shareholder has borrowed to acquire or carry its Highwoods Common.   
Qualified trusts that hold more than 10% (by value) of the shares of            
pension-held REITs may be required to treat a certain percentage of such a      
REIT's distributions as UBTI. This requirement will apply only if (i) the REIT  
would not qualify as such for Federal income tax purposes but for the           
application of a "look-through" exception to the five or fewer requirement      
applicable to shares held by qualified trusts and (ii) the REIT is              
"predominantly held" by qualified trusts. A REIT is predominantly held if       
either (i) at least one qualified trust holds more than 25% by value of the     
REIT interests or (ii) one or more qualified trusts, each owning more than 10%  
by value of the REIT interests, hold in the aggregate more than 50% of the REIT 
interests. The percentage of any REIT dividend treated as UBTI is equal to the  
ratio of (a) the UBTI earned by the REIT (treating the REIT as if it were a     
qualified trust and therefore subject to tax on UBTI) to (b) the total gross    
income (less certain associated expenses) of the REIT. In the event that this   
ratio is less than 5% for any year, then the qualified trust will not be        
treated as having received UBTI as a result of the REIT dividend. For these     
purposes, a qualified trust is any trust described in Section 401(a) of the     
Code and exempt from tax under Section 501(a) of the Code. The restrictions on  
ownership of Highwoods Common in the Articles of Incorporation generally will   
prevent application of the provisions treating a portion of REIT distributions  
as UBTI to tax-exempt entities purchasing Highwoods Common, absent a waiver of  
the restrictions by the board of directors.                                     

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Special Tax Considerations for Non-U.S. Shareholders                            

 The rules governing United States income taxation of non-resident alien
individuals, foreign corporations, foreign partnerships, and foreign trusts and 
estates (collectively, "Non-U.S. Shareholders") are complex, and the following  
discussion is intended only as a summary of these rules. This discussion is     
based on current law, which is subject to change, and assumes that Highwoods    
qualifies for taxation as a REIT. Prospective Non-U.S. Shareholders should      
consult with their own tax advisors to determine the impact of Federal, state,  
local, and foreign income tax laws on an investment in Highwoods, including any 
reporting requirements.                                                         

    A distribution by Highwoods that is not attributable to gain from the sale
or exchange by Highwoods of a United States real property interest and that is  
not designated by Highwoods as a capital gain distribution will be treated as   
an ordinary income dividend to the extent that it is made out of current or     
accumulated earnings and profits of Highwoods. Generally, any ordinary income   
dividend will be subject to a Federal income tax equal to 30% of the gross      
amount of the dividend unless this tax is reduced by an applicable tax treaty.  
Such a distribution in excess of Highwoods' earnings and profits will be        
treated first as a return of capital that will reduce a Non-U.S. Shareholder's  
basis in its Highwoods Common (but not below zero) and then as gain from the    
disposition of such shares, the tax treatment of which is described under the   
rules discussed below with respect to dispositions of Highwoods Common.         

   Distributions by Highwoods that are attributable to gain from the sale or
exchange of a United States real property interest will be taxed to a Non-U.S.  
Shareholder under the Foreign Investment in Real Property Tax Act of 1980       
("FIRPTA"). Under FIRPTA, such distributions are taxed to a Non-U.S.            
Shareholder as if the distributions were gains "effectively connected" with a   
United States trade or business. Accordingly, a Non-U.S. Shareholder will be    
taxed at the normal capital gain rates applicable to a U.S. Shareholder         
(subject to any applicable alternative minimum tax and a special alternative    
minimum tax in the case of non-resident alien individuals). Distributions that  
are taxable under FIRPTA also may be subject to a 30% branch profits tax when   
made to a foreign corporation that is not entitled to an exemption or reduced   
branch profits tax rate under an income tax treaty.                             

Although tax treaties may reduce Highwoods' withholding obligations,  
Highwoods generally will be required to withhold from distributions to Non-U.S. 
Shareholders, and remit to the IRS, (i) 35% of designated capital gain          
dividends (or, if greater, 35% of the amount of any distributions that could be 
designated as capital gain dividends) and (ii) 30% of ordinary dividends paid   
out of earnings and profits. In addition, if Highwoods designates prior         
distributions as capital gain dividends, subsequent distributions, up to the    
amount of such prior distributions that were designated as capital gains        
dividends, will be treated as capital gain dividends for purposes of            
withholding. A distribution in excess of Highwoods' earnings and profits may be 
subject to 30% dividend withholding (unless such Non-U.S. Shareholder is        
entitled to a lower rate under an income tax treaty) or 10% FIRPTA withholding. 
If the amount of tax withheld by Highwoods with respect to a distribution to a  
Non-U.S. Shareholder exceeds the shareholder's United States tax liability with 
respect to such distribution, the Non-U.S. Shareholder may file for a refund of 
such excess from the IRS.                                                       

Unless the Highwoods Common constitutes a "United States real property
interest" within the meaning of FIRPTA, a sale of Highwoods Common by a         
Non-U.S. Shareholder generally will not be subject to Federal income taxation.  
The Highwoods Common will not constitute a United States real property interest 
if Highwoods is a "domestically controlled REIT." A domestically controlled     
REIT is a REIT in which at all times during a specified testing period less     
than 50% in value of its shares is held directly or indirectly by Non-U.S.      
Shareholders. It currently is anticipated that Highwoods will be a domestically 
controlled REIT and, therefore, that the sale of Highwoods Common will not be   
subject to taxation under FIRPTA. However, because the Highwoods Common will be 
publicly traded, no assurance can be given that Highwoods will be a             
domestically controlled REIT. If Highwoods were not a domestically controlled   
REIT, a Non-U.S. Shareholder's sale of Highwoods Common would be subject to tax 
under FIRPTA as a sale of a United States real property interest unless the     
Highwoods Common were "regularly traded" on an established securities market    
(such as the New York Stock Exchange) on which the Highwoods Common will be     
listed and the selling shareholder owned no more than 5% of the Highwoods       
Common throughout the testing period. If the gain on the sale of Highwoods      
Common were subject to taxation under FIRPTA, the Non-U.S. Shareholder would be 
subject to the same treatment as a U.S. Shareholder with respect to the gain    
(subject to applicable alternative minimum tax and a special alternative        
minimum tax in the case of non-resident alien individuals). Notwithstanding the 
foregoing, capital gains not subject to FIRPTA will be taxable to a Non-U.S.    
Shareholder if the Non-U.S. Shareholder is a non-resident alien individual who  
is present in the United States for 183 days or more during the taxable year    
and certain other conditions apply, in which case the non-resident alien        
individual will be subject to a 30% tax on his or her U.S. source capital       
gains.                                                                          

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 A purchaser of Highwoods Common from a Non-U.S. Shareholder will not be
required to withhold under FIRPTA on the purchase price if the purchased        
Highwoods Common is "regularly traded" on an established securities market or   
if Highwoods is a domestically controlled REIT. Otherwise, the purchaser of     
Highwoods Common from a Non-U.S. Shareholder may be required to withhold 10% of 
the purchase price and remit this amount to the IRS. Highwoods Common currently 
is a regularly traded security on the New York Stock Exchange. Highwoods        
believes that it qualifies under both the regularly traded and the domestically 
controlled REIT exceptions to withholding but cannot provide any assurance to   
that effect.                                                                    

Information Reporting Requirements and Backup Withholding Tax                   

 Under certain circumstances, U.S. Shareholders may be subject to backup
withholding at a rate of 31% on payments made with respect to, or cash proceeds 
of a sale or exchange of, Highwoods Common. Backup withholding will apply only  
if (i) the payee fails to furnish his or her taxpayer identification number     
("TIN") (which, for an individual, would be his or her Social Security Number)  
to the payor as required, (ii) the IRS notifies the payor that the taxpayer     
identification number furnished by the payee is incorrect, (iii) the IRS has    
notified the payee that such payee has failed to properly include reportable    
interest and dividends in the payee's return or has failed to file the          
appropriate return and the IRS has assessed a deficiency with respect to such   
under reporting, or (iv) the payee has failed to certify to the payor, under    
penalties of perjury, that the payee is not subject to withholding. In          
addition, backup withholding will not apply with respect to payments made to    
certain exempt recipients, such as corporations and tax-exempt organizations.   

 U.S. Shareholders should consult their own tax advisors regarding their
qualifications for exemption from backup withholding and the procedure for      
obtaining such an exemption. Backup withholding is not an additional tax.       
Rather, the amount of any backup withholding with respect to a payment to a     
U.S. Shareholder will be allowed as a credit against the U.S. Shareholder's     
United States Federal income tax liability and may entitle the U.S. Shareholder 
to a refund, provided that the required information is furnished to the IRS.    

    Additional issues may arise pertaining to information reporting and backup
withholding for Non-U.S. Shareholders. Non-U.S. Shareholders should consult     
their tax advisors with regard to U.S. information reporting and backup         
withholding.                                                                    

Tax Aspects of the Highwoods Operating Partnership                              

   General. Substantially all of Highwoods' investments are held through the
Highwoods Operating Partnership. In general, partnerships are "pass-through"    
entities which are not subject to Federal income tax. Rather, partners are      
allocated their proportionate shares of the items of income, gain, loss,        
deduction, and credit of a partnership, and are potentially subject to tax      
thereon, without regard to whether the partners receive a distribution from the 
partnership. Highwoods includes in its income its proportionate share of the    
foregoing Highwoods Operating Partnership items for purposes of the various     
REIT income tests and in the computation of its REIT taxable income. Moreover,  
for purposes of the REIT asset tests, Highwoods includes its proportionate      
share of assets held by the Highwoods Operating Partnership.                    

Tax Allocations with Respect to the Highwoods Properties. Pursuant to 
Section 704(c) of the Code, income, gain, loss, and deduction attributable to   
appreciated or depreciated property (such as the Highwoods Properties) that is  
contributed to a partnership in exchange for an interest in the partnership,    
must be allocated in a manner such that the contributing partner is charged     
with, or benefits from the unrealized gain or unrealized loss, respectively,    
associated with the property at the time of the contribution. The amount of     
such unrealized gain or unrealized loss generally is equal to the difference    
between the fair market value of contributed property at the time of            
contribution and the adjusted tax basis of such property at the time of         
contribution (a "Book-Tax Difference"). Such allocations are solely for Federal 
income tax purposes and do not affect the book capital accounts or other        
economic or legal arrangements among the partners. The Highwoods Operating      
Partnership was formed by way of contributions of appreciated property          
(including the Highwoods Properties). Consequently, the Highwoods Operating     
Partnership Agreement requires such allocations to be made in a manner          
consistent with Section 704(c) of the Code.                                     

    In general, the partners who have contributed partnership interests in the
Highwoods Properties to the Highwoods Operating Partnership (the "Contributing  
Partners") will be allocated lower amounts of depreciation deductions for tax   
purposes than such deductions would be if determined on a pro rata basis. In    
addition, in the event of the disposition of any of the contributed assets      
(including the Highwoods Properties) that have a Book-Tax Difference, all       
taxable income attributable to such Book-Tax Difference generally will be       
allocated to the Contributing Partners, and Highwoods generally will be         
allocated only its share of capital gains attributable to appreciation, if any, 
occurring after the closing of the acquisition of such                          

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properties. This will tend to eliminate the Book-Tax Difference over the life   
of the Highwoods Operating Partnership. However, the special allocation rules   
of Section 704(c) of the Code do not always entirely eliminate the Book-Tax     
Difference on an annual basis or with respect to a specific taxable transaction 
such as a sale. Thus, the carryover basis of the contributed assets in the      
hands of the Highwoods Operating Partnership will cause Highwoods to be         
allocated lower depreciation and other deductions and possibly amounts of       
taxable income in the event of a sale of such contributed assets in excess of   
the economic or book income allocated to it as a result of such sale. This may  
cause Highwoods to recognize taxable income in excess of cash proceeds, which   
might adversely affect Highwoods' ability to comply with the REIT distribution  
requirements. See " -- Annual Distribution Requirements."                       

    Treasury Regulations under Section 704(c) of the Code provide partnerships
with a choice of several methods of accounting for Book-Tax Differences,        
including the "traditional method" that may leave some of the Book-Tax          
Differences unaccounted for, or the election of certain methods which would     
permit any distortions caused by a Book-Tax Difference at this time to be       
entirely rectified on an annual basis or with respect to a specific taxable     
transaction such as a sale. The Highwoods Operating Partnership and Highwoods   
have determined to use the "traditional method" for accounting for Book-Tax     
Differences with respect to the Highwoods Properties contributed to the         
Partnership. As a result of such determination, distributions to shareholders   
will be comprised of a greater portion of taxable income rather than a return   
of capital. The Highwoods Operating Partnership and Highwoods have not          
determined which of the alternative methods of accounting for Book-Tax          
Differences will be elected with respect to Highwoods Properties contributed to 
the Partnership in the future.                                                  

With respect to any property purchased by the Highwoods Operating     
Partnership, such property initially will have a tax basis equal to its fair    
market value and Section 704(c) of the Code will not apply.                     

    Basis in Highwoods Operating Partnership Interest. Highwoods' adjusted tax
basis in its interest in the Highwoods Operating Partnership generally (i) will 
be equal to the amount of cash and the basis of any other property contributed  
to the Highwoods Operating Partnership by Highwoods, (ii) will be increased by  
(a) its allocable share of the Highwoods Operating Partnership's income and (b) 
its allocable share of indebtedness of the Highwoods Operating Partnership and  
(iii) will be reduced, but not below zero, by Highwoods' allocable share of (a) 
losses suffered by the Highwoods Operating Partnership, (b) the amount of cash  
distributed to Highwoods, and (c) constructive distributions resulting from a   
reduction in Highwoods' share of indebtedness of the Highwoods Operating        
Partnership.                                                                    

If the allocation of Highwoods' distributive share of the Highwoods   
Operating Partnership's loss exceeds the adjusted tax basis of Highwoods'       
partnership interest in the Highwoods Operating Partnership, the recognition of 
such excess loss will be deferred until such time and to the extent that        
Highwoods has an adjusted tax basis in its partnership interest. To the extent  
that the Highwoods Operating Partnership's distributions, or any decrease in    
Highwoods' share of the indebtedness of the Highwoods Operating Partnership     
(such decreases being considered a cash distribution to the partners) exceed    
Highwoods' adjusted tax basis, such excess distributions (including such        
constructive distributions) constitute taxable income to Highwoods. Such        
taxable income normally will be characterized as a capital gain if Highwoods'   
interest in the Highwoods Operating Partnership has been held for longer than   
one year, subject to reduced tax rates described above (See " -- Taxation of    
U.S. Shareholders -- Capital Gain Distributions"). Under current law, capital   
gains and ordinary income of corporations generally are taxed at the same       
marginal rates.                                                                 

    Sale of the Highwoods Properties. Highwoods' share of gain realized by the
Highwoods Operating Partnership on the sale of any property held by the         
Highwoods Operating Partnership as inventory or other property held primarily   
for sale to customers in the ordinary course of the Highwoods Operating         
Partnership's trade or business will be treated as income from a prohibited     
transaction that is subject to a 100% penalty tax. See " -- Requirements for    
Qualification -- Income Tests." Such prohibited transaction income also may     
have an adverse effect upon Highwoods' ability to satisfy the income tests for  
qualification as a REIT. Under existing law, whether property is held as        
inventory or primarily for sale to customers in the ordinary course of the      
Highwoods Operating Partnership's trade or business is a question of fact that  
depends on all the facts and circumstances with respect to the particular       
transaction. The Highwoods Operating Partnership intends to hold the Highwoods  
Properties for investment with a view to long-term appreciation, to engage in   
the business of acquiring, developing, owning, and operating the Highwoods      
Properties (and other properties) and to make such occasional sales of the      
Highwoods Properties, including peripheral land, as are consistent with the     
Highwoods Operating Partnership's investment objectives.                        

Other Tax Considerations                                                        

   A portion of the amounts to be used to fund distributions to shareholders
is expected to come from the Highwoods Operating Partnership through            
distributions on stock of Highwoods Services held by the Highwoods Operating    
Partnership.                                                                    

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Highwoods Services will not qualify as a REIT and will pay Federal, state, and  
local income taxes on its taxable income at normal corporate rates. Any         
Federal, state, or local income taxes that Highwoods Services is required to    
pay will reduce the cash available for distribution by Highwoods to its         
shareholders.                                                                   

    As described above, the value of the securities of Highwoods Services held
by Highwoods cannot exceed 5% of the value of Highwoods' assets at a time when  
a Common Unit holder in the Highwoods Operating Partnership exercises his or    
her redemption right (or Highwoods otherwise is considered to acquire           
additional securities of Highwoods Services). See " -- Federal Income Taxation  
of Highwoods." This limitation may restrict the ability of Highwoods Services   
to increase the size of its business unless the value of the assets of          
Highwoods is increasing at a commensurate rate.                                 

State and Local Tax                                                             

 Highwoods and its shareholders may be subject to state and local tax in
various states and localities, including those in which it or they transact     
business, own property, or reside. The tax treatment of Highwoods and the       
shareholders in such jurisdictions may differ from the Federal income tax       
treatment described above. Consequently, prospective shareholders should        
consult their own tax advisors regarding the effect of state and local tax laws 
on an investment in the Highwoods Common.                                       

Proposed Legislation                                                            

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

Highwoods conducts its third-party fee-based services (i.e., leasing, 
property management, real estate development, construction and other            
miscellaneous services) through Highwoods Services. The Budget Bill includes a  
proposal to restrict these types of activities conducted by REITs under current 
law by expanding the ownership limitation from 10% of the voting securities of  
an issuer to 10% of the vote or value of all classes of the issuer's stock.     
Highwoods, therefore, could not own stock (either directly or indirectly        
through the Highwoods Operating Partnership) possessing more than 10% of the    
vote or value of all classes of any issuer's stock.                             

The Budget Bill proposal would be effective only with respect to stock
directly or indirectly acquired by Highwoods on or after the date of first      
committee action. In the event that the first committee action occurs on or     
before the date of the Merger, Highwoods could not acquire 10% of the vote or   
value of any corporation in connection with the Merger unless such issuer       
became a wholly owned subsidiary of Highwoods or is qualified as a REIT. In     
addition, to the extent that Highwoods' stock ownership is grandfathered by     
virtue of this effective date (e.g., the stock ownership in Highwoods           
Services), that grandfathered status will terminate if the subsidiary           
corporation engages in a trade or business that it is not engaged in on the     
date of first committee action or acquires substantial new assets on or after   
that date. Such restriction would adversely affect the ability to expand the    
business of Highwoods Services.                                                 

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DESCRIPTION OF HIGHWOODS  

General                                                                         

Highwoods is a self-administered and self-managed REIT that began     
operations through a predecessor in 1978. At March 31, 1998, Highwoods owned a  
portfolio of 382 office and 148 industrial (including 80 service center)        
properties encompassing approximately 33.9 million rentable square feet and 895 
acres (and had agreed to purchase an additional 395 acres) of undeveloped land  
suitable for future development. In addition, as of March 31, 1998, an          
additional 32 properties, which will encompass approximately 3.6 million        
rentable square feet, were under development. The Highwoods Properties are      
located in 19 markets in North Carolina, Florida, Tennessee, Georgia, Virginia, 
South Carolina, Maryland and Alabama. As of March 31, 1998, the Highwoods       
Properties were 93% leased to approximately 3,400 tenants.                      

Highwoods conducts substantially all of its activities through, and   
substantially all of its interests in the Highwoods Properties are held         
directly or indirectly by, the Highwoods Operating Partnership. Highwoods is    
the sole general partner of the Highwoods Operating Partnership and as of March 
31, 1998, owned approximately 83% of the Common Units in the Highwoods          
Operating Partnership. The remaining Common Units are owned by limited partners 
(including certain officers and directors of Highwoods). Each Common Unit may   
be redeemed by the holder thereof for the cash value of one share of Highwoods  
Common or, at Highwoods' option, one share (subject to certain adjustments) of  
Highwoods Common. With each such exchange, the number of Common Units owned by  
Highwoods and, therefore, Highwoods' percentage interest in the Highwoods       
Operating Partnership, will increase.                                           

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

Highwoods is a Maryland corporation that was incorporated in 1994. The
Highwoods Operating Partnership is a North Carolina limited partnership formed  
in 1994. Highwoods' and the Highwoods Operating Partnership's executive offices 
are located at 3100 Smoketree Court, Suite 600, Raleigh, North Carolina 27604,  
and their telephone number is (919) 872-4924. Highwoods maintains offices in    
each of its primary markets.                                                    

Operating Strategy                                                              

    Upon completion of the Merger, Highwoods believes that it will continue to
benefit from the following factors:                                             

 Diversification. Since its initial public offering (the "IPO") in 1994,
Highwoods has significantly reduced its dependence on any particular market,    
property type or tenant. At the time of the IPO, Highwoods' portfolio consisted 
almost exclusively of office properties in the Research Triangle. As of March   
31, 1998, Highwoods' in-service portfolio had expanded from 41 North Carolina   
properties (40 of which were in the Research Triangle) to 530 properties in 19  
markets concentrated in the Southeast. Based on March 1998 results,             
approximately 30.5% of the rental revenue from the Highwoods Properties is      
derived from properties in North Carolina (16.8% in the Research Triangle).     

  In October 1997, Highwoods significantly expanded its Florida operations
through its business combination with Associated Capital Properties, Inc.       
("ACP"). In February 1997, Highwoods made a significant investment in the       
suburban Atlanta market with the acquisition of the Century Center Office Park  
and a business combination with Anderson Properties, Inc. Highwoods 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, Highwoods 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. Highwoods has focused on markets that, like the Research  
Triangle, have strong demographic and economic characteristics.                 

 Highwoods' strategy has been to assemble a portfolio of properties that
enables Highwoods 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 Highwoods' combination 
with Forsyth in February 1995, which added industrial and service center        
properties (as well as additional office properties) to its suburban office     
portfolio. Based on March 1998 results, approximately 91% of Highwoods' rental  
revenue is derived from office properties and 9% is derived from industrial     
properties.                                                                     

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Highwoods 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 March 31, 1998, the 20 largest tenants of   
the Highwoods Properties represented approximately 20.7% of the combined rental 
revenue from the Highwoods Properties, and the largest single tenant accounted  
for approximately 3.5% of such revenue.                                         

Acquisition and Development Opportunities. Highwoods seeks to acquire 
suburban office and industrial properties at prices below replacement cost that 
offer attractive returns, including acquisitions of under-performing, high      
quality properties in situations offering opportunities for Highwoods to        
improve such properties' operating performance. Highwoods 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 Highwoods has identified sufficient demand. In      
build-to-suit development, the building is significantly pre-leased to one or   
more tenants prior to construction. Build-to-suit projects often foster strong  
long-term relationships between Highwoods and the tenant, creating future       
development opportunities as the facility needs of the tenant increase.         

Highwoods believes that it has several advantages over many of its    
competitors in pursuing development and acquisition opportunities. Highwoods    
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       
revolving loans, other bank and institutional borrowings and the issuance of    
Common Units. Frequently, Highwoods acquires properties through the exchange of 
Common Units in the Highwoods Operating Partnership for the property owner's    
equity in the acquired properties. As discussed above, each Common Unit         
received by these property owners is redeemable for cash from Highwoods or, at  
Highwoods' option, shares of Highwoods Common. In connection with these         
transactions, Highwoods may also assume outstanding indebtedness associated     
with the acquired properties. Highwoods believes that this acquisition method   
may enable it to acquire properties at attractive prices from property owners   
wishing to enter into tax-deferred transactions. As of March 31, 1998, Common   
Units had constituted all or part of the consideration for 239 properties       
comprising 16.9 million rentable square feet and only 1,200 of such Common      
Units have been redeemed for cash, totaling $35,000.                            

Another advantage is Highwoods' commercially zoned and unencumbered   
Highwoods Development Land in existing business parks. As of March 31, 1998,    
Highwoods owned 895 acres (and had agreed to purchase an additional 395 acres)  
of Highwoods Development Land, approximately 1,100 acres of which have utility  
infrastructure already in place.                                                

 Highwoods' development and acquisition activities also benefit from its
local market presence and knowledge. Highwoods' property-level officers have on 
average over 18 years of real estate experience in their respective markets.    
Because of this experience, Highwoods is in a better position to evaluate       
acquisition and development opportunities. In addition, Highwoods'              
relationships with its tenants and 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. Highwoods' 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 Highwoods 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, Highwoods 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 Highwoods Properties has   
been developed by Highwoods or is managed on a day-to-day basis by personnel    
that previously managed, leased and/or developed these Highwoods Properties     
prior to their acquisition by Highwoods.                                        

 Efficient, Customer Service-Oriented Organization. Highwoods provides a
complete line of real estate services to its tenants and third parties.         
Highwoods 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 Highwoods' capabilities and resources provides it with market        
information not generally available. Highwoods 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. Highwoods 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.                                                

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Highwoods and the Highwoods Operating Partnership have demonstrated a 
strong and consistent ability to access the private and public equity and debt  
markets. Since the IPO, Highwoods has completed 11 public offerings and two     
private placements of its Highwoods Common, one public offering of 8 5/8%       
Series A Cumulative Redeemable Preferred Shares, one public offering of 8%      
Series B Cumulative Redeemable Preferred Shares, and one public offering of     
4,000,000 Depositary Shares (each representing  1/10 of an 8% Series D          
Cumulative Redeemable Preferred Share), raising total net proceeds of           
approximately $1.5 billion, which were contributed to the Highwoods Operating   
Partnership in exchange for additional partnership interests as required under  
the Highwoods Operating Partnership Agreement. On December 2, 1996, the         
Highwoods 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 Highwoods Operating Partnership issued $125 million of 6.835%      
MandatOry Par Put Remarketed SecuritiesSM ("MOPPRSSM") due February 1, 2013 and 
$100 million of 7 1/8% notes due February 1, 2008. On April 20, 1998, the       
Highwoods Operating Partnership issued $200 million of 7 1/2% Notes due April   
15, 2018.                                                                       

 On June 24, 1997, a trust formed by the Highwoods 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 Highwoods 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, Highwoods has two unsecured revolving lines of credit    
aggregating $430 million with a syndicate of lenders (the "Revolving Loans").   
Interest accrued on borrowings under a $280 million Revolving Loan at an        
average rate of LIBOR plus 100 basis points and under a $150 million Revolving  
Loan at an average rate of LIBOR plus 90 basis points. As of May 13, 1998,      
interest on the outstanding balance on the Revolving Loans was payable monthly  
at a weighted average interest rate of 6.65%.                                   

DESCRIPTION OF JCN

General                                                                         
JCN is a real estate operating company engaged in the acquisition,    
development, ownership, and management of a diversified portfolio of real       
estate properties, principally located in the Kansas City, Missouri             
metropolitan area. JCN's real estate development activities were initiated in   
1902. JCN was incorporated in Missouri in 1908 and its principal office has     
been at 310 Ward Parkway, Kansas City, Missouri since July 1930.                

 JCN is best known for its development, ownership, and management of the
Plaza, a prestigious shopping, entertainment and office district in Kansas      
City. The Plaza is surrounded principally by single family residences,          
condominiums and upscale apartments, many of which are owned by JCN. The Plaza  
is generally regarded as the oldest major suburban shopping center in the       
United States.                                                                  

At December 31, 1997, JCN and its consolidated subsidiaries owned 16  
retail centers consisting of approximately 2,500,000 square feet of retail      
space (including basement space) occupied by approximately 400 tenants, 14      
apartment communities (including a majority interest in a partnership owning a  
Des Moines, Iowa area apartment complex) representing approximately 2,300       
units, 31 office properties (including majority interests in partnerships       
owning seven Des Moines, Iowa area office buildings) consisting of              
approximately 1,462,000 square feet of space occupied by over 500 tenants, two  
industrial and warehouse properties consisting of approximately 337,000 square  
feet of space occupied by 48 tenants, three residential developments containing 
169 lots available for sale, and over 1,000 acres available for residential and 
commercial development, as well as complete or partial ownership in several     
other minor properties. JCN also owns six unsold units in its Alameda Towers    
condominium project.                                                            

   JCN also owns an equity interest in eleven active entities whose holdings
are not consolidated with the financial statements of JCN. The largest of these 
holdings are JCN's approximately 50% interest in six partnerships which own     
properties in the Des Moines, Iowa area. At December 31, 1997, these            
partnerships owned fifteen buildings consisting of 936,000 square feet of       
offices, 200,000 square feet of industrial space, 26 acres currently under      
development or ground lease, and approximately 80 acres to be developed. The 80 
acres are located in four separate developments in the Des Moines, Iowa area.   
Of the 80 acres, 34 acres are planned for additional industrial buildings in    
two industrial parks, 8 acres are planned for office development upon the       
exercise of an option by the sole tenant of the adjacent office building, and   
38 acres are planned for development as an office complex with related retail   
development. Approximately 52,400 square feet of speculative office space in    
the Des Moines, Iowa area was started and completed in 1997 and the entire      
building was leased to a single tenant. In addition, in 1997, approximately     
60,000 square feet of speculative office space in the Des Moines, Iowa area was 
started and substantially completed and is expected to be fully leased up       
during 1998. Also in process in the Des Moines,                                 

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Iowa area is the construction of a 160,000 square foot industrial building and  
a 35,000 square foot retail center. Additional speculative industrial space     
will be constructed in 1998 when the 160,000 square foot building is            
substantially leased. There are also plans to construct approximately 47,000    
square feet of speculative office space during 1998 in the Des Moines, Iowa     
area and when it is significantly leased, additional speculative office space   
will be constructed. In addition to the Des Moines, Iowa area properties, one   
of JCN's eleven unconsolidated affiliates is a 40% interest in J.C. Nichols     
Real Estate, a residential sales and brokerage business in Kansas City. J.C.    
Nichols Real Estate also has an interest in an entity which owns a mortgage     
origination company.                                                            

Business Strategy                                                               

   Management strives to increase the equity value of JCN's income producing
portfolio by increasing the net operating income from existing properties,      
increasing the number of properties in its portfolio, and by reducing the       
amount of debt associated with its existing properties. The number of           
properties in JCN's portfolio is expected to increase by both the acquisition   
and development of revenue-producing properties, as well as by the acquisition  
of land for development and resale principally in the Midwest, and              
predominately in the Kansas City metropolitan area.                             

   Management believes JCN's strategy of enhancing its existing portfolio of
properties and focusing initially on acquisitions and developments in Kansas    
City and surrounding markets allows JCN to best capitalize on its reputation    
for quality and its employees' in-depth knowledge and experience in those       
markets. Management also believes that by developing, owning, and managing a    
diverse portfolio of properties in a relatively small geographic area, it can   
better control the overall character of JCN's developments and thus create      
greater value.                                                                  

Recent Developments                                                             

  In August of 1997, JCN announced the outsourcing of its Kansas City area
apartment management function. Previously, JCN's employees had provided leasing 
and management services for all Kansas City area apartment properties owned by  
JCN. These functions are now performed by RAM Partners, Inc., an affiliate of   
Post Properties, Inc. JCN believes that this strategic decision will result in  
improved operating efficiency and profitability.                                

   In November of 1997, JCN announced an agreement with Kessinger/Hunter and
Company, Inc. ("Kessinger/Hunter"), a long-standing Kansas City real estate     
brokerage, management and development firm, to form a limited liability company 
("LLC") in which JCN would initially own a 30% interest. The LLC will provide   
services to previous Kessinger/Hunter clients, as well as management and        
leasing for JCN's Kansas City area portfolio of office, industrial, and retail  
centers, exclusive of the Plaza. The acquisition provides JCN an immediate      
platform from which to grow its management, leasing, and brokerage services to  
third party property owners and investors.                                      

 JCN's comprehensive Plaza redevelopment plan continues to progress. The
projects covered by this plan will be supplemented by tax increment financing   
("TIF"). JCN has begun construction on Valencia Place, a project containing     
approximately 270,000 square feet of Class A office space and 80,000 square     
feet of retail space. JCN has preleased approximately 100,000 square feet of    
the office space. JCN has also begun construction to re-position the Seville    
Square building on the Plaza. The new Seville Square will be anchored by a      
70,000 square foot theater complex with 15 screens. Plans for JCN's upscale 350 
unit Plaza area apartment community continue to progress and construction is    
expected to begin in 1998.                                                      

Competition                                                                     

Substantially all of JCN's properties are located in the Kansas City  
metropolitan area, except those held in its Iowa investment partnerships. The   
Kansas City market area is a highly competitive one for real estate and real    
estate services. JCN's retail properties face increasing competition from newer 
upscale shopping centers, discount shopping centers, outlet malls, catalogues,  
discount shopping clubs, and telemarketing. All of JCN's retail properties      
overlap to some degree with the trade area of other shopping centers.           
Renovations and expansions at existing competing centers as well as the         
development of new centers in JCN's market area could negatively affect         
revenues of JCN.                                                                

JCN's office building properties compete for tenants principally with 
office buildings in the same general geographic location. In many areas where   
JCN's office buildings are located, there have been new office buildings built  
and planned office building construction which have and will continue to        
increase the supply of rentable office space, potentially placing downward      
pressure on market rental rates.                                                

JCN's apartment properties compete with numerous other apartment      
properties within the same market area. Those other apartment properties could  
have a material effect on the rental rates charged by JCN, as well as JCN's     
ability to rent its apartment properties.                                       

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   JCN competes directly with developers and other buyers in the acquisition
of development sites for retail, office, and apartment development and for      
financing sources.                                                              

With respect to all of its real estate operations, JCN competes for   
tenants and property acquisitions with others who may have greater resources    
than JCN and whose management may have more experience in operating and         
acquiring properties than JCN's management.                                     

Regulation and Legislation                                                      

Federal, state, and local statutes and regulations relating to        
environmental protection have not had a material impact on the businesses of    
JCN. However, existing properties and future development of other opportunities 
by JCN may require additional capital and other expenditures in order to comply 
with such statutes and regulations. It is impossible at this time to predict    
with any certainty the magnitude of any such expenditures or the long range     
effect, if any, on JCN's operations. JCN is currently not aware of any material 
violation of any applicable environmental statute or regulation with respect to 
any of its properties owned, managed, or held for development.                  

  The federal government and the states in which JCN operates have adopted
handicapped facilities and energy laws and regulations impacting the use and    
development of real estate. These laws and regulations may operate to reduce    
the number, attractiveness, and investment potential of properties and          
developments available to JCN. JCN has reviewed the properties it owns or in    
which it has an interest to determine the extent and amount of capital          
expenditures necessary to comply with the aforementioned laws and regulations.  
These expenditures, which will be incurred by JCN over the course of the next   
several years as modifications to such properties are undertaken, are not       
expected to be material in any single year.                                     

General Conditions                                                              

General economic conditions and trends, including interest rates,     
inflation, availability of credit, real estate trends, construction costs,      
income tax laws, governmental regulations and legislation, increases or         
decreases in operating expenses, zoning laws, population trends, and the        
ability of JCN to attract tenants and purchasers for its properties, among      
other factors, will affect JCN's success.                                       

Generally, JCN's business and that of the industry is not seasonal in 
nature.                                                                         

Reliance on Customers or Tenants                                                

   None of JCN's business segments depends upon a sole customer or tenant or
a few customers or tenants, the loss of which would materially adversely affect 
the business or financial condition of JCN. No single customer or tenant        
accounts for 5% or more of the consolidated revenues of JCN.                    

Employees                                                                       

   JCN and consolidated subsidiaries directly employed 159 full or part-time
employees as of December 31, 1997 as compared to 300 at December 31, 1996. The  
decrease is primarily a result of outsourcing the management and leasing        
functions for JCN's Kansas City area apartment properties and the agreement     
with Kessinger/Hunter in which the newly created LLC will perform the           
management and leasing functions for JCN's Kansas City area portfolio of        
office, industrial, and retail centers, exclusive of the Plaza.                 

Properties                                                                      

JCN's income producing properties include retail centers, apartments, 
office buildings, industrial properties, and mixed-use projects. JCN is also    
engaged in the development and sale of land for residential and commercial use. 
The number of properties in JCN's portfolio is expected to increase by both the 
acquisition and development of revenue-producing properties as well as by the   
acquisition of land for development and resale principally in the Midwest, and  
predominantly in the Kansas City Metropolitan Area. Management of JCN has       
sought to reduce the amount of debt associated with existing properties;        
however, no policy exists setting a limit on the number or amount of mortgages  
that may be placed on any one property. JCN seeks to acquire assets primarily   
for their revenue-producing capability and has no specific policy as to the     
amount or percentage of assets invested in any specific property. The objective 
of JCN management is to earn a normalized annual cash flow rate of return of at 
least 8.5% on new acquisitions of income-producing properties and higher rates  
of return on properties that JCN develops. JCN has in the past entered, and may 
in the future enter, into partnerships or invest in other entities involved in  
real estate activities. JCN has entered into partnerships related to its Des    
Moines, Iowa investments, and has invested in Kessinger/Hunter and J.C. Nichols 
Real Estate. Any such future investment will be based on its ability to provide 
an appropriate rate of return to JCN. JCN does not seek to invest in securities 
of other companies.                                                             

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                                                                                                                         Percent 
                                           Ownership   Company's      Year        Year     Land area       Rentable     leased at
Name/location                               interest   ownership   developed    acquired    (acres)     area (sq. ft)   12/31/97 
----------------------------------------- ----------- ----------- ----------- ----------- -----------  --------------- ----------
                                                                                                                                 
RETAIL                                                                                                                           
Kansas City, Missouri                                                                                                            
 Country Club Plaza                                                                                                              
 (Retail only, includes                                                                                                          
 basement space)                                                                                                                 
   Millcreek Block ......................    Fee         100%        1920      1906-1910       0.971        51,114          78%  
   Triangle Block .......................    Fee         100         1925      1906-1910       0.435        25,634         100   
   Balcony Block ........................    Fee         100         1925      1906-1910       1.068        38,571         100   
   Macy Building ........................    Fee         100         1926      1906-1910       0.555        71,365         100   
   Esplanade Block ......................    Fee         100         1928      1906-1910       1.838       145,694         100   
   Plaza Central ........................    Fee         100         1958      1906-1910       1.478         9,653          88   
   Theatre Block ........................    Fee         100         1928      1906-1910       1.223        99,699          87   
   Swanson Block ........................    Fee         100         1967      1906-1910       1.373        78,020         100   
   Halls Building .......................    Fee         100         1964      1906-1910       1.346        73,680         100   
   Nichols Block ........................    Fee         100         1930      1906-1910       1.161        59,085         100   
   Time Block ...........................    Fee         100         1929      1906-1910       2.859       249,844         100   
   48th & Penn ..........................    Fee         100         1948      1906-1910       0.560        37,654          76   
   Seville Shops West ...................    Fee         100         1980      1906-1910       2.972        19,517         100   
   Plaza Savings South ..................    Fee         100         1948      1906-1910       0.853        39,967         100   
   Court of the Penguins ................    Fee         100         1945           1975       0.678        28,707          92   
   Seville Square .......................    Fee         100         1945           1975       0.832        90,838          36   
 Colonial Shops .........................    Fee         100         1907           1907       0.517        14,160         100   
 Crestwood Shops ........................    Fee         100         1932           1923       1.079        20,261         100   
 Brookside Shops (Retail Only) ..........    Fee         100         1919           1920      10.000       159,254         100   
 Romanelli Shops ........................    Fee         100         1925           1925       1.500        24,360          98   
 Red Bridge Shops (Retail Only) .........    Fee         100         1959           1959      21.592       153,015          97   
 Romanelli Annex (Retail Only)               Fee         100         1963           1993       1.000         4,500         100   
Shawnee Mission, Kansas                                                                                                          
 Westwood Shops .........................    Fee         100         1926           1926       0.626         5,773         100   
 Fairway Shops ..........................    Fee         100         1940           1940       3.558        49,582          97   
 Prairie Village Shops (Retail Only)         Fee         100         1948           1948      21.375       363,311          97   
 Corinth Square Shops ...................    Fee         100         1962           1955      24.987       231,550         100   
 Kenilworth Shops .......................    Fee         100         1965           1972       1.788        13,136         100   
 Corinth Shops South ....................    Fee         100         1953           1953       6.880        86,390          93   
 Trailwood Shops ........................    Fee         100         1968           1972       8.855        57,583         100   
 Trailwood III Shops ....................    Fee         100         1986           1972       2.946        25,279          72   
 96th & Nall Shops ......................    Fee         100         1976           1981       1.027         7,202         100   
 Shannon Valley Shops ...................    Fee         100         1988           1988      11.378        98,127          99   
 Oak Park Mall Land Lease ...............    Fee         100         1959           1959     109.000         N/A           100   
 Georgetown Market Place ................    Fee         100         1974           1965      12.191       101,613          98   
INDUSTRIAL                                                                                                                       
Kansas City, Missouri                                                                                                            
 Bannister Business Center ..............    Fee         100         1985           1985       4.365        32,346          65   
Shawnee Mission, Kansas                                                                                                          
 Quivira Business Park                                                                                                           
   Building A ...........................    Fee         100%        1975           1973       1.695        20,848         100%  
   Building B ...........................    Fee         100         1973           1973       2.064        12,960          75   
   Building C ...........................    Fee         100         1973           1973       1.589        20,778         100   
   Building D ...........................    Fee         100         1973           1973       1.597        20,798          97   
   Building E ...........................    Fee         100         1973           1973       2.156        28,797          88   
   Building F ...........................    Fee         100         1973           1973       2.346        29,876         100   
   Building G ...........................    Fee         100         1973           1973       1.913        21,136         100   

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                                                                                                                      Percent 
                                       Ownership    Company's       Year       Year     Land area       Rentable     leased at
Name/location                           interest    ownership   developed    acquired    (acres)    area (sq. ft)    12/31/97 
------------------------------------- ----------- ------------- ----------- ---------- -----------  --------------- ----------
                                                                                                                              
   Building H .......................    Fee           100            1973    1973         2.485         26,060         100   
   Southwestern Bell ................    Fee           100            1973    1973         3.127         58,644           0   
   Building J .......................    Fee           100            1973    1973         2.953         46,764         100   
   Building K .......................    Fee           100            1985    1965         1.179          9,017         100   
   Building L .......................    Fee           100            1985    1965         1.223          8,891         100   
Urbandale, Iowa                                                                                                               
 Meredith Drive .....................    Fee          49.5(1)         1986    1985        13.910        200,000         100   
OFFICE                                                                                                                        
Kansas City, Missouri                                                                                                         
 Country Club Plaza (Office only)                                                                                             
   Millcreek Block ..................    Fee           100            1925    1925         N/A           11,463(2)       74   
   Balcony Block ....................    Fee           100            1928    1928         N/A           10,096(2)       97   
   Esplanade Block ..................    Fee           100            1945    1945         N/A           37,133(2)       92   
   Theatre Block ....................    Fee           100            1928    1928         N/A           29,740(2)      100   
   Nichols Block ....................    Fee           100            1938    1938         N/A           13,310(2)      100   
   Time Block .......................    Fee           100            1945    1945         N/A           25,964(2)       95   
 Parkway Building ...................    Fee           100       1906-1910    1955         0.588         26,365(2)       96   
 Brookside (Office Only) ............    Fee           100            1919    1919         N/A            6,796(2)      100   
 Romanelli Annex (Office Only)           Fee           100            1963    1993         N/A            7,948         100   
 Two Brush Creek ....................    Fee           100            1983    1983         1.500         63,325          84   
 One Ward Parkway ...................    Fee           100            1980    1980         1.500         54,580(2)       97   
 Red Bridge Professional ............    Fee           100            1972    1976         1.428         40,693(2)       95   
 Park Plaza .........................    Fee           100            1983    1983         0.952         80,315          99   
 4900 Main (includes vacant                                                                                                   
   commercial ground) ...............    Fee           100            1986    1985         5.000        182,153         100   
 Board of Trade .....................    Fee            49(1)         1966    1966         3.000        147,642(2)       99   
 Plaza West (includes vacant                                                                                                  
   commercial ground) ...............    Fee          12.5(1)         1988    1989         4.140        257,932          94   
 Junior League Building .............    Fee          12.5(1)         1928    1989         0.368          5,400         100   
Shawnee Mission, Kansas                                                                                                       
 Prairie Village (Office Only) ......    Fee           100            1956    1956         1.500          9,265(2)       51   
 Corinth Office Building ............    Fee           100            1960    1984         2.142         45,600(2)      100   
 Corinth Executive Building .........    Fee           100            1973    1986         3.638         44,441(2)       98   
 Nichols Building ...................    Fee           100            1978    1979         3.941         37,964(2)      100   
 Prairie Village Office Center ......    Fee           100            1960    1981         4.443         69,002(2)       90   
 Brymar Building ....................    Fee           100            1968    1984         1.500         55,890         100   
 7315 Building ......................    Fee           100            1978    1975         4.322         44,441(2)      100   
 Fairway West .......................    Fee           100(3)         1983    1948         5.483         67,519          84   
 Fairway North ......................    Fee           100(3)         1985    1948         4.141         61,225          93   
 Oak Park Bank Building .............    Fee           100            1976    1978         4.038         28,555(2)       97   
Des Moines, Iowa                                                                                                              
 Terrace Place ......................    Fee            50%(1)        1987    1987         1.500         51,058          63   
West Des Moines, Iowa                                                                                                         
 Crestwood Building .................    Fee            90(1)         1987    1987         3.208         30,128          89%  
 Highland Building ..................    Fee            90(1)         1987    1987         6.120         72,637          86   
 Waterford Building .................    Fee            60(1)         1990    1988         4.414         53,459          92   
 Edgewater Building .................    Fee            60(1)         1989    1988         8.629        102,400          97   
 Veridian Building ..................    Fee            60(1)         1989    1988         7.480         78,115          82   
 Sunset Building ....................    Fee            60(1)         1989    1988         1.763         10,727         100   
 Norwest Day Care Center ............    Fee            50(1)         1994    1994         1.030          6,500         100   
 Wedgewood Building .................    Fee            50(1)         1994    1994         5.170         50,020         100   
 Coronado Building ..................    Fee            50(1)         1994    1994         2.500         25,512         100   

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                                       Ownership   Company's      Year                             
Name/location                           interest   ownership  developed                            
------------------------------------- ----------- ----------- -----------                          
                                                                                                   
 Bristol Building ...................    Fee           50(1)        1992                           
 Ashford Building I .................    Fee           50(1)        1993                           
 Ashford Building II ................    Fee           50(1)        1994                           
 Augusta Building ...................    Fee           50(1)        1994                           
 Neptune Building ...................    Fee           85(1)        1986                           
 Norwest Card Services Building .....    Fee           50(1)        1993                           
 Norwood Building I .................    Fee           50(1)        1996                           
 Norwood Building II ................    Fee           50(1)        1996                           
 Palisade Building ..................    Fee           50(1)        1983                           
 Cambridge Building .................    Fee           50(1)        1997                           
 Brookview Building .................    Fee           50(1)        1997                           
APARTMENTS                                                                                         
Kansas City, Missouri                                                                              
 Coach House South ..................    Fee          100(3)   1986-1987                           
 Coach House ........................    Fee          100(3)        1984                           
 Coach Lamp .........................    Fee          100           1961                           
 Neptune ............................    Fee          100           1988                           
 Regency ............................    Fee          100           1960                           
 Sulgrave ...........................    Fee          100           1967                           
 Park Lane ..........................    Fee          100           1924                           
 Plaza North:                                                                                      
   Penn Wick ........................    Fee          100        1960's                            
   Cole Gardens .....................    Fee          100           1960                           
   Tama .............................    Fee          100        1960's                            
   Wornall Road .....................    Fee          100           1918                           
   Saint Charles ....................    Fee          100           1922                           
Shawnee Mission, Kansas                                                                            
 Corinth Gardens ....................    Fee          100           1961                           
 Kenilworth .........................    Fee          100           1965                           
 Corinth Place ......................    Fee          100(3)        1987                           
 Mission Valley .....................    Fee          100           1964                           
 Corinth Paddock ....................    Fee          100           1973                           
Johnston, Iowa                                                                                     
 Winwood Apartments .................    Fee           65(1)   1986-1987                           
REAL ESTATE LOTS AND                                                                               
MISCELLANEOUS                                                                                      
Shawnee Mission, Kansas                                                                            
 Whitehorse (Residential) ...........    Fee          100%          1994                           
 Whitehorse (Unplatted) .............    Fee          100         N/A                              
 Whitehorse (Commercial &                                                                          
   Multifamily) .....................    Fee          100         N/A                              
 Green Meadows ......................    Fee          100      1986-1996                           
 Lionsgate (Residential-                                                                           
   under contract) ..................    Fee          100         N/A                              
 Lionsgate (Commercial) .............    Fee          100         N/A                              
 Woodsonia (Residential) ............    Fee          100      1985-1996                           
 Woodsonia (Unplatted) ..............    Fee          100         N/A                              
 Woodsonia (Commercial and                                                                         
   Residential) .....................    Fee          100      1985-1996                           
 Clear Creek ........................    Fee          100         N/A                              


                                                                                           Percent 
                                          Year           Land area           Rentable     leased at
Name/location                           acquired          (acres)        area (sq. ft)    12/31/97 
------------------------------------- ------------ --------------------- --------------- ----------
                                                                                                   
 Bristol Building ...................       1992             5.210             51,400        100   
 Ashford Building I .................       1993             3.990             41,400        100   
 Ashford Building II ................       1994             4.110             41,400        100   
 Augusta Building ...................       1994             4.930             50,800         70   
 Neptune Building ...................       1986             6.530             61,430        100   
 Norwest Card Services Building .....       1993            35.250            272,490        100   
 Norwood Building I .................       1996             4.420             42,400         90   
 Norwood Building II ................       1996             4.420             42,400         80   
 Palisade Building ..................       1996            18.000            147,215         99   
 Cambridge Building .................       1997             5.320             52,400          0   
 Brookview Building .................       1997             6.460             60,640          0   
APARTMENTS                                                                                         
Kansas City, Missouri                                                                              
 Coach House South ..................  1986-1987            35.276          489 Units         98   
 Coach House ........................       1984             8.930          160 Units         96   
 Coach Lamp .........................       1962             8.500          158 Units         96   
 Neptune ............................       1988         N/A                 96 Units         98   
 Regency ............................       1976             1.150          131 Units         96   
 Sulgrave ...........................       1976             1.410          144 Units         95   
 Park Lane ..........................       1975             0.300           89 Units        100   
 Plaza North:                                                                                      
   Penn Wick ........................       1987             0.150           6 Units         100   
   Cole Gardens .....................       1986             0.200           8 Units          88   
   Tama .............................       1979             0.140           7 Units          86   
   Wornall Road .....................       1968             0.220           17 Units         94   
   Saint Charles ....................       1971             0.150           12 Units        100   
Shawnee Mission, Kansas                                                                            
 Corinth Gardens ....................       1995             3.722           52 Units        100   
 Kenilworth .........................       1972            17.219          246 Units         97   
 Corinth Place ......................       1987             7.888           76 Units         94   
 Mission Valley .....................       1972             5.300           89 Units         95   
 Corinth Paddock ....................       1995            10.128          126 Units         95   
Johnston, Iowa                                                                                     
 Winwood Apartments .................       1985            31.237          418 Units         90   
REAL ESTATE LOTS AND                                                                               
MISCELLANEOUS                                                                                      
Shawnee Mission, Kansas                                                                            
 Whitehorse (Residential) ...........       1983           33.000(lots)        N/A           N/A   
 Whitehorse (Unplatted) .............       1984            76.600             N/A           N/A   
 Whitehorse (Commercial &                                                                          
   Multifamily) .....................       1983            26.600             N/A           N/A   
 Green Meadows ......................       1984           85.000(lots)        N/A           N/A   
 Lionsgate (Residential-                                                                           
   under contract) ..................       1989            64.000             N/A           N/A   
 Lionsgate (Commercial) .............       1989           109.200             N/A           N/A   
 Woodsonia (Residential) ............       1981           51.000(lots)        N/A           N/A   
 Woodsonia (Unplatted) ..............       1981            16.450             N/A           N/A   
 Woodsonia (Commercial and                                                                         
   Residential) .....................       1981            67.800             N/A           N/A   
 Clear Creek ........................       1981           371.000             N/A           N/A   

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                                                                                                                        Percent 
                                     Ownership     Company's        Year        Year      Land area       Rentable     leased at
Name/location                         interest     ownership    developed     acquired     (acres)    area (sq. ft)    12/31/97 
----------------------------------- ----------- --------------- ----------- ------------ -----------  --------------- ----------
                                                                                                                                
Kansas City, Missouri                                                                                                           
 Alameda Towers (10                                                                                                             
   condominiums for sale) .........    Fee             100       1988-1996        1988    10 Units          N/A          N/A    
 54 Rental Houses .................    Fee             100          N/A      1928-1989       10.800         N/A            43%  
 Vacant Commercial Land and Land                                                                                                
   Leases .........................    Fee             100            1974   1954-1972       49.400         N/A           100   
 Building Lease ...................    Fee             100          N/A           1929        2.928         1,200         100   
Lee's Summit, Missouri                                                                                                          
 Lakewood Sales Office (includes                                                                                                
   vacant residential land) .......    Fee             100            1975        1993        8.738         1,363         100   
Shawnee Mission, Kansas                                                                                                         
 Vacant Commercial Land and Land                                                                                                
   Leases .........................    Fee             100       1956-1972   1956-1972      237.790         N/A           100   
 Corinth Place Villas (2 rental                                                                                                 
   condominiums) ..................    Fee             100            1989        1957        0.267         N/A           100   
 Farm House and Buildings .........    Fee             100            1940   1981-1983       N/A            N/A          N/A    
Olathe, Kansas                                                                                                                  
 Land Leases ......................    Fee             100            1960        1995        1.070         N/A           100   
Osage City, Kansas                                                                                                              
 Manufactured Homes Plant .........    Fee             100(4)         1985        1985       29.800         N/A          N/A    
Stone County, Missouri                                                                                                          
 Ozark Mountain Village Lots ......    Fee             100       1986-1995        1986       60.000         N/A          N/A    
Miami County, Kansas                                                                                                            
 810 Acre Farm (Someday, Inc.) ....    Fee             100          N/A           1994      810.000         N/A           100   
West Des Moines, Iowa                                                                                                           
 Vacant Commercial Land ...........    Fee              50(1)       N/A      1984-1985       44.370         N/A          N/A    
 Land Lease .......................    Fee              50(1)       N/A           1984        8.000         N/A          N/A    
Urbandale, Iowa                                                                                                                 
 Vacant Commercial Land ...........    Fee            49.5%(1)      N/A           1985       12.000         N/A          N/A    
 Land Lease .......................    Fee              50(1)       N/A           1997        9.550         N/A           100   
 Vacant Commercial Land ...........    Fee              50(1)       N/A           1997       31.690         N/A          N/A    
St. Petersburg, Florida                                                                                                         
 Vacant Land ......................    Fee             100%         N/A           1990        0.100         N/A          N/A    
 Women's Tennis Association .......    Fee              50(1)         1990        1990        0.750       133,697          99   

---------                                                                       
(1)  The indicated percentage interest in the property reflects the interest of 
JCN in the entity that owns the property.                             

(2)  This square footage represents useable rather than rentable square         
footage.                                                              

(3)  JCN shares 50% of the cash flow from these properties with an outside      
  company providing credit enhancement support related to the financing of
these properties.                                                     

(4)  JCN owns a 99% profit-sharing interest and a 100% loss-sharing interest in 
the partnership owning this facility.                                 

In the opinion of management, all properties of JCN listed above are  
adequately insured.                                                             

   JCN's only property that provided 10% or more of total 1997 rental income
or 10% or more of the total gross book value of land and building assets of JCN 
at December 31, 1997 is the Plaza, when the multiple blocks of the Plaza are    
considered to be a single property.                                             

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   The following table summarizes the principal types of business located on
the Plaza at December 31, 1997, and the percentage of total square footage      
occupied by each principal type of business.                                    

                                                                [Download Table]

         Type of business           % of total square footage
---------------------------------- --------------------------
                                                             
  Anchor (Department Stores) .....              23%          
  Miscellaneous Retail ...........              13           
  Office Space ...................              15           
  Restaurants and Food ...........              14           
  Apparel ........................              11           
  Specialty Items ................              10           
  Vacant Space ...................               6           
  Bookstores .....................               3           
  Home Accessories ...............               3           
  Art Galleries ..................               2           
                                                --           
  Total ..........................             100%          
                                               ===           

The following table summarizes the Plaza's occupancy rates and average
rental rates per square foot (showing only "minimum" rents or rents excluding   
the percentage component and operating expense recoveries) for the last five    
years. These figures include both the retail and office portions of the Plaza.  

                                                        [Enlarge/Download Table]

                                        1997       1996       1995       1994       1993   
                                     ---------- ---------- ---------- ---------- ----------
                                                                                           
Occupancy Percentage ...............       95%        96%        95%        93%        94% 
Average Rental Rate Per Square Foot                                                        
  (Exclusive of Basement Space) ....  $ 12.02    $ 11.45    $ 11.29    $ 10.83    $ 10.20  

The following table sets forth for each of the next ten years and all 
years thereafter (i) the number of leases on the Plaza that expire in each      
period; (ii) the square feet covered by such expiring leases (excluding         
basement space); (iii) the gross annual minimum rent revenue represented by     
such leases; and (iv) the percentage of total gross annual minimum rent revenue 
from such expiring leases based on December 31, 1997 rents. No single tenant    
leases more than ten percent of the total rentable square footage at the Plaza. 

                                                        [Enlarge/Download Table]

                                                                         % of total    
                                                                         annualized    
                     No. of      Approximate    Annualized minimum      minimum rent   
                     leases      leased area        rent under          represented    
Date                expiring   in square feet     expiring leases    by expiring leases
------------------ ---------- ---------------- -------------------- -------------------
                                                                                       
  1998 ...........      68         124,188         $  1,173,739              10%       
  1999 ...........      27         130,791              983,971               8        
  2000 ...........      32          84,799            1,564,752              13        
  2001 ...........      22          68,752            1,214,220              10        
  2002 ...........      17          34,976              736,863               6        
  2003 ...........      10          54,793            1,043,162               9        
  2004 ...........       9          50,439              859,905               7        
  2005 ...........      10          42,920              691,964               6        
  2006 ...........       9          43,050              856,334               7        
  2007 ...........      10          38,877              512,811               5        
  Thereafter .....      17         235,433            2,217,364              19        
                        --         -------         ------------              --        
  Total ..........     231         909,018         $ 11,855,085             100%       
                       ===         =======         ============             ===        

The following table sets forth tax information for the Plaza.         

                                                        [Enlarge/Download Table]

                 Federal        Rate of                                            1997     
                tax basis    depreciation       Method      Life (in years)   property taxes
             -------------- -------------- --------------- ----------------- ---------------
                                                                                            
Plaza ......  $56,208,876      2%-33%      Straight Line         3-40          $ 1,756,154  

JCN is moving forward with three of the projects included in the      
comprehensive Plaza redevelopment plan (which is supplemented by TIF).          

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Valencia Place                                                                  

   Valencia Place, located on the Plaza, will include 270,000 square feet of
Class A office space, approximately 80,000 square feet of retail space, and     
approximately 1,450 new parking spaces. JCN has preleased approximately 100,000 
square feet of the office space. JCN anticipates that the cost to build the     
project will be approximately $64 million, excluding any financing costs. The   
parking related aspects of the project will be supplemented by a TIF bond       
providing net proceeds of approximately $21 million. Due to the Merger          
Agreement, JCN has not secured the additional financing necessary to fund       
expenditures on this project beyond 1998.                                       

Seville Square                                                                  

   The restoration of the 90,000 square foot Seville Square building and 735
space parking garage on the Plaza will produce approximately 29,000 additional  
rentable square feet and an additional 500 parking spaces. The building will be 
anchored by a 70,000 square foot, 15 screen multiplex theater, a lease for      
which has been executed. JCN anticipates that the rehabilitation will cost      
approximately $28 million and will be initially financed by JCN's current cash  
reserves.                                                                       

Luxury Apartments                                                               

JCN intends to break ground in 1998 on its 350 unit luxury apartment  
community located south of the Plaza. JCN anticipates that the cost to build    
the project will be approximately $48 million, excluding any financing costs.   
Due to the Merger Agreement, JCN has not secured the financing necessary to     
advance the project beyond the site preparation phase.                          

Legal Proceedings                                                               

On April 20, 1995, a shareholder derivative lawsuit was filed in which
JCN, each of the then existing members of the JCN Board of Directors, and the   
Bowser Partnership, an entity controlled by and believed to be wholly owned by  
the former chief executive officer of JCN, were named as defendants. Among      
other things, the plaintiffs alleged a breach of fiduciary duties by the then   
existing directors of JCN and alleged that certain then existing officers of    
JCN had engaged in insider transactions from which they benefited personally at 
the expense of JCN. Specifically, the plaintiffs alleged that the former chief  
executive officer and former chief financial officer of JCN: (i) acquired in a  
series of transactions certain real property and other assets from JCN without  
paying fair value therefor; (ii) conveyed real property and other assets to JCN 
in exchange for assets of far greater value; (iii) caused JCN to make loans and 
investments unrelated to the business of JCN and intended for their personal    
benefit; and (iv) failed to disclose to or attempted to conceal certain of the  
foregoing matters from the other members of the JCN Board of Directors. The     
other members of the JCN Board of Directors were named as defendants because of 
their alleged failure to identify and prevent the foregoing actions.            

This litigation was followed by a lawsuit entitled Medina, et al. v.  
McCarthy, et al. (the "Medina Litigation") and initiated on behalf of the       
beneficiaries of the ESOT against many of those defendants, including JCN,      
named in the shareholder derivative lawsuit. The ESOT beneficiaries alleged     
that the foregoing transactions resulted in damages to them because of the      
significant interest in common stock of JCN held by the ESOT.                   

 After completion of an internal investigation by a committee of outside
directors of JCN, JCN then filed a lawsuit against many of the defendants named 
in the shareholder derivative lawsuit. All of such legal actions were           
consolidated in the United States District Court for the Western District of    
Missouri (the "Court"), where certain litigants, including JCN, requested,      
among other things, that the Court rescind certain transactions to which        
individuals who were then officers or directors of JCN were a party.            

  The consolidated litigation ended when JCN and the other parties thereto
entered into a Mutual Release and Settlement Agreement dated as of June 30,     
1995 ("Settlement Agreement"). The parties to the Settlement Agreement included 
the shareholders who had initiated the derivative litigation, JCN, the ESOT     
beneficiaries that had initiated the litigation on behalf of all ESOT           
participants, all of the individuals who were then directors of JCN, four       
former directors of JCN who were on the JCN Board of Directors at the time of   
certain transactions that were, in part, the subject of the litigation, the     
individuals who were at various times prior to the Settlement Agreement the     
trustees of the ESOT, certain individuals and entities related to or under the  
control of the former chief executive officer and former chief financial        
officer of JCN, and SunChase Capital, Inc. and Realty Capital Company, two      
outside entities that had entered into a business arrangement with JCN prior to 
the Settlement Agreement. The provisions of the Settlement Agreement that are   
material to JCN, and in parenthesis, the impact of each such provision on JCN's 
recognition of $19.6 million in net litigation settlement expense in 1995 are   
as follows: (i) JCN received, in total, $6.6 million in cash from the insurance 
companies providing director and officer liability insurance and a fiduciary    
policy ($6.6 million income); (ii) JCN agreed to indemnify the then existing    
directors and former                                                            

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directors for their litigation expenses and JCN agreed to pay all attorneys'    
fees, costs and expenses incurred on behalf of the shareholders initiating the  
shareholder derivative litigation and on behalf of the ESOT beneficiaries ($8.1 
million expense); (iii) the Bowser Partnership conveyed to JCN 125,242 shares   
(pre-split) of stock of JCN acquired by that partnership from the ESOT, and the 
indebtedness owed by the Bowser Partnership to JCN was deemed satisfied (no     
effect); (iv) all rights of the Bowser Partnership and other entities pursuant  
to an option agreement entered into with the ESOT were forfeited (no effect);   
(v) the former chief executive officer of JCN conveyed to JCN 5,719 shares      
(pre-split) of stock of JCN ($4.3 million income); (vi) the former chief        
executive officer of JCN conveyed to JCN 6,508 shares of stock of JCN that were 
pledged as collateral for an obligation owed to another defendant in the        
litigation ($4.9 million income), and JCN agreed to pay approximately $6.1      
million to acquire such shares ($6.1 million expense); (vii) JCN agreed to pay  
$3.6 million to the former chief executive officer of JCN ($3.6 million         
expense), indebtedness owed by such individual or other individuals to JCN or   
its subsidiaries, in the approximate amount of $8.1 million, was canceled ($5.6 
million expense, net of reserves at December 31, 1994 of $2.5 million), and     
$1.1 million of obligations of JCN to such individuals was cancelled ($1.1      
million income); (viii) JCN received title to six properties from an entity     
controlled by the former chief executive officer of JCN and indebtedness owed   
to JCN relating to such properties was cancelled (no effect); (ix) JCN received 
a new secured note in the approximate amount of $1.2 million from an entity     
affiliated with the former chief financial officer of JCN in replacement of     
accounts receivable of the same amount (no effect); (x) the former chief        
financial officer of JCN agreed to provide to JCN the benefits of stock         
ownership of certain stock of an entity affiliated with JCN (no effect); (xi)   
JCN agreed to transfer 8,500 shares (pre-split) of stock received from the      
Bowser Partnership and to pay $2 million to the ESOT or the beneficiaries of    
the ESOT ($13.1 million expense); (xii) JCN agreed to appoint an independent    
institutional trustee for the ESOT. The transfers made by the Bowser            
Partnership pursuant to the Settlement Agreement were deemed appropriate by the 
parties thereto because of the benefits derived through that entity by the      
former chief executive officer of JCN.                                          

   A summary of the foregoing litigation settlement expenses is set forth in
note 11 to the consolidated financial statements of JCN.                        

    Except for those involving the ESOT, nearly all transactions, conveyances,
payments, and debt extinguishment required by the Settlement Agreement were     
completed by November 30, 1995. As part of the Settlement Agreement, JCN was    
given the option to submit to the IRS a request for a private letter ruling on  
matters related to the ESOT pursuant to the Settlement Agreement. On August 1,  
1997 JCN entered into a closing agreement with the Internal Revenue Service. In 
addition to the payment of 680,000 shares and $2.0 million plus interest, JCN   
agreed to pay approximately $326,000 to the ESOT as an adjustment to a 1992     
dividend allocation. All amounts will be allocated pursuant to the Settlement   
Agreement and subject to the decision in the Interpleader action (discussed     
below). JCN also agreed to make a nondeductible payment of $585,000 to the IRS. 
The IRS agreed, among other things, not to assert that the events that were the 
subject of the Settlement Agreement disqualified JCN's Employee Stock Ownership 
Plan ("ESOP") or gave rise to liability for prohibited transaction excise       
taxes. The IRS also agreed that JCN may deduct in full the value of the         
settlement payment to the ESOT and that such payment and the method of          
allocating it will not adversely affect the tax qualification of the ESOP.      
Additionally, JCN agreed to deposit a portion of the settlement payment (59,413 
shares and $58,064, plus accrued interest) with the Court and requested that    
the Court determine the proper payee or payees. On August 15, 1997, JCN paid to 
the ESOT and to the Court a total of 679,999 shares of JCN's Common and         
$2,326,000, plus certain accrued interest (one share was converted to cash).    

    On August 29, 1997, JCN filed a Complaint for Interpleader and Declaratory
Relief with the Court. The interpleader portion of the complaint seeks the      
adjudication of competing interests in the 59,413 shares of JCN's common stock  
and $58,064, plus interest, discussed above. JCN asked the Court to resolve the 
disagreement among various parties as to whether, pursuant to the Settlement    
Agreement, the stock and cash should be paid directly to the ESOT or to nine    
individual defendants named in the interpleader action.                         

In the same action, JCN also sought a ruling of the Court regarding   
whether the Settlement Agreement requires the vesting provisions of the ESOP    
plan documents to be amended to provide that the Medina Litigation plaintiff    
class members be 100% vested in the stock and cash allocated in their ESOP      
accounts pursuant to the Settlement Agreement. JCN named as defendants in this  
proceeding certain ESOP participants who had raised an issue as to vesting of   
the Settlement Agreement proceeds. JCN is seeking certification of a defendant  
subclass consisting of those members of the Medina Litigation plaintiff class   
who are not 100% vested in their participation accounts in the ESOP.            

 In response to such interpleader and declaratory relief action, various
defendants in the initial interpleader and declaratory relief action and the    
original Medina Litigation filed motions to enforce the Settlement Agreement.   
On October 3, 1997, a group of former JCN employees who were not 100% vested in 
the ESOP at the time their employment with JCN was terminated filed a motion to 
enforce the Settlement Agreement. In such motion, the employees requested that  
the Court hold                                                                  

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that all class members are fully vested in the settlement proceeds allocated to 
their participation accounts in the ESOP. The Court sustained this motion on    
March 24, 1998. JCN's former chief executive officer and his daughter also      
filed a motion to enforce the Settlement Agreement and requested that a certain 
portion of the shares and cash deposited by JCN with the Court be allocated to  
them in the ESOT or alternatively, be paid to them directly. On April 1, 1998,  
the Court ruled that the 59,413 shares and the $58,064, plus accrued interest,  
deposited by JCN with the Court pursuant to the Settlement Agreement be paid    
outside the ESOT directly to the nine individual defendants named in the        
interpleader action.                                                            

    Four other ESOP participants have filed a separate Motion to Interpret and
Enforce the Settlement Agreement and for Preliminary Injunction (the            
"Participant Motion"). The relief sought by the Participant Motion included:    
(i) a request that the Court order JCN to cause an interim appraisal in order   
to allocate and to distribute stock to eligible ESOP participants in a manner   
not provided by the ESOP's plan and trust documents at the time of such motion; 
(ii) an order enjoining JCN from applying the provisions of its shareholders'   
rights plan to a sale by the ESOT Trustee of its shares of JCN Common to one    
party; (iii) an order requiring the 59,413 shares and the $58,064, plus accrued 
interest, deposited by JCN with the Court to be paid into the ESOT and          
allocated only to certain ESOP beneficiaries; (iv) an order enjoining the       
operation of the terms of the ESOP plan documents which provide that upon       
listing by JCN on an established securities exchange that JCN will no longer    
have the obligation to pay cash to ESOP participants in exchange for JCN's      
stock that they may receive from an ESOT distribution. A hearing date on the    
Participant Motion has not been set.                                            

JCN filed as a plaintiff on December 22, 1995, a petition against its 
former attorney, Charles Schleicher, and the law firm of Schleicher Latz, P.C.  
alleging certain breaches of fiduciary duties and obligations as an attorney    
and the attorneys for JCN, and alleging certain failures in performance of      
duties as attorney and attorneys for JCN. The suit against Mr. Schleicher and   
his law firm was filed in the Circuit Court of Jackson County, Missouri. The    
Settlement Agreement described above limits the potential recovery realizable   
by JCN to $2.0 million. The actual amount recovered by JCN, by settlement or    
otherwise, may be substantially less than such amount. This litigation has not  
progressed, as the parties have been attempting to settle the matter.           

JCN was named as a defendant in a complaint filed by Petula Associates
("Petula") in December 1996 in the United States District Court for the Western 
District of Missouri (the "Petula Litigation"). The dispute involves an         
agreement entered into in 1986 between Petula and JCN for the development of    
Coach House South Apartments located in Kansas City, Missouri. Petula is        
seeking reimbursement of approximately $3.9 million, plus interest, for its     
share of the construction cost overruns which it paid in 1989. Petula has       
alleged several alternative theories seeking to recover the payment including   
theories based in fraud and contract. JCN believes it has strong statue of      
limitations' defenses in addition to other meritorious defenses to the          
allegations made by Petula. JCN has been granted summary judgment on the        
contract and breach of fiduciary duty counts and currently has pending before   
the court a motion for summary judgment on the remaining counts. Trial of the   
matter is currently scheduled in November 1998.                                 

  A lawsuit was filed on January 8, 1998 by Dennis Wright against JCN, the
JCN Board of Directors, and Highwoods (the "Wright Litigation"). The lawsuit is 
pending in the Circuit Court of Jackson County, Missouri. The plaintiff, a JCN  
Shareholder, is bringing this lawsuit on behalf of other JCN Shareholders. The  
relief sought by the plaintiff includes certification of a class, an injunction 
preventing the Merger, and unspecified damages.                                 

 JCN has a $3.0 million proof of claim in the National Gypsum bankruptcy
proceeding pending in United States Bankruptcy Court, Northern District of      
Texas. Pursuant to such claim, JCN has received payments of $389,000 and        
$378,000 in 1997 and 1996, respectively. JCN's proof of claim in the National   
Gypsum bankruptcy is based on tort liability arising from claims relating to    
the quality of certain materials used in the construction of properties owned   
by JCN. Total payments received by JCN under the National Gypsum plan of        
reorganization will not equal the full amount of the proof of claim originally  
filed by JCN. However, counsel for JCN has advised management that such plan    
does provide for an additional payment of approximately $389,000 on JCN's claim 
in 1998. Such payment, if any, will be recorded as income when it is received.  

 JCN and its subsidiaries are parties to certain other legal proceedings
incident to their business. In the opinion of management, none of these other   
matters, either individually or in the aggregate, is material to JCN's          
financial condition or results of operations.                                   

Submission of Matters to a Vote of Security Holders                             

    No matter was submitted to JCN shareholders in the fourth quarter of 1997.

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Market for JCN Common and Related Shareholder Matters                           

   Although there is currently no established trading market for JCN Common,
such shares have for many years been traded over-the-counter very infrequently  
through inter-broker bulletin board trading under the symbol "NCJC.BB." The     
data prior to 1997 is high and low bid information reflecting inter-dealer      
bulletin board prices without retail mark-up, mark-down or commission. These    
quotations merely reflect the prices at which transactions were proposed, and   
do not necessarily represent actual transactions. The data subsequent to 1996   
is derived from actual closed transactions.                                     

                                                                [Download Table]

        1995              High          Low     
-------------------- ------------- -------------
                                                
  1st Quarter ...... $ 11.41       $  9.38      
  2nd Quarter ......  10.31         10.00       
  3rd Quarter ...... No Trades     No Trades    
  4th Quarter ......  21.88         14.38       
  1996                   High           Low     
------               -------       --------     
  1st Quarter ...... $ 21.06       $ 20.00      
  2nd Quarter ......  36.50         32.00       
  3rd Quarter ......  34.00         28.13       
  4th Quarter ......  31.06         27.00       
  1997                   High           Low     
------               -------       --------     
  1st Quarter ...... $ 34.00       $ 29.00      
  2nd Quarter ......  35.50         28.25       
  3rd Quarter ......  56.00         37.25       
  4th Quarter ......  70.00         51.00       

Issuances of JCN Common                                                         

    In the first quarter of 1995, JCN contributed the post-split equivalent of
110,000 shares of JCN Common to the ESOT. Pursuant to the Settlement Agreement, 
on August 15, 1997, JCN issued 59,413 shares of JCN Common to the United States 
District Court for the Western District of Missouri and issued 620,586 shares   
to the ESOT. On December 29, 1997, JCN issued 13,152 shares of JCN Common to    
Mr. Brady upon the exercise by Mr. Brady of a portion of the options granted to 
him at the time of his employment. Each of the foregoing issuances were made    
pursuant to the exemption to registration set forth in Section 4(2) of the      
Securities Act of 1933, as amended. Other than 1,001,696 shares of JCN Common   
held by the ESOT, the Court and various other shareholders, the 4,619,039       
currently outstanding shares of common stock of JCN may be sold pursuant to     
Rule 144 under the Securities Act. JCN has entered into no agreements to        
register any shares of JCN Common pursuant to the Securities Act and is not     
publicly offering, and has not publicly proposed to offer, any shares of JCN    
Common.                                                                         

The Operating Agreement entered into between Kessinger/Hunter and JCN 
required JCN to make an initial capital contribution of $4,285,714 in cash. The 
Operating Agreement provides Kessinger/Hunter the right to use that cash to buy 
a call right granting to the LLC the right to require JCN to issue to the LLC   
76,530 shares of JCN Common (the "Call Right"). Kessinger/Hunter provided       
notice to JCN of its intention to purchase the Call Right, and that purchase    
occurred on February 27, 1998. The Operating Agreement grants to                
Kessinger/Hunter authority to decide whether to exercise the Call Right and     
such right was exercised by notice given to JCN on March 18, 1998. Accordingly, 
JCN issued 76,530 shares of JCN Common to the LLC.                              

Dividend Policy                                                                 

   Prior to 1995, JCN typically declared and paid an annual cash dividend of
$10.00 on each share of JCN Common (or approximately $.125 per post-split       
share). No dividend was declared on JCN Common in 1995, 1996 or 1997. The JCN   
Board of Directors has not determined if, when or in what amount future         
dividends will be declared or paid. JCN is not currently under any dividend     
payment prohibition or restriction.                                             

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Selected Financial Data                                                         

  The following selected financial information has been derived from JCN's
audited consolidated financial statements for each of the five consecutive      
years ended December 31, 1997. The information set forth below for 1993 is      
based on JCN's audited financial statements for that year. Note, however, that  
JCN's prior auditor qualified its report on the consolidated financial          
statements for the year ended December 31, 1993 as a result of its inability to 
obtain sufficient evidence to evaluate whether certain capitalized cost         
balances for JCN's Bay Plaza assets as of December 31, 1993 were in excess of   
recoverable amounts. "Bay Plaza" is a project for the redevelopment and         
construction of parking, commercial and retail facilities in St. Petersburg,    
Florida. JCN has since sold substantially all Bay Plaza assets. Per share       
amounts for years prior to 1997 have been restated in accordance with Statement 
of Financial Accounting Standards No. 128, "Earnings per Share."                

                                                        [Enlarge/Download Table]

                                                                For the years ended December 31,                 
                                               ------------------------------------------------------------------
                                                    1997          1996          1995        1994         1993    
                                               ------------- -------------- ----------- ----------- -------------
                                                             (in thousands, except per share data)               
                                                                                                                 
Operating Results                                                                                                
Sales and revenues ...........................   $  97,859     $  132,628    $  99,305   $  94,213    $  96,204  
Selling, general and operating expenses ......      44,654         45,394       45,952      43,203       44,615  
Interest expense .............................      22,333         23,466       27,862      27,049       26,693  
Income (loss) before income taxes and                                                                            
 extraordinary gain ..........................      12,064         44,652      (16,498)    (44,698)          26  
Income (loss) before extraordinary gain ......      19,386         27,902      (10,752)    (43,670)         510  
Net income (loss) ............................      19,386         27,902      (10,752)    (14,534)         510  
Per Share Data (Basic):                                                                                          
 Income (loss) before extraordinary gain .....         4.63           5.75       (0.74)      (2.89)         0.04 
 Net income (loss) ...........................         4.63           5.75       (0.74)      (0.96)         0.04 
 Dividends ...................................          --             --           --         0.13         0.13 
Per Share Data (Diluted):                                                                                        
 Income (loss) before extraordinary gain               4.47           5.62       (0.74)      (2.89)         0.04 
 Net income (loss) ...........................         4.47           5.62       (0.74)      (0.96)         0.04 
 Dividends ...................................          --             --           --         0.13         0.13 

                                                        [Enlarge/Download Table]

                                                                 At December 31,                      
                                           -----------------------------------------------------------
                                               1997        1996        1995        1994        1993   
                                           ----------- ----------- ----------- ----------- -----------
                                                                 (in thousands)                       
                                                                                                      
Financial Position                                                                                    
Total properties .........................  $ 180,681   $ 220,133   $ 229,524   $ 244,105   $ 239,008 
Total assets .............................    297,774     320,327     328,695     350,302     362,112 
Mortgage indebtedness ....................    288,553     309,188     326,349     339,881     327,354 
Treasury stock ...........................    145,978     117,427     117,427      14,582      23,058 
Total shareholders' equity (deficit) .....    (26,173)    (28,606)    (36,725)    (25,821)    (31,568)

Management's Discussion and Analysis of Financial Condition and Results of      
Operations                                                                      

Overview                                                              

 JCN's operating results depend primarily upon income from the rental of
its retail, office, industrial, and residential properties. This income is      
substantially influenced by the demand for JCN's rental space in the Kansas     
City metropolitan area and, to a lesser degree, the Des Moines, Iowa            
metropolitan area. The ability of JCN to increase its rental income is          
dependent upon its ability to increase either or both of its occupancy rates    
and rental rates, control expenses on its existing properties, and to acquire   
or develop additional rental properties.                                        

  JCN's operating results are also dependent on the demand for lots in its
residential subdivisions. Demand for these lots is influenced by a number of    
factors, including population growth in the Kansas City metropolitan area,      
availability of existing housing stock, interest rates, tax rates, and the      
number and financial health of home builders in the area.                       

 JCN's primary markets in the midwest have continued to offer strong and
stable local economies. Management believes this will continue and the markets  
will offer attractive acquisition and development opportunities because of      
their central location, established business and industrial base, skilled work  
force, and moderate labor cost.                                                 

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  At December 31, 1997, the occupancy rate for JCN's retail properties was
97%, 94% for its office properties, 77% for its industrial properties (which    
includes one unoccupied building that represents approximately 17% of JCN's     
total industrial space) and 97% for its multi-family residential properties.    

Results of Operations                                                           

    Comparison of Year Ended December 31, 1997 to Year Ended December 31, 1996

Summary. Net income decreased by $8.5 million in 1997 to $19.4 million
primarily as a result of the absence of gains from disposition of JCN's         
marketable equity securities portfolio, partially offset by lower income tax    
expense in 1997. The change in several other income statement line items also   
contributed to the $8.5 million decrease as detailed below.                     

   Rents. Rental income decreased by $1.8 million (2.3%) to $78.1 million in
1997. This decrease was primarily due to the absence of $3.0 million in rental  
income from JCN's leasehold interest in the Raphael Hotel of San Francisco (as  
the underlying lease expired in the third quarter of 1996) and a $1.4 million   
decrease in rental income related to four properties sold (three in the third   
quarter of 1997 and one in the fourth quarter of 1996). These decreases were    
offset by an increase in rental income of $1.2 million related to two of JCN's  
office buildings that were substantially vacant during the first half of 1996   
while JCN made significant tenant improvements for new tenants that are now     
leasing all of the vacant space in those buildings. The remainder of the $1.4   
million increase is due primarily to improved rents in JCN's office, retail,    
and apartment properties.                                                       

 Property Sales. Property sales primarily represent sales of residential
lots in subdivisions developed by JCN, sales of condominiums in the Alameda     
Towers project, and sales of villas in the Corinth Place Villas project.        
Property sales increased by $514,000 (7.8%) to $7.1 million in 1997 and         
included lot sales of $4.3 million (including $1.2 million that was recognized  
pursuant to JCN's change in accounting method from recording lot sales on an    
"as closed" basis to recording lot sales on an "as sold" basis), condominium    
sales of $2.6 million, and villa sales of $169,000. Property sales of $6.6      
million in 1996 included $2.8 million of lot sales (also $2.8 million using an  
"as sold" basis), condominium sales of $2.9 million and villa sales of          
$945,000.                                                                       

Dividends and Interest. Dividends were received on marketable equity  
securities held for investment purposes prior to March 31, 1996. Interest       
income is received on JCN's cash and cash equivalents, temporary investments    
and notes receivable. Interest income fluctuates with interest rates, the level 
of JCN's excess cash, and the level of notes receivable. Dividends and interest 
income increased $1.1 million (23.9%) to $5.7 million in 1997. This increase is 
primarily due to the higher average balances of cash and notes receivable       
outstanding during 1997.                                                        

Gains on Sales of Investments and Other Assets. Gains on sales of     
investments and other assets represent gains associated with the sales of       
revenue-producing properties, property held for future development, marketable  
equity securities, and other assets used in the business. These gains fluctuate 
with the volume of asset dispositions and the magnitude of the difference       
between sales proceeds and carrying value. In the first quarter of 1996, JCN    
liquidated its entire investment in marketable equity securities for $38.6      
million, recognizing a pre-tax gain of approximately $33.0 million. The         
remainder of the gains in 1996 were primarily due to the sale of an industrial  
park. The gains in 1997 were primarily due to the sale of two shopping centers, 
one office property (two buildings), the majority of the Bay Plaza properties   
and vacant ground.                                                              

Equity in Earnings of Unconsolidated Affiliates. Equity in earnings of
unconsolidated affiliates represents JCN's proportionate share of earnings of   
affiliates in which JCN's ownership is 50% or less. This line item increased    
$942,000 to $1.6 million in 1997. The increase is primarily due to increased    
gains of $613,000 on pad sites sold by JCN's Iowa partnerships.                 

Other. Other represents miscellaneous revenues of JCN. Other revenue  
decreased by $3.1 million in 1997 to $1.6 million. This decrease resulted       
primarily from a $4.6 million payment recognized as income in 1996 pursuant to  
a Resolution Agreement with JCN's prior auditor, reduced by certain expenses    
totaling $1.4 million (See comments in "Comparison of Year Ended December 31,   
1996 to Year Ended December 31, 1995" for additional details). In addition, JCN 
received approximately $389,000 and $378,000 in 1997 and 1996, respectively, as 
a result of a claim it filed in the National Gypsum bankruptcy proceeding now   
pending in the United States Bankruptcy Court. JCN received notice that in 1998 
it may receive an additional $389,000 in satisfaction of such claim. The actual 
amount and date of any such payment is uncertain and therefore will not be      
recorded until received.                                                        

 Selling, General and Operating Expenses. Selling, general and operating
expenses represent the expenses directly associated with operating JCN's real   
estate assets and expenses that are considered to be overhead. These expenses   
decreased by $740,000 (1.6%) to $44.7 million in 1997, principally due to the   
absence of $1.4 million of costs to secure a new management team and the        
absence of $2.9 million in expenses related to the operation of the Raphael     
Hotel of San Francisco due                                                      

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to the expiration of the underlying lease. In addition, selling, general and    
operating expenses related to four sold properties decreased by $373,000. These 
reductions were partially offset by unusual expenses in 1997 of $1.3 million    
for severance costs relating to the outsourcing of certain functions and $1.9   
million in costs related to the proposed merger with a wholly-owned subsidiary  
of Highwoods. The remainder of the $733,000 increase over 1996 is due primarily 
to increased operating costs of Des Moines, Iowa area properties.               

    Cost of Property Sales. Cost of property sales represents JCN's cost basis
in residential lots, condominium units, and villas sold during the year. The    
cost of property sales is a function of the number of lots, condominium units,  
and villas sold and their underlying cost basis. Cost of property sales         
increased by $163,000 (3.2%) in 1997 to $5.3 million. Cost of property sales in 
1997 included lot cost of sales of $2.6 million (including $696,000 that was    
recognized pursuant to JCN's change in accounting method from recording sales   
on an "as closed" basis to recording sales on an "as sold" basis), condominium  
cost of sales of $2.6 million and villa cost of sales of $154,000. Cost of      
property sales for 1996 included lot cost of sales of $1.7 million (also $1.7   
million on an "as sold" basis of recording lot sales), condominium cost of      
sales of $2.6 million and villa cost of sales of $923,000. The gross margin     
percentage on lot sales was 40% for 1997 and 1996. The gross margin percentage  
on condominium sales was 3% for 1997 and 11% for 1996. The decrease in gross    
margin percentage on condominium sales in 1997 resulted from JCN incurring      
greater finishing costs in 1997 than in 1996.                                   

   Interest Expense. Fluctuations in interest expense occur due to the level
of JCN's interest bearing indebtedness and the effect changes in interest rates 
have on JCN's variable rate indebtedness. Interest expense declined by $1.1     
million (4.8%) to $22.3 million in 1997 primarily due to the lower average      
balance of outstanding indebtedness in 1997.                                    

Depreciation and Amortization. Depreciation of JCN's revenue producing
properties is computed using the straight-line method over the estimated useful 
lives of the assets, generally seven to thirty-one years. Depreciation expense  
fluctuates to some degree as properties are bought and sold. In addition,       
certain financing charges and certain lease related costs are amortized over    
the term of the associated loan or lease as applicable. The decrease of         
$471,000 (3.4%) to $13.5 million in 1997 is primarily due to property sales and 
older fixed assets becoming fully depreciated.                                  

Income Tax Expense (Benefit). The $24.1 million change in income tax  
expense (benefit) from the $16.8 million expense in 1996 to the income tax      
benefit of $7.3 million in 1997 is due primarily to the decrease in income tax  
expense from operations of $12.3 million and the recognition of a net $11.8     
million income tax benefit relating to the issuance of shares of common stock   
to the ESOT and to a Court pursuant to the Settlement Agreement, as described   
in "Legal Proceedings" above.                                                   

As discussed in Note 7 to JCN's consolidated financial statements, JCN
filed its 1996 income tax returns reflecting a net operating loss primarily     
attributable to a $103 million deduction for losses of principal and accrued    
interest arising from notes and accounts receivable to JCN from its ESOT and    
from a limited partnership owned by JCN's former president. The IRS may reject  
all or a portion of such claimed losses, and there is no assurance JCN will     
ultimately prevail on all or any portion of such claimed losses. Accordingly,   
JCN may not receive all or any portion of the benefits that result from such    
claimed losses.                                                                 

  Management of JCN has been advised by counsel that such counsel believes
the claimed losses to be valid. Discussions with respect to JCN's position have 
been held with representatives of the IRS, who are conducting an examination of 
JCN's returns for the years 1989 through 1995.                                  

  To the extent allowed, the loss would be used first to file for a refund
of taxes paid previously after offsetting deficiencies that may be proposed by  
the IRS in connection with its examination (JCN believes it has previously      
provided sufficient tax reserves for financial reporting purposes to cover any  
such deficiencies); second, the balance remaining, if any, could be used to     
offset the recognition of gains in future years that had occurred but were      
unrecognized prior to a "change in control," as defined in Section 382 of the   
Internal Revenue Code; and finally, after such offset, any remaining amount may 
be available annually to reduce other taxable income, subject to limitations    
set forth in Section 382.                                                       

Consistent with the requirements of generally accepted accounting     
principles, none of this potential impact is reflected in JCN's consolidated    
financial statements due to its uncertainty.                                    

Comparison of Year Ended December 31, 1996 to Year Ended December 31, 1995  

   Summary. Net income increased by $38.7 million in 1996 from a net loss of
$10.8 million in 1995 to net income of $27.9 million primarily as a result of   
the gains from disposition of JCN's marketable equity securities portfolio, the 
absence of litigation settlement expense in 1996, increased other income, and   
lower interest expense.                                                         

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  Rents. Rental income increased by $60,000 to $79.9 million in 1996. This
increase occurred even though one of JCN's larger office buildings was          
substantially vacant during the first half of 1996 while JCN made significant   
tenant improvements for a new tenant that is now leasing all of the vacant      
space. This vacancy resulted in a $1.8 million reduction in rental income in    
1996. Rental income from JCN's leasehold interest in the Raphael Hotel of San   
Francisco decreased by $489,000 due to the expiration of the underlying lease.  
As a result of apartment properties obtained pursuant to the Settlement         
Agreement, rental income increased by approximately $700,000 in 1996. The       
remainder of the $1.6 million increase is due primarily to $200,000 of certain  
nonrecurring items and $1.4 million in improved rents on JCN's office, retail,  
and apartment properties.                                                       

Property Sales. Property sales increased by $576,000 (9.5%) to $6.6   
million in 1996 and included lot sales of $2.8 million, condominium sales of    
$2.9 million, and villa sales of approximately $945,000. Property sales of $6.0 
million in 1995 included $3.5 million of lot sales and condominium sales of     
$2.5 million.                                                                   

Gains on Sales of Investments and Other Assets. In early 1996, JCN    
liquidated for $38.6 million its entire investment in marketable equity         
securities held at December 31, 1995, recognizing a pre-tax gain of             
approximately $33.0 million. The remainder of the gains in 1996 were primarily  
due to the sale of an industrial park.                                          

Equity in Earnings of Unconsolidated Affiliates. Equity in earnings of
unconsolidated affiliates increased $540,000 to $697,000 in 1996. The increase  
is primarily due to $324,000 of gains on pad sites sold by JCN's Iowa           
partnerships in 1996. Earnings from JCN's investment in J.C. Nichols Real       
Estate increased by $255,000 in 1996 as a result of a record year in its sales  
volume and net income.                                                          

Other. Other increased by $3.4 million in 1996 to $4.7 million. This  
increase resulted primarily from a $4.6 million payment received by JCN from    
its prior auditor, Deloitte & Touche LLP, pursuant to an agreement (the         
"Resolution Agreement") in which the prior auditor denied any wrongdoing or     
fault and agreed to resolve disagreements that arose out of circumstances that  
were the subject of the Settlement Agreement. The $4.6 million payment was      
reduced by certain expenses to reduce to $3.2 million the amount of income      
recognized by JCN as a result of such payment. Furthermore, in the Resolution   
Agreement JCN agreed to indemnify its prior auditor and various affiliates and  
related persons thereof, in an amount up to $2.5 million, from a broad range of 
losses and claims that may be incurred by such prior auditor as a result of its 
relationship with JCN. However, management of JCN currently believes the        
occurrence of a material reduction to the $3.2 million in recognized income is  
remote. In addition, JCN received approximately $378,000 as a result of a claim 
it filed in the National Gypsum bankruptcy proceeding now pending in the United 
States Bankruptcy Court.                                                        

 Selling, General and Operating Expenses. Selling, general and operating
expenses decreased by $558,000 (1.2%) to $45.4 million in 1996, principally due 
to a decline of $2.3 million in operating expenses of the discontinued Bay      
Plaza project, a decline of $827,000 in expenses related to the operation of    
the Raphael Hotel of San Francisco due to the expiration of the underlying      
lease, and $400,000 of nonrecurring items. These reductions were partially      
offset by additional costs of $1.4 million incurred to secure a new management  
team, and additional operating expenses of $255,000 related to apartment        
properties obtained in the Settlement Agreement. The remainder of the $1.3      
million increase over 1995 is due primarily to increased overhead (primarily    
legal and professional fees) and property operating costs.                      

  Cost of Property Sales. Cost of property sales increased by $1.2 million
(30.9%) in 1996 to $5.2 million. Cost of property sales in 1996 included lot    
cost of sales of $1.7 million, condominium cost of sales of $2.6 million and    
villa cost of sales of $923,000. Cost of property sales in 1995 included lot    
cost of sales of $2.3 million and condominium cost of sales of $1.6 million.    
The gross margin percentage on lot sales was 40% in 1996 as compared to 33% in  
1995. The increase in gross margin percentage on lot sales in 1996 resulted     
from a change in sales mix, as 1996 sales contained a larger percentage of      
sales from higher margin subdivisions. The gross margin percentage on           
condominium sales was 11% in 1996, as compared to 37% in 1995. The decrease in  
gross margin percentage on condominium sales in 1996 resulted from JCN          
incurring greater finishing costs on condominium sales in 1996 than in 1995.    
The gross margin percentage on villa sales in 1996 was approximately 2%.        

Interest Expense. Interest expense declined by $4.4 million (15.8%) to
$23.5 million in 1996. The primary reasons for this decline are the pay-down or 
pay-off of certain notes and mortgages during 1996 of approximately $16 million 
in addition to normal principal amortization, and the restructuring of a        
mortgage note as discussed in Note 5 to JCN's consolidated financial            
statements.                                                                     

Employee Stock Ownership Trust Contribution. JCN maintains an ESOT to 
which it has the right to make annual contributions in amounts determined by    
the Board of Directors. JCN made no contributions during 1996.                  

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 Valuation Allowances. JCN's assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying value of an asset 
is in excess of its net realizable value. If the carrying value of an asset is  
determined, in the opinion of management, to be in excess of its net realizable 
value, a charge to expense is recognized in the form of a valuation allowance.  
No valuation allowances were recorded in 1996.                                  

 Litigation Settlement. In 1995, JCN recorded a one time charge of $19.6
million as "Litigation Settlement" in its consolidated statement of operations  
as a result of the Settlement Agreement. The circumstances leading to and the   
impact of the Settlement Agreement are described in "Legal Proceedings" above   
and in Note 11 "Litigation and Settlements" of JCN's consolidated financial     
statements.                                                                     

 Comparison of the Three Months Ended March 31, 1998 to the Three Months Ended
March 31, 1997                                                              

 Summary. Net income increased by $516,000 (32.5%) from $1.6 million for
the three months ended March 31, 1997 to $2.1 million for the three months      
ended March 31, 1998. This net increase is due to changes in several income     
statement line items that are explained below.                                  

  Rents. Rental income decreased by $302,000 (1.5%) from $20.0 million for
the three months ended March 31, 1997 to $19.7 million for the three months     
ended March 31, 1998 primarily due to a $1.1 million decrease in rental income  
related to three properties that were sold during the third quarter of 1997.    
This decrease is partially offset by a $771,000 increase due to improved rents  
in JCN's office, retail, and apartment properties.                              

 Property Sales. Property sales primarily represent sales of residential
lots in subdivisions developed by JCN, sales of condominiums in the Alameda     
Towers project, and sales of villas in the Corinth Place Villas project.        
Property sales decreased by $126,000 (9.4%) from $1.3 million for the three     
months ended March 31, 1997 to $1.2 million for the three months ended March    
31, 1998 and included lot sales of $820,000 and condominium sales of $401,000.  
During the third quarter of 1997, JCN changed its accounting method from        
recording lot sales on an "as closed" basis to recording lot sales on an "as    
sold" basis. The lot sales recorded in the first quarter of 1997 are on an "as  
closed" basis. Property sales of $1.3 million for the three months ended March  
31, 1997 included lot sales of $518,000 ($666,000 on an "as sold" basis)        
condominium sales of $660,000 and villa sales of $169,000.                      

Gains on Sales of Investments and Other Assets. Gains on sales of     
investments and other assets represent gains associated with the sales of       
revenue-producing properties, property held for future development and other    
assets used in the business. These gains fluctuate with the volume of asset     
dispositions and the magnitude of the difference between sales proceeds and     
carrying value. The $586,000 gain for the three months ended March 31, 1998 is  
primarily due to the disposition of certain construction and maintenance        
equipment that was no longer necessary to service JCN's real estate portfolio.  

Equity in Earnings (Losses) of Unconsolidated Affiliates. Equity in   
earnings of unconsolidated affiliates represents JCN's proportionate share of   
earnings of affiliates in which JCN's ownership is 50% or less. This line item  
increased $131,000 from a $77,000 loss for the three months ended March 31,     
1997 to $54,000 in income for the three months ended March 31, 1998. The        
increase is primarily due to earnings generated by new office buildings that    
were constructed and/or leased up during 1997 by the Iowa partnerships in which 
JCN is a partner.                                                               

  Other. Other represents leasing commissions and property management fees
generated from JCN's third party real estate brokerage and management services, 
royalties, minority interest in losses and other miscellaneous revenues. Other  
decreased by $130,000 from $378,000 for the three months ended March 31, 1997   
to $248,000 for the three months ended March 31, 1998 primarily due to JCN      
transferring its third party real estate brokerage and management services      
business to Kessinger/  Hunter and Company, L.C., an unconsolidated affiliate.  

  Selling, General and Operating Expenses. Selling, general, and operating
expenses (S,G, & O) represent the expenses directly associated with operating   
JCN's real estate assets and expenses that are considered to be overhead. These 
expenses increased by $533,000 (5.4%) from $9.9 million for the three months    
ended March 31, 1997 to $10.4 million for the three months ended March 31,      
1998, principally due to the three months ended March 31, 1998 containing       
approximately $1,100,000 of expenses related to JCN's proposed merger with a    
wholly-owned subsidiary of Highwoods Properties, Inc. This increase was         
partially offset by the absence of $307,000 of operating expenses related to    
the three properties that were sold during the third quarter of 1997.           

    Cost of Property Sales. Cost of property sales represents JCN's cost basis
in residential lots, condominium units, and villas sold during the year. The    
cost of property sales is a function of the number of lots, condominium units,  
and villas sold and their underlying cost basis. Cost of property sales         
decreased by $234,000 (21.1%) from $1.1 million for the three months ended      
March 31, 1997 to $873,000 for the three months ended March 31, 1998 and        
included lot cost of sales of $450,000                                          

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and condominium cost of sales of $423,000. Cost of property sales for the three 
months ended March 31, 1997 included lot cost of sales of $342,000 ($448,000 on 
an "as sold" basis), condominium cost of sales of $623,000 and villa cost of    
sales of $142,000. The gross margin percentage on lot sales was 45.1% for the   
three months ended March 31, 1998 as compared to 34.2% for the three months     
ended March 31, 1997. The increase in gross margin percentage on lot sales for  
the three months ended March 31, 1998 resulted from JCN achieving higher        
average prices while keeping average lot costs at a level consistent with the   
prior year. The gross margin percentage on condominium sales was (5.5%) for the 
three months ended March 31, 1998, as compared to 5.6% for the three months     
ended March 31, 1997. The decrease in gross margin percentage on condominium    
sales for the three months ended March 31, 1998 resulted from JCN incurring     
greater finishing costs on condominium sales for the three months ended March   
31, 1998 than for the three months ended March 31, 1997.                        

   Interest Expense. Fluctuations in interest expense occur due to the level
of JCN's interest bearing indebtedness and the effect changes in interest rates 
have on JCN's variable rate indebtedness. Interest expense declined by $423,000 
(7.2%) from $5.8 million for the three months ended March 31, 1997 to $5.4      
million for the three months ended March 31, 1998 primarily due to the lower    
average balance of outstanding indebtedness during the three months ended March 
31, 1998.                                                                       

Depreciation and Amortization. Depreciation of JCN's revenue-producing
properties is computed using the straight-line method over the estimated useful 
lives of the assets, generally seven to thirty-one years. Depreciation expense  
fluctuates to some degree as properties are bought and sold. In addition,       
certain financing charges and certain lease related costs are amortized over    
the term of the associated loan or lease as applicable. The decrease of         
$479,000 (14.2%) from $3.4 million for the three months ended March 31, 1997 to 
$2.9 million for the three months ended March 31, 1998 is primarily due to      
property sales and older fixed assets becoming fully depreciated.               

Liquidity and Capital Resources                                                 

  Net cash provided by operating activities, permanent mortgage financing,
and short term notes payable to banks represent JCN's primary sources of        
liquidity to fund recurring capital costs associated with renovating and        
renewing leases of JCN's properties, payments on JCN's outstanding              
indebtedness, and distributions to shareholders. In April 1997, JCN renewed its 
$10 million unsecured line of credit with Commerce Bank, N.A. (Kansas City,     
Missouri) bearing interest at the prime rate. At December 31, 1997, there were  
no outstanding borrowings on this line of credit.                               

Management anticipates that cash generated before debt payments and   
capital expenditures, together with the bank line of credit, will provide       
adequate liquidity to conduct JCN's operations, fund its recurring capital      
costs and interest expense, and permit normal amortization payments on          
outstanding indebtedness.                                                       

   JCN is in the process of developing two of the projects included in JCN's
comprehensive Plaza redevelopment plan. These projects are to be supplemented   
by TIF. JCN will be able to fund the projects through 1998 with working capital 
and the proceeds of a TIF bond. However, due to the proposed merger with a      
wholly-owned subsidiary of Highwoods, JCN has not secured the additional        
financing necessary to fund expenditures on these two projects or meet other    
cash needs in 1999 and thereafter.                                              

At December 31, 1997, the total of JCN's consolidated debt was $301.5 
million. Such amount, with certain exceptions discussed below, bears interest   
at rates ranging from 3.9% to 10.5%. Of JCN's consolidated debt at that date,   
approximately $13.0 million was a note payable and $288.5 million was mortgage  
indebtedness. Approximately $256.7 million of JCN's $288.5 million of mortgage  
indebtedness at December 31, 1997, was nonrecourse to JCN. By including JCN's   
percentage interest in the indebtedness of unconsolidated subsidiaries and      
excluding the minority interest percentage in the indebtedness of consolidated  
subsidiaries of JCN, the interest-bearing debt of JCN at December 31, 1997      
would be $319.4 million.                                                        

Of JCN's $301.5 million in consolidated debt at December 31, 1997,    
approximately $224.6 million accrued interest at fixed rates, $72.9 million was 
floating rate debt of various types and $4.0 million was non-interest bearing   
(see below). Interest expense of JCN in future periods may be expected to       
fluctuate with short term interest rates.                                       

    As discussed in Note 5 to JCN's consolidated financial statements, JCN has
restructured two debt agreements. At December 31, 1997, JCN has classified as   
mortgage indebtedness approximately $10.0 million in debt that will be forgiven 
if JCN complies with certain conditions established by the lenders. The $10.0   
million in forgiven debt is being amortized into income over the life of the    
mortgages through monthly reductions to interest expense. This amortization     
reduces the effective rate to JCN on restructured debt to approximately 3% for  
financial reporting purposes. This treatment is in compliance with generally    
accepted accounting principles as the sum of the future undiscounted debt       
service payments exceeded the face value of the debt obligations at the time of 
the restructurings.                                                             

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  Also, as discussed in Note 5 to JCN's consolidated financial statements,
certain agreements to which JCN is a party provide for a 50% sharing of         
positive and negative cash flows from operations and certain capital            
expenditures. Interest expense recognized for such sharing arrangements was     
$622,000, $929,000, $479,000 for the years ended December 31, 1997, 1996 and    
1995, respectively. In addition, at December 31, 1997 and 1996, mortgage        
indebtedness includes a non-interest bearing preference item of $4.0 million    
related to these agreements. JCN's liability is contingent upon certain         
conditions being met upon the sale or refinancing of the mortgaged properties.  

The ESOT currently holds 1,390,003 shares of JCN's common stock. Until
such time as shares distributed by the ESOT to its beneficiaries can be readily 
traded on an established securities market, JCN is obligated to repurchase such 
shares for a specified period of time at a price determined by a qualified      
appraiser (the "Put Option"). The most recent appraisal of the JCN Common held  
by the ESOT was made as of October 31, 1997 and established a price of $61.00   
per share.                                                                      

If JCN remains obligated by the Put Option, JCN's liquidity could be  
constrained. Given expected retirement trends, management expects it can meet   
anticipated stock repurchase requirements with funds generated from operations, 
selling its securities or additional borrowings.                                

 On January 29, 1997, JCN purchased all outstanding shares of JCN Common
then owned beneficially and of record by AHI Metnall L.P. ("AHI").              
Additionally, Mr. John Simon and Mr. James W. Quinn, who are affiliated with    
AHI, resigned as directors of JCN.                                              

 JCN paid consideration of $27.25 per share, or a total of $25.9 million
for the 948,880 shares of JCN Common owned by AHI. The purchase price for the   
stock held by AHI was based on a negotiated price within the range of trades in 
the fourth quarter of 1996, which trades were between $27 and $31.06 per share. 
At the closing, JCN delivered to AHI $12.8 million in cash (which included      
approximately $39,000 of interest) and executed a promissory note in the amount 
of $13.0 million (which reflected a $57,500 reduction for certain expenses),    
bearing interest at a rate of eight percent (8%) per annum with interest only   
payable quarterly. That promissory note is secured by the pledge of a mortgage  
receivable and real property, and is due on January 29, 1999.                   

    The Operating Agreement entered into between Kessinger/Hunter and JCN, and
by which the LLC was formed, required JCN to make an initial capital            
contribution of $4,285,714 in cash. That capital contribution was made on       
January 2, 1998. Kessinger/Hunter had the right to determine the use of such    
cash, and it decided to pay such cash to JCN in exchange for the Call Right. As 
a result, the $4,285,714 was paid back to JCN on February 27, 1998 in exchange  
for the Call Right.                                                             

Comparison of Year Ended December 31, 1997 to Year Ended December 31, 1996  

Net cash provided by operating activities decreased by $2.9 million to
$26.8 million in 1997. The primary reasons for such decrease are discussed      
above under "Results of Operations."                                            

  Net cash flows used in investing activities increased by $3.6 million in
1997 to $8.2 million which amount was principally a result of issuing an        
additional $19.5 million of notes receivable and investing $11.3 million for    
additions to revenue-producing properties. These investments were substantially 
offset by the decrease in temporary investments of $2.4 million, the receipt of 
$9.1 million of payments on notes receivable, sales of capital assets of $9.6   
million and proceeds from the return of capital from unconsolidated affiliates  
of $1.4 million. In 1996, JCN's net cash used in investing activities of        
approximately $4.6 million was principally a result of increasing temporary     
investments a net $40.4 million, issuing an additional $6.6 million of notes    
receivable and investing $8.3 million for additions to revenue-producing        
properties. These investments were substantially offset by the receipt of $8.8  
million of payments on notes receivable, sales of capital assets of $3.1        
million and proceeds from the sale of marketable equity securities of $38.6     
million.                                                                        

Net cash used by financing activities decreased by $785,000 in 1997 to
$17.1 million. The principal uses of cash in financing activities in 1997 were  
treasury stock purchases of $13.5 million and a net reduction of mortgage and   
notes payable indebtedness of $3.6 million. In 1996 JCN's net cash used in      
financing activities of $17.9 million resulted from a net reduction of mortgage 
and notes payable indebtedness.                                                 

Comparison of Year Ended December 31, 1996 to Year Ended December 31, 1995  

Net cash provided by operating activities increased by $7.7 million to
$29.7 million in 1996. The primary reasons for such increase are discussed      
above under "Results of Operations."                                            

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  Net cash flows used in investing activities increased by $2.8 million in
1996 to $4.6 million which amount was principally a result of increasing        
temporary investments a net $40.4 million, issuing an additional $6.6 million   
of notes receivable and investing $8.3 million for additions to                 
revenue-producing properties. These investments were substantially offset by    
the receipt of $8.8 million of payments on notes receivable, sales of capital   
assets of $3.1 million and proceeds from the sale of marketable equity          
securities of $38.6 million. In 1995, JCN's net cash used in investing          
activities of approximately $1.7 million was principally a result of issuing an 
additional $6.2 million of notes receivable, investing $7.9 million for         
additions to revenue-producing properties and purchasing $3.0 million of        
marketable equity securities. These investments were substantially offset by    
the receipt of $6.9 million of payments on notes receivable, sales of capital   
assets of $5.3 million, and the maturing of marketable securities of $2.4       
million.                                                                        

    Net cash used by financing activities decreased by $9.4 million in 1996 to
$17.9 million. The principal use of cash in financing activities in 1996 and    
1995 was a net reduction of mortgage and notes payable indebtedness of $17.9    
million and $22.8 million, respectively.                                        

Comparison of Three Months Ended March 31, 1998 to Three Months Ended March 
31, 1997                                                                    

  Net cash provided by operating activities decreased by $6.8 million from
$8.4 million for the three months ended March 31, 1997 to $1.6 million for the  
three months ended March 31, 1998. The primary reasons for such decrease        
include higher net cash outflows from the payment of accounts payable and       
accrued expenses, lower cash inflows from the collection of income taxes        
receivable and accounts receivable, and other operating income factors          
discussed above under "Results of Operations."                                  

   Net cash flows provided by investing activities decreased by $6.7 million
from $9.8 million for the three months ended March 31, 1997 to $3.1 million for 
the three months ended March 31, 1998. The $3.1 million of net cash flow        
provided by investing activities was principally a result of decreasing         
temporary investments a net $9.1 million and receiving $2.3 million of payments 
on notes receivable. These receipts were substantially offset by the investment 
in unconsolidated affiliates of $4.3 million, the $2.0 million in additions to  
revenue-producing properties, and the issuance of $1.9 million of notes         
receivable. For the three months ended March 31, 1997, the Company's net cash   
provided by investing activities of approximately $9.8 million was principally  
a result of decreasing temporary investments $9.7 million and receiving $1.8    
million in payments on notes receivable. These receipts were partially offset   
by investments of $1.5 million for additions to revenue-producing properties.   

   Net cash provided by financing activities increased by $17.8 million from
($14.8) million for the three months ended March 31, 1997 to $3.0 million for   
the three months ended March 31, 1998. The $3.0 million of net cash provided by 
financing activities for the three months ended March 31, 1998 was principally  
a result of issuing $4.3 million of common stock, partially offset by a $1.4    
million reduction in mortgage indebtedness. For the three months ended March    
31, 1997, the Company's net cash used in financing activities of $14.8 million  
was principally a result of purchasing $12.8 million of treasury stock and      
reducing mortgage indebtedness $2.0 million.                                    

Earnings before Interest, Taxes Depreciation, and Amortization                  

 It is management's intent to apply the majority of JCN's operating cash
flows to reduce indebtedness and to improve and increase JCN's portfolio of     
revenue-producing properties. JCN is organized as a "Subchapter C" corporation  
and as such pays income taxes on its taxable income and is generally not        
subject to distribution requirements based on net income. Management believes   
that JCN's core operations are best measured by its earnings before interest    
and dividend income, interest expense, income taxes, depreciation and           
amortization, gains or losses from debt restructuring and sales of assets,      
valuation allowances, and after adjustments needed to similarly convert the     
earnings of minority interests and unconsolidated partnerships. Earnings, as so 
computed, are referred to herein as "EBITDA". This is a supplemental            
performance measure used along with net income to report operating results.     
EBITDA is not a measure of operating results or cash flows from operating       
activities as defined by generally accepted accounting principles.              
Additionally, EBITDA is not necessarily indicative of cash available to fund    
operating needs and should not be considered as an alternative to cash flow as  
a measure of liquidity. However, JCN believes that EBITDA provides relevant     
information about its operations and, along with net income (loss), facilitates 
understanding of its operating results. The EBITDA and EBITDA, as adjusted, set 
forth below may not be comparable to other real estate companies, as each real  
estate company may define differently such terms.                               

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                                                        [Enlarge/Download Table]

                                                                                      EBITDA                              
                                                                                      ($000)                              
                                                                  For the Years Ended           For the Three Months Ended
                                                                      December 31,                      March 31,         
                                                         -------------------------------------- ------------------------- 
                                                                                                                          
                                                           1997        1996         1995          1998         1997       
                                                         --------    --------     ---------     --------     --------     
NET INCOME (LOSS) ......................................  $ 19,386    $  27,902    $  (10,752)    $  2,103     $  1,587   
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS)                                                                                
 TO EBITDA:                                                                                                               
 Dividends and interest income .........................    (5,740)      (4,634)       (4,806)      (1,147)      (1,071)  
 Interest expense ......................................    22,333       23,466        27,862        5,426        5,849   
 Income tax expense (benefit) ..........................    (7,322)      16,750        (5,746)       1,262          955   
 Depreciation and amortization .........................    13,483       13,954        14,355        2,894        3,373   
 Gains on sales of investments and other assets ........    (2,628)     (34,867)       (5,711)        (586)         (15)  
 Valuation allowances ..................................        --           --         2,350           --           --   
 Minority interest portion of add-backs ................    (2,420)      (2,768)       (3,136)        (454)        (699)  
 Unconsolidated subsidiaries' portion of add-backs .....     3,642        3,684         3,997        1,189        1,071   
                                                         ---------   ----------  ------------   ----------   ----------   
EBITDA .................................................  $ 40,734    $  43,487    $   18,413     $ 10,687     $ 11,050   
                                                         =========   ==========  ============   ==========   ==========   

  Because of the number and size of non-recurring transactions included in
JCN's consolidated financial statements during the last three years, management 
believes it is important to also present a reconciliation of the foregoing      
EBITDA to "adjusted" EBITDA, as described below, which represents EBITDA        
exclusive of certain non-recurring transactions. Management believes adjusted   
EBITDA is more representative of JCN's underlying operations.                   

                                                        [Enlarge/Download Table]

                                                                              Adjusted EBITDA                      
                                                                                  ($000)                           
                                                                                             For the Three Months  
                                                                For the Years Ended                  Ended         
                                                                   December 31,                    March 31,       
                                                        ----------------------------------- -----------------------
                                                                                                                   
                                                          1997        1996        1995        1998        1997     
                                                        --------    --------    --------    --------    --------   
EBITDA ................................................  $ 40,734    $ 43,487    $ 18,413    $ 10,687    $ 11,050  
NON-RECURRING ITEMS:                                                                                               
  Costs related to proposed merger ....................     1,910          --          --       1,100          --  
  Severance costs .....................................     1,320          --          --          --          --  
  Subdivision lots, change in accounting method .......      (504)         --          --          --              
  Income from resolution of claims ....................      (389)     (3,578)         --          --          --  
  Costs of securing new management (including stock                                                                
   options) ...........................................        --       1,362          --          --          --  
  Litigation settlement expense .......................        --          --      19,553          --          --  
  ESOT Contribution ...................................        --          --       1,787          --          --  
  Other, net ..........................................      (143)        (25)        400          --          --  
                                                        ---------   ---------   ---------   ---------   ---------  
ADJUSTED EBITDA .......................................  $ 42,928    $ 41,246    $ 40,153    $ 11,787    $ 11,050  
                                                        =========   =========   =========   =========   =========  

The above adjusted EBITDA amounts illustrate JCN's EBITDA if certain  
non-recurring items had been eliminated from JCN's statements of operations.    
These amounts are not necessarily indicative of future performance. However,    
management does believe that, when read in conjunction with JCN's consolidated  
financial statements, they assist the reader in better understanding JCN's      
underlying business operations. The adjustments made to arrive at adjusted      
EBITDA are explained as follows: "Costs related to proposed merger" represent   
costs incurred by JCN in conjunction with the proposed merger with a            
wholly-owned subsidiary of Highwoods. "Severance costs" reflects the expense to 
JCN in 1997 of outsourcing certain functions. "Subdivision lots, change in      
accounting method" in 1997 reflects the change in gross margin on residential   
lot sales resulting from JCN's change in accounting method from recording sales 
on an "as closed" basis to recording sales on a "as sold" basis. "Income from   
resolution of claims" reflects the income to JCN from the resolution of certain 
claims in 1997 and 1996. "Costs of securing new management (including stock     
options)" reflects the expense to JCN in 1996 of obtaining the new members of   
its senior management. "Litigation settlement expense" reflects the expenses    
incurred by JCN in 1995 to implement substantially all of its obligations set   
forth in the Settlement Agreement and the related legal and other professional  
expense. "ESOT contribution" reflects the contribution by JCN to the ESOT of    
1,375 shares (or 110,000 post-split) of common stock of JCN in 1995. "Other,    
net" reflects the net of other less significant, non-recurring adjustments.     

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Year 2000 Compliance                                                            

 JCN has undertaken steps to address the issues and exposures related to
the Year 2000 which may affect key financial, operational, and information      
systems. By the end of 1998, JCN intends to have all of its key systems         
converted such that only year 2000 compliant, vendor developed software will be 
utilized. As JCN is undertaking a complete information system conversion,       
virtually all costs incurred in this process will be capitalized and such costs 
are not expected to have a material effect on JCN's consolidated financial      
statements.                                                                     

Impact of Recently Issued Accounting Standards                                  

Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," requires the reporting of comprehensive income and its   
components in the fiscal 1998 financial statements. Comprehensive income is     
defined as the change in equity from transactions and other events and          
circumstances from non-owner sources, and excludes investments by and           
distributions to owners. Comprehensive income includes net income and other     
items of comprehensive income meeting the above criteria. JCN currently has no  
components other than net income which would constitute comprehensive income    
and therefore no additional disclosures are anticipated.                        

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" requires reporting about operating segments, products and          
services, geographic areas, and major customers. The objective of the           
pronouncement is to provide information about the different types of business   
activities and economic activities in which businesses operate. The adoption of 
SFAS No. 131 is not expected to require any additional disclosure during fiscal 
1998.                                                                           

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Directors and Executive Officers                                                

The directors of JCN are set forth below.                             

                                                        [Enlarge/Download Table]
                                                                                                                        
a. Term Expiring 2000                                                                                                   
BARRETT BRADY           Age 51. Mr. Brady is the President and Chief Executive Officer of JCN and has been acting in    
                        those capacities since September 1995. Mr. Brady has served as a director of JCN since          
                        December 1995. For more than five years prior to becoming President and Chief Executive         
                        Officer of JCN, Mr. Brady served as President of Dunn Industries, Inc., an investment holding   
                        company in the primary business of regional commercial and industrial general contracting.      
                        Mr. Brady is also a director of North American Savings Bank. Mr. Brady is the brother-in-law    
                        of Mr. John Fox, Vice President of Special Projects for JCN.                                    

KAY N. CALLISON         Age 54. Ms. Callison has served as a director of JCN since 1982. For more than five years,      
                        Ms. Callison has been active in charitable activities in the Kansas City metropolitan area.     

WILLIAM V. MORGAN       Age 55. Mr. Morgan has been a director of JCN since 1997. He has been the President of          
                        Morgan Associates, Inc., an investment and pipeline management company, since February          
                        1987, and Cortez Holdings Corporation, a related pipeline investment company, since October     
                        1992. Mr. Morgan has served as a director of Midland Loan Services and Kinder Morgan, G.P.,     
                        Inc. since 1994. In February 1997, Mr. Morgan was appointed Vice Chairman of Kinder             
                        Morgan, G.P., Inc. Mr. Morgan has been Vice Chairman of Cortez Pipeline Company since           
                        February 1987. He has held legal and management positions in the energy industry since 1975,    
                        including the presidencies of three major interstate natural gas companies: Florida Gas         
                        Transmission Company, Transwestern Pipeline Company and Northern Natural Gas Company.           
b. Term Expiring 1999                                                                                                   
WILLIAM K. HOSKINS      Age 63. For more than five years Mr. Hoskins has served as Vice President, General Counsel,     
                        and Secretary to Hoechst Marion Roussel, Inc., a major pharmaceutical company. In 1997,         
                        Mr. Hoskins was appointed special counsel to Hoechst Marion Roussel, the parent company of      
                        Hoechst Marion Roussel, Inc. Mr. Hoskins is currently Chairman of the JCN Board of              
                        Directors and has served in that capacity since May 1996.                                       

MARK C. DEMETREE        Age 41. Since October 1997, Mr. Demetree has been the President, Chief Executive Officer        
                        and Chairman of the Board of U.S. Salt Corporation. From February 1993 to July 1997,            
                        Mr. Demetree was the President of North American Salt Company. From 1989 through January        
                        1993, Mr. Demetree was a Senior Vice President of D.G. Harris & Associates, Inc. From 1991      
                        through February 1993, Mr. Demetree was also President of the Trona Railway Company.            
                        Mr. Demetree is also a member of the Board of Directors of Advanced Radio Telecom Corp.         

c. Term Expiring 1998                                                                                                   
CLARENCE L. ROEDER     Age 64. Mr. Roeder has served as a director of JCN since 1974. For more than five years prior    
                       to July 1995, Mr. Roeder was Secretary of JCN. For more than five years prior to January         
                       1993, Mr. Roeder was Vice President and General Counsel of JCN. Mr. Roeder is also a             
                       member of the Board of Directors of Mercantile Bank of Kansas and Mercantile Bank of             
                       Kansas City.                                                                                     

THOMAS J. TURNER, III  Age 53. Mr. Turner has served as a director of JCN since December 1995. For more than five       
                       years, Mr. Turner has served as President of Charter American Mortgage Company, a business       
                       that operates as a correspondent, and originates and services commercial loans, for institutional
                       mortgage lenders.                                                                                

C. Q. CHANDLER, III    Age 71. Mr. Chandler was appointed to the board of directors of JCN in May 1997 to fill the      
                       vacancy created by the resignation of James W. Quinn. Mr. Chandler is the Chairman of the        
                       Board of INTRUST; a director of Fidelity State Bank & Trust Co.; a director of First Newton      
                       Bancshares; a director of Kansas Crippled Children's Society; the Vice President and Director,   
                       First Bank of Newton; and a Trustee of Kansas State University.                                  

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   The following are the executive officers of JCN, all of whom serve at the
will of the JCN Board of Directors.                                             

                                                        [Enlarge/Download Table]
                                                                                                                  
BARRETT BRADY       Information relating to Mr. Brady is set forth above.                                         
G. REID TEANEY      Age 51. Mr. Teaney is Senior Vice President of JCN and has served in that capacity since July 
                    1996. For more than five years prior to becoming Senior Vice President of JCN, Mr. Teaney     
                    served as Senior Vice President and Executive Managing Officer of the Kansas City office of   
                    CB Commercial Group, a commercial real estate marketing, sales, leasing and brokerage         
                    company. From January 1988 through March 1996, Mr. Teaney served as a director of             
                    Columbia Trust Company.                                                                       

EDWARD A. DE AVILA  Age 43. Mr. de Avila is Senior Vice President of Development of JCN and has been acting in    
                    that capacity since August 1996. From November 1993 to July 1996, Mr. de Avila was            
                    Managing Director of Centertainment, Inc., an indirect wholly-owned subsidiary of AMC         
                    Entertainment, Inc., one of the largest motion picture exhibitors in the United States.       
                    Centertainment, Inc. pursued the development of entertainment based retail centers with AMC   
                    Multiscreen Theaters as a major anchor. From March 1988 through May 1993, Mr. de Avila        
                    was Vice President, Director of Retail for Reston Town Center Associates, a major developer   
                    of retail space in Reston, Virginia.                                                          

MARK A. PETERSON    Age 34. Mr. Peterson is a Vice President, Treasurer and Chief Financial Officer of JCN and has
                    been acting in that capacity since June 1995. For more than five years prior to that time,    
                    Mr. Peterson acted in levels of increasing responsibility, concluding as senior audit manager 
                    for Donnelly Meiners Jordan Kline, P.C., a certified public accounting firm that has provided 
                    services to JCN.                                                                              

PRICE A. SLOAN      Age 35. Mr. Sloan is the Secretary and General Counsel of JCN and has been acting in that     
                    capacity since March 1996. For more than five years prior to that time, Mr. Sloan was an      
                    attorney with Blackwell Sanders Matheny Weary & Lombardi LLP, the law firm that has acted     
                    and continues to act as legal counsel to JCN.                                                 

Section 16(a) Beneficial Ownership Reporting Compliance                         

Under Section 16(a) of the Exchange Act, JCN's directors and executive
officers and shareholders holding more than ten percent of the outstanding      
stock of JCN are required to report their initial ownership of stock and any    
subsequent change in such ownership to the Securities and Exchange Commission   
and JCN. Specific time deadlines for the Section 16(a) filing requirements have 
been established by the Securities and Exchange Commission. To JCN's knowledge, 
all Section 16(a) filing requirements applicable to its directors, executive    
officers and ten percent holders were satisfied during the fiscal year ended    
December 31, 1997.                                                              

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Officer Compensation                                                            

The following tables set forth the compensation of certain executive      
                          officers of JCN for the last three fiscal years.

Summary Compensation Table  

                                                        [Enlarge/Download Table]

                                                                                                Long-Term               
                                               Annual Compensation                            Compensation              
                                  ---------------------------------------------  ---------------------------------------
                                                                  Other Annual    Securities Underlying      All Other  
Name and                               Salary        Bonus(a)     Compensation         Options/SARS         Compensation
Principal Position         Year         ($)             ($)            ($)                 (#)                  ($)     
------------------------  ------  ---------------   ----------   --------------  -----------------------   -------------
                                                                                                                        
Barrett Brady, CEO        1997        232,701        150,000         15,861(b)             N/A             N/A          
                          1996        225,000        144,000          9,857(c)           224,000           N/A          
                          1995        110,000           N/A          N/A                   N/A             N/A          
Jack Frost, CEO           1995         61,025           N/A          N/A                   N/A              6,975(d)    
Lynn L. McCarthy,         1995         87,667(f)      50,000          1,080(f)             N/A              5,388(h)    
CEO(e)                                                                                                                  
Edward A. de Avila,       1997        200,000         64,000         10,796(b)             7,500           N/A          
Senior Vice President     1996         78,205         20,000          2,850(f)             N/A             N/A          
G. Reid Teaney, Senior    1997        165,000         90,000          9,196(b)            10,000           N/A          
Vice President            1996         74,666         40,000          3,300(g)             N/A             N/A          
Mark A. Peterson,         1997        104,000         45,000          7,970(b)             5,000           N/A          
CFO                       1996        100,000         25,000          4,800(f)             N/A             N/A          
Price A. Sloan,           1997        104,000         45,000          7,194(b)             5,000           N/A          
General Counsel and                                                                                                     
Secretary                                                                                                               

---------                                                                       
(a) The amount reflects bonus in the year it was earned. All or a portion of    
the bonus may have been paid in the subsequent year.                    

(b) Amounts reported as "Other Annual Compensation" in 1997 include (1) JCN's   
matching contribution to its 401K savings plan as follows: Barrett Brady
$5,200, Edward de Avila $3,596, G. Reid Teaney $1,996, Mark Peterson    
$3,170 and Price Sloan $2,394; (2) automobile allowances as follows:    
Edward de Avila $7,200, G. Reid Teaney $7,200, Mark Peterson $4,800 and 
  Price Sloan $4,800; (3) the personal use of company automobile for Barrett
Brady $5,452; and (4) the cost of a country club membership for Barrett 
Brady $5,209.                                                           

(c) The amount reported reflects the value of personal automobile use paid to   
  Mr. Brady by JCN and the cost of a country club membership provided to Mr.
Brady by JCN.                                                           

(d) The amount reported includes $6,975 paid to Mr. Frost as director fees.     

(e) The amounts reflected for Mr. McCarthy in 1995 do not attempt to adjust for 
the value of cash and property received by Mr. McCarthy pursuant to the 
 Settlement Agreement that resolved the significant shareholder litigation
that occurred in 1995.                                                  

(f) The amount reported includes $6,533 deferred by Mr. McCarthy and $4,333     
contributed by JCN under JCN's 401(k) savings plan.                     

(g) The amount reported is an automobile allowance.                             

(h) The amount reported includes $1,050 paid to Mr. McCarthy as director fees   
  and $4,338 paid as premiums under supplemental split dollar life insurance
policies for Mr. McCarthy.                                              

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Outside Director Compensation                                                   

Directors attending, whether by telephone or in person, any regular or
special meeting of the JCN Board of Directors are paid $1,000 per meeting.      
Directors who are members of committees of the JCN Board of Directors           
attending, whether by telephone or in person, any regular or special meeting of 
a committee of the JCN Board of Directors are paid $500 per meeting. Directors  
who are also employees of JCN are not paid directors' fees.                     

Options and Stock Appreciation Rights                                           

Option/SAR Grants in Last Fiscal Year 

                                                        [Enlarge/Download Table]

                                               Individual Grants                                                    
                        ---------------------------------------------------------------                             
                                                                                         Potential Realizable Value 
                                       Percent of                                         at Assumed Annual Rates   
                          Number of       Total                     Market              of Stock Price Appreciation 
                         Securities      Options                   Price on                   for Option Term       
                         Underlying    Granted to    Exercise or   Date of              ----------------------------
                           Options    Employees in    Base Price    Grant    Expiration                             
Name                       Granted     Fiscal Year     ($/Shr)     ($/Shr)      Date      0% ($)    5% ($)   10%($) 
----------------------- ------------ -------------- ------------- --------- ----------- --------- --------- --------
                                                                                                                    
G. Reid Teaney,                                                                                                     
Senior Vice President      10,000         36%            30          46       7/22/07    160,000  449,292   893,122 
Edward de Avila,                                                                                                    
Senior Vice President       7,500         28%            30          46       7/22/07    120,000  336,969   669,841 
Mark A. Peterson, CFO       5,000         18%            30          46       7/22/07     80,000  224,646   446,561 
Price Sloan,                                                                                                        
General Counsel             5,000         18%            30          46       7/22/07     80,000  224,646   446,561 

Aggregated Option/SAR Exercises in Last 
Fiscal Year and FY-End Option/SAR Values

                                                        [Enlarge/Download Table]

                                                                                                   Value of Unexercised
                                                                           Number of Underlying        In-the-Money    
                                                                          Unexercised Options at     Options/SARS at   
                                                                            Fiscal Year-End (#)    Fiscal Year-End ($) 
                                                                         ------------------------ ---------------------
                                          Shares Acquired                                                              
                                                (#)            Value           Exercisable/            Exercisable/    
Name                                        on Exercise    Received ($)        Unexercisable          Unexercisable    
---------------------------------------- ---------------- -------------- ------------------------ ---------------------
                                                                                                                       
Barrett Brady, CEO                            25,000        1,500,156        79,000/120,000        4,754,512/6,075,000 
G. Reid Teaney, Senior Vice President         - 0 -           - 0 -             0/10,000                0/400,000      
Edward de Avila, Senior Vice President        - 0 -           - 0 -              0/7,500                0/300,000      
Mark A. Peterson, CFO                         - 0 -           - 0 -              0/5,000                0/200,000      
Price Sloan, General Counsel                   -0-             -0-               0/5,000                0/200,000      

Employment Agreements                                                           

JCN has an employment agreement with its President and Chief Executive
Officer, Mr. Barrett Brady. The principal terms of Mr. Brady's employment       
agreement provide that for a period of five years ending on December 31, 2000,  
Mr. Brady shall receive a base salary of $225,000 per year subject to annual    
review and adjustment at the discretion of the JCN Board of Directors.          
Additionally, Mr. Brady shall be entitled to an annual incentive discretionary  
bonus based upon achieving goals to be set annually, with an opportunity to     
earn up to 80% of his base salary as annual incentive discretionary bonus.      
Moreover, Mr. Brady shall be entitled to fixed supplemental retirement benefits 
of $78,000 per year payable for 15 years commencing upon the earlier of his     
disability or reaching the age of 60. Such supplemental retirement benefits     
vest at a rate of 40% on January 1, 1996, 20% on December 31, 1996, and 10%     
annually on December 31st for the years 1997, 1998, 1999 and 2000. Mr. Brady    
has been granted an option to purchase 64,000 shares of JCN Common Stock, or    
their equivalent, at a price of $.0125 per share, which option vested 50% on    
January 1, 1996 and the remaining 50% vested on January 1, 1997. Mr. Brady has  
also been granted an option to purchase 160,000 shares of JCN Common Stock, or  
their equivalent, at a price of $19.375 per share. Such options vest at a rate  
of 10% on December 31, 1996, 15% on December 31, 1997, and 25% annually on      
December 31st for the years 1998, 1999 and 2000. Mr. Brady shall be subject to  
a confidentiality and non-competition agreement during the term of the          
agreement and for a period of one year after termination.                       

Mr. Brady's employment agreement provides for termination by JCN for  
cause, by voluntary resignation of Mr. Brady, or by JCN without cause. The      
agreement also provides Mr. Brady the right to terminate the agreement upon a   
change in                                                                       

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control of JCN, which is defined as the acquisition by any entity or affiliated 
group of 35% or more of the combined voting power of the outstanding securities 
of JCN. Upon termination of the agreement by either party as a result of a      
change of control or by JCN without cause, Mr. Brady shall be entitled to       
certain rights, including, but not limited to, immediate vesting of all stock   
options and the right to receive his salary and normal employee benefits for    
the longer of twenty-four months or the remainder of the agreement's term.      

JCN has an employment agreement with its Senior Vice President of     
Development, Mr. Edward A. de Avila. The principal terms of Mr. de Avila's      
employment agreement provide that for a period of three years ending on August  
12, 1999, Mr. de Avila shall receive a base salary of $200,000 per year subject 
to annual review and increase at the discretion of JCN's Board of Directors.    
Additionally, Mr. de Avila shall be entitled to an annual incentive             
discretionary bonus, with an opportunity to receive up to 40% of his base       
salary as annual incentive discretionary bonus. Mr. de Avila's employment       
agreement provides for termination by JCN for cause, by voluntary resignation   
of Mr. de Avila, or by JCN without cause. Upon termination of the Agreement by  
JCN without cause, Mr. de Avila shall be entitled to certain rights, including, 
but not limited to, the right to receive his annual salary and normal employee  
benefits from the date of termination until August 12, 1999.                    

JCN has an employment agreement with its Senior Vice President, Mr. G.
Reid Teaney. The principal terms of Mr. Teaney's employment agreement provide   
that for a period of three years ending on July 14, 1999, Mr. Teaney shall      
receive a base salary of $160,000 per year subject to annual review and         
increase at the discretion of JCN's Board of Directors. Additionally, Mr.       
Teaney shall be entitled to an annual incentive discretionary bonus with an     
opportunity to receive up to 60% of his base salary as annual incentive         
discretionary bonus. Mr. Teaney's employment agreement provides for termination 
by JCN for cause, by voluntary resignation of Mr. Teaney, or by JCN without     
cause. Upon termination of the Agreement by JCN without cause, Mr. Teaney shall 
be entitled to certain rights, including, but not limited to, the right to      
receive his annual salary and normal employee benefits from the date of         
termination until July 14, 1999.                                                

    JCN has an employment agreement with its Chief Financial Officer, Mr. Mark
A. Peterson. The principal terms of Mr. Peterson's employment agreement provide 
that for a period of three years ending on December 31, 1998, Mr. Peterson      
shall receive a base salary of $100,000 per year subject to annual review and   
increase at the discretion of the JCN Board of Directors. Additionally, Mr.     
Peterson shall be entitled to an annual incentive discretionary bonus set by    
the JCN Board of Directors. Mr. Peterson's employment agreement provides for    
termination by JCN for cause, by voluntary resignation of Mr. Peterson, or by   
JCN without cause. Upon termination of the Agreement by JCN without cause, Mr.  
Peterson shall be entitled to certain rights, including, but not limited to,    
the right to receive his annual salary and normal employee benefits for a       
period of not less than twelve months following the date of termination.        

 JCN has an employment agreement with its General Counsel and Secretary,
Mr. Price A. Sloan. The principal terms of Mr. Sloan's employment agreement     
provide that for a period of three years ending on March 19, 1999, Mr. Sloan    
shall receive a base salary of $100,000 per year subject to annual review and   
increase at the discretion of the JCN Board of Directors. Additionally, Mr.     
Sloan shall be entitled to an annual incentive discretionary bonus set by the   
JCN Board of Directors. Mr. Sloan's employment agreement provides for           
termination by JCN for cause, by voluntary resignation of Mr. Sloan, or by JCN  
without cause. Upon termination of the Agreement by JCN without cause, Mr.      
Sloan shall be entitled to certain rights, including, but not limited to, the   
right to receive his annual salary and normal employee benefits for a period of 
not less than twelve months following the date of termination.                  

Change in Control Agreements                                                    

JCN has entered into change in control agreements with several of its 
employees to ensure their continued service and dedication to JCN and their     
objectivity in considering on behalf of JCN any transaction which would result  
in a change in control of JCN. Under an agreement with Mr. Brady, if Mr.        
Brady's employment is terminated or not renewed following a change in control   
(defined therein to exclude any transaction approved in advance by Mr. Brady in 
his capacity as a member of the Board), JCN must pay to Mr. Brady (i) his base  
salary and medical, dental, life, and long-term disability benefits through     
December 31, 2000 or for twenty-four months, whichever period is longer, (ii)   
cause all stock options to become immediately vested and (iii) cause certain    
supplemental retirement benefits to become immediately vested. Mr. Brady also   
has the right to voluntarily terminate employment during the period of six      
months following a change in control and receive the same benefits. At his      
current compensation level, the resulting benefit to Mr. Brady would be         
approximately $6,215,783.                                                       

    Under agreements with Messrs. Cook, de Avila, Dixon, Fox, Peterson, Sloan,
Stephenson and Teaney and Ms. Marietti, during the twenty-four month period     
after a change in control, the employee would be entitled to receive a lump-sum 
cash payment and certain insurance benefits if such employee's employment were  
terminated by JCN other than for cause or by                                    

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such employee for good reason (as defined therein). Upon such termination, JCN  
must make a lump-sum cash payment to the employee, in addition to any other     
compensation to which the employee is entitled, of (i) two (or three times in   
the case of Messrs. de Avila, Peterson, Sloan, and Teaney) such employee's base 
salary, (ii) an amount equal to the employee's base salary multiplied by such   
employee's management incentive bonus target participation level percentage and 
(iii) cause all stock options to become immediately vested. JCN must also       
maintain medical and dental insurance coverage for the employee and his or her  
dependents, on the same or substantially similar terms and conditions that      
existed immediately prior to the termination, for eighteen months. At current   
compensation levels, the following employees would receive the following        
approximate amounts: de Avila, $1,019,610; Peterson, $618,260; Sloan, $618,260; 
and Teaney, $1,016,171. JCN must also pay any excise tax payments required to   
be withheld under the Internal Revenue Code from any payments made to the       
employee.                                                                       

Stock Option Plan                                                               

The Board of Directors of JCN on March 28, 1996 adopted the 1996 Stock
Option Plan (the "JCN Plan") that allowed the granting of stock options to      
eligible plan participants. The JCN Shareholders approved the JCN Plan at their 
1996 annual meeting on May 29, 1996. An amendment and restatement of the JCN    
Plan was approved subsequently by the Board of Directors to reflect recent      
changes in the federal securities regulations relevant to the JCN Plan. The JCN 
Plan authorizes the Board to issue up to 480,000 shares of JCN Common Stock. If 
an option granted under the JCN Plan expires or is canceled without having been 
exercised or vested, the shares subject to the unvested and canceled options    
will be available thereunder for subsequent grants of options. The type,        
amount, and conditions of any options granted under the Plan are determined by  
the compensation committee, or such other committee as the JCN Board of         
Directors determines.                                                           

Compensation Committee Report on Executive Compensation                         

   Compensation Philosophy. JCN's executive compensation program is designed
to provide fair compensation to executives based on their performance and       
contribution to JCN and to provide incentives that attract and retain key       
executives, instill a long-term commitment to JCN and develop pride and a sense 
of Company ownership, all in a manner consistent with shareholder interests.    
Given these objectives, the executive officers' compensation package includes   
primarily two elements: (i) base salary, which is reviewed annually; and (ii)   
incentive compensation consisting of stock options and bonuses.                 

  Annual adjustments to the base salaries of JCN's executives are based on
JCN's performance during the preceding fiscal year and upon a subjective        
evaluation of each executive's individual contribution to that performance. In  
evaluating overall performance of JCN, the primary focus is on JCN's financial  
performance for the year. Additionally, certain intangible criteria, including  
whether JCN achieved strategic goals and conducted its operations in accordance 
with the standards of business expected of JCN by its shareholders and the      
community in which it operates, may also be considered.                         

Stock options are likely to be granted annually in the future as      
additional compensation in an effort to link each executive's future            
compensation to the long-term financial success of JCN, as measured by stock    
performance. The total number of options awarded each executive will be based   
on an evaluation of the performance of each executive under consideration       
without regard to the number of options held by or previously granted to each   
executive.                                                                      

 Compensation of the Chief Executive Officer. For the fiscal year ending
December 31, 1997, Barrett Brady, JCN's Chief Executive Officer, received a     
bonus of $150,000. Mr. Brady's bonus was based on a subjective valuation that   
considered, in part, JCN's financial performance for the fiscal year as well as 
the implementation of business strategies established by the JCN Board of       
Directors.                                                                      

This report has been issued over the names of each member of the      
compensation committee, Thomas J. Turner, III, Chairman, and Mark C. Demetree.  

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Performance of JCN Common                                                       

Prior to 1997 JCN did not have a class of stock registered under the  
Securities Exchange Act of 1934. Shares of JCN Common have been traded in the   
over-the-counter market through inter-broker bulletin board trading under the   
symbol "NCJC.BB." Trading prior to March 31, 1996 was very infrequent. The      
graph set forth below compares the yearly percentage change in cumulative       
stockholder return of JCN's shares of common stock since March 31, 1996 against 
the cumulative return of the NASDAQ Stock (U.S.), and the group of publicly     
held companies sharing JCN's Standard Industrial Code: 6552 -- Subdividers and  
Developers (the "Peer Group Index") covering the same time period. The graph is 
based on $100 invested on March 31, 1996, in JCN Common, the NASDAQ Stock       
(U.S.), and the Peer Group Index, each assuming dividend reinvestment.          

(Performance Graph appears here. See the table below for plot points.)          

                                                        [Enlarge/Download Table]


                   3/31/96  6/30/96  9/30/96  12/31/96  3/31/97  6/30/97  9/30/97  12/31/97
                                                                                           
J.C. Nichols        100.00  160.00   143.28    143.28    160.00  152.84    243.58   334.33 
NASDAQ - Total US   100.00   96.79    93.61     98.05     85.37   96.70    115.37   104.12 
Peer Group Index    100.00  107.41   110.37    115.56    109.69  129.76    151.30   141.76 

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Security Ownership of Certain Beneficial Owners and Management                  

Table A describes the security ownership of certain beneficial owners,
while Table B describes the security ownership by management as of April 27,    
1998.                                                                           

TABLE A -- Beneficial ownership of those owning more than five percent of the   
outstanding shares of JCN Common                                                

                                                        [Enlarge/Download Table]

                                                                                         Amount and                   
                                                                                          Nature of      Percentage of
Name of                                                                                  Beneficial       Outstanding 
Beneficial Owner                                     Address of Beneficial Owner          Ownership         Shares    
------------------------------------------------ ----------------------------------- ------------------ --------------
                                                                                                                      
INTRUST Bank, N.A., trustee of the J.C. Nichols                                                                       
  Company Employee Stock Ownership Trust         INTRUST Bank, N.A.                       1,390,003(a)        30.1%   
                                                 Attn: Scott Rankin                                                   
                                                 4000 Somerset Drive                                                  
                                                 Prairie Village, KS 66208                                            
Stephen Feinberg                                 450 Park Avenue, 28th Floor                660,897(b)        14.3%   
                                                 New York, NY 10022                                                   
The Miller Nichols Living Trust                  Miller Nichols, Jeannette Nichols          567,095(c)        12.3%   
                                                 and Clarence Roeder, Trustees                                        
                                                 400 West 49th Terrace                                                
                                                 Alameda Towers                                                       
                                                 Kansas City, MO 64112                                                
Kay N. Callison                                  Kay N. Callison                            277,440(d)         6.0%   
                                                 55 Lemans Court                                                      
                                                 Shawnee Mission, KS 66208                                            

---------                                                                       
(a) All 1,390,003 shares are owned by the ESOT and are held in the record name  
 of INTRUST's nominee, Transco & Company. INTRUST Bank, N.A. and Transco &
Company disclaim beneficial ownership of all such shares.               

(b) 160,957 shares are owned by Cerberus Partners, L.P., a partnership          
organized under the laws of Delaware ("Cerberus"). 173,220 shares are   
owned by Cerberus International, Ltd., a corporation organized under the
laws of the Bahamas ("International"). 74,500 shares are owned by Ultra 
  Cerberus Fund, Ltd., a corporation organized under the laws of the Bahamas
 ("Ultra"). Mr. Feinberg possesses sole voting and investment control over
all securities owned by Cerberus, International and Ultra. In addition, 
252,220 shares are owned by various other persons and entities for which
Stephen Feinberg possesses certain investment authority.                

(c) Shares reflected include shares beneficially owned by the Miller Nichols    
Living Trust. Miller Nichols and Clarence Roeder, Chairman Emeritus and 
Director of JCN, respectively, and Ms. Jeanette Nichols are trustees of 
the Miller Nichols Living Trust, none of whom have sole voting or       
investment powers.                                                      

(d) Ms. Callison is a director of JCN. Of the shares reported by Ms. Callison,  
 114,040 are held individually by Ms. Callison and she has sole voting and
  investment power over such shares. Additionally, 37,640 shares are held in
trusts for which Ms. Callison's spouse has sole voting and dispositive  
power. Ms. Callison is the trustee and has sole investment and voting   
power for a trust for the benefit of her daughter, Elizabeth Callison.  
Such trust holds 40,800 shares. Ms. Callison is the co-trustee with her 
  son, Mark Callison, and shares investment and voting power for a trust for
  the benefit of Mark Callison. Such trust holds 62,480 shares. Ms. Callison
is co-trustee with Ann Nichols and UMB Bank, N.A. of Kansas City of the 
Nancy Nichols Lopez Trust, which owns 7,680 shares. Ms. Callison, Ms.   
Nichols and UMB Bank share investment and voting power over such shares.
Ms. Callison is the co-trustee with Commerce Bank of the Miller Nichols 
Trust, which owns 14, 800 shares for the benefit of Ms. Ann Nichols. Ms.
Callison and Commerce Bank share investment and voting power over such  
shares.                                                                 

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TABLE B -- Management Ownership 

                                                        [Enlarge/Download Table]

                                                                               Amount and Nature of     Percentage of   
Name, Title                                                                    Beneficial Ownership   Outstanding Shares
----------------------------------------------------------------------------- ---------------------- -------------------
                                                                                                                        
Barrett Brady, Director, President and Chief Executive Officer ..............         122,672(a)              2.6%      
Price A. Sloan, General Counsel and Secretary ...............................           2,550(b)                *       
G. Reid Teaney, Senior Vice President .......................................           2,600(c)                *       
Mark A. Peterson, Vice President, Treasurer and Chief Financial Officer .....           1,300(d)                *       
Edward A. de Avila, Senior Vice President ...................................           1,500(e)                *       
Clarence Roeder, Director ...................................................         567,095(f)             12.3%      
Kay N. Callison, Director ...................................................         277,440(g)              6.0%      
William K. Hoskins, Director ................................................           2,240                   *       
Thomas J. Turner, III, Director .............................................           1,500                   *       
Beneficial Ownership of Directors and Executive Officers as a Group .........         978,897                21.2%      

---------                                                                       
*  Less than one percent.                                                     

(a) Of the 122,672 shares reported by Mr. Brady, 2,660 shares are held          
individually by Mr. Brady's spouse. Mr. Brady disclaims beneficial      
ownership of such shares. Additionally, shares reflected as beneficially
  owned by Mr. Brady include 8,000 shares held by the Fred Brady Trust dated
  December 5, 1985. Mr. Brady is a Trustee of such trust and has sole voting
and investment power over such shares. An additional 79,000 shares      
 reported by Mr. Brady are attributable to an unexercised but vested stock
option from JCN.                                                        

(b) Of the 2,550 shares reported by Mr. Sloan, 750 are held individually by Mr. 
Sloan and 300 are held individually by Mr. Sloan's spouse. Additionally,
500 shares are held in a life insurance trust for the benefit of Mr.    
Sloan's spouse. Mr. Sloan does not have voting or investment power over 
the shares held by the trust and disclaims beneficial ownership of such 
 shares. An additional 1,000 shares reported by Mr. Sloan are attributable
to an unexercised but vested stock option from JCN.                     

(c) Of the 2,600 shares reported by Mr. Teaney, 300 are held individually by    
  Mr. Teaney's spouse. An additional 2,000 shares reported by Mr. Teaney are
attributable to an unexercised but vested stock option from JCN.        

(d) Of the 1,300 shares reported by Mr. Peterson, 1,000 shares are attributable 
to an unexercised but vested stock option from JCN.                     

(e) All of the shares reported by Mr. de Avila are attributable to an           
unexercised but vested stock option from JCN.                           

(f) All 567,095 shares reported by Mr. Roeder are held by the Miller Nichols    
Living Trust. Mr. Roeder, Ms. Jeannette Nichols and Mr. Miller Nichols, 
  Chairman Emeritus, are co-trustees of the Miller Nichols Living Trust. Mr.
  Roeder does not have sole voting or investment powers for such shares. Mr.
Roeder disclaims all beneficial ownership of such shares.               

(g) Ms. Callison is a director of JCN. Of the shares reported by Ms. Callison,  
114,040 shares are held individually by Ms. Callison and she has sole   
 voting and investment power over such shares. Additionally, 37,640 shares
are held in trusts for which Ms. Callison's spouse has sole voting and  
  dispositive power. Ms. Callison is the trustee and has sole investment and
voting power for a trust for the benefit of her daughter, Elizabeth     
 Callison. Such trust holds 40,800 shares. Ms. Callison is co-trustee with
  her son, Mark Callison, and shares investment and voting power for a trust
for the benefit of Mark Callison. Such trust holds 62,480 shares. Ms.   
 Callison is co-trustee with Ann Nichols and UMB Bank, N.A. of Kansas City
of the Nancy Nichols Lopez Trust, which owns 7,680 shares. Ms. Callison,
Ms. Nichols and UMB Bank share investment and voting power over such    
shares. Ms. Callison is the co-trustee with Commerce Bank of the Miller 
Nichols Trust, which owns 14,800 shares for the benefit of Ms. Ann      
 Nichols. Ms. Callison and Commerce Bank share investment and voting power
over such shares.                                                       

Certain Relationships and Related Transactions                                  

Mr. Thomas J. Turner, III is a Director of JCN and is president and   
principal shareholder of Charter American Mortgage Company, a business that     
prepares and presents mortgage loan applications to institutional mortgage      
lenders. Charter American Mortgage Company has from time to time been asked to  
provide services to JCN, and JCN has obtained loans as a result of loan         
applications taken by Charter American Mortgage Company. Such loans were        
obtained by JCN at rates competitive with the rates charged by other mortgage   
lenders. Charter American Mortgage Company has earned approximately $145,875 in 
the last year in loan origination fees on mortgage financing obtained by JCN as 
a result of services provided by Charter American Mortgage Company.             

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  Mr. C. Q. Chandler, III is a director of JCN and is also chairman of the
board of directors and a significant shareholder of INTRUST. INTRUST received   
payments of fees from the ESOT totaling $114,480 during 1997 for serving as     
trustee of the ESOT. The fee was determined based on a percentage of assets in  
the ESOT.                                                                       

 On January 29, 1997, JCN purchased all outstanding shares of JCN Common
owned beneficially and of record by AHI. Additionally, Mr. John Simon and Mr.   
James W. Quinn, who are affiliated with AHI, resigned as directors of JCN. JCN  
paid consideration of $27.25 per share, or a total of $25,856,980 for the       
948,880 shares of JCN Common owned by AHI. At the closing, JCN delivered to AHI 
$12,809,880 in cash (plus eight percent (8%) interest per annum from January    
15, 1997 to January 29, 1997 in an amount totaling $39,307). JCN also executed  
a promissory note in the amount of $12,989,600 (which reflects a $57,500        
reduction for certain expenses), bearing interest at a rate of eight percent    
(8%) per annum with interest accruing commencing on January 15, 1997. That      
promissory note is secured by the pledge of a mortgage receivable and real      
property. The purchase price for the stock held by AHI was based on a           
negotiated price within the range of trades in the fourth quarter of 1996,      
which trades were between $27.00 and $31.06 per share. The transaction was      
negotiated on behalf of JCN over a number of months by management of JCN, with  
input from the JCN Board of Directors. The transaction was unanimously approved 
by the JCN Board of Directors without the participation of Mr. Simon or Mr.     
Quinn.                                                                          

MANAGEMENT AND OPERATION OF HIGHWOODS AFTER THE MERGER  

   Upon the consummation of the Merger, the executive officers and directors
of Highwoods shall continue to serve for the balance of their unexpired terms   
or their earlier death, resignation or removal. In addition, it is expected     
that Barrett Brady will become a senior vice president of Highwoods and the     
Highwoods Board of Directors will be expanded to include one independent        
director selected by the JCN Board of Directors.                                

  Barrett Brady, age 51, has been serving as President and Chief Executive
Officer of JCN since September of 1995. Mr. Brady has served as a director of   
JCN since December 1995. For more than five years prior to joining JCN, Mr.     
Brady served as President of Dunn Industries, Inc., an investment holding       
company in the primary business of regional commercial and industrial general   
contracting. Mr. Brady is also a director of North American Savings Bank.       

ANTICIPATED EFFECTS OF THE MERGER ON  
RESULTS OF OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES  

  As a result of the Merger, Highwoods expects to experience a significant
increase in net income available to Highwoods Common as well as an increase in  
total revenues, property and maintenance expenses, real estate taxes and        
insurance, property management expenses, depreciation expense, interest expense 
and general and administrative expenses.                                        

Also in connection with the Merger, Highwoods expects to assume       
liabilities for financial statement purposes of approximately $250 million.     
Because of the cash election option available to JCN Shareholders and the       
varying exchange ratio in the Merger, Highwoods cannot estimate how many shares 
of Highwoods Common will be issued or the amount of cash to be paid as          
consideration in the Merger. No more than 40% of the total Merger               
consideration, however, will be in cash. If the maximum amount of cash is paid, 
the Merger consideration will consist of approximately $126 million in cash and 
approximately 5.92 million shares of Highwoods Common. If the maximum number of 
shares of Highwoods Common is issued, the Merger consideration will consist of  
approximately 9.86 million shares of Highwoods Common and no cash. Highwoods    
also expects to incur approximately $14.5 million in related Merger costs.      
Highwoods expects to fund the cash portion of the purchase price and the Merger 
expenses through borrowings under its Revolving Loans. After the closing of the 
Merger, Highwoods will terminate JCN's line of credit facility but will         
continue to maintain Highwoods' Revolving Loans. Highwoods and the Highwoods    
Operating Partnership may also guarantee or assume debt obligations of JCN.     

   Highwoods expects to meet its short-term liquidity requirements including
capital expenditures relating to maintaining its existing properties and JCN's  
properties generally through its working capital, net cash provided by          
operating activities and borrowings under Highwoods' Revolving Loans. Highwoods 
considers its cash provided by operating activities to be adequate to meet      
operating requirements and payments of distributions. Highwoods also expects to 
meet its long-term liquidity requirements, such as scheduled mortgage debt      
maturities, reduction of outstanding amounts under its line of credit, property 
acquisitions, financing of construction and development activities related to   
JCN and capital improvements through the issuance of unsecured notes and equity 
securities including additional Common Units as well as from undistributed FFO  
and proceeds received from the disposition of certain properties.               

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COMPARISON OF RIGHTS OF SHAREHOLDERS  

    Highwoods is a Maryland corporation subject to the provisions of the MGCL.
JCN is a Missouri corporation subject to the provisions of the GBCL. The JCN    
Shareholders, whose rights as shareholders currently are governed by Missouri   
law, the JCN Articles and the JCN Bylaws, will become shareholders of Highwoods 
to the extent they receive shares of Highwoods Common upon consummation of the  
Merger; their rights as Highwoods shareholders will then be governed by         
Maryland law, the rules of the NYSE, the Highwoods Articles and the Highwoods   
Bylaws.                                                                         

    Discussed below are the differences between the rights of JCN Shareholders
and holders of Highwoods Common that are material to a JCN Shareholder's        
investment decision with respect to the Merger.                                 

Election of Directors                                                           

    Highwoods: The Highwoods Board of Directors is divided into three classes,
and the directors are elected by classes to three-year terms, so that           
approximately one-third of the directors of Highwoods will be elected at each   
annual meeting of Highwoods shareholders. The election of a director requires   
the vote of a plurality of all shares cast.                                     

 JCN: Like Highwoods, the JCN Board of Directors is divided equally into
three classes with one class of directors being elected at each annual meeting  
of the JCN Shareholders. However, JCN Shareholders elect the JCN Directors      
through cumulative voting, pursuant to which each share of stock eligible to be 
cast entitles its holder to cast as many votes as there are directors to be     
elected, and to cast all of such votes for the same candidate.                  

Removal of Directors                                                            

Highwoods: A director of Highwoods may only be removed from office for
cause and only by the affirmative vote of two-thirds of the shares of capital   
stock of Highwoods entitled to vote in the election of directors, voting        
together as a group. For the purposes of the removal of a director, "cause"     
means the willful and continuous failure to substantially perform or willful    
gross misconduct that demonstrably and materially harms Highwoods.              

JCN: The JCN Bylaws permit a director to be removed by the affirmative
vote of (i) the holders of a majority of the shares of JCN Common at an annual  
meeting or a special meeting called for that purpose or (ii) a majority of the  
members of the JCN Board of Directors if the JCN Board of Directors is of the   
opinion that such director has violated his fiduciary duties, engaged in an     
interested director transaction without fully informing the JCN Board of        
Directors or personally engaged in any transaction involving corporate property 
that was not fully disclosed to the JCN Board of Directors and was not fair to  
JCN. Additionally, since JCN elects directors through cumulative voting, if     
less than the entire JCN Board of Directors is to be removed, no one of the     
directors may be removed if the votes cast against his removal would be         
sufficient to elect him if then cumulatively voted at an election of the entire 
JCN Board of Directors or at an election of the class of directors of which he  
is a part.                                                                      

Indemnification and Liability of Directors and Officers                         

Highwoods: Under the MGCL, a corporation may indemnify its officers,  
directors, employees or agents for expenses, judgments or settlements actually  
and reasonably incurred by them in connection with suits and other legal        
proceedings, unless (i) the act or omission was material to the matter giving   
rise to the proceeding and either was committed in bad faith or was the result  
of active and deliberate dishonesty; (ii) the person actually received an       
improper personal benefit in money, property or services; or (iii) in the case  
of any criminal proceeding, the person had reasonable cause to believe that the 
act or omission was unlawful. Regardless, indemnification may not be made to    
such persons in connection with a proceeding by or in the right of the          
corporation in which the person seeking indemnification is found liable to the  
corporation or in any other proceeding in which the director is found liable    
for receiving an improper personal benefit. The Highwoods Articles provide that 
it shall indemnify its directors and officers to the full extent permitted by   
the MGCL and its other employees and agents to the extent permitted by law if   
so authorized by the Highwoods Board of Directors or the Highwoods Bylaws. The  
Highwoods Articles provide that no subsequent amendment or repeal of the        
Highwoods Articles shall limit or eliminate the benefits provided under its     
indemnification provisions with respect to any act or omission that occurred    
prior to such amendment or repeal.                                              

The MGCL permits a corporation to include in its charter provisions   
expanding or limiting the liability of directors and officers to Highwoods or   
its shareholders for money damages, so long as such provisions do not limit the 
liability of directors or officers (i) for the amount of any improper benefit   
or profit in money, property or services actually received or (ii) to the       
extent that a judgment or other final adjudication adverse to the director or   
officer based on a finding in the proceeding that the person's action, or       
failure to act, resulted from active and deliberate dishonesty and was material 
to the                                                                          

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causes of action adjudicated in the proceeding. The Highwoods Articles limit    
the liability of directors and officers to the fullest extent allowed by the    
MGCL and also state that no amendment or repeal of the Highwoods Articles shall 
limit or eliminate this limitation on liability with respect to any act or      
omission occurring before the amendment or repeal.                              

  JCN: The GBCL authorizes a Missouri corporation to indemnify a director,
officer, employee or agent for actually and reasonably incurred expenses in     
connection with suits and other legal proceedings, if (i) such person acted in  
good faith, (ii) such person acted in a manner reasonably believed to be in or  
not opposed to the best interests of the corporation, and (iii) with respect to 
any criminal action or proceeding, such person had no reasonable cause to       
believe his conduct was unlawful. No indemnification may be made, however, in   
respect of any claim by or in the right of the corporation as to which such     
person was adjudged to be liable for negligence or misconduct in the            
performance of his duties to the corporation unless and to the extent that the  
court in which the action or suit was brought determines upon application that, 
despite the adjudication of liability and in view of all the circumstances of   
the case, such person is fairly and reasonably entitled to indemnity for the    
expenses that the court deems proper. A corporation also may give any further   
indemnity to any such person, if such further indemnity is either (i)           
authorized, directed or provided for in the articles of incorporation of the    
corporation or (ii) is authorized, directed or provided for in any bylaw or     
agreement of the corporation that has been adopted by a vote of the             
shareholders of the corporation; provided that no such indemnity shall          
indemnify any person from or on account of such person's conduct that was       
finally adjudged to have been knowingly fraudulent or deliberately dishonest or 
to have engaged in willful misconduct. The JCN Bylaws provide that JCN will     
indemnify its directors and officers who are or would be a party to any         
proceeding, whether or not in right of the corporation, as a result of such     
person's service to or at the request of JCN, against expenses (including       
attorneys' fees), judgments, fines and settlement amounts paid or incurred by   
him, except if such person is finally adjudged to have been knowingly           
fraudulent or deliberately dishonest or to have engaged in willful misconduct.  
Additionally, the JCN Bylaws permit the JCN Board of Directors to indemnify its 
employees and agents to a similar extent.                                       

The GBCL does not contain any provisions allowing the limitation of   
liability of a director or officer. The JCN Bylaws do, however, limit the       
liability of any director or officer of JCN on account of any action taken or   
omitted as a director or officer of JCN or any other corporation at the request 
of JCN, if such person (i) exercised prudent care and skill under the           
circumstances or (ii) acted or did not act upon the advice of corporate counsel 
which such person had no reasonable grounds to disbelieve.                      

 Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling JCN or       
Highwoods pursuant to the foregoing provisions, in the opinion of the           
Commission, such indemnification is against public policy as expressed in the   
Securities Act and is therefore unenforceable.                                  

General Provisions Affecting Change of Control                                  

Highwoods: The MGCL provides that, unless a corporation's articles of 
incorporation or bylaws provide otherwise, certain business combinations,       
including mergers, consolidations, share exchanges and transfers of assets,     
require the approval of two-thirds of the shares entitled to vote thereon.      
However, the Highwoods Articles provide that, notwithstanding the foregoing,    
such business combinations may be taken by the affirmative vote of the holders  
of a majority of the total number of shares of capital stock entitled to vote,  
voting as a class. Additionally, under the MGCL, shareholder approval is not    
required for business combinations in which Highwoods would be the surviving    
corporation in the merger and (i) the merger does not reclassify or change the  
surviving corporation's outstanding stock or otherwise amend its charter and    
(ii) the number of shares of stock of the surviving corporation to be issued or 
delivered in connection with the merger does not exceed 20% of the number of    
shares of the same class or series outstanding immediately prior to the merger. 
The NYSE also requires shareholder approval as a prerequisite to listing shares 
to be issued in certain mergers or other acquisition transactions, including    
any transaction that would result in the present or potential increase of 20%   
or more in the outstanding shares of common stock of the acquiring corporation. 

JCN: The GBCL provides that certain business combinations, including  
mergers and consolidations, require the approval of the holders of two-thirds   
of all outstanding shares entitled to vote thereon. The JCN Articles and JCN    
Bylaws do not require otherwise.                                                

Voting Rights of Control Shares                                                 

  Highwoods: The MGCL provides that "control shares" acquired in a control
share acquisition have no voting rights except to the extent approved by a vote 
of two-thirds of the shareholders, excluding shares owned by the acquiror, by   
officers or by directors who are also employees of Highwoods. "Control shares"  
are voting shares of stock that, if aggregated                                  

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with all other such shares of stock previously acquired by the acquiror or for  
which the acquiror is able to exercise or direct the exercise of voting power,  
would entitle the acquiror to exercise voting power in electing directors in    
excess of one-fifth, one-third or a majority of all voting power. The Highwoods 
Bylaws exempt Highwoods from the control share acquisition provision of the     
MGCL. Because the Highwoods Bylaws may be amended by the Highwoods Board of     
Directors without shareholder approval, the Maryland control share statute may  
still have the effect of increasing the difficulty of completing a change of    
control transaction.                                                            

  JCN: The GBCL contains "control share acquisition" provisions similar to
those of the MGCL. In Missouri, an acquiror of a corporation subject to the     
GBCL's control share acquisition provisions would not be able to vote control   
shares unless certain disclosure requirements are satisfied and the retention   
of voting rights by such shareholder is approved by at least a majority of      
shares entitled to vote and a majority of all non-interested shares entitled to 
vote. The JCN Articles exempt JCN from the control share acquisition provisions 
of the GBCL.                                                                    

Business Combinations with Interested Shareholders                              

Highwoods: The MGCL establishes special requirements with respect to  
business combinations between Maryland corporations and interested shareholders 
unless exemptions are applicable. An "interested shareholder" is generally any  
holder of 10% or more of the voting power of the outstanding voting stock of    
the corporation. Among other things, the MGCL prohibits for a period of five    
years a merger and other specified or similar transactions between a company    
and an interested shareholder and requires a supermajority vote for such        
transactions after the end of the five-year period. The Highwoods Articles      
contain a provision exempting Highwoods from the requirements and provisions of 
the Maryland business combination statute. There can be no assurance that such  
provision will not be amended or repealed at any point in the future. If the    
foregoing exemption in the Highwoods Articles is amended, the Maryland business 
combination statute could have the effect of discouraging offers to acquire     
Highwoods and of increasing the difficulty of consummating any such offer.      

JCN: The GBCL contains provisions regulating a broad range of business
combinations, such as a merger or consolidation, between certain Missouri       
corporations and an "interested shareholder" (which is generally defined as any 
owner of 20% or more of the corporation's stock) for five years after the date  
on which such shareholder became an interested shareholder, unless, among other 
things, the stock acquisition that caused the person to become an interested    
shareholder was approved in advance by the corporation's board of directors.    
This so-called "five-year freeze" provision is effective even if all the        
parties should subsequently decide that they wish to engage in a business       
combination. Following the five-year period, a corporation cannot enter into a  
business combination with an interested shareholder unless the holders of a     
majority of the outstanding shares not beneficially owned by an interested      
shareholder or an associate or affiliate of an interested shareholder approve   
the business combination or the business combination satisfies certain price    
and procedural requirements. JCN is governed by the Missouri interested         
shareholder statute.                                                            

Ownership Limitations and Restrictions on Transfers                             

    Highwoods: For Highwoods to remain qualified as a REIT under the Code, not
more than 50% in value of its outstanding shares of capital stock may be owned, 
directly or indirectly, by five or fewer individuals during the last half of a  
taxable year, and such shares must be beneficially owned by 100 or more         
persons. To ensure that Highwoods remains a qualified REIT, the Highwoods       
Articles provide that no holder (other than persons approved by the directors   
at their option and in their discretion) may own, or be deemed to own by virtue 
of the attribution provisions of the Code, more than 9.8% (the "Ownership       
Limit") of the issued and outstanding capital stock of Highwoods. The Highwoods 
Board may waive the Ownership Limit if evidence satisfactory to the Highwoods   
Board of Directors and Highwoods' tax counsel is presented that the changes in  
ownership will not jeopardize Highwoods' status as a REIT.                      

   If any shareholder purports to transfer shares to a person and either the
transfer would result in Highwoods failing to qualify as a REIT, or the         
shareholder knows that such transfer would cause the transferee to hold more    
than the Ownership Limit, the purported transfer shall be null and void, and    
the shareholder will be deemed not to have transferred the shares. In addition, 
if any person holds shares of capital stock in excess of the Ownership Limit,   
such person will be deemed to hold the excess shares in trust for Highwoods,    
will not receive distributions with respect to such shares and will not be      
entitled to vote such shares. The person will be required to sell such shares   
to Highwoods or to sell such shares at the direction of Highwoods, in which     
case Highwoods will be reimbursed for its expense in connection with the sale   
and will receive any amount of such proceeds that exceeds the amount such       
person paid for the shares. If Highwoods repurchases such shares, it may pay    
for the shares with Common Units. The foregoing restrictions on transferability 
and ownership will not apply if the Highwoods Board of Directors and the        
shareholders (by the affirmative vote of the holders of two-thirds of the       

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outstanding shares of capital stock entitled to vote on the matter) determine   
that it is no longer in the best interest of Highwoods to continue to qualify   
as a REIT.                                                                      

All certificates representing shares of Highwoods Common bear a legend
referring to the restrictions described above.                                  

Every beneficial owner of more than 5% (or such lower percentage as   
required by the Code or regulations thereunder) of the issued and outstanding   
shares of capital stock must file a written notice with Highwoods no later than 
January 30th of each year, containing the name and address of such beneficial   
owner, the number of shares of capital stock owned and a description of how the 
shares are held. In addition, such shareholder shall be required upon demand to 
disclose to Highwoods in writing such information as Highwoods may request in   
order to determine the effect of such shareholder's direct, indirect and        
constructive ownership of such shares on the Highwoods' status as a REIT.       

These ownership limitations could have the effect of precluding       
acquisition of control of Highwoods by a third party.                           

    JCN: JCN has no similar ownership limitations or restrictions on transfer.

Operating Partnership Agreement                                                 

Highwoods: The Highwoods Operating Partnership Agreement provides that
Highwoods may not engage in certain change of control transactions without the  
approval of the holders of a majority of the outstanding Common Units. Should   
Highwoods ever own less than a majority of the outstanding Common Units, this   
voting requirement might delay, defer or preclude an acquisition or change in   
the control of Highwoods. As of March 31, 1998, Highwoods owned approximately   
83% of the Common Units.                                                        

The Highwoods Operating Partnership Agreement also contains provisions
(the "Unit Protection Provisions") relating to a limited partner's redemption   
right in the event of certain changes of control of Highwoods and under certain 
circumstances allows for limited partners to continue to hold Common Units in   
the Highwoods Operating Partnership following such a change of control, thereby 
maintaining the tax basis in their Common Units. The covered changes of control 
(each, a "Trigger Event") are: (i) a merger involving Highwoods in which        
Highwoods is not the surviving entity; (ii) a merger involving Highwoods in     
which Highwoods is the survivor but all or part of Highwoods' shares are        
converted into securities of another entity or the right to receive cash; and   
(iii) the transfer by Highwoods to another entity of substantially all of the   
assets or earning power of Highwoods or the Highwoods Operating Partnership.    

Upon occurrence of a Trigger Event, the rights of a limited partner to
receive a share of Highwoods Common (a "REIT Share") or cash equal to the fair  
market value of a REIT Share upon redemption of a Common Unit is converted into 
the right to receive a share (a "Replacement Share") or cash equal to the fair  
market value thereof of the acquiror or a parent of the acquiror. If the        
acquiror does not have publicly traded securities and a parent of the acquiror  
does, the publicly traded equity securities of the parent entity with the       
highest market capitalization will be the Replacement Shares. If neither the    
acquiror nor any parent has publicly traded equity securities, the Replacement  
Shares will be the equity securities of the entity with the highest market      
capitalization. The number of Replacement Shares to be received by a limited    
partner (or to be used to calculate the cash payment due) upon a redemption of  
Common Units shall be equal to the number of REIT Shares issuable prior to the  
Trigger Event multiplied by (i) the number of Replacement Shares the holder of  
a single REIT Share would have received as a result of the Trigger Event or, if 
the Replacement Shares have not been publicly traded for one year, (ii) a       
fraction, the numerator of which is the Average Trading Price (as defined in    
the Highwoods Operating Partnership Agreement) of a REIT Share as of the        
Trigger Event and the denominator of which is the Average Trading Price of a    
Replacement Share as of the Trigger Event.                                      

 If the acquiror in a Trigger Event is a REIT, it must make provision to
preserve an operating partnership structure with terms no less favorable to the 
limited partners than currently in place. In addition, the Highwoods Operating  
Partnership Agreement provides that, if a distribution of cash or property is   
made in respect of a Replacement Share, the Highwoods Operating Partnership     
will distribute the same amount in respect of a Common Unit as would have been  
received by a limited partner had such partner's Common Units been redeemed for 
Replacement Shares prior to such distribution.                                  

    Because the Highwoods Operating Partnership Agreement requires an acquiror
to make provision under certain circumstances to maintain the Highwoods         
Operating Partnership structure and maintain a limited partner's right to       
continue to hold Common Units with future redemption rights, the terms of the   
Highwoods Operating Partnership Agreement could also have the effect of         
discouraging a third party from making an acquisition proposal for Highwoods.   

The Unit Protection Provisions may only be waived or amended upon the 
consent of limited partners holding at least 75% of the Common Units (excluding 
those held by Highwoods).                                                       

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JCN: Unlike Highwoods, JCN is not an umbrella partnership REIT and    
therefore has no corresponding operating partnership agreement.                 

Shareholders' Rights Plan                                                       

   Highwoods: On October 4, 1997, the Highwoods Board of Directors adopted a
Shareholders' Rights Plan and declared a distribution of one preferred share    
purchase right (a "Highwoods Right") for each outstanding share of Highwoods    
Common. The Highwoods Rights were issued on October 16, 1997 to each            
shareholder of record on such date and are issued with each new issuance of     
Highwoods Common after such date and before such time that a person or group    
has acquired beneficial ownership of 15% or more of the outstanding Highwoods   
Common. The Highwoods Rights have certain anti-takeover effects. The Highwoods  
Rights will cause substantial dilution to a person or group that attempts to    
acquire Highwoods on terms not approved by the Highwoods Board of Directors.    
The Highwoods Rights should not interfere with any merger or other business     
combination approved by the Highwoods Board of Directors since the Highwoods    
Rights may be redeemed by Highwoods for $.01 per Highwoods Right prior to the   
time that a person or group has acquired beneficial ownership of 15% or more of 
the outstanding Highwoods Common.                                               

   JCN: On July 25, 1997, the JCN Board of Directors adopted a shareholders'
rights plan and declared a dividend of one common stock purchase right (a "JCN  
Right") for each outstanding share of JCN Common. The JCN Rights were issued to 
each JCN Shareholder of record on July 28, 1997. The JCN Rights provide an      
incentive to any potential bidders to negotiate with the JCN Board of Directors 
before attempting an acquisition of control of JCN and to discourage takeover   
tactics. The JCN Rights should not interfere with any merger or other business  
combination approved by the JCN Board of Directors since the JCN Rights may be  
redeemed by JCN for $.01 per JCN Right prior to the time that a person or group 
has acquired beneficial ownership of 15% or more of the outstanding JCN Common. 

Dissenters' Rights of Appraisal                                                 

  Highwoods: The MGCL eliminates dissenters' rights with respect to shares
of any class or series of stock listed on a national securities exchange.       
Holders of Highwoods Common do not have dissenters' rights with respect to the  
Highwoods Common because the Highwoods Common is listed on the NYSE.            

JCN: The GBCL provides that a shareholder who complies with applicable
statutory procedures is entitled to receive fair value for his or her shares if 
the shareholder dissents from certain transactions, including a merger or       
consolidation, a disposition of all or substantially all of the assets of a     
corporation, or a share exchange. Shareholders also have dissenters' rights     
with respect to certain amendments that materially and adversely affect a       
dissenter's shares as well as any corporate action taken pursuant to a          
shareholder vote to the extent that the articles of incorporation or bylaws or  
a resolution of the board of directors provides that voting or non-voting       
shareholders are entitled to dissent and obtain payment for their shares. JCN   
Shareholders who follow certain procedures are entitled to exercise their       
dissenters' rights in the Merger. See "The Merger -- Appraisal Rights."         

Dividends                                                                       

   Highwoods: Under the MGCL, Highwoods may pay dividends only to the extent
that, after giving effect to the dividend payment, Highwoods would be able to   
pay its indebtedness as it becomes due in the usual course of business and      
Highwoods' total assets would be at least equal to the sum of its total         
liabilities plus the amount that would be needed to satisfy any liquidation     
preferences.                                                                    

  JCN: The GBCL provides that a board of directors, unless its articles of
incorporation provide otherwise, may not declare or pay a dividend when the net 
assets of the corporation are below its stated capital or such payment would    
cause the net assets of the corporation to be below its stated capital.         

Special Meetings                                                                

Highwoods: A special meeting of the shareholders of Highwoods may be  
called by the Chairman of the Board, the Highwoods Board of Directors, the      
President or at the request of shareholders entitled to cast at least 25% of    
the votes at such meeting. A special meeting need not be called to consider any 
matter that is substantially the same as a matter voted on at any special       
meeting of shareholders held during the preceding 12 months unless the meeting  
is requested by shareholders entitled to cast a majority of all the votes       
entitled to be cast at the meeting.                                             

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  JCN: A special meeting of the JCN Shareholders may be convened by any of
the Chairman of the Board, the President, the Secretary, the JCN Board of       
Directors or the JCN Shareholders upon the written request of the holders of    
not less than 20% of all outstanding shares entitled to vote at any such        
meeting.                                                                        

Amendment of Articles of Incorporation                                          

Highwoods: The Highwoods Articles require the affirmative vote of the 
holders of at least a majority of the shares of capital stock outstanding and   
entitled to vote thereon voting together as a single class to amend the         
Highwoods Articles. Any amendment to provisions relating to the REIT status of  
Highwoods, the removal of directors or to the ability to amend the Articles,    
requires the affirmative vote of two-thirds of the shares of capital stock of   
Highwoods outstanding and entitled to vote thereon, voting together as a single 
class.                                                                          

JCN: Amendments to the JCN Articles require an affirmative vote of a  
majority of the outstanding shares entitled to vote thereon. Where shareholders 
are entitled to cumulative voting rights in the election of directors, the GBCL 
provides that the articles may not be amended to reduce the number of directors 
to less than three if the number of shares voted against the proposal would be  
sufficient to elect one member of a three-person board under cumulative voting. 

Shareholder Proposal Procedures                                                 

   Highwoods: Shareholder proposals must be received by Highwoods between 90
and 60 days before a shareholders' meeting.                                     

JCN: Shareholder proposals must be received by JCN at least 150 days  
before a shareholders' meeting.                                                 

LEGAL MATTERS 

 Certain legal matters in connection with the Merger will be passed upon
for Highwoods by Alston & Bird LLP, Raleigh, North Carolina. Certain legal      
matters in connection with the Merger will be passed upon for JCN by Blackwell  
Sanders Peper Martin LLP, Kansas City, Missouri.                                

EXPERTS 

The consolidated financial statements and schedule of Highwoods       
Properties, Inc., incorporated herein by reference from Highwoods' annual       
report (Form 10-K) for the year ended December 31, 1997 (as amended on Form     
10-K/A on April 29, 1998 and May 19, 1998), the statements of revenues and      
certain expenses of Shelton Properties, Riparus Properties and Winners Circle   
for the year ended December 31, 1996 incorporated herein by reference from      
Highwoods' current report on Form 8-K dated November 17, 1997, and the          
statements of revenue and certain expenses of Anderson Properties, Inc. and     
Century Center Group for the year ended December 31, 1996 incorporated herein   
by reference from Highwoods' current report on Form 8-K dated January 9, 1997   
(as amended on Forms 8-K/A dated February 7, 1997, March 10, 1997 and April 28, 
1998), have been audited by Ernst & Young LLP, independent auditors, as set     
forth in their reports thereon included therein and incorporated herein by      
reference. Such financial statements are incorporated herein by reference in    
reliance upon such reports given upon the authority of such firm as experts in  
accounting and auditing.                                                        

 The combined statement of revenue and certain operating expenses of the
Associated Capital Properties Portfolio for the year ended December 31, 1996,   
and the combined statement of revenue and certain operating expenses of the     
1997 Pending Acquisitions for the year ended December 31, 1996, incorporated by 
reference herein from Highwoods' current report on Form 8-K dated August 27,    
1997 (as amended on Form 8-K/A filed September 23, 1997) and dated October 1,   
1997, have been so incorporated in reliance upon the reports of Coopers &       
Lybrand L.L.P., independent accountants, given on the authority of said firm as 
experts in accounting and auditing.                                             

The consolidated financial statements and schedules of J.C. Nichols   
Company and subsidiaries as of December 31, 1997 and 1996, and for each of the  
years in the three-year period ended December 31, 1997 have been included       
herein and in the registration statement in reliance upon the reports of KPMG   
Peat Marwick LLP, independent certified public accountants, appearing elsewhere 
herein, and upon the authority of said firm as experts in accounting and        
auditing.                                                                       

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AUDITORS  

  Representatives of KPMG Peat Marwick LLP shall be present at the Special
Meeting and shall have the opportunity to make a statement to the JCN           
Shareholders should they so desire. In addition, the representatives of KPMG    
Peat Marwick LLP shall be available to respond to appropriate questions of JCN  
Shareholders.                                                                   

SHAREHOLDER PROPOSALS 

Any proposal which a JCN Shareholder intended to present at the 1998  
Annual Meeting of Shareholders of JCN, if the Merger has not been consummated   
prior to the date such meeting is held, must have been received by JCN at its   
principal executive offices on or before December 29, 1997 to have been         
eligible for inclusion in JCN's proxy statement and proxy form relating to such 
meeting.                                                                        

GLOSSARY  

"ACM" means asbestos-containing materials.                                

"ACP" means Associated Capital Properties, Inc.                       

"AFFO" means adjusted funds from operations.                          

"AHI" means AHI Metnall, L.P.                                         

   "Amendment" means Amendment No. 1 to the Merger Agreement dated April 29,
1998.                                                                           

"Antitrust Division" means the Antitrust Division of the Department of
Justice.                                                                        

 "Bay Plaza" means a project undertaken by JCN for the redevelopment and
construction of parking, commercial and retail facilities in St. Petersburg,    
Florida.                                                                        

  "Book-Tax Difference" means the difference between the fair market value
of contributed property at the time of contribution and the adjusted tax basis  
of such property at the time of contribution.                                   

  "Bosfield" means Bosfield, L.L.C., an Indiana limited liability company.

"Budget Bill" means the Budget Bill for Fiscal Year 1999.             

"Call Right" means the call right issued to the LLC.                  

"Cash Amount" means the cash portion of the aggregate consideration as
elected by JCN Shareholders, plus the Dissenting Share Amount, which is limited 
to 40% of the aggregate consideration paid in the Merger.                       

 "Cash Election Shares" means those shares of JCN Common as to which the
holder elects to receive cash and does not dissent.                             

"Closing Date" means the date upon which the Closing will take place. 

"Code" means the Internal Revenue Code of 1986, as amended.           

"Commission" means the Securities and Exchange Commission.            

"Common Units" means the common partnership interests in the Highwoods
Operating Partnership.                                                          

"Comparables" means a group of publicly traded real estate companies  
comparable to JCN.                                                              

"Contributing Partners" means those partners who have contributed     
partnership interests in the Highwoods Properties to the Highwoods Operating    
Partnership.                                                                    

    "Court" means the United States District Court for the Western District of
Missouri.                                                                       

"Dissenting Share Amount" means the amount equal to the number of     
Dissenting Shares multiplied by $65 per share.                                  

"Dissenting Shares" means those shares held by JCN Shareholders who   
perfect their statutory dissenters' rights as set forth in Section 351.455 of   
the GBCL.                                                                       

 "Downside Case 1" means the projection of Morgan Stanley after reducing
the projected EBITDA growth in the Management Case to 5.0%, resulting in        
implied compounded annual FFO per share growth of 11.7%.                        

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 "Downside Case 2" means the projection of Morgan Stanley after reducing
the projected EBITDA growth in the Management Case to 2.5%, resulting in        
implied compounded annual FFO per share growth of 7.7%.                         

"Duke/Simon" means Duke Realty Investments, Inc. and Simon DeBartolo  
Group, Inc., collectively.                                                      

"EBITDA" means earnings before interest, taxes, depreciation and      
amortization.                                                                   

 "EBITDA Multiple" means the multiples of total market capitalization to
1998 estimated EBITDA.                                                          

"Effective Time" means the time at which the Merger is consummated.   

    "Election Deadline" means 5:00 p.m. on the fifth business day prior to the
date of the Special Meeting or any adjournment thereof.                         

    "Election Form" means a form for use by JCN Shareholders to elect cash and
to state their intent to retain Highwoods Common to be received pursuant to the 
Merger and other appropriate and customary transmittal material in such form as 
Highwoods and JCN may mutually agree.                                           

"ESOP" means JCN's Employee Stock Ownership Plan.                     

"ESOT" means JCN's Employee Stock Ownership Trust.                    

"Exchange Act" means the Securities Exchange Act of 1934, as amended. 

"Exchange Agent" means First Union National Bank in its capacity as   
exchange agent.                                                                 

   "Exchange Fund" means the New Certificates along with an estimated amount
of cash to be paid in exchange for outstanding shares of JCN Common.            

    "Exchange Ratio" means the ratio at which outstanding shares of JCN Common
will be converted into shares of Highwoods Common pursuant to the Merger.       

"FFO" means funds from operations, which is defined as net income,    
computed in accordance with GAAP, excluding gains (and losses) from debt        
restructuring and sales of property, plus depreciation and amortization and     
after adjustments for unconsolidated partnerships and joint ventures.           

  "FFO Multiple" means the multiples of share price to 1998 estimated FFO.

"FIRPTA" means Foreign Investment in Real Property Tax Act of 1980.   

"Forsyth" means Forsyth Properties, Inc.                              

"FTC" mens the Federal Trade Commission.                              

"GAAP "means generally accepted accounting principles.                

"GBCL" means the General Business and Corporation Law of Missouri.    

"Highwoods" means Highwoods Properties, Inc., a Maryland corporation. 

"Highwoods Articles" means the Amended and Restated Articles of       
Incorporation of Highwoods.                                                     

"Highwoods Bylaws" means the Amended and Restated Bylaws of Highwoods.

 "Highwoods Common" means the common stock, par value $.01 per share, of
Highwoods.                                                                      

"Highwoods Comparables" means a group of publicly traded REITs        
specializing in office and industrial properties comparable to Highwoods.       

"Highwoods Development Land" means the 1,285 acres of undeveloped land
suitable for future development controlled by Highwoods as of March 31, 1998.   

"Highwoods Development Projects" means the 32 properties which will   
encompass approximately 3.6 million rentable square feet under development by   
Highwoods as of March 31, 1998.                                                 

"Highwoods Entity" means an entity affiliated with Highwoods.         

"Highwoods Operating Partnership" means Highwoods/Forsyth Limited     
Partnership, a North Carolina limited partnership.                              

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    "Highwoods Operating Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of the Highwoods Operating Partnership.        

"Highwoods Properties" means the portfolio of 382 office and 148      
industrial (including 80 service center) properties owned by Highwoods as of    
March 31, 1998.                                                                 

  "Highwoods Right" means a preferred share purchase right declared by the
Highwoods Board of Directors for each outstanding share Highwoods Common.       

  "Highwoods Services" means Highwoods Services, Inc., a subsidiary of the
Highwoods Operating Partnership.                                                

   "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.                                                                     

"Indemnified Party" means the present and former directors, officers, 
employees and agents of any JCN Entity whom, for a period of six years after    
the Effective Time, Highwoods will indemnify, defend and hold harmless in       
certain identified circumstances.                                               

"Innisfree" means Innisfree M&A Incorporated.                         

"Intell" means Intell Management and Investment Company.              

"INTRUST" means INTRUST Bank, N.A., the trustee of the ESOT.          

"IPO" means the initial public offering of Highwoods in 1994.         

"IRS" means Internal Revenue Service.                                 

"J.P. Morgan" means J.P. Morgan Securities Inc.                       

 "Jackson" means Jackson Acquisition Corp., a wholly owned subsidiary of
Highwoods Properties, Inc., formed for the sole purpose of effecting the        
Merger.                                                                         

"JCN" means J.C. Nichols Company, a Missouri real estate operating    
company.                                                                        

    "JCN Articles" means the Amended and Restated Articles of Incorporation of
JCN.                                                                            

"JCN Bylaws" means the Amended and Restated Bylaws of JCN.            

"JCN Common" means the common stock, $.01 par value per share, of JCN.

"JCN Entity" means any entity affiliated with JCN.                    

"JCN Board of Directors" means the Board of Directors of JCN.         

"JCN Plan" means JCN's 1996 Stock Option Plan.                        

   "JCN Right" means a common stock purchase right declared by the JCN Board
of Directors for each outstanding share of JCN Common.                          

"JCN Shareholders" means the holders of JCN Common.                   

    "Kessinger/Hunter" means Kessinger/Hunter and Company, Inc., a Kansas City
real estate brokerage, management and development firm.                         

"LLC" means the limited liability company formed by JCN and           
Kessinger/Hunter.                                                               

"Management Case" means the compounded annual growth of FFO and EBITDA
implied by the projections of JCN's management.                                 

"Maximum Amount" means 200% of the current annual premium for JCN's   
existing directors' and officers' liability insurance.                          

    "Medina Litigation" means the lawsuit entitled Medina, et al. v. McCarthy,
et al., initiated in 1995 on behalf of the beneficiaries of the ESOT.           

"Merger" means the merger of JCN into Jackson Acquisition Corp.       

"Merger Agreement" means the Agreement and Plan of Merger dated as of 
December 22, 1997 by and among JCN, Jackson and Highwoods, as amended pursuant  
to Amendment No. 1 dated April 29, 1998.                                        

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"MGCL" means the Maryland General Corporation Law.                    

"MOPPRSSM" means 6.835% Mandatory Par Put Remarketed SecuritiesSM due 
February 1, 2013 issued by the Highwoods Operating Partnership.                 

"Morgan Stanley" means Morgan Stanley & Co. Incorporated.             

"New Certificates" means the certificates representing the shares of  
Highwoods Common to be issued in the Merger.                                    

  "No Election Shares" means those shares of JCN Common whose holders have
not submitted an effective, properly completed Election Form on or before the   
Election Deadline.                                                              

"Non-U.S. Shareholders" means non-resident alien individuals, foreign 
corporations, foreign partnerships, and foreign trusts and estates.             

"NYSE" means the New York Stock Exchange.                             

  "Old Certificates" means the certificates representing the shares of JCN
Common.                                                                         

  "Original Merger Agreement" means the Agreement and Plan of Merger dated
December 22, 1998 among Highwoods, Jackson and JCN.                             

"Ownership Limit" means the limit set forth in the Highwoods Articles 
providing that no holder may own, or be deemed to own by virtue of the          
attribution provisions of the Code, more than 9.8% of the issued and            
outstanding capital stock of Highwoods.                                         

"Peer Group Index" means the group of publicly held companies sharing 
JCN's standard industrial code.                                                 

    "Per Share Cash Consideration" means the $65 per share of JCN Common Stock
to be received by JCN Shareholders who select to receive in cash in the Merger, 
subject to the limitations described herein.                                    

    "Per Share Stock Consideration" means the 1.84 to 2.03 shares of Highwoods
Common issuable per share of JCN Common to JCN Shareholders who elect to        
receive shares of Highwoods Common in the Merger.                               

"Petula" means Petula Associates.                                     

"Petula Litigation" means the complaint filed by Petula Associates in 
December 1996 in the United States District Court for the Western District of   
Missouri, and related proceedings.                                              

 "Plaza" means the Country Club Plaza, JCN's most significant retail and
office development with approximately 1.1 million square feet of retail space.  

   "Put Option" means the obligation of JCN, under certain circumstances, to
repurchase shares from ESOT beneficiaries.                                      

   "Put Option Notes" means the $100 million of Exercisable Put Option Notes
due June 15, 2011 issued by the Highwoods Operating Partnership on June 24,     
1997.                                                                           

"Recognition Period" means the 10-year period beginning on the date on
which Highwoods acquires an asset from a C-corporation in a carryover-basis     
transaction.                                                                    

"Record Date" means the date upon which holders of JCN Common become  
entitled to vote at the Special Meeting.                                        

"Registration Statement" means the registration statement filed by    
Highwoods on Form S-4 covering the shares of Highwoods Common to be issued in   
connection with the Merger.                                                     

"REIT" means a real estate investment trust.                          

    "REIT Share" means a share of Highwoods Common issued upon redemption of a
Common Unit.                                                                    

 "Related Party Tenant" means a tenant of Highwoods which is 10% or more
owned by either Highwoods or an owner of 10% or more (directly or               
constructively) of Highwoods, taking into account the applicable attribution    
rules.                                                                          

"Replacement Share" is a share of the acquiror or the parent of an    
acquiror which a limited partner may be entitled to upon occurrence of a        
"Trigger Event."                                                                

"Research Triangle" means the Raleigh-Durham, North Carolina area.    

 "Revolving Loans" means Highwoods' two revolving loans aggregating $430
million.                                                                        

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"Securities Act" means the Securities Act of 1933, as amended.        

  "Settlement Agreement" means the Mutual Release and Settlement Agreement
dated as of June 30, 1995, between JCN and certain other parties.               

   "Special Meeting" means the Special Meeting of the shareholders of JCN to
be held on June   , 1998 and any adjournments or postponements thereof.         

"Taxpayer Relief Act" means the Taxpayer Relief Act of 1997.          

"TIF" means tax increment financing.                                  

"TIN" means taxpayer identification number.                           

"Trigger Event" means a change of control of Highwoods which under the
Highwoods Operating Partnership Agreement entitles a limited partner of the     
Highwoods Operating Partnership to a Replacement Share or the cash value        
thereof.                                                                        

 "U.S. Shareholder" means a holder of Highwoods Common that (for Federal
income tax purposes) (a) is a citizen or resident of the United States, (b) is  
a corporation or partnership (including an entity treated as a corporation or   
partnership for United States Federal income tax purposes) created or organized 
in or under the laws of the United States or of any political subdivision       
thereof, (c) is an estate, the income of which is subject to Federal income     
taxation regardless of its source, or (d) is any trust if a court within the    
United States is able to exercise primary supervision over the administration   
of the trust and one or more United States persons have the authority to        
control all substantial decisions of the trust.                                 

"UBTI" means unrelated business taxable income.                       

"Wright Litigation" means a lawsuit filed on January 8, 1998 by Dennis
Wright against JCN, the JCN Board of Directors and Highwoods.                   

    "X-POSSM" means Exercisable Put Option Securities issued by a trust formed
by the Highwoods Operating Partnership which represent factional undivided      
beneficial interests in the trust.                                              

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INDEX TO THE FINANCIAL STATEMENTS 

                                                        [Enlarge/Download Table]

                                                                                           Page
                                                                                          -----
                                                                                               
PRO FORMA FINANCIAL STATEMENTS OF HIGHWOODS                                                    
 Pro Forma Condensed Consolidated Balance Sheet (unaudited) as of March 31, 1998 ........ F-2  
 Notes to Pro Forma Condensed Consolidated Balance Sheet (unaudited) .................... F-3  
 Pro Forma Condensed Consolidated Statement of Operations (unaudited) For the Three            
  Months Ended March 31, 1998 ........................................................... F-4  
 Notes to Pro Forma Condensed Consolidated Statement of Operations (unaudited) .......... F-5  
 Pro Forma Condensed Consolidated Statement of Operations (unaudited) For the Year Ended       
  December 31, 1997 ..................................................................... F-7  
 Notes to Pro Forma Condensed Consolidated Statement of Operations (unaudited) .......... F-9  
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES OF JCN                                  
Years Ended December 31, 1997, 1996 and 1995 ............................................ F-12 
FINANCIAL STATEMENTS:                                                                          
 Independent Auditors' Report ........................................................... F-13 
 Consolidated Balance Sheets at December 31, 1997 and 1996 .............................. F-14 
 Consolidated Statements of Operations For the Years Ended December 31, 1997, 1996 and         
 1995 ................................................................................... F-15 
 Consolidated Statements of Stockholders' Equity (Deficit) For the Years Ended December        
  31, 1997, 1996 and 1995 ............................................................... F-16 
 Consolidated Statements of Cash Flows For the Years Ended December 31, 1997, 1996 and         
 1995 ................................................................................... F-17 
 Notes to Consolidated Financial Statements ............................................. F-18 
FINANCIAL STATEMENT SCHEDULES:                                                                 
 Independent Auditors' Report ........................................................... F-29 
 Schedule of Real Estate and Accumulated Depreciation at December 31, 1997 .............. F-30 
 Schedule of Real Estate and Accumulated Depreciation Rollforwards For the Years ended         
  December 31, 1997, 1996 and 1995 ...................................................... F-36 
 Schedule of Mortgage Loans and Real Estate at December 31, 1997 ........................ F-37 
 Schedule of Rollforward of Mortgage Loans on Real Estate For the Years Ended December         
  31, 1997, 1996, and 1995 .............................................................. F-38 
 Schedule of Valuation and Qualifying Accounts For the Year Ended December 31, 1997 ..... F-39 
 Schedule of Valuation and Qualifying Accounts For the Year Ended December 31, 1996 ..... F-40 
 Schedule of Valuation and Qualifying Accounts For the Year Ended December 31, 1995 ..... F-41 
 Schedule of Mortgages Payable at December 31, 1997 ..................................... F-42 
Three Months Ended March 31, 1998 and 1997                                                     
FINANCIAL STATEMENTS:                                                                          
 Consolidated Balance Sheets at March 31, 1998 (Unaudited) and December 31, 1997 ........ F-46 
 Consolidated Statements of Income for the Three Months Ended March 31, 1998 and               
  March 31, 1997 (Unaudited) ............................................................ F-47 
 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1998 and           
  March 31, 1997 (Unaudited) ............................................................ F-48 
 Notes to Unaudited Consolidated Financial Statements ................................... F-49 

F-1 

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HIGHWOODS PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
March 31, 1998  
(in thousands)

                                                        [Enlarge/Download Table]

                                                                              Series D                
                                                                          Preferred Share             
                                                         Historical (a)     Offering (b)              
                                                        ---------------- -----------------            
                                                                                                      
ASSETS                                                                                                
 Real estate assets, net ..............................    $2,998,539        $      --                
 Cash and cash equivalents ............................        42,436               --                
 Accounts and notes receivables .......................        32,276               --                
 Accrued straight line rent receivable ................        16,189               --                
 Investment in real estate partnerships ...............            --               --                
 Other assets .........................................        42,292               --                
                                                           ----------        ---------                
                                                           $3,131,732        $      --                
                                                           ==========        =========                
LIABILITIES AND STOCKHOLDERS' EQUITY                                                                  
 Mortgages and notes payable ..........................    $1,231,099        $ (96,700)               
 Accounts payable, accrued expenses and other .........        61,640               --                
                                                           ----------        ---------                
 Total liabilities ....................................     1,292,739          (96,700)               
 Minority interest ....................................       301,031               --                
 Preferred stock:                                                                                     
  Series A ............................................       125,000               --                
  Series B ............................................       172,500               --                
  Series D ............................................            --          100,000                
 Stockholders' equity:                                                                                
  Common stock ........................................           510               --                
  Additional paid in capital ..........................     1,271,266           (3,300)               
  Distributions in excess of net earnings .............       (31,314)              --                
                                                           ----------        ---------                
 Total stockholders' equity ...........................     1,537,962           96,700                
                                                           ----------        ---------                
                                                           $3,131,732        $      --                
                                                           ==========        =========                


                                                          April 1998                                  
                                                             Debt             JCN                     
                                                         Offering (c)   Transaction (d)    Pro Forma  
                                                        -------------- ----------------- -------------
                                                                                                      
ASSETS                                                                                                
 Real estate assets, net ..............................     $   --          $509,806      $3,508,345  
 Cash and cash equivalents ............................         --            42,767          85,203  
 Accounts and notes receivables .......................         --            43,381          75,657  
 Accrued straight line rent receivable ................         --                --          16,189  
 Investment in real estate partnerships ...............         --            29,888          29,888  
 Other assets .........................................      8,988             8,069          59,349  
                                                            ------          --------      ----------  
                                                            $8,988          $633,911      $3,774,631  
                                                            ======          ========      ==========  
LIABILITIES AND STOCKHOLDERS' EQUITY                                                                  
 Mortgages and notes payable ..........................     $8,988          $300,116      $1,443,503  
 Accounts payable, accrued expenses and other .........         --            16,218          77,858  
                                                            ------          --------      ----------  
 Total liabilities ....................................      8,988           316,334       1,521,361  
 Minority interest ....................................         --             1,846         302,877  
 Preferred stock:                                                                                     
  Series A ............................................         --                --         125,000  
  Series B ............................................         --                --         172,500  
  Series D ............................................         --                --         100,000  
 Stockholders' equity:                                                                                
  Common stock ........................................         --                99             609  
  Additional paid in capital ..........................         --           315,632       1,583,598  
  Distributions in excess of net earnings .............         --                --         (31,314) 
                                                            ------          --------      ----------  
 Total stockholders' equity ...........................         --           315,731       1,950,393  
                                                            ------          --------      ----------  
                                                            $8,988          $633,911      $3,774,631  
                                                            ======          ========      ==========  

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HIGHWOODS PROPERTIES, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) 

March 31, 1998

1. BASIS OF PRESENTATION                                                        

   The accompanying unaudited pro forma condensed consolidated balance sheet
of Highwoods Properties, Inc. (the "Company") is presented as if the following  
transactions had been consummated on March 31, 1998: (a)  the issuance of       
4,000,000 Depositary Shares each representing  1/10 of an 8% Series D           
Cumulative Redeemable Preferred Share (the "Series D Preferred Share            
Offering"), (b) the issuance of $200 million 7.5% notes due 2018 (the "April    
1998 Debt Offering"), and (c) the completion of the acquisition of J.C. Nichols 
Company, a publicly traded Kansas City real estate operating company ("J.C.     
Nichols") owning or having an ownership interest in 48 office properties, 14    
industrial properties, 33 retail properties and 18 multi-family communities     
(the "JCN Transaction").                                                        

The foregoing description of the properties to be acquired in the J.C.
Nichols Transaction may differ from J.C. Nichols' description of such           
properties set forth elsewhere in the Proxy Statement/Prospectus. See           
"Description of JCN." Such descriptions differ because, among other things, (i) 
unlike J.C. Nichols, the Company discloses property information on a            
consolidated, rather than unconsolidated, basis and (ii) the Company counts     
each building as a separate property regardless of whether such building is     
part of an office or industrial park.                                           

The acquisitions have been accounted for using the purchase method of 
accounting. Accordingly, assets acquired and liabilities assumed have been      
recorded at their estimated fair values, which may be subject to further        
refinement, including appraisals and other analyses.                            

 This unaudited pro forma condensed consolidated balance sheet should be
read in conjunction with the pro forma condensed consolidated statement of      
operations of the Company for the three months ended March 31, 1998 and for the 
year ended December 31, 1997, the consolidated financial statements and related 
notes of the Company included in its Annual Report on Form 10-K for the year    
ended December 31, 1997, the unaudited financial statements and related notes   
of the Company included in its Quarterly Report on Form 10-Q for the quarter    
ended March 31, 1998 and the consolidated financial statements and related      
notes of J.C. Nichols Company and Subsidiaries as of and for the three months   
ended March 31, 1998 set forth elsewhere in this Proxy Statement/Prospectus.    

 The pro forma condensed consolidated balance sheet is unaudited and not
necessarily indicative of what the actual financial position would have been    
had the aforementioned transactions actually occurred on March 31, 1998, nor    
does it purport to represent the future financial position of the Company.      

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HIGHWOODS PROPERTIES, INC.  
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)-- Continued 

2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET  

(a.) Represents the Company's historical consolidated balance sheet       
  contained in the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998.                                                 

(b.) Reflects the issuance of 4,000,000 Depositary Shares, each           
representing  1/10 of a share of the Company's 8% Series D Cumulative 
    Redeemable Preferred Shares in the 1998 Series D Preferred Share Offering,
at an offering price of $25 per Depositary Share, net of underwriting 
  discounts and other offering costs of approximately $3.3 million and the
use of net proceeds to pay off $96.7 million of debt drawn on the     
  Company's $430 aggregate amount of unsecured revolving loans (the "Lines
of Credit").                                                          

(c.) Reflects approximately $6.4 million paid to settle a treasury lock   
agreement in connection with the April 1998 Debt Offering and the     
underwriters discount and other offering costs of approximately $2.6  
  million. The $6.4 million paid to terminate the hedge instrument and the
 underwriters discount and other offering costs are being amortized over
the life of the notes using the effective interest rate method for the
    hedge instrument and the underwriters discount and the straight line basis
for the financing costs.                                              

(d.) Reflects the allocation of the $589.3 million purchase price to the  
    fair value of the net assets acquired in the JCN Transaction. The purchase
 price will consist of the issuance of approximately 9,860,496 shares of
the Company's Common Stock (valued at $32.0197 per share) and the     
  assumption of approximately $273.5 million of net liabilities ($316.3 of
liabilities assumed offset by the March 31, 1998 cash balance of J.C. 
Nichols of $42.8 million, after paying approximately $14.5 million in 
 transaction costs). For purposes of calculating the pro forma condensed
    consolidated balance sheet, the Company has assumed that the consideration
will consist entirely of the issuance of its Common Stock.            

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HIGHWOODS PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Three Months Ended March 31, 1998 
(In thousands, except per share data) 

                                                        [Enlarge/Download Table]

                                                                                              MOPPRS          Series D    
                                                                                             and Debt     Preferred Share 
                                                                          Historical (a)     Offering         Offering    
                                                                         ---------------- -------------- -----------------
                                                                                                                          
REVENUE:                                                                                                                  
Rental property ........................................................     $100,331       $      --       $       --    
Residential sales ......................................................           --              --               --    
Other Income ...........................................................        2,157              --               --    
                                                                             --------       ---------       ----------    
                                                                              102,488              --               --    
OPERATING EXPENSES:                                                                                                       
Rental property ........................................................       29,728              --               --    
Residential cost of sales ..............................................           --              --               --    
Depreciation and amortization ..........................................       17,161              --               --    
INTEREST EXPENSE:                                                                                                         
 Contractual ...........................................................       17,162           1,123(b)        (1,612)(e)
 Amortization of deferred financing costs ..............................          616               9(c)            --    
                                                                             --------       ---------       ----------    
                                                                               17,778           1,132           (1,612)   
General and administrative .............................................        3,784              --               --    
                                                                             --------       ---------       ----------    
Income before minority interest ........................................       34,037          (1,132)           1,612    
Minority interest ......................................................       (5,608)            170(d)          (242)(d)
                                                                             --------       ---------       ----------    
Income before extraordinary item and dividends on preferred shares .....       28,429            (962)           1,370    
Extraordinary item-loss on extinguishment of debt ......................          (46)             --               --    
                                                                             --------       ---------       ----------    
                                                                               28,383            (962)           1,370    
Dividends on preferred shares ..........................................       (6,145)             --           (2,000)(f)
                                                                             --------       ---------       ----------    
Net income available for common shareholders ...........................     $ 22,238       $    (962)      $     (630)   
                                                                             ========       =========       ==========    
Net income per common share-basic ......................................     $   0.45                                     
                                                                             ========                                     
Net income per common share-diluted ....................................     $   0.45                                     
                                                                             ========                                     
Weighted average shares-basic ..........................................       49,051                                     
                                                                             ========                                     
Weighted average shares-diluted ........................................       49,688                                     
                                                                             ========                                     


                                                                          April 1998                          JCN         
                                                                             Debt            JCN           Pro forma      
                                                                           Offering    Historical (i)     Adjustments     
                                                                         ------------ ---------------- -----------------  
                                                                                                                          
REVENUE:                                                                                                                  
Rental property ........................................................   $   --          $19,709        $       --      
Residential sales ......................................................       --            1,221            (1,221)(j)  
Other Income ...........................................................       --            2,035               348 (j)  
                                                                           ------          -------        ----------      
                                                                               --           22,965              (873)     
OPERATING EXPENSES:                                                                                                       
Rental property ........................................................       --           10,407            (1,845)(k)  
Residential cost of sales ..............................................       --              873              (873)(j)  
Depreciation and amortization ..........................................       --            2,894              (345)(l)  
INTEREST EXPENSE:                                                                                                         
 Contractual ...........................................................      555(g)         5,426                --      
 Amortization of deferred financing costs ..............................      112(h)            --                --      
                                                                           ------          -------        ----------      
                                                                              667            5,426                --      
General and administrative .............................................       --               --             1,845 (k)  
                                                                           ------          -------        ----------      
Income before minority interest ........................................     (667)           3,365               345      
Minority interest ......................................................      100(d)            --               (54)(d)  
                                                                           ------          -------        ----------      
Income before extraordinary item and dividends on preferred shares .....     (567)           3,365               291      
Extraordinary item-loss on extinguishment of debt ......................       --               --                --      
                                                                           ------          -------        ----------      
                                                                             (567)           3,365               291      
Dividends on preferred shares ..........................................       --               --                --      
                                                                           ------          -------        ----------      
Net income available for common shareholders ...........................   $ (567)         $ 3,365        $      291      
                                                                           ======          =======        ==========      
Net income per common share-basic ......................................                                                  
Net income per common share-diluted ....................................                                                  
Weighted average shares-basic ..........................................                                                  
Weighted average shares-diluted ........................................                                                  


                                                                           Pro Forma                                      
                                                                         ------------                                     
                                                                                                                          
REVENUE:                                                                                                                  
Rental property ........................................................   $120,040                                       
Residential sales ......................................................         --                                       
Other Income ...........................................................      4,540                                       
                                                                           --------                                       
                                                                            124,580                                       
OPERATING EXPENSES:                                                                                                       
Rental property ........................................................     38,290                                       
Residential cost of sales ..............................................         --                                       
Depreciation and amortization ..........................................     19,710                                       
INTEREST EXPENSE:                                                                                                         
 Contractual ...........................................................     22,654                                       
 Amortization of deferred financing costs ..............................        737                                       
                                                                           --------                                       
                                                                             23,391                                       
General and administrative .............................................      5,629                                       
                                                                           --------                                       
Income before minority interest ........................................     37,560                                       
Minority interest ......................................................     (5,634)                                      
                                                                           --------                                       
Income before extraordinary item and dividends on preferred shares .....     31,926                                       
Extraordinary item-loss on extinguishment of debt ......................        (46)                                      
                                                                           --------                                       
                                                                             31,880                                       
Dividends on preferred shares ..........................................     (8,145)                                      
                                                                           --------                                       
Net income available for common shareholders ...........................   $ 23,735                                       
                                                                           ========                                       
Net income per common share-basic ......................................   $   0.39                                       
                                                                           ========                                       
Net income per common share-diluted ....................................   $   0.39                                       
                                                                           ========                                       
Weighted average shares-basic ..........................................     60,897                                       
                                                                           ========                                       
Weighted average shares-diluted ........................................     61,534                                       
                                                                           ========                                       

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HIGHWOODS PROPERTIES, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) 

For the Three Months Ended March 31, 1998 

1. BASIS OF PRESENTATION                                                        

  The accompanying unaudited pro forma condensed consolidated statement of
operations is presented as if the following transactions had been consummated on
January 1, 1998: (a) the completion of offering of $125 million of 6.835%       
MandatOry Par Put Remarketed SecuritiesSM ("MOPPRSSM") and $100 million of      
unsecured notes due 2018 (collectively, the "MOPPRS and Debt Offering"), (b) the
completion of the Series D Preferred Share Offering, (c) the completion of the  
April 1998 Debt Offering and (d) the completion of the JCN Transaction.         

 This unaudited pro forma condensed consolidated statement of operations
should be read in conjunction with the pro forma condensed consolidated balance 
sheet of the Company as of March 31, 1998, the consolidated financial           
statements and related notes of the Company included in its Annual Report on    
Form 10-K for the year ended December 31, 1997, the unaudited financial         
statements and related notes of the Company included in its Quarterly Report on 
Form 10-Q for the quarter ended March 31, 1998, the financial statements and    
related notes of Associated Capital Properties Portfolio and 1997 Pending       
Acquisitions included in the Company's Current Report on Form 8-K dated October 
1, 1997 (as filed with the Securities and Exchange Commission on October 16,    
1997), the statements of revenues and certain expenses of Riparius Properties,  
Shelton Properties and Winners Circle for the year ended December 31, 1996      
included in the Company's Form 8-K dated November 17, 1997 (as filed with the   
Securities and Exchange Commission on February 3, 1998), and the consolidated   
financial statements and related notes of J.C. Nichols Company and Subsidiaries 
for the year ended December 31, 1997 and for the three months ended March 31,   
1998, both of which are set forth elsewhere in this Proxy Statement/            
Prospectus.                                                                     

   The pro forma condensed consolidated statement of operations is unaudited
and is not necessarily indicative of what the Company's actual results would    
have been had the aforementioned transactions actually occurred on January 1,   
1998 nor does it purport to represent the future operating results of the       
Company.                                                                        

2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF   
OPERATIONS                                                                

(a.) Represents the Company's historical consolidated statement of        
 operations contained in its Quarterly Report on Form 10-Q for the three
months ended March 31, 1998.                                          

 (b.) Represents the pro-rated estimated interest expense on $125 million of
MOPPRS due 2013 at an interest rate of 6.835% and $100 million in debt
  securities due 2008 (at a rate of 7.125%) offset by the interest expense
savings of $33.3 million on the Lines of Credit at an average interest
 rate of 6.59% repaid with the proceeds of the MOPPRS and Debt Offering.

 (c.) Represents the amortization of the deferred financing costs associated
with the MOPPRS and Debt Offering, straight-line over the terms of the
  securities offset by the amortization of the $3.5 million MOPPRS premium
  paid by the remarketing dealer, using the effective interest method over
the term of the securities.                                           

    (d.) Represents the net adjustment to minority interest to reflect the pro
forma minority interest percentage of 15.0%.                          

(e.) Represents the interest expense savings on $96.7 million of the Lines
    of Credit at an average interest rate of 6.67% repaid with the proceeds of
the Series D Preferred Share Offering.                                

(f.) Represents the pro-rated 8% dividend on the Series D Preferred Shares
issued in the Series D Preferred Share Offering.                      

 (g.) Represents the estimated interest expense on $200 million of notes due
 2018 at a discount of .361% with an interest rate of 7.5% offset by the
 interest expense savings on $191.0 million of the Lines of Credit at an
average interest rate of 6.69% repaid with the proceeds of the notes. 

 (h.) Represents the amortization of the deferred financing costs (including
 the $6.4 million paid to terminate the related treasury lock agreement)
  associated with the $200 million notes using the effective interest rate
    method for the hedge instrument and underwriters discount and the straight
line basis for the financing costs.                                   

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HIGHWOODS PROPERTIES, INC.  
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS               
(UNAUDITED)-- Continued 

(i.) Represents the J.C. Nichols Company and Subsidiaries' historical     
   statement of operations (pre-tax) contained in its consolidated financial
    statements and related notes for the three months ended March 31, 1998 set
forth elsewhere in this Proxy Statement/Prospectus.                   

(j.) Represents the reclass of the historical gross profit of the         
 residential business to other income as this will be accounted for in a
separate business entity under the equity method of accounting upon   
    acquisition. J.C. Nichols presently consolidates the residential business;
however, subsequent to the merger, Highwoods will not have majority   
ownership or control of the entity which will conduct the residential 
business and will accordingly use the equity method of accounting.    

(k.) Represents a reclass of certain operating expenses to general and    
administrative expense ($1,845) for comparative purposes.             

(l.) Represents the reduction in historical depreciation expense on the   
 properties acquired in the JCN Transaction based on a 80% allocation to
 buildings and a 20% allocation to land for net assets acquired. Amounts
recorded as tenant improvements on J.C. Nichols' general ledger       
depreciated as buildings over 40 years after the combination which    
accounts for the decrease.                                            

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HIGHWOODS PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Year Ended December 31, 1997  
(In thousands, except per share data) 

                                                        [Enlarge/Download Table]

                                                         Century Center                                          1997            
                                                          and Anderson         Other            ACP             Pending          
                                       Historical (a)   Transactions (b)   Offerings (c)   Portfolio (d)   Acquisitions (e)      
                                      ---------------- ------------------ --------------- --------------- ------------------     
                                                                                                                                 
REVENUE:                                                                                                                         
Rental property .....................    $ 266,933          $  1,047         $      --       $ 52,411           $10,560          
Residential sales ...................           --                --                --             --                --          
Other Income ........................        7,537                --                --          1,880               123          
                                         ---------          --------         ---------       --------           -------          
                                           274,470             1,047                --         54,291            10,683          
OPERATING EXPENSES:                                                                                                              
Rental property .....................       76,743               317                --         23,956             4,396          
Residential cost of sales ...........           --                --                --             --                --          
Depreciation and amortization .......       47,533               715                --          9,019                --          
INTEREST EXPENSE:                                                                                                                
 Contractual ........................       45,138             1,358            (1,077)        25,215                --          
 Amortization of deferred                                                                                                        
  financing costs ...................        2,256                --                --             --                --          
                                         ---------          --------         ---------       --------           -------          
                                            47,394             1,358            (1,077)        25,215                --          
General and administrative ..........       10,216                --                --             --                --          
                                         ---------          --------         ---------       --------           -------          
Income before minority interest .....       92,584            (1,343)            1,077         (3,899)            6,287          
Minority interest ...................      (15,106)               --                --             --                --          
                                         ---------          --------         ---------       --------           -------          
Income before extraordinary item                                                                                                 
 and dividends on preferred                                                                                                      
 shares .............................       77,478            (1,343)            1,077         (3,899)            6,287          
Extraordinary item-loss on                                                                                                       
 extinguishment of debt .............       (5,799)                                                                              
                                         ---------                                                                               
                                            71,679            (1,343)            1,077         (3,899)            6,287          
Dividends on preferred shares .......      (13,117)               --            (1,289)            --                --          
                                         ---------          --------         ---------       --------           -------          
Net income available for common                                                                                                  
 shareholders .......................    $  58,562          $ (1,343)        $    (212)      $ (3,899)          $ 6,287          
                                         =========          ========         =========       ========           =======          
Net income per common                                                                                                            
 share-basic ........................    $    1.51                                                                               
                                         =========                                                                               
Net income per common-basic                                                                                                      
 share-diluted ......................    $    1.50                                                                               
                                         =========                                                                               
Weighted average shares-basic .......       38,770                                                                               
                                         =========                                                                               
Weighted average shares-diluted .....       39,161                                                                               
                                         =========                                                                               


                                            Use of                                                                               
                                          Preferred                                                                              
                                            Stock             Common                              Other            Pro forma     
                                           Offering            Stock           Acquired         Acquired      Acquired Properties
                                           Proceeds          Offering       Properties (j)   Properties (k)       Adjustments    
                                      ----------------- ------------------ ---------------- ---------------- --------------------
                                                                                                                                 
REVENUE:                                                                                                                         
Rental property .....................   $        --        $        --          $9,332          $ 13,255          $      --      
Residential sales ...................            --                 --              --                --                 --      
Other Income ........................            --                 --              --                --                 --      
                                        -----------        -----------          ------          --------          ---------      
                                                 --                 --           9,332            13,255                 --      
OPERATING EXPENSES:                                                                                                              
Rental property .....................            --                 --           1,727             6,474                188(l)   
Residential cost of sales ...........            --                 --              --                --                 --      
Depreciation and amortization .......            --                 --              --                --              3,369(m)   
INTEREST EXPENSE:                                                                                                                
 Contractual ........................        (8,378)(f)        (13,704)(i)          --                --             12,947(n)   
 Amortization of deferred                                                                                                        
  financing costs ...................            --                 --              --                --                 --      
                                        -----------        -----------          ------          --------          ---------      
                                             (8,378)           (13,704)             --                --             12,947      
General and administrative ..........            --                 --              --                --                 --      
                                        -----------        -----------          ------          --------          ---------      
Income before minority interest .....         8,378             13,704           7,605             6,781            (16,504)     
Minority interest ...................        (1,257)(g)         (2,056)(g)          --                --                 --      
                                        -----------        -----------          ------          --------          ---------      
Income before extraordinary item                                                                                                 
 and dividends on preferred                                                                                                      
 shares .............................         7,121             11,648           7,605             6,781            (16,504)     
Extraordinary item-loss on                                                                                                       
 extinguishment of debt .............                                                                                            
                                              7,121             11,648           7,605             6,781            (16,504)     
Dividends on preferred shares .......       (10,175)(h)             --              --                --                 --      
                                        -----------        -----------          ------          --------          ---------      
Net income available for common                                                                                                  
 shareholders .......................   $    (3,054)       $    11,648          $7,605          $  6,781          $ (16,504)     
                                        ===========        ===========          ======          ========          =========      
Net income per common                                                                                                            
 share-basic ........................                                                                                            
Net income per common-basic                                                                                                      
 share-diluted ......................                                                                                            
Weighted average shares-basic .......                                                                                            
Weighted average shares-diluted .....                                                                                            

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HIGHWOODS PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) --         
(continued) 
For the Year Ended December 31, 1997  
(In thousands, except per share data) 

                                                        [Enlarge/Download Table]

                                                                            MOPPRS         1998           Series D        
                                                                           and Debt    Common Stock   Preferred Share     
                                                                           Offering      Offering         Offering        
                                                                         ------------ -------------- -----------------    
                                                                                                                          
REVENUE:                                                                                                                  
Rental property ........................................................   $   --       $     --        $       --        
Residential sales ......................................................       --             --                --        
Other Income ...........................................................       --             --                --        
                                                                           ------       --------        ----------        
                                                                               --             --                --        
OPERATING EXPENSES:                                                                                                       
Rental property ........................................................       --             --                --        
Cost of residential sales ..............................................       --             --                --        
Depreciation and amortization ..........................................       --             --                --        
INTEREST EXPENSE:                                                                                                         
 Contractual ...........................................................      285(o)        (415)(q)            --        
 Amortization of deferred financing costs ..............................      108(p)          --                --        
                                                                           ------       --------        ----------        
                                                                              393           (415)               --        
General and administrative .............................................       --             --                --        
                                                                           ------       --------        ----------        
Income before minority interest ........................................     (393)           415                --        
Minority interest ......................................................       59(g)         (62)(g)            --        
                                                                           ------       --------        ----------        
Income before extraordinary item and dividends on preferred shares .....     (334)           353                --        
Extraordinary item -- loss on extinguishment of debt ...................                                                  
                                                                             (334)           353                --        
Dividends on preferred shares ..........................................       --             --            (8,000)(r)    
                                                                           ------       --------        ----------        
Net income available for common shareholders ...........................   $ (334)      $    353        $   (8,000)       
                                                                           ======       ========        ==========        
Net income per common share -- basic ...................................                                                  
Net income per common share -- diluted .................................                                                  
Weighted average shares-basic ..........................................                                                  
Weighted average shares-diluted ........................................                                                  


                                                                          $200 Million                          JCN       
                                                                              Debt             JCN           Pro Forma    
                                                                            Offering     Historical (u)     Adjustments   
                                                                         -------------- ---------------- -----------------
                                                                                                                          
REVENUE:                                                                                                                  
Rental property ........................................................   $     --          $78,076        $       --    
Residential sales ......................................................         --            7,137            (7,137)(v)
Other Income ...........................................................         --           12,646             1,812 (v)
                                                                           --------          -------        ----------    
                                                                                 --           97,859            (5,325)   
OPERATING EXPENSES:                                                                                                       
Rental property ........................................................         --           44,654            (7,476)(w)
Cost of residential sales ..............................................         --            5,325            (5,325)(v)
Depreciation and amortization ..........................................                      13,483            (3,287)(x)
INTEREST EXPENSE:                                                                                                         
 Contractual ...........................................................      2,078(s)        22,333                --    
 Amortization of deferred financing costs ..............................        449(t)            --                --    
                                                                           --------          -------        ----------    
                                                                              2,527           22,333                --    
General and administrative .............................................         --                              7,476(w) 
                                                                           --------                         ----------    
Income before minority interest ........................................     (2,527)          12,064             3,287    
Minority interest ......................................................        379(g)            --            (1,085)(g)
                                                                           --------          -------        ----------    
Income before extraordinary item and dividends on preferred shares .....     (2,148)          12,064             2,202    
Extraordinary item -- loss on extinguishment of debt ...................                                                  
                                                                             (2,148)          12,064             2,202    
Dividends on preferred shares ..........................................         --               --                --    
                                                                           --------          -------        ----------    
Net income available for common shareholders ...........................   $ (2,148)         $12,064        $    2,202    
                                                                           ========          =======        ==========    
Net income per common share -- basic ...................................                                                  
Net income per common share -- diluted .................................                                                  
Weighted average shares-basic ..........................................                                                  
Weighted average shares-diluted ........................................                                                  


                                                                           Pro Forma                                      
                                                                         ------------                                     
                                                                                                                          
REVENUE:                                                                                                                  
Rental property ........................................................  $ 431,614                                       
Residential sales ......................................................         --                                       
Other Income ...........................................................     23,998                                       
                                                                          ---------                                       
                                                                            455,612                                       
OPERATING EXPENSES:                                                                                                       
Rental property ........................................................    150,979                                       
Cost of residential sales ..............................................         --                                       
Depreciation and amortization ..........................................     70,832                                       
INTEREST EXPENSE:                                                                                                         
 Contractual ...........................................................     85,780                                       
 Amortization of deferred financing costs ..............................      2,813                                       
                                                                          ---------                                       
                                                                             88,593                                       
General and administrative .............................................     17,692                                       
                                                                          ---------                                       
Income before minority interest ........................................    127,516                                       
Minority interest ......................................................    (19,128)                                      
                                                                          ---------                                       
Income before extraordinary item and dividends on preferred shares .....    108,388                                       
Extraordinary item -- loss on extinguishment of debt ...................     (5,799)                                      
                                                                          ---------                                       
                                                                            102,589                                       
Dividends on preferred shares ..........................................    (32,581)                                      
                                                                          ---------                                       
Net income available for common shareholders ...........................  $  70,008                                       
                                                                          =========                                       
Net income per common share -- basic ...................................  $    1.15                                       
                                                                          =========                                       
Net income per common share -- diluted .................................  $    1.14                                       
                                                                          =========                                       
Weighted average shares-basic ..........................................     60,897                                       
                                                                          =========                                       
Weighted average shares-diluted ........................................     61,534                                       
                                                                          =========                                       

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HIGHWOODS PROPERTIES, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) 

For the Year Ended December 31, 1997

1. BASIS OF PRESENTATION                                                        

  The accompanying unaudited pro forma condensed consolidated statement of
operations is presented as if the following transactions had been consummated   
on January 1, 1997: (a) the completion of the business combination with         
Anderson Properties, Inc. ("Anderson Properties") and the purchase of a         
portfolio of properties from affiliates of Anderson Properties (the "Anderson   
Transaction") and the purchase of Century Center Office Park and an affiliated  
property portfolio (the "Century Center Transaction"), (b) the issuance of      
125,000 8 5/8% Series A Cumulative Redeemable Preferred Shares (the "Series A   
Preferred Shares") and of $100,000,000 of Exercisable Put Option Notes          
(collectively the "Other Offerings"), (c) the completion of a business          
combination with Associated Capital Properties, Inc. ("ACP") (d) the completion 
of the acquisition of the seven properties that ACP had under contract to       
purchase (the "1997 Pending Acquisitions"), (e) the issuance of 6.9 million     
Series B Preferred Shares at a price of $25 per share (the "Preferred Stock     
Offering"), (f) the issuance of 8.5 million shares of Common Stock (the "Common 
Stock Offering"), (g) the completion of the business combination with Riparius  
Development Corporation and the acquisitions of seven properties in             
Winston-Salem, NC and one property in Nashville, TN (collectively, the          
"Acquired Properties"), (h) the completion of the Garcia acquisition consisting 
of fourteen properties, six service center properties an 66 acres of            
development land and the completion of four other acquisitions of seven         
properties (collectively, the "Other Acquired Properties"), (i) the completion  
of the MOPPRS and Debt Offering and (j) the completion of the issuance of 2     
million shares of Common Stock at a price of $36 per share ("the 1998 Common    
Stock Offering), (k) the completion of the Series D Preferred Share Offering,   
(l) the completion of the April 1998 Debt Offering and (m) the completion of    
the JCN Transaction.                                                            

 This unaudited pro forma condensed consolidated statement of operations
should be read in conjunction with the pro forma condensed consolidated balance 
sheet of the Company as of March 31, 1998, the consolidated financial           
statements and related notes of the Company included in its Annual Report on    
Form 10-K for the year ended December 31, 1997, the unaudited financial         
statements and related notes of the Company included in its Quarterly Report on 
Form 10-Q for the quarter ended March 31, 1998, the financial statements and    
related notes of Associated Capital Properties Portfolio and 1997 Pending       
Acquisitions included in the Company's Current Report on Form 8-K dated October 
1, 1997 (as filed with the Securities and Exchange Commission on October 16,    
1997), the statements of revenues and certain expenses of Riparius Properties,  
Shelton Properties and Winners Circle for the year ended December 31, 1996      
included in the Company's Form 8-K dated November 17, 1997 (as filed with the   
Securities and Exchange Commission on February 3, 1998), and the consolidated   
financial statements and related notes of J.C. Nichols Company and Subsidiaries 
for the year ended December 31, 1997 and for the three months ended March 31,   
1998, both of which are set forth elsewhere in this Proxy Statement/            
Prospectus.                                                                     

   The pro forma condensed consolidated statement of operations is unaudited
and is not necessarily indicative of what the Company's actual results would    
have been had the aforementioned transactions actually occurred on January 1,   
1997 nor does it purport to represent the future operating results of the       
Company.                                                                        

2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF   
OPERATIONS                                                                

   (a.) Represents the Company's historical consolidated statement of operations
       contained in its Annual Report on Form 10-K for the year ended December
31, 1997.                                                       

   (b.) Reflects the historical statement of operations of Century Center Office
      Park and an affiliated portfolio ("Century Center") and the properties
        acquired in the Anderson Transaction for the period from January 1, 1997
    through the respective dates of their acquisition, adjusted on a pro
   forma basis for interest expense and depreciation expense. Interest
       expense reflects the reduction in mortgage interest rate costs based on
        the average rate of assumed debt (7.15% and 8.78% for Century Center and
Anderson Properties, respectively) at the date of acquisition.  
       Depreciation expense has been adjusted to reflect a 40 year depreciable
       life for buildings on a straight line basis at the date of acquisition.

   (c.) Reflects the estimated interest expense savings on $127.5 million of the
     Lines of Credit at an interest rate of 7.60% (6.25% interest rate cap
       plus 135 basis points) and $63.1 million of other loans repaid with the
proceeds of the                                                 

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HIGHWOODS PROPERTIES, INC.  

NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS               
(UNAUDITED) -- Continued

2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF   
OPERATIONS -- Continued                                               

      Other Offerings at an average interest rate of 8.50% and the dividends
  incurred on the Company's Series A Cumulative Redeemable Preferred
   Shares from January 1, 1997 through the date of the offering of the
Series A Cumulative Redeemable Preferred Shares.                

(d.) Represents the historical revenues and operating expenses of the ACP 
       Portfolio through the date of acquisition and the historical operations
     of properties acquired by ACP during 1997 from January 1, 1997 to the
       respective dates of their acquisition adjusted on a pro forma basis for
 incremental revenue related to owner-occupied buildings, interest
     expense and depreciation expense related to the ACP Portfolio and the
     1997 Pending Acquisitions. Interest expense reflects the reduction in
     mortgage interest costs based on the average interest rate of assumed
      debt (8.27%) and the interest rate on debt drawn on the line of credit
 (6.69%) at the date of acquisition. Depreciation expense had been
 adjusted to reflect a 40 year depreciable life for buildings on a
straight line basis at the date of acquisition.                 

(e.) Reflects the historical revenues and operating expenses of the 1997  
Pending Acquisitions through the date of acquisition.           

   (f.) Reflects the estimated interest expense savings on $166.9 million of the
    Lines of Credit at an average interest rate of 6.69% repaid with the
proceeds of the Preferred Stock Offering.                       

(g.) Represents the net adjustment to minority interest to reflect the pro
forma minority interest percentage of 15.0%.                    

(h.) Represents the 8% dividend on the Series B Preferred Shares issued in
the Preferred Stock Offering.                                   

 (i.) Represents the estimated interest expense savings on $273.1 million of
        the Lines of Credit at an average interest rate of 6.69% repaid with the
proceeds of the Common Stock Offering.                          

(j.) Reflects the historical revenues and operating expenses of Acquired  
Properties through the date of acquisition.                     

(k.) Reflects the historical revenues and operating expenses of Other     
Acquired Properties through the date of acquisition.            

  (l.) Represents the incremental operating expenses related to salary expense
  of property management expected to be incurred by the Company upon
        completion of the Acquired Properties and the Other Acquired Properties.

(m.) Represents the net adjustment of depreciation expense for Acquired   
  Properties and the Other Acquired Properties based upon an assumed
      allocation of the purchase price to land, buildings and development in
   process. Building depreciation is computed on a straight-line basis
using an estimated life of 40 years.                            

(n.) Represents the net adjustment to interest expense to reflect interest
     costs on $219.4 million in borrowings under the Lines of Credit at an
       assumed rate of 6.87% (the capped interest rate based on a 30-day LIBOR
      rate of 5.87% plus 100 basis points) and $31.0 million in assumed debt
at a weighted average interest rate of 8.33%.                   

  (o.) Represents the estimated interest expense on $125 million of MOPPRS due
      2013 at an interest rate of 6.835% and $100 million in debt securities
        due 2008 (at a rate of 7.125%) offset by the interest expense savings on
        the $226.3 million of the Lines of Credit at an average interest rate of
6.69% repaid with the proceeds of the MOPPRS and Debt Offering. 

 (p.) Represents the amortization of the deferred financing costs associated
      with the MOPPRS and Debt Offering, straight-line over the terms of the
        securities offset by the amortization of the $3.5 million MOPPRS premium
        paid by the remarketing dealer, using the effective interest method over
the term of the securities.                                     

(q.) Represents the estimated interest expense savings on $30.8 million of
      the Lines of Credit at an average interest rate of 6.69% repaid with a
portion of the net proceeds of the 1998 Common Stock Offering.  

(r.) Represents the 8% dividend on the Series D Preferred Shares issued in
the Series D Preferred Share Offering.                          

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HIGHWOODS PROPERTIES, INC.  
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS               
(UNAUDITED)-- Continued 

 (s.) Represents the estimated interest expense on $200 million of notes due
       2018 at a discount of .361% with an interest rate of 7.5% offset by the
       interest expense savings on $170.9 million of the Lines of Credit at an
     average interest rate of 6.95% repaid with the proceeds of the notes.

 (t.) Represents the amortization of the deferred financing costs (including
       the $6.4 million paid to terminate the related treasury lock agreement)
        associated with the $200 million notes using the effective interest rate
 method for the hedge instrument and underwriters discount and the
straight line basis for the financing costs.                    

(u.) Represents the J.C. Nichols Company and Subsidiaries' historical     
statement of operations (pre-tax) contained in the consolidated 
  financial statements and related notes of J.C. Nichols Company and
     Subsidiaries as of and for the year ended December 31, 1997 set forth
elsewhere in this Proxy Statement/Prospectus.                   

   (v.) Represents the reclass of the historical gross profit of the residential
    business to other income as this will be accounted for in a separate
       business entity under the equity method of accounting upon acquisition.
     J.C. Nichols Company presently consolidates the residential business;
   however, subsequent to the merger, Highwoods will not have majority
     ownership or control of the entity which will conduct the residential
  business and will accordingly use the equity method of accounting.

(w.) Represents a reclass of certain operating expenses to general and    
administrative expense ($7,476) for comparative purposes.       

(x.) Represents the reduction in historical depreciation expense on the   
       properties acquired in the JCN Transaction based on a 80% allocation to
       buildings and a 20% allocation to land for net assets acquired. Amounts
   recorded as tenant improvements on J.C. Nichols' general ledger and
  depreciated as buildings over 40 years after the combination which
accounts for the decrease.                                      

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INDEPENDENT AUDITORS' REPORT  

Board of Directors                                                              

J.C. Nichols Company                                                            
Kansas City, Missouri:                                                          

We have audited the accompanying consolidated balance sheets of J.C.  
Nichols Company and subsidiaries (the Company) as of December 31, 1997 and 1996 
and the related consolidated statements of operations, stockholders' equity     
(deficit) and cash flows for each of the years in the three year period ended   
December 31, 1997. These consolidated financial statements are the              
responsibility of the Company's management. Our responsibility is to express an 
opinion on these consolidated financial statements based on our audits.         

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to       
obtain reasonable assurance about whether the financial statements are free of  
material misstatement. An audit includes examining, on a test basis, evidence   
supporting the amounts and disclosures in the financial statements. An audit    
also includes assessing the accounting principles used and significant          
estimates made by management, as well as evaluating the overall financial       
statement presentation. We believe that our audits provide a reasonable basis   
for our opinion.                                                                

  In our opinion, the consolidated financial statements present fairly, in
all material respects, the financial position of the Company and its            
subsidiaries as of December 31, 1997 and 1996 and the results of their          
operations and their cash flows for each of the years in the three year period  
ended December 31, 1997, in conformity with generally accepted accounting       
principles.                                                                     

/s/ KPMG Peat Marwick LLP                                                       

Kansas City, Missouri                                                           
March 6, 1998                                                                   

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS 

                                                        [Enlarge/Download Table]

                                                                                                     December 31,           
                                                                                           ---------------------------------
                                                                                                 1997             1996      
                                                                                           ---------------- ----------------
                                                                                                                            
ASSETS                                                                                                                      
Revenue-producing properties (note 2) ....................................................  $ 163,097,000    $ 189,011,000  
Land and improvement inventories .........................................................      9,791,000       24,204,000  
Property held for future development .....................................................      7,793,000        6,918,000  
                                                                                            -------------    -------------  
 Total properties ........................................................................    180,681,000      220,133,000  
Cash and cash equivalents ................................................................     15,968,000       14,454,000  
Temporary investments ....................................................................     42,633,000       45,053,000  
Accounts receivable (note 9) .............................................................      3,061,000        2,000,000  
Prepaid expenses .........................................................................      6,378,000        6,355,000  
Notes receivable (notes 3, 9 and 10) .....................................................     40,757,000       21,514,000  
Investments in real estate partnerships (note 4) .........................................      2,457,000        2,163,000  
Minority interest in consolidated partnerships ...........................................      4,717,000        4,431,000  
Income taxes receivable ..................................................................        383,000               --  
Deferred income taxes (note 7) ...........................................................             --        3,456,000  
Other assets, net ........................................................................        739,000          768,000  
                                                                                            -------------    -------------  
                                                                                            $ 297,774,000    $ 320,327,000  
                                                                                            =============    =============  
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                                                              
Mortgage indebtedness (note 5) ...........................................................  $ 288,553,000    $ 309,188,000  
Notes payable to banks and others (notes 9 and 14) .......................................     12,990,000        2,000,000  
Accounts payable and tenants' deposits ...................................................      9,059,000        6,633,000  
Accrued expenses and other liabilities ...................................................      8,613,000        8,020,000  
Income taxes payable .....................................................................             --       11,525,000  
Accrued contribution to Employee Stock Ownership Trust (note 10) .........................             --       11,050,000  
Deferred gains on the sale of property ...................................................      2,024,000          517,000  
Deferred income taxes (note 7) ...........................................................      2,708,000               --  
                                                                                            -------------    -------------  
                                                                                              323,947,000      348,933,000  
                                                                                            -------------    -------------  
Stockholders' equity (deficit):                                                                                             
 Common stock, par value $.01 per share; 10,000,000 shares authorized and 5,721,744                                         
   and 5,016,745 shares issued (note 13) .................................................        100,000          100,000  
 Additional paid-in capital ..............................................................     19,917,000        8,319,000  
 Retained earnings .......................................................................     99,788,000       80,402,000  
                                                                                            -------------    -------------  
                                                                                              119,805,000       88,821,000  
 Less treasury stock, at cost (1,179,235 and 164,345 shares of common stock) (note 14)        145,978,000      117,427,000  
                                                                                            -------------    -------------  
Total stockholders' equity (deficit) .....................................................    (26,173,000)     (28,606,000) 
Commitments and contingencies (notes 2, 8 and 10) ........................................                                  
                                                                                            -------------    -------------  
                                                                                            $ 297,774,000    $ 320,327,000  
                                                                                            =============    =============  

See accompanying notes to consolidated financial statements.  

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF OPERATIONS 

                                                        [Enlarge/Download Table]

                                                                           Years ended December 31,              
                                                             ----------------------------------------------------
                                                                   1997             1996              1995       
                                                             --------------- ----------------- ------------------
                                                                                                                 
Sales and revenues:                                                                                              
 Rents .....................................................  $ 78,076,000     $  79,878,000     $   79,818,000  
 Property sales ............................................     7,137,000         6,623,000          6,047,000  
 Commissions and fees ......................................     1,057,000         1,232,000          1,459,000  
 Dividends and interest ....................................     5,740,000         4,634,000          4,806,000  
 Gains on sales of investments and other assets ............     2,628,000        34,867,000          5,711,000  
 Equity in earnings of unconsolidated affiliates ...........     1,639,000           697,000            157,000  
 Other .....................................................     1,582,000         4,697,000          1,307,000  
                                                              ------------     -------------     --------------  
                                                                97,859,000       132,628,000         99,305,000  
                                                              ------------     -------------     --------------  
Costs and expenses:                                                                                              
 Selling, general and operating expenses ...................    44,654,000        45,394,000         45,952,000  
 Cost of property sales ....................................     5,325,000         5,162,000          3,944,000  
 Interest ..................................................    22,333,000        23,466,000         27,862,000  
 Depreciation and amortization .............................    13,483,000        13,954,000         14,355,000  
 Employee Stock Ownership Trust contribution (note 10) .....            --                --          1,787,000  
 Valuation allowances ......................................            --                --          2,350,000  
 Litigation settlement (note 11) ...........................            --                --         19,553,000  
                                                              ------------     -------------     --------------  
                                                                85,795,000        87,976,000        115,803,000  
                                                              ------------     -------------     --------------  
Income (loss) before income taxes ..........................    12,064,000        44,652,000        (16,498,000) 
Income tax expense (benefit) (note 7) ......................    (7,322,000)       16,750,000         (5,746,000) 
                                                              ------------     -------------     --------------  
Net income (loss) ..........................................  $ 19,386,000     $  27,902,000     $  (10,752,000) 
                                                              ============     =============     ==============  
Basic income (loss) per share ..............................  $       4.63     $        5.75     $        (0.74) 
                                                              ============     =============     ==============  
Diluted income (loss) per share ............................  $       4.47     $        5.62     $        (0.74) 
                                                              ============     =============     ==============  

See accompanying notes to consolidated financial statements.  

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) 

                                                        [Enlarge/Download Table]

                                                                               Years ended                       
                                                                              December 31,                       
                                                                            -----------------                    
                                                                                   1997                          
                                                                            -----------------                    
                                                                                                                 
Common stock:                                                                                                    
 Balance at beginning and end of year (note 13) ...........................  $      100,000                      
                                                                             --------------                      
Additional paid-in capital (note 13):                                                                            
 Balance at beginning of year .............................................       8,319,000                      
 Contribution of 110,000 shares to Employee Stock Ownership Trust                                                
   (note 10) ..............................................................              --                      
 Conveyance of 679,999 shares to Employee Stock Ownership Trust                                                  
   and to a Court (note 10) ...............................................      11,050,000                      
 Income tax benefit of options exercised on 25,000 shares .................         381,000                      
 Earned stock compensation (note 12) ......................................         167,000                      
                                                                             --------------                      
 Balance at end of year ...................................................      19,917,000                      
                                                                             --------------                      
Unrealized gain on marketable equity securities available-for-sale, net                                          
 of income taxes:                                                                                                
 Balance at beginning of year .............................................              --                      
 Unrealized gain, net of income taxes of $184,000 and $4,165,000 ..........              --                      
 Realized loss from sale of securities, net of income taxes of                                                   
   $23,000 ................................................................              --                      
 Realized gain from sale of securities, net of income taxes of                                                   
   $11,636,000 and $208,000 ...............................................              --                      
                                                                             --------------                      
 Balance at end of year ...................................................              --                      
                                                                             --------------                      
Retained earnings:                                                                                               
 Balance at beginning of year .............................................      80,402,000                      
 Net income (loss) ........................................................      19,386,000                      
                                                                             --------------                      
 Balance at end of year ...................................................      99,788,000                      
                                                                             --------------                      
Treasury stock:                                                                                                  
 Balance at beginning of year .............................................    (117,427,000)                     
 Contribution of 110,000 shares to Employee Stock Ownership Trust                                                
   (notes 10 and 13) ......................................................              --                      
 Receipt of 12,227 shares in litigation settlement (note 11) ..............              --                      
 Receipt of 125,242 shares previously securing note receivable                                                   
   (note 11) ..............................................................              --                      
 Purchase of 948,880 shares (note 14) .....................................     (25,857,000)                     
 Receipt of 54,162 shares from Employee Stock Ownership Trust in                                                 
   payment of note receivable (note 10) ...................................      (1,983,000)                     
 Purchase of 11,848 shares ................................................        (711,000)                     
                                                                             --------------                      
 Balance at end of year ...................................................    (145,978,000)                     
                                                                             --------------                      
Note receivable secured by the Company's common stock:                                                           
 Balance at beginning of year .............................................              --                      
 Transfer of 125,242 shares to treasury stock in settlement of note                                              
   receivable (note 11) ...................................................              --                      
 Balance at end of year ...................................................              --                      
                                                                             --------------                      
Total stockholders' equity (deficit) ......................................  $  (26,173,000)                     
                                                                             ==============                      


                                                                                  Years ended December 31,       
                                                                            -------------------------------------
                                                                                   1996               1995       
                                                                            ------------------ ------------------
                                                                                                                 
Common stock:                                                                                                    
 Balance at beginning and end of year (note 13) ...........................   $      100,000     $      100,000  
                                                                              --------------     --------------  
Additional paid-in capital (note 13):                                                                            
 Balance at beginning of year .............................................        7,079,000          6,002,000  
 Contribution of 110,000 shares to Employee Stock Ownership Trust                                                
   (note 10) ..............................................................               --          1,077,000  
 Conveyance of 679,999 shares to Employee Stock Ownership Trust                                                  
   and to a Court (note 10) ...............................................               --                 --  
 Income tax benefit of options exercised on 25,000 shares .................               --                 --  
 Earned stock compensation (note 12) ......................................        1,240,000                 --  
                                                                              --------------     --------------  
 Balance at end of year ...................................................        8,319,000          7,079,000  
                                                                              --------------     --------------  
Unrealized gain on marketable equity securities available-for-sale, net                                          
 of income taxes:                                                                                                
 Balance at beginning of year .............................................       21,023,000         13,755,000  
 Unrealized gain, net of income taxes of $184,000 and $4,165,000 ..........          320,000          7,612,000  
 Realized loss from sale of securities, net of income taxes of                                                   
   $23,000 ................................................................               --             42,000  
 Realized gain from sale of securities, net of income taxes of                                                   
   $11,636,000 and $208,000 ...............................................      (21,343,000)          (386,000) 
                                                                              --------------     --------------  
 Balance at end of year ...................................................               --         21,023,000  
                                                                              --------------     --------------  
Retained earnings:                                                                                               
 Balance at beginning of year .............................................       52,500,000         63,252,000  
 Net income (loss) ........................................................       27,902,000        (10,752,000) 
                                                                              --------------     --------------  
 Balance at end of year ...................................................       80,402,000         52,500,000  
                                                                              --------------     --------------  
Treasury stock:                                                                                                  
 Balance at beginning of year .............................................     (117,427,000)       (14,582,000) 
 Contribution of 110,000 shares to Employee Stock Ownership Trust                                                
   (notes 10 and 13) ......................................................               --            710,000  
 Receipt of 12,227 shares in litigation settlement (note 11) ..............               --         (9,207,000) 
 Receipt of 125,242 shares previously securing note receivable                                                   
   (note 11) ..............................................................               --        (94,348,000) 
 Purchase of 948,880 shares (note 14) .....................................               --                 --  
 Receipt of 54,162 shares from Employee Stock Ownership Trust in                                                 
   payment of note receivable (note 10) ...................................               --                 --  
 Purchase of 11,848 shares ................................................               --                 --  
                                                                              --------------     --------------  
 Balance at end of year ...................................................     (117,427,000)      (117,427,000) 
                                                                              --------------     --------------  
Note receivable secured by the Company's common stock:                                                           
 Balance at beginning of year .............................................               --        (94,348,000) 
 Transfer of 125,242 shares to treasury stock in settlement of note                                              
   receivable (note 11) ...................................................               --         94,348,000  
 Balance at end of year ...................................................               --                 --  
                                                                              --------------     --------------  
Total stockholders' equity (deficit) ......................................   $  (28,606,000)    $  (36,725,000) 
                                                                              ==============     ==============  

See accompanying notes to consolidated financial statements.  

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                                                      Years ended December 31,             
                                                                         --------------------------------------------------
                                                                               1997            1996             1995       
                                                                         --------------- --------------- ------------------
                                                                                                                           
Operating activities:                                                                                                      
  Net income (loss) ....................................................  $  19,386,000   $  27,902,000    $  (10,752,000) 
  Adjustments to reconcile net income (loss) to net cash provided by                                                       
   operating activities:                                                                                                   
   Depreciation and amortization .......................................     13,483,000      13,954,000        14,355,000  
   Valuation allowances ................................................             --              --         2,350,000  
   Earned stock compensation ...........................................        167,000       1,240,000                --  
   Noncash portion of litigation settlement ............................             --              --        13,588,000  
   Deferred income taxes ...............................................      6,164,000       2,062,000        (2,597,000) 
   Equity in earnings of unconsolidated affiliates .....................     (1,639,000)       (697,000)         (157,000) 
   Employee Stock Ownership Trust contribution .........................             --              --         1,787,000  
   Gains on sales of investments and other assets ......................     (2,628,000)    (34,867,000)       (5,711,000) 
   Changes in:                                                                                                             
    Land and improvement inventories ...................................      3,604,000       2,714,000         7,280,000  
    Accounts receivable ................................................     (1,114,000)      2,165,000           577,000  
    Minority interest in consolidated partnerships .....................       (424,000)       (147,000)         (430,000) 
    Accounts payable and tenants' deposits .............................      2,577,000        (153,000)         (539,000) 
    Accrued expenses and other liabilities .............................        707,000        (577,000)         (640,000) 
    Current income taxes ...............................................    (11,528,000)     15,717,000         1,437,000  
    Other, net .........................................................     (1,954,000)        400,000         1,469,000  
                                                                          -------------   -------------    --------------  
Net cash provided by operating activities ..............................     26,801,000      29,713,000        22,017,000  
                                                                          -------------   -------------    --------------  
Investing activities:                                                                                                      
  Net (increase) decrease in temporary investments .....................      2,420,000     (40,447,000)         (202,000) 
  Payments on notes receivable .........................................      9,086,000       8,773,000         6,927,000  
  Issuance of notes receivable .........................................    (19,466,000)     (6,632,000)       (6,174,000) 
  Additions to revenue-producing properties ............................    (11,327,000)     (8,317,000)       (7,862,000) 
  Purchase of marketable equity securities .............................             --              --        (3,021,000) 
  Proceeds from sales of capital assets ................................      9,577,000       3,056,000         5,269,000  
  Return of capital from unconsolidated affiliates .....................      1,360,000         400,000           420,000  
  Proceeds from sales of marketable equity securities ..................             --      38,617,000           925,000  
  Maturities of marketable securities ..................................             --              --         2,359,000  
  Investments in and advances to unconsolidated affiliates .............        (15,000)        (14,000)         (394,000) 
  Other, net ...........................................................        191,000          (6,000)           30,000  
                                                                          -------------   -------------    --------------  
Net cash used in investing activities ..................................     (8,174,000)     (4,570,000)       (1,723,000) 
                                                                          -------------   -------------    --------------  
Financing activities:                                                                                                      
  Payments on mortgage indebtedness ....................................    (22,978,000)    (20,593,000)      (11,825,000) 
  Issuance of mortgage indebtedness ....................................     21,366,000       6,353,000                --  
  Purchases of treasury stock ..........................................    (13,521,000)             --        (4,901,000) 
  Issuance of notes to banks and others ................................             --              --        11,356,000  
  Payments on notes to banks and others ................................     (2,000,000)     (3,658,000)      (22,362,000) 
  Dividends paid .......................................................             --              --        (1,180,000) 
  Capital contributions from minority partners .........................         20,000              --         1,641,000  
                                                                          -------------   -------------    --------------  
Net cash used in financing activities ..................................    (17,113,000)    (17,898,000)      (27,271,000) 
                                                                          -------------   -------------    --------------  
Net increase (decrease) in cash and cash equivalents ...................      1,514,000       7,245,000        (6,977,000) 
Cash and cash equivalents, beginning of year ...........................     14,454,000       7,209,000        14,186,000  
                                                                          -------------   -------------    --------------  
Cash and cash equivalents, end of year .................................  $  15,968,000   $  14,454,000    $    7,209,000  
                                                                          =============   =============    ==============  

See accompanying notes to consolidated financial statements.

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

December 31, 1997, 1996 and 1995  

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                  

Basis of Consolidation                                                

    The consolidated financial statements include the accounts of J.C. Nichols
Company and its majority controlled affiliates (the Company). Significant       
intercompany profits, transactions and balances have been eliminated.           

  Minority interest in consolidated partnerships represents the cumulative
losses, after capital contributions, attributable to minority interests in      
consolidated general partnership investments of the Company.                    

Revenue-producing Properties                                          

Revenue-producing properties are carried at cost less accumulated     
depreciation. All direct and indirect costs clearly associated with the         
acquisition and development of real estate projects are capitalized. Interest   
and certain indirect costs are capitalized during periods in which activities   
necessary to ready the property for its intended use are in progress.           
Depreciation is generally computed using the straight-line method over the      
estimated useful lives of the assets, generally seven to thirty-one years.      

Real estate projects are reviewed for impairment whenever events or   
changes in circumstances indicate that the carrying amount of the asset may not 
be recoverable. If the sum of the expected future cash flows (undiscounted and  
without interest changes) of the asset is less than the carrying amount of the  
asset, an impairment loss is recognized. The amount of the impairment loss is   
calculated based on an evaluation of discounted cash flows.                     

   Leases for office and warehouse space provide for fixed monthly rents and
may contain provisions for rent escalations, utility charges and other          
adjustments. Retail leases generally provide for minimum annual rents,          
contingent rentals based on a percentage of the lessee's sales and, in many     
instances, the tenant's proportionate share of real estate taxes, insurance and 
maintenance. These leases generally have a term of three to five years or       
longer in the case of most major tenants. Apartment leases provide for a fixed  
monthly rental primarily for a term of one year. All leases are accounted for   
as operating leases.                                                            

Land and Improvement Inventories                                      

  Land and improvement inventories includes residentially zoned land, land
improvements and building improvements, and are carried at the lower of average 
cost or market. Revenues from property sales are recorded when sufficient funds 
are received from the buyer and all conditions precedent to the sale are        
completed, generally when the property is deeded to the buyer. Improvement      
costs are allocated to the parcels benefited on the basis of estimated relative 
sales value.                                                                    

Deferred Gains on the Sale of Property                                

   Gains on the sale of property are deferred until such time as the Company
is no longer required to perform significant activities related to the property 
sold, has no continuing involvement and has transferred the risks and rewards   
of ownership. Additionally, the buyer must have evidenced a substantial initial 
and continuing investment in the property.                                      

    Gains on the sale of property to unconsolidated affiliates are deferred to
the extent of the Company's ownership interest in such affiliates.              

Investments in Real Estate Partnerships                               

  Investments in real estate partnerships primarily consist of investments
in and advances to unconsolidated affiliates. Investments in real estate        
partnerships are accounted for on the equity method and reflect the Company's   
share of income or loss of the partnerships, reduced by distributions received  
and increased by contributions made.                                            

Temporary Investments and Cash Equivalents                            

   Temporary investments are marketable securities which are callable within
30 to 180 days of purchase and are carried at the lower of amortized cost or    
market value. Cash equivalents include money market funds, certificates of      
deposit and debt securities acquired with an original maturity of three months  
or less.                                                                        

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  -- Continued

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued                     

Income Taxes                                                          

Deferred tax assets and liabilities are recognized for temporary      
differences between the financial reporting basis and the income tax basis of   
the Company's assets and liabilities. The impact on deferred taxes of changes   
in tax rates and laws is reflected in the financial statements in the period of 
change.                                                                         

Treasury Stock                                                        

Treasury stock purchases have been recorded at cost. Other receipts of
treasury stock have been recorded at estimated fair value.                      

Income (Loss) Per Share                                               

 In 1997, the Company adopted Statement of Financial Accounting Standard
(SFAS) No. 128 Earnings Per Share, which established new standards for          
computing and presenting income per share. Basic income per share is computed   
using the weighted average number of common shares outstanding during each      
year. Diluted income per share includes the effect of all dilutive potential    
common shares (primarily stock options) outstanding during each year. All       
income per share data has been restated to reflect the adoption of SFAS No. 128 
and retroactive adjustment of the 1996 stock split (see note 13).               

  The shares used in the calculation of basic and diluted income per share
are shown below:                                                                

                                                        [Enlarge/Download Table]

                                                             1997        1996         1995    
                                                         ----------- ----------- -------------
                                                                                              
Weighted average common shares outstanding for                                                
  computation of basic income per share ................  4,186,219   4,852,400   14,469,360  
Stock options ..........................................    153,807     116,029           --  
                                                          ---------   ---------   ----------  
Shares outstanding for computation of diluted income per                                      
  share ................................................  4,340,026   4,968,429   14,469,360  
                                                          =========   =========   ==========  

Use of Estimates                                                      

 The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates  
and assumptions that affect the reported balances of assets and liabilities and 
disclosure of contingent assets and liabilities at the date of the consolidated 
financial statements and reported amounts of revenues and expenses during the   
reporting period. Actual results could differ from these estimates.             

Reclassifications                                                     

Certain amounts in the consolidated financial statements have been    
reclassified to conform with the 1997 presentation.                             

(2) REVENUE-PRODUCING PROPERTIES                                                

  Revenue-producing properties at December 31, 1997 and 1996 consisted of:

                                                                [Download Table]

                                               1997            1996     
                                         --------------- ---------------
                                                                        
Land and improvements ..................  $  25,567,000   $  29,355,000 
Buildings and improvements .............    284,423,000     308,667,000 
Furnishings and equipment ..............      5,450,000       4,163,000 
Construction in progress ...............      5,925,000         625,000 
                                          -------------   ------------- 
                                            321,365,000     342,810,000 
Less accumulated depreciation ..........    158,268,000     153,799,000 
                                          -------------   ------------- 
                                          $ 163,097,000   $ 189,011,000 
                                          =============   ============= 

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  -- Continued

(2) REVENUE-PRODUCING PROPERTIES -- Continued                                   

 As of December 31, 1997, future minimum lease payments receivable under
noncancelable operating leases, excluding apartments, are as follows:           

                                                                [Download Table]

Year                                               Amount    
--------------------------------------------- ---------------
                                                             
    1998 ....................................  $  37,333,000 
    1999 ....................................     32,294,000 
    2000 ....................................     25,810,000 
    2001 ....................................     21,574,000 
    2002 ....................................     18,194,000 
    Thereafter ..............................    136,483,000 
                                               ------------- 
    Total future minimum lease payments .....  $ 271,688,000 
                                               ============= 

Contingent rents amounted to $3,395,000, $3,713,000 and $4,162,000 for
1997, 1996 and 1995, respectively. Apartment rentals under leases of one year   
or less aggregated $19,793,000, $19,735,000 and $18,681,000 for 1997, 1996 and  
1995, respectively.                                                             

  In 1987, a subsidiary of the Company entered into various contracts with
the City of St. Petersburg, Florida (the City) for the redevelopment and        
construction of certain parking, commercial and retail facilities known as Bay  
Plaza. Due to a delay in significant development activities, the Company ceased 
capitalization of interest, property taxes, insurance and other development     
costs on December 31, 1990.                                                     

  Based on its assessment of the feasibility of developing Bay Plaza under
the existing cost structure, management determined in 1994 that the value of    
Bay Plaza had declined and reduced its carrying value to $3,000,000 at December 
31, 1994. During 1996, the Company disposed of certain Bay Plaza assets with a  
book value of $7,300,000 and was released from related mortgages payable in the 
amount of $2,200,000. In December 1997, the Company sold substantially all of   
its remaining Bay Plaza assets for $4,000,000, realizing a gain of $2,500,000.  

  In December 1996, the Company announced a $240,000,000 plan to redevelop
areas on and around the Country Club Plaza in Kansas City, Missouri. The        
Company filed an application with the Tax Increment Financing Commission of     
Kansas City seeking to use funds generated from tax increment financing to fund 
approximately 25% of the proposed redevelopment. The application was approved   
by the Tax Increment Financing Commission, and the City Council of Kansas City, 
Missouri gave final approval in April 1997. The Plan is to be executed over the 
next ten years and is contingent on market demand. The Company is currently     
exploring various options for funding development cost in excess of the         
approved tax increment financing. At December 31, 1997, the Company had         
capitalized approximately $5,100,000 in costs relating to the redevelopment.    

(3) NOTES RECEIVABLE                                                            

Notes receivable at December 31, 1997 and 1996 consisted of:          

                                                                [Download Table]

                                                           1997            1996     
                                                     --------------- ---------------
                                                                                    
Promissory notes, collateralized by real estate, due                                
 1998 to 2013, 7% to 11% ...........................  $ 24,682,000    $ 14,116,000  
Notes receivable -- ESOT (note 10) .................    12,000,000       1,926,000  
Notes receivable -- miscellaneous, 8% to 10% .......       657,000       2,577,000  
First mortgage and construction loans on residential                                
 property, 10% to 10.5% ............................     3,418,000       2,895,000  
                                                      ------------    ------------  
                                                      $ 40,757,000    $ 21,514,000  
                                                      ============    ============  

In 1997, the Company sold a parcel of real estate in exchange for a   
$10,845,000 promissory note receivable bearing interest at 7% and maturing on   
May 10, 2000. The resulting gain of $1,523,000 was deferred at December 31,     
1997 and will be recognized upon collection of the note.                        

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  -- Continued
(3) NOTES RECEIVABLE -- Continued                                               

    The Company has valuation reserves of $1,954,000 and $3,799,000 related to
notes receivable at December 31, 1997 and 1996, respectively.                   

(4) INVESTMENTS IN REAL ESTATE PARTNERSHIPS                                     

In November, 1997, the Company entered into an agreement with         
Kessinger/Hunter & Company, Inc. (Kessinger/                                    
Hunter) to form a limited liability company (LLC) to provide services to        
previous Kessinger/Hunter clients as well as management and leasing for the     
Company's portfolio of office, industrial and retail properties, excluding the  
Country Club Plaza in Kansas City, Missouri. On January 2, 1998, the Company    
made an initial investment in the LLC of $4,286,000, which represents a 30%     
equity interest. The Company has the option of increasing its equity interest   
to 65% by 2001. In addition, the agreement provides to the LLC a call right     
which enables it to purchase up to 76,530 shares of common stock of the Company 
at a price of $56 per share. In February 1998, the LLC returned to the Company  
the $4,286,000 to permit it to exercise this call right. Accordingly, the       
Company will issue 76,530 shares of its common stock to the LLC.                

   At December 31, 1997, the Company had an equity interest in the following
unconsolidated entities:                                                        

                                                                [Download Table]

                                              Percent owned
                                             --------------
                                                           
Center Court Partners ......................       50.0%   
Dallas County Partners .....................       50.0    
Dallas County Partners II ..................       50.0    
Dallas County Partners III L.C .............       50.0    
Fountain Three .............................       50.0    
Terrace Place Partners .....................       50.0    
Meredith Drive Associates L.P ..............       49.5    
Board of Trade Investment Company ..........       49.0    
J.C. Nichols Real Estate ...................       40.0    
4600 Madison Associates L.P ................       12.5    
Raphael Hotel Group L.P ....................        5.0    

  Selected aggregate financial data for unconsolidated affiliates for 1997
and 1996 is presented below:                                                    

                                                                [Download Table]

                                          1997             1996      
                                    ---------------- ----------------
                                                                     
Total assets ......................  $ 131,341,000    $ 125,076,000  
Total liabilities (note 8) ........  $ 141,526,000    $ 137,870,000  
Net income ........................  $   3,714,000    $   2,189,000  

(5) MORTGAGE INDEBTEDNESS                                                       

Mortgage indebtedness consists principally of first mortgage notes on 
revenue-producing properties. These obligations bear annual interest at rates   
ranging from 3.9% to 10.5% and mature from 1998 to 2021. Substantially all of   
the Company's revenue-producing properties are pledged to secure this debt.     

 Aggregate annual principal payments applicable to mortgage indebtedness
subsequent to December 31, 1997 are:                                            

                                                                [Download Table]
                                   
1998 ...............  $   8,723,000
1999 ...............     13,968,000
2000 ...............      6,982,000
2001 ...............      7,419,000
2002 ...............     15,540,000
Thereafter .........    235,921,000
                      -------------
                      $ 288,553,000
                      =============

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  -- Continued

(5) MORTGAGE INDEBTEDNESS -- Continued                                          

As a result of the bankruptcy of a primary tenant, the Company ceased 
making debt service payments on the underlying loan in 1991 and began           
negotiations with the lender to restructure the debt agreement. As of December  
31, 1993, this nonrecourse debt had a principal balance of $7,149,000 and       
accrued interest of $1,818,000. In March 1994, the Company and the lender       
agreed to restructure the loan which required a cash payment of $1,649,000 to   
reduce the loan balance to $5,500,000. Accrued interest through February 1994   
was waived under the agreement. The restructuring reduced the effective         
interest rate for financial statement purposes from 12% to approximately 3%.    

Due to the loss of a primary tenant in an office building that had an 
underlying mortgage, the Company began negotiations in 1995 with the lender to  
restructure the debt agreement. As of December 31, 1995, this nonrecourse debt  
had a principal balance of $22,500,000 and accrued interest of $3,720,000. In   
January 1996, the Company and the lender agreed to restructure the loan, which  
required a cash payment by the Company of $2,500,000. In addition, the Company  
has the option to retire the outstanding indebtedness prior to maturity for     
$14,000,000 less future principal payments thereon. The restructuring reduced   
the effective interest rate beginning in 1996, for financial statement          
purposes, from 10.5% to approximately 3%.                                       

In 1997, the Company relinquished certain partnership interests, the  
primary assets of which were revenue-producing properties, in exchange for the  
acquiror assuming $18,223,000 of related mortgage indebtedness. As a result of  
this transaction, the Company recognized a gain of $128,000.                    

    Certain debt agreements provide for a 50% sharing of positive and negative
cash flows from operations and capital expenditures as defined between the      
parties. Interest expense recognized for such sharing was $622,000, $929,000    
and $479,000 for 1997, 1996 and 1995, respectively. Additionally, as of         
December 31, 1997 and 1996, mortgage indebtedness includes a $4,026,000         
preference item related to these agreements. The Company's liability is         
contingent upon certain conditions being met upon the sale or refinancing of    
the mortgaged properties.                                                       

Interest payments (net of capitalized interest of $31,000, $14,000 and
$121,000, respectively) aggregated $22,533,000, $22,898,000 and $28,417,000 for 
1997, 1996 and 1995, respectively.                                              

The Company has a $10,000,000 unsecured line of credit with a bank.   
Interest on outstanding borrowings are at the prime rate and are due on demand. 
There were no borrowings on this line of credit at December 31, 1997 or 1996.   

(6) DEFERRED COMPENSATION                                                       

  Prior to 1995, the Company accrued deferred compensation for certain key
personnel to be paid over a five or ten-year period following retirement or     
death, including interest. Interest expense related to these agreements         
amounted to $126,000, $229,000 and $275,000 for 1997, 1996 and 1995,            
respectively, with the accrued liability as of December 31, 1997 and 1996       
aggregating $2,113,000 and $2,910,000, respectively.                            

(7) INCOME TAXES                                                                

Income tax expense (benefit) is comprised of the following:           

                                                        [Enlarge/Download Table]

                                           1997              1996             1995      
                                    ------------------ --------------- -----------------
                                                                                        
Current ...........................   $  (13,486,000)   $ 14,688,000     $  (3,149,000) 
Deferred ..........................        6,164,000       2,062,000        (2,597,000) 
                                      --------------    ------------     -------------  
Total income tax expense (benefit)    $   (7,322,000)   $ 16,750,000     $  (5,746,000) 
                                      ==============    ============     =============  

In 1997, the Company recognized $11,846,000 in additional income tax  
benefit after the conveyance of 679,999 common shares to the Employee Stock     
Option Trust (ESOT) and to a Court was determined to be fully deductible by the 
Internal Revenue Service (IRS), as described in note 10. The deduction for the  
contribution of those shares is based on the market value at the date of the    
conveyance, with no limitations.                                                

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  -- Continued

(7) INCOME TAXES -- Continued                                                   

Total income tax expense (benefit) differs from expected income tax   
expense (benefit) as follows:                                                   

                                                        [Enlarge/Download Table]

                                                         1997             1996             1995      
                                                   ---------------- --------------- -----------------
                                                                                                     
Expected income tax expense (benefit) at 34% .....  $   4,102,000    $ 15,182,000     $  (5,609,000) 
ESOT contribution ................................    (11,846,000)             --                --  
Tax-exempt income ................................             --              --           (26,000) 
State income taxes, exclusive of ESOT contribution        422,000       1,455,000                --  
Dividend exclusion ...............................             --          (7,000)         (170,000) 
Other, net .......................................             --         120,000            59,000  
                                                    -------------    ------------     -------------  
Total income tax expense (benefit) ...............  $  (7,322,000)   $ 16,750,000     $  (5,746,000) 
                                                    =============    ============     =============  

Deferred income taxes reflect the tax impact of temporary differences 
between the amount of assets and liabilities for financial reporting and such   
amounts measured by tax laws and regulations. Deferred income taxes are         
comprised of the following:                                                     

                                                        [Enlarge/Download Table]

                                                                      1997             1996     
                                                                ---------------- ---------------
                                                                                                
Deferred tax assets:                                                                            
 Property and receivable allowances ...........................  $   3,430,000    $  10,590,000 
 Note receivable extinguished in settlement (note 11) .........     15,715,000       15,715,000 
 Alternative minimum tax credits ..............................      6,162,000               -- 
 Gains recognized for tax reporting, deferred for financial                                     
   reporting ..................................................      4,024,000        3,654,000 
 Net operating loss carryforward ..............................      2,066,000               -- 
 Deferred compensation ........................................        718,000          990,000 
 ESOT contributions ...........................................             --        4,437,000 
 Other ........................................................             --          106,000 
                                                                 -------------    ------------- 
Total gross deferred tax assets ...............................     32,115,000       35,492,000 
Less valuation allowance ......................................    (15,715,000)     (15,715,000)
                                                                 -------------    ------------- 
Total deferred tax assets .....................................     16,400,000       19,777,000 
                                                                 -------------    ------------- 
Deferred tax liabilities:                                                                       
 Accelerated depreciation .....................................    (12,601,000)     (11,845,000)
 Gains recognized for financial reporting, deferred for tax                                     
   reporting ..................................................     (5,696,000)      (4,476,000)
 State taxes ..................................................       (804,000)              -- 
 Other ........................................................         (7,000)              -- 
                                                                 -------------    ------------- 
Total deferred tax liabilities ................................    (19,108,000)     (16,321,000)
                                                                 -------------    ------------- 
Net deferred tax assets (liabilities) .........................  $  (2,708,000)   $   3,456,000 
                                                                 =============    ============= 

  The Company filed its 1996 income tax returns reflecting a net operating
loss primarily attributable to a $103 million deduction for losses of principal 
and accrued interest arising from notes and accounts receivable to the Company  
from its ESOT and from a limited partnership, owned by the Company's former     
president, which could result in immediate tax benefits of up to $7,400,000 and 
additional deferred tax benefits of up to $39 million. Due to the uncertainty   
surrounding these issues, the Company has not recognized these tax benefits in  
the accompanying consolidated financial statements.                             

Net cash refunds for income taxes during 1997, 1996 and 1995 were     
$2,543,000, $955,000 and $4,588,000, respectively.                              

(8) CONCENTRATION OF CREDIT RISK                                                

Several of the Company's consolidated general partnerships and        
subsidiaries have revenue-producing real estate. During the initial lease-up    
phase, this real estate generated net operating losses, which upon              
consolidation resulted in minority                                              

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  -- Continued

(8) CONCENTRATION OF CREDIT RISK -- Continued                                   

obligations to the Company of $4,717,000 and $4,431,000 at December 31, 1997    
and 1996, respectively. If the outside partners fail to perform their           
obligations, such amounts may not be realized by the Company. Based on its      
evaluation of the outside partners, the Company has determined that the outside 
partners have the financial ability to perform their obligations.               

As of December 31, 1997 and 1996, the aggregate of the liabilities of 
unconsolidated partnerships in which the Company is a general partner,          
excluding nonrecourse debt, is approximately $10,477,000 and $12,534,000,       
respectively. The Company could become liable for such amounts in the event of  
default by the various partnerships and nonperformance by the outside partners. 

The collection of principal and interest balances secured by          
revenue-producing properties and real estate under development is dependent     
upon sufficient cash flows from operations of the properties, refinancing,      
capital infusions from outside parties or the sale of the related property. All 
such property is principally located in the metropolitan Kansas City, Missouri  
area.                                                                           

(9) AFFILIATED PARTY BALANCES AND TRANSACTIONS                                  

Included in the consolidated financial statements are the following   
affiliated party balances:                                                      

                                                                [Download Table]

                                            1997           1996     
                                      --------------- --------------
                                                                    
Notes receivable (note 10) ..........  $ 12,497,000    $ 4,084,000  
Accounts receivable .................       400,000        737,000  
Notes payable .......................            --      2,000,000  

 The Company established a valuation allowance of $2,467,000 at December
31, 1994 related to notes and accounts receivable from former executive         
officers and directors of the Company who were removed from their positions on  
May 26, 1995 by action of the Board of Directors. The Company entered           
settlement agreements in August 1995 with certain former executive officers and 
directors (see note 11).                                                        

(10) EMPLOYEE STOCK OWNERSHIP TRUST (ESOT)                                      

The Company has an Employee Stock Ownership Plan (ESOP) related to the
ESOT. All nonunion employees of the Company qualify for participation in the    
ESOP after one year of continuous service (1,000 hours) and upon reaching age   
twenty-one. Under the terms of the ESOP, the Company makes voluntary            
contributions, as determined by the Board of Directors and not to exceed IRS    
limitations, that are allocated to participants using a formula based on        
compensation. Compensation is defined as total salary and wages paid by the     
Company subject to certain limitations. Noncash contributions to the ESOT are   
recorded at fair market value.                                                  

As of December 31, 1997 and 1996, the ESOT held 1,390,233 shares and  
825,280 shares, respectively, of common stock of the Company.                   

 In 1995, the Company contributed 110,000 shares of the Company's common
stock to the ESOT which were valued at $1,787,500.                              

  On August 15, 1997, as part of the 1995 settlement described in note 11,
the Company conveyed to the Company's ESOT 620,586 shares of common stock and   
$2,326,000 plus accrued interest of $226,000. Additionally, the Company agreed  
to resolve related claims with certain ESOP participants by reducing the        
settlement payment otherwise due to the ESOT by approximately $67,000 and       
59,413 shares of the Company's common stock, which were delivered to a Court to 
determine the proper payee or payees. The Company also agreed to make a         
nondeductible payment of approximately $585,000 to the IRS. The IRS agreed,     
among other things, that the Company may deduct in full the value of the        
settlement payments to the ESOT and a Court and that such payments and methods  
of allocating the payments will not adversely affect the tax qualification of   
the ESOP.                                                                       

   The conveyance of cash and stock resulted in a decrease in liabilities of
$13,602,000, an increase in additional paid-in capital of $11,050,000 and a     
decrease in income tax expense of $11,846,000.                                  

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  -- Continued

(10) EMPLOYEE STOCK OWNERSHIP TRUST (ESOT) -- Continued                         

    ESOP participants may request their distributions from the ESOT in cash or
Company common stock that is held by the ESOT. Future distributions to ESOP     
participants for the next five years based on December 31, 1997 market values   
of Company common stock could be as much as:                                    

                                                                [Download Table]
                                  
1998 ...............  $ 11,500,000
1999 ...............     1,900,000
2000 ...............     2,900,000
2001 ...............     4,900,000
2002 ...............    11,400,000
Thereafter .........    45,800,000

   In the absence of a liquid trading market for the Company's common stock,
the Company may be obligated to repurchase shares of the Company's common stock 
from ESOP participants in future years in the amounts detailed above. The ESOT  
has sufficient assets to meet its obligations, and the Company has recorded no  
additional liability beyond its contributions to the ESOT.                      

   In 1997 and 1996, the Company provided short-term advances to the ESOT to
assist in funding distributions and expenses. All advances to the ESOT are      
unsecured and noninterest bearing. At December 31, 1997 and 1996, the Company   
had advanced $12,000,000 and $1,926,000, respectively. The amount due at        
December 31, 1996, from the ESOT, along with an additional advance of $56,000,  
was repaid by the ESOT during January 1997 by transferring 54,162 shares of the 
Company's common stock to the Company.                                          

(11) LITIGATION AND SETTLEMENTS                                                 

 In 1995, the Company was involved in various legal actions as plaintiff
and defendant against former officers and directors, representatives of the     
ESOT, minority shareholders and others. The Company had requested, among other  
things, that the District Court rescind certain transactions (including the     
1992 transactions described below) between the Company and former executive     
officers, the ESOP and others.                                                  

The Company and various other parties entered settlement agreements in
August 1995 which required conveyance of Company common stock, payment of cash  
and extinguishment of amounts due to and from the Company in consideration of   
releases from all present and future claims by, among and between the parties   
to the settlements.                                                             

During 1992, the Company entered into a transaction with the Company's
former president, whereby properties with aggregate carrying values of          
$2,592,000 and marketable equity securities with aggregate carrying values of   
$1,103,000 were exchanged for 517,920 shares of common stock of the Company and 
a note receivable for $2,700,000. The fair values of the properties received,   
based on current appraisals, aggregated $5,907,000. The quoted market values of 
the marketable equity securities aggregated $2,781,000. The purchase price of   
the common stock was equivalent to the former president's basis in such shares. 
The Company recognized a gain on the transaction of $4,993,000 in 1992. As part 
of the 1995 settlement, the common stock was retained by the Company, the       
properties were returned to the Company and the note receivable was canceled.   
Management of the Company determined the canceled note receivable did not       
exceed the fair value of the properties received. This portion of the           
settlement had no net impact on the 1995 consolidated statement of operations.  

  In May 1992, a limited partnership owned in part by the Company's former
president, acquired 125,242 unallocated shares of common stock of the Company   
from the ESOT. These shares were acquired for $124,529,000 through the          
assumption of existing principal indebtedness from the ESOT of $94,348,000 and  
accrued interest and other advances of $30,181,000. The Company had previously  
recorded, as contribution expense, the accrued interest and other advances to   
the ESOT. At the time the shares were sold, the $30,181,000 was deferred and    
recorded as a reduction of the contractual note receivable from the limited     
partnership. The $94,348,000 note receivable, secured by Company stock as of    
December 31, 1994, was comprised of the contractual note receivable from the    
limited partnership of $124,529,000 net of the $30,181,000 deferrals.           
Contractual interest of $12,291,000 on the note receivable from the limited     
partnership was deferred as of December 31, 1993. Pursuant to a Pledge          
Agreement, the shares of common stock were pledged as collateral to secure the  
note receivable from the limited partnership. The related note receivable was   
due in ten annual equal installments beginning December 31,                     

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  -- Continued

(11) LITIGATION AND SETTLEMENTS -- Continued                                    

1994 and had a stated interest rate of prime (6.0% as of December 31, 1993)     
payable annually beginning December 31, 1994. As part of the 1995 settlement,   
the unallocated 125,242 shares were conveyed to the Company as treasury stock   
in exchange for extinguishment of the $94,348,000 note receivable and all       
related deferred amounts. This portion of the settlement had no impact on the   
1995 consolidated statement of operations.                                      

   In 1994, the Company provided valuation allowances of $2,502,000 on notes
and accounts receivable that were part of the 1995 litigation settlement. The   
impact of the litigation settlement included in the 1995 statement of           
operations was as follows:                                                      

                                                        [Enlarge/Download Table]
                                                                                             
ESOT contribution (8,500 shares and $2,000,000)................................. $ 13,050,000
Settlement of notes and accounts receivable ($5,619,000) and cash paid                       
 ($9,665,000), net of related obligations ($1,064,000) and receipt of 12,227                 
 shares of Company common stock ($9,207,000) ...................................    5,013,000
Legal expenses ($8,117,000), net of insurance reimbursement ($6,627,000) .......    1,490,000
                                                                                 ------------
                                                                                 $ 19,553,000
                                                                                 ============

(12) EARNED STOCK COMPENSATION                                                  

   In March 1996, the Company approved the 1996 Stock Option Plan (the Plan)
enabling the Company to grant stock options to eligible plan participants. The  
options vest immediately upon a change in control, as defined, of the Company.  
Pursuant to this Plan, the Company in 1996 granted to an executive officer a    
nonstatutory stock option to purchase 64,000 shares at a price of $.0125 per    
share, which option vested 50% on January 1, 1996 and the remaining 50% vested  
on January 1, 1997. The Company recorded compensation expense and additional    
paid-in capital relating to this stock option during the year ended December    
31, 1996 of $1,240,000. An incentive stock option was also granted to this      
executive officer to purchase 160,000 shares of common stock of the Company at  
a price of $19.375 per share, which option vests at a rate of 10% on December   
31, 1996, 15% on December 31, 1997 and 25% annually on December 31 for the      
years ended 1998, 1999 and 2000. The fair market value of the Company's common  
stock was $19.375 per share at the date this incentive stock option was         
granted.                                                                        

In July 1997, the Company granted to key executives nonstatutory stock
options to purchase 27,500 shares of the Company's common stock at a price of   
$30 per share. The options vest 20% on January 1, 1998, 35% on January 1, 1999, 
and 45% on January 1, 2000. At the date of grant, the estimated fair market     
value of the stock was approximately $46 per share. In 1997, the Company        
recorded compensation expense and additional paid-in capital relating to these  
options of $167,000.                                                            

Transactions involving the 1996 Stock Option Plan are as follows:     

                                                        [Enlarge/Download Table]

                                                1997                    1996         
                                      ------------------------ ----------------------
                                       Number of     Average    Number of    Average 
                                         shares       price       shares      price  
                                      ----------- ------------ ----------- ----------
                                                                                     
Stock options:                                                                       
 Outstanding, beginning of year .....   224,000    $   13.84          --    $    --  
 Granted during the year ............    27,500        30.00     224,000      13.84  
 Exercised during the year ..........   (25,000)        0.01          --         --  
                                        -------    ---------     -------    -------  
 Outstanding, end of year ...........   226,500    $   17.33     224,000   $  13.84  
                                        =======    =========     =======   ========  

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  -- Continued

(12) EARNED STOCK COMPENSATION -- Continued                                     

Options outstanding and exercisable are as follows:                   

                                                                [Download Table]

   Outstanding at      Exercise       Exercisable at       Average  
 December 31, 1997       price      December 31, 1997       price   
-------------------   ----------   -------------------   -----------
                                                                    
        39,000        $   0.01            39,000          $   0.01  
       160,000           19.38            40,000             19.38  
        27,500           30.00             5,500             30.00  
       -------        --------            ------          --------  
       226,500        $  17.33            84,500          $  11.13  
       =======        ========            ======          ========  

On January 1, 1996, the Company adopted SFAS 123, Accounting for      
Stock-Based Compensation, which permits entities to recognize as expense over   
the vesting period the fair value of all stock-based awards on the date of      
grant. Alternatively, SFAS 123 allows entities to disclose pro forma net income 
and income per share as if the fair value-based method defined in SFAS 123 had  
been applied, while continuing to apply the provisions of Accounting Principles 
Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, under     
which compensation expense is recorded on the date of grant only if the current 
market price of the underlying stock exceeds the exercise price.                

    The Company has elected to apply the recognition provisions of APB Opinion
No. 25 and provide the pro forma disclosure provisions of SFAS 123. Had         
compensation expense for the Company's incentive and nonstatutory stock options 
been determined based upon the fair value at the grant date consistent with the 
methodology prescribed under SFAS 123, the Company's net income and diluted     
earnings per share would have been reduced by approximately $501,000, or $.12   
per share in 1997 and $367,000, or $.07 per share in 1996. The weighted average 
fair value of all options granted during 1997 and 1996 is estimated as $36.38   
and $12.34 per share, respectively, on the date of grant using an               
option-pricing model with the following assumptions: expected dividend yield of 
0.0%, risk-free interest rate of 7.0%, and an average expected life of ten      
years in 1997 and 11.4 years in 1996. The stock price volatility was 52.7% in   
1997.                                                                           

  Pro forma net income reflects only options granted and vested by the end
of the respective year. Therefore, the full impact of calculating compensation  
expense for stock options under SFAS 123 is not reflected in the pro forma net  
income amounts presented above because compensation expense is reflected over   
the options' vesting period.                                                    

(13) STOCK SPLIT                                                                

On May 29, 1996, the Company approved an increase from 225,000 to     
10,000,000 in the number of shares of common stock authorized for issuance by   
the Company and a decrease in the par value per share of common stock from      
$20.00 to $.01. Additionally, the Company approved an 80-for-1 stock split of   
the Company's common stock for all issued and outstanding shares not then held  
in the Company's treasury. Accordingly, the common stock par value decreased    
from $4,500,000 to $100,000 with an off-setting increase in additional paid-in  
capital from $2,679,000 to $7,079,000. All periods presented have been restated 
to reflect the effect of the Company's stock split.                             

(14) TREASURY STOCK                                                             

    Included in treasury stock transactions during 1997 is the purchase by the
Company of 948,880 shares of its common stock from a shareholder in January     
1997 for $25,857,000, payable in cash of $12,849,000 (which included            
approximately $39,000 of interest) and a note payable of $12,990,000 (net of    
expenses totaling approximately $57,000), bearing interest at 8% and due        
January 29, 1999.                                                               

(15) FAIR VALUES OF FINANCIAL INSTRUMENTS                                       

The following disclosure of the estimated fair value of financial     
instruments is made in accordance with the requirements of SFAS No. 107,        
Disclosures About Fair Value of Financial Instruments. The estimated fair value 
amounts have been determined by the Company, using available market information 
and appropriate valuation methodologies. However, considerable judgment is      
required in interpreting market data to develop the estimates of fair value.    
Accordingly, the estimates                                                      

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  -- Continued

(15) FAIR VALUES OF FINANCIAL INSTRUMENTS -- Continued                          

presented herein are not necessarily indicative of the amounts that the Company 
might realize in a current market exchange. The use of different market         
assumptions and/or estimation methodologies may have a material effect on the   
estimated fair value amounts.                                                   

o Notes receivable -- Fair value for notes receivable was estimated 
utilizing discounted cash flow calculations based on interest rates       
currently offered for notes with similar terms and credit risk.           

 o Temporary investments -- Fair values for temporary investments were
based upon quoted market prices.                                                

o Notes payable to banks and others -- The carrying value of these  
financial instruments approximates fair value.                                  

    o Mortgage indebtedness -- The carrying value of variable rate mortgages
approximates fair value. Fair value for fixed rate mortgage indebtedness  
was estimated utilizing discounted cash flow calculations based on the    
Company's incremental borrowing rates for similar types of borrowing      
arrangements.                                                             

  o Off-balance sheet instruments -- Fair value of commitments to extend
credit, guarantees of debt and letters of credit is based on the estimated
fees which would be charged for similar arrangements or the estimated cost
 to terminate or otherwise settle the obligations with the counterparties at
the reporting date. The aggregate amount of these fees is not material to 
the consolidated financial statements.                                    

  The estimated fair values of the Company's financial instruments were as
follows:                                                                        

                                                        [Enlarge/Download Table]

                                                 1997                            1996              
                                    ------------------------------- -------------------------------
                                        Carrying          Fair          Carrying          Fair     
                                         value           value           value           value     
                                    --------------- --------------- --------------- ---------------
                                                                                                   
Financial assets:                                                                                  
 Temporary investments ............  $ 42,633,000    $ 42,633,000    $ 45,053,000    $ 45,053,000  
 Notes receivable .................    40,757,000      39,861,000      21,514,000      20,900,000  
Financial liabilities:                                                                             
 Notes payable to banks and others     12,990,000      12,990,000       2,000,000       2,000,000  
 Mortgage indebtedness ............   288,553,000     279,341,000     309,188,000     300,234,000  

  The fair value estimates presented are based on information available to
management as of December 31, 1997 and 1996. Although management is not aware   
of any factors that would significantly affect the estimated fair value         
amounts, such amounts have not been revalued for purposes of these consolidated 
financial statements since the balance sheet date, and current estimates may    
differ significantly from the amounts presented above.                          

(16) POTENTIAL SALE OF COMPANY                                                  

    In December 1997, with the approval of the Board of Directors, the Company
entered into a definitive agreement to merge with a wholly-owned subsidiary of  
Highwoods Properties, Inc. (Highwoods), a real estate investment trust based in 
North Carolina for consideration of $65 per common share of the Company to be   
received as a combination of cash and Highwood's common stock, subject to       
certain limitations. The potential merger is conditional upon the approval of   
two-thirds of the Company's shareholders. Under certain conditions, if the      
Highwoods transaction is not consummated because the Board of Directors         
withdraws its support for the transaction, the Company may be required to pay a 
breakup fee ranging from $2,500,000 to $17,200,000 to Highwoods.                

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INDEPENDENT AUDITORS' REPORT  

Board of Directors                                                              
J.C. Nichols Company                                                            
Kansas City, Missouri:                                                          

Under date of March 6, 1998, we reported on the consolidated balance  
sheets of J.C. Nichols Company and subsidiaries (the Company) as of December    
31, 1997 and 1996 and the related consolidated statements of operations,        
stockholders' equity (deficit) and cash flows for each of the years in the      
three year period ended December 31, 1997, which are included in the            
prospectus. In connection with our audits of the aforementioned consolidated    
financial statements, we also have audited the related consolidated financial   
statement schedules in the registration statement. These consolidated financial 
statement schedules are the responsibility of the Company's management. Our     
responsibility is to express an opinion on these consolidated financial         
statement schedules based on our audits.                                        

In our opinion, these consolidated financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as  
a whole, present fairly, in all material respects, the information set forth    
therein.                                                                        

/s/ KPMG Peat Marwick LLP                                                       

Kansas City, Missouri                                                           
March 6, 1998                                                                   

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION  
DECEMBER 31, 1997 

                                                        [Enlarge/Download Table]

                                                                                           Total                            
                                                                                          Initial                           
                                                 Building                                  Bldg.                            
Location/Development              Building         Type      Encumbrances      Land        Costs                            
----------------------------- ---------------- ------------ -------------- ----------- -------------                        
                                                                                                                            
Kansas City, Missouri                                                                                                       
Country Club Plaza .......... Millcreek        Office &      $ 2,595,435    $ 73,343    $    82,820                         
                               Block            Retail                                                                      
Country Club Plaza .......... Triangle Block   Retail          1,709,189      32,857        284,951                         
Country Club Plaza .......... Balcony Block    Office &        3,734,895      80,670      4,755,506                         
                                                Retail                                                                      
Country Club Plaza  ......... Macy Building    Retail                 --      41,921        140,668                         
Country Club Plaza .......... Esplanade        Office &        7,659,699     138,830        883,230                         
                               Block            Retail                                                                      
Country Club Plaza .......... Plaza Central    Retail          1,519,279     111,638        818,484                         
Country Club Plaza .......... Theatre Block    Office &        5,507,387      92,377        796,865                         
                                                Retail                                                                      
Country Club Plaza .......... Swanson Block    Retail          3,608,288     103,707         83,720                         
Country Club Plaza .......... Halls Building   Retail          1,645,886     101,668      3,209,723                         
Country Club Plaza .......... Nichols Block    Office &        3,165,165      87,694        349,267                         
                                                Retail                                                                      
Country Club Plaza .......... Time Block       Office &       11,774,413     215,950      1,907,746                         
                                                Retail                                                                      
Country Club Plaza .......... 48th & Penn      Retail          1,772,492      42,299        177,782                         
Country Club Plaza .......... Seville Shops    Retail          2,278,919     224,485        572,084                         
                               West                                                                                         
Country Club Plaza .......... Plaza Savings    Retail          1,962,402      64,430      1,949,328                         
                               South                                                                                        
Country Club Plaza .......... Court of the     Retail          2,658,739      51,212      2,744,639                         
                               Penguins                                                                                     
Country Club Plaza .......... Seville Square   Office &        6,013,813      62,844      1,969,500                         
                                                Retail                                                                      
Country Club Plaza .......... Plaza Parking    Parking                --     689,286        204,291                         
Country Club Plaza .......... Common Areas     Sidewalks,             --          --        336,922                         
                                                Fountains,                                                                  
                                                Statues                                                                     
4620 Nichols Parkway ........ Parkway          Office                 --      44,414        858,939                         
                               Building                                                                                     
300-320 East 51st St. ....... Colonial Shops   Retail                 --       6,805        139,680                         
301-337 East 55th St. ....... Crestwood        Retail                 --      18,205        114,196                         
                               Shops                                                                                        
63rd & Brookside ............ Brookside        Office &        4,251,989     128,392        521,792                         
                               Shops            Retail                                                                      
7100-7126 Wornall Rd. ....... Romanelli        Retail                 --       4,656         87,629                         
                               Shops                                                                                        
Red Bridge & Holmes ......... Red Bridge       Retail                 --       8,860      1,717,885                         
                               Shops                                                                                        
7140 Wornall Road ........... Romanelli        Office &               --       1,404          8,351                         
                               Annex            Retail                                                                      
Two Brush Creek Blvd. ....... Two Brush        Office          6,533,612       6,539      7,327,125                         
                               Creek Plaza                                                                                  
One Ward Parkway ............ One Ward         Office                 --      10,755      5,946,413                         
                               Parkway                                                                                      
400 East Red Bridge Rd. ..... Red Bridge       Office            617,578       4,290      1,382,758                         
                               Prof. Bldg.                                                                                  
801 West 47th St. ........... Park Plaza       Office          5,697,297     132,572      6,769,352                         


                                                             Total                                                          
                                  Costs                       Cost                                                          
                               Capitalized  -------------------------------------                                           
                               Subseq. to      Land &      Buildings/                     Accum.     Date of        Date    
Location/Development           Acquisition     Impts.        Impts.         Total          Depr.      Const.      Acquired  
----------------------------- ------------ -----------   ------------   ------------   ------------   ------     -----------
                                                                                                                            
Kansas City, Missouri                                                                                                       
Country Club Plaza ..........  $ 4,731,005    $ 73,343    $ 4,813,825    $ 4,887,168    $ 2,012,051      1920     1906-1910 
Country Club Plaza ..........      651,188      32,857        936,139        968,996        397,887      1925     1906-1910 
Country Club Plaza ..........    1,568,643      80,670      6,324,149      6,404,819      2,969,614      1925     1906-1910 
Country Club Plaza  .........    2,442,558      41,921      2,583,226      2,625,147        749,151      1926     1906-1910 
Country Club Plaza ..........    2,469,596     138,830      3,352,826      3,491,656      2,033,551      1928     1906-1910 
Country Club Plaza ..........    2,615,338     111,638      3,433,822      3,545,460      1,959,734      1958     1906-1910 
Country Club Plaza ..........    1,701,276      92,377      2,498,141      2,590,518      1,312,854      1928     1906-1910 
Country Club Plaza ..........    5,509,830     103,707      5,593,550      5,697,257      2,412,931      1967     1906-1910 
Country Club Plaza ..........      411,563     101,668      3,621,286      3,722,954      2,605,389      1964     1906-1910 
Country Club Plaza ..........    2,150,060      87,694      2,499,327      2,587,021      2,005,691      1930     1906-1910 
Country Club Plaza ..........    2,749,542     215,950      4,657,288      4,873,238      3,159,581      1929     1906-1910 
Country Club Plaza ..........      298,215      42,299        475,997        518,296        316,379      1948     1906-1910 
Country Club Plaza ..........      132,756     224,485        704,840        929,325        271,323      1980     1906-1910 
Country Club Plaza ..........      182,654      64,430      2,131,982      2,196,412        669,833      1948     1906-1910 
Country Club Plaza ..........      198,019      51,212      2,942,658      2,993,870      2,825,831      1945        1975   
Country Club Plaza ..........    7,042,257      62,844      9,011,757      9,074,601      7,098,693      1945        1975   
Country Club Plaza ..........           --     689,286        204,291        893,577        147,941   1920-1964   1906-1910 
Country Club Plaza ..........      869,687     744,254        462,355      1,206,609        822,251   1920-1964   1906-1910 
4620 Nichols Parkway ........      524,327      44,414      1,383,266      1,427,680        870,970      1955     1906-1910 
300-320 East 51st St. .......       90,809       6,805        230,489        237,294        140,873      1907        1907   
301-337 East 55th St. .......       85,819      36,357        181,863        218,220        145,015      1932        1923   
63rd & Brookside ............      922,710     142,844      1,430,050      1,572,894        937,925      1919        1920   
7100-7126 Wornall Rd. .......       54,694       4,656        142,323        146,979         99,965      1925        1925   
Red Bridge & Holmes .........    1,863,187     532,623      3,057,309      3,589,932      2,878,549      1959        1959   
7140 Wornall Road ...........       34,369       1,404         42,720         44,124          2,770      1963        1993   
Two Brush Creek Blvd. .......      431,593       6,539      7,758,718      7,765,257      4,625,583      1983        1983   
One Ward Parkway ............      228,161      10,755      6,174,574      6,185,329      3,833,959      1980        1980   
400 East Red Bridge Rd. .....      342,585       4,290      1,725,343      1,729,633      1,178,019      1972        1976   
801 West 47th St. ...........      797,119     132,572      7,566,471      7,699,043      3,735,136      1983        1983   


                                  Depr.                                                                                     
Location/Development              Life                                                                                      
----------------------------- ------------                                                                                  
                                                                                                                            
Kansas City, Missouri                                                                                                       
Country Club Plaza ..........      20-40                                                                                    
Country Club Plaza ..........      20-50                                                                                    
Country Club Plaza ..........      20-50                                                                                    
Country Club Plaza  .........      20-50                                                                                    
Country Club Plaza ..........      20-50                                                                                    
Country Club Plaza ..........      20-40                                                                                    
Country Club Plaza ..........      20-45                                                                                    
Country Club Plaza ..........      20-55                                                                                    
Country Club Plaza ..........      20-60                                                                                    
Country Club Plaza ..........      20-45                                                                                    
Country Club Plaza ..........      20-45                                                                                    
Country Club Plaza ..........      20-40                                                                                    
Country Club Plaza ..........      20-45                                                                                    
Country Club Plaza ..........      20-40                                                                                    
Country Club Plaza ..........      10-20                                                                                    
Country Club Plaza ..........      10-39                                                                                    
Country Club Plaza ..........         15                                                                                    
Country Club Plaza ..........      10-20                                                                                    
4620 Nichols Parkway ........      20-45                                                                                    
300-320 East 51st St. .......      20-25                                                                                    
301-337 East 55th St. .......      15-50                                                                                    
63rd & Brookside ............      10-50                                                                                    
7100-7126 Wornall Rd. .......      10-49                                                                                    
Red Bridge & Holmes .........      10-50                                                                                    
7140 Wornall Road ...........         20                                                                                    
Two Brush Creek Blvd. .......      10-45                                                                                    
One Ward Parkway ............      10-45                                                                                    
400 East Red Bridge Rd. .....     10-31.5                                                                                   
801 West 47th St. ...........      10-45                                                                                    

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                                                                                           Total                    
                                                                                          Initial                   
                                                 Building                                  Bldg.                    
Location/Development              Building         Type      Encumbrances      Land        Costs                    
----------------------------- ---------------- ------------ -------------- ----------- -------------                
                                                                                                                    
4900 Main ................... 4900 Main         Office &         22,460,327    2,138,451   18,977,120               
                               Bldg.             Vacant                                                             
                                                 1.926                                                              
                                                 Acres                                                              
400 East Bannister Rd. ...... Bannister         Industrial        1,208,571        5,839    1,553,689               
                               Business                                                                             
                               Center                                                                               
6310 Troost ................. Retail Shops      Land Lease               --       13,764           --               
664 E. Red Bridge Road ...... KFC               Land Lease               --          604           --               
11049 Holmes ................ Burger King       Land Lease               --      100,465           --               
135th & Holmes                                                                                                      
 (18.6 Acres) ............... Golf Driving      Land Lease               --        5,074            1               
                               Range                                                                                
Bannister & Raytown                                                                                                 
 Rd. ........................ 2.928 Acres       Bldg. Lease              --        1,589            1               
(6)655 East Minor Drive ..... Coach House       Apartments       20,000,000       54,754   23,400,787               
                               South                                                                                
(6)11230 Oak ................ Coach House       Apartments        8,000,000       16,285    6,474,535               
11209 McGee Drive ........... Coach Lamp        Apartments               --       16,374    1,989,363               
4509 Wornall Rd. ............ Wornall Road      Apartments               --        5,188       93,720               
4517 Wornall Rd. ............ St. Charles       Apartments               --        4,200       57,600               
221 West 48th St. ........... Regency           Apartments        4,396,430       35,263    3,085,365               
                               House                                                                                
121 West 48th St. ........... Sulgrave          Apartments        8,164,799      240,000    5,145,373               
4600 Nichols Parkway ........ Park Lane         Apartments               --       55,960      554,840               
4417 Pennsylvania ........... Penn Wick         Apartments               --        4,108      208,509               
4424-4426 Pennsylvania ...... Cole Gardens      Apartments               --        4,521      287,844               
4419 Pennsylvania ........... Tama              Apartments               --       15,952            1               
333 West 46th Terr. ......... Neptune           Apartments        3,538,739           --    5,987,040               
4921 Wornall Rd. ............ Wornall Point     Apartments               --       18,750      656,250               
Plaza Area .................. 54 Rental         Single               23,470      177,324    3,339,091               
                               Houses           Family                                                              
95th & Noland Road .......... Vacant Lot                                 --        6,000           --               
                               2.72 Acres                                                                           
72nd & Wyandotte ............ Maintenance                                --        1,243      684,964               
                               Shop                                                                                 
26 Miscellaneous Vacant                                                  --    1,087,843           --               
 Lots, Less Than 1 Acre                                                                                             
 Each                                                                                                               
46th Terr. &                                                                                                        
 Pennsylvania ............... Surface           Parking                  --           --      254,075               
                               Parking                                                                              
Various Locations ........... Const. In         Development              --      303,966           --               
                               Progress          Costs                                                              
                                                 and Tenant                                                         
                                                 Improvements                                                       
Lee's Summit, Missouri                                                                                              
211 N. E. Lakewood                                                                                                  
 Blvd. ...................... Sales Office      Retail                   --      267,122      133,333               
Shawnee Mission, Kansas                                                                                             
5000-5012 State Line ........ Westwood          Retail                   --        2,470       21,236               
                               Shops                                                                                
2700-2812 W. 53 Street ...... Fairway Shops     Retail            2,874,813        1,099      243,393               
Mission Road &                                                                                                      
 Tomahawk ................... Prairie Village   Retail &         11,384,100       30,889    2,150,389               
                               Shops            Office                                                              


                                                             Total                                                  
                                  Costs                       Cost                                                  
                               Capitalized  -------------------------------------                                   
                               Subseq. to      Land &      Buildings/                Accum.   Date of      Date     
Location/Development           Acquisition     Impts.        Impts.      Total        Depr.    Const.    Acquired   
----------------------------- ------------ ----------- -------------- ----------- ------------ ------   ----------- 
                                                                                                                    
4900 Main ...................   1,452,477    2,138,451    20,429,597   22,568,048    8,429,077  1986          1985  
400 East Bannister Rd. ......     181,583      177,540     1,563,571    1,741,111    1,093,407  1985          1985  
6310 Troost .................      44,034       57,798            --       57,798       44,034  1974          1971  
664 E. Red Bridge Road ......          --          604            --          604           --    --          1954  
11049 Holmes ................          --      100,465            --      100,465           --    --          1954  
135th & Holmes                                                                                                      
 (18.6 Acres) ...............          --        5,074             1        5,075           --    --          1972  
Bannister & Raytown                                                                                                 
 Rd. ........................          --        1,589             1        1,590           --    --          1929  
(6)655 East Minor Drive .....   2,988,581    2,980,304    23,463,818   26,444,122   11,421,626  1986          1986  
(6)11230 Oak ................   1,205,966      854,240     6,842,546    7,696,786    3,995,979  1984          1984  
11209 McGee Drive ...........     630,102      189,645     2,446,194    2,635,839    2,082,989  1961          1963  
4509 Wornall Rd. ............      14,384        5,188       108,104      113,292      107,477  1918          1968  
4517 Wornall Rd. ............      16,137        4,200        73,737       77,937       59,217  1922          1972  
221 West 48th St. ...........   3,414,509       35,263     6,499,874    6,535,137    4,933,662  1960          1961  
121 West 48th St. ...........   2,585,132      240,000     7,730,505    7,970,505    4,513,357  1967          1976  
4600 Nichols Parkway ........     319,593       55,960       874,433      930,393      837,511  1924          1971  
4417 Pennsylvania ...........       5,227        4,108       213,736      217,844      209,190  1960          1987  
4424-4426 Pennsylvania ......          --        4,521       287,844      292,365      287,844  1960          1987  
4419 Pennsylvania ...........       9,166       15,952         9,167       25,119          389  1960          1979  
333 West 46th Terr. .........     114,661       94,557     6,007,144    6,101,701    2,409,329  1988          1910  
4921 Wornall Rd. ............       1,931       20,681       656,250      676,931      253,211  1950          1987  
Plaza Area ..................      15,032      177,324     3,354,123    3,531,447    1,882,222  1920's &   1971-1989
                                                                                                 1930's             
95th & Noland Road ..........          --        6,000            --        6,000           --    --          1956  
72nd & Wyandotte ............          --        1,243       684,964      686,207      275,421  1986          1983  
26 Miscellaneous Vacant            76,468    1,164,311            --    1,164,311       20,456    --       1930-1985
 Lots, Less Than 1 Acre                                                                                             
 Each                                                                                                               
46th Terr. &                                                                                                        
 Pennsylvania ...............          --           --       254,075      254,075       26,819    --              --
Various Locations ...........   5,664,412      303,966     5,664,412    5,968,378           --    --              --
Lee's Summit, Missouri                                                                                              
211 N. E. Lakewood                                                                                                  
 Blvd. ......................       8,249      275,371       133,333      408,704       23,100  1975            1993
Shawnee Mission, Kansas                                                                                             
5000-5012 State Line ........     116,460        2,470       137,696      140,166       22,805  1926            1949
2700-2812 W. 53 Street ......   1,487,462       27,330     1,704,624    1,731,954      391,238  1940            1962
Mission Road &                                                                                                      
 Tomahawk ...................   3,690,459      121,092     5,750,645    5,871,737    3,508,640  1948            1962


                                  Depr.                                                                             
Location/Development              Life                                                                              
----------------------------- ------------                                                                          
                                                                                                                    
4900 Main ...................      10-50                                                                            
400 East Bannister Rd. ......      10-40                                                                            
6310 Troost .................         20                                                                            
664 E. Red Bridge Road ......         --                                                                            
11049 Holmes ................         --                                                                            
135th & Holmes                                                                                                      
 (18.6 Acres) ...............         --                                                                            
Bannister & Raytown                                                                                                 
 Rd. ........................         --                                                                            
(6)655 East Minor Drive .....      10-35                                                                            
(6)11230 Oak ................      10-45                                                                            
11209 McGee Drive ...........      10-50                                                                            
4509 Wornall Rd. ............         15                                                                            
4517 Wornall Rd. ............     15-27.5                                                                           
221 West 48th St. ...........      10-40                                                                            
121 West 48th St. ...........      10-31                                                                            
4600 Nichols Parkway ........       8-21                                                                            
4417 Pennsylvania ...........      7-31.5                                                                           
4424-4426 Pennsylvania ......          7                                                                            
4419 Pennsylvania ...........         15                                                                            
333 West 46th Terr. .........      10-40                                                                            
4921 Wornall Rd. ............       31.5                                                                            
Plaza Area ..................     10-31.5                                                                           
95th & Noland Road ..........         --                                                                            
72nd & Wyandotte ............      10-40                                                                            
26 Miscellaneous Vacant               --                                                                            
 Lots, Less Than 1 Acre                                                                                             
 Each                                                                                                               
46th Terr. &                                                                                                        
 Pennsylvania ...............      10-40                                                                            
Various Locations ...........         --                                                                            
Lee's Summit, Missouri                                                                                              
211 N. E. Lakewood                                                                                                  
 Blvd. ......................     15-31.5                                                                           
Shawnee Mission, Kansas                                                                                             
5000-5012 State Line ........         48                                                                            
2700-2812 W. 53 Street ......      10-39                                                                            
Mission Road &                                                                                                      
 Tomahawk ...................      10-50                                                                            

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                                                                                           Total                    
                                                                                          Initial                   
                                                 Building                                  Bldg.                    
Location/Development              Building         Type      Encumbrances      Land        Costs                    
----------------------------- ---------------- ------------ -------------- ----------- -------------                
                                                                                                                    
83 & Mission Road .......... Corinth Square    Retail          6,976,058     43,330    2,033,398                    
                              Shops                                                                                 
3910-4024 W. 95 Street ..... 95 & Mission      Retail                 --      3,041      110,785                    
                              Road                                                                                  
                             Shops                                                                                  
9507-9541 Nall ............. Trailwood         Retail                 --      4,232      567,658                    
                              Shops                                                                                 
9555-9563 Nall ............. 96 & Nall         Retail                 --        509      151,583                    
                              Shops                                                                                 
5205-5287 W. 95 Street ..... Trailwood III     Retail            856,071      1,459    1,473,877                    
                              Shops                                                                                 
4101-4117 W. 83 Street ..... Corinth Shops     Retail          1,967,606     11,931      191,765                    
                              South                                                                                 
75 & I-35 .................. Georgetown        Retail                 --     11,335    1,548,724                    
                              Shops                                                                                 
8340 Mission Road .......... Corinth Office    Office            954,382      3,715    1,121,970                    
                              Building                                                                              
4121 W. 83 Street .......... Corinth           Office            381,708      6,309    1,117,443                    
                              Executive                                                                             
                              Building                                                                              
7315 Frontage Road ......... Hartford Office   Office                 --      5,004    1,344,996                    
                              Building                                                                              
4200 Somerset .............. Nichols           Office          1,011,644      6,834    1,849,885                    
                              Building                                                                              
11111 W. 95 Street ......... Oak Park Bank     Office            430,663      4,912    1,025,676                    
                              Building                                                                              
7301 Mission Road .......... Prairie Village   Office                 --     44,254      443,776                    
                              Office Ctr                                                                            
(6)4350 Shawnee Msn                                                                                                 
 Pkway ..................... Fairway West      Office          4,775,000     68,829    3,771,257                    
                              Office Ctr.                                                                           
2400 W. 75 Street .......... Brymar            Office                 --         --    1,634,058                    
                              Building                                                                              
(6)4330 Shawnee Msn                                                                                                 
 Pkway ..................... Fairway North     Office          4,500,000    109,739    3,809,023                    
11836-50 W. 85 Street ...... Quivira Bus       Industrial         18,918     24,605      246,154                    
                              Park --                                                                               
                              Bldg A                                                                                
8441-8457 Quivira .......... Quivira Bus       Industrial             --     29,968      284,611                    
                              Park --                                                                               
                              Bldg B                                                                                
8419-8433 Quivira .......... Quivira Bus       Industrial         18,918     23,079      235,351                    
                              Park --                                                                               
                              Bldg C                                                                                
8403-8417 Quivira .......... Quivira Bus       Industrial         18,918     23,189      256,012                    
                              Park --                                                                               
                              Bldg D                                                                                
8347-8363 Quvira ........... Quivira Bus       Industrial        145,159     31,309      304,368                    
                              Park --                                                                               
                              Bldg E                                                                                
11835-55 W. 83 Street ...... Quivira Bus       Industrial        150,496     34,061      463,200                    
                              Park --                                                                               
                              Bldg F                                                                                
8605-8619 Quivira .......... Quivira Bus       Industrial        106,734     27,279      244,256                    
                              Park --                                                                               
                              Bldg G                                                                                


                                                             Total                                                  
                                  Costs                       Cost                                                  
                               Capitalized  ----------------------------------                                      
                               Subseq. to     Land &    Buildings/                Accum.   Date of    Date    Depr. 
Location/Development           Acquisition    Impts.      Impts.       Total       Depr.    Const.  Acquired  Life  
----------------------------- ------------- ----------  ----------  ----------  ----------  ------  -------   ------
                                                                                                                    
83 & Mission Road ..........   3,832,759      519,635    5,389,852   5,909,487   3,830,299   1962      1955   10-50 
3910-4024 W. 95 Street .....      72,142       63,254      122,714     185,968     146,476   1965      1972   15-50 
9507-9541 Nall .............      26,924        4,232      594,582     598,814     468,212   1968      1972   10-50 
9555-9563 Nall .............      22,347        2,358      172,081     174,439     133,632   1976      1981   15-35 
5205-5287 W. 95 Street .....       4,820        1,459    1,478,697   1,480,156     781,504   1986      1972   10-40 
4101-4117 W. 83 Street .....   2,455,002      116,999    2,541,699   2,658,698   1,362,619   1953      1953   10-55 
75 & I-35 ..................   1,173,856       69,784    2,664,131   2,733,915   1,478,208   1974      1965   10-40 
8340 Mission Road ..........     266,179        3,715    1,388,149   1,391,864   1,101,136   1960      1984   15-20 
4121 W. 83 Street ..........     395,038        6,309    1,512,481   1,518,790     888,205   1973      1986   10-55 
7315 Frontage Road .........     454,367       64,377    1,739,990   1,804,367   1,181,303   1978      1975   10-45 
4200 Somerset ..............     254,865       25,135    2,086,449   2,111,584   1,327,703   1978      1979   10-45 
11111 W. 95 Street .........     105,877       13,202    1,123,263   1,136,465     773,331   1976      1978   15-40 
7301 Mission Road ..........     440,346       53,430      874,946     928,376     512,727   1960      1981   15-20 
(6)4350 Shawnee Msn                                                                                                 
 Pkway .....................     572,600      147,319    4,265,367   4,412,686   2,231,978   1983      1981   15-32 
2400 W. 75 Street ..........     204,850        5,808    1,833,100   1,838,908   1,600,801   1968      1984   15-20 
(6)4330 Shawnee Msn                                                                                                 
 Pkway .....................     224,819      209,651    3,933,930   4,143,581   2,202,673   1985      1985   10-45 
11836-50 W. 85 Street ......     156,518      105,801      321,476     427,277     264,513   1973      1973   15-45 
8441-8457 Quivira ..........      36,816       29,968      321,427     351,395     230,765   1975      1973   15-35 
8419-8433 Quivira ..........     109,159       23,079      344,510     367,589     187,717   1973      1973   15-45 
8403-8417 Quivira ..........      49,929       23,189      305,941     329,130     191,804   1973      1973   15-45 
8347-8363 Quvira ...........     105,019       31,309      409,387     440,696     258,042   1973      1973   10-45 
11835-55 W. 83 Street ......     130,045       34,061      593,245     627,306     330,901   1973      1973   15-45 
8605-8619 Quivira ..........       4,428       27,279      248,684     275,963     153,103   1973      1973   15-45 

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                                                                                           Total                    
                                                                                          Initial                   
                                                 Building                                  Bldg.                    
Location/Development              Building         Type      Encumbrances      Land        Costs                    
----------------------------- ---------------- ------------ -------------- ----------- -------------                
                                                                                                                    
11730-11748 W. 86                                                                                                   
 Terrace ................... Quivira Bus       Industrial        131,283       36,082       324,805                 
                              Park --                                                                               
                              Bldg H                                                                                
11705 W. 83 Terrace ........ Quivira Bus       Industrial         53,237       45,412       516,014                 
                              Park --                                                                               
                              Bldg WE                                                                               
11531-11621 W. 83                                                                                                   
 Terrace ................... Quivira Bus       Industrial      1,396,000        4,962     1,064,467                 
                              Park --                                                                               
                              Bldg J                                                                                
11633-11647 W. 83                                                                                                   
 Terrace ................... Quivira Bus       Industrial        304,000        1,982       364,696                 
                              Park --                                                                               
                              Bldg K                                                                                
11505-11517 W. 83                                                                                                   
 Terrace ................... Quivira Bus       Industrial        300,000        2,056       400,517                 
                              Park --                                                                               
                              Bldg L                                                                                
11100-11200 Antioch ........ Shannon Valley    Retail          6,738,583    1,800,000     6,307,009                 
8201 Mission Road ..........                   Land Lease             --      276,648            --                 
4010 Somerset .............. 1.25 Acres        Land Lease             --        2,166            --                 
I-35 & 75th St.                                                                                                     
 (1.1 Acres) ............... Perkins           Land Lease             --        1,303            --                 
                              Restaurant                                                                            
I-35 & 75th St.                                                                                                     
 (.45 Acres) ............... Bank Drive-In     Land Lease             --          537            --                 
I-35 & 75th St.                                                                                                     
 (.86 Acres) ............... Convenience       Land Lease             --        1,020            --                 
                              Store                                                                                 
I-35 & 75th St.                                                                                                     
 (.64 Acres) ............... Vacant Land                              --          390            --                 
5301 West 95th St.                                                                                                  
 (.31 Acres) ............... Savings &         Land Lease             --          155            --                 
                              Loan                                                                                  
75th & Reinhardt ........... Service Station   Vacant                 --       12,825            --                 
                                                Building                                                            
                                                and Land                                                            
8100-8300 Quivira .......... Vacant Land                              --       81,308            --                 
                              45 Acres                                                                              
99th & Nieman Road ......... Vacant Land                              --       26,830            --                 
                              22 Acres                                                                              
3541 Somerset Drive ........   Maintenance                            --          850       266,120                 
                              Shop                                                                                  
151st & Nall ............... 11.214 Acres                             --       32,079       159,770                 
                              Land                                                                                  
Johnson Drive & Hwy. 7 ..... Farm House &                             --           --        53,106                 
                              Bldgs.                                                                                
135th-143rd, Metcalf to                                                                                             
 Nall ...................... Farm Houses                              --           --       467,987                 
                              & Bldgs.                                                                              
Various Locations .......... Tenant            Const. In              --           --            --                 
                              Improvements,    Progress                                                             
                              Etc.                                                                                  
3617 & 3733 Somerset                                                                                                
 Drive ..................... Corinth Place     2 Condos               --          541       313,608                 
                              Villas                                                                                


                                                             Total                                                  
                                  Costs                       Cost                                                  
                               Capitalized  -----------------------------------                                     
                               Subseq. to     Land &    Buildings/                  Accum.      Date of       Date  
Location/Development           Acquisition    Impts.      Impts.        Total        Depr.       Const.     Acquired
----------------------------- ------------- ---------   ----------   ----------   ----------   ----------  ---------
                                                                                                                    
11730-11748 W. 86                                                                                                   
 Terrace ...................      54,288       36,082      379,093      415,175      209,590         1973     1973  
11705 W. 83 Terrace ........     169,830       45,412      685,844      731,256      381,393         1973     1973  
11531-11621 W. 83                                                                                                   
 Terrace ...................     372,485      355,896    1,086,018    1,441,914      899,994         1983     1965  
11633-11647 W. 83                                                                                                   
 Terrace ...................      88,880       82,510      373,048      455,558      303,951         1985     1965  
11505-11517 W. 83                                                                                                   
 Terrace ...................      88,940       82,559      408,954      491,513      331,005         1985     1965  
11100-11200 Antioch ........   1,830,227    1,800,000    8,137,236    9,937,236    4,145,178         1988     1988  
8201 Mission Road ..........          --      276,648           --      276,648           --           --     1957  
4010 Somerset ..............          --        2,166           --        2,166           --           --     1955  
I-35 & 75th St.                                                                                                     
 (1.1 Acres) ...............          --        1,303           --        1,303           --           --     1953  
I-35 & 75th St.                                                                                                     
 (.45 Acres) ...............          --          537           --          537           --           --     1953  
I-35 & 75th St.                                                                                                     
 (.86 Acres) ...............          --        1,020           --        1,020           --           --     1953  
I-35 & 75th St.                                                                                                     
 (.64 Acres) ...............          --          390           --          390           --           --     1953  
5301 West 95th St.                                                                                                  
 (.31 Acres) ...............          --          155           --          155           --           --     1972  
75th & Reinhardt ...........          --       12,825           --       12,825           --           --     1950  
8100-8300 Quivira ..........          --       81,308           --       81,308           --           --     1955  
99th & Nieman Road .........     210,628      237,458           --      237,458      177,275    1966-1995     1959  
3541 Somerset Drive ........          --          850      266,120      266,970      132,914         1987     1957  
151st & Nall ...............      11,945       44,024      159,770      203,794      157,673      1940's      1983  
Johnson Drive & Hwy. 7 .....          --           --       53,106       53,106       53,105      1940's      1981  
135th-143rd, Metcalf to                                                                                             
 Nall ......................          --           --      467,987      467,987      158,362      1950's      1989  
Various Locations ..........     260,499           --      260,499      260,499           --           --     1995  
3617 & 3733 Somerset                                                                                                
 Drive .....................          --          541      313,608      314,149       37,701         1989   1957    


                                 Depr.                                                                              
Location/Development             Life                                                                               
---------------------------- ------------                                                                           
                                                                                                                    
11730-11748 W. 86                                                                                                   
 Terrace ...................      15-45                                                                             
11705 W. 83 Terrace ........      15-45                                                                             
11531-11621 W. 83                                                                                                   
 Terrace ...................      10-35                                                                             
11633-11647 W. 83                                                                                                   
 Terrace ...................      15-35                                                                             
11505-11517 W. 83                                                                                                   
 Terrace ...................      15-35                                                                             
11100-11200 Antioch ........      10-48                                                                             
8201 Mission Road ..........         --                                                                             
4010 Somerset ..............         --                                                                             
I-35 & 75th St.                                                                                                     
 (1.1 Acres) ...............         --                                                                             
I-35 & 75th St.                                                                                                     
 (.45 Acres) ...............         --                                                                             
I-35 & 75th St.                                                                                                     
 (.86 Acres) ...............         --                                                                             
I-35 & 75th St.                                                                                                     
 (.64 Acres) ...............         --                                                                             
5301 West 95th St.                                                                                                  
 (.31 Acres) ...............         --                                                                             
75th & Reinhardt ...........         --                                                                             
8100-8300 Quivira ..........         --                                                                             
99th & Nieman Road .........      15-20                                                                             
3541 Somerset Drive ........      10-40                                                                             
151st & Nall ...............         15                                                                             
Johnson Drive & Hwy. 7 .....         15                                                                             
135th-143rd, Metcalf to                                                                                             
 Nall ......................     20-27.5                                                                            
Various Locations ..........         --                                                                             
3617 & 3733 Somerset                                                                                                
 Drive .....................     15-27.5                                                                            

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                                                                                           Total                             
                                                                                          Initial                            
                                                 Building                                  Bldg.                             
Location/Development              Building         Type      Encumbrances      Land        Costs                             
----------------------------- ---------------- ------------ -------------- ----------- -------------                         
                                                                                                                             
84th & Mission Road ......... Corinth          Apartments             --        43,000        228,396                        
                               Gardens                                                                                       
4120 West 94th Terr. ........ Kenilworth       Apartments      7,569,683        63,527      4,085,515                        
(6)3815 Somerset Drive ...... Corinth Place    Apartments      4,500,000        27,101      3,868,982                        
3518 West 83rd St. .......... Mission Valley   Apartments      1,160,839        38,192        930,039                        
8037 Mohawk ................. Corinth          Apartments        307,515       205,500        986,170                        
                               Paddock                                                                                       
Olathe, Kansas                                                                                                               
1515 E. Santa Fe ............                  Land Lease             --        44,441             --                        
Miami County, Kansas                                                                                                         
250th & Farley .............. 810 Acre         Land Lease             --     1,173,083        357,950                        
                               Farmland                                                                                      
Osage City, Kansas                                                                                                           
(1)East HiWay 31 ............ Manufactured     Building        4,800,000        47,840      3,866,625                        
                               Homes            Lease                                                                        
                               Plant                                                                                         
                               Valuations                             --            --     (1,194,800)                       
                               Reserve                                                                                       
Des Moines, Iowa                                                                                                             
(2)4201 Westown                                                                                                              
 Parkway .................... Highland         Office          6,261,065     1,066,243      5,056,684                        
                               Building                                                                                      
(2)4200 Corporate Drive ..... Crestwood        Office          2,315,737       171,121      2,068,285                        
                               Building                                                                                      
(3)4344 Corporate Drive ..... Sunset           Office            907,993        93,759        834,073                        
                               Building                                                                                      
(3)4601 Westown                                                                                                              
 Parkway .................... Veridian         Office          7,220,709       396,387      5,530,003                        
                               Building                                                                                      
(3)4200 University Ave. ..... Edgewater        Office          8,928,602       458,901      6,699,069                        
                               Building                                                                                      
(3)4445 Corporate Drive ..... Waterford        Office          4,561,586       234,529      3,977,761                        
                               Building                                                                                      
(4)4401 Westown                                                                                                              
 Parkway .................... Neptune          Office          6,000,000       624,327      4,363,862                        
                               Building                                                                                      
(5)6031 Meadow Crest                                                                                                         
 Drive ...................... Winwood          Apartments     23,000,000     1,299,865     19,103,697                        
                               Apartments                                                                                    
St. Petersburg, Florida                                                                                                      
135 1st Ave NE .............. Vacant Land                             --       156,563             --                        
                                                              ----------     ---------     ----------                        
Total Revenue --  Producing Properties ..................    265,526,833    16,187,648    216,670,401                        
(7)Preference Item ......................................      4,026,458                                                     
                                                             -----------                                                     
Total Encumbrances --  Revenue-Producing Property .......    269,553,291                                                     


                                                             Total                                                           
                                  Costs                       Cost                                                           
                               Capitalized  ------------------------------------------                                       
                               Subseq. to       Land &     Buildings/                       Accum.       Date of       Date  
Location/Development           Acquisition     Impts.        Impts.           Total          Depr.        Const.     Acquired
----------------------------- ------------- ------------ --------------   ------------ -------------- ----------- -----------
                                                                                                                             
84th & Mission Road .........      31,098        47,979        254,515         302,494         28,365          1961      1995
4120 West 94th Terr. ........   2,640,303       347,301      6,442,044       6,789,345      4,691,151          1965      1972
(6)3815 Somerset Drive ......     665,189       650,565      3,910,707       4,561,272      1,909,772          1987      1987
3518 West 83rd St. ..........     889,006        93,438      1,763,799       1,857,237      1,004,546          1964      1972
8037 Mohawk .................     308,626       307,897      1,192,399       1,500,296        148,444          1973      1995
Olathe, Kansas                                                                                                               
1515 E. Santa Fe ............          --        44,441             --          44,441             --            --      1995
Miami County, Kansas                                                                                                         
250th & Farley ..............          --     1,173,083        357,950       1,531,033         66,407    1940's-50's     1994
Osage City, Kansas                                                                                                           
(1)East HiWay 31 ............     682,582        47,840      4,549,207       4,597,047      2,523,665          1985      1985
                                       --            --     (1,194,800)     (1,194,800)            --            --        --
Des Moines, Iowa                                                                                                             
(2)4201 Westown                                                                                                              
 Parkway ....................    (213,725)    1,066,243      4,842,959       5,909,202      2,398,758          1987      1987
(2)4200 Corporate Drive .....          --       171,121      2,068,285       2,239,406      1,024,439          1987      1987
(3)4344 Corporate Drive .....     463,315        93,759      1,297,388       1,391,147        339,493          1989      1988
(3)4601 Westown                                                                                                              
 Parkway ....................     584,787       396,387      6,114,790       6,511,177      1,600,079          1989      1988
(3)4200 University Ave. .....   1,192,112       683,229      7,666,853       8,350,082      2,006,213          1989      1988
(3)4445 Corporate Drive .....          --       234,529      3,977,761       4,212,290      1,040,875          1990      1988
(4)4401 Westown                                                                                                              
 Parkway ....................   1,812,768     1,161,419      5,639,538       6,800,957      2,874,517          1986      1986
(5)6031 Meadow Crest                                                                                                         
 Drive ......................     123,227     1,299,865     19,226,924      20,526,789      8,937,493       1986-87      1985
St. Petersburg, Florida                                                                                                      
135 1st Ave NE ..............          --       156,563             --         156,563             --          1992      1990
                                ---------     ---------     ----------      ----------      ---------                        
Total Revenue --  Producing    88,507,300    25,566,667    295,798,682     321,365,349    158,268,459                        
Properties                                                                                                                   
(7)Preference Item ........                                                                                                  
Total Encumbrances --                                                                                                        
Revenue-Producing Property                                                                                                   


                                  Depr.                                                                                      
Location/Development              Life                                                                                       
----------------------------- ------------                                                                                   
                                                                                                                             
84th & Mission Road .........     15-27.5                                                                                    
4120 West 94th Terr. ........      10-40                                                                                     
(6)3815 Somerset Drive ......      10-40                                                                                     
3518 West 83rd St. ..........      10-40                                                                                     
8037 Mohawk .................     15-27.5                                                                                    
Olathe, Kansas                                                                                                               
1515 E. Santa Fe ............         --                                                                                     
Miami County, Kansas                                                                                                         
250th & Farley ..............       5-30                                                                                     
Osage City, Kansas                                                                                                           
(1)East HiWay 31 ............       5-35                                                                                     
                                      --                                                                                     
Des Moines, Iowa                                                                                                             
(2)4201 Westown                                                                                                              
 Parkway ....................      10-40                                                                                     
(2)4200 Corporate Drive .....      10-40                                                                                     
(3)4344 Corporate Drive .....       5-39                                                                                     
(3)4601 Westown                                                                                                              
 Parkway ....................       7-39                                                                                     
(3)4200 University Ave. .....       7-39                                                                                     
(3)4445 Corporate Drive .....       7-39                                                                                     
(4)4401 Westown                                                                                                              
 Parkway ....................      10-50                                                                                     
(5)6031 Meadow Crest                                                                                                         
 Drive ......................       5-28                                                                                     
St. Petersburg, Florida                                                                                                      
135 1st Ave NE ..............                                                                                                
Total Revenue --  Producing                                                                                                  
Properties                                                                                                                   
(7)Preference Item ........                                                                                                  
Total Encumbrances --                                                                                                        
Revenue-Producing Property                                                                                                   

-------                                                                         
(1)   The Company owns a 99% profit-sharing interest and a 100% loss-sharing    
interest in the partnership owning this facility.                   

(2)   The Company owns a 90% interest in the partnership owning these two office
buildings.                                                          

(3)   The Company owns a 60% interest in the partnership owning these four      
office buildings.                                                   

(4)   The Company owns an 85% interest in the partnership owning this office    
building.                                                           

(5)   The Company owns a 65% interest in the partnership owning this apartment  
building.                                                           

(6)   The Company shares 50% of the cash flow from these properties with an     
outside company providing credit enhancement support related to the 
financing of these properties.                                      

(7)   See discussion in Note 5 to the 1997 Consolidated Financial Statements and
Management's Discussion and Analysis.                               

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                 Location/                                  Building                                                             
                Development                    Building       Type     Encumberances        Land                                 
------------------------------------------- ------------- ----------- --------------- ----------------                           
                                                                                                                                 
Kansas City,                                                                                                                     
 Missouri                                                                                                                        
400 West 49th Terr.                         Alameda       49 Units                                                               
                                            Towers        Sold                   --               --                             
                                            Condominium   10 Units                                                               
                                            (19-Story     Remaining                                                              
                                            Building)     for Sale                                                               
                                            Valuation                                                                            
                                            Reserve                              --               --                             
Stone County,                                                                                                                    
 Missouri                                                                                                                        
Table Rock Lake                                                                                                                  
 (20 Miles West                                                                                                                  
 of Branson, MO)                            257-Lot       148 Lots                                                               
                                            Subdivision   Available              --        1,226,379                             
                                            (104 Acres)   for Sale                                                               
                                            Valuation                                                                            
                                            Reserve                                         (425,000)                            
Shawnee Mission,                                                                                                                 
 Kansas                                                                                                                          
(1)135th-151st,                                                                                                                  
 Metcalf to Nall .......................... 64 Acres                                                                             
                                            Vacant Land                          --        1,334,040                             
Residential                                                                                                                      
 Subdivisions:                                                                                                                   
151st & Nall (SW                                                                                                                 
 Corner) .................................. Green         85 Lots                                                                
                                            Meadows       Available                                                              
                                                          for Sale               --          162,411                             
148th & Nall .............................. Whitehorse    33 Lots                --            3,970                             
                                                          Available                                                              
                                                          for Sale                                                               
Johnson Dr. & Hwy                                         51 Lots                --          107,970                             
                                            Woodsonia                                                                            
 K-7 ......................................               Available                                                              
                                                          for Sale                                                               
TOTAL LAND & IMPROVEMENT                                                                                                         
 INVENTORIES ......................................................              --        2,409,770                             
PROPERTY HELD FOR FUTURE                                                                                                         
 DEVELOPMENT                                                                                                                     
Various Land Parcels Kansas City, Missouri;                                                                                      
 Johnson County, Kansas and Miami County,                                                                                        
 Kansas Held for Future Development ...............................      19,000,000        6,433,337                             
                                                                         ----------        ---------                             
TOTAL PROPERTIES & MORTGAGE                                                                                                      
 INDEBTEDNESS PER CONSOLIDATED                                                                                                   
 BALANCE SHEET ....................................................   $ 288,553,291     $ 25,030,755                             
                                                                      =============     ============                             
LESS ACCUMULATED DEPRECIATION .....................................                                                              
TOTAL PROPERTIES, NET OF                                                                                                         
 ACCUMULATED DEPRECIATION .........................................                                                              


                                                  Total           Costs                             Total                        
                                                                                                     Cost                        
                                                 Initial       Capitalized   ----------------------------------------------------
                 Location/                        Bldg.         Subseq. to        Land &          Buildings/                     
                Development                       Costs        Acquisition        Impts.            Impts.            Total      
------------------------------------------- ---------------- --------------- ---------------- ----------------- -----------------
                                                                                                                                 
Kansas City,                                                                                                                     
 Missouri                                                                                                                        
400 West 49th Terr.                                                                                                              
                                                 9,066,409              --               --         9,066,409         9,066,409  
                                                        --      (5,023,443)              --        (5,023,443)       (5,023,443) 
Stone County,                                                                                                                    
 Missouri                                                                                                                        
Table Rock Lake                                                                                                                  
 (20 Miles West                                                                                                                  
 of Branson, MO)                                                                                                                 
                                                        --              --        1,226,379                --         1,226,379  
                                                        --              --         (425,000)               --          (425,000) 
Shawnee Mission,                                                                                                                 
 Kansas                                                                                                                          
(1)135th-151st,                                                                                                                  
 Metcalf to Nall ..........................                                                                                      
                                                        --              --        1,334,040                --         1,334,040  
Residential                                                                                                                      
 Subdivisions:                                                                                                                   
151st & Nall (SW                                                                                                                 
 Corner) ..................................                                                                                      
                                                        --       1,310,113        1,472,524                --                --  
148th & Nall ..............................             --       1,222,181        1,226,151                --         1,226,151  
Johnson Dr. & Hwy                                       --         805,542          913,512                --           913,512  
 K-7 ......................................                                                                                      
TOTAL LAND & IMPROVEMENT                                                                                                         
 INVENTORIES ............................        9,066,409      (1,685,607)       5,747,606         4,042,966         9,790,572  
PROPERTY HELD FOR FUTURE                                                                                                         
 DEVELOPMENT                                                                                                                     
Various Land Parcels Kansas City, Missouri;                                                                                      
 Johnson County, Kansas and Miami County,                                                                                        
 Kansas Held for Future Development .....               --       1,359,245        7,792,582                --         7,792,582  
                                                 ---------      ----------        ---------        ----------        ----------  
TOTAL PROPERTIES & MORTGAGE                                                                                                      
 INDEBTEDNESS PER CONSOLIDATED                                                                                                   
 BALANCE SHEET ..........................    $ 225,736,810    $ 88,180,938     $ 39,106,855     $ 299,841,648     $ 338,948,503  
                                             =============    ============     ============     =============                    
LESS ACCUMULATED DEPRECIATION ...........                                                                           158,268,459  
TOTAL PROPERTIES, NET OF                                                                                                         
 ACCUMULATED DEPRECIATION ...............                                                                         $ 180,680,044  
                                                                                                                  =============  


                 Location/                       Accum.        Date of      Date     Depr.                                       
                Development                       Depr.         Const.    Acquired   Life                                        
------------------------------------------- ---------------- ----------- ---------- ------                                       
                                                                                                                                 
Kansas City,                                                                                                                     
 Missouri                                                                                                                        
400 West 49th Terr.                                                                                                              
                                                        --    1988-1996     1962       --                                        
                                                        --           --       --       --                                        
Stone County,                                                                                                                    
 Missouri                                                                                                                        
Table Rock Lake                                                                                                                  
 (20 Miles West                                                                                                                  
 of Branson, MO)                                                                                                                 
                                                        --           --     1986       --                                        
                                                        --           --       --       --                                        
Shawnee Mission,                                                                                                                 
 Kansas                                                                                                                          
(1)135th-151st,                                                                                                                  
 Metcalf to Nall ..........................                                                                                      
                                                        --           --     1989       --                                        
Residential                                                                                                                      
 Subdivisions:                                                                                                                   
151st & Nall (SW                                                                                                                 
 Corner) ..................................                                                                                      
                                                        --           --     1984       --                                        
148th & Nall ..............................             --           --     1983       --                                        
Johnson Dr. & Hwy                                       --           --     1981       --                                        
 K-7 ......................................                                                                                      
TOTAL LAND & IMPROVEMENT                                                                                                         
 INVENTORIES ............................               --                                                                       
PROPERTY HELD FOR FUTURE                                                                                                         
 DEVELOPMENT                                                                                                                     
Various Land Parcels Kansas City, Missouri;                                                                                      
 Johnson County, Kansas and Miami County,                                                                                        
 Kansas Held for Future Development .....               --           --     1981       --                                        
                                                        --    ---------     ----       --                                        
TOTAL PROPERTIES & MORTGAGE                                                                                                      
 INDEBTEDNESS PER CONSOLIDATED                                                                                                   
 BALANCE SHEET ..........................    $ 158,268,459                                                                       
                                             =============                                                                       
LESS ACCUMULATED DEPRECIATION ...........                                                                                        
TOTAL PROPERTIES, NET OF                                                                                                         
 ACCUMULATED DEPRECIATION ...............                                                                                        

-------                                                                         
(1) All of this property is under contract for sale.                            

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

REAL ESTATE AND ACCUMULATED DEPRECIATION ROLLFORWARDS 

YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995  

                                                        [Enlarge/Download Table]

                                           1997                             1996                            1995              
                             -------------------------------- -------------------------------- -------------------------------
                               Real Estate      Accumulated     Real Estate      Accumulated     Real Estate     Accumulated  
                                  Assets       Depreciation        Assets       Depreciation        Assets       Depreciation 
                             --------------- ---------------- --------------- ---------------- --------------- ---------------
                                                                                                                              
Balance at beginning                                                                                                          
 of year ...................  $ 373,932,917    $153,799,478    $375,972,490     $146,449,317    $ 381,320,313   $137,215,827  
Additions during year:                                                                                                        
 Acquisitions ..............             --              --              --               --        3,700,609             --  
 Construction and                                                                                                             
   tenant                                                                                                                     
   improvements ............     13,846,635              --      10,717,282               --        7,449,127             --  
 Depreciation and                                                                                                             
   amortization                                                                                                               
   expense .................     (2,509,222)      9,741,447      (2,390,406)      10,391,018       (3,324,818)     9,991,182  
Deductions during year:                                                                                                       
 Cost of real estate                                                                                                          
   sold ....................    (46,100,123)     (5,272,466)     (9,405,299)      (3,040,857)     (11,055,540)      (757,692) 
 Valuation allowances                                                                                                         
   and write-offs ..........       (221,704)             --        (961,150)              --       (2,117,201)            --  
                              -------------    ------------    ------------     ------------    -------------   ------------  
Balance at end of year .....  $ 338,948,503    $158,268,459    $373,932,917     $153,799,478    $ 375,972,490   $146,449,317  
                              =============    ============    ============     ============    =============   ============  

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J.C. NICHOLS COMPANY  

MORTGAGE LOANS ON REAL ESTATE 

DECEMBER 31, 1997 

                                                        [Enlarge/Download Table]

                                 Interest         Maturity                                              
Description                        Rate             Date                                                
--------------------------- ------------------ --------------                                           
                                                                                                        
Landing Ventures                                                                                        
Shopping Center                                                                                         
Kansas City, MO ........... Prime adj. qtrly      8/15/98                                               
Lemons Descendents                                                                                      
Shopping Center                                                                                         
Kansas City, MO ...........        11%           11/30/01                                               
Rayman, Steven M.                                                                                       
Apartments                                                                                              
Merriam, KS ...............        7%             12/1/02                                               
Synergy Dev. Alliance                                                                                   
Land                                                                                                    
Overland Park, KS .........        7%             5/10/00                                               
Construction loans                                                                                      
on single family                                                                                        
residences ................   10% to 10.50%      On Demand                                              
Other misc. mortgages .....    0% to 9.5%      1/98 to 9/99                                             
 Totals ...................                                                                             


                                                                                             Principal  
                                                                                             amount of  
                                                                                           loans subject
                                    Periodic                     Face         Carrying     to delinquent
                                    Payment          Prior    Amount of      Amount of     principal or 
Description                           Term           Liens     Mortgage       Mortgage       interest   
--------------------------- ----------------------- ------- ------------- --------------- --------------
                                                                                                        
                                Varying amounts                                                         
Landing Ventures             over life to maturity                                                      
Shopping Center               Balloon at maturity                                                       
Kansas City, MO ...........      of $2,861,723       $ --    $ 3,255,000    $ 2,907,939       $    --   
                                 Level monthly                                                          
Lemons Descendents                 at $7,741                                                            
Shopping Center               Balloon at maturity                                                       
Kansas City, MO ...........       of $564,556          --        750,000        660,523            --   
                                 Level monthly                                                          
Rayman, Steven M.                 at $87,000                                                            
Apartments                    Balloon at maturity                                                       
Merriam, KS ...............      of $8,736,325         --     11,750,000     10,530,900            --   
                                Interest only,                                                          
Synergy Dev. Alliance       payable every 6 months                                                      
Land                          Balloon at maturity                                                       
Overland Park, KS .........     of $10,845,302         --     10,845,302     10,845,302            --   
Construction loans                                                                                      
on single family                                                                                        
residences ................           N/A             N/A        N/A          3,429,828            --   
Other misc. mortgages .....           N/A             N/A        N/A            474,073        26,007   
                                                             -----------    -----------       -------   
 Totals ...................                                  $26,600,302    $28,848,565       $26,007   
                                                             ===========                      =======   
                                   Reserve for uncollectable accounts          (749,055)                
                                                                            -----------                 
                                                                            $28,099,510                 
                                                                            ===========                 

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J.C. NICHOLS COMPANY  

ROLLFORWARD OF MORTGAGE LOANS ON REAL ESTATE  

YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995  

                                                        [Enlarge/Download Table]

                                                     1997            1996             1995      
                                                -------------- ---------------- ----------------
                                                                                                
Balance at beginning of period ................  $ 17,916,799    $ 21,337,384     $ 24,332,412  
 Additions during period:                                                                       
   New mortgage loans .........................    16,660,302       4,649,693        4,591,994  
 Deductions during period:                                                                      
   Collections of principal ...................    (5,728,536)     (7,918,608)      (5,065,068) 
   Write-offs .................................            --        (151,670)        (250,000) 
   Settlement expense items (see Note 11 to                                                     
    consolidated financial statements) ........            --              --       (2,271,954) 
                                                 ------------    ------------     ------------  
Balance at close of period ....................  $ 28,848,565    $ 17,916,799     $ 21,337,384  
                                                 ============    ============     ============  

                                                                [Download Table]

                                                     December 31,                 
                                    ----------------------------------------------
                                         1997            1996            1995     
                                    -------------- --------------- ---------------
                                                                                  
Gross balance .....................  $28,848,565    $ 17,916,799    $ 21,337,384  
Reserve for uncollectible accounts      (749,055)       (905,397)     (1,468,218) 
                                     -----------    ------------    ------------  
                                     $28,099,510    $ 17,011,402    $ 19,869,166  
                                     ===========    ============    ============  

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

VALUATION AND QUALIFYING ACCOUNTS 

YEAR ENDED DECEMBER 31, 1997  

                                                        [Enlarge/Download Table]

                                                   Balance at     Charged to                                     
                                                  Beginning of     Costs and                       Balance at End
                   Description                        Year         Expenses        Write-Offs         of Year    
------------------------------------------------ -------------- -------------- ------------------ ---------------
                                                                                                                 
 Valuation Reserve:                                                                                              
   Revenue-producing property ..................  $10,402,332     $ (465,818)    $   (8,954,932)   $    981,582  
 Valuation Reserve:                                                                                              
   Land and improvements inventory .............    4,983,443        465,000                 --       5,448,443  
 Valuation Reserve:                                                                                              
   Marketable equity securities ................       85,000             --            (85,000)             --  
 Valuation Reserve:                                                                                              
   Notes and accounts receivable ...............    3,496,337        639,853         (1,046,740)      3,089,450  
 Valuation Reserve:                                                                                              
   Investments in real estate partnerships .....    1,216,839             --           (647,624)        569,215  
                                                  -----------     ----------     --------------    ------------  
    Totals .....................................  $20,183,951     $  639,035     $  (10,734,296)   $ 10,088,690  
                                                  ===========     ==========     ==============    ============  

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

VALUATION AND QUALIFYING ACCOUNTS 

YEAR ENDED DECEMBER 31, 1996  

                                                        [Enlarge/Download Table]

                                                  Balance at      Charged to                                    
                                                 Beginning of      Costs and                      Balance at End
                  Description                        Year          Expenses        Write-Offs        of Year    
----------------------------------------------- -------------- ---------------- ---------------- ---------------
                                                                                                                
 Valuation Reserve:                                                                                             
  Revenue-producing property ..................  $16,715,475     $   (961,489)    $ (5,351,654)    $10,402,332  
 Valuation Reserve:                                                                                             
  Land and improvements inventory .............    4,983,443               --               --       4,983,443  
 Valuation Reserve:                                                                                             
  Marketable equity securities ................       85,000               --               --          85,000  
 Valuation Reserve:                                                                                             
  Notes and accounts receivable ...............    5,143,001         (102,833)      (1,543,831)      3,496,337  
 Valuation Reserve:                                                                                             
  Investments in real estate partnerships .....    1,216,839               --               --       1,216,839  
                                                 -----------     ------------     ------------     -----------  
    Totals ....................................  $28,143,758     $ (1,064,322)    $ (6,895,485)    $20,183,951  
                                                 ===========     ============     ============     ===========  

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

VALUATION AND QUALIFYING ACCOUNTS 

YEAR ENDED DECEMBER 31, 1995  

                                                        [Enlarge/Download Table]

                                             Balance at     Charged to       Charged to                                     
                                            Beginning of     Costs and         Other                          Balance at End
                Description                     Year         Expenses        Accounts*         Write-Offs        of Year    
------------------------------------------ -------------- -------------- ----------------- ----------------- ---------------
                                                                                                                            
Valuation Reserve:                                                                                                          
 Revenue-producing property ..............  $ 15,025,400   $ 1,830,000     $          --     $    (139,925)   $ 16,715,475  
Valuation Reserve:                                                                                                          
 Land and improvements inventory .........     4,696,242       287,201                --                --       4,983,443  
Valuation Reserve:                                                                                                          
 Property held for future development ....     1,327,450            --        (1,327,450)               --              --  
Valuation Reserve:                                                                                                          
 Marketable equity securities ............            --        85,000                --                --          85,000  
Valuation Reserve:                                                                                                          
 Notes and accounts receivable ...........     4,259,930     2,380,750                --        (1,497,679)      5,143,001  
Valuation Reserve:                                                                                                          
 Prepaid expenses ........................     1,208,631            --        (1,208,631)               --              --  
Valuation Reserve:                                                                                                          
 Investments in real estate partnerships .     1,360,239            --           (68,400)          (75,000)      1,216,839  
Valuation Reserve:                                                                                                          
 Minority interest .......................       952,474            --          (952,474)               --              --  
                                            ------------   -----------     -------------     -------------    ------------  
   Totals ................................  $ 28,830,366   $ 4,582,951     $  (3,556,955)    $  (1,712,604)   $ 28,143,758  
                                            ============   ===========     =============     =============    ============  

 * These amounts were taken as credits to valuation allowance expense as
the Company was released from the assets and liabilities (net liability         
position) of a consolidated affiliate during 1995.                              

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

MORTGAGES PAYABLE 

DECEMBER 31, 1997 

                                                        [Enlarge/Download Table]

                                                                          Balance                                          
                               Lender        Origination   Maturity   Outstanding as                                       
        Property             or Trustee          Date        Date       of 12/31/97                                        
------------------------ ------------------ ------------- ---------- ----------------                                      
                                                                                                                           
Millcreek Block ........ Principal Mutual     12/15/93    12/13/13     $  2,595,435                                        
Swanson Block .......... Principal Mutual     12/15/93    12/13/13     $  3,608,288                                        
Hall's Building ........ Principal Mutual     12/15/93    12/13/13     $  1,645,886                                        
Theatre Block .......... Principal Mutual     12/15/93    12/13/13     $  5,507,387                                        
Triangle Block ......... Principal Mutual     12/15/93    12/13/13     $  1,709,189                                        
Balcony Block .......... Principal Mutual     12/15/93    12/13/13     $  3,734,895                                        
Plaza Central .......... Principal Mutual     12/15/93    12/13/13     $  1,519,279                                        
Nichols Block .......... Principal Mutual     12/15/93    12/13/13     $  3,165,165                                        
Time Block ............. Principal Mutual     12/15/93    12/13/13     $ 11,774,413                                        
Esplanade Block ........ Principal Mutual     12/15/93    12/13/13     $  7,659,699                                        
Plaza Savings South .... Principal Mutual     12/15/93    12/13/13     $  1,962,402                                        
48th & Penn ............ Principal Mutual     12/15/93    12/13/13     $  1,772,492                                        
Court of the Penguins .. Principal Mutual     12/15/93    12/13/13     $  2,658,739                                        
Seville Shops West ..... Principal Mutual     12/15/93    12/13/13     $  2,278,919                                        
Seville Square ......... Principal Mutual     12/15/93    12/13/13     $  6,013,813                                        
Park Plaza ............. Principal Mutual     12/15/93    12/13/13     $  5,697,297                                        
Mission Valley                                                                                                             
 Apartments ............ Royal                06/26/96    07/01/11     $  1,160,839                                        
                         Neighbors                                                                                         


                                                                      Prepayment             Amortization     Balance Due  
        Property                   Interest Rate                      Provisions                Period        at Maturity  
------------------------ -------------------------------- --------------------------------- -------------- ----------------
                                                                                                                           
Millcreek Block ........ Fixed at 8% until 2004; rate     Greater of 1% of principal or a   20 years       Fully Amortized 
                         adjusted by holder, as           calculated re-investment yield                                   
                         defined at 2004 and 2009                                                                          
Swanson Block .......... Fixed at 8% until 2004; rate     Greater of 1% of principal or a   20 years       Fully Amortized 
                         adjusted by holder, as           calculated re-investment yield                                   
                         defined at 2004 and 2009                                                                          
Hall's Building ........ Fixed at 8% until 2004; rate     Greater of 1% of principal or a   20 years       Fully Amortized 
                         adjusted by holder, as           calculated re-investment yield                                   
                         defined at 2004 and 2009                                                                          
Theatre Block .......... Fixed at 8% until 2004; rate     Greater of 1% of principal or a   20 years       Fully Amortized 
                         adjusted by holder, as           calculated re-investment yield                                   
                         defined at 2004 and 2009                                                                          
Triangle Block ......... Fixed at 8% until 2004; rate     Greater of 1% of principal or a   20 years       Fully Amortized 
                         adjusted by holder, as           calculated re-investment yield                                   
                         defined at 2004 and 2009                                                                          
Balcony Block .......... Fixed at 8% until 2004; rate     Greater of 1% of principal or a   20 years       Fully Amortized 
                         adjusted by holder, as           calculated re-investment yield                                   
                         defined at 2004 and 2009                                                                          
Plaza Central .......... Fixed at 8% until 2004; rate     Greater of 1% of principal or a   20 years       Fully Amortized 
                         adjusted by holder, as           calculated re-investment yield                                   
                         defined at 2004 and 2009                                                                          
Nichols Block .......... Fixed at 8% until 2004; rate     Greater of 1% of principal or a   20 years       Fully Amortized 
                         adjusted by holder, as           calculated re-investment yield                                   
                         defined at 2004 and 2009                                                                          
Time Block ............. Fixed at 8% until 2004; rate     Greater of 1% of principal or a   20 years       Fully Amortized 
                         adjusted by holder, as           calculated re-investment yield                                   
                         defined at 2004 and 2009                                                                          
Esplanade Block ........ Fixed at 8% until 2004; rate     Greater of 1% of principal or a   20 years       Fully Amortized 
                         adjusted by holder, as           calculated re-investment yield                                   
                         defined at 2004 and 2009                                                                          
Plaza Savings South .... Fixed at 8% until 2004; rate     Greater of 1% of principal or a   20 years       Fully Amortized 
                         adjusted by holder, as           calculated re-investment yield                                   
                         defined at 2004 and 2009                                                                          
48th & Penn ............ Fixed at 8% until 2004; rate     Greater of 1% of principal or a   20 years       Fully Amortized 
                         adjusted by holder, as           calculated re-investment yield                                   
                         defined at 2004 and 2009                                                                          
Court of the Penguins .. Fixed at 8% until 2004; rate     Greater of 1% of principal or a   20 years       Fully Amortized 
                         adjusted by holder, as           calculated re-investment yield                                   
                         defined at 2004 and 2009                                                                          
Seville Shops West ..... Fixed at 8% until 2004; rate     Greater of 1% of principal or a   20 years       Fully Amortized 
                         adjusted by holder, as           calculated re-investment yield                                   
                         defined at 2004 and 2009                                                                          
Seville Square ......... Fixed at 8% until 2004; rate     Greater of 1% of principal or a   20 years       Fully Amortized 
                         adjusted by holder, as           calculated re-investment yield                                   
                         defined at 2004 and 2009                                                                          
Park Plaza ............. Fixed at 8% until 2004; rate     Greater of 1% of principal or a   20 years       Fully Amortized 
                         adjusted by holder, as           calculated re-investment yield                                   
                         defined at 2004 and 2009                                                                          
Mission Valley                                                                                                             
 Apartments ............ 7.875%                           Greater of 1% of principal or     15 years       Fully Amortized 
                                                          a calculated re-investment                                       
                                                          yield                                                            

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                                                                          Balance                                             
                                 Lender      Origination   Maturity   Outstanding as                                          
          Property             or Trustee        Date        Date       of 12/31/97                                           
--------------------------- --------------- ------------- ---------- ----------------                                         
                                                                                                                              
Corinth Office                                                                                                                
 Building ................. Members Life      08/29/96    09/01/06     $    954,382                                           
                            Ins                                                                                               
Nichols Building .......... CUNA Mutual       08/29/96    09/01/06     $  1,011,644                                           
Trailwood III Shops ....... Bank Midwest      05/22/86    05/01/21     $    856,071                                           
Bannister Business                                                                                                            
 Center ................... Bank Midwest      05/22/86    05/01/21     $  1,208,571                                           
Regency House ............. Lincoln           05/23/97    06/10/17     $  4,396,430                                           
                            National                                                                                          
Sulgrave .................. Lincoln           05/23/97    06/10/17     $  8,164,799                                           
                            National                                                                                          
Corinth Place ............. Bank of NY        12/31/85    12/01/15     $  4,500,000                                           
Coach House South ......... Bank of NY        12/31/85    12/01/15     $  20,000,00                                           
Coach House ............... U. S. Trust       05/01/85    05/01/15     $  8,000,000                                           
Fairway North ............. U. S. Trust       11/28/84    11/01/14     $  4,500,000                                           
(1)Two Brush Creek                                                                                                            
 Plaza .................... Archon Group      05/12/83    01/01/02     $  6,533,612                                           
Brookside Shops ........... Lutheran          12/21/90    01/01/11     $  4,251,989                                           
Prairie Village Shops ..... Lutheran          12/21/90    01/01/11     $ 11,384,100                                           
Rental Houses ............. Mages             05/01/89    05/01/04     $     23,470                                           
Neptune Apartments ........ Lutheran          12/09/91    01/01/99     $  3,538,739                                           
Quivira Business Park                                                                                                         
 Buildings J, K                                                                                                               
 and L .................... Commerce Bank     08/01/83    08/01/98     $  2,000,000                                           
Corinth Square Shops ...... Farm Bureau       03/12/92    04/01/02     $  6,976,058                                           
Corinth Shops South ....... Farm Bureau       03/12/92    04/01/02     $  1,967,606                                           


                                                                    Prepayment               Amortization      Balance Due    
          Property                 Interest Rate                    Provisions                  Period         at Maturity    
--------------------------- -------------------------- ----------------------------------- --------------- -------------------
                                                                                                                              
Corinth Office                                                                                                                
 Building .................  7.950%                    Greater of 1% of principal or       15 years        $   476,814        
                                                       a calculated re-investment                                             
                                                       yield                                                                  
Nichols Building ..........  7.950%                    Greater of 1% of principal or       15 years        $   505,423        
                                                       a calculated re-investment                                             
                                                       yield                                                                  
Trailwood III Shops ....... Monthly weighted average   None                                35 years        Fully Amortized    
                            plus 2%                                                                                           
Bannister Business                                                                                                            
 Center ................... Monthly weighted average   None                                35 years        Fully Amortized    
                            plus 2%                                                                                           
Regency House .............  7.560%                    Greater of 1% of principal or a     20 years        Fully Amortized    
                                                       calculated re-investment yield                                         
Sulgrave ..................  7.560%                    Greater of 1% of principal or a     20 years        Fully Amortized    
                                                       calculated re-investment yield                                         
Corinth Place ............. Lower floater, adjusted    Administrative costs for early      Interest Only   $ 4,500,000        
                                                       monthly                             call                               
Coach House South ......... Lower floater, adjusted    Administrative costs for early      Interest Only   $20,000,000        
                                                       monthly                             call                               
Coach House ............... Lower floater, adjusted    Administrative costs for early      Interest Only   $ 8,000,000        
                                                       monthly                             call                               
Fairway North ............. Lower floater, adjusted    Administrative costs for early      Interest Only   $ 4,500,000        
                                                       monthly                             call                               
(1)Two Brush Creek                                                                                                            
 Plaza ....................  8.000%                    Requires lender's approval and      25 years        $ 4,977,066        
                                                       payment of all contingent                                              
                                                       interest                                                               
Brookside Shops ........... 10.500%                    In the first ten years additional   20 years        Fully Amortized    
                                                       charge at reinvestment rate.                                           
                                                       Beginning in 11th year 5% of                                           
                                                       principal, declining by 1/2%                                           
                                                       each year thereafter                                                   
Prairie Village Shops ..... 10.500%                    In the first ten years additional   30 years        $ 9,537,790        
                                                       charge at reinvestment rate.                                           
                                                       Beginning in 11th year 5% of                                           
                                                       principal, declining by 1/2%                                           
                                                       each year thereafter                                                   
Rental Houses .............  8.000%                    None                                15 years        Fully Amortized    
Neptune Apartments ........  9.875%                    Beginning in 4th year, 5% of        30 years        $ 3,500,962        
                                                       principal and declining 1%                                             
                                                       each year to a minimum of                                              
                                                       2%                                                                     
Quivira Business Park                                                                                                         
 Buildings J, K                                                                                                               
 and L ....................  9.800%                    Administrative costs for early      Interest Only   $ 2,000,000        
                                                       call                                                                   
Corinth Square Shops ......  9.375%                    Beginning in 8th year, greater of   30 years        $ 5,767,975        
                                                       1% of principal or a                                                   
                                                       calculated reinvestment yield                                          
Corinth Shops South .......  9.375%                    Beginning in 8th year, greater of   30 years        $ 1,626,865        
                                                       1% of principal or a                                                   
                                                       calculated reinvestment yield                                          

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                                                        [Enlarge/Download Table]

                                                                              Balance                                            
                                Lender         Origination     Maturity   Outstanding as                                         
         Property             or Trustee           Date          Date       of 12/31/97                                          
-------------------------- ---------------- ----------------- ---------- ----------------                                        
                                                                                                                                 
Kenilworth                                                                                                                       
 Apartments .............. Aegon            05/07/97          06/01/07     $  7,569,683                                          
Red Bridge                                                                                                                       
 Professional                                                                                                                    
 Building ................ NYLIC            04/04/72          07/10/98     $    617,578                                          
Fairway West Office                                                                                                              
 Center .................. Commerce Bank    03/01/83          03/01/03     $  4,775,000                                          
Oak Park Bank                                                                                                                    
 Building ................ NYLIC            02/10/78          01/10/03     $    430,663                                          
Quivira Business Park                                                                                                            
 Buildings A, C, D,                                                                                                              
 and SWB ................. Northland        12/14/71          01/01/99     $    109,991                                          
                           Financial                                                                                             
Quivira Business Park                                                                                                            
 Buildings E, F,                                                                                                                 
 G and H ................. Northland        09/12/73          11/01/98     $    533,672                                          
                           Financial                                                                                             
Corinth Paddock                                                                                                                  
 Apartments .............. NYLIC            05/23/74          04/10/99     $    307,515                                          
(1) 4900 Main                                                                                                                    
 Building ................ KPERS             06/09/86(2)      02/01/21     $ 22,460,327                                          
Corinth Executive                                                                                                                
 Building ................ NYLIC            09/18/72          10/01/02     $    381,708                                          
Fairway Shops ............ USG Annuity      01/16/96          02/01/06     $  2,874,813                                          
Shannon Valley Shops ..... Ohio National    12/01/97          11/01/17     $  6,738,583                                          
Winwood Apartments ....... Iowa Finance     12/31/83          11/01/15     $ 23,000,000                                          
                           Authority                                                                                             
Neptune Building ......... Iowa Finance     09/01/85          09/01/15     $  6,000,000                                          
                           Authority                                                                                             
Manufactured Homes                                                                                                               
 Plant ................... Osage City --    12/01/84          12/01/99     $  4,800,000                                          
                           IRB                                                                                                   


                                                                        Prepayment              Amortization      Balance Due    
         Property                    Interest Rate                      Provisions                 Period         at Maturity    
-------------------------- -------------------------------- --------------------------------- --------------- -------------------
                                                                                                                                 
Kenilworth                                                                                                                       
 Apartments .............. 8.070%                           Beginning in 37th month,          20 years        $ 4,776,930        
                                                            greater of 1% of principal or                                        
                                                            a calculated re-investment                                           
                                                            yield                                                                
Red Bridge                                                                                                                       
 Professional                                                                                                                    
 Building ................ 9.125%                           Beginning in 14th year, 5% of     25 years        $   617,578        
                                                            principal declining 1/4% per                                         
                                                            year                                                                 
Fairway West Office                                                                                                              
 Center .................. 9.000%                           Redeemable on 3/1/98 and          2000-2003       $ 1,775,000        
                                                            thereafter on interest payment    Sinking                            
                                                                                              Fund                               
                                                            dates declining from 102% to                                         
                                                            100% of principal                                                    
Oak Park Bank                                                                                                                    
 Building ................ 8.875%                           Beginning in 11th year, 5% of     25 years        Fully Amortized    
                                                            principal declining 1/4% per                                         
                                                            year                                                                 
Quivira Business Park                                                                                                            
 Buildings A, C, D,                                                                                                              
 and SWB ................. 8.875%                           Beginning in 11th year, 5% of     27 years        Fully Amortized    
                                                                                              principal                          
                                                                                              declining                          
                                                                                              1/2 of 1%                          
                                                                                              per year to                        
                                                                                              not less                           
                                                                                              than 1%                            
Quivira Business Park                                                                                                            
 Buildings E, F,                                                                                                                 
 G and H ................. 8.750%                           Beginning in 11th year, 5% of     25 years        $   527,720        
                                                            principal declining 1/2 of 1%                                        
                                                            per year to not less than 1%                                         
Corinth Paddock                                                                                                                  
 Apartments .............. 8.500%                           Beginning in 11th year, 5% of     25 years        Fully Amortized    
                                                            principal declining 1/2% per                                         
                                                            year to a minimum of 1%                                              
                                                            thereafter                                                           
(1) 4900 Main                                                                                                                    
 Building ................ 8.000%                           None                              35 years        Fully Amortized    
Corinth Executive                                                                                                                
 Building ................ 8.000%                           Beginning in 11th year 3% of      30 years        Fully Amortized    
                                                            principal declining 1/2% per      to 1%                              
                                                            year                                                                 
Fairway Shops ............ 7.650%                           Greater of 1% of principal or a   20 years        $ 2,057,065        
                                                            calculated re-investment yield                                       
Shannon Valley Shops ..... 8.030%                           Greater of 1% of principal or a   20 years        Fully Amortized    
                                                            calculated re-investment yield                                       
Winwood Apartments ....... Lower floater, adjusted weekly   Redeemable at rates declining     Interest Only   $23,000,000        
                                                            from 102% to 100% of                                                 
                                                            principal                                                            
Neptune Building ......... Lower floater, adjusted weekly   Redeemable at rates declining     Interest Only   $ 6,000,000        
                                                            from 102% to 100% of                                                 
                                                            principal                                                            
Manufactured Homes                                                                                                               
 Plant ................... Lower floater, adjusted weekly   Redeemable at rates declining     Interest Only   $ 4,800,000        
                                                            from 103% to 100% of                                                 
                                                            principal                                                            

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                                                                      Balance                             
                              Lender     Origination   Maturity   Outstanding as                          
         Property           or Trustee       Date        Date       of 12/31/97                           
-------------------------- ------------ ------------- ---------- ----------------                         
                                                                                                          
Highland and                                                                                              
 Crestwood Buildings       Cigna          10/27/89    12/01/02    $   8,576,802                           
Sunset, Veridian,                                                                                         
 Edgewater and                                                                                            
 Waterford Buildings ..... Cigna          10/27/89    12/01/02    $  21,618,890                           
Land under ground                                                                                         
 lease ................... Cigna          12/13/92    03/01/09    $  19,000,000                           
(1) Preference Items .....                                        $   4,026,458                           
                                                                  -------------                           
Total mortgages                                                                                           
 payable .................                                        $ 288,553,291                           
                                                                  =============                           


                                                       Prepayment             Amortization    Balance Due 
         Property           Interest Rate              Provisions                Period       at Maturity 
-------------------------- --------------- --------------------------------- -------------- --------------
                                                                                                          
Highland and                                                                                              
 Crestwood Buildings       8.290%          Greater of 1% of principal or a   25 years       $ 7,918,383   
                                           calculated re-investment yield                                 
Sunset, Veridian,                                                                                         
 Edgewater and                                                                                            
 Waterford Buildings ..... 8.290%          Greater of 1% of principal or a   25 years       $19,737,955   
                                           calculated re-investment yield                                 
Land under ground                                                                                         
 lease ................... 9.050%          Beginning in 9th year, 1% plus    25 years       $17,429,339   
                                           yield maintenance                                              
(1) Preference Items .....                                                                                
Total mortgages                                                                                           
 payable .................                                                                                

-------                                                                         
(1)   See discussion in Note 5 to the Consolidated Financial Statements and     
    Management's Discussion and Analysis -- Liquidity and Capital Resources.

(2)   This note is callable by the lender on 2/1/06.                            

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS 

(Unaudited) 

                                                        [Enlarge/Download Table]

                                                                                             March 31,      December 31, 
                                                                                                1998            1997     
                                                                                          --------------- ---------------
                                                                                            (Unaudited)                  
                                                                                                                         
ASSETS                                                                                                                   
Revenue-producing properties ............................................................  $ 162,705,000   $ 163,320,000 
Land and improvement inventories ........................................................      9,424,000       9,791,000 
Property held for future development ....................................................      8,597,000       7,660,000 
                                                                                           -------------   ------------- 
  Total properties ......................................................................    180,726,000     180,681,000 
Cash and cash equivalents ...............................................................     23,713,000      15,968,000 
Temporary investments ...................................................................     33,554,000      42,633,000 
Accounts receivable .....................................................................      2,974,000       2,454,000 
Prepaid expenses ........................................................................      7,005,000       6,378,000 
Notes receivable ........................................................................     40,407,000      40,757,000 
Investments in real estate partnerships .................................................      6,445,000       2,457,000 
Minority interest in consolidated partnerships ..........................................      4,680,000       4,717,000 
Income taxes receivable .................................................................        365,000         383,000 
Other assets, net .......................................................................        699,000         739,000 
                                                                                           -------------   ------------- 
                                                                                           $ 300,568,000   $ 297,167,000 
                                                                                           =============   ============= 
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)                                                                           
Mortgage indebtedness ...................................................................  $ 287,126,000   $ 288,553,000 
Notes payable to banks and others .......................................................     12,990,000      12,990,000 
Accounts payable and tenants' deposits ..................................................      6,551,000       9,059,000 
Accrued expenses and other liabilities ..................................................      7,645,000       8,006,000 
Deferred income taxes ...................................................................      3,970,000       2,708,000 
Deferred gains on the sale of property ..................................................      2,022,000       2,024,000 
                                                                                           -------------   ------------- 
                                                                                             320,304,000     323,340,000 
Shareholders' equity (deficit):                                                                                          
  Common stock, par value $.01 per share; 10,000,000 shares authorized (5,798,274 and                                    
   5,721,744 shares issued) .............................................................        100,000         100,000 
  Additional paid-in capital ............................................................     24,251,000      19,917,000 
  Retained earnings .....................................................................    101,891,000      99,788,000 
                                                                                           -------------   ------------- 
                                                                                             126,242,000     119,805,000 
Less:                                                                                                                    
  Treasury stock, at cost (1,179,235 shares of common stock) ............................    145,978,000     145,978,000 
                                                                                           -------------   ------------- 
Total shareholders' equity (deficit) ....................................................    (19,736,000)    (26,173,000)
Commitments and contingencies ...........................................................                                
                                                                                           $ 300,568,000   $ 297,167,000 
                                                                                           =============   ============= 

See accompanying notes to consolidated financial statements.

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF INCOME 

(Unaudited) 

                                                        [Enlarge/Download Table]

                                                                     For the Three Months      
                                                                        Ended March 31,        
                                                                -------------------------------
                                                                      1998            1997     
                                                                ---------------- --------------
                                                                                               
Sales and revenues:                                                                            
 Rents ........................................................   $ 19,709,000    $20,011,000  
 Property sales ...............................................      1,221,000      1,347,000  
 Dividends and interest .......................................      1,147,000      1,071,000  
 Gains on sales of investments and other assets ...............        586,000         15,000  
 Equity in earnings (losses) of unconsolidated affiliates .....         54,000        (77,000) 
 Other ........................................................        248,000        378,000  
                                                                  ------------    -----------  
                                                                    22,965,000     22,745,000  
                                                                  ------------    -----------  
Costs and expenses:                                                                            
 Selling, general and operating expenses ......................     10,407,000      9,874,000  
 Cost of property sales .......................................        873,000      1,107,000  
 Interest .....................................................      5,426,000      5,849,000  
 Depreciation and amortization ................................      2,894,000      3,373,000  
                                                                  ------------    -----------  
                                                                    19,600,000     20,203,000  
                                                                  ------------    -----------  
Income before income taxes ....................................      3,365,000      2,542,000  
Income tax expense ............................................      1,262,000        955,000  
                                                                  ------------    -----------  
 Net income ...................................................   $  2,103,000    $ 1,587,000  
                                                                  ============    ===========  
Basic income per share (note 2) ...............................   $       0.46    $      0.38  
                                                                  ============    ===========  
Diluted income per share (note 2) .............................   $       0.44    $      0.37  
                                                                  ============    ===========  

See accompanying notes to consolidated financial statements.

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(Unaudited) 

                                                        [Enlarge/Download Table]

                                                                                            For the Three Months      
                                                                                               Ended March 31,        
                                                                                       -------------------------------
                                                                                             1998            1997     
                                                                                       --------------- ---------------
                                                                                                                      
Operating activities:                                                                                                 
 Net income ..........................................................................  $  2,103,000    $   1,587,000 
 Adjustments to reconcile net income to net cash provided by operating activities:                                    
   Depreciation and amortization .....................................................     2,894,000        3,373,000 
   Deferred income taxes .............................................................     1,262,000          955,000 
   Equity in (earnings) losses of unconsolidated affiliates ..........................       (54,000)          77,000 
   Earned stock compensation .........................................................        48,000               -- 
   Gains on sales of investments and other assets ....................................      (586,000)         (15,000)
 Changes in:                                                                                                          
   Land and improvement inventories ..................................................       356,000          726,000 
   Accounts receivable ...............................................................      (520,000)          90,000 
   Prepaid expenses ..................................................................      (982,000)      (1,169,000)
   Income taxes receivable ...........................................................        17,000        2,071,000 
   Minority interest in consolidated partnerships ....................................      (110,000)         (15,000)
   Accounts payable and tenants' deposits ............................................    (2,507,000)        (174,000)
   Accrued expenses and other liabilities ............................................      (269,000)         951,000 
   Other, net ........................................................................       (60,000)         (69,000)
                                                                                        ------------    ------------- 
    Net cash provided by operating activities ........................................     1,592,000        8,388,000 
                                                                                        ------------    ------------- 
Investing activities:                                                                                                 
 Net decrease in temporary investments ...............................................     9,079,000        9,677,000 
 Payments on notes receivable ........................................................     2,272,000        1,805,000 
 Issuance of notes receivable ........................................................    (1,922,000)        (931,000)
 Additions to revenue-producing properties ...........................................    (1,963,000)      (1,531,000)
 Additions to property held for future development ...................................      (937,000)              -- 
 Proceeds from sales of capital assets ...............................................       537,000               -- 
 Investments in unconsolidated affiliates ............................................    (4,289,000)              -- 
 Return of capital from real estate partnerships .....................................       370,000          548,000 
 Other, net ..........................................................................            --          188,000 
                                                                                        ------------    ------------- 
    Net cash provided by investing activities ........................................     3,147,000        9,756,000 
                                                                                        ------------    ------------- 
Financing activities:                                                                                                 
 Payments on mortgage indebtedness ...................................................    (1,427,000)      (2,010,000)
 Issuance of common stock ............................................................     4,286,000               -- 
 Purchase of treasury stock ..........................................................            --      (12,810,000)
 Capital contributions from minority partners ........................................       147,000               -- 
                                                                                        ------------    ------------- 
    Net cash provided by (used in) financing activities ..............................     3,006,000      (14,820,000)
                                                                                        ------------    ------------- 
    Net increase in cash and cash equivalents ........................................     7,745,000        3,324,000 
Cash and cash equivalents, beginning of period .......................................    15,968,000       14,454,000 
                                                                                        ------------    ------------- 
Cash and cash equivalents, end of period .............................................  $ 23,713,000    $  17,778,000 
                                                                                        ============    ============= 

See accompanying notes to consolidated financial statements.

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J.C. NICHOLS COMPANY AND SUBSIDIARIES 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  

MARCH 31, 1998 AND 1997 

(1) INTERIM FINANCIAL STATEMENTS                                                

The consolidated financial statements of J.C. Nichols Company and     
subsidiaries (the Company) have been prepared in accordance with the            
instructions to interim financial statements. To the extent that information    
and footnotes required by generally accepted accounting principles for complete 
financial statements are contained in or consistent with the audited            
consolidated financial statements, such information and footnotes have not been 
duplicated herein. The December 31, 1997 consolidated balance sheet has been    
derived from the audited consolidated financial statements as of that date. In  
the opinion of management, all adjustments, including normal recurring          
accruals, considered necessary for a fair presentation of financial statements  
have been reflected herein. The results of the interim period ended March 31,   
1998 are not necessarily indicative of the results expected for the year ended  
December 31, 1998. Certain amounts in the consolidated financial statements     
have been reclassified to conform with the 1998 presentation.                   

(2) INCOME PER SHARE                                                            

 Basic income per share is computed using the weighted average number of
common shares outstanding during each period. Diluted income per share includes 
the effect of all dilutive potential common shares (primarily stock options)    
outstanding during each period.                                                 

  The shares used in the calculation of basic and diluted income per share
are shown below:                                                                

                                                        [Enlarge/Download Table]

                                                                  For the Three Months  
                                                                    Ended March 31,     
                                                                ------------------------
                                                                    1998        1997    
                                                                ----------- ------------
                                                                                        
Weighted average common shares outstanding for computation of                           
  basic income per share ......................................  4,571,420   4,172,560  
Stock options .................................................    167,946     125,562  
                                                                 ---------   ---------  
Shares outstanding for computation of diluted income per share   4,739,366   4,298,122  
                                                                 =========   =========  

(3) INVESTMENT IN LIMITED LIABILITY COMPANY                                     

In November, 1997, the Company entered into an agreement with         
Kessinger/Hunter & Company, Inc. (Kessinger/                                    
Hunter) to form a limited liability company (LLC) to provide services to        
previous Kessinger/Hunter clients as well as management and leasing for the     
Company's Kansas City area portfolio of office, industrial and retail           
properties, excluding the Country Club Plaza. On January 2, 1998, the Company   
made an initial investment in the LLC of $4,286,000, which represents a 30%     
equity interest. The Company has the option of increasing its equity interest   
to 65% by 2001. In addition, the agreement provides to the LLC a call right     
which enables it to purchase up to 76,530 shares of common stock of the Company 
at a price of $56 per share. In February, 1998, the LLC returned to the Company 
the $4,286,000 to permit it to exercise this call right. Accordingly, the       
Company issued 76,530 shares of its common stock to the LLC.                    

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                                                                      Appendix A

AGREEMENT AND PLAN OF MERGER  

  THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of December 22, 1997, by and among HIGHWOODS PROPERTIES, INC.           
("Highwoods"), a Maryland corporation; JACKSON ACQUISITION CORP. ("Sub"), a     
Maryland corporation; and J.C. Nichols Company ("JCN"), a Missouri corporation. 

PREAMBLE  

 The respective Boards of Directors of JCN, Sub and Highwoods are of the
opinion that the transactions described herein are in the best interests of the 
parties to this Agreement and their respective shareholders. This Agreement     
provides for the acquisition of JCN by Highwoods pursuant to the merger of JCN  
with and into Sub. At the effective time of such merger, the outstanding shares 
of the capital stock of JCN shall be converted into the right to receive shares 
of the common stock of Highwoods (except as provided herein). The transactions  
described in this Agreement are subject to the approvals of the shareholders of 
JCN and the satisfaction of certain other conditions described in this          
Agreement. It is the intention of the parties to this Agreement that the Merger 
for federal income tax purposes shall qualify as a "reorganization" within the  
meaning of Section 368(a)(1)(A) of the Internal Revenue Code.                   

  Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.                                                                      

  NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree  
as follows:                                                                     

ARTICLE 1 
TRANSACTIONS AND TERMS OF MERGER  

   1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, JCN shall be merged with and into Sub in accordance with the    
provisions of Section 351.440 of the GBCL and with the effect provided in       
Section 351.450 of the GBCL and in accordance with Section 3-105 of the MGCL    
and with the effect provided in Section 3-114 of the MGCL (the "Merger"). Sub   
shall be the Surviving Corporation resulting from the Merger and shall remain a 
wholly owned Subsidiary of Highwoods and shall continue to be governed by the   
Laws of the State of Maryland. The Merger shall be consummated pursuant to the  
terms of this Agreement, which has been approved and adopted by the respective  
Boards of Directors of JCN, Sub and Highwoods and by Highwoods, as the sole     
shareholder of Sub.                                                             

1.2 Time and Place of Closing. The closing of the transactions        
contemplated hereby (the "Closing") will take place at 9:00 A.M. on the date    
that the Effective Time occurs (or the immediately preceding day if the         
Effective Time is earlier than 9:00 A.M.), or at such other time as the         
Parties, acting through their authorized officers, may mutually agree. The      
Closing shall be held at such location as may be mutually agreed upon by the    
Parties.                                                                        

    1.3 Effective Time. The Merger and other transactions contemplated by this
Agreement shall become effective on the later of the date and at the time the   
Articles of Merger reflecting the Merger shall become effective with the        
Secretary of State of the State of Missouri and the Articles of Merger          
reflecting the Merger become effective with the Department of Assessments and   
Taxation of the State of Maryland (the "Effective Time"). Subject to the terms  
and conditions hereof, unless otherwise mutually agreed upon in writing by the  
authorized officers of each Party, the Parties shall use their reasonable       
efforts to cause the Effective Time to occur on the second business day         
following the last to occur of (i) the effective date (including expiration of  
any applicable waiting period) of the last required Consent referred to in      
Section 9.1(b) hereof, and (ii) the date on which the shareholders of JCN       
approve this Agreement to the extent such approval is required by applicable    
Law; provided, however, in the event the Effective Time, as otherwise           
determined hereunder, would be any date within 15 business days prior to the    
last day of a calendar quarter, the Effective Time shall be the first business  
day of the next calendar quarter.                                               

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ARTICLE 2 
TERMS OF MERGER 

 2.1 Charter. The Articles of Incorporation of Sub in effect immediately
prior to the Effective Time shall be the Articles of Incorporation of the       
Surviving Corporation until duly amended or repealed.                           

    2.2 Bylaws. The Bylaws of Sub in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation until duly amended or     
repealed.                                                                       

2.3 Directors and Officers. The directors of Sub in office immediately
prior to the Effective Time, together with such additional persons as may       
thereafter be elected, shall serve as the directors of the Surviving            
Corporation from and after the Effective Time in accordance with the Bylaws of  
the Surviving Corporation. The officers of Sub in office immediately prior to   
the Effective Time, together with such additional persons as may thereafter be  
elected, shall serve as the officers of the Surviving Corporation from and      
after the Effective Time in accordance with the Bylaws of the Surviving         
Corporation.                                                                    

ARTICLE 3 
MANNER OF CONVERTING SHARES 

   3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part  
of Highwoods, JCN, Sub or the shareholders of any of the foregoing, the shares  
of the constituent corporations shall be converted as follows:                  

(a) Each share of capital stock of Highwoods issued and outstanding 
 immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.                                        

 (b) Each share of Sub Common Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from and  
after the Effective Time.                                                 

(c) Subject to the rights granted in Section 3.2, each share of JCN 
Common Stock (including any associated JCN Rights, but excluding shares   
held by any JCN Entity or any Highwoods Entity, and excluding shares held 
by shareholders who perfect their statutory dissenters' rights as provided
in Section 3.5) issued and outstanding immediately prior to the Effective 
Time shall cease to be outstanding and shall be converted into and        
exchanged for the right to receive 1.84 shares (the "Exchange Ratio") of  
Highwoods Common Stock (the "Per Share Stock Consideration"). Pursuant to 
 the Highwoods Rights Agreement, each share of Highwoods Common Stock issued
in connection with the Merger upon conversion of JCN Common Stock shall be
accompanied by a Highwoods Right.                                         

  3.2 Cash Election. Holders of JCN Common Stock shall be provided with an
opportunity to elect to receive cash consideration in lieu of receiving         
Highwoods Common Stock in the Merger, in accordance with the election           
procedures set forth below in this Section 3.2. Holders who are to receive cash 
in lieu of exchanging their shares of JCN Common Stock for Highwoods Common     
Stock as specified below shall receive $65 per share of JCN Common Stock in     
cash (the "Per Share Cash Consideration"). The amount determined by multiplying 
$65 by the number of Dissenting Shares shall be defined herein as the           
"Dissenting Share Amount." The aggregate Per Share Cash Consideration to be     
paid in the Merger, plus the Dissenting Share Amount, shall be limited to 40%   
of the aggregate consideration paid in exchange for shares of JCN Common Stock  
and shall be defined herein as the "Cash Amount." Furthermore, in the event the 
aggregate Per Share Stock Consideration to be paid for the JCN Common Stock is  
in excess of 75% of the aggregate consideration to be paid in exchange for      
shares of JCN Common Stock, Highwoods shall have the option to limit the        
aggregate Per Share Stock Consideration to as low as 75% of such consideration  
(such limiting amount as may be elected by Highwoods shall be referred to as    
the "Maximum Share Amount") and to make a corresponding increase in the         
aggregate Per Share Cash Consideration. For purposes of calculating the         
aggregate consideration to be paid in exchange for shares of JCN Common Stock   
for purposes of this Section 3.2, the aggregate Per Share Stock Consideration   
shall be determined by using the price of Highwoods Common Stock used to        
calculate the Exchange Ratio in Section 3.1 hereof.                             

    A form for use by JCN shareholders to elect cash and to state their intent
to retain Highwoods Common Stock to be received pursuant to the Merger and      
other appropriate and customary transmittal material (which shall specify that  
delivery shall be effected only upon proper delivery of the certificates        
theretofore representing JCN Common Stock ("Old Certificates") to an exchange   
agent designated by Highwoods (the "Exchange Agent")) in such form as Highwoods 
and JCN shall mutually agree ("Election Form") shall be mailed concurrently     
with the mailing of the Proxy Statement required by Section 8.1 hereof, or on   
such other date as Highwoods and JCN shall mutually agree ("Mailing Date") to   
each holder of record of                                                        

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JCN Common Stock on the record date ("Record Date") for the JCN shareholders    
entitled to vote at the shareholders' meeting to approve the Merger as required 
by Section 8.1 (the "JCN Shareholders Meeting").                                

   Each Election Form shall permit a holder (or the beneficial owner through
appropriate and customary documentation and instructions) of JCN Common Stock   
to elect to receive cash with respect to all or a portion of such holder's JCN  
Common Stock and to state an intent to retain Highwoods Common Stock to be      
received pursuant to the Merger.                                                

 Any shares of JCN Common Stock with respect to which the holder (or the
beneficial owner, as the case may be) elects to receive cash and does not       
dissent shall be referred to herein as the "Cash Election Shares." Any shares   
of JCN Common Stock with respect to which the holder (or the beneficial owner,  
as the case may be) does not elect to receive cash, states an intention to      
retain Highwoods Common Stock to be received pursuant to the Merger and does    
not dissent shall be referred to herein as "Stock Retained Shares." Any shares  
of JCN Common Stock with respect to which the holder (or the beneficial owner,  
as the case may be) does not elect to receive cash, does not state an intention 
to retain Highwoods Common Stock to be received pursuant to the Merger and does 
not dissent shall be referred to herein as "Stock Non-Retained Shares." Any     
shares of JCN Common Stock with respect to which the holder (or the beneficial  
owner, as the case may be) shall not have submitted to the Exchange Agent an    
effective, properly completed Election Form on or before 5:00 p.m. on the fifth 
business day prior to the date of the JCN Shareholders Meeting (or such other   
time and date as Highwoods and JCN may mutually agree) (the "Election           
Deadline") shall be referred to herein as "No Election Shares."                 

   Any of the elections set forth in the foregoing paragraph shall have been
properly made only if the Exchange Agent shall have actually received a         
properly completed Election Form by the Election Deadline. Any Election Form    
may be revoked or changed by the person submitting a subsequent Election Form   
at or prior to the Election Deadline. In the event an Election Form is revoked  
prior to the Election Deadline, the shares of JCN Common Stock represented by   
such Election Form shall become No Election Shares. Subject to the terms of     
this Agreement and of the Election Form, the Exchange Agent shall have          
reasonable discretion to determine whether any election, revocation or change   
has been properly or timely made and to disregard immaterial defects in the     
Election Forms, and any good faith decisions of the Exchange Agent regarding    
such matters shall be binding and conclusive. The Exchange Agent shall promptly 
notify JCN of any defect in an Election Form other than an immaterial defect    
disregarded in good faith by the Exchange Agent. Subject to the foregoing       
sentence, neither Highwoods nor the Exchange Agent shall be under any           
obligation to notify any person of any defect in an Election Form.              

 Within three business days after the Election Deadline, Highwoods shall
cause the Exchange Agent to effect the allocation among the holders of JCN      
Common Stock in accordance with the Election Forms, subject to the following:   

    (i) Cash Elections More Than the Cash Amount. If the amount of cash that
would be issued upon the conversion of the Cash Election Shares is greater
than the amount by which the Cash Amount exceeds the Dissenting Share     
Amount (the "Maximum Cash Election Amount"), then the Exchange Agent shall
convert a sufficient number of Cash Election Shares (other than Dissenting
Shares) into the right to receive the Per Share Stock Consideration, which
Cash Election Shares shall be selected pro rata from among all of the     
holders thereof, based upon the aggregate number of Cash Election Shares  
held by each of such holders, such that the amount of cash that will be   
issued in the Merger to satisfy the non-converted Cash Election Shares    
equals as closely as practicable the Maximum Cash Election Amount.        

(ii) Stock Elections More than Maximum Share Amount. If the value of
Highwoods Common Stock that would be issued in the Merger upon conversion 
of all shares of JCN Common Stock other than Cash Election Shares and     
Dissenting Shares (whose value for purposes of this determination is      
presumed to be $65 per share) is greater than the Maximum Share Amount and
Highwoods has elected to exercise its option to limit the aggregate Per   
Share Stock Consideration to an amount equal to the Maximum Share Amount, 
then the Exchange Agent shall:                                            

   (1) convert a sufficient number of No Election Shares (other than
Dissenting Shares) into the right to receive the Per Share Cash     
   Consideration, which No Election Shares shall be selected pro rata from
   among all of the holders thereof, based upon the aggregate number of No
Election Shares held by each such holder, such that the amount of   
Highwoods Common Stock to be issued in the Merger equals as close as
practicable the Maximum Share Amount; and                           

       (2) to the extent that such conversion of No Election Shares does not
  reduce the value of Highwoods Common Stock that would be issued in the
    Merger to the Maximum Share Amount, convert a sufficient number of Stock
Non-Retained Shares into the right to receive the Per Share Cash    
     Consideration, which Stock Non-Retained Shares shall be selected pro rata
     from among all of the holders thereof, based upon the aggregate number of
Stock                                                               

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 Non-Retained Shares held by each such holder, such that the amount of
Highwoods Common Stock to be issued in the Merger equals as close as
practicable the Maximum Share Amount; and                           

       (3) to the extent that such conversions of the No Election Shares and
   Stock Non-Retained Shares does not reduce the value of Highwoods Common
 Stock that would be issued in the Merger to the Maximum Share Amount,
  convert a sufficient number of Stock Retained Shares into the right to
 receive the Per Share Cash Consideration, which Stock Retained Shares
   shall be selected pro rata from among all of the holders thereof, based
upon the aggregate number of Stock Retained Shares held by each such
  holder, such that the amount of Highwoods Common Stock to be issued in
the Merger equals as close as practicable the Maximum Share Amount. 

  Highwoods shall, at least two business days prior to the date of the JCN
Shareholders Meeting, communicate to JCN the aggregate allocation of stock and  
cash, the amount of stock and cash going to each of JCN's shareholders, and the 
method in which such amounts were calculated.                                   

3.3 Anti-Dilution Provisions. In the event Highwoods (i) changes the  
number of shares of Highwoods Common Stock issued and outstanding prior to the  
Effective Time as a result of a stock split, stock dividend, or similar         
recapitalization with respect to such stock; (ii) makes any distribution to its 
shareholders other than in the ordinary course (such as Highwoods regular       
quarterly dividend in an amount generally consistent with past practices,       
including typical annual increases); (iii) issues any Highwoods security or     
other right to receive any Highwoods security except upon receipt of reasonably 
equivalent value or pursuant to any Highwoods (or its Affiliates) stock option  
or other benefit plans, and the record date therefor (in the case of a stock    
dividend) or the effective date thereof (in the case of a stock split or        
similar recapitalization for which a record date is not established) shall be   
prior to the Effective Time, the Exchange Ratio shall be proportionately        
adjusted.                                                                       

3.4 Shares Held by JCN or Highwoods. Each of the shares of JCN Common 
Stock held by any JCN Entity or by any Highwoods Entity shall be canceled and   
retired at the Effective Time and no consideration shall be issued in exchange  
therefor.                                                                       

   3.5 Dissenting Shareholders. Any holder of shares of JCN Common Stock who
perfects his dissenters' rights in accordance with and as contemplated by       
Section 351.455 of the GBCL shall be entitled to receive the value of such      
shares in cash as determined pursuant to such provision of Law; provided, that  
no such payment shall be made to any dissenting shareholder unless and until    
such dissenting shareholder has complied with the applicable provisions of the  
GBCL and surrendered to the Surviving Corporation the certificate or            
certificates representing the shares for which payment is being made. In the    
event that after the Effective Time a dissenting shareholder of JCN fails to    
perfect, or effectively withdraws or loses, his right to appraisal and of       
payment for his shares, Highwoods shall issue and deliver the consideration to  
which such holder of shares of JCN Common Stock would have been entitled under  
this Article 3 (without interest) had such shares been No Election Shares upon  
surrender by such holder of the certificate or certificates representing shares 
of JCN Common Stock held by him. If and to the extent required by applicable    
Law, the Surviving Corporation will establish (or cause to be established) an   
escrow account with an amount sufficient to satisfy the maximum aggregate       
payment that may be required to be paid to dissenting shareholders. Upon        
satisfaction of all claims of dissenting shareholders, the remaining escrowed   
amount, reduced by payment of the fees and expenses of the escrow agent, will   
be returned to the Surviving Corporation. In the event that the Surviving       
Corporation is liquidated prior to the fulfillment of all obligations of the    
Surviving Corporation under this Section 3.5, such obligations shall be assumed 
by Highwoods.                                                                   

3.6 Fractional Shares. Notwithstanding any other provision of this    
Agreement, each holder of shares of JCN Common Stock exchanged pursuant to the  
Merger who would otherwise have been entitled to receive a fraction of a share  
of Highwoods Common Stock (after taking into account all certificates delivered 
by such holder) shall receive, in lieu thereof, cash (without interest) in an   
amount equal to such fractional part of a share of Highwoods Common Stock       
multiplied by the market value of one share of Highwoods Common Stock at the    
Effective Time. For purposes of this Section 3.6, the market value of one share 
of Highwoods Common Stock at the Effective Time shall be equal to the price of  
Highwoods Common Stock used to calculate the Exchange Ratio in Section 3.1      
hereof. No such holder will be entitled to dividends, voting rights, or any     
other rights as a shareholder in respect of any fractional shares.              

3.7 Conversion of Stock Options.                                          

    (a) At the Effective Time, each option or other Equity Right to purchase
shares of JCN Common Stock pursuant to stock options or stock appreciation
rights ("JCN Options") granted by JCN under the JCN Stock Plans, which are
outstanding at the Effective Time, whether or not exercisable, shall be   
converted into and become rights with respect to Highwoods Common Stock,  
 and Highwoods shall assume each JCN Option, in accordance with the terms of
the JCN                                                                   

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 Stock Plan and stock option agreement by which it is evidenced, except that
from and after the Effective Time, (i) Highwoods and its Compensation     
Committee shall be substituted for JCN and the committee of JCN's Board of
Directors (including, if applicable, the entire Board of Directors of JCN)
administering such JCN Stock Plan, (ii) each JCN Option assumed by        
Highwoods may be exercised solely for shares of Highwoods Common Stock (or
cash, if so provided under the terms of such JCN Option), (iii) the number
of shares of Highwoods Common Stock subject to such JCN Option shall be   
equal to the number of shares of JCN Common Stock subject to such JCN     
Option immediately prior to the Effective Time multiplied by the Exchange 
Ratio, (iv) the per share exercise price under each such JCN Option shall 
be adjusted by dividing the per share exercise price under each such JCN  
Option by the Exchange Ratio and rounding up to the nearest cent, (v) each
JCN Option that would have become fully exercisable under a JCN Stock Plan
as a result of a "change in control" will continue to be fully exercisable
into shares of Highwoods Common Stock upon consummation of the Merger, and
(vi) employment by Highwoods of a JCN employee upon consummation of the   
Merger will not be deemed a termination of employment by JCN that would   
limit such employee's rights to exercise any JCN Option under the         
provisions hereof. Notwithstanding the provisions of clause (iii) of the  
preceding sentence, Highwoods shall not be obligated to issue any fraction
of a share of Highwoods Common Stock upon exercise of JCN Options and any 
fraction of a share of Highwoods Common Stock that otherwise would be     
subject to a converted JCN Option shall represent the right to receive a  
cash payment upon exercise of such converted JCN Option equal to the      
 product of such fraction and the difference between the market value of one
share of Highwoods Common Stock at the time of exercise of such Option and
the per share exercise price of such Option. For purposes of this Section 
 3.7, the market value of one share of Highwoods Common Stock at the time of
 exercise of a JCN Option shall be the closing price of such common stock on
the NYSE-Composite Transactions List (as reported by The Wall Street      
Journal or, if not reported thereby, any other authoritative source       
selected by Highwoods) on the last trading day preceding the date of      
exercise. In addition, notwithstanding the provisions of clauses (iii) and
 (iv) of the first sentence of this Section 3.7, each JCN Option which is an
"incentive stock option" shall be adjusted as required by Section 424 of  
the Internal Revenue Code, and the regulations promulgated thereunder, so 
as not to constitute a modification, extension or renewal of the option,  
within the meaning of Section 424(h) of the Internal Revenue Code. Each of
JCN and Highwoods agrees to take all necessary steps to effectuate the    
foregoing provisions of this Section 3.7, including using its reasonable  
efforts to obtain from each holder of a JCN Option any reasonable Consent 
or Contract that may be deemed reasonably necessary or advisable in order 
to effect the transactions contemplated by this Section 3.7. Anything in  
this Agreement to the contrary notwithstanding, Highwoods shall have the  
 right, in its sole discretion, not to deliver the consideration provided in
this Section 3.7 to a former holder of a JCN Option who has not delivered 
such Consent or Contract.                                                 

(b) As soon as practicable after the Effective Time, Highwoods shall
deliver to the participants in each JCN Stock Plan an appropriate notice  
setting forth such participant's rights pursuant thereto and the grants   
subject to such JCN Stock Plan shall continue in effect on the same terms 
 and conditions (subject to the adjustments required by Section 3.7(a) after
giving effect to the Merger), and Highwoods shall comply with the terms of
each JCN Stock Plan to ensure, to the extent required by, and subject to  
 the provisions of, such JCN Stock Plan, that JCN Options which qualified as
incentive stock options prior to the Effective Time continue to qualify as
incentive stock options after the Effective Time. At or prior to the      
Effective Time, Highwoods shall take all corporate action necessary to    
reserve for issuance sufficient shares of Highwoods Common Stock for      
 delivery upon exercise of JCN Options assumed by it in accordance with this
Section 3.7. As soon as practicable after the Effective Time, Highwoods   
shall file a registration statement on Form S3 or Form S8, as the case may
be (or any successor or other appropriate forms), with respect to the     
shares of Highwoods Common Stock subject to such options and shall use its
reasonable efforts to maintain the effectiveness of such registration     
statements (and maintain the current status of the prospectus or          
prospectuses contained therein) for so long as such options remain        
 outstanding. With respect to those individuals who subsequent to the Merger
will be subject to the reporting requirements under Section 16(a) of the  
1934 Act, where applicable, Highwoods shall administer the JCN Stock Plan 
assumed pursuant to this Section 3.7 in a manner that complies with Rule  
16b3 promulgated under the 1934 Act.                                      

    (c) All contractual restrictions or limitations on transfer with respect
to JCN Common Stock awarded under the JCN Stock Plan or any other plan,   
 program, Contract or arrangement of any JCN Entity, to the extent that such
restrictions or limitations shall not have already lapsed (whether as a   
result of the Merger or otherwise), and except as otherwise expressly     
provided in such plan, program, Contract or arrangement, shall remain in  
 full force and effect with respect to shares of Highwoods Common Stock into
which such restricted stock is converted pursuant to Section 3.1.         

 3.8 Extraordinary Dividend. In the event that the consolidated earnings
and profits of JCN (as defined in Section 312 of the Internal Revenue Code)     
would otherwise exceed $20,000,000 as of the Effective Time, the directors of   
JCN shall take all necessary action to cause the distribution of an             
extraordinary dividend to the shareholders of JCN prior to the Effective        

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Date in such amount that as of the Effective Date such consolidated earnings    
and profits will be no more than $20,000,000. The amount of earnings and        
profits shall be determined by an earnings and profits study to be performed by 
either KPMG Peat Marwick or Ernst & Young, L.L.P. in consultation with the      
other, including an estimate for the period beginning as of the day following   
the date of the latest available JCN Financial Statements and ending on the     
probable Effective Time. In making the earnings and profits study, the interest 
accrued by the Company on the ESOT (as defined below) debt and the Bowser       
limited partnership debt shall be excluded from taxable income. The per share   
amount of the extraordinary dividend so distributed, if any, shall reduce the   
value of the JCN Common Stock in an equivalent amount, and the Per Share Stock  
Consideration, the Per Share Cash Consideration and the Exchange Ratio shall be 
proportionately adjusted, as appropriate.                                       

ARTICLE 4 
EXCHANGE OF SHARES  

4.1 Exchange Procedures.                                                  

    (a) At or prior to the Effective Time, Highwoods shall deposit, or shall
cause to be deposited, with the Exchange Agent, for the benefit of the    
 holders of Old Certificates for exchange in accordance with this Article IV
certificates representing the shares of Highwoods Common Stock ("New      
Certificates") and an estimated amount of cash (such cash and New         
Certificates, together with any dividends or distributions with respect   
thereto (without any interest thereon), being hereinafter referred to as  
 the "Exchange Fund") to be paid pursuant to this Article IV in exchange for
outstanding shares of JCN Common Stock.                                   

    (b) As promptly as practicable after the Effective Date, Highwoods shall
send or cause to be sent to each former holder of record of shares of JCN 
Common Stock (other than Cash Election Shares, shares of JCN Common Stock 
held in treasury by JCN or Dissenting Shares) of JCN Common Stock         
immediately prior to the Effective Time transmittal materials for use in  
exchanging such stockholder's Old Certificates for the consideration set  
forth in this Article IV. Highwoods shall cause the New Certificates into 
which shares of a stockholder's JCN Common Stock are converted on the     
Effective Date and/or any check in respect of the Per Share Cash          
Consideration and any fractional share interests or dividends or          
distributions which such person shall be entitled to receive to be        
delivered to such stockholder upon delivery to the Exchange Agent of Old  
Certificates representing such shares of JCN Common Stock (or indemnity   
 reasonably satisfactory to Highwoods and the Exchange Agent, if any of such
certificates are lost, stolen or destroyed) owned by such stockholder. No 
interest will be paid on any such cash to be paid pursuant to this Article
IV upon such delivery.                                                    

 (c) Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to any former holder of JCN Common Stock for 
any amount properly delivered to a public official pursuant to applicable 
abandoned property, escheat or similar laws.                              

    (d) No dividends or other distributions with respect to Highwoods Common
Stock with a record date occurring after the Effective Time shall be paid 
to the holder of any unsurrendered Old Certificate representing shares of 
JCN Common Stock converted in the Merger into shares of such Highwoods    
Common Stock until the holder thereof shall surrender such Old Certificate
in accordance with this Article IV. After the surrender of an Old         
Certificate in accordance with this Article IV, the record holder thereof 
shall be entitled to receive any such dividends or other distributions,   
without any interest thereon, which theretofore had become payable with   
respect to shares of Highwoods Common Stock represented by such Old       
Certificates.                                                             

     (e) To the extent permitted by Law, any portion of the Exchange Fund that
remains unclaimed by the stockholders of JCN for twelve months after the  
 Effective Time shall be paid to Highwoods. Any stockholders of JCN who have
 not theretofore complied with this Article IV shall thereafter look only to
 Highwoods for payment of the shares of Highwoods Common Stock, cash in lieu
of any fractional shares and unpaid dividends and distributions on the    
Highwoods Common Stock deliverable in respect of each share of JCN Common 
Stock such stockholder holds as determined pursuant to this Agreement, in 
each case, without any interest thereon.                                  

 4.2 Rights of Former JCN Shareholders. At the Effective Time, the stock
transfer books of JCN shall be closed as to holders of JCN Common Stock         
immediately prior to the Effective Time and no transfer of JCN Common Stock by  
any such holder shall thereafter be made or recognized. Until surrendered for   
exchange in accordance with the provisions of Section 4.1, each Certificate     
theretofore representing shares of JCN Common Stock (other than shares to be    
canceled pursuant to                                                            

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Sections 3.4 and 3.5) shall from and after the Effective Time represent for all 
purposes only the right to receive the consideration provided in Sections 3.1   
through 3.6 in exchange therefor, subject, however, to the Surviving            
Corporation's obligation (or Highwoods' obligation following any liquidation of 
the Surviving Corporation) to pay any dividends or make any other distributions 
with a record date prior to the Effective Time which have been declared or made 
by JCN in respect of such shares of JCN Common Stock in accordance with the     
terms of this Agreement and which remain unpaid at the Effective Time. To the   
extent permitted by Law, former shareholders of record of JCN shall be entitled 
to vote after the Effective Time at any meeting of Highwoods shareholders the   
number of whole shares of Highwoods Common Stock into which their respective    
shares of JCN Common Stock are converted, regardless of whether such holders    
have exchanged their Old Certificates for New Certificates representing         
Highwoods Common Stock in accordance with the provisions of this Agreement.     

ARTICLE 5 
REPRESENTATIONS AND WARRANTIES OF JCN 

JCN hereby represents and warrants to Highwoods as follows:           

5.1 Organization, Standing, and Power. JCN is a corporation duly      
organized, validly existing, and in good standing under the Laws of the State   
of Missouri, and has the corporate power and authority to carry on its business 
as now conducted and to own, lease and operate its Assets. JCN is duly          
qualified or licensed to transact business as a foreign corporation in good     
standing in the States of the United States and foreign jurisdictions where the 
character of its Assets or the nature or conduct of its business requires it to 
be so qualified or licensed, except for such jurisdictions in which the failure 
to be so qualified or licensed is not reasonably likely to have a JCN Material  
Adverse Effect. The minute book and other organizational documents for JCN have 
been made available to Highwoods for its review and, except as disclosed in     
Section 5.1 of the JCN Disclosure Memorandum, are complete in all material      
respects as in effect as of the date of this Agreement and accurately reflect   
in all material respects all amendments thereto and all proceedings of the      
Board of Directors and shareholders thereof.                                    

5.2 Authority of JCN; No Breach By Agreement.                             

(a) JCN has the corporate power and authority necessary to execute, 
 deliver, and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery, and        
performance of this Agreement and the consummation of the transactions    
contemplated herein, including the Merger, have been duly and validly     
 authorized by all necessary corporate action in respect thereof on the part
of JCN, subject to the approval of this Agreement by the holders of       
 two-thirds of the outstanding shares of JCN Common Stock, which is the only
vote of JCN shareholders required for approval of this Agreement and      
consummation of the Merger by JCN. Subject to such requisite shareholder  
approval, this Agreement represents a legal, valid, and binding obligation
 of JCN, enforceable against JCN in accordance with its terms (except in all
cases as such enforceability may be limited by applicable bankruptcy,     
insolvency, reorganization, receivership, conservatorship, moratorium, or 
similar Laws affecting the enforcement of creditors' rights generally and 
except that the availability of the equitable remedy of specific          
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought).                              

    (b) Neither the execution and delivery of this Agreement by JCN, nor the
 consummation by JCN of the transactions contemplated hereby, nor compliance
by JCN with any of the provisions hereof, will (i) conflict with or result
in a breach of any provision of JCN's Articles of Incorporation or Bylaws 
or the certificate or articles of incorporation or bylaws of any JCN      
Subsidiary or any resolution adopted by the board of directors or the     
shareholders of any JCN Entity, or (ii) except as disclosed in Section 5.2
of the JCN Disclosure Memorandum, constitute or result in a Default under,
or require any Consent pursuant to, or result in the creation of any Lien 
on any Asset of any JCN Entity under, any Contract or Permit of any JCN   
Entity, where such Default or Lien, or any failure to obtain such Consent,
is reasonably likely to have, individually or in the aggregate, a JCN     
Material Adverse Effect, or, (iii) subject to receipt of the requisite    
Consents referred to in Section 9.1(b) and 9.1(c), constitute or result in
a Default under, or require any Consent pursuant to, any Law or Order     
applicable to any JCN Entity or any of their respective material Assets.  

 (c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules
of the NASD, and other than Consents required from Regulatory Authorities,
and other than notices to or filings with the Internal Revenue Service or 
the Pension Benefit Guaranty Corporation with respect to any employee     
benefit plans, or under the HSR Act, and other than Consents, filings, or 
notifications which, if not obtained or made, are not reasonably likely to
have, individually or in the aggregate, a JCN Material Adverse Effect, no 
notice to, filing with, or Consent of, any public body or authority is    
necessary for the consummation by JCN of the Merger and the other         
transactions contemplated in this Agreement.                              

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5.3 Capital Stock.                                                        

     (a) The authorized capital stock of JCN consists of (i) 10,000,000 shares
of JCN Common Stock, of which 4,529,357 shares are issued and outstanding 
 as of the date of this Agreement and not more than 4,857,387 shares will be
issued and outstanding at the Effective Time. All of the issued and       
outstanding shares of capital stock of JCN are duly and validly issued and
outstanding and are fully paid and nonassessable under the GBCL. None of  
 the outstanding shares of capital stock of JCN has been issued in violation
of any preemptive rights of the current or past shareholders of JCN.      

  (b) Except as set forth in Section 5.3(a), or as set forth in the Call
Right granted to KH/JCN LLC, or as disclosed in Section 5.3(b) of the JCN 
 Disclosure Memorandum, there are no shares of capital stock or other equity
securities of JCN outstanding and no outstanding Equity Rights relating to
the capital stock of JCN.                                                 

5.4 JCN Subsidiaries. JCN has disclosed in Section 5.4 of the JCN     
Disclosure Memorandum all of the JCN Subsidiaries that are corporations         
(identifying its jurisdiction of incorporation, each jurisdiction in which it   
is qualified and/or licensed to transact business, and the number of shares     
owned and percentage ownership interest represented by such share ownership)    
and all of the JCN Subsidiaries that are general or limited partnerships,       
limited liability companies, or other non-corporate entities (identifying the   
Law under which such entity is organized, each jurisdiction in which it is      
qualified and/or licensed to transact business, and the amount and nature of    
the ownership interest therein). Except as disclosed in Section 5.4 of the JCN  
Disclosure Memorandum, JCN or one of its Subsidiaries owns all of the issued    
and outstanding shares of capital stock (or other equity interests) of each JCN 
Subsidiary. No capital stock (or other equity interest) of any JCN Subsidiary   
is or may become required to be issued (other than to another JCN Entity) by    
reason of any Equity Rights, and there are no Contracts by which any JCN        
Subsidiary is bound to issue (other than to another JCN Entity) additional      
shares of its capital stock (or other equity interests) or Equity Rights or by  
which any JCN Entity is or may be bound to transfer any shares of the capital   
stock (or other equity interests) of any JCN Subsidiary (other than to another  
JCN Entity). There are no Contracts relating to the rights of any JCN Entity to 
vote or to dispose of any shares of the capital stock (or other equity          
interests) of any JCN Subsidiary. All of the shares of capital stock (or other  
equity interests) of each JCN Subsidiary held by a JCN Entity are fully paid    
and nonassessable under the applicable corporation Law of the jurisdiction in   
which such Subsidiary is incorporated or organized and are owned by the JCN     
Entity free and clear of any Lien. Except as disclosed in Section 5.4 of the    
JCN Disclosure Memorandum, each JCN Subsidiary is a corporation, and each JCN   
Subsidiary is duly organized, validly existing, and (as to corporations) in     
good standing under the Laws of the jurisdiction in which it is incorporated or 
organized, and has the corporate power and authority necessary for it to own,   
lease, and operate its Assets and to carry on its business as now conducted.    
Each JCN Subsidiary is duly qualified or licensed to transact business as a     
foreign corporation or organization, as the case may be, in good standing in    
the States of the United States where the character of its Assets or the nature 
or conduct of its business requires it to be so qualified or licensed, except   
for such jurisdictions in which the failure to be so qualified or licensed is   
not reasonably likely to have, individually or in the aggregate, a JCN Material 
Adverse Effect. The minute book and other organizational documents for each JCN 
Subsidiary have been made available to Highwoods for its review, and, except as 
disclosed in Section 5.4 of the JCN Disclosure Memorandum, are complete in all  
material respects as in effect as of the date of this Agreement and accurately  
reflect in all material respects all amendments thereto and all proceedings of  
the Board of Directors and shareholders thereof; provided, however, that for    
purposes of this sentence all representations relating to the period prior to   
January 1, 1996, are based solely on the Knowledge of JCN.                      

5.5 SEC Filings; Financial Statements.                                    

(a) JCN has timely filed and made available to Highwoods all SEC    
 Documents required to be filed by JCN since November 30, 1996 (the "JCN SEC
Reports"). The JCN SEC Reports (i) at the time filed, complied in all     
material respects with the applicable requirements of the Securities Laws 
and other applicable Laws and (ii) did not, at the time they were filed   
(or, if amended or superseded by a filing prior to the date of this       
 Agreement, then on the date of such filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated in 
such JCN SEC Reports or necessary in order to make the statements in such 
JCN SEC Reports, in light of the circumstances under which they were made,
not misleading. No JCN Subsidiary is required to file any SEC Documents.  

  (b) Each of the JCN Financial Statements (including, in each case, any
related notes) contained in the JCN SEC Reports, including any JCN SEC    
Reports filed after the date of this Agreement until the Effective Time,  
complied as to form in all material respects with the applicable published
rules and regulations of the SEC with respect thereto, was prepared in    
accordance with GAAP applied on a consistent basis throughout the periods 
involved (except as may be indicated in the notes to such financial       
 statements or, in the case of unaudited interim statements, as permitted by
Form                                                                      

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10-Q of the SEC), and fairly presented in all material respects the       
consolidated financial position of JCN and its Subsidiaries as at the     
respective dates and the consolidated results of operations and cash flows
for the periods indicated, except that the unaudited interim financial    
 statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount or effect.    

    5.6 Absence of Undisclosed Liabilities. Except as set forth in Section 5.6
of the JCN Disclosure Memorandum, no JCN Entity has any Liabilities that are    
reasonably likely to have a JCN Material Adverse Effect, except Liabilities     
which are accrued or reserved against in the consolidated balance sheets of JCN 
as of September 30, 1997 or December 31, 1996, included in the JCN Financial    
Statements delivered prior to the date of this Agreement or reflected in the    
notes thereto.                                                                  

   5.7 Absence of Certain Changes or Events. Since December 31, 1996, except
as disclosed in the JCN Financial Statements delivered prior to the date of     
this Agreement or as disclosed in Section 5.7 of the JCN Disclosure Memorandum, 
there have been no events, changes, or occurrences which have had, or are       
reasonably likely to have a JCN Material Adverse Effect.                        

5.8 Tax Matters.                                                          

     (a) To the Knowledge of JCN, no Tax Return is or has been delinquent and,
except as set forth in Section 5.8 of the JCN Disclosure Memorandum, all  
Tax Returns filed are complete and accurate in all material respects. All 
Taxes shown on filed Tax Returns have been paid. There is no audit        
examination, deficiency, or refund Litigation with respect to any Taxes,  
except as reserved against in the JCN Financial Statements delivered prior
to the date of this Agreement or as disclosed in Section 5.8 of the JCN   
Disclosure Memorandum. The statute of limitations on JCN's federal income 
Tax Returns have run for all periods prior to December 31, 1987. All Taxes
and other Liabilities due with respect to completed and settled           
examinations or concluded Litigation have been paid. There are no Liens   
with respect to Taxes upon any of the Assets of the JCN Entities, except  
for any such Liens which are not reasonably likely to have a JCN Material 
Adverse Effect.                                                           

   (b) Except as may result from the extension of JCN's federal income Tax
Returns described in Section 5.8 of the JCN Disclosure Memorandum or from 
of an adjustment by the Internal Revenue Service of JCN's income, none of 
the JCN Entities has executed an extension or waiver of any statute of    
limitations on the assessment or collection of any Tax due to any State   
taxing authority that is currently in effect.                             

    (c) Except as set forth in Section 5.8 of the JCN Disclosure Memorandum,
the provision for any Taxes due or to become due for any of the JCN       
Entities for the period or periods through and including the date of the  
respective JCN Financial Statements that has been made and is reflected on
such JCN Financial Statements is sufficient to cover all such Taxes.      

    (d) Except as set forth in Section 5.8 of the JCN Disclosure Memorandum,
deferred taxes of the JCN Entities have been provided for in accordance   
with GAAP.                                                                

    (e) None of the JCN Entities is a party to any Tax allocation or sharing
agreement, none of the JCN Entities has been a member of an affiliated    
group filing a consolidated federal income Tax Return (other than a group 
the common parent of which was JCN), and none of the JCN Entities has any 
Liability for Taxes of any Person (other than JCN and its Subsidiaries)   
under Treasury Regulation Section 1.15026 (or any similar provision of    
 state, local or foreign Law) as a transferee or successor or by Contract or
otherwise.                                                                

(f) Each of the JCN Entities is in compliance with, and its records 
contain all information and documents (including properly completed IRS   
Forms W9) necessary to comply with, all applicable information reporting  
and Tax withholding requirements under federal, state, and local Tax Laws,
and such records identify with specificity all accounts subject to backup 
withholding under Section 3406 of the Internal Revenue Code, except for   
such instances of noncompliance and such omissions as are not reasonably  
likely to have, individually or in the aggregate, a JCN Material Adverse  
Effect.                                                                   

    (g) Except as disclosed in Section 5.8 of the JCN Disclosure Memorandum,
none of the JCN Entities has made any payments, is obligated to make any  
payments, or is a party to any Contract that could obligate it to make any
payments that would be disallowed as a deduction under Section 280G or    
162(m) of the Internal Revenue Code.                                      

    (h) Except as disclosed in Section 5.8 of the JCN Disclosure Memorandum,
 there has not been an ownership change, as defined in Internal Revenue Code
Section 382(g), of the JCN Entities that occurred during or after any     
 taxable period in which the JCN Entities incurred a net operating loss that
carries over to any taxable period ending after December 31, 1996.        

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(i) No JCN Entity has or has had in any foreign country a permanent 
establishment, as defined in any applicable tax treaty or convention      
between the United States and such foreign country.                       

5.9 Assets.                                                               

(a) Except as disclosed in Section 5.9 or 5.14 of the JCN Disclosure
Memorandum, or as disclosed or reserved against in the JCN Financial      
Statement, the JCN Entities have good and marketable title, free and clear
of all Liens to all of their respective Assets, except for any such Liens 
or other defects of title which are not reasonably likely to have a JCN   
Material Adverse Effect. All material personal property used in the       
business of the JCN Entities are in good condition, reasonable wear and   
 tear excepted, and are usable in the ordinary course of business consistent
with such entities past practices.                                        

(b) None of the JCN Entities has received notice from any insurance 
carrier that (i) any policy of insurance will be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with      
 respect to such policy of insurance will be substantially increased. Except
as set forth in Section 5.9 of the JCN Disclosure Memorandum, there are   
presently no claims for amounts exceeding in any individual case $50,000  
 pending under such policies of insurance and no notices of claims in excess
of such amounts have been given by any JCN Entity under such policies.    

   (c) JCN will make available to Highwoods a true and correct copy of all
Leases.                                                                   

   (d) Except as set forth in Section 5.9 of the JCN Disclosure Memorandum
and except for such matters which would not reasonably be expected to have
a JCN Material Adverse Effect, as of the last day of the calendar month   
immediately preceding the date hereof, no tenant under any of the Leases  
has asserted any claim of which JCN or any Subsidiary has received written
notice which would materially affect the collection of rent from such     
tenant and neither JCN nor any JCN Subsidiary has received written notice 
of any material default or breach on the part of JCN or any Subsidiary    
under any of the Leases which has not been cured.                         

 (e) Section 5.9 of the JCN Disclosure Memorandum sets forth all space
leases under which JCN or any JCN Subsidiary is a lessee (except where the
underlying real property is owned by JCN). True and correct copies of such
leases have been delivered or made available to Highwoods.                

5.10 Environmental Matters.                                               

  (a) Each JCN Entity, its Operating Properties and, to the Knowledge of
JCN, its Participation Facilities are, and have been, in compliance with  
all Environmental Laws, except for violations which are not reasonably    
likely to have, individually or in the aggregate, a JCN Material Adverse  
Effect.                                                                   

(b) There is no Litigation pending or, to the Knowledge of JCN,     
threatened before any court, governmental agency, or authority or other   
forum in which any JCN Entity or any of its Operating Properties or       
Participation Facilities (or JCN in respect of such Operating Property or 
 Participation Facility) has been or, with respect to threatened Litigation,
 may be named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release,  
discharge, spillage, or disposal into the environment of any Hazardous    
 Material, whether or not occurring at, on, under, adjacent to, or affecting
(or potentially affecting) a site owned, leased, or operated by any JCN   
Entity or any of its Operating Properties or Participation Facilities,    
except such as is not reasonably likely to have, individually or in the   
aggregate, a JCN Material Adverse Effect.                                 

   (c) During the period of (i) any JCN Entity's ownership or operation of
any of their respective current properties, (ii)any JCN Entity's          
 participation in the management of any Participation Facility, or (iii) any
 JCN Entity's holding of a security interest in an Operating Property, there
have been no releases, discharges, spillages, or disposals of Hazardous   
Material in, on, under, adjacent to, or affecting (or potentially         
affecting) such properties, except such as are not reasonably likely to   
have, individually or in the aggregate, a JCN Material Adverse Effect. To 
 the Knowledge of JCN, prior to the period of (i) any JCN Entity's ownership
or operation of any of their respective current properties, (ii) any JCN  
Entity's participation in the management of any Participation Facility, or
(iii) any JCN Entity's holding of a security interest in an Operating     
Property, there were no releases, discharges, spillages, or disposals of  
Hazardous Material in, on, under, or affecting any such property,         
Participation Facility or Operating Property, except such as are not      
 reasonably likely to have, individually or in the aggregate, a JCN Material
Adverse Effect.                                                           

5.11 Compliance with Laws. Each JCN Entity has in effect all Permits  
necessary for it to own, lease, or operate its material Assets and to carry on  
its business as now conducted, except for those Permits the absence of which    
are not reasonably likely to have, individually or in the aggregate, a JCN      
Material Adverse Effect, and there has occurred no Default                      

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under any such Permit, other than Defaults which are not reasonably likely to   
have a JCN Material Adverse Effect. Except as disclosed in Section 5.11 of the  
JCN Disclosure Memorandum, none of the JCN Entities:                            

(a) is in Default under any of the provisions of its Certificate of 
Incorporation or Bylaws (or other governing instruments);                 

  (b) is in Default under any Laws, Orders, or Permits applicable to its
business, except for Defaults which are not reasonably likely to have,    
individually or in the aggregate, a JCN Material Adverse Effect; or       

     (c) since January 1, 1993, has received any notification or communication
 from any agency or department of federal, state, or local government or any
 Regulatory Authority or the staff thereof (i) asserting that any JCN Entity
 is not in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is   
reasonably likely to have a JCN Material Adverse Effect, (ii) threatening 
 to revoke any Permits, the revocation of which is reasonably likely to have
a JCN Material Adverse Effect, or (iii) requiring any JCN Entity to enter 
into or consent to the issuance of a cease and desist order, formal       
agreement, directive, commitment or memorandum of understanding, or to    
adopt any Board resolution or similar undertaking, which restricts        
materially the conduct of its business.                                   

Copies of all material reports, correspondence, notices and other     
documents relating to any inspection, audit, monitoring or other form of review 
or enforcement action by a Regulatory Authority have been made available to     
Highwoods.                                                                      

5.12 Labor Relations. No JCN Entity is the subject of any Litigation  
asserting that it or any other JCN Entity has committed an unfair labor         
practice (within the meaning of the National Labor Relations Act or comparable  
state law) or seeking to compel it or any other JCN Entity to bargain with any  
labor organization as to wages or conditions of employment, nor, except as      
disclosed in Section 5.12 of the JCN Disclosure Memorandum, is any JCN Entity   
party to any collective bargaining agreement, nor is there any strike or other  
labor dispute involving any JCN Entity, pending or, to the Knowledge of JCN,    
threatened, or to the Knowledge of JCN, is there any activity involving any JCN 
Entity's employees seeking to certify a collective bargaining unit or engaging  
in any other organization activity.                                             

5.13 Employee Benefit Plans.                                              

   (a) JCN has disclosed in Section 5.13 of the JCN Disclosure Memorandum,
and has delivered or made available to Highwoods prior to the execution of
this Agreement copies in each case of, all pension, retirement,           
profit-sharing, deferred compensation, stock option, employee stock       
ownership, severance pay, vacation, bonus, or other incentive plan, all   
other written employee programs, arrangements, or agreements, all medical,
vision, dental, or other health plans, all life insurance plans, and all  
other employee benefit plans or fringe benefit plans, including "employee 
benefit plans" as that term is defined in Section 3(3) of ERISA, currently
 adopted, maintained by, sponsored in whole or in part by, or contributed to
by any JCN Entity or ERISA Affiliate thereof for the benefit of employees,
 retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries and under which employees, retirees, dependents, spouses,   
directors, independent contractors, or other beneficiaries are eligible to
 participate (collectively, the "JCN Benefit Plans"). Any of the JCN Benefit
Plans which is an "employee pension benefit plan," as that term is defined
 in Section 3(2) of ERISA, is referred to herein as a "JCN ERISA Plan." Each
JCN ERISA Plan which is also a "defined benefit plan" (as defined in      
Section 414(j) of the Internal Revenue Code) is referred to herein as a   
"JCN Pension Plan." Except as disclosed in Section 5.13 of the JCN        
Disclosure Memorandum, no JCN Pension Plan is or has been a multiemployer 
plan within the meaning of Section 3(37) of ERISA.                        

     (b) Except as disclosed in Section 5.13 of the JCN Disclosure Memorandum,
 all JCN Benefit Plans are in compliance with the applicable terms of ERISA,
the Internal Revenue Code, and any other applicable Laws the breach or    
violation of which are reasonably likely to have a JCN Material Adverse   
 Effect. Each JCN ERISA Plan which is intended to be qualified under Section
401(a) of the Internal Revenue Code has received a favorable determination
letter from the Internal Revenue Service, and JCN is not aware of any     
circumstances likely to result in revocation of any such favorable        
 determination letter. To the Knowledge of JCN, no JCN Entity has engaged in
a transaction with respect to any JCN Benefit Plan that, assuming the     
taxable period of such transaction expired as of the date hereof, would   
subject any JCN Entity to a Tax imposed by either Section 4975 of the     
Internal Revenue Code or Section 502(i) of ERISA.                         

     (c) Except as disclosed in Section 5.13 of the JCN Disclosure Memorandum,
no JCN Pension Plan has any "unfunded current liability," as that term is 
defined in Section 302(d)(8)(A) of ERISA, and the fair market value of the
assets of any such plan exceeds the plan's "benefit liabilities," as that 
term is defined in Section 4001(a)(16) of ERISA, when determined under    
actuarial factors that would apply if the plan terminated in accordance   
with all applicable legal                                                 

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requirements. Since the date of the most recent actuarial valuation, there
has been (i) no material change in the financial position of any JCN      
Pension Plan, (ii) no change in the actuarial assumptions with respect to 
any JCN Pension Plan, and (iii) no increase in benefits under any JCN     
Pension Plan as a result of plan amendments or changes in applicable Law  
which is reasonably likely to have a JCN Material Adverse Effect or       
materially adversely affect the funding status of any such plan. Neither  
any JCN Pension Plan nor any "single-employer plan," within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any JCN 
Entity, or the single-employer plan of any entity which is considered one 
employer with JCN under Section 4001 of ERISA or Section 414 of the       
Internal Revenue Code or Section 302 of ERISA (whether or not waived) (an 
"ERISA Affiliate") has an "accumulated funding deficiency" within the     
meaning of Section 412 of the Internal Revenue Code or Section 302 of     
 ERISA, which is reasonably likely to have a JCN Material Adverse Effect. No
JCN Entity has provided, or is required to provide, security to a JCN     
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant
to Section 401(a)(29) of the Internal Revenue Code.                       

   (d) No Liability under Subtitle C or D of Title IV of ERISA has been or
is expected to be incurred by any JCN Entity with respect to any ongoing, 
frozen, or terminated single-employer plan or the single-employer plan of 
any ERISA Affiliate, which Liability is reasonably likely to have a JCN   
Material Adverse Effect. No JCN Entity has incurred any withdrawal        
 Liability with respect to a multiemployer plan under Subtitle B of Title IV
of ERISA (regardless of whether based on contributions of an ERISA        
Affiliate), which Liability is reasonably likely to have a JCN Material   
Adverse Effect. No notice of a "reportable event," within the meaning of  
Section 4043 of ERISA for which the 30-day reporting requirement has not  
been waived, has been required to be filed for any JCN Pension Plan or by 
any ERISA Affiliate within the 12-month period ending on the date hereof. 

     (e) Except as disclosed in Section 5.13 of the JCN Disclosure Memorandum,
no JCN Entity has any Liability for retiree health and life benefits under
 any of the JCN Benefit Plans and there are no restrictions on the rights of
such JCN Entity to amend or terminate any such retiree health or benefit  
Plan without incurring any Liability.                                     

     (f) Except as disclosed in Section 5.13 of the JCN Disclosure Memorandum,
neither the execution and delivery of this Agreement nor the consummation 
of the transactions contemplated hereby will (i) result in any payment    
(including severance, unemployment compensation, golden parachute, or     
otherwise) becoming due to any director or any employee of any JCN Entity 
from any JCN Entity under any JCN Benefit Plan or otherwise, (ii) increase
any benefits otherwise payable under any JCN Benefit Plan, or (iii) result
in any acceleration of the time of payment or vesting of any such benefit.

 (g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,    
supplemental retirement, or employment agreement) of employees and former 
employees of any JCN Entity and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the   
provisions of Section 412 of the Internal Revenue Code or Section 302 of  
ERISA, have been fully reflected on the JCN Financial Statements to the   
extent required by and in accordance with GAAP.                           

 5.14 Material Contracts. Except as disclosed in Section 5.14 of the JCN
Disclosure Memorandum or otherwise reflected in the JCN Financial Statements,   
none of the JCN Entities, nor any of their respective Assets, businesses, or    
operations, is a party to, or is bound or affected by, or receives benefits     
under, (i) any employment, severance, termination, consulting, or retirement    
Contract providing for aggregate payments to any Person in any calendar year in 
excess of $50,000, (ii) any Contract relating to the borrowing of money by any  
JCN Entity or the guarantee by any JCN Entity of any such obligation (other     
than Contracts evidencing trade payables and Contracts relating to borrowings   
or guarantees made in the ordinary course of business), (iii) any Contract      
which materially prohibits or restricts any JCN Entity from engaging in any     
business activities in any geographic area, line of business or otherwise in    
competition with any other Person, other than restrictions in Leases intended   
to protect certain tenant interests, all of which restrictions are normal and   
customary in the business of JCN, (iv) any Material Contract between or among   
JCN Entities, (v) any Material Contract involving Intellectual Property (other  
than Contracts entered into in the ordinary course with customers and           
"shrink-wrap" software licenses), (vi) any Contract relating to the provision   
of data processing, network communication, or other technical services to or by 
any JCN Entity, (vii) any Contract relating to the purchase or sale of any      
goods or services (other than Contracts entered into in the ordinary course of  
business and involving payments under any individual Contract not in excess of  
$50,000), (viii) any Material Contract for property management or property      
operations, and (ix) any other Contract or amendment thereto that would be      
required to be filed as an exhibit to a Form 10-K filed by JCN with the SEC as  
of the date of this Agreement (together with all Contracts referred to in       
Sections 5.9 and 5.13(a), the "JCN Contracts"). With respect to each JCN        
Contract and except as disclosed in Section 5.14 of the JCN Disclosure          
Memorandum: (i) the Contract is in full force and effect; (ii) no JCN Entity is 
in Default thereunder, other than Defaults which are not reasonably likely to   
have a JCN Material Adverse Effect;                                             

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(iii) no JCN Entity has repudiated or waived any material provision of any such 
Contract; and (iv) no other party to any such Contract, to the Knowledge of     
JCN, is, in Default in any respect, other than Defaults which are not           
reasonably likely to have a JCN Material Adverse Effect, or has repudiated or   
waived any material provision thereunder.                                       

5.15 Legal Proceedings. Except as disclosed in Section 5.15 of the JCN
Disclosure Memorandum, there is no Litigation instituted or pending, or, to the 
Knowledge of JCN, threatened (or unasserted but considered probable of          
assertion and which if asserted would have at least a reasonable probability of 
an unfavorable outcome) against any JCN Entity, or against any director,        
employee or employee benefit plan of any JCN Entity, or against any Asset,      
interest, or right of any of them, that is reasonably likely to have a JCN      
Material Adverse Effect, nor are there any Orders of any Regulatory             
Authorities, other governmental authorities, or arbitrators outstanding against 
any JCN Entity, that are reasonably likely to have a JCN Material Adverse       
Effect. Section 5.15 of the JCN Disclosure Memorandum contains a summary of all 
Litigation as of the date of this Agreement to which any JCN Entity is a party  
and which names a JCN Entity as a defendant or cross-defendant or for which any 
JCN Entity has any potential uninsured Liability in excess of $50,000.          

    5.16 Reports. Since January 1, 1993, or the date of organization if later,
each JCN Entity has timely filed all reports and statements, together with any  
amendments required to be made with respect thereto, that it was required to    
file with Regulatory Authorities, except for those which the failure to file    
are not reasonably likely to have a JCN Material Adverse Effect). To the        
Knowledge of JCN, as of their respective dates, each of such reports and        
documents, including the financial statements, exhibits, and schedules thereto, 
complied in all material respects with all applicable Laws. As of its           
respective date, each such report and document did not, in all material         
respects, contain any untrue statement of a material fact or omit to state a    
material fact required to be stated therein or necessary to make the statements 
made therein, in light of the circumstances under which they were made, not     
misleading, except for those untrue statements or omissions not reasonably      
expected to have a JCN Material Adverse Effect.                                 

  5.17 Statements True and Correct. No certificate or instrument furnished
by any JCN Entity or any officer, director or employee thereof to Highwoods     
pursuant to this Agreement or pursuant to any other document, agreement, or     
instrument referred to herein contains or will contain any untrue statement of  
material fact or will omit to state a material fact necessary to make the       
statements therein, in light of the circumstances under which they were made,   
not misleading. None of the information supplied or to be supplied by any JCN   
Entity or any officer, director or employee thereof for inclusion in the        
Registration Statement to be filed by Highwoods with the SEC will, when the     
Registration Statement becomes effective, be false or misleading with respect   
to any material fact, or omit to state any material fact necessary to make the  
statements therein not misleading. None of the information supplied or to be    
supplied by any JCN Entity or any officer, director or employee thereof for     
inclusion in the Proxy Statement to be mailed to JCN's shareholders in          
connection with the JCN Shareholders Meeting, and any other documents to be     
filed by a JCN Entity or any officer, director or employee thereof with the SEC 
or any other Regulatory Authority in connection with the transactions           
contemplated hereby, will, at the respective time such documents are filed, and 
with respect to the Proxy Statement, when first mailed to the shareholders of   
JCN, be false or misleading with respect to any material fact, or omit to state 
any material fact necessary to make the statements therein, in light of the     
circumstances under which they were made, not misleading, or, in the case of    
the Proxy Statement or any amendment thereof or supplement thereto, at the time 
of the JCN Shareholders Meeting, be false or misleading with respect to any     
material fact, or omit to state any material fact necessary to correct any      
statement in any earlier communication with respect to the solicitation of any  
proxy for the JCN Shareholders Meeting. All documents that any JCN Entity is    
responsible for filing with any Regulatory Authority in connection with the     
transactions contemplated hereby will comply as to form in all material         
respects with the provisions of applicable Law.                                 

   5.18 Tax and Regulatory Matters. No JCN Entity or any officer or director
thereof has taken or agreed to take any action or has any Knowledge of any fact 
or circumstance that is reasonably likely to (i) prevent the Merger from        
qualifying as a reorganization within the meaning of Section 368(a) of the      
Internal Revenue Code, or (ii) materially impede or delay receipt of any        
Consents of Regulatory Authorities referred to in Section 9.1(b).               

  5.19 State Takeover Laws. Each JCN Entity has taken all necessary action
to exempt the transactions contemplated by this Agreement from, or, if          
necessary, to challenge the validity or applicability of, any applicable        
"moratorium," "fair price," "business combination," "control share," or other   
anti-takeover Laws (collectively, "Takeover Laws"), including Section 351.459   
of the GBCL.                                                                    

   5.20 Charter Provisions. Each JCN Entity has taken all action so that the
entering into of this Agreement and the consummation of the Merger and the      
other transactions contemplated by this Agreement do not and will not result in 
the grant of any rights to any Person under the Certificate of Incorporation,   
Bylaws or other governing instruments of any JCN Entity                         

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or restrict or impair the ability of Highwoods or any of its Subsidiaries to    
vote, or otherwise to exercise the rights of a shareholder with respect to,     
shares of any JCN Entity that may be directly or indirectly acquired or         
controlled by them.                                                             

  5.21 Rights Agreement. JCN has taken all necessary action (including, if
required, redeeming all of the outstanding JCN Rights or amending or            
terminating the JCN Rights Agreement) so that the entering into of this         
Agreement, the acquisition of shares pursuant to the consummation of the Merger 
and the other transactions contemplated hereby do not and will not result in    
any Person becoming able to exercise any JCN Rights under the JCN Rights        
Agreement or enabling or requiring the JCN Rights to be separated from the      
shares of JCN Common Stock to which they are attached or to be triggered or to  
become exercisable.                                                             

   5.22 Opinion of Financial Advisor. JCN has received the opinion of Morgan
Stanley, Dean Witter, Discover & Co., dated the date of this Agreement, to the  
effect that the consideration to be received in the Merger by the holders of    
JCN Common Stock is fair, from a financial point of view, to such holders, a    
signed copy of which has been delivered to Highwoods.                           

5.23 Board Recommendation. The Board of Directors of JCN, at a meeting
duly called and held, has validly adopted resolutions (which resolutions have   
not been withdrawn or revoked) stating that the Board of Directors of JCN has   
(i) determined that this Agreement and the transactions contemplated hereby,    
including the Merger and the transactions contemplated thereby, taken together, 
are fair to and in the best interests of the shareholders and (ii) resolved to  
recommend that the holders of the shares of JCN Common Stock approve this       
Agreement.                                                                      

ARTICLE 6 
REPRESENTATIONS AND WARRANTIES OF HIGHWOODS 

Highwoods hereby represents and warrants to JCN as follows:         

6.1 Organization, Standing, and Power. Highwoods is a corporation duly
organized, validly existing, and in good standing under the Laws of the State   
of Maryland, and has the corporate power and authority to carry on its business 
as now conducted and to own, lease and operate its material Assets. Highwoods   
is duly qualified or licensed to transact business as a foreign corporation in  
good standing in the States of the United States and foreign jurisdictions      
where the character of its Assets or the nature or conduct of its business      
requires it to be so qualified or licensed, except for such jurisdictions in    
which the failure to be so qualified or licensed is not reasonably likely to    
have, individually or in the aggregate, a Highwoods Material Adverse Effect.    

6.2 Authority; No Breach By Agreement.                                    

     (a) Highwoods has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery and         
performance of this Agreement and the consummation of the transactions    
contemplated herein, including the Merger, have been duly and validly     
 authorized by all necessary corporate action in respect thereof on the part
of Highwoods. This Agreement represents a legal, valid, and binding       
obligation of Highwoods, enforceable against Highwoods in accordance with 
its terms (except in all cases as such enforceability may be limited by   
applicable bankruptcy, insolvency, reorganization, receivership,          
conservatorship, moratorium, or similar Laws affecting the enforcement of 
creditors' rights generally and except that the availability of the       
 equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought).  

  (b) Neither the execution and delivery of this Agreement by Highwoods,
nor the consummation by Highwoods of the transactions contemplated hereby,
nor compliance by Highwoods with any of the provisions hereof, will (i)   
conflict with or result in a breach of any provision of Highwoods' Amended
and Restated Articles of Incorporation or Bylaws, or (ii) constitute or   
 result in a Default under, or require any Consent pursuant to, or result in
the creation of any Lien on any Asset of any Highwoods Entity under, any  
Contract or Permit of any Highwoods Entity, where such Default or Lien, or
any failure to obtain such Consent, is reasonably likely to have a        
Highwoods Material Adverse Effect, or, (iii) subject to receipt of the    
 requisite Consents referred to in Section 9.1(b), constitute or result in a
Default under, or require any Consent pursuant to, any Law or Order       
applicable to any Highwoods Entity or any of their respective material    
Assets (including any Highwoods Entity or any JCN Entity becoming subject 
to or liable for the payment of any Tax or any of the Assets owned by any 
Highwoods Entity or any JCN Entity being reassessed or revalued by any    
taxing authority).                                                        

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 (c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules
of the NYSE, and other than Consents required from Regulatory Authorities,
and other than notices to or filings with the Internal Revenue Service or 
the Pension Benefit Guaranty Corporation with respect to any employee     
benefit plans, or under the HSR Act, and other than Consents, filings, or 
notifications which, if not obtained or made, are not reasonably likely to
have a Highwoods Material Adverse Effect, no notice to, filing with, or   
Consent of, any public body or authority is necessary for the consummation
by Highwoods of the Merger and the other transactions contemplated in this
Agreement.                                                                

6.3 Capital Stock.                                                        

     (a) The authorized capital stock of Highwoods consists of (i) 100,000,000
 shares of Highwoods Common Stock, of which 37,948,435 shares are issued and
 outstanding as of the date of this Agreement, and (ii) 10,000,000 shares of
Highwoods Preferred Stock, of which 7,025,000 shares are issued and       
outstanding. All of the issued and outstanding shares of Highwoods Capital
Stock are, and all of the shares of Highwoods Common Stock to be issued in
exchange for shares of JCN Common Stock upon consummation of the Merger,  
when issued in accordance with the terms of this Agreement, will be, duly 
and validly issued and outstanding and fully paid and nonassessable under 
the MGCL. None of the outstanding shares of Highwoods Capital Stock has   
been, and none of the shares of Highwoods Common Stock to be issued in    
exchange for shares of JCN Common Stock upon consummation of the Merger   
will be, issued in violation of any preemptive rights of the current or   
past shareholders of Highwoods.                                           

     (b) Except as set forth in Section 6.3(a), or as provided pursuant to the
 Highwoods Stock Plans or the Highwoods Rights Agreement, or as disclosed in
Section 6.3 of the Highwoods Disclosure Memorandum, there are no shares of
capital stock or other equity securities of Highwoods outstanding and no  
outstanding Equity Rights relating to the capital stock of Highwoods.     

   6.4 Highwoods Subsidiaries. Highwoods has disclosed in Section 6.4 of the
Highwoods Disclosure Memorandum all of the Highwoods Subsidiaries as of the     
date of this Agreement that are corporations (identifying its jurisdiction of   
incorporation and percentage ownership interest represented by such share       
ownership) and all of the Highwoods Subsidiaries that are general or limited    
partnerships or other non-corporate entities (identifying the Law under which   
such entity is organized and the amount and nature of the ownership interest    
therein). Except as disclosed in Section 6.4 of the Highwoods Disclosure        
Memorandum, Highwoods and/or one of its Subsidiaries owns all of the issued and 
outstanding shares of capital stock (or other equity interests) of each         
Highwoods Subsidiary. No capital stock (or other equity interest) of any        
Highwoods Subsidiary are or may become required to be issued (other than to     
another Highwoods Entity) by reason of any Equity Rights, and there are no      
Contracts (except for property acquisition contracts utilizing the issuance of  
partnership interests in Highwoods/  Forsyth Limited Partnership and for which  
the partnership is receiving reasonable equivalent value or as otherwise        
disclosed in Section 6.13 of the Highwoods Disclosure Memorandum) by which any  
Highwoods Subsidiary is bound to issue (other than to another Highwoods Entity) 
additional shares of its capital stock (or other equity interests) or Equity    
Rights or by which any Highwoods Entity is or may be bound to transfer any      
shares of the capital stock (or other equity interests) of any Highwoods        
Subsidiary (other than to another Highwoods Entity). There are no Contracts     
relating to the rights of any Highwoods Entity to vote or to dispose of any     
shares of the capital stock (or other equity interests) of any Highwoods        
Subsidiary. All of the shares of capital stock (or other equity interests) of   
each Highwoods Subsidiary held by a Highwoods Entity are fully paid and         
nonassessable under the applicable corporation Law of the jurisdiction in which 
such Subsidiary is incorporated or organized and are owned by the Highwoods     
Entity free and clear of any Lien. Except as disclosed in Section 6.4 of the    
Highwoods Disclosure Memorandum), each Highwoods Subsidiary is a corporation,   
and each Highwoods Subsidiary is duly organized, validly existing, and (as to   
corporations) in good standing under the Laws of the jurisdiction in which it   
is incorporated or organized, and has the corporate power and authority         
necessary for it to own, lease and operate its Assets and to carry on its       
business as now conducted. Each Highwoods Subsidiary is duly qualified or       
licensed to transact business as a foreign corporation or organization, as the  
case may be, is in good standing in the States of the United States and foreign 
jurisdictions where the character of its Assets or the nature or conduct of its 
business requires it to be so qualified or licensed, except for such            
jurisdictions in which the failure to be so qualified or licensed is not        
reasonably likely to have a Highwoods Material Adverse Effect.                  

6.5 SEC Filings; Financial Statements.                                    

    (a) Highwoods and Highwoods/Forsyth Limited Partnership has timely filed
and made available to JCN all SEC Documents required to be filed by       
 Highwoods or Highwoods/Forsyth Limited Partnership since June 14, 1994 (the
"Highwoods SEC Reports"). The Highwoods SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the 
Securities Laws and other applicable Laws and (ii) did not, at the time   
they were                                                                 

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filed (or, if amended or superseded by a filing prior to the date of this 
 Agreement, then on the date of such filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated in 
such Highwoods SEC Reports or necessary in order to make the statements in
such Highwoods SEC Reports, in light of the circumstances under which they
were made, not misleading. Except for Highwoods/Forsyth Limited           
 Partnership, no Highwoods Subsidiary is required to file any SEC Documents.

    (b) Each of the Highwoods Financial Statements (including, in each case,
any related notes) contained in the Highwoods SEC Reports, including any  
Highwoods SEC Reports filed after the date of this Agreement until the    
Effective Time, complied as to form in all material respects with the     
 applicable published rules and regulations of the SEC with respect thereto,
was prepared in accordance with GAAP applied on a consistent basis        
 throughout the periods involved (except as may be indicated in the notes to
such financial statements or, in the case of unaudited interim statements,
 as permitted by Form 10-Q of the SEC), and fairly presented in all material
respects the consolidated financial position of Highwoods and its         
Subsidiaries as at the respective dates and the consolidated results of   
operations and cash flows for the periods indicated, except that the      
unaudited interim financial statements were or are subject to normal and  
recurring year-end adjustments which were not or are not expected to be   
material in amount or effect.                                             

6.6 Absence of Undisclosed Liabilities. No Highwoods Entity has any   
Liabilities that are reasonably likely to have a Highwoods Material Adverse     
Effect, except Liabilities which are accrued or reserved against in the         
consolidated balance sheets of Highwoods as of September 30, 1997 or December   
31, 1996, included in the Highwoods Financial Statements delivered prior to the 
date of this Agreement or reflected in the notes thereto.                       

   6.7 Absence of Certain Changes or Events. Since December 31, 1996, except
as disclosed in the Highwoods Financial Statements delivered prior to the date  
of this Agreement or as disclosed in Section 6.7 of the Highwoods Disclosure    
Memorandum, there have been no events, changes or occurrences which have had,   
or are reasonably likely to have a Highwoods Material Adverse Effect.           

6.8 Tax Matters.                                                          

  (a) All Tax Returns required to be filed by or on behalf of any of the
Highwoods Entities have been timely filed or requests for extensions have 
been timely filed, granted, and have not expired for periods ended on or  
before September 30, 1997, and on or before the date of the most recent   
fiscal year end immediately preceding the Effective Time, and all Tax     
 Returns filed are complete and accurate in all material. All Taxes shown on
filed Tax Returns have been paid. As of the date of this Agreement, there 
is no audit examination, deficiency, or refund Litigation with respect to 
 any Taxes that is reasonably likely to result in a determination that would
 have a Highwoods Material Adverse Effect, except as reserved against in the
Highwoods Financial Statements or as disclosed in Section 6.8 of the      
Highwoods Disclosure Memorandum.                                          

 (b) Highwoods, based on its current and intended method of operation,
meets the requirements for qualification as a REIT under Sections 856-860 
of the Internal Revenue Code.                                             

    6.9 Assets. Except as disclosed in Section 6.9 of the Highwoods Disclosure
Memorandum or as disclosed or reserved against in the Highwoods Financial       
Statements, the Highwoods Entities have good and marketable title, free and     
clear of all Liens, to all of their respective Assets, except for any such      
Liens or other defects of title which are not reasonably likely to have a       
Highwoods Material Adverse Effect. All Material personal properties used in the 
businesses of the Highwoods Entities are in good condition, reasonable wear and 
tear excepted, and are usable in the ordinary course of business consistent     
with Highwoods' past practices.                                                 

6.10 Environmental Matters.                                               

(a) Each Highwoods Entity, its Operating Properties, and, to the    
 Knowledge of Highwoods, its Participating Facilities are, and have been, in
 compliance with all Environmental Laws, except for violations which are not
reasonably likely to have a Highwoods Material Adverse Effect.            

 (b) There is no Litigation pending or, to the Knowledge of Highwoods,
threatened before any court, governmental agency, or authority or other   
forum in which any Highwoods Entity or any of its Operating Properties or 
Participation Facilities (or Highwoods in respect of such Operating       
 Property or Participation Facility) has been or, with respect to threatened
Litigation, may be named as a defendant (i) for alleged noncompliance     
(including by any predecessor) with any Environmental Law or (ii) relating
to the release, discharge, spillage, or disposal into the environment of  
any Hazardous Material, whether or not occurring at, on, under, adjacent  
to, or affecting (or potentially affecting) a site                        

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owned, leased, or operated by any Highwoods Entity or any of its Operating
Properties or Participation Facilities, except such as is not reasonably  
likely to have a Highwoods Material Adverse Effect.                       

(c) During the period of (i) any Highwoods Entity's ownership or    
 operation of any of their respective current properties, (ii) any Highwoods
Entity's participation in the management of any Participation Facility, or
 (iii) any Highwoods Entity's holding of a security interest in an Operating
Property, there have been no releases, discharges, spillages, or disposals
of Hazardous Material in, on, under, adjacent to, or affecting (or        
potentially affecting) such properties, except such as are not reasonably 
likely to have a Highwoods Material Adverse Effect. To the Knowledge of   
Highwoods, prior to the period of (i) any Highwoods Entity's ownership or 
 operation of any of their respective current properties, (ii) any Highwoods
Entity's participation in the management of any Participation Facility, or
 (iii) any Highwoods Entity's holding of a security interest in an Operating
Property, there were no releases, discharges, spillages, or disposals of  
Hazardous Material in, on, under, or affecting any such property,         
Participation Facility or Operating Property, except such as are not      
reasonably likely to have a Highwoods Material Adverse Effect.            

    6.11 Compliance with Laws. Each Highwoods Entity has in effect all Permits
necessary for it to own, lease or operate its material Assets and to carry on   
its business as now conducted, except for those Permits the absence of which    
are not reasonably likely to have a Highwoods Material Adverse Effect, and      
there has occurred no Default under any such Permit, other than Defaults which  
are not reasonably likely to have a Highwoods Material Adverse Effect. Except   
as disclosed in Section 6.11 of the Highwoods Disclosure Memorandum, none of    
the Highwoods Entities:                                                         

(a) is in Default under its Amended and Restated Articles of        
Incorporation or Bylaws (or other governing instruments); or              

 (b) is in Default under any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for Defaults which  
are not reasonably likely to have, individually or in the aggregate, a    
Highwoods Material Adverse Effect; or                                     

     (c) since January 1, 1993, has received any notification or communication
 from any agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (i) asserting that any Highwoods
Entity is not in compliance with any of the Laws or Orders which such     
governmental authority or Regulatory Authority enforces, where such       
noncompliance is reasonably likely to have a Highwoods Material Adverse   
Effect, (ii) threatening to revoke any Permits, the revocation of which is
reasonably likely to have a Highwoods Material Adverse Effect, or (iii)   
requiring any Highwoods Entity to enter into or consent to the issuance of
a cease and desist order, formal agreement, directive, commitment or      
memorandum of understanding, or to adopt any board resolution or similar  
undertaking, which restricts materially the conduct of its business.      

    6.12 Labor Relations. No Highwoods Entity is the subject of any Litigation
asserting that it or any other Highwoods Entity has committed an unfair labor   
practice (within the meaning of the National Labor Relations Act or comparable  
state law) or seeking to compel it or any other Highwoods Entity to bargain     
with any labor organization as to wages or conditions of employment, nor is any 
Highwoods Entity party to any collective bargaining agreement, nor is there any 
strike or other labor dispute involving any Highwoods Entity, pending or        
threatened, or to the Knowledge of Highwoods, is there any activity involving   
any Highwoods Entity's employees seeking to certify a collective bargaining     
unit or engaging in any other organization activity.                            

6.13 Employee Benefit Plans.                                              

   (a) Highwoods has disclosed in Section 6.13 of the Highwoods Disclosure
Memorandum, and has delivered or made available to JCN prior to the       
execution of this Agreement copies in each case of, all pension,          
retirement, profit-sharing, deferred compensation, stock option, employee 
stock ownership, severance pay, vacation, bonus, or other incentive plan, 
all other written employee programs, arrangements, or agreements, all     
medical, vision, dental, or other health plans, all life insurance plans, 
and all other employee benefit plans or fringe benefit plans, including   
"employee benefit plans" as that term is defined in Section 3(3) of ERISA,
currently adopted, maintained by, sponsored in whole or in part by, or    
contributed to by any Highwoods Entity or ERISA Affiliate thereof for the 
 benefit of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,  
dependents, spouses, directors, independent contractors, or other         
beneficiaries are eligible to participate (collectively, the "Highwoods   
Benefit Plans"). Any of the Highwoods Benefit Plans which is an "employee 
 pension benefit plan," as that term is defined in Section 3(2) of ERISA, is
referred to herein as a "Highwoods ERISA Plan." Each Highwoods ERISA Plan 
 which is also a "defined benefit plan" (as defined in Section 414(j) of the
Internal Revenue                                                          

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Code) is referred to herein as a "Highwoods Pension Plan." No Highwoods   
Pension Plan is or has been a multiemployer plan within the meaning of    
Section 3(37) of ERISA.                                                   

 (b) All Highwoods Benefit Plans are in compliance with the applicable
terms of ERISA, the Internal Revenue Code, and any other applicable Laws  
the breach or violation of which are reasonably likely to have a Highwoods
Material Adverse Effect. Each Highwoods ERISA Plan which is intended to be
qualified under Section 401(a) of the Internal Revenue Code has received a
favorable determination letter from the Internal Revenue Service, and     
Highwoods is not aware of any circumstances likely to result in revocation
of any such favorable determination letter. To the Knowledge of Highwoods,
no Highwoods Entity has engaged in a transaction with respect to any      
Highwoods Benefit Plan that, assuming the taxable period of such          
transaction expired as of the date hereof, would subject any Highwoods    
 Entity to a Tax imposed by either Section 4975 of the Internal Revenue Code
or Section 502(i) of ERISA.                                               

  (c) No Highwoods Pension Plan has any "unfunded current liability," as
that term is defined in Section 302(d)(8)(A) of ERISA, and the fair market
value of the assets of any such plan exceeds the plan's "benefit          
 liabilities," as that term is defined in Section 4001(a)(16) of ERISA, when
determined under actuarial factors that would apply if the plan terminated
 in accordance with all applicable legal requirements. Since the date of the
most recent actuarial valuation, there has been (i) no material change in 
 the financial position of any Highwoods Pension Plan, (ii) no change in the
 actuarial assumptions with respect to any Highwoods Pension Plan, and (iii)
no increase in benefits under any Highwoods Pension Plan as a result of   
plan amendments or changes in applicable Law which is reasonably likely to
 have a Highwoods Material Adverse Effect or materially adversely affect the
 funding status of any such plan. Neither any Highwoods Pension Plan nor any
 "single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any Highwoods Entity, or the          
single-employer plan of any entity which is considered an ERISA Affiliate 
of Highwoods has an "accumulated funding deficiency" within the meaning of
Section 412 of the Internal Revenue Code or Section 302 of ERISA, which is
 reasonably likely to have a Highwoods Material Adverse Effect. No Highwoods
Entity has provided, or is required to provide, security to a Highwoods   
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant
to Section 401(a)(29) of the Internal Revenue Code.                       

   (d) No Liability under Subtitle C or D of Title IV of ERISA has been or
is expected to be incurred by any Highwoods Entity with respect to any    
ongoing, frozen, or terminated single-employer plan or the single-employer
 plan of any ERISA Affiliate, which Liability is reasonably likely to have a
Highwoods Material Adverse Effect. No Highwoods Entity has incurred any   
withdrawal Liability with respect to a multiemployer plan under Subtitle B
of Title IV of ERISA (regardless of whether based on contributions of an  
ERISA Affiliate), which Liability is reasonably likely to have a Highwoods
Material Adverse Effect. No notice of a "reportable event," within the    
 meaning of Section 4043 of ERISA for which the 30-day reporting requirement
has not been waived, has been required to be filed for any Highwoods      
 Pension Plan or by any ERISA Affiliate within the 12-month period ending on
the date hereof.                                                          

(e) Except as disclosed in Section 6.13 of the Highwoods Disclosure 
Memorandum, no Highwoods Entity has any Liability for retiree health and  
life benefits under any of the Highwoods Benefit Plans and there are no   
restrictions on the rights of such Highwoods Entity to amend or terminate 
any such retiree health or benefit Plan without incurring any Liability.  

 (f) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,    
supplemental retirement, or employment agreement) of employees and former 
 employees of any Highwoods Entity and their respective beneficiaries, other
than entitlements accrued pursuant to funded retirement plans subject to  
the provisions of Section 412 of the Internal Revenue Code or Section 302 
of ERISA, have been fully reflected on the Highwoods Financial Statements 
to the extent required by and in accordance with GAAP.                    

   6.14 Legal Proceedings. There is no Litigation instituted or pending, or,
to the Knowledge of Highwoods, threatened (or unasserted but considered         
probable of assertion and which if asserted would have at least a reasonable    
probability of an unfavorable outcome) against any Highwoods Entity, or against 
any director, employee or employee benefit plan of any Highwoods Entity, or     
against any Asset, interest, or right of any of them, that is reasonably likely 
to have a Highwoods Material Adverse Effect, nor are there any Orders of any    
Regulatory Authorities, other governmental authorities, or arbitrators          
outstanding against any Highwoods Entity, that are reasonably likely to have a  
Highwoods Material Adverse Effect.                                              

    6.15 Reports. Since January 1, 1993, or the date of organization if later,
each Highwoods Entity has timely filed all reports and statements, together     
with any amendments required to be made with respect thereto, that it was       
required to file with Regulatory Authorities except for those which the failure 
to file are not reasonably likely to have a Highwoods Material Adverse Effect). 
To the Knowledge of Highwoods, as of their respective dates, each of such       
reports and documents, including the financial statements, exhibits, and        
schedules thereto, complied in all material respects with all applicable Laws.  

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As of its respective date, each such report and document did not, in all        
material respects, contain any untrue statement of a material fact or omit to   
state a material fact required to be stated therein or necessary to make the    
statements made therein, in light of the circumstances under which they were    
made, not misleading, except for those untrue statements or omissions not       
reasonably expected to have a Highwoods Material Adverse Effect.                

    6.16 Statements True and Correct. No statement, certificate, instrument or
other writing furnished or to be furnished by any Highwoods Entity or any       
Affiliate thereof to JCN pursuant to this Agreement or any other document,      
agreement or instrument referred to herein contains or will contain any untrue  
statement of material fact or will omit to state a material fact necessary to   
make the statements therein, in light of the circumstances under which they     
were made, not misleading. None of the information supplied or to be supplied   
by any Highwoods Entity or any Affiliate thereof for inclusion in the           
Registration Statement to be filed by Highwoods with the SEC, will, when the    
Registration Statement becomes effective, be false or misleading with respect   
to any material fact, or omit to state any material fact necessary to make the  
statements therein not misleading. None of the information supplied or to be    
supplied by any Highwoods Entity or any Affiliate thereof for inclusion in the  
Proxy Statement to be mailed to JCN's shareholders in connection with the JCN   
Shareholders Meeting, and any other documents to be filed by any Highwoods      
Entity or any Affiliate thereof with the SEC or any other Regulatory Authority  
in connection with the transactions contemplated hereby, will, at the           
respective time such documents are filed, and with respect to the Proxy         
Statement, when first mailed to the shareholders of JCN, be false or misleading 
with respect to any material fact, or omit to state any material fact necessary 
to make the statements therein, in light of the circumstances under which they  
were made, not misleading, or, in the case of the Proxy Statement or any        
amendment thereof or supplement thereto, at the time of the JCN Shareholders    
Meeting, be false or misleading with respect to any material fact, or omit to   
state any material fact necessary to correct any statement in any earlier       
communication with respect to the solicitation of any proxy for the JCN         
Shareholders Meeting. All documents that any Highwoods Entity or any Affiliate  
thereof is responsible for filing with any Regulatory Authority in connection   
with the transactions contemplated hereby will comply as to form in all         
material respects with the provisions of applicable Law.                        

6.17 Authority of Sub. Sub is a corporation duly organized, validly   
existing and in good standing under the Laws of the State of Maryland as a      
wholly owned Subsidiary of Highwoods. The authorized capital stock of Sub       
consists of 1,000 shares of Sub Common Stock, all of which is validly issued    
and outstanding, fully paid and nonassessable and is owned by Highwoods free    
and clear of any Lien. Sub has the corporate power and authority necessary to   
execute, deliver and perform its obligations under this Agreement and to        
consummate the transactions contemplated hereby. The execution, delivery and    
performance of this Agreement and the consummation of the transactions          
contemplated herein, including the Merger, have been duly and validly           
authorized by all necessary corporate action in respect thereof on the part of  
Sub. This Agreement represents a legal, valid, and binding obligation of Sub,   
enforceable against Sub in accordance with its terms (except in all cases as    
such enforceability may be limited by applicable bankruptcy, insolvency,        
reorganization, moratorium, or similar Laws affecting the enforcement of        
creditors' rights generally and except that the availability of the equitable   
remedy of specific performance or injunctive relief is subject to the           
discretion of the court before which any proceeding may be brought).            

6.18 Tax and Regulatory Matters. No Highwoods Entity or any Affiliate 
thereof has taken or agreed to take any action or has any Knowledge of any fact 
or circumstance that is reasonably likely to (i) prevent the Merger from        
qualifying as a reorganization within the meaning of Section 368(a) of the      
Internal Revenue Code, or (ii) materially impede or delay receipt of any        
Consents of Regulatory Authorities referred to in Section 9.1(b) or result in   
the imposition of a condition or restriction of the type referred to in the     
last sentence of Section 9.1(b).                                                

    6.19 Rights Agreement. Execution of this Agreement and consummation of the
Merger and the other transactions contemplated by this Agreement will not       
result in the grant of any rights to any Person under the Highwoods Rights      
Agreement (other than as contemplated by Section 3.1) or enable or require the  
Highwoods Rights to be exercised, distributed or triggered.                     

ARTICLE 7 
CONDUCT OF BUSINESS PENDING CONSUMMATION  

 7.1 Affirmative Covenants of JCN. From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement, unless  
the prior written consent of Highwoods shall have been obtained, and except as  
otherwise expressly contemplated herein or as set forth in the capital budget   
for JCN as detailed in Section 7.1 of the JCN Disclosure Memorandum, JCN shall  
and shall cause each of its Subsidiaries to (a) operate its business only in    
the usual, regular, and ordinary course, (b) preserve intact its business       
organization and Assets and maintain its rights and franchises, (c) take        

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no action which would (i) adversely affect the ability of any Party to obtain   
any Consents required for the transactions contemplated hereby without          
imposition of a condition or restriction of the type referred to in the last    
sentences of Section 9.1(b) or 9.1(c), or (ii) adversely affect the ability of  
any Party to perform its covenants and agreements under this Agreement, and (d) 
aggressively take such actions as may reasonably be necessary to prevent any    
violation of Law by any Person suggesting a competing Acquisition Proposal      
without first obtaining the endorsement of the JCN Board of Directors for such  
Acquisition Proposal.                                                           

  7.2 Negative Covenants of JCN. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, unless the  
prior written consent of Highwoods shall have been obtained, and except as      
otherwise expressly contemplated herein, JCN covenants and agrees that it will  
not do or agree or commit to do, or permit any of its Subsidiaries to do or     
agree or commit to do, any of the following:                                    

 (a) amend the Certificate of Incorporation, Bylaws or other governing
instruments of any JCN Entity; or                                               

(b) other than as provided in Section 7.2(b) of the JCN Disclosure  
Memorandum, incur any additional debt obligation or other obligation for  
borrowed money (other than indebtedness of a JCN Entity to another JCN    
Entity) in excess of an aggregate of $250,000 (for the JCN Entities on a  
consolidated basis) except in the ordinary course of the business of JCN  
Subsidiaries consistent with past practices, or impose, or suffer the     
imposition, on any Asset of any JCN Entity of any Lien or permit any such 
 Lien to exist (other than in connection with Liens in effect as of the date
hereof that are disclosed in the JCN Disclosure Memorandum); or           

   (c) repurchase, redeem, or otherwise acquire or exchange (other than in
settlement of obligations then owed by the ESOT (as defined below) to JCN 
as reasonably approved by Highwoods and other than exchanges in the       
ordinary course under employee benefit plans), directly or indirectly, any
 shares, or any securities convertible into any shares, of the capital stock
of any JCN Entity, or declare or pay any dividend or make any other       
distribution in respect of JCN's capital stock; or                        

(d) except for this Agreement, or pursuant to the exercise of stock 
 options outstanding as of the date hereof and pursuant to the terms thereof
in existence on the date hereof or as disclosed in Section 7.2(d) of the  
JCN Disclosure Memorandum, issue, sell, pledge, encumber, authorize the   
issuance of, enter into any Contract to issue, sell, pledge, encumber, or 
authorize the issuance of, or otherwise permit to become outstanding, any 
 additional shares of JCN Common Stock or any other capital stock of any JCN
Entity, or any stock appreciation rights, or any option, warrant, or other
Equity Right; or                                                          

(e) except as provided in Section 7.2(e) of the JCN Disclosure      
Memorandum, adjust, split, combine or reclassify any capital stock of any 
JCN Entity or issue or authorize the issuance of any other securities in  
respect of or in substitution for shares of JCN Common Stock, or sell,    
lease, mortgage or otherwise dispose of or otherwise encumber (x) any     
shares of capital stock of any JCN Subsidiary (unless any such shares of  
stock are sold or otherwise transferred to another JCN Entity) or (y) any 
Asset having a book value or gross lease value (with respect to any new   
Lease of a JCN Property) in excess of $50,000 other than in the ordinary  
course of business for reasonable and adequate consideration; or          

   (f) except for purchases of U.S. Treasury securities or U.S. Government
agency securities, which in either case have maturities of three years or 
less, purchase any securities or make any material investment, either by  
 purchase of stock of securities, contributions to capital, Asset transfers,
or purchase of any Assets, in any Person other than a wholly owned JCN    
Subsidiary, or otherwise acquire direct or indirect control over any      
Person, other than in connection with (i) foreclosures in the ordinary    
course of business, or (ii) the creation of new wholly owned Subsidiaries 
organized to conduct or continue activities otherwise permitted by this   
Agreement; or                                                             

  (g) grant any increase in compensation or benefits to the employees or
officers of any JCN Entity, except in accordance with past practice       
disclosed in Section 7.2(g) of the JCN Disclosure Memorandum and as       
reasonably approved by Highwoods or as required by Law; pay any severance 
or termination pay or any bonus other than pursuant to written policies or
written Contracts in effect on the date of this Agreement and disclosed in
Section 7.2(g) of the JCN Disclosure Memorandum; enter into or amend any  
severance agreements with officers of any JCN Entity; grant any material  
increase in fees or other increases in compensation or other benefits to  
directors of any JCN Entity except in accordance with past practice       
disclosed in Section 7.2(g) of the JCN Disclosure Memorandum; or          

  (h) enter into or amend any employment Contract between any JCN Entity
and any Person (unless such amendment is required by Law) that the JCN    
 Entity does not have the unconditional right to terminate without Liability
(other than Liability for services already rendered), at any time on or   
after the Effective Time; or                                              

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(i) except as provided in Section 7.2(i) of the JCN Disclosure      
Memorandum, adopt any new employee benefit plan of any JCN Entity or      
terminate or withdraw from, or make any material change in or to, any     
existing employee benefit plans of any JCN Entity other than any such     
change that is required by Law or that, in the opinion of counsel, is     
necessary or advisable to maintain the tax qualified status of any such   
 plan, or make any distributions from such employee benefit plans, except as
required by Law, the terms of such plans or consistent with past practice;
or                                                                        

(j) make any significant change in any Tax or accounting methods or 
systems of internal accounting controls, except as may be appropriate to  
conform to changes in Tax Laws or regulatory accounting requirements or   
GAAP; or                                                                  

    (k) commence any Litigation other than in accordance with past practice,
settle any Litigation involving any Liability of any JCN Entity for       
material money damages or restrictions upon the operations of any JCN     
Entity without first providing notice thereof to Highwoods and obtaining  
Highwoods consent, which consent shall not be unreasonably withheld; or   

   (l) make any payments or accommodations to the Employee Stock Ownership
Trust of the J.C. Nichols Company ("ESOT") or any other shareholder       
relating directly or indirectly to any of the costs, expenses or other    
charges (including break-up fees owed to any third-party) of the ESOT or  
any other shareholder related to or arising out of directly or indirectly 
any of the transactions contemplated by this Agreement without first      
obtaining Highwoods consent; or                                           

 (m) without first providing notice thereof to Highwoods and obtaining
Highwoods consent, which consent shall not be unreasonably withheld and,  
except in the ordinary course of business, enter into, modify, amend or   
 terminate any material Contract (including any loan Contract with an unpaid
balance exceeding $50,000) or waive, release, compromise or assign any    
material rights or claims.                                                

7.3 Covenants of Highwoods. From the date of this Agreement until the 
earlier of the Effective Time or the termination of this Agreement, unless the  
prior written consent of JCN shall have been obtained, and except as otherwise  
expressly contemplated herein, Highwoods covenants and agrees that it shall (a) 
continue to conduct its business and the business of its Subsidiaries in a      
manner designed in its reasonable judgment, to continue it to meet the          
requirements for qualification as a real estate investment trust under Sections 
856-860 of the Internal Revenue Code and to enhance the long-term value of the  
Highwoods Common Stock and the business prospects of the Highwoods Entities and 
to the extent consistent therewith use all reasonable efforts to preserve       
intact the Highwoods Entities' core businesses and goodwill with their          
respective employees and the communities they serve, (b) take no action which   
would (i) materially adversely affect the ability of any Party to obtain any    
Consents required for the transactions contemplated hereby without imposition   
of a condition or restriction of the type referred to in the last sentences of  
Section 9.1(b) or 9.1(c), or (ii) materially adversely affect the ability of    
any Party to perform its covenants and agreements under this Agreement;         
provided, that the foregoing shall not prevent any Highwoods Entity from        
acquiring any Assets or other businesses or from discontinuing or disposing of  
any of its Assets or business if such action is, in the judgment of Highwoods,  
desirable in the conduct of the business of Highwoods and its Subsidiaries.     
Highwoods further covenants and agrees that it will not, without the prior      
written consent of JCN, which consent shall not be unreasonably withheld, amend 
the Amended and Restated Articles of Incorporation or Bylaws of Highwoods, in   
each case, in any manner adverse to the holders of JCN Common Stock as compared 
to rights of holders of Highwoods Common Stock generally as of the date of this 
Agreement. Highwoods shall take all action necessary under the MGCL prior to    
the Effective Time for Sub to enter into and consummate the transactions        
contemplated hereunder, including the Merger.                                   

7.4 Adverse Changes in Condition.                                         

    (a) Each Party agrees to give written notice promptly to the other Party
upon becoming aware of the occurrence or impending occurrence of any event
or circumstance relating to it or any of its Subsidiaries which (i) is    
 reasonably likely to have, individually or in the aggregate, a JCN Material
Adverse Effect or a Highwoods Material Adverse Effect, as applicable, or  
(ii) would cause or constitute a material breach of any of its            
representations, warranties, or covenants contained herein, and to use its
reasonable efforts to prevent or promptly to remedy the same.             

(b) Unless JCN, based upon the advice of tax counsel, is reasonably 
satisfied that JCN shareholders receiving only Highwoods Common Stock in  
the Merger will incur no income tax liability as a result of the Merger,  
the parties shall develop a mutually acceptable plan that carries out as  
nearly as possible the economic results provided herein without resulting 
in income tax liability for JCN shareholders receiving only Highwoods     
Common Stock.                                                             

7.5 Reports. Each Party and its Subsidiaries shall file all reports   
required to be filed by it with Regulatory Authorities between the date of this 
Agreement and the Effective Time and shall deliver to the other Party copies of 
all such reports                                                                

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promptly after the same are filed. If financial statements are contained in any 
such reports filed with the SEC, such financial statements will fairly present  
the consolidated financial position of the entity filing such statements as of  
the dates indicated and the consolidated results of operations, changes in      
shareholders' equity, and cash flows for the periods then ended in accordance   
with GAAP (subject in the case of interim financial statements to normal        
recurring year-end adjustments that are not material). As of their respective   
dates, such reports filed with the SEC will comply in all material respects     
with the Securities Laws and will not contain any untrue statement of a         
material fact or omit to state a material fact required to be stated therein or 
necessary in order to make the statements therein, in light of the              
circumstances under which they were made, not misleading. Any financial         
statements contained in any other reports to another Regulatory Authority shall 
be prepared in accordance with Laws applicable to such reports.                 

ARTICLE 8 
ADDITIONAL AGREEMENTS 

    8.1 Registration Statement; Proxy Statement; Shareholder Approval. As soon
as reasonably practicable after execution of this Agreement, Highwoods shall    
prepare and file the Registration Statement with the SEC, and shall use its     
reasonable efforts to cause the Registration Statement to become effective      
under the 1933 Act and take any action required to be taken under the           
applicable state Blue Sky or securities Laws in connection with the issuance of 
the shares of Highwoods Common Stock upon consummation of the Merger. JCN shall 
cooperate in the preparation and filing of the Registration Statement and shall 
furnish all information concerning it and the holders of its capital stock as   
Highwoods may reasonably request in connection with such action. JCN shall call 
the JCN Shareholders Meeting, to be held as soon as reasonably practicable      
after the Registration Statement is declared effective by the SEC, for the      
purpose of voting upon approval of this Agreement and such other related        
matters as it deems appropriate. In connection with the JCN Shareholders        
Meeting, (i) JCN shall prepare and file with the SEC a Proxy Statement and mail 
such Proxy Statement to its shareholders, (ii) the Parties shall furnish to     
each other all information concerning them that they may reasonably request in  
connection with such Proxy Statement, (iii) the Board of Directors of JCN shall 
recommend to its shareholders the approval of the matters submitted for         
approval (subject to the Board of Directors of JCN, after having consulted with 
outside counsel, reasonably determining in good faith that the making of such   
recommendation, or the failure to withdraw or modify its recommendation, would  
be inconsistent with the fiduciary duties of the members of such Board of       
Directors to JCN's shareholders under applicable law), and (iv) the Board of    
Directors and officers of JCN shall use their reasonable efforts to obtain such 
shareholders' approval (subject to the Board of Directors of JCN, after having  
consulted with outside counsel, reasonably determining in good faith the taking 
of such actions would be inconsistent with the fiduciary duties of the members  
of such Board of Directors to JCN's shareholders under applicable law).         
Highwoods and JCN shall make all necessary filings with respect to the Merger   
under the Securities Laws.                                                      

8.2 Exchange Listing. Highwoods shall cause to be listed, prior to the
Effective Time, on the NYSE, subject to official notice of issuance, the shares 
of Highwoods Common Stock to be issued to the holders of JCN Common Stock       
pursuant to the Merger, and Highwoods shall give all notices and make all       
filings with the NYSE required in connection with the transactions contemplated 
herein.                                                                         

    8.3 Applications; Antitrust Notification. Highwoods shall promptly prepare
and file, and JCN shall cooperate in the preparation and, where appropriate,    
filing of, applications with all Regulatory Authorities having jurisdiction     
over the transactions contemplated by this Agreement seeking the requisite      
Consents necessary to consummate the transactions contemplated by this          
Agreement. To the extent required by the HSR Act, each of the Parties will      
promptly file with the United States Federal Trade Commission and the United    
States Department of Justice the notification and report form required for the  
transactions contemplated hereby and any supplemental or additional information 
which may reasonably be requested in connection therewith pursuant to the HSR   
Act and will comply in all material respects with the requirements of the HSR   
Act. The Parties shall deliver to each other copies of all filings,             
correspondence and orders to and from all Regulatory Authorities in connection  
with the transactions contemplated hereby. The Parties agree that the           
consummation of the Merger does not require any filings or approvals under the  
HSR Act.                                                                        

8.4 Filings with State Offices. Upon the terms and subject to the     
conditions of this Agreement, Sub shall execute and file the Articles of Merger 
with the Secretary of State of the State of Missouri and the Articles of Merger 
with the Department of Assessment and Taxation of the State of Maryland in      
connection with the Closing.                                                    

8.5 Agreement as to Efforts to Consummate. Subject to the terms and   
conditions of this Agreement, each Party agrees to use, and to cause its        
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all  
actions, and to do, or cause to be done, all things necessary, proper, or       
advisable under applicable Laws to consummate and make effective, as soon as    

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reasonably practicable after the date of this Agreement, the transactions       
contemplated by this Agreement, including using its reasonable efforts to lift  
or rescind any Order adversely affecting its ability to consummate the          
transactions contemplated herein and to cause to be satisfied the conditions    
referred to in Article 9; provided, that nothing herein shall preclude either   
Party from exercising its rights under this Agreement. Each Party shall use,    
and shall cause each of its Subsidiaries to use, its reasonable efforts to      
obtain all Consents necessary or desirable for the consummation of the          
transactions contemplated by this Agreement.                                    

8.6 Investigation and Confidentiality.                                    

  (a) Prior to the Effective Time, each Party shall keep the other Party
advised of all material developments relevant to its business and to      
consummation of the Merger and shall permit the other Party to make or    
cause to be made such investigation of the business and properties of it  
 and its Subsidiaries and of their respective financial and legal conditions
as the other Party reasonably requests, provided that such investigation  
shall be reasonably related to the transactions contemplated hereby and   
shall not interfere unnecessarily with normal operations. No investigation
by a Party shall affect the representations and warranties of the other   
Party.                                                                    

(b) In addition to the Parties' respective obligations under the    
Confidentiality Agreement, which is hereby reaffirmed and adopted, and    
incorporated by reference herein, each Party shall, and shall cause its   
advisers and agents to, maintain the confidentiality of all confidential  
information furnished to it by the other Party concerning its and its     
 Subsidiaries' businesses, operations, and financial positions and shall not
use such information for any purpose except in furtherance of the         
transactions contemplated by this Agreement. If this Agreement is         
 terminated prior to the Effective Time, each Party shall promptly return or
certify the destruction of all documents and copies thereof, and all work 
papers containing confidential information received from the other Party. 

(c) Each Party agrees to give the other Party notice as soon as     
practicable after any determination by it of any fact or occurrence       
relating to the other Party which it has discovered through the course of 
its investigation and which represents, or is reasonably likely to        
represent, either a material breach of any representation, warranty,      
covenant or agreement of the other Party or which has had or is reasonably
likely to have a JCN Material Adverse Effect or a Highwoods Material      
Adverse Effect, as applicable. Each party hereby represents and warrants  
that it knows of no such fact or occurrence as of the date of this        
Agreement.                                                                

  8.7 Press Releases. Prior to the Effective Time, JCN and Highwoods shall
consult with each other as to the form and substance of any press release or    
other public disclosure materially related to this Agreement or any other       
transaction contemplated hereby; provided, that nothing in this Section 8.7     
shall be deemed to prohibit any Party from making any disclosure which its      
counsel deems necessary or advisable in order to satisfy such Party's           
disclosure obligations imposed by Law.                                          

8.8 Certain Actions.                                                      

(a) Except with respect to this Agreement and the transactions      
contemplated hereby, no JCN Entity nor any officer or director thereof nor
any Representatives thereof retained by any JCN Entity shall directly or  
indirectly solicit any Acquisition Proposal by any Person. Except to the  
extent the Board of Directors of JCN, after having consulted with and     
considered the advice of outside counsel, reasonably determines in good   
faith that the failure to take such actions would constitute a breach of  
fiduciary duties of the members of such Board of Directors to JCN's       
 shareholders under applicable law, no JCN Entity or any officer or director
or Representative thereof shall furnish any non-public information that it
is not legally obligated to furnish, negotiate with respect to, or enter  
into any Contract with respect to, any Acquisition Proposal. JCN may      
communicate information about such an Acquisition Proposal to its         
shareholders if and to the extent that it is required to do so in order to
comply with its legal obligations as advised by outside counsel. JCN shall
 promptly advise Highwoods following the receipt of any Acquisition Proposal
or any inquiry concerning a possible Acquisition Proposal and the details 
thereof, and advise Highwoods of any developments with respect to such    
Acquisition Proposal or inquiry promptly upon the occurrence thereof. JCN 
shall (i) immediately cease and cause to be terminated any existing       
activities, discussions or negotiations with any Persons conducted        
heretofore with respect to any of the foregoing, and (ii) use its         
reasonable efforts to cause all of its Affiliates and Representatives not 
to engage in any of the foregoing. JCN also agrees to take reasonable     
efforts to prevent any employee of any JCN Entity from committing any of  
the foregoing acts.                                                       

(b) During the period from the date of this Agreement through the   
Effective Time (or earlier termination hereof), none of the JCN Entities  
shall terminate, amend, modify or waive any provision of any              
 confidentiality or standstill agreement to which it is a party. During such
period, the JCN Entities shall enforce, to the fullest extent permitted   
under                                                                     

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applicable law, the provisions of any such agreement, including, but not  
limited to, by obtaining injunctions to prevent any breaches of any such  
agreements and to enforce specifically the terms and provisions thereof in
any court having jurisdiction.                                            

 8.9 Tax Treatment. Each of the Parties undertakes and agrees to use its
reasonable efforts to cause the Merger, and to take no action which would cause 
the Merger not, to qualify for or as a "reorganization" within the meaning of   
Section 368(a) of the Internal Revenue Code for federal income tax purposes,    
including obtaining letters or other written instruments evidencing investment  
intent from the requisite number of JCN Shareholders.                           

  8.10 State Takeover Laws. Each JCN Entity shall take all necessary steps
to exempt the transactions contemplated by this Agreement from, or if necessary 
to challenge the validity or applicability of, any applicable Takeover Law,     
including Section 351.459 of the GBCL.                                          

  8.11 Charter Provisions. Each JCN Entity shall take all necessary action
to ensure that the entering into of this Agreement and the consummation of the  
Merger and the other transactions contemplated hereby do not and will not       
result in the grant of any rights to any Person under the Certificate of        
Incorporation, Bylaws or other governing instruments of any JCN Entity or       
restrict or impair the ability of Highwoods or any of its Subsidiaries to vote, 
or otherwise to exercise the rights of a shareholder with respect to, shares of 
any JCN Entity that may be directly or indirectly acquired or controlled by     
them.                                                                           

    8.12 Agreement of Affiliates. JCN has disclosed in Section 8.12 of the JCN
Disclosure Memorandum all Persons it reasonably believes are an "affiliate" of  
JCN for purposes of Rule 145 under the 1933 Act. JCN shall use its reasonable   
efforts to cause each such Person to deliver to Highwoods not later than 30     
days prior to the Effective Time, a written agreement providing that such       
Person will not sell, pledge, transfer, or otherwise dispose of the shares of   
Highwoods Common Stock to be received by such Person upon consummation of the   
Merger except in compliance with applicable provisions of the 1933 Act and the  
rules and regulations thereunder. Highwoods shall not be required to maintain   
the effectiveness of the Registration Statement under the 1933 Act for the      
purposes of resale of Highwoods Common Stock by such affiliates who do not      
enter into such written agreements.                                             

8.13 Employee Benefits and Contracts. Following the Effective Time,   
Highwoods shall provide generally to officers and employees of the JCN Entities 
employee benefits under employee benefit and welfare plans (other than stock    
option or other plans involving the potential issuance of Highwoods Common      
Stock), on terms and conditions which when taken as a whole are substantially   
similar to those currently provided by the Highwoods Entities to their          
similarly situated officers and employees. For purposes of participation,       
vesting and (except in the case of Highwoods retirement plans) benefit accrual  
under Highwoods' employee benefit plans, the service of the employees of the    
JCN Entities prior to the Effective Time shall be treated as service with a     
Highwoods Entity participating in such employee benefit plans. Highwoods also   
shall cause the Surviving Corporation and its Subsidiaries to honor in          
accordance with their terms all employment, severance, consulting and other     
compensation Contracts disclosed in Section 8.13 of the JCN Disclosure          
Memorandum to Highwoods between any JCN Entity and any current or former        
director, officer, or employee thereof, and all provisions for vested benefits  
or other vested amounts earned or accrued through the Effective Time under the  
JCN Benefit Plans.                                                              

8.14 Indemnification.                                                     

    (a) For a period of six years after the Effective Time, Highwoods shall,
and shall cause the Surviving Corporation to, indemnify, defend and hold  
harmless the present and former directors, officers, employees and agents 
of the JCN Entities (each, an "Indemnified Party") against all Liabilities
arising out of actions or omissions arising out of the Indemnified Party's
service or services as directors, officers, employees or agents of any JCN
Entity or, at any JCN Entity's request, of another corporation,           
 partnership, joint venture, trust or other enterprise occurring at or prior
to the Effective Time (including the transactions contemplated by this    
Agreement) to the fullest extent permitted under Missouri Law and by the  
Certificate of Incorporation and Bylaws and any other organizational      
instruments of the applicable JCN Entity as in effect on the date hereof, 
including provisions relating to advances of expenses incurred in the     
defense of any Litigation and whether or not any Highwoods Entity is      
insured against any such matter. Without limiting the foregoing, in any   
case in which approval by the Surviving Corporation is required to        
effectuate any indemnification, the Surviving Corporation shall direct, at
the election of the Indemnified Party, that the determination of any such 
approval shall be made by independent counsel mutually agreed upon between
Highwoods and the Indemnified Party.                                      

     (b) Highwoods shall, or shall cause the Surviving Corporation to, use its
reasonable efforts (and JCN shall cooperate prior to the Effective Time in
these efforts) to maintain in effect for a period of three years after the
Effective                                                                 

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Time JCN's existing directors' and officers' liability insurance policy   
(provided that Highwoods may substitute therefor (i) policies of at least 
the same coverage and amounts containing terms and conditions which are   
substantially no less advantageous or (ii) with the consent of JCN given  
prior to the Effective Time, any other policy) with respect to claims     
 arising from facts or events which occurred prior to the Effective Time and
covering persons who are currently covered by such insurance; provided,   
that neither Highwoods nor the Surviving Corporation shall be obligated to
make aggregate premium payments for such three-year period in respect of  
such policy (or coverage replacing such policy) which exceed, for the     
 portion related to JCN's directors and officers, 200% of the annual premium
 payments on JCN's current policy in effect as of the date of this Agreement
 (the "Maximum Amount"). If the amount of the premiums necessary to maintain
or procure such insurance coverage exceeds the Maximum Amount, Highwoods  
 shall use its reasonable efforts to maintain the most advantageous policies
of directors' and officers' liability insurance obtainable for a premium  
equal to the Maximum Amount.                                              

(c) Any Indemnified Party wishing to claim indemnification under    
paragraph (a) of this Section 8.14, upon learning of any such Liability or
Litigation, shall promptly notify Highwoods thereof. In the event of any  
such Litigation (whether arising before or after the Effective Time), (i) 
Highwoods or the Surviving Corporation shall have the right (but only     
 subsequent to the Effective Time) to assume the defense thereof and neither
 Highwoods nor the Surviving Corporation shall be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses     
subsequently incurred by such Indemnified Parties in connection with the  
defense thereof, except that if Highwoods or the Surviving Corporation    
elects not to assume such defense or counsel for the Indemnified Parties  
 advises that there are substantive issues which raise conflicts of interest
 between Highwoods or the Surviving Corporation and the Indemnified Parties,
the Indemnified Parties may retain counsel satisfactory to them, and      
Highwoods or the Surviving Corporation shall pay all reasonable fees and  
 expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received; provided, that Highwoods and the Surviving         
Corporation shall be obligated pursuant to this paragraph (c) to pay for  
only one firm of counsel for all Indemnified Parties in any jurisdiction, 
(ii) the Indemnified Parties will cooperate in the defense of any such    
 Litigation, and (iii) neither Highwoods nor the Surviving Corporation shall
be liable for any settlement effected without its prior written consent,  
 which consent shall not be unreasonably withheld; and provided further that
neither Highwoods nor the Surviving Corporation shall have any obligation 
hereunder to any Indemnified Party when and if a court of competent       
jurisdiction shall determine, and such determination shall have become    
final, that the indemnification of such Indemnified Party in the manner   
contemplated hereby is prohibited by applicable Law.                      

(d) If Highwoods or the Surviving Corporation or any successors or  
 assigns shall consolidate with or merge into any other Person and shall not
be the continuing or surviving Person of such consolidation or merger or  
shall transfer all or substantially all of its assets to any Person, then 
 and in each case, proper provision shall be made so that the successors and
assigns of Highwoods or the Surviving Corporation shall assume the        
obligations set forth in this Section 8.14.                               

(e) The provisions of this Section 8.14 are intended to be for the  
benefit of and shall be enforceable by, each Indemnified Party and their  
respective heirs and representatives.                                     

8.15 Tenant Estoppels. JCN shall endeavor to use reasonable commercial
efforts to obtain prior to the Effective Date, tenant estoppel certificates for 
the 100 largest Leases (based on gross rental payments) with respect to the JCN 
Properties in form reasonably acceptable to Highwoods.                          

   8.16 Maintenance of Organizational Structure. Highwoods acknowledges that
its present operating structure enables a level of operational flexibility that 
facilitates the growth of Highwoods and its business. Highwoods shall not alter 
its current operating structure in any material respect, except to the extent   
the Board of Directors of Highwoods determines in good faith that such          
alteration is in the best interests of the shareholders of Highwoods.           

  8.17 Maintenance of Plaza Redevelopment Plan. Highwoods acknowledges the
economic and social significance of the Country Club Plaza district (the        
"Plaza") to Kansas City, Missouri and surrounding communities, and further      
acknowledges the importance of the development and redevelopment of the Plaza   
by the JCN Entities. From and after the Effective Time, Highwoods shall         
continue to pursue each portion of the Plaza redevelopment plan unless the      
economics of any single portion of the redevelopment plan, or changes in        
circumstances beyond the reasonable control of Highwoods, causes the Board of   
Directors of Highwoods to determine in good faith, after consideration of       
available alternatives, that such redevelopment plan or portion thereof is      
contrary to the best interests of the shareholders of Highwoods.                

    8.18 Maintenance of Charitable Contributions. From and after the Effective
Time, Highwoods shall make annual charitable contributions and provide          
community support in the geographic areas in which the business of JCN is       
currently                                                                       

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operated, at levels substantially comparable to or greater than the levels of   
charitable contributions and community support provided by JCN Entities within  
such areas during calendar year 1996 and the period from January 1, 1997        
through the date of this Agreement.                                             

  8.19 Maintenance of Merchant Support. From and after the Effective Time,
Highwoods shall provide annual financial assistance and marketing support to    
merchants' associations relating to properties currently owned or operated by   
any JCN Entity, at levels substantially comparable to or greater than the       
levels of such support provided by JCN Entities during calendar year 1996 and   
the period from January 1, 1997 through the date of this Agreement.             

    8.20 Member of Board of Directors. Highwoods shall appoint to its Board of
Directors an individual (who would qualify as an independent director under     
Highwoods' Articles of Incorporation and bylaws) designated by JCN's Board of   
Directors, which designee shall be reasonably acceptable to the Highwoods Board 
of Directors to serve until the next annual shareholders meeting, at which time 
the Highwoods Board of Directors will nominate and recommend such designee for  
a three-year term on Highwoods Board of Directors.                              

ARTICLE 9 
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE 

    9.1 Conditions to Obligations of Each Party. The respective obligations of
each Party to perform this Agreement and consummate the Merger and the other    
transactions contemplated hereby are subject to the satisfaction of the         
following conditions, unless waived by both Parties pursuant to Section 11.6:   

 (a) Shareholder Approval. The shareholders of JCN shall have approved
this Agreement, and the consummation of the transactions contemplated     
hereby, including the Merger, as and to the extent required by Law, by the
provisions of any governing instruments, or by the rules of the NASD, if  
applicable.                                                               

(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for       
 consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have  
expired.                                                                  

  (c) Third Party Consents and Approvals. Each Party shall have obtained
any and all Consents required for consummation of the Merger (other than  
those referred to in Section 9.1(b)), which as to JCN, the parties agree  
shall include only those Consents set forth in Section 9.1 of the JCN     
Disclosure Memorandum. In the event such third party does not make such   
payment within ten days of demand therefor by Highwoods, the payment shall
be an obligation of JCN and shall be paid by JCN within two business days 
of notice to JCN by Highwoods. In addition to the Consents set forth in   
 Section 9.1 to the JCN Disclosure Memorandum, to the extent required by the
applicable contract, mortgage, document or other instrument, JCN shall use
commercially reasonable efforts to obtain the consent of (i) any lender to
 JCN and (ii) any other party reasonably identified by Highwoods. No Consent
so obtained which is necessary to consummate the transactions contemplated
hereby shall be conditioned or restricted in a manner which in the        
reasonable judgment of the Board of Directors of Highwoods would so       
materially adversely impact the economic or business benefits of the      
transactions contemplated by this Agreement that, had such condition or   
requirement been known, such Party would not, in its reasonable judgment, 
have entered into this Agreement.                                         

   (d) Legal Proceedings. No court or governmental or regulatory authority
 of competent jurisdiction shall have enacted, issued, promulgated, enforced
or entered any Law or Order (whether temporary, preliminary or permanent) 
or taken any other action which prohibits, restricts or makes illegal     
consummation of the transactions contemplated by this Agreement.          

     (e) Registration Statement. The Registration Statement shall be effective
under the 1933 Act, no stop orders suspending the effectiveness of the    
Registration Statement shall have been issued, no action, suit, proceeding
 or investigation by the SEC to suspend the effectiveness thereof shall have
been initiated and be continuing, and all necessary approvals under state 
 securities Laws or the 1933 Act or the 1934 Act relating to the issuance or
trading of the shares of Highwoods Common Stock issuable pursuant to the  
Merger shall have been received.                                          

(f) Exchange Listing. The shares of Highwoods Common Stock issuable 
pursuant to the Merger shall have been approved for listing on the NYSE,  
subject to official notice of issuance.                                   

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  9.2 Conditions to Obligations of Highwoods. The obligations of Highwoods
to perform this Agreement and consummate the Merger and the other transactions  
contemplated hereby are subject to the satisfaction of the following            
conditions, unless waived by Highwoods pursuant to Section 11.6(a):             

    (a) Representations and Warranties. For purposes of this Section 9.2(a),
 the accuracy of the representations and warranties of JCN set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that   
 representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties set forth 
 in Section 5.3 shall be true and correct (except for inaccuracies which are
de minimus in amount). The representations and warranties set forth in    
Sections 5.18, 5.19, and 5.20 shall be true and correct in all material   
respects. No representation or warranty of JCN set forth in this Agreement
shall be deemed untrue or incorrect, and no JCN Entity shall be deemed to 
have breached a representation or warranty, as a consequence of the       
 existence of any fact, circumstance or event unless such fact, circumstance
 or event, individually or taken together with other facts, circumstances or
events inconsistent with any other representation or warranty has had, or 
is expected to have, a JCN Material Adverse Effect; provided that, for    
purposes of this sentence only, those representations and warranties which
are qualified by references to "material" or "Material Adverse Effect" or 
to the "Knowledge" of any Person shall be deemed not to include such      
qualifications.                                                           

(b) Performance of Agreements and Covenants. Each and all of the    
agreements and covenants of JCN to be performed and complied with pursuant
 to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all    
material respects, as of the Effective Time.                              

(c) Certificates. JCN shall have delivered to Highwoods (i) a       
 certificate, dated as of the Effective Time and signed on its behalf by its
 chief executive officer and its chief financial officer, to the effect that
the conditions set forth in Section 9.1 as relates to JCN and in Section  
9.2(a) and 9.2(b) have been satisfied, and (ii) certified copies of       
resolutions duly adopted by JCN's Board of Directors and shareholders     
evidencing the taking of all corporate action necessary to authorize the  
 execution, delivery and performance of this Agreement, and the consummation
of the transactions contemplated hereby, all in such reasonable detail as 
Highwoods and its counsel shall request.                                  

(d) Opinion of Counsel. Highwoods shall have received an opinion of 
 Blackwell Sanders Matheny Weary & Lombardi L.L.P., counsel to JCN, dated as
of the Closing, in form reasonably satisfactory to Highwoods, as to the   
matters set forth in Exhibit 1.                                           

  (e) Accountant's Letters. Highwoods shall have received from KPMG Peat
Marwick LLP letters dated not more than five days prior to (i) the date of
the Proxy Statement and (ii) the Effective Time, with respect to certain  
financial information regarding JCN, in form and substance reasonably     
satisfactory to Highwoods, which letters shall be based upon customary    
specified procedures undertaken by such firm in accordance with Statement 
of Auditing Standard Nos. 72 and 75.                                      

   (f) Rights Agreement. Neither this Agreement and any agreements related
hereto nor consummation of the Merger shall have caused or shall cause any
 of the JCN Rights to become non-redeemable or exercisable for capital stock
of Highwoods or JCN.                                                      

  (g) Shareholders' Equity. JCN's shareholders' equity as of the Closing
shall not be less than JCN's shareholders' equity as of March 31, 1997,   
excluding for purposes of the calculation of such shareholders' equity the
effects of (i) all costs, fees and charges, including fees and charges of 
JCN's accountants, counsel and financial advisors, whether or not accrued 
or paid, that are related to the transactions contemplated by this        
Agreement and (ii) any reductions in JCN's shareholders' equity resulting 
from any actions or changes in policies of JCN taken at the request of    
Highwoods.                                                                

 9.3 Conditions to Obligations of JCN. The obligations of JCN to perform
this Agreement and consummate the Merger and the other transactions             
contemplated hereby are subject to the satisfaction of the following            
conditions, unless waived by JCN pursuant to Section 11.6(b):                   

    (a) Representations and Warranties. For purposes of this Section 9.3(a),
the accuracy of the representations and warranties of Highwoods set forth 
 in this Agreement shall be assessed as of the date of this Agreement and as
of the Effective Time with the same effect as though all such             
representations and warranties had been made on and as of the Effective   
Time (provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and 
 warranties of Highwoods set forth in Section 6.15 shall be true and correct
in all material respects. No representation or warranty of Highwoods set  
forth in this Agreement shall be deemed untrue or incorrect, and no       
Highwoods Entity shall be deemed to have breached a representation or     
warranty, as a consequence                                                

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of the existence of any fact, circumstance or event unless such fact,     
 circumstance or event, individually or taken together with all other facts,
circumstances or events inconsistent with any other representation or     
warranty has had, or is expected to have, a Highwoods Material Adverse    
Effect; provided that, for purposes of this sentence only, those          
representations and warranties which are qualified by references to       
 "material" or "Material Adverse Effect" or to the "Knowledge" of any Person
shall be deemed not to include such qualifications.                       

(b) Performance of Agreements and Covenants. Each and all of the    
agreements and covenants of Highwoods to be performed and complied with   
pursuant to this Agreement and the other agreements contemplated hereby   
prior to the Effective Time shall have been duly performed and complied   
with in all material respects.                                            

(c) Certificates. Highwoods shall have delivered to JCN (i) a       
 certificate, dated as of the Effective Time and signed on its behalf by its
 chief executive officer and its chief financial officer, to the effect that
the conditions set forth in Section 9.1 as relates to Highwoods and in    
 Section 9.3(a) and 9.3(b) have been satisfied, and (ii) certified copies of
resolutions duly adopted by Highwoods' Board of Directors and Sub's Board 
of Directors and sole shareholder evidencing the taking of all corporate  
action necessary to authorize the execution, delivery and performance of  
this Agreement, and the consummation of the transactions contemplated     
 hereby, all in such reasonable detail as JCN and its counsel shall request.

    (d) Opinion of Counsel. JCN shall have received an opinion of (i) Alston
& Bird LLP, counsel to Highwoods, dated as of the Effective Time, in form 
reasonably acceptable to JCN, as to the matters set forth in Exhibit 2 and
(ii) a tax opinion of Blackwell Sanders Matheny Weary & Lombardi, L.L.P., 
to the effect that the Merger will constitute a reorganization within the 
meaning of Section 368(a) of the Internal Revenue Code and that JCN       
 shareholders receiving only Highwoods Common Stock will incur no income tax
liability.                                                                

(e) Fairness Opinion. JCN shall not have received notice from Morgan
Stanley, Dean Witter, Discover & Co. prior to the date of the Proxy       
Statement, indicating withdrawal of its prior opinion that the            
consideration to be received by JCN shareholders in connection with the   
Merger is fair, from a financial point of view, to such shareholders and  
shall have received an update to such opinion immediately prior to the    
 shareholder meeting at which approval of this Agreement will be considered.

     (f) Exchange Agent Certification. The Exchange Agent shall have delivered
to JCN a certificate, dated as of the Effective Time, to the effect that  
 the Exchange Agent has received from Highwoods appropriate instructions and
 authorization for the Exchange Agent to issue a sufficient number of shares
of Highwoods Common Stock in exchange for outstanding shares of JCN Common
Stock and that Highwoods has deposited with the Exchange Agent sufficient 
funds to pay a reasonable estimate of the cash payments necessary to make 
all fractional share payments as required by Section 3.6.                 

ARTICLE 10  
TERMINATION 

  10.1 Termination. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the shareholders of JCN,  
this Agreement may be terminated and the Merger abandoned at any time prior to  
the Effective Time:                                                             

(a) By mutual consent of Highwoods and JCN; or                      

   (b) By either Party (provided that the terminating Party is not then in
material breach of any representation, warranty, covenant, or other       
 agreement contained in this Agreement) in the event of a material breach by
the other Party of any representation or warranty contained in this       
Agreement which cannot be or has not been cured within 30 days after the  
giving of written notice to the breaching Party of such breach and which  
breach is reasonably likely, in the opinion of the non-breaching Party, to
have, individually or in the aggregate, a JCN Material Adverse Effect or a
Highwoods Material Adverse Effect, as applicable, on the breaching Party; 
or                                                                        

   (c) By either Party (provided that the terminating Party is not then in
material breach of any representation, warranty, covenant, or other       
 agreement contained in this Agreement) in the event of a material breach by
the other Party of any covenant or agreement contained in this Agreement  
which cannot be or has not been cured within 30 days after the giving of  
written notice to the breaching Party of such breach; or                  

   (d) By either Party (provided that the terminating Party is not then in
material breach of any representation, warranty, covenant, or other       
agreement contained in this Agreement) in the event (i) any Consent of any
Regulatory                                                                

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Authority required for consummation of the Merger and the other           
transactions contemplated hereby shall have been denied by final          
nonappealable action of such authority or if any action taken by such     
authority is not appealed within the time limit for appeal, or (ii) the   
shareholders of JCN fail to vote their approval of the matters relating to
this Agreement and the transactions contemplated hereby at the JCN        
 Shareholders Meeting where such matters were presented to such shareholders
for approval and voted upon; or                                           

(e) By either Party in the event that the Merger shall not have been
 consummated by June 30, 1998, if the failure to consummate the transactions
contemplated hereby on or before such date is not caused by any breach of 
this Agreement by the Party electing to terminate pursuant to this Section
10.1(e); or                                                               

    (f) By Highwoods or JCN, in the event that the Board of Directors of JCN
shall have failed to recommend to its shareholders the approval of the    
Merger and the transactions contemplated by this Agreement (to the        
 exclusion of any other Acquisition Proposal), or shall have resolved not to
recommend to its shareholders the approval of the Merger, or shall have   
affirmed, recommended or authorized entering into any other Acquisition   
Proposal or other transaction involving a merger, share exchange,         
consolidation or transfer of substantially all of the Assets of JCN, or   
shall fail to call and hold a JCN Shareholders Meeting for purposes of    
voting on the approval of the Merger and the transaction contemplated     
hereby.                                                                   

10.2 Effect of Termination. In the event of the termination and       
abandonment of this Agreement pursuant to Section 10.1, this Agreement shall    
become void and have no effect, except that (i) the provisions of this Section  
10.2 and Article 11 and Section 8.6(b) shall survive any such termination and   
abandonment, and (ii) a termination pursuant to Sections 10.1(b) or 10.1(c)     
shall not relieve the breaching Party from Liability for an uncured willful     
breach of a representation, warranty, covenant, or agreement giving rise to     
such termination.                                                               

10.3 Non-Survival of Representations and Covenants. The respective    
representations, warranties, obligations, covenants, and agreements of the      
Parties shall not survive the Effective Time except this Section 10.3 and       
Articles 1, 2, 3, 4 and 11 and Sections 8.13 and 8.14.                          

ARTICLE 11  
MISCELLANEOUS 

11.1 Definitions.                                                         

    (a) Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:                                        

"1933 Act" shall mean the Securities Act of 1933, as amended.       

  "1934 Act" shall mean the Securities Exchange Act of 1934, as amended.

"Acquisition Proposal" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of the 
stock or assets of, or other business combination involving the acquisition of  
such Party or any of its Subsidiaries or the acquisition of a substantial       
equity interest in, or a substantial portion of the assets of, such Party or    
any of its Subsidiaries.                                                        

 "Affiliate" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or    
under common control with such Person; (ii) any officer, director, partner,     
employer, or direct or indirect beneficial owner of any 10% or greater equity   
or voting interest of such Person.                                              

   "Agreement" shall mean this Agreement and Plan of Merger, including the
Exhibits delivered pursuant hereto and incorporated herein by reference.        

    "Articles of Merger" shall mean, collectively, the Articles of Merger to
be executed by JCN and Sub and filed with the Secretary of State of the State   
of Missouri relating to the Merger as contemplated by Section 1.1, and the      
Articles of Merger to be executed by JCN and Sub and filed with the Department  
of Assessments and Taxation of the State of Maryland relating to the Merger as  
contemplated by Section 1.1.                                                    

     "Assets" of a Person shall mean all of the assets, properties, businesses
and rights of such Person of every kind, nature, character and description,     
whether real, personal or mixed, tangible or intangible, accrued or contingent, 
or otherwise relating to or utilized in such Person's business, directly or     
indirectly, in whole or in part, whether or not carried on the books and        
records of such Person, and whether or not owned in the name of such Person or  
any Affiliate of such Person and wherever located.                              

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"Cash Amount" shall have the meaning set forth in Section 3.2.      

"Closing Date" shall mean the date on which the Closing occurs.     

"Confidentiality Agreement" shall mean that certain Confidentiality 
Agreement, dated November 24, 1997, between JCN and Highwoods.                  

 "Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation required from any Person pursuant to  
any Contract, Law, Order, or Permit.                                            

"Contract" shall mean any written or oral agreement, arrangement,   
authorization, commitment, contract, indenture, instrument, lease, obligation,  
plan, practice, restriction, understanding, or undertaking of any kind or       
character, or other document to which any Person is a party or that is binding  
on any Person or its capital stock, Assets or business.                         

"Default" shall mean (i) any breach or violation of, default under, 
contravention of, or conflict with, any Contract, Law, Order, or Permit, (ii)   
any occurrence of any event that with the passage of time or the giving of      
notice or both would constitute a breach or violation of, default under,        
contravention of, or conflict with, any Contract, Law, Order, or Permit, or     
(iii) any occurrence of any event that with or without the passage of time or   
the giving of notice would give rise to a right of any Person to exercise any   
remedy or obtain any relief under, terminate or revoke, suspend, cancel, or     
modify or change the current terms of, or renegotiate, or to accelerate the     
maturity or performance of, or to increase or impose any Liability under, any   
Contract, Law, Order, or Permit.                                                

 "Dissenting Shares" shall mean those shares of JCN Common Stock as to
which the holders thereof elect to exercise their dissenter's rights in         
accordance with and as contemplated by Section 351.455 of the GBCL and as       
provided for in Section 3.5 hereof.                                             

"Environmental Laws" shall mean all Laws relating to pollution or   
protection of human health and the environment (including ambient air, surface  
water, ground water, land surface, or subsurface strata) and which are          
administered, interpreted, or enforced by the United States Environmental       
Protection Agency or state and local agencies with jurisdiction over, and       
including published court decisions interpreting the foregoing pollution or     
protection of the environment, including the Comprehensive Environmental        
Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq.     
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42 U.S.C.   
6901 et seq. ("RCRA"), and other Laws relating to emissions, discharges,        
releases, or threatened releases of any Hazardous Material, or otherwise        
relating to the manufacture, processing, distribution, use, treatment, storage, 
disposal, transport, or handling of any Hazardous Material.                     

"Equity Rights" shall mean all arrangements, calls, commitments,    
Contracts, options, rights to subscribe to, scrip, understandings, warrants, or 
other binding obligations of any character whatsoever relating to, or           
securities or rights convertible into or exchangeable for, shares of the        
capital stock of a Person or by which a Person is or may be bound to issue      
additional shares of its capital stock or other Equity Rights.                  

   "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.                                                                     

 "Exhibits" 1 through 2, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby        
incorporated by reference herein and made a part hereof, and may be referred to 
in this Agreement and any other related instrument or document without being    
attached hereto.                                                                

    "GAAP" shall mean generally accepted accounting principles, consistently
applied during the periods involved.                                            

   "GBCL" shall mean the General and Business Corporation Law of Missouri.

  "Hazardous Material" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as those    
terms are defined by any applicable Environmental Laws) and (ii) any chemicals, 
pollutants, contaminants, petroleum, petroleum products, or oil (and            
specifically shall include asbestos requiring abatement, removal, or            
encapsulation pursuant to any Environmental Law and any polychlorinated         
biphenyls).                                                                     

    "Highwoods Capital Stock" shall mean, collectively, the Highwoods Common
Stock, the Highwoods Preferred Stock and any other class or series of capital   
stock of Highwoods.                                                             

  "Highwoods Common Stock" shall mean the $.01 par value common stock of
Highwoods.                                                                      

"Highwoods Disclosure Memorandum" shall mean the written information
entitled "Highwoods Properties, Inc. Disclosure Memorandum" delivered prior to  
the date of this Agreement to JCN describing in reasonable detail the matters   
contained therein and, with respect to each disclosure made therein,            
specifically referencing each Section of this Agreement                         

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under which such disclosure is being made. Information disclosed with respect   
to one Section shall not be deemed to be disclosed for purposes of any other    
Section not specifically referenced with respect thereto.                       

"Highwoods Entities" shall mean, collectively, Highwoods and all    
Highwoods Subsidiaries.                                                         

    "Highwoods Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Highwoods as of       
September 30, 1997, and as of December 31, 1996 and 1995, and the related       
statements of operations, changes in shareholders' equity, and cash flows       
(including related notes and schedules, if any) for the nine months ended       
September 30, 1997, and for each of the three fiscal years ended December 31,   
1996, 1995 and 1994, as filed by Highwoods in SEC Documents, and (ii) the       
consolidated balance sheets of Highwoods (including related notes and           
schedules, if any) and related statements of operations, changes in             
shareholders' equity, and cash flows (including related notes and schedules, if 
any) included in SEC Documents filed with respect to periods ended subsequent   
to September 30, 1997.                                                          

"Highwoods Material Adverse Effect" shall mean an event, change or  
occurrence which, individually or together with any other event, change or      
occurrence, has a material adverse impact on (i) the financial position,        
business, or results of operations of Highwoods and its Subsidiaries, taken as  
a whole, or (ii) the ability of Highwoods to perform its obligations under this 
Agreement or to consummate the Merger or the other transactions contemplated by 
this Agreement.                                                                 

     "Highwoods Preferred Stock" shall mean, collectively, the 8 5/8% Series A
Cumulative Redeemable Preferred Shares of which 125,000 shares are outstanding  
and the 8% Series B Cumulative Redeemable Preferred Shares of which 6,900,000   
shares are outstanding, of Highwoods.                                           

    "Highwoods Rights Agreement" shall mean that certain Shareholders Rights
Agreement, dated October 4, 1997, between Highwoods and First Union National    
Bank, as Rights Agent.                                                          

    "Highwoods Rights" shall mean the preferred stock purchase rights issued
pursuant to the Highwoods Rights Agreement.                                     

  "Highwoods Stock Plans" shall mean the existing stock option and other
stock-based compensation plans of Highwoods designated as follows: the Amended  
and Restated 1994 Stock Option Plan; the Dividend Reinvestment Plan and the     
1997 Employee Stock Purchase Plan.                                              

    "Highwoods Subsidiaries" shall mean the Subsidiaries of Highwoods, which
shall include Highwoods/Forsyth Limited Partnership and the other Highwoods     
Subsidiaries described in Section 6.4 and any corporation or other organization 
acquired as a Subsidiary of Highwoods in the future and held as a Subsidiary by 
Highwoods at the Effective Time.                                                

    "HSR Act" shall mean Section 7A of the Clayton Act, as added by Title II
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and    
the rules and regulations promulgated thereunder.                               

"Intellectual Property" shall mean copyrights, patents, trademarks, 
service marks, service names, trade names, applications therefor, technology    
rights and licenses, computer software (including any source or object codes    
therefor or documentation relating thereto), trade secrets, franchises,         
know-how, inventions, and other intellectual property rights.                   

    "Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.                  

 "JCN Common Stock" shall mean the $.01 par value common stock of JCN.

"JCN Disclosure Memorandum" shall mean the written information      
entitled"J.C. Nichols Company Disclosure Memorandum" delivered prior to the     
date of this Agreement to Highwoods describing in reasonable detail the matters 
contained therein and, with respect to each disclosure made therein,            
specifically referencing each Section of this Agreement under which such        
disclosure is being made. Information disclosed with respect to one Section     
shall not be deemed to be disclosed for purposes of any other Section not       
specifically referenced with respect thereto.                                   

  "JCN Entities" shall mean, collectively, JCN and all JCN Subsidiaries.

     "JCN Financial Statements" shall mean (i) the consolidated balance sheets
(including related notes and schedules, if any) of JCN as of September 30,      
1997, and as of December 31, 1996 and 1995, and the related statements of       
income, changes in shareholders' equity, and cash flows (including related      
notes and schedules, if any) for the nine months ended September 30, 1997, and  
for each of the three fiscal years ended December 31, 1996, 1995, and 1994, as  
filed by JCN in SEC Documents, and (ii) the consolidated balance sheets of JCN  
(including related notes and schedules, if any) and related                     

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statements of operations, changes in shareholders' equity, and cash flows       
(including related notes and schedules, if any) included in SEC Documents filed 
with respect to periods ended subsequent to September 30, 1997.                 

   "JCN Material Adverse Effect" shall mean an event, change or occurrence
which, individually or together with any other event, change or occurrence, has 
a material adverse impact on (i) the financial position, business, or results   
of operations of JCN and its Subsidiaries, taken as a whole, or (ii) the        
ability of JCN to perform its obligations under this Agreement or to consummate 
the Merger or the other transactions contemplated by this Agreement.            

    "JCN Rights" shall mean the common stock purchase rights issued pursuant
to the JCN Rights Agreement.                                                    

"JCN Rights Agreement" shall mean that certain Shareholders Rights  
Agreement, dated July 28, 1997, between JCN and American Stock Transfer & Trust 
Company, as Rights Agent.                                                       

"JCN Stock Plans" shall mean the existing stock option and other    
stock-based compensation plans of JCN designated as follows: the Amended and    
Restated 1996 Stock Option Plans.                                               

"JCN Subsidiaries" shall mean the Subsidiaries of JCN, which shall  
include the JCN Subsidiaries described in Section 5.4 and any corporation or    
other organization acquired as a Subsidiary of JCN in the future and held as a  
Subsidiary by JCN at the Effective Time; provided, however, that neither KH/JCN 
L.L.C., a Missouri limited liability company, nor the ESOT shall be deemed a    
JCN Subsidiary.                                                                 

 "Knowledge" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts that are 
known or should reasonably have been known after due inquiry by the chairman,   
president, chief financial officer, chief accounting officer, chief operating   
officer, general counsel, any assistant or deputy general counsel, or any       
senior, executive or other vice president of such Person and the Knowledge of   
any such persons obtained or which would have been obtained from a reasonable   
investigation.                                                                  

"Law" shall mean any code, law, ordinance, regulation, reporting or 
licensing requirement, rule, or statute applicable to a Person or its Assets,   
Liabilities, or business, including those promulgated, interpreted or enforced  
by any Regulatory Authority.                                                    

    "Lease" shall mean any lease of more than 10,000 rentable square feet in
effect as of the date hereof and as to which JCN is the lessor.                 

"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including costs  
of investigation, collection and defense), claim, deficiency, guaranty or       
endorsement of or by any Person (other than endorsements of notes, bills,       
checks, and drafts presented for collection or deposit in the ordinary course   
of business) of any type, whether accrued, absolute or contingent, liquidated   
or unliquidated, matured or unmatured, or otherwise.                            

"Lien" shall mean any conditional sale agreement, default of title, 
easement, encroachment, encumbrance, hypothecation, infringement, lien,         
mortgage, pledge, reservation, restriction, security interest, title retention  
or other security arrangement, or any adverse right or interest, charge, or     
claim of any nature whatsoever of, on, or with respect to any property or       
property interest, other than (i) liens for current property Taxes not yet due  
and payable, and (iii) liens which do not materially impair the use of or title 
to the Assets subject to such lien.                                             

    "Litigation" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, governmental or other examination or           
investigation, hearing, administrative or other proceeding to which a Party is  
a party or of which a Party's, business or Assets (including Contracts related  
to it) are the subject, or relating in any way to the transactions contemplated 
by this Agreement.                                                              

     "Material" for purposes of this Agreement shall be determined in light of
the facts and circumstances of the matter in question; provided that any        
specific monetary amount stated in this Agreement shall determine materiality   
in that instance.                                                               

"MGCL" shall mean the Maryland General Corporation Law.             

  "NASD" shall mean the National Association of Securities Dealers, Inc.

"NYSE" shall mean the New York Stock Exchange, Inc.                 

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   "Operating Property" shall mean any property owned, leased, or operated
by the Party in question or by any of its Subsidiaries and, where required by   
the context, includes the owner or operator of such property, but only with     
respect to such property.                                                       

"Order" shall mean any administrative decision or award, decree,    
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ  
of any federal, state, local or foreign or other court, arbitrator, mediator,   
tribunal, administrative agency, or Regulatory Authority.                       

     "Participation Facility" shall mean any facility or property in which the
Party in question or any of its Subsidiaries participates in the management     
and, where required by the context, said term means the owner or operator of    
such facility or property, but only with respect to such facility or property.  

     "Party" shall mean either JCN or Highwoods, and "Parties" shall mean both
JCN and Highwoods.                                                              

   "Permit" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,     
notice, permit, or right to which any Person is a party or that is or may be    
binding upon or inure to the benefit of any Person or its securities, Assets,   
or business.                                                                    

"Per Share Cash Consideration" shall have the meaning set forth in  
Section 3.2.                                                                    

"Per Share Stock Consideration" shall have the meaning set forth in 
Section 3.1.                                                                    

"Person" shall mean a natural person or any legal, commercial or    
governmental entity, such as, but not limited to, a corporation, general        
partnership, joint venture, limited partnership, limited liability company,     
trust, business association, group acting in concert, or any person acting in a 
representative capacity.                                                        

   "Proxy Statement" shall mean the proxy statement used by JCN to solicit
the approval of its shareholders of the transactions contemplated by this       
Agreement, which shall include the prospectus of Highwoods relating to the      
issuance of the Highwoods Common Stock to holders of JCN Common Stock.          

  "Registration Statement" shall mean the Registration Statement on Form
S4, or other appropriate form, including any pre-effective or post-effective    
amendments or supplements thereto, filed with the SEC by Highwoods under the    
1933 Act with respect to the shares of Highwoods Common Stock to be issued to   
the shareholders of JCN in connection with the transactions contemplated by     
this Agreement.                                                                 

     "Regulatory Authorities" shall mean, collectively, the SEC, the NYSE, the
NASD, the Federal Trade Commission, the United States Department of Justice,    
and all other federal, state, county, local or other governmental or regulatory 
agencies, authorities (including self-regulatory authorities),                  
instrumentalities, commissions, boards or bodies having jurisdiction over the   
Parties and their respective Subsidiaries.                                      

 "Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative engaged by a Person.  

"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to be    
filed, by a Party or any of its Subsidiaries with any Regulatory Authority      
pursuant to the Securities Laws.                                                

   "Securities Laws" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as        
amended, the Trust Indenture Act of 1939, as amended, and the rules and         
regulations of any Regulatory Authority promulgated thereunder.                 

 "Sub Common Stock" shall mean the $.01 par value common stock of Sub.

    "Subsidiaries" shall mean all those corporations, associations, or other
business entities of which the entity in question either (i) owns or controls   
50% or more of the outstanding equity securities either directly or through an  
unbroken chain of entities as to each of which 50% or more of the outstanding   
equity securities is owned directly or indirectly by its parent (provided,      
there shall not be included any such entity the equity securities of which are  
owned or controlled in a fiduciary capacity), (ii) in the case of partnerships, 
serves as a general partner, (iii) in the case of a limited liability company,  
serves as a managing member, or (iv) otherwise has the ability to elect a       
majority of the directors, trustees or managing members thereof.                

"Surviving Corporation" shall mean Sub as the surviving corporation 
resulting from the Merger.                                                      

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    "Tax Return" shall mean any report, return, information return, or other
information required to be supplied to a taxing authority in connection with    
Taxes, including any return of an affiliated or combined or unitary group that  
includes a Party or its Subsidiaries.                                           

     "Tax" or "Taxes" shall mean any federal, state, county, local, or foreign
taxes, charges, fees, levies, imposts, duties, or other assessments, including  
income, gross receipts, excise, employment, sales, use, transfer, license,      
payroll, franchise, severance, stamp, occupation, windfall profits,             
environmental, federal highway use, commercial rent, customs duties, capital    
stock, paid-up capital, profits, withholding, Social Security, single business  
and unemployment, disability, real property, personal property, registration,   
ad valorem, value added, alternative or add-on minimum, estimated, or other tax 
or governmental fee of any kind whatsoever, imposed or required to be withheld  
by the United States or any state, county, local or foreign government or       
subdivision or agency thereof, including any interest, penalties, and additions 
imposed thereon or with respect thereto.                                        

     (b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:                                                        

                                                                [Download Table]
                                              
Business Combination           Section 11.2   
Cash Election Shares           Section 3.2    
Closing                        Section 1.2    
Dissenting Share Amount        Section 4.2    
Effective Time                 Section 1.3    
Election Deadline              Section 3.2    
Election Form                  Section 3.2    
ERISA Affiliate                Section 5.13(c)
ESOT                           Section 7.2(l) 
Exchange Agent                 Section 3.2    
Exchange Fund                  Section 4.1(a) 
Exchange Ratio                 Section 3.1(c) 
Highwoods Benefit Plans        Section 6.13(a)
Highwoods ERISA Plan           Section 6.13(a)
Highwoods Option Amount        Section 3.2(ii)
Highwoods Pension Plan         Section 6.13(a)
Highwoods SEC Reports          Section 6.5(a) 
JCN Benefit Plans              Section 5.13(a)
JCN Contracts                  Section 5.14   
JCN ERISA Plan                 Section 5.13(a)
JCN Options                    Section 3.7(a) 
JCN Pension Plan               Section 5.13(a)
JCN Retained Shares            Section 3.2    
JCN Non-Retained Shares        Section 3.2    
JCN Properties                 Section 5.9(a) 
JCN Permitted Encumbrances     Section 5.9(a) 
JCN SEC Reports                Section 5.5(a) 
JCN Shareholders Meeting       Section 3.2    
Leases                         Section 5.9(b) 
Mailing Date                   Section 3.2    
Maximum Amount                 Section 8.14   
Maximum Cash Election Amount   Section 3.2(i) 
Maximum Share Amount           Section 3.2    
Merger                         Section 1.1    
New Certificates               Section 4.1(a) 
No Election Shares             Section 3.2    
Old Certificates               Section 3.2    
Record Date                    Section 3.2    
Takeover Laws                  Section 5.19   

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  (c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"   
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."                               

11.2 Expenses.                                                            

(a) Except as otherwise provided in this Section 11.2, each of the  
Parties shall bear and pay all direct costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder, 
including filing, registration and application fees, printing fees, and   
fees and expenses of its own financial or other consultants, investment   
bankers, accountants, and counsel.                                        

(b) Notwithstanding the foregoing,                                  

     (i) if this Agreement is terminated by Highwoods pursuant to any of
Sections 10.1(b), 10.1(c) or 10.1(f); or                                        

     (ii) if the Merger is not consummated as a result of the failure of
JCN to satisfy any of the conditions set forth in Section 9.2,      

then JCN shall promptly pay Highwoods the sum of $2,500,000, which amount       
represents the costs and expenses of Highwoods (including reasonable costs of   
counsel, investment bankers, actuaries and accountants).                        

(c) Notwithstanding the foregoing,                                  

  (i) if this Agreement is terminated by JCN pursuant to either of
Sections 10.1(b) or 10.1(c); or                                     

     (ii) if the Merger is not consummated as a result of the failure of
Highwoods to satisfy any of the conditions set forth in Section 9.3,

then Highwoods shall promptly pay JCN $2,500,000, which amount represents the   
costs and expenses of JCN (including reasonable costs of counsel, investment    
bankers, actuaries and accountants).                                            

     (d) In addition to the foregoing, if within twelve (12) months following:

(i) any termination of this Agreement by Highwoods pursuant to
Sections 10.1(b), 10.1(c), or 10.1(f); or                                       

       (ii) failure to consummate the Merger by reason of any failure of JCN
to satisfy the conditions enumerated in Section 9.2; or             

any third-party shall acquire, merge with, combine with, purchase more than 40% 
of the Assets of, or engage in any other business combination with, or purchase 
any equity securities involving the acquisition of 50% or more of the voting    
stock of JCN or a transaction which results in a Person owning 50% or more of   
the voting stock of JCN, or enter into any binding agreement to do any of the   
foregoing (collectively, a "Business Combination"), such third-party that is a  
party to the Business Combination shall pay to Highwoods, prior to the earlier  
of consummation of the Business Combination or execution of any letter of       
intent or definitive agreement with JCN or any JCN Entity relating to such      
Business Combination, an amount in cash equal to the sum of                     

(x) $14,700,000, plus                                                 

 (y) the amount described in subsection (b) of this Section 11.2 (if not
previously paid to Highwoods);                                                  

provided, however, that in the event: (i) there has been no Business            
Combination consummated or a letter of intent or definitive agreement relating  
to a Business Combination entered into at or prior to the time of the JCN       
Shareholders Meeting, (ii) this Agreement is terminated or terminable by        
Highwoods under Section 10.1(f), and (iii) within 12 months of such meeting or  
such termination, a Business Combination is consummated, then such third party  
shall pay to Highwoods, at the time of consummation of the Business             
Combination, an amount in cash equal to the sum of                              

(xx) $7,350,000; plus                                                 

  (yy) the amount described in subsection (b) of this Section 11.2 (if not
previously paid to Highwoods);                                                  

which payments represent additional compensation for Highwoods' loss as the     
result of the transactions contemplated by this Agreement not being             
consummated. In the event such third-party shall refuse to pay such amounts     
within ten days of demand therefor by Highwoods, the amounts shall be an        
obligation of JCN and shall be paid by JCN within two business days of notice   
to JCN by Highwoods. Notwithstanding anything herein to the contrary, if: (i)   
Highwoods would not have had the right to terminate this Agreement under        
Section 10.1(f) above, and (ii) JCN has not intentionally taken any action      

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reasonably likely to afford Highwoods the right to terminate this Agreement     
pursuant to 10.1(b) or 10.1(c) or JCN has not intentionally failed to satisfy   
any of the conditions set forth in Section 9.2, then no payments shall be due   
to Highwoods pursuant to this Section 11.2(d).                                  

(e) Notwithstanding the foregoing, if                               

       (i) this Agreement is not terminable by Highwoods pursuant to Section
10.1(f); and                                                                    

       (ii) this Agreement is terminated by either Party pursuant to Section
10.1(d)(ii);and                                                                 

   (iii) at the time of the JCN Shareholders Meeting there is public
    knowledge of an identifiable third party's financially superior proposal
to purchase all of the then outstanding JCN Common Stock; and       

   (iv) the proposal by such third party referred to in clause (iii)
above is accepted and closes within 12 months of the date of this   
Agreement,                                                          

then the third party making such proposal shall pay to Highwoods, upon
consummation of the transaction, the sum of $2,500,000, which amount represents 
the costs and expenses of Highwoods (including reasonable costs of counsel,     
investment bankers, actuaries and accountants). In the event such third party   
does not make such payment within ten days of demand therefor by Highwoods, the 
payment shall be an obligation of JCN and shall be paid by JCN within two       
business days of notice to JCN by Highwoods.                                    

    11.3 Brokers and Finders. Except for Morgan Stanley, Dean Witter, Discover
& Co. as to JCN and except for J.P. Morgan Securities Inc. as to Highwoods,     
each of the Parties represents and warrants that neither it nor any of its      
officers, directors or employees has employed any broker or finder or incurred  
any Liability for any financial advisory fees, investment bankers' fees,        
brokerage fees, commissions, or finders' fees in connection with this Agreement 
or the transactions contemplated hereby. In the event of a claim by any broker  
or finder based upon his or its representing or being retained by or allegedly  
representing or being retained by JCN or by Highwoods, each of JCN and          
Highwoods, as the case may be, agrees to indemnify and hold the other Party     
harmless of and from any Liability in respect of any such claim.                

    11.4 Entire Agreement. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)          
constitutes the entire agreement between the Parties with respect to the        
transactions contemplated hereunder and supersedes all prior arrangements or    
understandings with respect thereto, written or oral (except, as to Section     
8.6(b), for the Confidentiality Agreement). Nothing in this Agreement expressed 
or implied, is intended to confer upon any Person, other than the Parties or    
their respective successors, any rights, remedies, obligations, or liabilities  
under or by reason of this Agreement, other than as provided in Sections 8.13   
and 8.14.                                                                       

11.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval 
of each of the Parties, whether before or after shareholder approval of this    
Agreement has been obtained; provided, that after any such approval by the      
holders of JCN Common Stock, there shall be made no amendment that reduces or   
modifies in any material respect the consideration to be received by holders of 
JCN Common Stock.                                                               

11.6 Waivers.                                                             

    (a) Prior to or at the Effective Time, Highwoods, acting through its Board
of Directors, chief executive officer or other authorized officer, shall have   
the right to waive any Default in the performance of any term of this Agreement 
by JCN, to waive or extend the time for the compliance or fulfillment by JCN of 
any and all of its obligations under this Agreement, and to waive any or all of 
the conditions precedent to the obligations of Highwoods under this Agreement,  
except any condition which, if not satisfied, would result in the violation of  
any Law. No such waiver shall be effective unless in writing signed by a duly   
authorized officer of Highwoods.                                                

 (b) Prior to or at the Effective Time, JCN, acting through its Board of
Directors, chief executive officer or other authorized officer, shall have the  
right to waive any Default in the performance of any term of this Agreement by  
Highwoods, to waive or extend the time for the compliance or fulfillment by     
Highwoods of any and all of its obligations under this Agreement, and to waive  
any or all of the conditions precedent to the obligations of JCN under this     
Agreement, except any condition which, if not satisfied, would result in the    
violation of any Law. No such waiver shall be effective unless in writing       
signed by a duly authorized officer of JCN.                                     

  (c) The failure of any Party at any time or times to require performance
of any provision hereof shall in no manner affect the right of such Party at a  
later time to enforce the same or any other provision of this Agreement. No     
waiver of any                                                                   

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condition or of the breach of any term contained in this Agreement in one or    
more instances shall be deemed to be or construed as a further or continuing    
waiver of such condition or breach or a waiver of any other condition or of the 
breach of any other term of this Agreement.                                     

11.7 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be    
assigned by any Party hereto (whether by operation of Law or otherwise) without 
the prior written consent of the other Party. Subject to the preceding          
sentence, this Agreement will be binding upon, inure to the benefit of and be   
enforceable by the Parties and their respective successors and assigns.         

 11.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by 
facsimile transmission, by registered or certified mail, postage pre-paid, or   
by courier or overnight carrier, to the persons at the addresses set forth      
below (or at such other address as may be provided hereunder), and shall be     
deemed to have been delivered as of the date so delivered:                      

JCN:                                                                  

J.C. Nichols Company                                                
310 Ward Parkway                                                    
Kansas City, Missouri 64112                                         
Telecopy Number: (816) 561-3456                                     

Attention: Barrett Brady                                            

Copy to Counsel:                                                      

Blackwell Sanders Matheny Weary & Lombardi L.L.P.                   
Two Pershing Square, Suite 1100                                     
Kansas City, Missouri 64108                                         
Telecopy Number: (816) 983-8080                                     

Attention: Steve Carman                                             

and to:                                                               

Weil, Gotshal & Manges L.L.P.                                       
767 Fifth Avenue                                                    
New York, New York 10153                                            
Telecopy Number: (212) 310-8007                                     

Attention: Steve Jacobs                                             

Highwoods:                                                            

Highwoods Properties, Inc.                                          
3100 Smoketree Court, Suite 600                                     
Raleigh, North Carolina 27604                                       
Telecopy Number: (919) 876-6929                                     

Attention: Mack D. Pridgen, III,                                    
Vice President and General Counsel                                  

Copy to Counsel:                                                      

Alston & Bird LLP                                                   
3605 Glenwood Avenue, Suite 310                                     
Raleigh, North Carolina 27612                                       
Telecopy Number: (919) 881-3175                                     

Attention: Brad S. Markoff                                          

  11.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Missouri, without regard to any        
applicable conflicts of Laws.                                                   

11.10 Counterparts. This Agreement may be executed in two or more     
counterparts, each of which shall be deemed to be an original, but all of which 
together shall constitute one and the same instrument.                          

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11.11 Captions; Articles and Sections. The captions contained in this 
Agreement are for reference purposes only and are not part of this Agreement.   
Unless otherwise indicated, all references to particular Articles or Sections   
shall mean and refer to the referenced Articles and Sections of this Agreement. 

11.12 Interpretations. Neither this Agreement nor any uncertainty or  
ambiguity herein shall be construed or resolved against any party, whether      
under any rule of construction or otherwise. No party to this Agreement shall   
be considered the draftsman. The parties acknowledge and agree that this        
Agreement has been reviewed, negotiated, and accepted by all parties and their  
attorneys and shall be construed and interpreted according to the ordinary      
meaning of the words used so as fairly to accomplish the purposes and           
intentions of all parties hereto.                                               

   11.13 Enforcement of Agreement. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement    
was not performed in accordance with its specific terms or was otherwise        
breached. It is accordingly agreed that the Parties shall be entitled to an     
injunction or injunctions to prevent breaches of this Agreement and to enforce  
specifically the terms and provisions hereof in any court of the United States  
or any state having jurisdiction, this being in addition to any other remedy to 
which they are entitled at law or in equity.                                    

11.14 Severability. Any term or provision of this Agreement which is  
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be 
ineffective to the extent of such invalidity or unenforceability without        
rendering invalid or unenforceable the remaining terms and provisions of this   
Agreement or affecting the validity or enforceability of any of the terms or    
provisions of this Agreement in any other jurisdiction. If any provision of     
this Agreement is so broad as to be unenforceable, the provision shall be       
interpreted to be only so broad as is enforceable.                              

 IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf by its duly authorized officers as of the day and year   
first above written.                                                            

                          HIGHWOODS PROPERTIES, INC.

                                    By:-------------------------------------

             President

                         JACKSON ACQUISITION CORP.

                                    By:-------------------------------------

             President

                    J.C. NICHOLS COMPANY

                                    By:-------------------------------------

             President

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                                                                     Exhibit 1

MATTERS AS TO WHICH BLACKWELL SANDERS MATHENY WEARY & 
LOMBARDI LLP WILL OPINE 

1. JCN is a corporation duly organized, validly existing and in good  
standing under the laws of the State of Missouri, with full corporate power and 
authority to carry on the business in which it is engaged and to own and use    
its Assets.                                                                     

2. The authorized capital stock of JCN consists of     shares of JCN  
Common Stock, of which     shares were issued and outstanding as of     , 19  . 
Subsequent to September 1995, no shares of JCN Common Stock have been issued in 
violation of any statutory preemptive rights of shareholders, and all shares    
issued since such date were duly issued and are fully paid and nonassessable    
under the Missouri Business Corporation Act. To our knowledge, except as set    
forth above or as disclosed in Section 5.3 of the JCN Disclosure Memorandum, as 
of           , 19  there were no shares of capital stock or other equity        
securities of JCN outstanding and no outstanding Equity Rights relating to the  
capital stock of JCN.                                                           

3. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Articles   
of Incorporation or Bylaws of JCN or, to our knowledge but without any          
independent investigation, result in any conflict with, breach of, or default   
or acceleration under any Law or Order to which JCN is a party or by which JCN  
is bound, except as may be disclosed in the JCN Disclosure Memorandum.          

  4. The Agreement has been duly and validly executed and delivered by JCN
and, assuming valid authorization, execution and delivery by Highwoods and Sub, 
constitutes a valid and binding agreement of JCN enforceable in accordance with 
its terms, except as enforceability may be limited by bankruptcy, insolvency,   
reorganization or similar laws affecting creditors' rights generally, provided, 
however, that we express no opinion as to the availability of the equitable     
remedy of specific performance.                                                 

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                                                                     Exhibit 2

MATTERS AS TO WHICH ALSTON & BIRD LLP WILL OPINE  

    1. Highwoods is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland with full corporate power and  
authority to carry on the business in which it is engaged, and to own and use   
its Assets.                                                                     

 2. Sub is a corporation duly organized and validly existing and in good
standing under the laws of the State of Maryland with full corporate power and  
authority to carry on the business in which it is engaged, and to own and use   
its Assets.                                                                     

3. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Amended    
and Restated Articles of Incorporation or Bylaws of Highwoods or, to our        
knowledge but without any independent investigation, any Law or Order to which  
Highwoods is a party or by which Highwoods is bound. The adoption of the        
Agreement and compliance with its terms do not and will not violate or          
contravene any provision of the Articles of Incorporation or Bylaws of Sub or,  
to our knowledge but without any independent investigation, any Law or Order to 
which Sub is a party or by which Sub is bound.                                  

4. The Agreement has been duly and validly executed and delivered by  
Highwoods and Sub, and assuming valid authorization, execution and delivery by  
JCN, constitutes a valid and binding agreement of Highwoods and Sub enforceable 
in accordance with its terms, except as enforceability may be limited by        
bankruptcy, insolvency, reorganization, or similar laws affecting creditors'    
rights generally, provided, however, that we express no opinion as to the       
availability of the equitable remedy of specific performance.                   

  5. The shares of Highwoods Common Stock to be issued to the shareholders
of JCN as contemplated by the Agreement have been registered under the          
Securities Act of 1933, as amended, and when properly issued and delivered      
following consummation of the Merger will be fully paid and non-assessable      
under the General Corporation Law of Maryland.                                  

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                                                                  Appendix A-1

AMENDMENT NO. 1 TO  
AGREEMENT AND PLAN OF MERGER  

    THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER (this "Amendment") is
dated as of April 23, 1998, by and among HIGHWOODS PROPERTIES, INC., a Maryland 
corporation ("Highwoods"), JACKSON ACQUISITION CORP., a Maryland corporation    
("Sub"), and J.C. NICHOLS COMPANY, a Missouri corporation ("JCN"). Capitalized  
terms used but not defined herein shall have the meanings set forth in the      
Agreement and Plan of Merger dated as of December 22, 1997 and entered into     
among Highwoods, Sub, and JCN (the "Agreement").                                

  WHEREAS, the Parties wish to amend the Agreement, which contemplates the
merger of JCN with and into Sub (the "Merger"), in order to provide to JCN      
shareholders greater certainty in determining the amount and form of            
consideration to be received in the Merger; and                                 

WHEREAS, Highwoods wishes to waive a condition to its obligation to   
consummate the Merger.                                                          

    NOW, THEREFORE, in consideration of the foregoing premises, covenants, and
agreements contained herein, and other good and valuable consideration, the     
receipt of which is hereby acknowledged, the parties to this Amendment,         
intending to be legally bound, hereby agree as follows:                         

SECTION I 
AMENDMENT TO ARTICLE 3  

    Section 1.1 Conversion of Shares. Section 3.1 (c) is hereby amended in its
entirety to read as follows:                                                    

   (c) Subject to the right granted in Section 3.2, each share of JCN Common
  Stock (including any associated JCN Rights, but excluding shares held by
any JCN Entity or any Highwoods Entity and excluding shares held by   
    shareholders who perfect their statutory dissenters' rights as provided in
Section 3.5) issued and outstanding immediately prior to the Effective
Time shall cease to be outstanding and shall be converted into a fixed
number of shares of Highwoods Common Stock. The number of shares of   
Highwoods Common Stock to be issued for each share of JCN Common Stock
   (the "Per Share Stock Consideration") shall be determined by reference to
   a ratio (the "Exchange Ratio") that shall be equal to the greater of: (i)
1.84, or (ii) the quotient of $65 divided by the average of the daily 
 average high and low sale price for shares of Highwoods Common Stock on
the NYSE for each of the twenty (20) days immediately preceding the   
Effective Time; provided, however, that at no time shall the Exchange 
   Ratio exceed 2.03. Pursuant to the Highwoods Rights Agreement, each share
of Highwoods Common Stock issued in connection with the Merger upon   
   conversion of JCN Common Stock shall be accompanied by a Highwoods Right.

 Section 1.2 Cash Election. Section 3.2 is hereby amended in its entirety to
read as follows:                                                

     3.2 Cash Election. Holders of JCN Common Stock shall be provided with
    an opportunity to elect to receive cash consideration in lieu of receiving
Highwoods Common Stock in the Merger, in accordance with the election 
    procedures set forth below in this Section 3.2. Holders who are to receive
   cash in lieu of exchanging their shares of JCN Common Stock for Highwoods
   Common Stock as specified below shall receive $65 per share of JCN Common
   Stock in cash (the "Per Share Cash Consideration"). The amount determined
by multiplying $65 by the number of Dissenting Shares shall be defined
herein as the "Dissenting Share Amount." The aggregate Per Share Cash 
   Consideration to be paid in the Merger, plus the Dissenting Share Amount,
 shall be limited to 40% of the aggregate consideration paid in exchange
 for shares of JCN Common Stock and shall be defined herein as the "Cash
Amount."                                                              

     A form for use by JCN shareholders to elect to receive cash and other
  appropriate and customary transmittal material (which shall specify that
  delivery shall be effected only upon proper delivery of the certificates
theretofore representing JCN Common Stock ("Old Certificates") to an  
exchange agent designated by Highwoods (the "Exchange Agent")) in such
   form as Highwoods and JCN shall mutually agree ("Election Form") shall be
 mailed concurrently with the mailing of the Proxy Statement required by
Section 8.1 hereof, or on such other date as Highwoods and JCN shall  
mutually agree ("Mailing Date") to each holder of record of JCN Common
Stock on the record date ("Record Date") for the JCN shareholders     

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entitled to vote at the shareholders meeting to approve the Merger as 
required by Section 8.1 (the "JCN Shareholders Meeting").             

 Each Election Form shall permit a holder (or the beneficial owner
  through appropriate and customary documentation and instructions) of JCN
   Common Stock to elect to receive cash with respect to all or a portion of
such holder's JCN Common Stock.                                       

       Any shares of JCN Common Stock with respect to which the holder (or the
   beneficial owner, as the case may be) elects to receive cash and does not
dissent shall be referred to herein as the "Cash Election Shares." Any
shares of JCN Common Stock with respect to which the holder (or the   
  beneficial owner, as the case may be) either does not submit an Election
Form or does not elect to receive cash and does not dissent, shall be 
collectively referred to herein as "Stock Election Shares."           

    Any of the elections set forth in the foregoing paragraph shall have
    been properly made only if the Exchange Agent shall have actually received
  an effective, properly completed Election Form on or before 5:00 p.m. on
  the fifth business day prior to the date of the JCN Shareholders Meeting
(or such other time and date as Highwoods and JCN may mutually agree, 
including as a result of any adjournment or postponement of the JCN   
 Shareholders Meeting) (the "Election Deadline") which is not revoked or
  changed prior to the Election Deadline. Any Election Form may be revoked
    or changed by the person submitting a subsequent Election Form at or prior
  to the Election Deadline. In the event an Election Form is revoked prior
 to the Election Deadline, the shares of JCN Common Stock represented by
   such Election Form shall become Stock Election Shares unless the Exchange
Agent shall have actually received an effective, properly completed   
    Election Form prior to the Election Deadline and such Election Form is not
    revoked or changed prior to the Election Deadline. Subject to the terms of
this Agreement and of the Election Form, the Exchange Agent shall have
reasonable discretion to determine whether any election, revocation or
change has been properly or timely made and to disregard immaterial   
defects in the Election Forms, and any good faith decisions of the    
    Exchange Agent regarding such matters shall be binding and conclusive. The
    Exchange Agent shall promptly notify JCN of any defect in an Election Form
   other than an immaterial defect disregarded in good faith by the Exchange
Agent. Subject to the foregoing sentence, neither Highwoods nor the   
  Exchange Agent shall be under any obligation to notify any person of any
defect in an Election Form.                                           

       Within three business days after the Election Deadline, Highwoods shall
    cause the Exchange Agent to effect the allocation among the holders of JCN
   Common Stock in accordance with the Election Forms; provided, however, if
 the amount of cash that would be issued upon the conversion of the Cash
Election Shares is greater than the amount by which the Cash Amount   
   exceeds the Dissenting Share Amount (the "Maximum Cash Election Amount"),
    then the Exchange Agent shall convert a sufficient number of Cash Election
 Shares (other than Dissenting Shares) into the right to receive the Per
 Share Stock Consideration, which Cash Election Shares shall be selected
  pro rata from among all of the holders thereof, based upon the aggregate
    number of Cash Election Shares held by each of such holders, such that the
amount of cash that will be issued in the Merger to satisfy the       
 non-converted Cash Election Shares equals as closely as practicable the
Maximum Cash Election Amount.                                         

    Highwoods shall, at least two business days prior to the date of the
  JCN Shareholders Meeting, communicate to JCN the aggregate allocation of
stock and cash, the amount of stock and cash going to each of JCN's   
shareholders, and the method in which such amounts were calculated.   

SECTION II  
AMENDMENT TO ARTICLE 9  

  Section 2.1 Waiver by Highwoods of Certain Obligations. The introductory
paragraph to Section 9.1 of the Agreement is hereby amended in its entirety to  
read as follows:                                                                

       9.1 Conditions to Obligations of Each Party. The respective obligations
   of each Party to perform this Agreement and consummate the Merger and the
   other transactions contemplated hereby are subject to the satisfaction of
the conditions set forth below in this Section 9.1. JCN may waive,    
pursuant to Section 11.6, one or more of the following conditions.    
   Highwoods hereby irrevocably waives and agrees to waive immediately prior
  to Closing, pursuant to Section 11.6, all of the conditions set forth in
Section 9.1(b) (except                                                

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     for the filing of the Articles of Merger as contemplated by Section
    1.1) and the condition set forth in Section 9.1(c) that JCN obtain
   from Principal Mutual Insurance Company the Consent to the Merger
referred to in Section 9.1 of the JCN Disclosure Memorandum.  

SECTION III 
AMENDMENT TO ARTICLE 10 

Section 3.1 Waiver by Highwoods of Certain Termination Rights. Section
10.1(d)(i) is hereby amended in its entirety to read as follows:                

           (i) Highwoods shall, after using its best efforts, have been unable
        to satisfy the condition to closing set forth in either Section 9.1(e)
       or (f), to the extent required for consummation of the Merger and the
other transactions contemplated hereby, or                    

SECTION IV  
AMENDMENT TO ARTICLE 11.1 

Section 4.1 Definitions.                                                  

       (a) Section 11.1(a) is hereby amended by adding the phrase, "as
        such Section has been amended by Amendment No. 1 to this Agreement" to
the end of the definition of "Per Share Stock Consideration". 

      (b) Section 11.1(b) is hereby amended by adding the phrase "as
        amended by Amendment No. 1 to this Agreement" after the end of each of
      the definitions of "Cash Election Shares" and "Maximum Cash Election
Amount".                                                      

SECTION V 
GENERAL PROVISIONS  

Section 5.1 Entire Agreement. Except as otherwise expressly provided  
herein, this Amendment (including the Agreement and the documents and           
instruments referred to therein) constitutes the entire agreement between the   
Parties with respect to the transactions contemplated hereunder and in the      
Agreement and supersedes all other arrangements or understandings with respect  
thereto, written or oral (except for the Confidentiality Agreement referred to  
in Section 8.6(b) of the Agreement and any correspondence from any Party        
waiving any rights or obligations or consenting to any actions taken by or on   
behalf of another party).                                                       

 Section 5.2 Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which 
together shall constitute one and the same instrument.                          

Section 5.3 Captions, Articles and Sections. The captions contained in
this Amendment are for reference purposes only and are not part of this         
Amendment. Unless otherwise indicated, all references to particular Articles or 
Sections shall mean and refer to the referenced Articles and Sections of this   
Amendment.                                                                      

  Section 5.4 References to the Agreement. From and after the execution of
this Amendment, all references in the Agreement to "this Agreement," "hereof,"  
"herein" and similar terms shall mean and refer to the Agreement as amended by  
this Amendment, and all references in other documents to the Agreement shall    
mean the Agreement as amended by this Amendment. This Amendment shall not be    
modified, supplemented or terminated in any manner whatsoever except by written 
instrument signed by the party against which such modification, supplement or   
termination is sought to be enforced.                                           

Section 5.5 Ratification and Confirmation. The Agreement is hereby    
ratified and confirmed and, except as herein amended, remains in full force and 
effect.                                                                         

Section 5.6 Governing Law. This Amendment shall be governed by and    
construed in accordance with the Laws of the State of Missouri, without regard  
to any applicable conflicts of Laws.                                            

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   IN WITNESS WHEREOF, Highwoods, Sub, and JCN have caused this Amendment to
be signed by their respective duly authorized officers as of the date first     
written above.                                                                  

                      HIGHWOODS PROPERTIES, INC.

                                    By: ------------------------------------

                                    Name: ----------------------------------

                                      Title: -----------------------------------

                     JACKSON ACQUISITION CORP.

                                    By: ------------------------------------

                                    Name: ----------------------------------

                                      Title: -----------------------------------

                J.C. NICHOLS COMPANY

                                    By: ------------------------------------

                                    Name: ----------------------------------

                                      Title: -----------------------------------

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                                                                    Appendix B
MORGAN STANLEY                                                                  

                                  MORGAN STANLEY & CO.
                          INCORPORATED
                           1585 BROADWAY
                                      NEW YORK, NEW YORK 10036
                            (212) 761-4000

                                                                  May 15, 1998

Board of Directors                                                              
J.C. Nichols Company                                                            
310 Ward Parkway                                                                
Kansas City, MO 64112                                                           

Members of the Board:                                                           

We understand that J.C. Nichols Company ("JCN" or the "Company"),     
Highwoods Properties, Inc. ("Highwoods" or "Buyer") and Jackson Acquisition     
Corp. ("Acquisition Sub") have entered into an Agreement and Plan of Merger,    
dated December 22, 1997 (the "Original Merger Agreement"), and Amendment No. 1  
to the Original Merger Agreement, dated April 29, 1998 (together with the       
Original Merger Agreement, the "Merger Agreement"), which provides, among other 
things, for the merger (the "Merger") of JCN with and into Acquisition Sub.     
Pursuant to the Merger, each outstanding share of common stock, par value $0.01 
per share (the "JCN Common Stock") of JCN, other than shares held in treasury   
or held by Buyer or any affiliate of Buyer or as to which dissenters' rights    
have been perfected, will cease to be outstanding and be converted into a fixed 
number of shares of common stock of Buyer, par value $0.01 per share (the       
"Buyer Common Stock"). The number of shares of Buyer Common Stock to be issued  
for each share of JCN Common Stock will be determined by reference to a ratio   
(the "Exchange Ratio") that shall be equal to the greater of: (i) 1.84, or (ii) 
the quotient of $65 divided by the average of the daily average high and low    
sale price for shares of Buyer Common Stock on the New York Stock Exchange for  
each of the twenty (20) days immediately preceding the Effective Time, as       
defined in the Merger Agreement; provided, however, that at no time shall the   
Exchange Ratio exceed 2.03. Holders of JCN Common Stock will also be provided   
with an opportunity to elect to receive cash consideration in lieu of receiving 
Buyer Common Stock in an amount equal to $65 per share of JCN Common Stock in   
cash (the "Per Share Cash Consideration"); provided that the aggregate Per      
Share Cash Consideration to be paid in the Merger, plus the Dissenting Share    
Amount (as defined in the Merger Agreement), shall be limited to 40% of the     
aggregate consideration paid in exchange for shares of JCN Common Stock. The    
terms and conditions of the Merger are more fully set forth in the Merger       
Agreement.                                                                      

You have asked for our opinion as to whether the consideration to be  
received by the holders of shares of JCN Common Stock pursuant to the Merger    
Agreement is fair from a financial point of view to such holders (other than    
Buyer and its affiliates).                                                      

For purposes of the opinion set forth herein, we have:                

(i) reviewed certain publicly available financial statements and other    
information of the Company and Buyer, respectively;               

(ii) reviewed certain internal financial statements and other financial and 
 operating data concerning the Company and Buyer and prepared by the
managements of the Company and Buyer, respectively;               

(iii) analyzed certain financial projections for the Company and Buyer        
 prepared by the managements of the Company and Buyer, respectively;

(iv) reviewed the reported prices and trading activity for the JCN Common   
Stock and the Buyer Common Stock;                                 

 (v) compared the financial performance of the Company and the Buyer and the
  prices and trading activity of the JCN Common Stock and Buyer Common
   Stock with that of certain other comparable publicly-traded companies
and their securities;                                             

(vi) discussed with the senior management of the Company and Buyer their    
     estimates of the synergies and cost savings expected to be derived from
the Merger;                                                       

(vii) reviewed the financial terms, to the extent publicly available, of      
certain comparable transactions;                                  

(viii) reviewed the pro forma impact of the Merger on the Buyer's funds from    
     operations per share, consolidated capitalization and financial ratios;

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Board of Directors                                                              
JCN Properties Corporation                MORGAN STANLEY                        
May 15, 1998                                                                    
Page 2                                                                          

(ix) participated in discussions and negotiations among representatives of
the Company and Buyer and their financial and legal advisors;   

(x) reviewed the Merger Agreement, the Registration Statement on Form     
S-4, including the Proxy Statement/                               
     Prospectus relating to the Special Meeting of the Holders of JCN Common
    Stock to be held pursuant to the Merger Agreement, and certain related
documents; and                                                    

(xi) performed such other analyses as we have deemed appropriate.           

We have assumed and relied upon without independent verification the  
accuracy and completeness of the information reviewed by us for the purposes of 
this opinion. With respect to the financial projections, including the          
estimates of synergies and cost savings expected to be derived from the Merger, 
we have assumed that they have been reasonably prepared on bases reflecting the 
best currently available estimates and judgments of the future financial        
performance of the Company and Buyer. We have not made any independent          
valuation or appraisal of the assets or liabilities of the Company or Buyer,    
nor have we been furnished with any such appraisals other than the common stock 
valuation prepared by Houlihan Lokey Howard & Zukin as of December 31, 1996 and 
furnished to us by the Company. Our opinion is necessarily based on economic,   
market and other conditions as in effect on, and the information made available 
to us as of, the date hereof.                                                   

We have acted as financial advisor to the Board of Directors of the   
Company in connection with this transaction and will receive a fee for our      
services. In the past, Morgan Stanley & Co. Incorporated and its affiliates     
have provided financial advisory and financing services for the Company and     
Buyer and have received fees for the rendering of these services.               

  It is understood that this letter is for the information of the Board of
Directors of JCN only and may not be used for any other purpose without our     
prior written consent, except that this opinion may be included in its entirety 
in any filing made by JCN or Highwoods with the Securities and Exchange         
Commission with respect to the Merger. We express no opinion and make no        
recommendation as to how shareholders of JCN should vote at any shareholders'   
meeting to be held in connection with the Merger.                               

    Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the consideration to be received by the holders of shares of JCN    
Common Stock pursuant to the Merger Agreement is fair from a financial point of 
view to such holders (other than Buyer and its affiliates).                     

                   Very truly yours,

                                   MORGAN STANLEY & CO. INCORPORATED

                        By: /s/  YIE-HSIN HUNG
                                            ----------------------------------
                       Yie-Hsin Hung
                   Principal

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                                                                    Appendix C
Missouri Revised Statutes, Section 351.455: 
Shareholder Who Objects to Merger May Demand Value of Shares, When. 

1. If a shareholder of a corporation which is a party to a merger or  
consolidation shall file with such corporation, prior to or at the meeting of   
shareholders at which the plan of merger or consolidation is submitted to a     
vote, a written objection to such plan of merger or consolidation, and shall    
not vote in favor thereof, and such shareholder, within twenty days after the   
merger or consolidation is effected, shall make written demand on the surviving 
or new corporation for payment of the fair value of his shares as of the day    
prior to the date on which the vote was taken approving the merger or           
consolidation, the surviving or new corporation shall pay to such shareholder,  
upon surrender of his certificate or certificates representing said shares, the 
fair value thereof. Such demand shall state the number and class of the shares  
owned by such dissenting shareholder. Any shareholder failing to make demand    
within the twenty day period shall be conclusively presumed to have consented   
to the merger or consolidation and shall be bound by the terms thereof.         

2. If within thirty days after the date on which such merger or       
consolidation was effected the value of such shares is agreed upon between the  
dissenting shareholder and the surviving or new corporation, payment therefor   
shall be made within ninety days after the date on which such merger or         
consolidation was effected, upon the surrender of his certificate or            
certificates representing said shares. Upon payment of the agreed value the     
dissenting shareholder shall cease to have any interest in such shares or in    
the corporation.                                                                

   3. If within such period of thirty days the shareholder and the surviving
or new corporation do not so agree, then the dissenting shareholder may, within 
sixty days after the expiration of the thirty day period, file a petition in    
any court of competent jurisdiction within the county in which the registered   
office of the surviving or new corporation is situated, asking for a finding    
and determination of the fair value of such shares, and shall be entitled to    
judgment against the surviving or new corporation for the amount of such fair   
value as of the day prior to the date on which such vote was taken approving    
such merger or consolidation, together with interest thereon to the date of     
such judgment. The judgment shall be payable only upon and simultaneously with  
the surrender to the surviving or new corporations of the certificate or        
certificates representing said shares. Upon the payment of the judgment, the    
dissenting shareholder shall cease to have any interest in such shares, or in   
the surviving or new corporation. Such shares may be held and disposed of by    
the surviving or new corporation as it may see fit. Unless the dissenting       
shareholder shall file such petition within the time herein limited, such       
shareholder and all persons claiming under him shall be conclusively presumed   
to have approved and ratified the merger or consolidation, and shall be bound   
by the terms thereof.                                                           

   4. The right of a dissenting shareholder to be paid the fair value of his
shares as herein provided shall cease if and when the corporation shall abandon 
the merger or consolidation.                                                    

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PROXY                                   PROXY                                   
J.C. NICHOLS COMPANY

This Proxy is Solicited on Behalf of the Board of Directors.

  The undersigned hereby appoints William K. Hoskins and Barrett Brady and
anyone or more of them, with full power of substitution, as a proxy or proxies  
to represent and to vote, as designated below, all the shares of Common Stock   
of J.C. Nichols Company the undersigned is entitled to vote at the Special      
Meeting of Shareholders to be held on July 1, 1998, or any adjournment or       
postponement thereof. This proxy revokes all prior proxies given by the         
undersigned. Please mark vote in box in the following manner using dark ink     
only. -The Board of Directors recommends a vote FOR the following proposal:     

1.  Approval of the Agreement and Plan of Merger among Highwoods Properties,
 Inc., Jackson Acquisition Corp. and J.C. Nichols Company, pursuant to
  which the Company's shareholders may elect to receive either shares of
   Highwoods common stock or cash in exchange for shares of Company common
stock.                                                              

FOR [ ]       AGAINST [ ]       ABSTAIN [ ]                       

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY 
USING THE ENCLOSED PREPAID ENVELOPE.

(Continued and to be signed on the reverse side)

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J.C. NICHOLS COMPANY
This proxy, when properly executed, will be voted in the manner directed    
herein by the undersigned stockholder. If no direction is made, this proxy  
will be voted FOR the Merger Agreement.                                     
2. The named proxies may vote in their discretion upon such other business  
   as may properly come before the Special Meeting, and all matters incident
    to the conduct of the Special Meeting. If you have voted against the first
 proposal, the named proxies may not vote the shares represented by this
proxy in favor of any adjournment or postponement intended to permit  
further solicitation.                                                 
   -----------------------------------------------------------------------------

                                  Printed Name of Certificate Holder

                                     ------------------------------ , 1998
                    Signature       Date

                                     ------------------------------ , 1998
                                    Signature(s) (if Jointly Held)  Date

                                     ------------------------------ , 1998
                              Title (If Applicable)     Date

                                 ---------------------------------
                                      Please sign exactly as name appears on
                                       your stock certificate. When shares are
                                        held by joint tenants, both should sign.
                                   When signing as attorney, executor,
                                   administrator, trustee or guardian,
                                    please give full title as such. If a
                                corporation, please sign in full
                                    corporate name by President or other
                                     authorized officer. If a partnership,
                                     please sign in partnership name by an
                  authorized person.

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ELECTION FORM 
THIS ELECTION FORM MUST BE COMPLETED AND DELIVERED BY    TO:  
First Union National Bank 

------------------- 
------------------- 
Attention:          
   Telephone No.:---------
   Facsimile No.:---------

   An envelope addressed to First Union National Bank (the "Exchange Agent")
is enclosed for your convenience. Delivery of this instrument to an address     
other than as set forth above will not constitute valid delivery.               

 On December 22, 1997, Highwoods Properties, Inc. ("Highwoods"), Jackson
Acquisition Corp. and J.C. Nichols Company (the "Company") entered into an      
Agreement and Plan of Merger (the "Merger Agreement"). Pursuant to the Merger   
Agreement, as amended, all of the issued and outstanding shares of common stock 
of the Company are to be converted into either the right to receive between     
1.84 and 2.03 shares of Highwoods common stock, or $65 in cash or a combination 
of the two, as elected by the holder thereof (subject to the limitations set    
forth in the Merger Agreement). The right to receive Highwoods common stock or  
cash, as the case may be, is subject to the completion of this Election Form.   

TO FIRST UNION NATIONAL BANK:                                                   

   By executing this Election Form, the undersigned hereby elects to receive
cash for the number of his or her shares of Company common stock set forth      
below. The undersigned understands that the Exchange Agent will pay cash in     
lieu of any fractional shares of Highwoods common stock otherwise issuable in   
connection with the transaction contemplated by the Merger Agreement.           

    The undersigned hereby represents and warrants that the undersigned is, as
of the date hereof, the registered holder or assignee of the registered holder  
of the Company common stock for which the election below is. The undersigned    
will, upon request, execute any additional documents necessary or desirable to  
complete the surrender and exchange of such Company common stock. All authority 
conferred or agreed to be conferred in this Election Form shall be binding upon 
the successors, assigns, heirs, executors, administrators and legal             
representatives of the undersigned and shall not be affected by, and shall      
survive, the death or incapacity of the undersigned. The Exchange Agent         
reserves the right to waive any defect in this Election Form.                   

 If you wish to receive Highwoods common stock for all of your shares of
Company common stock, you should either enter a "0" in the appropriate blank    
below or not submit this Election Form at all. If you wish to receive a         
combination of cash and Highwoods common stock for your shares of Company       
common stock, you should state, in the appropriate blank below, the number of   
shares of Company common stock for which you wish to receive cash. If you wish  
to receive cash for all of your shares of Company common stock, you should, in  
the appropriate blank below, either enter the total number of shares of Company 
common stock you own or write the word "all."                                   

IMPORTANT: COMPLETE THIS SECTION  

[ ]  I hereby elect to receive cash for    of my shares of Company common 
stock.                          

    X-------------------------------------------------------------------------
(Signature(s) of Holder(s)) 

     Dated:-------------------------------------------------------------- , 1998

     Name:----------------------------------------------------------------------

     Authorized  Signature:-----------------------------------------------------

     Print Name of Authorized Signor:-------------------------------------------

     Title of Authorized Signor (if applicable):--------------------------------

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INSTRUCTIONS TO ELECTION FORM 

  This Election Form must be properly filled in, dated and signed and must
be either sent to the Exchange Agent or delivered by hand to the Exchange Agent 
at the address listed above. Delivery of your Election Form will not be         
complete until actually received by the Exchange Agent. The signature on this   
Election Form must correspond exactly with the name appearing on the holder's   
stock certificate(s). Joint owners should each sign personally. The person      
signing on behalf of an entity must give such person's full title in such       
capacity, if applicable. The Exchange Agent will give notification to the       
Company of defects in this Election Form or in any other required documents.    
The terms and conditions of the Merger Agreement are incorporated herein by     
reference and are deemed to form a part of the terms and conditions of this     
Election Form for all purposes.                                                 

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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS 

ITEM 20. Indemnification of Directors and Officers                              

Highwoods' officers and directors are and will be indemnified against 
certain liabilities in accordance with the MGCL, the Articles of Incorporation  
and bylaws of Highwoods and the Highwoods Operating Partnership Agreement. The  
Articles of Incorporation require Highwoods to indemnify its directors and      
officers to the fullest extent permitted from time to time by the MGCL. The     
MGCL permits a corporation to indemnify its directors and officers, among       
others, against judgments, penalties, fines, settlements and reasonable         
expenses actually incurred by them in connection with any proceeding to which   
they may be made a party by reasons of their service in those or other          
capacities unless it is established that the act or omission of the director or 
officer was material to the matter giving rise to the proceeding and was        
committed in bad faith or was the result of active and deliberate dishonesty,   
or the director or officer actually received an improper personal benefit in    
money, property or services, or in the case of any criminal proceeding, the     
director or officer had reasonable cause to believe that the act or omission    
was unlawful.                                                                   

The Highwoods Operating Partnership Agreement also provides for       
indemnification of Highwoods and its officers and directors to the same extent  
indemnification is provided to officers and directors of Highwoods in its       
Articles of Incorporation and limits the liability of Highwoods and its         
officers and directors to the Highwoods Operating Partnership and its partners  
to the same extent liability of officers and directors of Highwoods to          
Highwoods and its stockholders is limited under Highwoods' Articles of          
Incorporation.                                                                  

 Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling Highwoods    
pursuant to the foregoing provisions, Highwoods has been informed that in the   
opinion of the Securities and Exchange Commission such indemnification is       
against public policy as expressed in the Securities Act and is therefore       
unenforceable.                                                                  

ITEM 21. Exhibits                                                               

                                                        [Enlarge/Download Table]

   Ex.        FN     Description                                                                                   
--------  ---------  ----------------------------------------------------------------------------------------------
                                                                                                                   
  2        (1)            Master Agreement and Plan of Merger by and among the Registrant, Jackson Acquisition     
                     Corp. and J.C. Nichols Company dated December 22, 1997, as amended on April 29, 1998          
 3.1       (2)       Amended and Restated Articles of Incorporation of the Registrant                              
 3.2       (3)       Amended and Restated Bylaws of the Registrant                                                 
 4.1       (3)       Specimen of certificate representing shares of Highwoods Common                               
 4.2       (4)           Rights Agreement, dated as of October 6, 1997, between the Registrant and First Union     
                     National Bank                                                                                 
 4.3       (5)           Purchase Agreement between the Registrant, UBS Limited and Union Bank of Switzerland,     
                     London Branch, dated as of August 28, 1997                                                    
 4.4       (5)           Forward Stock Purchase Agreement between the Registrant and Union Bank of Switzerland,    
                     London Branch, dated as of August 28, 1997                                                    
 4.5       (5)       Agreement to furnish certain instruments defining the rights of long-term debt holders of the 
                     Registrant                                                                                    
  5                  Opinion of Alston & Bird LLP re legality                                                      
 8.1                 Opinion of Blackwell Sanders Peper Martin LLP re tax matters                                  
 8.2                 Opinion of Alston & Bird LLP re certain tax matters                                           
 8.3                 Opinion of Alston & Bird LLP re certain tax matters                                           
10.1       (3)              Amended and Restated Agreement of Limited Partnership of the Highwoods Operating       
                     Partnership                                                                                   
10.2       (6)            Amendment to Amended and Restated Agreement of Limited Partnership of the Highwoods      
                     Operating Partnership with respect to Series A Preferred Units                                
10.3       (7)            Amendment to Amended and Restated Agreement of Limited Partnership of the Highwoods      
                       Operating Partnership with respect to certain rights of limited partners upon a change in   
                     control                                                                                       
10.4       (8)            Amendment to Amended and Restated Agreement of Limited Partnership of the Highwoods      
                     Operating Partnership with respect to Series B Preferred Units                                
10.5       (9)            Amendment to Amended and Restated Agreement of Limited Partnership of the Highwoods      
                                     Operating Partnership with respect to Series D Preferred Units                

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                                                        [Enlarge/Download Table]

       Ex.               FN         Description                                                                           
----------------  ----------------  --------------------------------------------------------------------------------------
                                                                                                                          
    10.6            (10)            Form of Registration Rights and Lockup Agreement among the Registrant and the Holders 
                                    named therein, which agreement is signed by all Common Unit holders                   
    10.7            (10)            Articles of Incorporation of Highwoods Services, Inc.                                 
    10.8            (10)            Bylaws of Highwoods Services, Inc.                                                    
    10.9            (11)(12)        Amended and Restated 1994 Stock Option Plan of the Registrant                         
    10.10            (5)(12)        1997 Performance Award Plan of the Registrant                                         
    10.11            (5)(12)        1997 Unit Option Plan of the Highwoods Operating Partnership                          
   10.12(a)         (10)(12)         Employment Agreement between the Registrant and the Highwoods Operating Partnership  
                                    and John L. Turner                                                                    
   10.12(b)         (13)(12)         Employment Agreement between the Registrant and the Highwoods Operating Partnership  
                                    and John W. Eakin                                                                     
   10.12(c)         (14)(12)         Employment Agreement between the Registrant and the Highwoods Operating Partnership  
                                    and Gene H. Anderson                                                                  
   10.12(d)          (5)(12)         Employment Agreement between the Registrant and the Highwoods Operating Partnership  
                                    and James R. Heistand                                                                 
   10.13(a)          (5)(12)                Executive Supplemental Employment Agreement between the Registrant and        
                                    Ronald P. Gibson                                                                      
   10.13(b)          (5)(12)        Executive Supplemental Employment Agreement between the Registrant and John L. Turner 
   10.13(c)          (5)(12)            Executive Supplemental Employment Agreement between the Registrant and Edward     
                                    J. Fritsch                                                                            
   10.13(d)          (5)(12)            Executive Supplemental Employment Agreement between the Registrant and Carman     
                                    J. Liuzzo                                                                             
   10.13(e)          (5)(12)             Executive Supplemental Employment Agreement between the Registrant and Mack      
                                    D. Pridgen, III                                                                       
    10.14           (15)               Form of warrants to purchase Highwoods Common issued to John L. Turner, William    
                                    T. Wilson III and John E. Reece II                                                    
    10.15           (13)                Form of warrants to purchase Highwoods Common issued to W. Brian Reames, John     
                                    W. Eakin and Thomas S. Smith                                                          
    10.16              (5)          Form of warrants to purchase Highwoods Common issued to James R. Heistand and certain 
                                    other shareholders of Associated Capital Properties, Inc.                             
      21               (5)          Schedule of subsidiaries of the Registrant                                            
    23.1                            Consent of Alston & Bird LLP (included in Exhibits 5 and 8.3)                         
    23.2                            Consent of Blackwell Sanders Peper Martin LLP (included in Exhibit 8.1)               
    23.3                            Consent of Ernst & Young LLP                                                          
    23.4                            Consent of Coopers & Lybrand LLP                                                      
    23.5                            Consent of Morgan Stanley & Co. Incorporated                                          
    23.6                            Consent of KPMG Peat Marwick LLP                                                      
      24                            Power of attorney (included on signature page)                                        

---------                                                                       
(1) Included as Appendix A to the Proxy Statement/Prospectus contained herein.  

(2) Filed as part of the Registrant's Current Report on Form 8-K dated          
 September 25, 1997 and amended by articles supplementary filed as part of
the Registrant's Current Report on Form 8-K dated October 4, 1997 and   
  articles supplementary filed as part of the Registrant's Current Report on
Form 8-K dated April 20, 1998, each of which is incorporated herein by  
reference.                                                              

(3) Filed as part of Registration Statement No. 33-76952 with the Securities    
and Exchange Commission and incorporated herein by reference.           

(4) Filed as part of the Registrant's Current Report on Form 8-K dated October  
4, 1997 and incorporated herein by reference.                           

(5) Filed as part of the Registrant's Annual Report on Form 10-K for the year   
ended December 31, 1997 and incorporated herein by reference.           

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(6) Filed as a part of the Registrant's Current Report on Form 8-K dated        
February 12, 1997 and incorporated herein by reference.                 

(7) Filed as a part of the Highwoods Operating Partnership's Quarterly Report   
on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein
by reference.                                                           

(8) Filed as a part of the Registrant's Current Report on Form 8-K dated        
September 25, 1997 and incorporated herein by reference.                

(9) Filed as a part of the Registrant's Current Report on Form 8-K dated April  
20, 1998 and incorporated herein by reference.                          

(10) Filed as a part of the Registrant's Annual Report on Form 10-K for the     
year ended December 31, 1995 and incorporated herein by reference.    

(11) Filed as a part of the Registrant's proxy statement on Schedule 14A        
relating to the 1997 Annual Meeting of Stockholders.                  

(12) Management contract or compensatory plan.                                  

(13) Filed as a part of the Registrant's Current Report on Form 8-K dated April 
1, 1996 and incorporated herein by reference.                         

(14) Filed as a part of the Registrant's Current Report on Form 8-K dated       
January 9, 1997 and incorporated herein by reference.                 

(15) Filed as part of Registration Statement No. 33-88364 with the Securities   
and Exchange Commission and incorporated herein by reference.         

  The Registrant will provide copies of any exhibit, upon written request,
at a cost of $.05 per page.                                                     

ITEM 22. Undertakings                                                           

(a) The undersigned registrant hereby undertakes:                               

     (1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:                  

   (i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;                                                                 

     (ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the     
     aggregate, represent a fundamental change in the information set forth in
the registration statement; provided, however, that any increase or 
  decrease in volume of securities offered (if the total dollar value of
  securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the     
   Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum 
  aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and             

       (iii) To include any material information with respect to the plan of
  distribution not previously disclosed in the Registration Statement or
  any material change to such information in the Registration Statement;
    provided, however, that the undertakings set forth in paragraphs (i) and
     (ii) also shall not apply if the information required to be included in a
 post-effective amendment by those paragraphs is contained in periodic
   reports filed by the registrant pursuant to Section 13 or Section 15(d)
     of the Securities Exchange Act of 1934 that are incorporated by reference
in this registration statement.                                     

(2) That, for the purpose of determining any liability under the    
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered     
therein, and the offering of such securities at that time shall be deemed 
to be the initial bona fide offering thereof.                             

  (3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the         
termination of the offering.                                              

(b) The undersigned registrant hereby undertakes that, for purposes of          
determining any liability under the Securities Act of 1933, each filing of the  
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the    
Securities Exchange Act of 1934 (and, where applicable, each filing of an       
employee benefit plan's annual report pursuant to Section 15(d) of the          
Securities Exchange Act of 1934) that is incorporated by reference in the       
registration statement shall be deemed to be a new                              

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registration statement relating to the securities offered therein, and the      
offering of such securities at that time shall be deemed to be the initial bona 
fide offering thereof.                                                          

(c) Insofar as indemnification for liability arising under the Securities Act   
may be permitted to directors, officers and controlling persons of the          
registrant pursuant to the foregoing provisions, or otherwise, the registrant   
has been advised that in the opinion of the Commission such indemnification is  
against public policy as expressed in the Securities Act and is, therefore,     
unenforceable. In the event that a claim for indemnification against such       
liabilities (other than the payment by the registrant of expenses incurred or   
paid by a director, officer or controlling person of the registrant in the      
successful defense of any action, suit or proceeding) is asserted by such       
director, officer or controlling person in connection with the securities being 
registered, the registrant will, unless in the opinion of its counsel the       
matter has been settled by controlling precedent, submit to a court of          
appropriate jurisdiction the question whether such indemnification by it is     
against public policy as expressed in the Securities Act and will be governed   
by the final adjudication of such issue.                                        

(d) The undersigned registrant hereby undertakes to respond to requests for     
information that is incorporated by reference into the prospectus pursuant to   
Items 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of    
such request, and to send the incorporated documents by first class mail or     
other equally prompt means. This includes information contained in documents    
filed subsequent to the effective date of the registration statement through    
the date of responding to the request.                                          

(e) The undersigned registrant hereby undertakes to supply by means of a        
post-effective amendment all information concerning a transaction, and the      
company being acquired involved therein, that was not the subject of and        
included in the registration statement when it became effective.                

(f) The undersigned registrant hereby undertakes as follows: that prior to any  
public reoffering of the securities registered hereunder through use of a       
prospectus which is a part of this registration statement, by any person or     
party who is deemed to be an underwriter within the meaning of Rule 145(c), the 
issuer undertakes that such reoffering prospectus will contain the information  
called for by the applicable registration form with respect to the reofferings  
by persons who may be deemed underwriters, in addition to the information       
called for by the other Items of the applicable form.                           

(g) The registrant undertakes that every prospectus (i) that is filed pursuant  
to paragraph (f) immediately preceding, or (ii) that purports to meet the       
requirements of section 10(a)(3) of the Securities Act and is used in           
connection with an offering of securities subject to Rule 415, will be filed as 
a part of an amendment to the registration statement and will not be used until 
such amendment is effective, and that, for purposes of determining any          
liability under the Securities Act, each such post-effective amendment shall be 
deemed to be a new registration statement relating to the securities offered    
therein, and the offering of such securities at that time shall be deemed to be 
the initial bona fide offering thereof.                                         

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SIGNATURES  

    Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the    
requirements for filing on Form S-4 and has duly caused this registration       
statement to be signed on its behalf by the undersigned, thereunto duly         
authorized, in the City of Raleigh, State of North Carolina, on June 1, 1998.   

                          HIGHWOODS PROPERTIES, INC.

                         By: /s/  RONALD P. GIBSON
                                          ------------------------------------
                      Ronald P. Gibson
               President

KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and 
directors of Highwoods Properties, Inc. hereby severally constitute Ronald P.   
Gibson, Carman J. Liuzzo and Edward J. Fritsch and each of them singly, our     
true and lawful attorneys with full power to them, and each of them singly, to  
sign for us and in our names in the capacities indicated below, the             
Registration Statement filed herewith and any and all amendments to said        
Registration Statement, and generally to do all such things in our names and in 
our capacities as officers and directors to enable Highwoods Properties, Inc.   
to comply with the provisions of the Securities Act of 1933, and all            
requirements of the Securities and Exchange Commission, hereby ratifying and    
confirming our signature as they may be signed by our said attorneys, or any of 
them, to said Registration Statement and any and all amendments thereto.        

Pursuant to the requirements of the Securities Act of 1933, this      
registration statement has been signed by the following persons in the          
capacities and on the dates indicated:                                          

                                                        [Enlarge/Download Table]

Name                                    Title                                    Date         
--------------------------------------  ---------------------------------------- -------------
                                                                                              
/s/   O. TEMPLE SLOAN, JR.              Chairman of the Board of Directors       June 1, 1998 
----------------------------------                                                            
O. Temple Sloan, Jr.                                                                          

/s/  RONALD P. GIBSON                   President, Chief Executive Officer       June 1, 1998 
----------------------------------      and Director                                          
Ronald P. Gibson                                                                              

 /s/  JOHN L. TURNER                    Chief Investment Officer and             June 1, 1998 
----------------------------------      Vice Chairman of the Board of Directors               
John L. Turner                                                                                

                                        Senior Vice President and Director                    
----------------------------------                                                            
James R. Heistand                                                                             

 /s/  GENE H. ANDERSON                  Senior Vice President and Director       June 1, 1998 
----------------------------------                                                            
Gene H. Anderson                                                                              

/s/  JOHN W. EAKIN                      Senior Vice President and Director       June 1, 1998 
----------------------------------                                                            
John W. Eakin                                                                                 

 /s/  THOMAS W. ADLER                   Director                                 June 1, 1998 
----------------------------------                                                            
Thomas W. Adler                                                                               

 /s/  WILLIAM E. GRAHAM, JR.            Director                                 June 1, 1998 
----------------------------------                                                            
William E. Graham, Jr.                                                                        

 /s/  L. GLENN ORR, JR.                 Director                                 June 1, 1998 
----------------------------------                                                            
L. Glenn Orr, Jr.                                                                             

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                                                        [Enlarge/Download Table]

Name                                    Title                            Date         
--------------------------------------  -------------------------------- -------------
                                                                                      
 /s/  WILLIAM H. SMITH, JR.             Director                         June 1, 1998 
----------------------------------                                                    
Willard H. Smith, Jr.                                                                 

 /s/  STEPHEN TIMKO                     Director                         June 1, 1998 
----------------------------------                                                    
Stephen Timko                                                                         

 /s/  WILLIAM T. WILSON, III            Director                         June 1, 1998 
----------------------------------                                                    
William T. Wilson, III                                                                

 /s/  CARMAN J. LIUZZO                  Vice President and               June 1, 1998 
----------------------------------                                                    
Carman J. Liuzzo                        Chief Financial Officer                       
                                        (Principal Accounting Officer)                

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