* It's a prepositional phrase. The phrase begins with the preposition "of" and modifies "highlands."
* It acts as an adjective, but it's not a phrase specifically called an adjective phrase. Adjective phrases typically consist of an adjective as the headword, followed by modifiers (adverbs, other adjectives, etc.).
Example of an adjective phrase: "very tall" (very is an adverb modifying the adjective "tall")
How to rephrase it as an adjective phrase:
You could use a more descriptive adjective to replace the prepositional phrase:
* "mountainous highlands"
* "highland mountains"
These options use adjectives directly to describe the highlands.