BRE PROPERTIES INC /MD/ - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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Form 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 1999

OR

[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Commission File No. 0-5305

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BRE PROPERTIES, INC.
(Exact name of registrant as specified in its charter)

Maryland 94-1722214
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)

44 Montgomery Street 36th Floor
San Francisco, California 94104-4809
(Address of principal executive offices) (Zip Code)

(415) 445-6530
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered
------------------- -----------------------------------------

Common Stock, $.01 par value New York Stock Exchange
8 1/2% Series A Preferred Stock New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

At March 17, 2000, the aggregate market value of the registrant's shares of
Common Stock par value, $.01 per share, held by nonaffiliates of the
registrant was approximately $1,151,000,000. At that date 44,702,341 shares
were outstanding.

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DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Annual Meeting of Shareholders of
BRE Properties, Inc. (the "Company") to be filed within 120 days of December
31, 1999 (the "Proxy Statement") are incorporated by reference in Part III of
this report.

FORWARD-LOOKING STATEMENTS

In addition to historical information, we have made forward-looking
statements in this Annual Report on Form 10-K. These forward-looking
statements pertain to, among other things, our capital resources, portfolio
performance and results of operations. Forward-looking statements involve
numerous risks and uncertainties. You should not rely on these statements as
predictions of future events because there is no assurance that the events or
circumstances reflected in the statements can be achieved or will occur.
Forward-looking statements are identified by words such as "believes,"
"expects," "may," "will," "should," "seeks," "approximately," "intends,"
"plans," "pro forma," "estimates," or "anticipates" or in their negative form
or other variations, or by discussions of strategy, plans or intentions.
Forward-looking statements are based on assumptions, data or methods that may
be incorrect or imprecise or incapable of being realized. The following
factors, among others, could affect actual results and future events: defaults
or nonrenewal of leases, increased interest rates and operating costs, failure
to obtain necessary outside financing, difficulties in identifying properties
to acquire and in effecting acquisitions, failure to successfully integrate
acquired properties and operations, risks and uncertainties affecting property
development and construction (including construction delays, cost overruns,
inability to obtain necessary permits and public opposition to such
activities), failure to qualify as a real estate investment trust under the
Internal Revenue Code of 1986, as amended (the "Code"), environmental
uncertainties, risks related to natural disasters, financial market
fluctuations, changes in real estate and zoning laws and increases in real
property tax rates. Our success also depends on general economic trends,
including interest rates, income tax laws, governmental regulation,
legislation, population changes and other factors. Do not rely solely on
forward-looking statements, which only reflect management's analysis. We
assume no obligation to update forward-looking statements.

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BRE PROPERTIES, INC.
PART I

Item 1. BUSINESS

Corporate Profile

BRE Properties, Inc. ("BRE" or the "Company"), a Maryland corporation, is a
fully integrated real estate investment trust which owns, develops,
rehabilitates, manages and acquires apartment communities in 12 targeted
metropolitan markets in the Western United States. At December 31, 1999, BRE's
multifamily portfolio included 86 completed multifamily communities
aggregating 22,690 units in California, Arizona, Washington, Utah, New Mexico,
Nevada, Oregon and Colorado and eight apartment communities under development
aggregating an estimated 2,161 units. On that date, BRE also owned one
commercial property and held limited partnership interests in two shopping
centers. Founded in 1970, the Company has paid 117 consecutive quarterly
dividends to shareholders since it commenced operations.

The Company's business objective is to build valuable, innovative
residential Lifestyle Solutionstm for its customers. BRE does this by
building, buying and internally managing high-quality apartment homes, located
conveniently to the business, transportation and employment centers the
Company believes are essential to rental customers. Recognizing that customers
have many housing choices, BRE focuses on developing and acquiring apartment
homes with customer-defined amenities and by providing professional management
services, delivered by well-trained associates.

The Company believes that its future growth will be supported by the
continued implementation of a six-point strategy focused on property
operations, research-driven capital deployment, customer satisfaction,
technological innovation and balance sheet management. Key characteristics of
the strategy include:

. Focus on accelerated growth from operation of existing assets--through
internal property management activities, continued improvements in
operating efficiencies and selective sale of properties which management
believes have reached maximum cash flow potential.

. Deployment of new capital to supply-constrained markets of the West--
through both direct and joint-venture investment, based on a research-
driven model which targets Western U.S. markets with long-term positive
fundamentals for apartment demand.

. Creation of a valuable residential customer experience--through delivery
of goods and services that enhance the residential experience,
encouraging customers to extend their leases and refer BRE's apartment
communities to other prospective customers.

. Innovation of technology-enabled tools--that support leasing,
management, maintenance, customer satisfaction and retention efforts.

. Creation of a sought-after constituent culture--through continued
development and enhancement of Company attributes that attract and
retain valuable customers, talented associates and loyal shareholders.

. Maintenance of balance sheet strength and flexibility--to fund
obligations and appropriate growth opportunities.

Events During 1999

During 1999, the Company completed the development and lease-up of six
communities that were under development at December 31, 1998. The Company also
purchased two other multifamily communities located in Los Angeles and San
Diego totaling 628 units and four land sites for development of an estimated
additional 1,132 units.

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The Company started a program of joint ventures in 1999, and as of December
31, 1999, had committed to three joint ventures. These joint ventures involve
the construction of three communities with 780 proposed units and an estimated
total cost of $72,000,000 with BRE's contribution representing approximately
$17,000,000. The Company is a minority partner in the joint ventures and will
receive additional operational cash flow or sales proceeds upon certain return
thresholds from the property. The Company intends to continue using joint
ventures to fund the development and or acquisition of multifamily
communities.

In the first quarter of 1999, the Company issued a total of 2,150,000
shares of preferred stock for net proceeds of approximately $52,000,000.

Events During 1998

During 1998, the Company completed the construction of eight communities
that were under construction as of December 31, 1997. Seven of these were
ready for occupancy as of December 31, 1998. The Company also purchased seven
other multifamily communities located in Denver, Seattle, Portland, Los
Angeles and San Diego totaling 1,597 units and five land sites for development
of an estimated additional 1,215 units. Three multifamily communities and four
commercial and retail properties were sold and the proceeds reinvested in
multifamily communities.

In February 1998, the Company issued $130 million in unsecured notes due
2013, at an effective yield of 7.3%, taking advantage of what it considered a
favorable interest rate. In October 1998, the Company's $300 million lines of
credit were replaced with one $400 million line of credit and the maturity was
extended by more than one year. Also, the Company issued a total of 2,119,515
shares of common stock for net proceeds of $56 million, further enhancing the
Company's financial flexibility.

In addition to completing seven of the eight properties under construction,
BRE also completed the integration of the personnel and assets purchased from
Trammell Crow Residential-West in November 1997 as described below.

Events During 1997

On November 18, 1997, the Company completed the acquisition of certain
assets and operations of Trammell Crow Residential-West ("TCRW") (the
"Transaction"), which further advanced significant objectives of BRE's
strategic plan. As a result of the Transaction, BRE:

. Acquired 16 completed apartment communities totaling 4,786 units and
eight apartment communities under development (the "Development
Communities") aggregating approximately 2,445 units, all of which were
completed and ready for occupancy by the first quarter of 1999;

. Added development, construction and third-party management capabilities,
creating fully integrated multifamily real estate operations, and
further strengthened and deepened the senior management team; and

. Significantly increased the geographic diversification of the portfolio
by expanding from nine Western markets to 12.

BRE acquired these assets and operations of TCRW pursuant to a definitive
agreement (the "Contribution Agreement"). The consideration for the
Transaction included the payment to certain entities of approximately $160
million in cash and $100 million in common stock based on a stock price of
$26.93 per share as provided in the Contribution Agreement. Further, certain
entities received 2,824,587 operating company units ("OC Units") (valued at
$76 million assuming a stock price of $26.93 per share) in BRE Property
Investors LLC (the "Operating Company"). The Operating Company also assumed
approximately $120 million in debt. The Operating Company is a 74% owned
subsidiary of BRE and BRE is the sole managing member. The OC Units held by
holders other than the Company are exchangeable, at the option of the holders,
into common

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stock of the Company on a 1:1 basis or, at the option of the Company, cash in
an amount equal to the market value of the common stock at the time of the
exchange. As of December 31, 1999, 185,000 OC Units have been exchanged for
common stock.

In connection with the acquisition of the Development Communities, the
Contribution Agreement also provides for the additional issuance of OC Units,
based on the completion of certain budget and schedule objectives relating to
the Development Communities. Accordingly, a total of 430,624 OC Units were
issued for the Development Communities.

Competition

All of the Company's communities are located in developed areas that
include other multifamily communities. There are numerous other multifamily
properties and real estate companies within these areas that compete with the
Company for tenants and development and acquisition opportunities. Such
competition could have a material effect on the Company's ability to lease
apartment homes at its communities or at any newly developed or acquired
communities and on the rents charged. The Company may be competing with others
that have greater resources than the Company. In addition, other forms of
residential properties including single family housing provide housing
alternatives to potential residents of upscale apartment communities.

Structure, Tax Status and Investment Policy

BRE is a real estate investment trust ("REIT") under Sections 856-860 of
the Internal Revenue Code of 1986, as amended (the "Code"). As a result, the
Company generally will not be subject to Federal income tax if it distributes
95% of its taxable income to its shareholders. REITs are subject to a number
of complex organizational and operational requirements. If the Company fails
to qualify as a REIT, its taxable income may be subject to income tax at
regular corporate rates. See "Risk Factors--Tax Risks."

The Company's long-range investment policy emphasizes the development,
construction and acquisition of multifamily communities located in the Western
United States. As circumstances warrant, certain properties may be sold and
the proceeds reinvested into multifamily communities which management believes
offer better growth potential. Among other items, this policy is intended to
enable management to monitor developments in local real estate markets and to
take an active role in managing the Company's properties and improving their
performance. The policy is subject to ongoing review by the Board of Directors
and may be modified in the future to take into account changes in business or
economic conditions, as circumstances warrant.

Employees

As of December 31, 1999, the Company had approximately 1,060 employees.
None of the employees is covered by collective bargaining agreements.

Investment Portfolio

See Items 2 and 7 of this report for a description of the Company's
individual investments and certain developments during the year with respect
to these investments. See Item 14(d), Schedule III (financial statement
schedule), for additional information about the Company's portfolio, including
location, costs and encumbrances.

In addition, see Item 8 of this report for the Company's consolidated
financial statements.

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Executive Officers of the Registrant

The following persons were executive officers of the Company as of March
17, 2000:

Age at
March 17,
Name 2000 Position(s)
---- --------- ----------

Frank C. McDowell....... 51 President, Chief Executive Officer and Director
LeRoy E. Carlson........ 54 Executive Vice President, Chief Financial Officer and Secretary
Bruce C. Ward........... 39 Executive Vice President, Development and Acquisitions
John H. Nunn............ 41 Executive Vice President, Asset Management
Lauren L. Barr.......... 38 Senior Vice President, Strategic Planning & Communications

Mr. McDowell was appointed to his current position in June, 1995. Mr.
Carlson and Mr. Nunn joined the Company in March, 1996. Mr. Ward was appointed
in connection with the Transaction in November, 1997 and Ms. Barr was
appointed to her current position in July, 1998. Set forth below is
information regarding the business experience of each of the executive
officers:

From 1992 to 1995, Mr. McDowell was Chief Executive Officer and Chairman of
Cardinal Realty Services, Inc., a Columbus, Ohio-based apartment management
company and owner of multifamily housing. From 1988 to 1992, Mr. McDowell was
Senior Vice President, Head of Real Estate of First Interstate Bank of Texas.
Mr. McDowell holds a Bachelor of Business Administration Degree and a Master
of Business Administration Degree, both from the University of Texas, Austin.

Mr. Carlson served as Vice President and Chief Financial Officer of Real
Estate Investment Trust of California from 1980 to 1996. Prior to joining RCT,
Mr. Carlson was the Chief Financial Officer of the William Walters Company, a
large asset management company based in Los Angeles, California. He is a
licensed Certified Public Accountant in the State of California. Mr. Carlson
holds a Bachelor's Degree from the University of Southern California.

Mr. Ward served as group managing partner of TCRW prior to the acquisition
of TCRW by BRE. While with TCRW, Mr. Ward served on the management board,
which was responsible for TCRW's strategic planning and governance. Prior to
1987, Mr. Ward held the position of Vice President and Regional Manager of
Lomas Management, Inc. located in Dallas, Texas. Mr. Ward holds a degree in
Business Administration from the University of Texas, Austin.

Mr. Nunn served as Vice President of Asset Management of RCT from 1990 to
1996. Prior to joining RCT, Mr. Nunn was a Vice President of Asset Management
and a property manager for the William Walters Company from 1986 to 1990. Mr.
Nunn holds a Bachelor's Degree from California State University, Long Beach
and is a Certified Property Manager.

Ms. Barr served as a Vice President of the asset management group for the
Company since 1990 and was promoted in 1998 to Senior Vice President,
Strategic Planning & Communications. Ms. Barr holds a Bachelor's Degree in
Economics from the University of San Francisco and is a Certified Property
Manager.

There is no family relationship among any of the Company's executive
officers or Directors.

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RISK FACTORS

The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere in
this Annual Report on Form 10-K. In this section, "we" or "us" refers to the
Company and "you" refers to the Company's shareholders.

Risks Due to Investment in Real Estate

Decreased Yields from an Investment in Real Property Due to Factors Which May
Cause a Decrease in Revenues or an Increase in Operating Expenses

Real property investments are subject to varying degrees of risk. The
yields available from equity investments in real estate depend upon the amount
of revenues generated and expenses incurred. If properties do not generate
revenues sufficient to meet operating expenses, debt service and capital
expenditures, our results of operations and ability to make distributions to
you and to pay amounts due on our debt will be adversely affected. The
performance of the economy in each of the areas in which the properties are
located affects occupancy, market rental rates and expenses. These factors
consequently can have an impact on the revenues from the properties and their
underlying values. The financial results of major local employers may also
have an impact on the revenues and value of certain properties.

Other factors may further adversely affect revenues from properties. These
factors include the general economic climate, local conditions in the areas in
which properties are located such as an oversupply of apartment units or a
reduction in the demand for apartment units, the attractiveness of the
properties to residents, competition from other multifamily communities and
our ability to provide adequate facilities maintenance, services and
amenities. Our revenues would also be adversely affected if residents were
unable to pay rent or we were unable to rent apartments on favorable terms. If
we were unable to promptly relet or renew the leases for a significant number
of apartment units, or if the rental rates upon such renewal or reletting were
significantly lower than expected rates, then our funds from operations would,
and our ability to make expected distributions to you and to pay amounts due
on our debt may, be adversely affected. There is also a risk that as leases on
the properties expire, residents will vacate or enter into new leases on terms
that are less favorable to us. Operating costs, including real estate taxes,
insurance and maintenance costs, and mortgage payments, if any, do not, in
general, decline when circumstances cause a reduction in income from a
property. We could sustain a loss as a result of foreclosure on the property,
if a property is mortgaged to secure payment of indebtedness and we were
unable to meet our mortgage payments. In addition, applicable laws, including
tax laws, interest rate levels and the availability of financing also affect
revenues from properties and real estate values.

Development and Construction Projects May Not Be Completed or Completed
Successfully

As a general matter, property development and construction projects
typically have a higher, and sometimes substantially higher, level of risk
than the acquisition of existing properties. We intend to actively pursue
development and construction of multifamily apartment communities. There can
be no assurance that we will complete development of the properties currently
under development or any other development project that we may undertake.
Risks associated with our development and construction activities may include
the following:

. development opportunities may be abandoned;

. construction costs of multifamily apartment communities may exceed
original estimates, possibly making the communities uneconomical;

. occupancy rates and rents at newly completed communities may not be
sufficient to make the communities profitable;

. financing for the construction and development of projects may not be
available on favorable terms or at all;

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. construction and lease-up may not be completed on schedule; and

. expenses of operating a completed community may be higher than
anticipated.

In addition, development and construction activities, regardless of whether
or not they are ultimately successful, typically require a substantial portion
of management's time and attention. Development and construction 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.

Investments in Newly Acquired Properties May Not Perform in Accordance with
Expectations

In the normal course of business, we typically evaluate potential
acquisitions, enter into non-binding letters of intent, and may, at any time,
enter into contracts to acquire and may acquire additional properties.
However, no assurance can be given that we will have the financial resources
to make suitable acquisitions or that properties that satisfy our investment
policies will be available for acquisition. Acquisitions of properties entail
risks that investments will fail to perform in accordance with expectations.
Such risks may include construction costs exceeding original estimates,
possibly making a project uneconomical. Other risks may include financing not
being available on favorable terms or at all and construction and lease-up may
not be completed on schedule. Estimates of the costs of improvements to bring
an acquired property up to standards established for the market position
intended for that property might prove inaccurate. In addition, there are
general real estate investment risks associated with any new real estate
investment. Although we undertake an evaluation of the physical condition of
each new investment before it is acquired, certain defects or necessary
repairs may not be detected until after the investment is acquired. This could
significantly increase our total acquisition costs, which could have a
material adverse effect on us and our ability to make distributions to you and
pay amounts due on our debt.

Illiquidity of Real Estate and Reinvestment Risk May Reduce Economic Returns
to Investors

Real estate investments are relatively illiquid and, therefore, tend to
limit our ability to adjust our portfolio in response to changes in economic
or other conditions. Additionally, the Code places certain limits on the
number of properties a REIT may sell without adverse tax consequences. To
effect our current operating strategy, we have in the past raised, and will
seek to continue to raise additional funds, both through outside financing and
through the orderly disposition of assets which no longer meet our investment
criteria. Depending upon interest rates, current development and acquisition
opportunities and other factors, generally we will reinvest the proceeds in
multifamily properties, although such funds may be employed in other uses. In
the markets we have targeted for future acquisition of multifamily properties,
there is considerable buying competition from other real estate companies,
many of whom may have greater resources, experience or expertise than us. In
many cases, this competition for acquisition properties has resulted in an
increase in property prices and a decrease in property yields. Due to the
relatively low capitalization rates currently prevailing in the pricing of
potential acquisitions of multifamily properties which meet our investment
criteria, no assurance can be given that the proceeds realized from the
disposition of assets which no longer meet our investment criteria can be
reinvested to produce economic returns comparable to those being realized from
the properties disposed of, or that we will be able to acquire properties
meeting our investment criteria. To the extent that we are unable to reinvest
proceeds from the assets which no longer meet our investment criteria, or if
properties acquired with such proceeds produce a lower rate of return than the
properties disposed of, such results may have a material adverse effect on us.
In addition, a delay in reinvestment of such proceeds may have a material
adverse effect on us.

We may seek to structure future dispositions as tax-free exchanges, where
appropriate, utilizing the nonrecognition provisions of Section 1031 of the
Code to defer income taxation on the disposition of the exchanged property.
For an exchange of such properties to qualify for tax-free treatment under
Section 1031 of the Code, certain technical requirements must be met. Given
the competition for properties meeting our investment criteria, it may be
difficult for us to identify suitable properties within the foregoing time
frames in order to meet the requirements of Section 1031. Even if we can
structure a suitable tax-deferred exchange, as

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noted above, we cannot assure that we will reinvest the proceeds of any of
these dispositions to produce economic returns comparable to those currently
being realized from the properties which were disposed of.

Substantial Competition Among Multifamily Properties and Real Estate
Companies May Adversely Affect Our Rental Revenues and Development and
Acquisition Opportunities

All of the properties currently owned by us are located in developed areas.
There are numerous other multifamily properties and real estate companies,
many of which have greater financial and other resources than we have, within
the market area of each of the properties which will compete with us for
tenants and development and acquisition opportunities. The number of
competitive multifamily properties and real estate companies in such areas
could have a material effect on (1) our ability to rent the apartments and the
rents charged and (2) development and acquisition opportunities. The
activities of these competitors could cause us to pay a higher price for a new
property than we otherwise would have paid or may prevent us from purchasing a
desired property at all, which could have a material adverse effect on us and
our ability to make distributions to you and to pay amounts due on our debt.

Potential Effect on Operations Due to Geographic Concentration of Properties
and Economic Conditions; Dependence on Western United States Regions

Our portfolio is located in Phoenix, the San Francisco Bay Area, Los
Angeles/Orange County, San Diego, Seattle, Tucson, Sacramento, Salt Lake City,
Albuquerque, Las Vegas, Portland, and the Denver area. Our performance could
be adversely affected by economic conditions in, and other factors relating
to, these geographic areas, including supply and demand for apartments in
these areas, zoning and other regulatory conditions and competition from other
properties and alternative forms of housing. In that regard, certain of these
areas have in the recent past experienced economic recessions and depressed
conditions in the local real estate markets. To the extent general economic or
social conditions in any of these areas deteriorate or any of these areas
experiences natural disasters, the value of the portfolio, our results of
operations and our ability to make distributions to you and to pay amounts due
on our debt could be materially adversely affected.

Inability to Implement Growth Strategy; Potential Failure to Identify,
Acquire or Integrate New Acquisitions

Our future growth will be dependent upon a number of factors, including our
ability to identify acceptable properties for development and acquisition,
complete acquisitions and developments on favorable terms, successfully
integrate acquired and newly developed properties, and obtain financing to
support expansion. There can be no assurance that we will be successful in
implementing our growth strategy, that growth will continue at historical
levels or at all, or that any expansion will improve operating results. The
failure to identify, acquire and integrate new properties effectively could
have a material adverse affect on us and our ability to make distributions to
you and to pay amounts due on our debt.

A substantial portion of our growth over the last several years has been
attributable to acquisitions. We intend to continue to acquire stabilized
multifamily apartment communities to the extent we identify communities that
meet our investment criteria. However, we do not presently expect to make a
significant number of acquisitions in 2000. Acquisitions of multifamily
apartment communities entail risks that investments will fail to perform in
accordance with expectations. 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. In addition, there are
general investment risks associated with any new real estate investment. In
that regard, we acquired the TCRW properties on an "as is" basis. "As is"
means the sellers did not warrant as to the physical condition of the
properties, which increased the risks associated with acquiring the TCRW
properties.

Restrictions on the Operations of the Operating Company

A substantial portion of the properties acquired in the Transaction are
held by BRE Property Investors LLC, which is referred to in this Annual Report
on Form 10-K as the "Operating Company." We are the sole managing

9

member of the Operating Company and, as of December 31, 1999, held
approximately a 74% equity interest in the Operating Company. The remaining
equity interests in the Operating Company are held by third parties as
nonmanaging members.

Under the terms of the limited liability company agreement governing the
operations of the Operating Company (the "LLC Agreement"), the Operating
Company is required to maintain certain debt service coverage, debt-to-asset
and other financial ratios intended to protect the members' rights to receive
distributions. In addition, with respect to certain tax-exempt financing for
certain completed properties, the Operating Company is restricted from
repaying its debt or taking certain other specified action which could have
adverse tax consequences for the members. Further, we, as the managing member,
are restricted from taking certain other specified actions--either absolutely
or without the consent of a majority in interest of the nonmanaging members
(or of the nonmanaging members affected thereby)--including, but not limited
to, any actions:

. that would make it impossible to carry out the business of the Operating
Company

. that would subject a nonmanaging member to liability as a managing
member

. that would cause the Operating Company to institute bankruptcy
proceedings or permit an automatic judgment to be entered against it by
a creditor

Any such requirement to maintain financial ratios and any such restrictions
on the actions of the Operating Company and its managing member could have a
material adverse affect on us and our ability to make distributions to you and
to pay amounts due on our debt.

Further, under the terms of the LLC Agreement, the Operating Company may
not, without the consent of a majority in interest of the nonmanaging members,
(i) dispose of any of the properties held by the Operating Company in a
taxable sale or exchange prior to respective dates which are specified in the
LLC Agreement for each of the properties, ranging from eight to ten years from
November 18, 1997, or (ii) dissolve the Operating Company other than in
certain limited circumstances specified in the LLC Agreement, such as a sale
of all or substantially all of our assets, or any merger, consolidation or
other combination by us with or into another person, or reclassification,
recapitalization or change of our outstanding equity interests. These
restrictions on our ability to dispose of a significant portion of our
properties and to dissolve the Operating Company, even when such a disposition
or dissolution of the Operating Company would be in our best interest, could
have a material adverse effect on us and our ability to make distributions to
you and to pay amounts due on our debt.

The Operating Company also must distribute all Available Cash (as defined
in the LLC Agreement) on a quarterly basis: first, to members (other than us)
until each member has received, cumulatively on a per Operating Company unit
basis, distributions equal to the cumulative dividends declared with respect
to one share of BRE common stock over the corresponding period (subject to
adjustment from time to time as applicable to account for stock dividends,
stock splits and similar transactions affecting BRE common stock) (the
"Priority Distribution"); and second, the balance to us.

If the Operating Company's Available Cash in any quarterly period is
insufficient to permit distribution of the full amount of the Priority
Distribution for that quarter, we are required to make a capital contribution
to the Operating Company in an amount equal to the lesser of (i) the amount
necessary to permit the full Priority Distribution or (ii) an amount equal to
the sum of any capital expenditures made by the Operating Company plus the sum
of any payments made by the Operating Company on account of any loans to or
investments in, or any guarantees of the obligations of, BRE or our affiliates
for that quarterly period.

In addition, we may not be removed as the managing member of the Operating
Company by the nonmanaging members, with or without cause, other than with our
consent. We may not voluntarily withdraw from the Operating Company or
transfer all or any portion of our interest in the Operating Company without
the consent of all of the nonmanaging members, except in certain limited
circumstances, such as a sale of all or substantially all of our assets, or
any merger, consolidation or other combination by us with or into another
person, or any reclassification, recapitalization or change of our outstanding
equity interests. Such restrictions on

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our withdrawal as the managing member of the Operating Company, and on our
ability to transfer our interest in the Operating Company, could have a
material adverse effect on us and our ability to make distributions to you and
to pay amounts due on our debt.

Uninsured and Underinsured Losses; Limited Insurance Coverage

We carry comprehensive liability, fire, extended coverage and rental loss
insurance with respect to our properties with certain policy specifications,
limits and deductibles. While we currently carry flood and earthquake
insurance for our properties with an aggregate annual limit of $250 million,
subject to substantial deductibles, no assurance can be given that such
coverage will be available on acceptable terms or at an acceptable cost, or at
all, in the future, or if obtained, that the limits of those policies will
cover the full cost of repair or replacement of covered properties. In
addition, there may be certain extraordinary losses (such as those resulting
from civil unrest) that are not generally insured (or fully insured against)
because they are either uninsurable or not economically insurable. Should an
uninsured or underinsured loss occur to a property, we could be required to
use our own funds for restoration or lose all or part of our investment in,
and anticipated revenues from, the property and would continue to be obligated
on any mortgage indebtedness on the property. Any such loss could have a
material adverse effect on us and our ability to make distributions to you and
pay amounts due on our debt.

Survey Exceptions to Certain Title Insurance Policies May Result in
Incomplete Coverage in the Event of a Claim

We did not obtain updated surveys when we acquired the TCRW properties
because we believe that prior owners of the TCRW properties in the past
obtained surveys of these properties. Because updated surveys of the
properties acquired in the Transaction were not obtained, the title insurance
policies obtained by us for those properties contain exceptions for matters
that an updated survey might have disclosed. Such matters might include such
things as boundary encroachments, unrecorded easements or similar matters,
which would have been reflected on a survey. Moreover, because no updated
surveys were prepared for these properties, there can be no assurance that the
title insurance policies in fact cover the entirety of the real property,
buildings, fixtures, and improvements which we believe they cover, any of
which could have a material adverse effect on us.

Adverse Changes in Laws May Affect Our Potential Liability Relating to the
Properties and Our Operations

Increases in real estate taxes and income, service and transfer taxes
cannot always be passed through to residents or users in the form of higher
rents, and may adversely affect our cash available for distribution and our
ability to make distributions to you and to pay amounts due on our debt.
Similarly, changes in laws increasing the potential liability for
environmental conditions existing on properties or increasing the restrictions
on discharges or other conditions, as well as changes in laws affecting
development, construction and safety requirements, may result in significant
unanticipated expenditures, which could have a material adverse effect on us
and our ability to make distributions to you and pay amounts due on our debt.
In addition, future enactment of rent control or rent stabilization laws or
other laws regulating multifamily housing may reduce rental revenues or
increase operating costs.

Potential Effect on Costs and Investment Strategy From Compliance With Laws
Benefiting Disabled Persons

A number of federal, state and local laws (including the Americans with
Disabilities Act) and regulations exist that may require modifications to
existing buildings or restrict certain renovations by requiring improved
access to such buildings by disabled persons and may require other structural
features which add to the cost of buildings under construction. Legislation or
regulations adopted in the future may impose further burdens or restrictions
on us with respect to improved access by disabled persons. The costs of
compliance with these laws and regulations may be substantial, and limits or
restrictions on construction or completion of certain renovations may limit
implementation of our investment strategy in certain instances or reduce
overall returns on our investments, which could have a material adverse effect
on us and our ability to make distributions to you and to

11

pay amounts due on our debt. We review our properties periodically to
determine the level of compliance and, if necessary, take appropriate action
to bring such properties into compliance. We believe, based on property
reviews to date, that the costs of such compliance should not have a material
adverse effect on us. Such conclusions are based upon currently available
information and data, and no assurance can be given that further review and
analysis of our properties, or future legal interpretations or legislative
changes, will not significantly increase the costs of compliance.

Liabilities Assumed in the Transaction May Exceed Expectations

In the Transaction, we (1) acquired the TCRW properties either by acquiring
title to the properties and related assets (plus assumption of associated
contractual obligations of the contributing parties) or, as to certain TCRW
properties, by acquiring all of the ownership interests in the partnerships or
limited liability companies which held such properties, and (2) assumed
certain specified loans secured by the TCRW properties. Under the terms of the
Transaction, we have not expressly agreed to assume any liabilities other than
the assumed loans and the contractual obligations, warranties and guarantees
referenced above. However, as a matter of law, we automatically assumed all of
the liabilities (known, unknown or contingent) of the partnerships and limited
liability companies whose ownership interests were acquired by us, potentially
including liabilities unrelated to the properties conveyed pursuant to such
transfer. Moreover, even in cases where title to the properties and related
assets (rather than ownership interests therein) were acquired by us, the
legal doctrine of successor liability may give creditors of and claimants
against the prior owners the right to hold us responsible for liabilities
which arose with respect to such properties prior to their acquisition by us,
whether or not such liabilities were expressly assumed by us under the terms
of the Transaction.

As a result of the foregoing, there can be no assurance that we will not be
subject to liabilities and claims relating to the TCRW properties arising from
events which occurred or circumstances which existed prior to our acquisition
of those properties, which could have a material adverse effect on us and our
ability to make distributions to you and pay amounts due on our debt. In that
regard, the terms of the Transaction do not provide for us to be indemnified
against such liabilities and claims.

Limited Indemnification in the Event of Claims or Liabilities Arising out of
the Transaction

We acquired the TCRW properties on an "as is" basis, meaning that the
properties were acquired without warranty from the sellers. As a result, we
have no recourse against the sellers for matters relating to the properties or
the Transaction, except to a limited extent. This limited indemnification
relates to claims or liabilities that might arise out of the Transaction or
actions taken by the sellers before the closing. Specifically, certain
Trammell Crow Residential entities and related parties (the "TCRW Parties")
have agreed to indemnify us and our affiliates only against claims arising out
of (1) certain representations made by the TCRW Parties in the Transaction,
(2) certain breaches of fiduciary duties by the TCRW Parties and (3) certain
documents filed in connection with the Transaction.

We have no recourse against the TCRW Parties with respect to any claims
that are not within the specific coverage of the indemnity provisions. In
addition, in the event we are entitled to indemnification, the terms of the
Transaction significantly limit the amount which we would be entitled to
recover.

There can be no assurance that we will not be confronted in the future with
claims by third parties relating to the Transaction or to the activities of
the TCRW Parties or the operations of the TCRW properties and matters related
thereto prior to the closing of the Transaction. Likewise, there can be no
assurance that the properties acquired in the Transaction will meet our
expectations. Accordingly, the limited scope of the indemnification could have
a material adverse effect on us and our ability to make distributions to you
and to pay amounts due on our debt. See "Liabilities Assumed in the
Transaction May Exceed Expectations," above.

We and the Operating Company have also provided a limited indemnity to the
TCRW Parties. Notwithstanding the limit upon our indemnification obligations,
if claims within the coverage of the indemnity

12

provisions were brought against us, we could be required to incur costs in
defending against or satisfying the claims, which could have a material
adverse effect on us and our ability to make distributions to you and to pay
amounts due on our debt.

Risks Due to Real Estate Financing

We anticipate that future developments and acquisitions will be financed,
in whole or in part, under various construction loans, lines of credit, other
forms of secured or unsecured financing or through the issuance of additional
debt or equity by us. We expect periodically to review our financing options
regarding the appropriate mix of debt and equity financing. Equity, rather
than debt, financing of future developments or acquisitions could have a
dilutive effect on the interests of our existing shareholders. Similarly,
there are certain risks involved with financing future developments and
acquisitions with debt, including those described below. In addition, if new
developments are financed through construction loans, there is a risk that,
upon completion of construction, permanent financing for such properties may
not be available or may be available only on disadvantageous terms or that the
cash flow from new properties will be insufficient to cover debt service. If a
newly developed or acquired property is unsuccessful, our losses may exceed
our investment in the property. Any of the foregoing could have a material
adverse effect on us and our ability to make distributions to you and to pay
amounts due on our debt.

Potential Inability to Renew, Repay or Refinance Our Debt Financing

We are subject to the normal risks associated with debt financing,
including the risk that our cash flow will be insufficient to meet required
payments of principal and interest, the risk that indebtedness on our
properties, or unsecured indebtedness, will not be able to be renewed, repaid
or refinanced when due or that the terms of any renewal or refinancing will
not be as favorable as the terms of such indebtedness. If we were unable to
refinance our indebtedness on acceptable terms, or at all, we might be forced
to dispose of one or more of the properties on disadvantageous terms, which
might result in losses to us. Such losses could have a material adverse effect
on us and our ability to make distributions to you and pay amounts due on our
debt. Furthermore, if a property is mortgaged to secure payment of
indebtedness and we are unable to meet mortgage payments, the mortgagee could
foreclose upon the property, appoint a receiver and receive an assignment of
rents and leases or pursue other remedies, all with a consequent loss of our
revenues and asset value. Foreclosures could also create taxable income
without accompanying cash proceeds, thereby hindering our ability to meet the
REIT distribution requirements of the Code.

Increase in Cost of Indebtedness Due to Rising Interest Rates

We have incurred and expect in the future to incur indebtedness which bears
interest at a variable rate. Accordingly, increases in interest rates would
increase our interest costs, which could have a material adverse effect on us
and our ability to make distributions to you or cause us to be in default
under certain debt instruments (including our debt). In addition, an increase
in market interest rates may lead holders of our common shares to demand a
higher yield on their shares from distributions by us, which could adversely
affect the market price for BRE common stock.

Potential Incurrence of Additional Debt and Related Debt Service

We currently fund the acquisition and development of multifamily
communities partially through borrowings (including our line of credit) as
well as from other sources such as sales of properties which no longer meet
our investment criteria or the contribution of property to joint ventures. Our
organizational documents do not contain any limitation on the amount of
indebtedness that we may incur. Accordingly, subject to limitations on
indebtedness set forth in various loan agreements, we could become more highly
leveraged, resulting in an increase in debt service, which could have a
material adverse effect on us and our ability to make distributions to you and
to pay amounts due on our debt and in an increased risk of default on our
obligations.

13

Restrictive Terms of Certain Indebtedness May Cause Acceleration of Debt
Payments

At December 31, 1999, we had outstanding borrowings of $73 million under
two loan agreements with one lender which, among other things, (1) contain a
covenant which requires us to maintain our investment grade rating for our
long-term unsecured debt and (2) define "events of default" to include the
acquisition by any person of either (a) 20% or more of our outstanding shares
or securities (or other securities convertible into such securities) or (b)
10% or more of our outstanding shares or securities (or other securities
convertible into such securities) if such acquisition results in any change of
our board of directors or any change in our management or any of our assets.
In the event that we fail to maintain an investment grade rating for our long-
term unsecured debt or if such an event of default occurs, the lender may
declare all borrowings under such loan agreements to be due and payable
immediately, which could have a material adverse effect on us and our ability
to make distributions to you and to pay amounts due on our debt.

Potential Liability Under Environmental Laws

Under various federal, state and local laws, ordinances and regulations, a
current or previous owner or operator of real estate may be liable for the
costs of removal or remediation of certain hazardous or toxic substances in,
on, around or under such 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, or
failure to remediate properly, such substances may adversely affect the
owner's or operator's ability to sell or rent the affected 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 into the air, and third parties may also seek recovery from owners
or operators of real properties for personal injury associated with asbestos-
containing materials and other hazardous or toxic substances. The operation
and subsequent removal of certain underground storage tanks are also regulated
by federal and state laws. In connection with the current or former ownership
(direct or indirect), operation, management, development and/or control of
real properties, we may be considered an owner or operator of such properties
or as having arranged for the disposal or treatment of hazardous or toxic
substances and, therefore, may be potentially liable for removal or
remediation costs, as well as certain other costs, including governmental
fines, and claims for injuries to persons and property.

Our current policy is to obtain a Phase I environmental study on each
property we seek to acquire and to proceed accordingly. No assurance can be
given, however, that the Phase I environmental studies or other environmental
studies undertaken with respect to any of our current or future properties
will reveal all or the full extent of potential environmental liabilities,
that any prior owner or operator of a property did not create any material
environmental condition unknown to us, that a material environmental condition
does not otherwise exist as to any one or more of such properties or that
environmental matters will not have a material adverse effect on us and our
ability to make distributions to you and to pay amounts due on our debt. We
currently carry no insurance for environmental liabilities.

Certain environmental laws impose liability on a previous owner of property
to the extent that hazardous or toxic substances were present during the prior
ownership period. A transfer of the property does not relieve an owner of such
liability. Thus, we may have liability with respect to properties previously
sold by us or our predecessors.

Ranking of Securities and Subordination of Claims

A significant portion of our operations is conducted through our
subsidiaries, including the Operating Company. Our cash flow and the
consequent ability to make distributions and other payments on our equity
securities and to service our debt, will be partially dependent upon the
earnings of such subsidiaries and the distribution of those earnings to us, or
upon loans or other payments of funds made by such subsidiaries to us. In

14

addition, debt or other arrangements of our subsidiaries may impose
restrictions that affect, among other things, our subsidiaries' ability to pay
dividends or make other distributions or loans to us.

Likewise, a substantial portion of our consolidated assets are owned by our
subsidiaries, effectively subordinating certain unsecured indebtedness of BRE
to all existing and future liabilities, including indebtedness, trade
payables, lease obligations and guarantees of our subsidiaries. The Operating
Company has guaranteed amounts due under our $400 million bank credit facility
(the "Credit Facility") with a syndicate of banks. Likewise, any other of our
subsidiaries with assets or net income which, when multiplied by our effective
percentage ownership interest in such subsidiary exceeds $30 million or 5% of
our consolidated net income, respectively, is required to guarantee the
repayment of borrowings under the Credit Facility. The Operating Company and
other of our subsidiaries may also, from time to time, guarantee other of our
indebtedness. Therefore, our rights and rights of our creditors, including the
holders of other unsecured indebtedness, to participate in the assets of any
subsidiary upon the latter's liquidation or reorganization will be subject to
the prior claims of such subsidiary's creditors, except to the extent that we
may ourselves be a creditor with recognized claims against the subsidiary, in
which case our claims would still be effectively subordinate to any security
interests in or mortgages or other liens on the assets of such subsidiary and
would be subordinate to any indebtedness of such subsidiary senior to that
held by us.

Provisions Which Could Limit a Change in Control or Deter a Takeover

In order to maintain our qualification as a REIT, not more than 50% in
value of our outstanding capital stock may be owned, actually or
constructively, by five or fewer individuals (as defined in the Code to
include certain entities). In order to protect us against risk of losing our
status as a REIT due to a concentration of ownership among our shareholders,
our articles of incorporation provide, among other things, that if the Board
of Directors determines, in good faith, that direct or indirect ownership of
BRE common stock has or may become concentrated to an extent that would
prevent us from qualifying as a REIT, the Board of Directors may prevent the
transfer of BRE common stock or call for redemption (by lot or other means
affecting one or more shareholders selected in the sole discretion of the
Board of Directors) of a number of shares of BRE common stock sufficient in
the opinion of the Board of Directors to maintain or bring the direct or
indirect ownership of BRE common stock into conformity with the requirements
for maintaining REIT status. These limitations may have the effect of
precluding acquisition of control of us by a third-party without consent of
the Board of Directors.

In addition, certain other provisions contained in our articles of
incorporation and bylaws may have the effect of discouraging a third-party
from making an acquisition proposal for us and may thereby inhibit a change in
control. For example, such provisions may (i) deter tender offers for BRE
common stock which offers may be attractive to the shareholders, or (ii) deter
purchases of large blocks of BRE common stock, thereby limiting the
opportunity for shareholders to receive a premium for their shares of BRE
common stock over then-prevailing market prices.

Tax Risks

Tax Liabilities as a Consequence of Failure to Qualify as a REIT

Although management believes that we are organized and are operating so as
to qualify as a REIT under the Code, no assurance can be given that we have in
fact operated or will be able to continue to operate in a manner so as to
qualify or remain so qualified. Qualification as a REIT involves the
application of highly technical and complex Code provisions for which there
are only limited judicial or administrative interpretations and the
determination of various factual matters and circumstances not entirely within
our control. For example, in order to qualify as a REIT, at least 95% of our
taxable gross income in any year must be derived from qualifying sources and
we must make distributions to shareholders aggregating annually at least 95%
of our REIT taxable income (excluding net capital gains). Thus, to the extent
revenues from non-qualifying sources such as income from third-party
management represents more than 5% of our gross income in any taxable year,

15

we will not satisfy the 95% income test and may fail to qualify as a REIT,
unless certain relief provisions apply, and, even if those relief provisions
apply, a tax would be imposed with respect to excess net income, any of which
could have a material adverse effect on us and our ability to make
distributions to you and to pay amounts due on our debt. Additionally, to the
extent the Operating Company or certain other subsidiaries are determined to
be taxable as a corporation, we would not qualify as a REIT, which could have
a material adverse effect on us and our ability to make distributions to you
and to pay amounts due on our debt. Finally, no assurance can be given that
new legislation, new regulations, administrative interpretations or court
decisions will not change the tax laws with respect to qualification as a REIT
or the federal income tax consequences of such qualification.

If we fail to qualify as a REIT, we will be subject to federal income tax
(including any applicable alternative minimum tax) on our taxable income at
corporate rates, which would likely have a material adverse effect on us and
our ability to make distributions to you and to pay amounts due on our debt.
In addition, unless entitled to relief under certain statutory provisions, we
would also be disqualified from treatment as a REIT for the four taxable years
following the year during which qualification is lost. This treatment would
reduce funds available for investment or distributions to you because of the
additional tax liability to us for the year or years involved. In addition, we
would no longer be required to make distributions to you. To the extent that
distributions to you would have been made in anticipation of qualifying as a
REIT, we might be required to borrow funds or to liquidate certain investments
to pay the applicable tax.

Item 2. PROPERTIES

General

In addition to the information in this Item 2, certain information on our
portfolio is contained in Schedule III (financial statement schedule) under
Item 14(d).

Multifamily Property Data

Our multifamily properties represent 100% of our real estate portfolio and
97% of our total revenue.

Multifamily Properties 1999 1998 1997 1996 1995
- ---------------------- ---- ---- ---- ---- ----

Percentage of total portfolio at cost, as of
December 31....................................... 100% 100% 99% 87% 72%
Percentage of total revenue, for the year ended
December 31....................................... 97% 97% 89% 77% 76%

During 1997 and 1996, multifamily revenues as a percentage of total
revenues did not increase in proportion to the increase in the relative size
of the multifamily portfolio at December 31 of the year indicated due to the
timing of purchases of multifamily properties and the sales of commercial
properties. No single multifamily property accounted for more than 10% of
revenues in 1999.

The following table discloses certain year-end operating data about our
multifamily units.

December 31,
-------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ -----

Total available units................. 22,690 21,858 18,569 12,212 5,475
Occupancy percent(1).................. 95% 94% 95% 96% 93%
Average monthly rate per unit......... $893 $877 $817 $755 $699
Total number of properties............ 86 85 74 54 25

- --------
(1) Portfolio occupancy is calculated by dividing the total occupied units by
the total units in the portfolio. Apartment units are generally leased to
residents for rental terms which do not exceed one year.

16

This table summarizes data about our stabilized multifamily properties:

Percentage Number of Average
Market of NOI(2) Units Communities Occupancy(3) Rent(4)
------ ---------- ------ ----------- ------------ -------

San Francisco Bay Area.. 24% 2,960 9 96% $1,338
Phoenix................. 14 3,388 11 94% $ 797
Seattle................. 10 2,316 9 95% $ 896
San Diego............... 11 2,575 11 97% $ 862
Los Angeles/Orange
County................. 10 2,668 10 96% $ 768
Sacramento.............. 8 1,783 8 93% $ 841
Salt Lake City.......... 6 1,517 5 91% $ 741
Tucson.................. 5 1,836 9 96% $ 607
Albuquerque............. 4 1,241 4 96% $ 771
Portland................ 2 780 3 93% $ 691
Las Vegas............... 4 1,138 5 96% $ 806
Denver.................. 2 488 2 98% $ 828
--- ------ ---
Total/Weighted
Average.............. 100% 22,690 86 95% $ 893
=== ====== ===

- --------
(2) Represents the aggregate net operating income of all properties in each
market divided by the total net operating income of multifamily properties
for the year ended December 31, 1999, and includes the results of two
completed properties acquired during 1999 from the date of acquisition.
Accordingly, these results do not reflect a full year of operations for
properties acquired or completed in 1999 and six communities under lease-
up.

(3) Represents physical occupancy at December 31, 1999. The total is a
weighted average by units for all communities.

(4) Represents total gross potential rent divided by total units as of
December 31, 1999. The total is a weighted average by units for all
communities shown.

Completed Properties

In 1999, BRE completed the development of Pinnacle Flamingo West at Las
Vegas, Nevada which added 324 units to the Company's portfolio.

17

Properties Under Development

This table provides information about our multifamily properties under
development or construction at December 31, 1999. We can not guarantee that
the estimated costs or completion dates will be accurate.

Costs Incurred
Proposed to Date-- Estimated Estimated Estimated
Number December 31, Cost to Total Completion
Property Name Location of Units 1999 Complete Cost Date(5)
------------- -------- -------- -------------- --------- --------- ----------
(Dollar amounts in millions)

Construction in progress
Direct Investment
Pinnacle Bellevue....... Bellevue, WA 248 $23.1 $15.2 $38.3 4Q/2000
Pinnacle Carmel Creek... San Diego, CA 348 21.7 25.1 46.8 4Q/2000
Pinnacle at Overlook
II..................... Folsom, CA 112 1.8 8.6 10.4 3Q/2000
--- ----- ----- -----
708 $46.6 $48.9 $95.5
--- ----- ----- -----
Equity interests in
joint ventures(6)
Pinnacle at Blue
Ravine................. Folsom, CA 260 $28.0 -- $28.0 1Q/2000
Pinnacle Sonata......... Bothell, WA 268 30.7 $ 9.8 40.5 3Q/2000
Pinnacle at Queen
Creek.................. Chandler, AZ 252 13.1 4.9 18.0 4Q/2000
--- ----- ----- -----
780 $71.8 $14.7 $86.5
--- ----- ----- -----
Land under
development(7)
Pinnacle at MacArthur
Place.................. Santa Ana, CA 253 $20.2 3Q/2001
Pinnacle at Denver Tech
Center................. Greenwood Village, CO 420 6.3 2Q/2001
--- -----
673 $26.5
--- -----

- --------
(5) Represents when the Company estimates a certificate of occupancy will be
received for the entire community.

(6) These amounts are shown gross of the joint venture partner's equity or
construction loan.

(7) The development plan is under finalization.

Commercial and Retail Property Data

This table provides certain information about our commercial and retail
properties for the following year ends:

December 31,
------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ----- -----

Total available square feet (in
thousands)................................ 31 31 157 1,194 1,135
Occupancy percent(8)....................... 100% 100% 93% 93% 96%
Average minimum annual rent per square
foot(9)................................... $12 $12 $10 $13 $11
Total number of properties................. 1 1 5 15 11

- --------
(8) For commercial and retail properties, portfolio occupancy is calculated by
dividing the total occupied square footage by the total rentable square
footage in the portfolio.

18

(9) Average minimum annual rent per square foot is calculated by dividing the
reported minimum rental income for commercial and retail properties by
total rentable square feet. The changes in the amounts shown are due to
variances in occupancy levels and the changing composition of the
properties due to acquisitions and dispositions.

At December 31, 1999, BRE owned only one commercial property and two
investments held in limited partnerships in which the Company is a minority
partner. These partnership investments are included as other assets in the
Company's consolidated balance sheet and are not included in the above table.
No single tenant accounted for more than 10% of revenues for the year ended
December 31, 1999.

Insurance, Property Taxes and Income Tax Basis

The Company carries comprehensive liability, fire, extended coverage and
rental loss insurance on its properties with certain policy specifications,
limits and deductible. In addition, the Company currently carries flood and
earthquake coverage with an annual aggregate limit of $250,000,000 (after
policy deductibles ranging from 2%-5% of damages). Management believes the
properties are adequately covered by such insurance.

Property taxes on portfolio properties are assessed on asset values based
on the valuation method and tax rate used by the respective jurisdictions;
such rates ranged from approximately 1% to 2% of assessed values for 1999. The
gross carrying value of the Company's direct investments in rental properties
was $1,691,762,000 as of December 31, 1999; at that date BRE's assets had an
underlying federal income tax basis approximately $146,000,000 lower, which
reflects, among other factors, the carryover of basis on tax-deferred
exchanges.

Headquarters

The Company leases its corporate headquarters at 44 Montgomery Street, 36th
Floor, San Francisco, California, 94104-4809, from OTR, an Ohio general
partnership. The lease has an 8-year term, and covers 15,142 rentable square
feet at annual per square foot rents which began at $37.00 in 1998 and rise to
$44.00 in the eighth year of the lease. The lease term ends on January 31,
2006. The Company also maintains regional offices in: Seattle, Washington;
Sacramento, Long Beach, Newport Beach and San Diego, California; Phoenix and
Tucson, Arizona; Las Vegas, Nevada; Denver, Colorado; and Salt Lake City,
Utah.

Item 3. LEGAL PROCEEDINGS

The Company is defending various claims and legal actions that arise from
its normal course of business, including certain environmental actions. While
it is not feasible to predict or determine the ultimate outcome of these
matters, in the opinion of management, none of these actions will have a
material adverse effect on the Company.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

19

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Our common stock is traded on the New York Stock Exchange (the "NYSE")
under the symbol "BRE". As of March 17, 2000, there were approximately 6,600
recordholders of BRE's common stock and the last reported sales price on the
NYSE was $26.00. The number of holders does not include shares held of record
by a broker or clearing agency, but does include each such broker or clearing
agency as one recordholder. As of March 17, 2000, there were approximately
35,000 beneficial holders of BRE's common stock.

This table shows the high and low sales prices of the common stock reported
on the NYSE Composite Tape and the dividends we paid for each common share.

Years ended December 31,
-----------------------------------------------
1999 1998
----------------------- -----------------------
Stock Price Stock Price
------------- Dividends ------------- Dividends
High Low Paid High Low Paid
------ ------ --------- ------ ------ ---------

First Quarter................... $25.25 $22.00 $.39 $28.63 $26.19 $.36
Second Quarter.................. $26.38 $22.38 $.39 $28.69 $24.63 $.36
Third Quarter................... $26.13 $23.19 $.39 $28.63 $21.50 $.36
Fourth Quarter.................. $24.13 $21.00 $.39 $25.25 $22.31 $.36

Since 1970, when BRE was founded, we have made regular and uninterrupted
quarterly distributions to shareholders. The payment of distributions by the
Company is at the discretion of the Board of Directors and depends on numerous
factors, including the cash flow, financial condition, capital requirements,
REIT provisions of the Code and other factors.

20

Item 6. SELECTED FINANCIAL DATA

The selected financial data below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and notes. The 1998,
1997 and 1996 results were significantly affected by the transaction with
Trammell Crow Residential-West in 1997, the merger with Real Estate Investment
Trust of California in 1996, and numerous acquisitions and dispositions as
discussed in "Management's Discussion and Analysis of Financial Condition and
Results of Operations." As such, the consolidated financial statements and
notes thereto included elsewhere in this report are not directly comparable to
prior years.

Years ended December 31,
-----------------------------------------------------------------
1999 1998 1997 1996 1995 1994
---------- ---------- ---------- --------- -------- --------
(Amounts in thousands, except per share data)

Operating Results
Revenues................ $ 234,253 $ 203,245 $ 137,761 $ 101,651 $ 65,387 $ 56,970
========== ========== ========== ========= ======== ========
Net income available to
common shareholders.... $ 69,034 $ 60,644 $ 76,197 $ 89,839 $ 22,010 $ 24,212
Less:
Net gain (loss) on
sales of
investments.......... 54 (1,859) 27,824 52,825 221 1,646
Plus:
Depreciation and
amortization......... 35,524 27,763 17,938 13,283 7,864 7,080
Provision for
nonrecurring charge.. 1,250 2,400 -- -- -- --
Provision for
investment losses.... -- -- -- -- 2,000 --
Minority interest in
income convertible
into common shares... 4,847 4,126 972 -- -- --
---------- ---------- ---------- --------- -------- --------
Funds from
operations(10)......... $ 110,601 $ 96,792 $ 67,283 $ 50,297 $ 31,653 $ 29,646
========== ========== ========== ========= ======== ========
Net cash flows generated
from operating
activities............. $ 113,024 $ 97,081 $ 67,564 $ 47,887 $ 27,068 $ 31,063
Net cash flows used in
investing activities... $ (104,288) $ (290,297) $ (235,293) $(132,082) $ (3,820) $(66,740)
Net cash flows from
financing activities... $ 3,019 $ 191,057 $ 171,761 $ 68,322 $(11,077) $ 25,821
Dividends to common and
preferred shareholders
and distributions to
minority members....... $ 79,313 $ 66,327 $ 52,035 $ 39,849 $ 27,596 $ 26,210
Weighted average number
of shares outstanding.. 44,540 42,940 35,750 30,520 21,905 21,840
Weighted average number
of operating company
units.................. 3,100 2,840 290 -- -- --
Weighted average number
of shares outstanding--
assuming dilution...... 47,760 46,110 36,610 30,790 21,940 21,870
Shares outstanding at
end of period.......... 44,680 44,220 41,740 32,880 21,940 21,850
Operating company units
outstanding at end of
period................. 3,050 2,990 2,820 -- -- --
Per share data
Income excluding gain
(loss) on sales of
investments............ $ 1.55 $ 1.45 $ 1.35 $ 1.21 $ 1.00 $ 1.03
Net gain (loss) on sales
of investments......... -- (0.04) 0.78 1.73 0.01 0.08
---------- ---------- ---------- --------- -------- --------
Net income.............. $ 1.55 $ 1.41 $ 2.13 $ 2.94 $ 1.01 $ 1.11
========== ========== ========== ========= ======== ========
Per share data--assuming
dilution
Income excluding gain
(loss) on sales of
investments............ $ 1.55 $ 1.45 $ 1.35 $ 1.20 $ 0.99 $ 1.03
Net gain (loss) on sales
of investments......... -- (0.04) 0.76 1.72 0.01 0.08
---------- ---------- ---------- --------- -------- --------
Net income--assuming
dilution............... $ 1.55 $ 1.41 $ 2.11 $ 2.92 $ 1.00 $ 1.11
========== ========== ========== ========= ======== ========
Dividends paid to common
shareholders........... $ 1.56 $ 1.44 $ 1.38 $ 1.33 $ 1.26 $ 1.20
Balance sheet
information and other
data
Total assets............ $1,709,453 $1,630,916 $1,341,898 $ 783,714 $354,895 $343,853
Real estate portfolio,
before depreciation.... $1,779,958 $1,677,619 $1,346,923 $ 816,389 $371,438 $373,676
Cash.................... $ 13,812 $ 2,057 $ 4,216 $ 184 $ 16,057 $ 3,887
Long-term debt.......... $ 779,403 $ 752,146 $ 541,367 $ 311,985 $112,290 $ 97,169
Minority interest....... $ 87,640 $ 87,432 $ 76,066 -- -- --
Shareholders' equity.... $ 825,198 $ 765,005 $ 707,495 $ 464,114 $239,248 $243,436

- -------
(10) Management considers Funds from Operations ("FFO") to be an appropriate
supplemental measure of the performance of an equity REIT because it is
predicated on cash flow analyses that facilitate an understanding of the
operating performances of the Company's properties without giving effect
to noncash items such as depreciation. FFO is defined by the National
Association of Real Estate Investment Trusts ("NAREIT") as net income or
loss (computed in accordance with generally accepted accounting
principles) excluding gains or losses from debt restructuring and sales
of property, plus depreciation and amortization of real estate assets.
FFO does not represent cash generated from operating activities in
accordance with generally accepted accounting principles, and therefore
should not be considered a substitute for net income as a measure of
results of operations or for cash flow from operations as a measure of
liquidity. Additionally, the application and calculation of FFO by other
REITs may vary materially from that of the Company, and therefore the
Company's FFO and the FFO of other REITs may not be directly comparable.
On October 27, 1999, NAREIT revised this definition for periods after
January 1, 2000.

21

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Overview

BRE Properties, Inc. ("BRE" or the "Company") is a real estate investment
trust that owns and internally manages a portfolio of 86 apartment communities
(aggregating 22,690 units) in 12 major markets of the Western United States.
The majority of our revenues are from rental income from our portfolio of
multifamily properties (93% of total revenues in 1999, 94% in 1998 and 93% in
1997). Our policy emphasizes cash flows from operations rather than the
realization of capital gains through property dispositions.

BRE has a Western-focused investment strategy. In 1999, we acquired two
apartment communities in Los Angeles and San Diego, with a total of 628 units.
In addition, we acquired land or started development on 2,161 proposed units.
In 1998, we acquired seven apartment communities in Denver, Seattle, Portland,
Los Angeles and San Diego, for a total of 1,597 units. In November 1997, we
acquired the assets and operations of Trammell Crow Residential-West ("TCRW")
(the "Transaction"). This transaction added 16 completed properties totaling
4,786 units, eight properties under development comprising 2,445 units (seven
were completed in 1998, the eighth in 1999; two were stabilized in 1998 and
the balance in 1999) and management experience in development and
construction. In 1996, we merged with Real Estate Investment Trust of
California (the "Merger"), which added 22 apartment communities (totaling
3,581 units) and 18 commercial and retail properties to our portfolio. The
Transaction and the Merger provided increased depth in management and other
resources. We started our in-house development and construction function with
personnel and resources from the Transaction. As planned, we sold all but one
of our commercial and retail properties by December 31, 1998. During the years
ended December 31, 1999, 1998 and 1997, we acquired a total of 38 multifamily
properties, which were funded in part by the proceeds from the sale of
commercial and retail properties.

In addition to historical information, we make forward-looking statements
in this Annual Report on Form 10-K. These forward-looking statements pertain
to, among other things, our capital resources, portfolio performance and
results of operations. Forward-looking statements involve numerous risks and
uncertainties. You should not rely on these statements as predictions of
future events because there is no assurance that the events or circumstances
reflected in the statements can be achieved or will occur. Forward-looking
statements are identified by words such as "believes," "expects," "may,"
"will," "should," "seeks," "approximately," "intends," "plans," "pro forma,"
"estimates," or "anticipates" or in their negative form or other variations,
or by discussions of strategy, plans or intentions. Forward-looking statements
are based on assumptions, data or methods that may be incorrect or imprecise
or incapable of being realized. The following factors, among others, could
affect actual results and future events: defaults or nonrenewal of leases,
increased interest rates and operating costs, failure to obtain necessary
outside financing, difficulties in identifying properties to acquire and in
effecting acquisitions, failure to successfully integrate acquired properties
and operations, risks and uncertainties affecting property development and
construction (including construction delays, cost overruns, inability to
obtain necessary permits and public opposition to such activities), failure to
qualify as a real estate investment trust under the Internal Revenue Code of
1986, as amended (the "Code"), environmental uncertainties, risks related to
natural disasters, financial market fluctuations, changes in real estate and
zoning laws and increases in real property tax rates. Our success also depends
on general economic trends, including interest rates, income tax laws,
governmental regulation, legislation, population changes and other factors. Do
not rely solely on forward-looking statements, which only reflect management's
analysis. We assume no obligation to update forward-looking statements.

22

Results of Operations

Comparison of the Years ended December 31, 1999, 1998 and 1997

General

The results of operations for the three years ended December 31, 1999 were
significantly affected by acquisitions of apartment communities, including the
Transaction, and the repositioning of the Company's portfolio through the sale
of commercial and retail properties. The 1999 results include completion and
lease-up of six properties acquired in the Transaction and nine communities
acquired in 1998, with a full year of stabilized operations in 1999. The 1998
results include revenue and expense for an entire year for 16 stabilized
apartment communities that were acquired in the Transaction, while the 1997
results included those properties only from November 18, 1997. In addition,
the 1998 results include a full year of operations from five other
acquisitions in 1997, and a partial year for 1998 acquisitions and seven
completed communities previously under development that were acquired in the
Transaction. During 1997 and continuing in 1998, the Company substantially
completed the strategic repositioning of its portfolio to concentrate on
apartment communities and disposed of nearly all of its commercial and retail
assets, which significantly reduced the revenues received from such properties
in 1999 and 1998.

At December 31, 1999, the Company's portfolio of apartment communities
consisted of the following: (i) 17,592 units in 69 communities that were
completed and stabilized for all of 1999 and 1998 ("same-store" communities;
see footnote 11 on page 24), (ii) 3,291 units in 11 stabilized communities
that were acquired or stabilized in 1998 and held for all of 1999 and (iii)
1,807 units in six communities that were completed and leased up in 1999.

Revenues

Total revenues (excluding net gain on sales of investments in rental
properties) were $234,253,000 in 1999, $203,245,000 in 1998 and $137,761,000
in 1997. Revenues increased in 1999 primarily from the completion and lease-up
of six apartment communities and acquisitions of stabilized properties in
1998, which were held for all of 1999. Revenues increased in 1998 primarily as
a result of revenues derived from 16 stabilized apartment communities acquired
in the Transaction. A summary of revenues for the years ended December 31,
1999, 1998 and 1997 follows.

% of % of % of
Total Total Total
1999 Total Revenues 1998 Total Revenues 1997 Total Revenues
------------ -------- ------------ -------- ------------ --------

Revenues
Multifamily rental.... $217,812,000 93% $189,810,000 93% $122,936,000 89%
Commercial and retail
rental............... 245,000 -- 996,000 1 5,742,000 4
Other income.......... 16,196,000 7 12,439,000 6 9,083,000 7
------------ --- ------------ --- ------------ ---
Total revenue....... $234,253,000 100% $203,245,000 100% $137,761,000 100%
============ === ============ === ============ ===

% Change from Prior Year
--------------------------------
1999 1998 1997
-------- -------- --------

Multifamily rental.......................... 15 % 54 % 58 %
Commercial and retail rental................ (75)% (83)% (62)%
Other income................................ 30 % 37 % 7 %
Total revenue............................... 15 % 48 % 36 %

23

Multifamily rental income increased in each of the last three years
primarily due to property acquisitions (including the completion and lease-up
of communities under construction) and to a lesser extent, increases in same-
store communities. A summary of net changes in rental revenue by type of
community follows.

1999 Compared 1998 Compared
to 1998 to 1997
------------- -------------

Same-store(11)................................... $ 6,224,000 $ 6,595,000
Acquisitions..................................... 10,737,000 54,990,000
Development...................................... 11,041,000 5,289,000
----------- -----------
$28,002,000 $66,874,000
=========== ===========

- --------
(11) The Company defines annual same-store communities as those with
stabilized operations for the two full years listed. A stabilized
community has reached the underwritten occupancy (typically 95%) or has
been completed for one year. Includes 17,592 of the Company's 22,690
units at December 31, 1999 and 11,722 of the 21,858 units at December 31,
1998.

On a same-store basis, rental revenues increased 4% due to average rent per
unit increasing approximately 3% and higher occupancy in 1999. On a same-store
basis in 1998, rental revenues increased 6% due to average rent per unit
increasing approximately 5% and decreased use of rental concessions, which
were partially offset by lower occupancy in 1998.

Revenues from commercial and retail properties decreased 75% in 1999
compared to 1998 due to sales of properties during 1998, and decreased 83% in
1998 compared to 1997 due to the sale of four properties. Commercial and
retail revenues as a percentage of total revenues have declined in each of the
last three years as a result of the Company's strategy emphasizing
redeployment of these investments into apartment communities.

Portfolio occupancy rates as of December 31:

1999 1998 1997
---- ---- ----

Multifamily................................................... 95% 94% 95%
Number of properties........................................ 86 85 74
Commercial and retail......................................... 100% 100% 99%
Number of properties........................................ 1 1 5

For multifamily properties, portfolio occupancy is calculated by dividing
the total occupied units by the total units in stabilized communities in the
portfolio at the end of the period. For commercial and retail properties,
portfolio occupancy is calculated by dividing the total occupied square
footage by the total rentable square footage in the portfolio at the end of
the period.

24

The following table summarizes by property classification the acquisitions
and dispositions for the years ended December 31, 1999, 1998 and 1997 (dollar
amounts are gross acquisition costs in the case of acquisitions, total
delivered cost in the case of completed development communities and gross
sales prices in the case of property sales).

Acquisition/disposition summary:

1999 1998 1997
--------------- ---------------- ----------------
# $ # $ # $
--- ----------- --- ------------ --- ------------

Multifamily
Property
acquisitions(12)...... 2 $57,900,000 7 $162,700,000 22 $537,700,000
Development properties
completed............. 1 29,965,000 7 183,088,000 -- --
Property dispositions.. 1 7,000,000 3 19,200,000 2 12,550,000
Commercial and retail
Property acquisitions.. -- -- -- -- -- --
Property dispositions.. -- -- 4 10,500,000 10 97,300,000

- --------
(12) Includes, for 1997, 16 properties acquired in the Transaction with an
aggregate cost of approximately $386,000,000, held by consolidated
subsidiaries of BRE

Other income

Other income (which consists primarily of recurring nonrental income
derived from apartment communities and includes, among other items,
partnership, interest and third-party property management and development
income) was $16,196,000, $12,439,000 and $9,083,000 for the years ended
December 31, 1999, 1998 and 1997, respectively. The increase in 1999 over 1998
is due to other income from same-store communities, communities acquired in
1998 and held for all of 1999, and development fees from joint ventures to the
extent of third-party interests. The increase in 1998 over 1997 is due largely
to other income generated by communities acquired in 1997 and held for all of
1998, including those acquired in the Transaction.

Expenses

Real estate expenses

A summary of real estate expenses for the years ended December 31, 1999,
1998 and 1997 follows.

1999 1998 1997
----------- ----------- -----------

Multifamily.............................. $70,469,000 $64,566,000 $44,049,000
Commercial and retail.................... -- 58,000 522,000
----------- ----------- -----------
Total.................................... $70,469,000 $64,624,000 $44,571,000
=========== =========== ===========

Real estate expenses for multifamily rental properties (which include
maintenance and repairs, utilities, on-site staff payroll, property taxes,
insurance, advertising and other direct operating expenses) increased by
$5,903,000 (9%) in the year ended December 31, 1999 as compared to the prior
year. This increase is due largely to the completion and lease-up of six
communities previously under development as real estate expenses at same-store
communities remained unchanged. Real estate expenses for the year ended
December 31, 1998 increased 47% or $20,517,000 from 1997 primarily due to
acquisitions in 1998 and communities completed in 1998,which were previously
under development, and the expenses for an entire year for properties acquired
in 1997, including those acquired in the Transaction. Multifamily real estate
expenses as a percentage of multifamily rental income decreased from 35.8% in
1997 to 34.0% in 1998 and to 32.4% in 1999. Although not measurable with
precision, management believes that this decrease resulted in part from
economies of scale derived from increased concentration of assets in the
Company's markets.

25

Provision for depreciation

The provision for depreciation increased by $7,761,000 for the year ended
December 31, 1999 as compared to 1998, and increased $9,825,000 for the year
ended December 31, 1998 as compared to 1997. The increases in 1999 and 1998
resulted from additional depreciation on property acquisitions (including
those properties acquired in the Transaction) and to a lesser extent,
depreciation on development properties completed in 1999. Further, during 1998
and 1997, dispositions of commercial and retail properties generally resulted
in a higher depreciable base (and related depreciation expense) as the
original cost basis plus the realized gain was reinvested.

Interest expense

Interest expense for the years ending December 31, 1999, 1998 and 1997
follows.

1999 1998 1997
----------- ------------ -----------

Interest on line of
credit................. $15,016,000 $ 12,550,000 $ 5,750,000
Interest on unsecured
senior notes........... 19,018,000 17,672,000 7,331,000
Interest on mortgage
loans payable.......... 17,146,000 17,982,000 9,703,000
Capitalized interest.... (9,485,000) (12,606,000) (1,178,000)
----------- ------------ -----------
Total interest expense.. $41,695,000 $ 35,598,000 $21,606,000
=========== ============ ===========

Year-end debt balances at December 31, 1999, 1998 and 1997 follow.

December 31, December 31, December 31,
1999 1998 1997
------------ ------------ ------------

Unsecured line of credit.......... $315,000,000 $264,000,000 $186,000,000
Unsecured senior notes............ 253,000,000 253,000,000 123,000,000
Mortgage loans payable............ 211,403,000 235,146,000 232,367,000
------------ ------------ ------------
Total debt........................ $779,403,000 $752,146,000 $541,367,000
============ ============ ============
Weighted average interest rate for
all debt at end of period........ 7.1% 7.0% 7.2%
============ ============ ============

Interest expense increased $6,097,000 to $41,695,000 in 1999 due to eight
properties previously under development and lease-up. The cost of development
increased borrowings under the line of credit and related interest expense,
and lowered capitalization of interest upon completion. These increases were
offset in part by the paydown of the line of credit from the proceeds of the
January 1999 issuance of $53,750,000 in Series A Preferred Stock. In 1998,
interest expense increased $13,992,000 to $35,598,000 due to: interest on the
$130,000,000 unsecured senior notes due 2013, issued in February 1998;
borrowings on the line of credit to fund acquisitions of stabilized
properties; a full year of interest on debt assumed and incurred in the
Transaction of approximately $280,000,000; and a full year of interest on
$50,000,000 unsecured notes due 2007 issued in June 1997. This amount was
offset in part by a paydown of balances on the Company's credit facilities
from the net proceeds of equity offerings in 1998 totaling approximately
$56,000,000 and net proceeds from property sales of approximately $31,000,000.
Further, the 1998 amount is net of capitalized interest related to
construction in progress for eight communities acquired in the Transaction and
five other properties purchased for development. The 1997 interest expense was
partially offset by the paydown of balances on the Company's line of credit
using net proceeds from equity offerings in 1997 totaling approximately
$109,900,000 and net proceeds from sales of investments in rental properties
of approximately $105,318,000.

26

General and administrative expenses

General and administrative expenses for the three years ending December 31,
1999 were as follows.

1999 1998 1997
---------- ---------- ----------

General and administrative expenses....... $6,706,000 $6,133,000 $4,301,000
As a percentage of total revenues......... 2.9% 3.0% 3.1%

General and administrative expenses as a percentage of total revenues
decreased by 0.1% in 1999 as compared to 1998 due to continued efficiencies in
administrating a larger portfolio and a restructuring of corporate personnel
in the first quarter of 1999. In 1998 as compared to 1997, general and
administrative expenses decreased by 0.1%, although total revenues increased
approximately 48%. This relatively small decrease is due to the efficiencies
of administering a larger portfolio being offset in part by start-up costs in
establishing new regional offices (the Company added new regions in connection
with the Transaction) and the relocation of its corporate office. No such
costs were incurred in 1997.

Included in general and administrative expenses is office rent of $792,000,
$568,000 and $415,000 for the three years ended December 31, 1999.

Provision for nonrecurring charge

In the first quarter of 1999, BRE recorded a restructuring charge of
$1,250,000 related to reductions in corporate personnel. In the third quarter
of 1998, BRE recorded a provision for litigation loss of $2,400,000 in
connection with a jury award and related legal expenses. Both of these charges
were concluded in 1999 with no further charge to expense. There were no such
amounts in 1997.

Net gain (loss) on sales of investments in rental properties

The net gain on sales of investments in rental properties in 1999 was
$54,000, primarily from the sale of the Los Senderos community. In 1998, the
net loss on sales of investments in rental properties was $1,859,000,
primarily from the sale of the Park Glenn apartment community and three
commercial and retail properties: Hawthorne Del Amo, Valencia Medical Center
and Vista Village Shopping Center for a total gross sale price of
approximately $17,300,000. The net gain on sales in 1997 was $27,824,000,
primarily due to the sale of the Villa Serra, Central, Santa Fe Springs and
Hub properties for a total gross sale price of approximately $80,500,000.
Certain of these sales were structured as tax-deferred exchanges, with the
proceeds applied toward new investments in apartment communities. As of
December 31, 1999, the Company had gains on sales totaling approximately
$146,000,000 which have been deferred for federal and state income tax
purposes since the Company's organization in 1970.

Minority interest in income

Minority interest in income was $5,447,000 for the year ended December 31,
1999 due to the earnings attributable to the minority members of the Company's
consolidated subsidiaries, up from $4,224,000 for the year ended December 31,
1998. This increase is primarily due to the issuance of additional interests
in income pursuant to the attainment of development goals in the Transaction
and a full year of operations from another consolidated subsidiary formed in
1998. Minority interest in income was $4,224,000 for the year ended December
31, 1998 due to the earnings attributable to the minority members of the
Company's consolidated subsidiaries, up from $972,000 for the year ended
December 31, 1997. This increase is primarily due to a full year of allocation
of income to minority members in connection with the Transaction.

27

Dividends attributable to preferred stock

The Company issued 2,150,000 shares of 8 1/2 % Series A Cumulative
Redeemable Preferred Stock during the quarter ended March 31, 1999, and
recorded $4,182,000 in dividends for the year ended December 31, 1999. No
preferred stock was outstanding in the 12 months ended December 31, 1998 or
1997.

Net income available to common shareholders

Net income available to common shareholders was $69,034,000, $60,644,000
and $76,197,000 for the years ended December 31, 1999, 1998 and 1997,
respectively. The increase in the year ended 1999 as compared to 1998 is due
largely to an increase in net contribution to income from the completion of
six communities and properties acquired or stabilized in 1998 and held for all
of 1999. The decrease in the year ended 1998 as compared to 1997 is due
largely to the loss on the sale of investments in rental properties in 1998,
while 1997 had gains on sales of investments in rental properties. This
decrease was offset in part by contributions to net income from properties
acquired during 1997 and held for all of 1998, primarily from the Transaction.

Construction in progress and land under development

Land acquired for development is capitalized and reported as "Land under
development" until the development plan for the land is formalized. Once the
development plan is determined, the costs are transferred to the balance sheet
line items "Construction in progress." Land acquisition, development and
carrying costs of properties under construction are capitalized and reported
as "Direct investments in real estate" or "Equity interests in and advances to
real estate joint ventures", as appropriate, in "Construction in progress."
The Company transfers the capitalized costs of direct investment properties
for each building in a community under construction to the balance sheet line
item "Investments in rental properties" once the building receives a final
certificate of occupancy and is ready to lease.

The following table presents data with respect to the Company's properties
included in construction in progress and land under development at December
31, 1999, for both direct investment and equity interest properties.
Completion of these properties is subject to a number of risks and
uncertainties, including construction delays and cost overruns. No assurance
can be given that these properties will be completed or, if completed, that
they will be completed by the estimated dates or for the estimated amounts or
that they will contain the number of units proposed in the table below.

Cost to
Date--
Proposed December 31, Estimated
Units(13) 1999 Total Cost
--------- ------------ ------------

Direct investment
Construction in progress(14).............. 708 $ 46,600,000 $ 95,500,000
Equity interests in joint venture
construction in progress(15)............. 780 71,700,000 86,500,000
----- ------------ ------------
Subtotal................................ 1,488 118,300,000 $182,000,000
============
Land under development(16)................ 673 26,500,000
----- ------------
2,161 $144,800,000
===== ============

- --------
(13) As of December 31, 1999, 339 of these units had been delivered.

(14) Consists of the Pinnacle Bellevue community in Bellevue, Washington,
Pinnacle Carmel Creek community in San Diego, California, and Pinnacle at
Overlook II in Folsom, California, with 248, 348 and 112 units planned,
respectively. Pinnacle at Overlook II has an estimated completion in the
third quarter of 2000; the others in the fourth quarter of 2000.

(15) Consists of the gross costs of three communities, Pinnacle at Blue
Ravine, Pinnacle Sonata and Pinnacle at Queen Creek, with 260, 268 and
252 units planned, respectively. These three communities are under joint
venture agreements and are presented on the financial statements net of
$56,700,000 of draws on

28

construction loans and joint venture partner's capital contribution. The
Company's net equity contribution upon completion is estimated at
$16,500,000.

(16) Consists of Pinnacle MacArthur Place in Santa Ana, California and
Pinnacle at Denver Tech Center, Greenwood Village, Colorado with 253 and
420 units planned, respectively. The development plans for these
communities are under review and finalization, including obtaining final
bids for construction costs, and the total proposed units may change.

Impact of Inflation

Over 97% of BRE's total revenues for 1999 were derived from apartment
properties. Due to the short-term nature of most apartment leases (typically
one year or less), the Company may seek to adjust rents to mitigate the impact
of inflation upon renewal of existing leases or commencement of new leases,
although there can be no assurance that the Company will be able to adjust
rents in response to inflation. In addition, occupancy rates may also
fluctuate due to short-term leases that permit apartment residents to leave at
the end of each lease term at minimal cost to the resident.

Year 2000 Considerations

As of December 31, 1998, the Company had completed a project that replaced
portions of its software so that its computer systems would function properly
with respect to dates in the year 2000 and thereafter. The total Year 2000
project cost for the Company's systems was approximately $200,000, and such
costs were expensed according to the Company's existing policy. The Company
completed the necessary software replacement largely using existing employees.
The Company believes that with the conversions to new software, the Year 2000
issue will not pose significant operational problems for its computer systems.
As of March 1, 2000, the Company has not experienced significant operational
problems due to Year 2000 issues. Further, the Company believes that its risk
for future operational problems related to the Year 2000 issue is minimal.

The Company is dependent on third parties to continue operating properly,
and as of March 1, 2000, the Company is unaware of any significant Year 2000
issue preventing third parties with material dealings with the Company to
function normally. However, as a component of its Year 2000 project, the
Company has discussed Year 2000 compliance issues with its key vendors and
service providers, and has developed contingency plans, although there can be
no assurance that these contingency plans will successfully avoid future
service interruption.

Due to the complexity and pervasiveness of the Year 2000 issue and, in
particular, the uncertainty regarding the compliance programs of third
parties, no assurance can be given that these estimates will be achieved;
actual results could differ materially from those anticipated.

Liquidity and Capital Resources

At December 31, 1999, the Company's cash totaled $13,812,000, up from
$2,057,000 at the end of 1998 due to the excess of cash flow provided by
operating and financing activities over cash flows used for investing
activities, as follows:

-- Net cash flows generated by operating activities increased by
$15,943,000 from $97,081,000 for the year ended December 31, 1998, due
primarily to higher net income in 1999.

-- Net cash flows generated by financing activities decreased by
$188,038,000 from $191,057,000 for the year ended December 31, 1998, due
primarily to the issuance in 1998 of senior unsecured notes and higher
borrowings on the line of credit to fund construction in progress and
acquisitions of stabilized properties.

-- Net cash flows used in investing activities decreased by $186,009,000
from $290,297,000 for the year ended December 31, 1998, due primarily to
the 1998 funding of construction in progress and acquisitions of
stabilized properties.

29

Borrowings under the Company's line of credit totaled $315,000,000 at
December 31, 1999, compared to $264,000,000 at December 31, 1998. Drawings on
the line of credit are available to pay dividends to shareholders and
distributions to minority members, to fund capital improvements and operating
expenses, and to fund property acquisitions and development. The Company
typically reduces its outstanding balance on the line of credit with available
cash balances. Borrowings of up to $400,000,000 are available under the
Company's line of credit, with $85,000,000 available at December 31, 1999. The
line of credit matures in August 2001 and bears interest at the lower of LIBOR
plus 0.70% or a rate based on bids of the participating banks. Cost of the
line of credit is 0.15% per annum on the total commitment amount.

The Company had a total of $253,000,000 in unsecured indebtedness other
than the line of credit at December 31, 1999, consisting of the following:

-- $73,000,000 of unsecured senior notes with an interest rate of 7.44% per
annum on $55,000,000 and 7.88% per annum on $18,000,000. This indebtedness
is to be repaid through scheduled principal payments annually from 2000 to
2005;

-- $50,000,000 principal amount of unsecured senior notes due 2007, with an
effective interest rate of approximately 7.8%; and

-- $130,000,000 principal amount of unsecured notes due 2013, with an
effective interest rate of 7.3%.

In addition, at December 31, 1999, the Company had mortgage indebtedness
totaling $211,403,000 at interest rates ranging from 5.3% to 9.3%, with
remaining terms of from less than one to 29 years.

For additional information regarding the Company's line of credit,
unsecured senior notes payable and mortgage loans payable, including scheduled
principal payments over the next five years, see Notes 5 and 6 to Notes to
Consolidated Financial Statements. Certain of the Company's indebtedness
contain financial covenants as to minimum net worth, interest coverage ratios,
maximum secured debt and total debt to capital, among others. The Company was
in compliance with all such financial covenants during the year ended December
31, 1999.

The Company purchased two completed apartment communities totaling 628
units during the year ended December 31, 1999 for a gross purchase price of
approximately $58,000,000. During this period, the Company also purchased four
land sites for development of an estimated 1,132 units, for a gross purchase
price of approximately $13,000,000. Further, the Company funded approximately
$21,000,000 for direct investment construction in progress and funded
approximately $49,000,000 in costs in 1999 for construction in progress for
communities under joint venture agreements. These acquisition and construction
costs were funded by borrowings on the line of credit, the issuance of
preferred stock, construction loans on communities under joint venture
agreements and proceeds from the sale of properties. Because of higher prices
and corresponding declining rates of return on completed apartment communities
in its targeted Western markets, the Company presently does not anticipate
significant acquisitions of completed apartment communities in 2000, other
than the communities noted below. The Company continually evaluates its
portfolio to determine whether acquisitions or dispositions may be appropriate
to maximize the portfolio's performance.

The Company intends to meet its short-term liquidity requirements through
cash balances and cash flows provided by operations, borrowings on the
unsecured line of credit and to a lesser extent, proceeds from asset sales.
The Company believes that its cash flow and cash available from its line of
credit will be sufficient to meet its liquidity needs during 2000, which
include normal recurring expenses, debt service requirements, budgeted
expenditures for improvements to certain properties, funding ongoing
construction in progress and distributions required to maintain the Company's
real estate investment trust qualification under the Code.

However, the Company anticipates that it will continue to require outside
sources of financing to meet its long-term liquidity needs beyond 2000, such
as scheduled debt repayments, construction funding and property acquisitions.
At December 31, 1999, the Company had committed to purchase two multifamily
communities for approximately $65,000,000 (estimated to fund in the year 2000)
and had an estimated cost of $50,000,000 to

30

complete existing direct investment construction in progress, and $2,000,000
(net of construction financing and partners' contributions) to fund joint
venture construction in progress, with funding estimated from 2000 to 2002. In
addition, the estimated cost to complete land under development has not been
determined as the development plans have not been finalized. These properties
may be contributed to a joint venture, which may significantly lower the
Company's required funding. To facilitate the acquisition of public capital,
the Company filed a universal shelf registration statement in March 1998
providing for the issuance of up to $750 million in equity, debt, preferred or
convertible securities, of which approximately $640,000,000 remains unused at
December 31, 1999. The Company believes that public capital markets will not
be, for the foreseeable future, as significant a source of funding as they
have in the three years ended December 31, 1999. The Company is actively
searching for other sources of possible funding, including further joint
ventures and additional secured construction debt. The Company owns
unencumbered real estate assets that could be sold, contributed to joint
ventures or used as collateral for financing purposes (subject to certain
lender restrictions) and has encumbered assets with significant equity that
could be further encumbered should other sources of capital not be available.

Substantially all of the properties acquired in the Transaction are held
through BRE Property Investors LLC (the "Operating Company"). Under the terms
of the limited liability company agreement governing the operations of the
Operating Company (the "LLC Agreement"), the nonmanaging members are entitled
to receive certain distributions of cash prior to the Company. If the
Operating Company's cash available for distribution is not sufficient to
permit such priority distributions, the Company is required to make certain
capital contributions to the Operating Company. The Operating Company is also
required to maintain certain debt service coverage, debt-to-asset and other
financial ratios intended to protect the members' rights to receive priority
distributions. Under the terms of the LLC Agreement, among other items, the
properties owned by the Operating Company may not be sold in a taxable
transaction without the consent of the nonmanaging members for up to 10 years
from the closing of the Transaction. The Operating Company has also guaranteed
repayment of borrowings under the Company's $400 million line of credit.

Dividends and Distributions to Minority Members

A cash dividend has been paid to common shareholders each quarter since the
Company's inception in 1970. Dividends per common share were $1.56 in 1999,
$1.44 in 1998 and $1.38 in 1997. Total dividends paid to common shareholders
for the three years ended December 31, 1999, 1998 and 1997 were $69,544,000,
$62,138,000 and $51,063,000, respectively. Distributions to minority members
were $5,587,000 in 1999, $4,189,000 in 1998 and $972,000 in 1997. In 1999,
$4,182,000 in dividends were paid to preferred shareholders.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to the Company's operations result primarily from
changes in short-term LIBOR interest rates. The Company does not have any
direct foreign exchange or other significant market risk.

The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's unsecured line of credit. The Company primarily
enters into fixed and variable rate debt obligations to support general
corporate purposes, including acquisitions, capital expenditures and working
capital needs. The Company continuously evaluates its level of variable rate
debt with respect to total debt and other factors, including its assessment of
the current and future economic environment. The Company did not have any
derivative financial instruments at December 31, 1999, but had in previous
years. In 1997 and 1998, the Company closed out treasury rate lock agreements
in conjunction with the issuance of its $50 million unsecured senior notes due
2007, issued in June 1997, and $130 million unsecured senior notes due 2013,
issued in February 1998. The purpose of these treasury rate lock agreements
was to obtain what the Company considered advantageous pricing for future
anticipated debt issuance.

The fair values of BRE's financial instruments (including such items in the
financial statement captions as cash, other assets, accounts payable and other
liabilities and unsecured line of credit) approximate their carrying or
contract values based on their nature, terms and interest rates that
approximate current market rates. The fair

31

value of mortgage loans payable and unsecured senior notes is estimated using
discounted cash flow analyses with an interest rate similar to that of current
market borrowing arrangements. The fair value of the Company's mortgage loans
payable and unsecured senior notes approximates their carrying value at
December 31, 1999.

The Company had $347,530,000 and $297,000,000 in variable rate debt
outstanding at December 31, 1999 and 1998, respectively. A hypothetical 10%
adverse change in interest rates would have had an annualized unfavorable
impact of approximately $2,200,000 and $1,800,000, respectively, on the
Company's earnings and cash flows based on these year-end debt levels. The
Company cannot predict the effect of adverse changes in interest rates on its
variable rate debt and, therefore, its exposure to market risk, nor can there
be any assurance that fixed rate, long term debt will be available to the
Company at advantageous pricing. Consequently, future results may differ
materially from the estimated adverse changes discussed above.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the Index to Financial Statements. Such Financial Statements and
Schedules are incorporated herein by reference.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

32

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a) Executive Officers. See "Executive Officers of the Registrant" in Part
I of this report.

(b) Directors. The information required by this Item is incorporated herein
by reference to the Company's Proxy Statement, relating to the Company's 1999
Annual Meeting of Shareholders, under the headings "Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance," to be filed with
the Securities and Exchange Commission within 120 days of December 31, 1999. A
summary of the directors and their principal business for the last five years
follows:

John McMahan Chairman of the Board of the Company. Managing Principal,
The McMahan Group, real estate strategic management
consultants, since 1996. President, John McMahan
Associates, Inc., a management consulting firm, and
McMahan Real Estate Securities, Inc., a real estate
investment firm, 1994 to 1996. President and Chief
Executive Officer, Mellon/McMahan Real Estate Advisors,
Inc., a real estate advisory firm, 1990 to 1994.
Executive Director, The Center for Real Estate Enterprise
Management, since 1999.

William E. Borsari Chairman or President, The Walters Management Company, a
real estate asset management company, for more than five
years.

Robert A. Fiddaman Former board chairman of SSR Realty Advisors, a real
estate investment and management firm, from 1996 to 1997.
President and Chief Executive Officer of Metric Realty
from 1993 to 1996.

L. Michael Foley Principal, L. Michael Foley and Associates, real estate
and corporate consulting, since 1996. Senior Vice
President and Chief Financial Officer, Coldwell Banker
Corporation, 1995-1996. Chairman and Chief Executive
Officer, Sears Savings Bank, 1989-93. Senior Executive
Vice President, Coldwell Banker Real Estate Group, Inc.,
1986-93. Executive Vice President, Homart Development
Co., 1983-1993. Director and Executive Committee Member,
Western Property Trust.

Roger P. Kuppinger President, The Kuppinger Company, a private financial
advisor to public and private companies, since February
1994. Senior Vice President and Managing Director,
Sutro & Co., Inc., an investment banking company, from
1969 to February 1994. Director, Realty Income
Corporation.

Frank C. McDowell President and Chief Executive Officer of the Company
since June 1995. Chief Executive Officer and Chairman of
Cardinal Realty Services, Inc., 1992-95.

Edward E. Mace President and Chief Executive Officer of Fairmont Hotels
& Resorts- U.S. /Mexico division based in San Francisco
since 1999. President and Chief Executive Officer of
Fairmont Hotels 1996--1999. Midwest regional director for
management consulting for the Real Estate Industry Group
of KPMG Peat Marwick from 1994 to 1996. President and
managing partner for Lincoln Property Company of Europe
from 1990 to 1994.

Gregory M. Simon Self employed as a private investor, since 1991. Senior
Vice President, H.F. Ahmanson & Co. and Home Savings of
America, from 1983 to 1991. Officer and Director, Golden
Orange Broadcasting, a privately held corporation.

Arthur G. von Thaden President and Chief Executive Officer of the Company from
1987 to June 1995. Chief Executive Officer, BankAmerica
Realty Services, Inc., a real estate investment advisory
firm, from 1970 to 1987.

33

Item 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference
to the Company's Proxy Statement, relating to the Company's 1999 Annual
Meeting of Shareholders, under the headings "Executive Compensation and Other
Information" and "Board and Committee Meetings; Compensation of Directors," to
be filed with the Securities and Exchange Commission within 120 days of
December 31, 1999.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT.

The information required by this Item is incorporated herein by reference
to the Company's Proxy Statement, relating to the Company's 1999 Annual
Meeting of Shareholders, under the heading "Security Ownership of Certain
Beneficial Owners and Management" to be filed with the Securities and Exchange
Commission within 120 days of December 31, 1999.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this Item is incorporated herein by reference
to the Company's Proxy Statement, relating to the Company's 1999 Annual
Meeting of Shareholders, under the headings "Stock Loans" and "Employment
Contracts and Termination of Employment and Change in Control Arrangements--
Mr. McDowell--Stock Loan," to be filed with the Securities and Exchange
Commission within 120 days of December 31, 1999.

34

PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Financial Statements

1. Financial Statements:

Report of Independent Auditors

Consolidated Balance Sheets at December 31, 1999 and 1998

Consolidated Statements of Income for the years ended December 31,
1999, 1998 and 1997

Consolidated Statements of Cash Flows for the years ended December
31, 1999, 1998 and 1997

Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1999, 1998 and 1997

Notes to Consolidated Financial Statements

2. Financial Statement Schedule:

Schedule III--Real Estate and Accumulated Depreciation

All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable, and, therefore, have been omitted.

3. See Index to Exhibits immediately following the Consolidated
Financial Statements. Each of the exhibits listed is incorporated
herein by reference.

(b) Reports on Form 8-K:

None

(c) Exhibits

See Index to Exhibits.

(d) Financial Statement Schedules

See Index to Financial Statements and Financial Statement Schedule.

35

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

Dated March 22, 2000 BRE Properties, Inc.

/s/ Frank C. McDowell
By: _________________________________
Frank C. McDowell
President and Chief Executive
Officer

Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:

Signature Title Dated
--------- ----- -----

/s/ Frank C. McDowell President and Director March 22, 2000
____________________________________ (Principal Executive
Frank C. McDowell Officer)

/s/ LeRoy E. Carlson Executive Vice President March 22, 2000
____________________________________ (Principal Financial and
LeRoy E. Carlson Accounting Officer)

/s/ John McMahan Chairman and Director March 22, 2000
____________________________________
John McMahan

/s/ William E. Borsari Director March 22, 2000
____________________________________
William E. Borsari

/s/ Robert A. Fiddaman Director March 22, 2000
____________________________________
Robert A. Fiddaman

/s/ L. Michael Foley Director March 22, 2000
____________________________________
L. Michael Foley

/s/ Roger P. Kuppinger Director March 22, 2000
____________________________________
Roger P. Kuppinger

/s/ Edward E. Mace Director March 22, 2000
____________________________________
Edward E. Mace

/s/ Gregory M. Simon Director March 22, 2000
____________________________________
Gregory M. Simon

/s/ Arthur G. von Thaden Director March 22, 2000
____________________________________
Arthur G. von Thaden

36

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Directors of
BRE Properties, Inc.:

We have audited the accompanying consolidated balance sheets of BRE
Properties, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of income, cash flows and shareholders' equity
for each of the three years in the period ended December 31, 1999. Our audits
also included the financial statement schedule listed in the Index at Item
14(a). These financial statements and the related schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and the related financial schedule
based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit 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 referred to above
present fairly, in all material respects, the consolidated financial position
of BRE Properties, Inc. and subsidiaries at December 31, 1999 and 1998, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

/s/ Ernst & Young LLP

San Francisco, California
January 18, 2000

37

BRE PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except per share data)

December 31,
----------------------
1999 1998
---------- ----------

ASSETS
------
Real estate portfolio
Direct investments in rental properties:
Multifamily.......................................... $1,691,762 $1,618,461
Construction in progress............................. 46,575 43,830
Less: Accumulated depreciation....................... (109,623) (75,838)
---------- ----------
1,628,714 1,586,453
---------- ----------
Equity interests in and advances to real estate joint
ventures
Investments in rental properties..................... -- --
Construction in progress............................. 15,083 --
---------- ----------
15,083 --
---------- ----------
Land under development................................. 26,538 15,328
---------- ----------
Total real estate portfolio........................ 1,670,335 1,601,781
Cash................................................... 13,812 2,057
Other assets........................................... 25,306 27,078
---------- ----------
Total assets....................................... $1,709,453 $1,630,916
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------

Mortgage loans payable................................. $ 211,403 $ 235,146
Unsecured senior notes................................. 253,000 253,000
Unsecured line of credit............................... 315,000 264,000
Accounts payable and other liabilities................. 17,212 26,333
---------- ----------
Total liabilities.................................. 796,615 778,479
---------- ----------
Minority interest...................................... 87,640 87,432
---------- ----------
Shareholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares
authorized: 8 1/2% Series A cumulative redeemable,
liquidation preference $25 per share. Shares issued
and outstanding: 2,150,000 shares at December 31,
1999; no shares outstanding at December 31, 1998.... 53,750 --
Common stock, $.01 par value; 100,000,000 shares
authorized. Shares issued and outstanding:
44,679,341 shares at December 31, 1999; 44,221,560
shares at December 31, 1998......................... 447 443
Additional paid-in capital............................. 671,760 664,811
Accumulated net income in excess of cumulative
dividends............................................. 99,241 99,751
---------- ----------
Total shareholders' equity......................... 825,198 765,005
---------- ----------
Total liabilities and shareholders' equity......... $1,709,453 $1,630,916
========== ==========

See Notes to Consolidated Financial Statements

38

BRE PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF INCOME
(Dollar amounts in thousands, except per share data)

Years ended December 31,
---------------------------
1999 1998 1997
-------- -------- --------

Revenue
Rental income Multifamily....................... $217,812 $189,810 $122,936
Commercial and retail........................... 245 996 5,742
Other income.................................... 16,196 12,439 9,083
-------- -------- --------
Total revenue................................. 234,253 203,245 137,761
-------- -------- --------
Expenses
Real estate..................................... 70,469 64,624 44,571
Provision for depreciation...................... 35,524 27,763 17,938
Interest........................................ 41,695 35,598 21,606
General and administrative...................... 6,706 6,133 4,301
Provision for nonrecurring charge............... 1,250 2,400 --
-------- -------- --------
Total expenses................................ 155,644 136,518 88,416
-------- -------- --------
Income before gain (loss) on sales of investments
in rental properties and minority interest....... 78,609 66,727 49,345
Net gain (loss) on sales of investments in rental
properties....................................... 54 (1,859) 27,824
-------- -------- --------
Income before minority interest................... 78,663 64,868 77,169
Minority interest in income....................... 5,447 4,224 972
-------- -------- --------
Net income........................................ 73,216 60,644 76,197
Dividends attributable to preferred stock......... 4,182 -- --
-------- -------- --------
Net income available to common shareholders....... $ 69,034 $ 60,644 $ 76,197
======== ======== ========
Earnings per common share:
Income excluding net gain (loss) on sales of
investments in rental properties and minority
interest......................................... $ 1.55 $ 1.45 $ 1.35
Net gain (loss) on sales of investments in rental
properties....................................... -- $ (0.04) $ 0.78
-------- -------- --------
Net income per common share--basic................ $ 1.55 $ 1.41 $ 2.13
======== ======== ========
Earnings per common share assuming dilution:
Income excluding net gain (loss) on sales of
investments in rental properties and minority
interest......................................... $ 1.55 $ 1.45 $ 1.35
Net gain (loss) on sales of investments in rental
properties....................................... -- $ (0.04) $ 0.76
-------- -------- --------
Net income per common share--assuming dilution.... $ 1.55 $ 1.41 $ 2.11
======== ======== ========

See Notes to Consolidated Financial Statements

39

BRE PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)

Years ended December 31,
-------------------------------
1999 1998 1997
--------- --------- ---------

Cash flows from operating activities
Net income................................... $ 73,216 $ 60,644 $ 76,197
Adjustments to reconcile net income to net
cash flows generated by operating activities
Net (gain) loss on sales of investments in
rental properties......................... (54) 1,859 (27,824)
Provision for depreciation................. 35,524 27,763 17,938
Provision for nonrecurring charge.......... -- 2,400 --
Minority interest in income................ 5,447 4,224 972
Decrease (increase) in other assets........ 392 63 (9,074)
(Decrease) increase in accounts payable and
other liabilities......................... (1,501) 128 9,355
--------- --------- ---------
Net cash flows generated by operating
activities.................................. 113,024 97,081 67,564
--------- --------- ---------
Cash flows from investing activities
Additions to direct investment construction
in progress................................. (35,514) (179,568) (9,813)
Reimbursements of construction in progress
from unconsolidated joint ventures.......... 56,615 -- --
Advances to unconsolidated joint ventures for
construction in progress.................... (49,243) -- --
Purchase of land under development........... (11,210) -- --
Multifamily communities acquired, net........ (59,206) (149,638) (152,700)
Apartments and construction in progress
purchased from TCRW......................... -- -- (160,544)
Decrease (increase) in funds held in escrow.. -- 15,833 (15,833)
Capital expenditures--multifamily............ (4,715) (3,553) (1,542)
Capital expenditures--commercial and retail.. -- (141) (446)
Rehabilitation expenditures.................. (12,604) (6,665) (4,578)
Mortgage loans receivable advanced........... -- -- (5,950)
Mortgage loans receivable repayments......... -- 2,535 10,795
Proceeds from sales of property, net......... 11,589 30,900 105,318
--------- --------- ---------
Net cash flows (used in) investing
activities.................................. (104,288) (290,297) (235,293)
--------- --------- ---------
Cash flows from financing activities
Principal payments on mortgage loans......... (23,743) (5,833) (2,736)
Issuance of unsecured senior notes, net...... -- 130,000 50,000
Costs of issuance of senior unsecured notes.. -- (3,787) (3,746)
Line of credit
Advances................................... 231,000 386,000 240,500
Repayments................................. (180,000) (308,000) (178,500)
Proceeds from preferred equity offering,
net......................................... 51,637 -- --
Proceeds from common equity offerings, net... -- 56,013 109,903
Proceeds from exercises of stock options,
net......................................... 3,438 2,991 8,375
Distributions to minority members............ (5,587) (4,189) (972)
Dividends paid............................... (73,726) (62,138) (51,063)
--------- --------- ---------
Net cash flows generated by financing
activities.................................. 3,019 191,057 171,761
--------- --------- ---------
Increase (decrease) in cash.................. 11,755 (2,159) 4,032
Balance at beginning of period............... 2,057 4,216 184
--------- --------- ---------
Balance at end of period..................... $ 13,812 $ 2,057 $ 4,216
========= ========= =========

See Notes to Consolidated Financial Statements

40

BRE PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollar amounts in thousands, except share and per share data)

Years ended December 31,
-------------------------------------
1999 1998 1997
----------- ----------- -----------

Common stock shares
Balance at beginning of year........... 44,221,560 41,738,704 32,879,741
Issuance of shares pursuant to purchase
transactions.......................... -- -- 3,713,331
Stock options exercised................ 269,852 350,415 364,752
Conversion of operating company units
to common shares...................... 185,000 -- --
Shares issued pursuant to dividend
reinvestment plan..................... -- 12,926 101,951
Issuance of shares pursuant to equity
offerings............................. -- 2,119,515 4,678,929
Other.................................. 2,929 -- --
----------- ----------- -----------
Balance at end of year............... 44,679,341 44,221,560 41,738,704
----------- ----------- -----------
Preferred stock shares
Balance at beginning of year........... -- -- --
Issuance of 8 1/2% Series A cumulative
redeemable............................ 2,150,000 -- --
----------- ----------- -----------
Balance at end of year............... 2,150,000 -- --
----------- ----------- -----------
Common stock
Balance at beginning of year........... $ 443 $ 417 $ 329
Issuance of shares pursuant to purchase
transactions.......................... -- -- 37
Stock options exercised................ 2 5 4
Conversion of operating company units
to common shares...................... 2 -- --
Issuance of shares pursuant to dividend
reinvestment plan..................... -- -- 1
Issuance of shares pursuant to equity
offerings............................. -- 21 46
----------- ----------- -----------
Balance at end of year............... $ 447 $ 443 $ 417
----------- ----------- -----------
Preferred stock
Balance at beginning of year........... -- -- --
Issuance of 8 1/2% Series A cumulative
redeemable............................ $ 53,750 -- --
----------- ----------- -----------
Balance at end of year............... $ 53,750 -- --
----------- ----------- -----------
Additional paid-in capital
Balance at beginning of year........... $ 664,811 $ 605,833 $ 387,674
Issuance of shares pursuant to purchase
transactions.......................... -- -- 99,932
Conversion of operating company units
to common shares...................... 4,980 -- --
Stock options exercised................ 1,899 2,637 5,764
Issuance of shares pursuant to dividend
reinvestment plan..................... -- 349 2,606
Issuance of shares pursuant to equity
offerings............................. -- 55,992 109,857
Other.................................. 70 -- --
----------- ----------- -----------
Balance at end of year............... $ 671,760 $ 664,811 $ 605,833
----------- ----------- -----------
Accumulated net income in excess of
cumulative dividends
Balance at beginning of year........... $ 99,751 $ 101,245 $ 76,111
Net income for year................ 73,216 60,644 76,197
Cash dividends paid: $1.56, $1.44 and
$1.38 per common share for the years
ended December 31, 1999, 1998 and
1997, respectively, and $1.96 per
preferred share in 1999............... (73,726) (62,138) (51,063)
----------- ----------- -----------
Balance at end of year............... $ 99,241 $ 99,751 $ 101,245
----------- ----------- -----------
Total shareholders' equity......... $ 825,198 $ 765,005 $ 707,495
=========== =========== ===========

See Notes to Consolidated Financial Statements

41

BRE PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Company

BRE Properties, Inc. ("BRE" or the "Company") is a self-administered real
estate investment trust that owns and operates multifamily communities and
other income-producing properties in the Western United States. At December
31, 1999, BRE's portfolio, owned directly or through subsidiaries, consisted
of 89 properties, including 86 multifamily communities (aggregating 22,690
units), one commercial and retail property, and two properties held in
partnerships in which BRE is a limited partner. Of these properties, 39 were
located in California, 22 in Arizona, nine in Washington, five in Nevada, five
in Utah, four in New Mexico, three in Oregon and two in Colorado. In addition,
at December 31, 1999, there were eight properties under development
aggregating an estimated 2,161 units, including 780 units held under joint
venture agreements in which BRE will be a minority owner when construction is
completed.

Transaction with Trammell Crow Residential-West

On November 18, 1997, BRE acquired 16 completed properties and eight
development properties from certain entities of Trammell Crow Residential-West
(the "Transaction") pursuant to a definitive agreement (the "Contribution
Agreement"). BRE paid a total of approximately $160 million in cash and issued
$100 million in common stock based on a stock price of $26.93 per share, as
provided for in the Contribution Agreement. In addition, certain entities
received Operating Company Units ("OC Units ") valued at $76 million in BRE
Property Investors LLC (the "Operating Company"), a Delaware limited liability
company and majority-owned subsidiary of BRE. The Operating Company also
assumed approximately $120 million in debt. BRE is the sole managing member of
the Operating Company and owned an approximate 74% interest therein at
December 31, 1999. Substantially all of the properties acquired in the
Transaction were held through the Operating Company, which was formed by the
Company for the purpose of acquiring the properties in the Transaction. The
Operating Company continues to hold substantially all of the properties
acquired in the Transaction.

The OC Units held by nonmanaging members are included in minority interest
in the Company's consolidated financial statements. Starting in November 1998,
nonmanaging members of the Operating Company can exchange their units for
common stock of BRE on a 1:1 basis or, at the option of the Company, cash in
an amount equal to the market value of such common stock at the time of the
exchange. As of December 31, 1999, 185,000 OC Units have been exchanged for
common stock. The nonmanaging members are entitled to priority distributions
regardless of the cash flow of the Operating Company. The Operating Company is
also required to maintain certain financial ratios to protect the nonmanaging
member's distributions. Further, the Company is restricted from selling assets
of the Operating Company in a taxable sale for a period ranging from eight to
ten years from the date of the Transaction. The Operating Company has also
guaranteed the repayment of the Company's $400 million line of credit.

The Contribution Agreement also provided for an additional issuance of OC
Units dependent on the extent to which the eight development properties
attained completion schedules and budget objectives. Accordingly, a total of
430,624 additional OC Units were issued. In 1998, the Company recorded a
liability of approximately $7 million for its estimate of additional OC Units
to be issued. The actual amount was reclassified to minority interest in 1999,
once the actual number of OC Units issued was determined.

Equity Offerings

In the first quarter of 1999, BRE issued 2,150,000 shares of 8 1/2% Series
A Cumulative Redeemable Preferred Stock for net proceeds of approximately $52
million. The Series A Preferred Stock is redeemable, at the Company's option,
starting January 29, 2004.

In July 1998, the Company issued 1,750,000 shares of common stock, for net
proceeds of approximately $47 million. In April 1998, the Company issued
369,515 shares of common stock for net proceeds of approximately $9 million.

42

Debt Offering

In February 1998, the Company issued $130 million in unsecured notes due
2013, with a coupon rate of 7.125% resulting, after related costs, in an
effective rate of 7.3%.

2. Accounting Policies

Consolidation

The accompanying consolidated financial statements include the accounts of
the Company, the Operating Company and other subsidiaries that hold title to
individual properties. All significant intercompany balances and transactions
have been eliminated in consolidation. Due to the Company's ability to control
the Operating Company and other subsidiaries, such entities have been
consolidated with the Company for financial reporting purposes.

During 1999, the Company entered into joint venture agreements in which the
Company will be a noncontrolling minority owner. Accordingly, these interests
are recorded using the equity method. BRE receives certain fees for the
development and construction of the real estate property held by these joint
ventures and has recognized other income to the extent of the third-party
interest.

Rental property

Rental property is recorded at cost, less accumulated depreciation, less an
adjustment, if any, for impairment. Rental properties are evaluated for
impairment when conditions indicate that the sum of expected future cash flows
before interest from a rental property during the expected holding period may
be less than its carrying value. Upon determination that such impairment has
occurred, rental properties are reduced to estimated fair value. There were no
properties for which an adjustment for impairment in value was made in 1999 or
1998. Depreciation is computed on a straight-line basis over the estimated
useful lives of the assets, which range from 35 to 45 years for buildings and
three to ten years for other property. Direct investment development projects
are considered placed in service as certificates of occupancy are issued and
the units become ready for occupancy. Land acquired for development is
capitalized and reported as "Land under development" until the development
plan for the land is formalized. Once the development plan is determined, the
costs are transferred to the balance sheet line items "Construction in
progress."

Real estate held for sale

Real estate classified as held for sale is stated at the lower of its
carrying amount or estimated fair value less disposal costs. Depreciation is
not recorded on assets classified as held for sale.

In the normal course of business, BRE will receive offers for sale of its
properties, either solicited or unsolicited. For those offers that are
accepted, the prospective buyer will usually require a due diligence period
before consummation of the transaction. It is not unusual for matters to arise
that result in the withdrawal or rejection of the offer during this process.
As a result, real estate is not classified as "held for sale" until it is
likely, in the opinion of management, that a property will be disposed of in
the near term, even if sales negotiations for such property are currently
under way. No properties were considered "held for sale" for this purpose as
of December 31, 1999 or 1998.

Rental expenses and capitalized costs

For multifamily properties, costs of replacements, such as appliances,
carpets and drapes, are expensed. For all properties, improvements and
betterments that increase the value of the property or extend its useful life
are capitalized.

43

Cash and short-term investments

Financial instruments that potentially subject BRE to concentrations of
credit risk include cash, short-term investments and funds held in escrow. BRE
places its cash deposits and temporary cash investments with creditworthy,
high-quality financial institutions. Cash and cash-equivalent balances are
held with various financial institutions and may at times exceed the
applicable Federal Deposit Insurance Corporation limit of $100,000.

Deferred costs

Included in Other assets are costs incurred in obtaining debt financing
that are deferred and amortized over the terms of the respective debt
agreements as interest expense. Related amortization expense is included in
interest expense in the accompanying consolidated statements of income. Net
deferred financing costs included in Other assets in the accompanying balance
sheets are $7,730,000 and $8,713,000 as of December 31, 1999 and 1998,
respectively.

Income taxes

BRE has elected to be taxed as a Real Estate Investment Trust ("REIT")
under the Internal Revenue Code of 1986, as amended ("the Code"). As a result,
BRE will not be subject to federal taxation at the corporate level to the
extent it distributes, annually, at least 95% of its REIT taxable income, as
defined by the Code, to its shareholders and satisfies certain other
requirements. In addition, the states in which BRE owns and operates real
estate properties have provisions equivalent to the federal REIT provisions.
Accordingly, no provision has been made for federal or state income taxes in
the accompanying consolidated financial statements.

Net gain (loss) on sales of investments in rental properties

Sales are generally recorded after title has been transferred to the buyer
and after appropriate payments have been received and other criteria met.

Fair value of financial instruments

The fair values of BRE's financial instruments (including such items in the
financial statement captions as cash, other assets, accounts payable and other
liabilities and unsecured line of credit) approximate their carrying or
contract values based on their nature, terms and interest rates that
approximate current market rates. The fair value of mortgage loans payable and
unsecured senior notes is estimated using discounted cash flow analyses with
an interest rate similar to that of current market borrowing arrangements. The
fair value of the Company's mortgage loans payable and unsecured senior notes
approximates their carrying value at December 31, 1999.

Reclassifications

Certain reclassifications have been made to the prior years' financial
statements to conform to the presentation of the current year's financial
statements.

Use of estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the dates of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Descriptive information about reportable segments

BRE adopted Financial Accounting Standards Board Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information"
("Statement 131") in the fourth quarter of 1998. Statement 131 requires
certain descriptive information to be provided about an enterprise's
reportable segments. BRE has determined

44

that it has one operating and reportable segment, multifamily communities,
which comprised 98% of BRE's assets at December 31, 1999 and 1998 and
approximately 96% of its total revenues for the three years ended December 31,
1999. All multifamily communities owned by the Company are located in the
Western United States, in three general markets that it defines as Coastal,
Desert and Mountain states.

BRE's business focus is the ownership and operation of multifamily
communities; it evaluates performance and allocates resources primarily based
on the net operating income ("NOI") of an individual multifamily community.
NOI is defined by the Company (and generally by the real estate industry) as
the excess of all revenue generated by the community (primarily rental
revenue) less direct operating expenses (primarily, but not limited to,
payroll, property taxes, insurance and maintenance expense). Accordingly, NOI
excludes depreciation, capitalized expenditures and interest expense. NOI from
multifamily communities totaled $158 million, $134 million and $83 million for
the years ended December 31, 1999, 1998, and 1997, respectively. All other
segment measurements are presently disclosed in the accompanying consolidated
balance sheets and Notes to Consolidated Financial Statements.

All revenues are from external customers and there are no revenues from
transactions with other segments, as the only activity outside operating
apartments is the ownership of one parcel of commercial land. There are no
tenants that contributed 10% or more of BRE's total revenues in 1999, 1998 or
1997. Interest income is not separately reported, as it is immaterial.
Interest expense on debt is not allocated to individual properties, even if
such debt is secured. Further, minority interest in consolidated subsidiaries
is not allocated to the related properties. There is no provision for income
tax as the Company is organized as a REIT under the Code.

3. Real Estate Portfolio

Direct investments in rental properties--multifamily:

December 31,
1999
--------------

Land........................................................ $ 327,928,000
Improvements................................................ 1,363,834,000
--------------
Subtotal.................................................. 1,691,762,000
Accumulated depreciation.................................... (109,623,000)
--------------
Total..................................................... $1,582,139,000
==============

December 31,
1998
--------------

Land........................................................ $ 316,705,000
Improvements................................................ 1,301,756,000
--------------
Subtotal.................................................. 1,618,461,000
Accumulated depreciation.................................... (75,838,000)
--------------
Total..................................................... $1,542,623,000
==============

An analysis of direct investment construction in progress follows.

Balance, December 31, 1998................................... $ 43,830,000
Additions to projects under construction at December 31,
1998........................................................ 9,426,000
Projects started in 1999..................................... 24,444,000
Communities sold............................................. (5,369,000)
Contributions to joint ventures.............................. (22,455,000)
Transfers of construction in progress to direct investments
in rental properties--multifamily........................... (3,301,000)
------------
Balance, December 31, 1999................................... $ 46,575,000
============

45

As of December 31, 1999, the Company had commitments to acquire two
multifamily communities with a total estimated acquisition cost of
approximately $65,000,000. The Company expects the commitments will be funded
in calendar year 2000. There can be no assurance that these communities will
be acquired, or will be acquired for the estimated cost indicated.

During the year ended December 31, 1998, approximately $7,000,000 of
taxable gain (unaudited) was deferred under Section 1031 of the Code for
certain properties sold. BRE's carrying value of its assets exceeded the tax
basis by approximately $146,000,000 (unaudited) at December 31, 1999.

4. Equity Interests in and Advances to Real Estate Joint Ventures

As of December 31, 1999, BRE had no completed communities under joint
venture agreements. Such communities are accounted for under the equity method
and, accordingly, BRE's interest is presented net of debt or partners'
contributions. An analysis of equity interests in real estate joint ventures--
construction in progress follows.

Balance, December 31, 1998................................... --
Transfers from direct investments for contributions to joint
ventures.................................................... 22,455,000
Reimbursements from joint ventures........................... (56,615,000)
Advances to joint ventures................................... 49,243,000
------------
Balance, December 31, 1999................................... $ 15,083,000
============

The joint ventures have total costs in construction in progress of
$71,698,000 at December 31, 1999. The joint ventures have construction loans
with total commitments of $72,700,000, with $54,668,000 outstanding at
December 31, 1999. These construction loans are guaranteed by BRE, mature in
2000 and 2011, and have interest rates between 7.00%-7.25%, with interest only
due until maturity.

5. Line of Credit and Unsecured Senior Notes

As of December 31, 1999, BRE had an unsecured line of credit for up to
$400,000,000, expiring in August 2001. Borrowings totaled $315,000,000 at
December 31, 1999 and $264,000,000 at December 31, 1998. The interest rate is
variable and the average interest rate was approximately 6.1% and 6.3% for the
years ended December 31, 1999 and 1998, respectively.

As of December 31, 1999, there were $253,000,000 in unsecured senior notes
outstanding with an average fixed interest rate of 7.5% with interest only due
through 1999. Included in this effective interest rate is the amortization of
the costs related to the issuance of the $50 million unsecured notes due 2007
and the $130 million unsecured notes due 2013. These unsecured notes are to be
repaid through scheduled principal payments from 2000 through 2005, 2007 and
2013.

The line of credit and unsecured senior note agreements contain various
covenants that include, among other factors, tangible net worth and
requirements to maintain certain financial ratios. BRE was in compliance with
such financial covenants as of December 31, 1999.

6. Mortgage Loans Payable

The following data pertain to loans payable at December 31, 1999 and 1998.

December 31,
-------------------------
1999 1998
------------ ------------

Mortgage loans payable........................... $211,403,000 $235,146,000
Cost of investments in real estate securing
mortgage loans payable.......................... $400,247,000 $401,850,000
Annual principal and interest payments........... $ 19,500,000 $ 20,400,000
Remaining terms of mortgage loans payable........ 1-29 years 1-30 years
Interest rates on fixed rate mortgages........... 6.5%-9.3% 6.5%-9.3%

46

Included in the $211,403,000 mortgage loans payable is $32,530,000 of tax-
exempt debt with a variable interest rate, which was 3.3% at December 31,
1999. The effective interest rate on this debt is 5.3%, which includes
amortization of related fees and costs. Interest on all other mortgage loans
is fixed.

Scheduled principal payments required on the unsecured line of credit,
unsecured senior notes payable and mortgage loans payable for the next five
years and thereafter are as follows. Included in the 2001 amount is
$315,000,000 for the unsecured line of credit.

2000.......................................................... $ 30,737,000
2001.......................................................... 327,893,000
2002.......................................................... 40,916,000
2003.......................................................... 28,840,000
2004.......................................................... 21,931,000
Thereafter.................................................... 329,086,000
------------
Total....................................................... $779,403,000
============

Interest expense on mortgage loans and unsecured senior notes including
amortization of related costs aggregated $36,164,000, $35,654,000 and
$17,034,000 for the years ended December 31, 1999, 1998 and 1997,
respectively. Capitalized interest was $9,485,000, $12,606,000 and $1,178,000
for the years ended December 31, 1999, 1998 and 1997, respectively. Excluding
capitalized interest, interest expense exceeded cash paid for interest by
approximately $1,500,000 and $1,300,000 in 1999 and 1998, respectively; this
difference was immaterial in 1997.

7. Stock Option Plans

BRE has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), and related
Interpretations in accounting for its employee and non-employee director stock
options. As discussed below, the alternative fair value accounting provided
for under Financial Accounting Standards Board Statement No. 123, "Accounting
and Disclosure of Stock-Based Compensation" ("Statement 123"), requires the
use of option valuation models that were not developed for use in valuing
employee and non-employee director stock options. Under APB 25, because the
exercise price equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized.

47

Employee Plan

The 1984 and 1992 Stock Option Plans and the 1999 BRE Stock Incentive Plan
("Plans") provide for the issuance of Incentive Stock Options, Non-Qualified
Stock Options, restricted shares and other grants. The maximum number of
shares that may be issued under the Plans is 4,350,000. The option price may
not be less than the fair market value of a share on the date that the option
is granted and the options generally vest over five years. The 1999 BRE Stock
Incentive Plan was adopted by shareholders in 1999. The 1999 BRE Stock
Incentive Plan incorporated the Broad Based Plan created in 1998, and allows
for grants of up to 2,000,000 shares. During 1999 and 1998, certain key
employees were allowed to exercise options with a reload provision and 18,567
and 186,374 reload grants were made, respectively, in those years. Changes in
options outstanding during the years ended December 31, 1999, 1998 and 1997
were as follows.

Years ended December 31,
----------------------------------------------------------
1999 1998 1997
------------------- ------------------- ------------------
Weighted Weighted Weighted
Shares average Shares average Shares average
under exercise under exercise under exercise
option price option price option price
--------- -------- --------- -------- -------- --------

Balance at beginning of
period................. 1,445,179 $24.29 864,200 $20.96 752,600 $16.90
Granted................. 825,410 $24.64 852,424 $26.72 397,500 $25.87
Exercised............... (218,510) $19.34 (208,095) $19.04 (236,700) $16.89
Cancelled............... (211,310) $25.76 (63,350) $24.29 (49,200) $21.14
--------- --------- --------
Balance at end of
period............... 1,840,769 $24.96 1,445,179 $24.29 864,200 $20.96
========= ========= ========
Exercisable............. 441,096 $24.33 266,005 $18.79 319,600 $16.59
Shares available for
granting future
options................ 1,385,764 2,601 755,936
Weighted average
estimated fair value of
options granted during
the year............... $ 3.26 $ 3.14 $ 3.23

At December 31, 1999, the exercise price of shares under option ranged from
$12.97 to $28.06, with a weighted average exercise price of $24.96. The
exercise price of all options granted in the years ended December 31, 1999,
1998 and 1997 was equal to the market price on the date of grant. Expiration
dates range from 2000 through 2009; the weighted average remaining contractual
life of these options is 8.1 years. Stock options were exercised during 1999
on options originally granted from $12.97 to $26.00. At December 31, 1999,
there were 20,175 restricted shares outstanding under the Plans, and 18,375
were granted in 1999. There were no restricted shares granted in 1998 or 1997.

In addition to the options granted under the Plans, an option for 100,000
shares (at $15.32 per share) is held by the President and Chief Executive
Officer. During 1998, 33,334 and in 1999, 33,333 such options were exercised
for $15.32 per share; 33,333 options remain outstanding at December 31, 1999.
This option was registered with the Securities and Exchange Commission on a
Form S-8 and is not part of the Plans. This option had a fair value of $2.28
per share in 1995, the year of the grant. In conjunction with the 1996 merger
with Real Estate Investment Trust of California ("RCT"), options on 381,900
BRE shares equivalent to options previously granted under the RCT plan were
issued to officers with exercise prices ranging from $11.41 to $14.70. During
1999, 81,919 of these options were exercised at $14.70 and none of these
options remain outstanding at December 31, 1999. In addition, an outside
consultant holds options on 8,000 shares at a strike price of $26.88, which is
not a part of the Plans.

Direct Stock Purchase and Dividend Reinvestment Plan

In 1996, the Company instituted a direct stock purchase and dividend
reinvestment plan (the "DRIP") in which shareholders may purchase either newly
issued or previously issued shares. The total amount of shares authorized
under the DRIP is 1,500,000; from inception through December 31, 1999, 122,001
new shares have been issued.

48

Non-Employee Director Stock Option Plan

The Amended and Restated Non-Employee Director Stock Option Plan provides
for the issuance of 25,000 Non-Qualified Stock Options per year to each non-
employee member of the Board of Directors and an additional 25,000 options to
the Chairman of the Board of Directors. In addition, up to 8,000 options may
be granted to each non-employee director for committee membership and/or
chairmanship, and up to 5,000 options may be granted based on operational
performance. This plan has a reload provision that granted an additional
140,681 options in 1999 and 100,305 options in 1998. The maximum number of
shares that may be issued under this plan is 1,550,000. As with the Plans, the
option price may not be less than the fair market value of a share on the date
the option is granted. Changes in options outstanding for the years ended
December 31, 1999, 1998 and 1997 were as follows.

Years ended December 31,
--------------------------------------------------------
1999 1998 1997
------------------- ------------------ -----------------
Weighted Weighted Weighted
Shares average Shares average Shares average
under exercise under exercise under exercise
option price option price option price
--------- -------- -------- -------- ------- --------

Balance at beginning of
period................. 796,204 $24.38 600,000 $21.92 420,000 $18.71
Granted................. 433,545 $24.30 381,305 $25.25 240,000 $26.82
Exercised............... (158,548) $21.25 (174,349) $17.61 (60,000) $18.97
Cancelled............... (667) $26.25 (10,752) $27.80 -- --
--------- -------- -------
Balance at end of
period............... 1,070,534 $24.81 796,204 $24.38 600,000 $21.92
========= ======== =======
Exercisable............. 704,413 $24.89 527,723 $24.10 445,828 $19.94
Shares available for
granting future
options................ 310,475 602,672 140,000
Weighted average
estimated fair value of
options granted during
the year............... $ 3.28 $ 2.84 $ 3.64

At December 31, 1999, the exercise prices of shares under option ranged
between $15.25 and $27.88, with expiration dates from 2004 to 2009. The
exercise price of all options granted in the years ended December 31, 1999,
1998 and 1997 was equal to the market price on the date of grant. The options
vest ratably over one year, except for options granted pursuant to a reload,
which vest 100% after 18 months from the date of the grant, and options
granted by operational performance, which vest immediately. The weighted
average remaining contractual life of these options is 8.4 years.

Pro forma information regarding net income and earnings per share required
by Statement 123 was determined as if BRE had accounted for the employee and
non-employee director stock options granted only in the years ended December
31, 1999, 1998 and 1997 under the fair value method of that Statement. The
impact on the years ended December 31, 1999, 1998 and 1997 of options granted
prior to 1996 was excluded from this presentation. The fair value for these
options was estimated as of the date of grant using a Black-Scholes option
pricing model, with the following weighted average assumptions for the years
ended December 31, 1999, 1998 and 1997.

Years ended December
31,
-------------------------
1999 1998 1997
------- ------- -------

Risk-free interest rate........................... 5.70% 5.50% 6.12%
Dividend yield.................................... 6.70% 5.70% 5.70%
Volatility........................................ .24 .18 .18
Weighted average option life...................... 7 years 7 years 7 years

The Black-Scholes option pricing model was developed for use in estimating
the fair market value of traded options that have no vesting restrictions and
are fully transferable. In addition, option valuation models require the input
of highly subjective assumptions, including the expected stock price
volatility. Because the above stock option plans have characteristics
significantly different from those of traded options, and because, in

49

management's opinion, changes in the subjective input assumptions can
materially affect the fair value estimate, the existing models do not
necessarily provide a reliable single measure of the fair value of the above
stock option plans.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized over the options' vesting periods. BRE's pro forma
information, as if the Company had adopted Statement 123 as discussed above,
follows.

Years ended December 31,
-----------------------------------
1999 1998 1997
----------- ----------- -----------

Pro forma net income................... $66,291,000 $58,474,000 $74,721,000
Pro forma earnings per share........... $ 1.49 $ 1.36 $ 2.09
Pro forma earnings per share assuming
dilution.............................. $ 1.49 $ 1.36 $ 2.07

The effect of the application of Statement 123 is not necessarily
representative of the effect on net income for future years.

8. Earnings per Share

The following table sets forth the computation of basic and diluted
earnings per share with respect to income from continuing operations:

1999 1998 1997
----------- ----------- ------------

Numerator
Net income available to common
shareholders......................... $69,034,000 $60,644,000 $ 76,197,000
Less adjustment for gain (loss) on
sales of investments in rental
properties available to common
shareholders......................... (54,000) 1,859,000 (27,824,000)
----------- ----------- ------------
Numerator for basic earnings per share
income from continuing operations
available to common shareholders....... 68,980,000 62,503,000 48,373,000
Effect of dilutive securities
Minority interest in income
convertible into common shares....... 4,847,000 4,126,000 972,000
----------- ----------- ------------
Numerator for diluted earnings per
share.................................. $73,827,000 $66,629,000 $ 49,345,000
=========== =========== ============
Denominator
Denominator for basic earnings per
share--weighted average shares....... 44,540,000 42,940,000 35,750,000
Effect of dilutive securities
Stock options....................... 120,000 330,000 570,000
Weighted average convertible
operating company units............ 3,100,000 2,840,000 290,000
----------- ----------- ------------
Dilutive potential common shares...... 3,220,000 3,170,000 860,000
----------- ----------- ------------
Denominator for diluted earnings per
share adjusted for weighted average
shares and assumed conversion........ 47,760,000 46,110,000 36,610,000
=========== =========== ============
Basic earnings per share excluding
gain (loss) on sale.................. $ 1.55 $ 1.45 $ 1.35
=========== =========== ============
Diluted earnings per share excluding
gain (loss) on sale.................. $ 1.55 $ 1.45 $ 1.35
=========== =========== ============

9. Retirement Plan

BRE has a defined contribution retirement plan covering all employees with
more than six months of continuous full-time employment. In addition to
employee elective deferrals, in 1999 and 1998, BRE contributed up to 3% of the
employee's compensation up to $4,800 per employee in 1999, and $4,500 in 1998.
In 1997,

50

BRE's contribution was limited to 1.5% of the participating employee's salary.
The aggregate amounts contributed by BRE were $359,000, $197,000 and $63,000
for the years ended December 31, 1999, 1998 and 1997, respectively.

10. Related Party Transactions

Certain executives of BRE have purchased stock, the consideration for which
was interest-bearing recourse loans. The loans may be forgiven in whole or in
part upon the achievement of certain performance goals for BRE related to
growth in assets, funds from operations and stock price. A portion of the
loans expected to be forgiven are expensed currently as compensation. At
December 31, 1999, the carrying amount of the loans was $2,291,000 and was
included in other assets. The amounts of such loans expected to be forgiven
and treated as compensation expense were $166,000, $370,000 and $151,000 for
the years ended December 31, 1999, 1998 and 1997, respectively.

11. Litigation

BRE defends against various claims and legal actions that happen in its
normal course of business, including certain environmental actions. BRE cannot
predict the ultimate outcome of these matters. In the opinion of management,
there are no current actions that would have a material adverse effect on
BRE's consolidated results of operations or financial position.

In the third quarter of 1998, the Company recorded a provision for
litigation loss of $2,400,000 in connection with a jury award and related
legal expenses. This judgment was settled in 1999 with no additional charges
to expenses.

13. Supplemental Financial Data

Quarterly financial information (unaudited) follows.

Year ended December 31, 1999
-------------------------------------------------------
Quarter ended Quarter ended Quarter ended Quarter ended
March 31 June 30 September 30 December 31
------------- ------------- ------------- -------------
(amounts in thousands, except per share data)

Revenues................ $55,420 $58,339 $59,829 $60,665
Income before gain
(loss) on sales........ $17,511 $19,462 $20,434 $21,202
Net income available to
common shareholders.... $15,340 $17,038 $17,939 $18,717
Net income per
outstanding common
share--basic
Income before gain
(loss) on sales...... $ 0.40 $ 0.44 $ 0.46 $ 0.47
Net income............ $ 0.35 $ 0.38 $ 0.40 $ 0.42
Net income per
outstanding common
share--assuming
dilution
Income before gain
(loss) on sales...... $ 0.45 $ 0.41 $ 0.43 $ 0.37
Net income............ $ 0.35 $ 0.38 $ 0.40 $ 0.42

Year ended December 31, 1998
-------------------------------------------------------
Quarter ended Quarter ended Quarter ended Quarter ended
March 31 June 30 September 30 December 31
------------- ------------- ------------- -------------
(amounts in thousands, except per share data)

Revenues................ $47,413 $49,231 $52,750 $53,851
Income before gain
(loss) on sales........ $14,967 $15,787 $14,318 $17,431
Net income.............. $14,142 $15,741 $14,116 $16,645
Net income per share
Income before gain
(loss) on sales...... $ 0.36 $ 0.37 $ 0.33 $ 0.39
Net income............ $ 0.34 $ 0.37 $ 0.32 $ 0.38
Net income per share-
assuming dilution
Income before gain
(loss) on sales...... $ 0.36 $ 0.37 $ 0.33 $ 0.39
Net income............ $ 0.34 $ 0.37 $ 0.32 $ 0.38

51

For the years ended December 31, 1999, 1998 and 1997, the federal income
tax components of the Company's dividends on the common stock were as follows.
In 1999, the dividends on the preferred stock were 100% allocable to ordinary
income (unaudited).

28% 20% Unrecaptured Return
Ordinary Capital Capital Section 1250 of
Income Gain Gain Gain Capital
-------- ------- ------- ------------ -------

December 31, 1999.............. 95% -- 1% 4% 0%
December 31, 1998.............. 83% -- 4% 2% 11%
December 31, 1997.............. 83% 13% 2% 2% 0%

52

BRE PROPERTIES, INC.

SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 1999
(Dollar amounts in thousands)

Initial Cost to Costs
Company Capitalized
Dates --------------------- Subsequent Depreciable
Acquired/ Buildings & to Lives--
Name Location Constructed Land Improvements Acquisition Years
---- -------- ------------ -------- ------------ ----------- -----------

APARTMENTS
Sharon Green.... Menlo Park, CA 1971/1970 $ 1,250 $ 5,770 $ 2,567 45
Verandas........ Union City, CA 1993/1989 3,233 12,932 670 40
Foster's
Landing......... Foster City, CA 1996/1987 11,742 47,846 4,427 40
Promontory
Point........... San Ramon, CA 1996/1992 8,724 34,895 254 40
Redhawk Ranch... Fremont, CA 1997/1995 11,747 47,082 368 40
Lakeshore
Landing......... San Mateo, CA 1997/1988 8,548 34,228 1,917 40
Deer Valley*.... San Rafael, CA 1997/1996 6,042 24,169 138 40
Blue Rock I*.... Vallejo, CA 1997/1986 3,417 13,672 518 40
Blue Rock II*... Vallejo, CA 1997/1988 3,419 13,680 629 40
-------- --------- -------
San Francisco
Bay Area 58,122 234,274 11,488
======== ========= =======
Montanosa....... San Diego, CA 1992/1989-90 6,005 24,065 689 40
Lakeview
Village......... Spring Valley, CA 1996/1985 3,977 15,910 585 40
Terra Nova
Villas.......... Chula Vista, CA 1994/1985 2,925 11,699 333 40
Cimmaron........ San Diego, CA 1993/1985 1,899 7,517 412 40
Hacienda........ San Diego, CA 1993/1985 1,979 8,027 239 40
Westpark........ San Diego, CA 1993/1985 990 3,949 93 40
Canyon Villa.... Chula Vista, CA 1996/1981 3,064 12,258 618 40
Winchester...... San Diego, CA 1994/1987 1,482 5,928 62 40
Countryside
Village......... El Cajon, CA 1996/1989 1,002 4,007 102 40
Cambridge
Park*........... San Diego, CA 1998/1998 7,627 30,521 44 40
Reflections
Apartments...... San Diego, CA 1999/1989 6,928 27,686 -- 40
-------- --------- -------
San Diego 37,878 151,567 3,177
======== ========= =======
Windrush........ Colton, CA 1996/1985 3,747 14,989 244 40
Village Green... La Habra, CA 1972/1971 372 2,763 471 45
Candlewood
North........... Northridge, CA 1996/1964-95 2,110 8,477 123 40
The Summit...... Chino, CA 1996/1989 1,839 7,354 220 40
Sycamore
Valley.......... Fountain Valley, CA 1996/1969 4,617 18,691 1,316 40
Parkside
Village*........ Riverside, CA 1997/1987 3,417 13,674 150 40
Parkside
Court*.......... Santa Ana, CA 1997/1987 2,013 8,632 231 40
Parkside
Terrace*........ Santa Ana, CA 1997/1986 3,016 12,180 239 40
The Arbors at
Warner Center... Woodland Hills, CA 1978/1994 4,718 19,375 287 40
Pinnacle at
Adams Place..... Costa Mesa, CA 1999/1974 4,853 19,739 -- 40
-------- --------- -------
Los
Angeles/Orange
County 30,702 125,874 3,281
======== ========= =======

Gross Amount at Which Carried at December 31, 1999
---------------------------------------------------------
Buildings & Accumulated
Name Land Improvements Total Depreciation Encumbrances
---- -------- ------------ --------- ------------ ------------

APARTMENTS
Sharon Green.... $ 1,250 $ 8,337 $ 9,587 $ (3,787) $ 17,833
Verandas........ 3,233 13,602 16,835 (2,247) 11,460
Foster's
Landing......... 11,742 52,273 64,015 (3,919)
Promontory
Point........... 8,724 35,149 43,873 (2,653)
Redhawk Ranch... 11,747 47,450 59,197 (3,165)
Lakeshore
Landing......... 8,548 36,145 44,693 (2,031)
Deer Valley*.... 6,042 24,307 30,349 (1,294)
Blue Rock I*.... 3,417 14,190 17,607 (758) 12,090
Blue Rock II*... 3,419 14,309 17,728 (755) 11,200
-------- ------------ --------- ------------ ------------
San Francisco
Bay Area 58,122 245,762 303,884 (20,609) 52,583
======== ============ ========= ============ ============
Montanosa....... 6,005 24,754 30,759 (4,328)
Lakeview
Village......... 3,977 16,495 20,472 (1,572)
Terra Nova
Villas.......... 2,925 12,032 14,957 (1,714) 9,240
Cimmaron........ 1,899 7,929 9,828 (1,215) 12,160
Hacienda........ 1,979 8,266 10,245 (1,262) **
Westpark........ 990 4,042 5,032 (627) **
Canyon Villa.... 3,064 12,876 15,940 (1,218)
Winchester...... 1,482 5,990 7,472 (860)
Countryside
Village......... 1,002 4,109 5,111 (455)
Cambridge
Park*........... 7,627 30,565 38,192 (896)
Reflections
Apartments...... 6,928 27,686 34,614 --
-------- ------------ --------- ------------ ------------
San Diego 37,878 154,744 192,622 (14,147) 21,400
======== ============ ========= ============ ============
Windrush........ 3,747 15,233 18,980 (1,439)
Village Green... 372 3,234 3,606 (1,953)
Candlewood
North........... 2,110 8,600 10,710 (816)
The Summit...... 1,839 7,574 9,413 (730)
Sycamore
Valley.......... 4,617 20,007 24,624 (1,647)
Parkside
Village*........ 3,417 13,824 17,241 (742) 8,740
Parkside
Court*.......... 2,013 8,863 10,876 (501) 7,902
Parkside
Terrace*........ 3,016 12,419 15,435 (674) 9,405
The Arbors at
Warner Center... 4,718 19,662 24,380 (810)
Pinnacle at
Adams Place..... 4,853 19,739 24,592 (121)
-------- ------------ --------- ------------ ------------
Los
Angeles/Orange
County 30,702 129,155 159,857 (9,433) 26,047
======== ============ ========= ============ ============

53

BRE PROPERTIES, INC.

SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION--(Continued)

December 31, 1999
(Dollar amounts in thousands)

Initial Cost to Costs
Company Capitalized
Dates --------------------- Subsequent Depreciable
Acquired/ Buildings & to Lives--
Name Location Constructed Land Improvements Acquisition Years
---- -------- --------------- -------- ------------ ----------- -----------

APARTMENTS
Selby Ranch..... Sacramento, CA 1986/1971-74 2,660 18,340 2,355 40
Hazel Ranch..... Fair Oaks, CA 1996/1985 2,471 9,885 268 40
Canterbury
Downs........... Roseville, CA 1996/1993 2,297 9,190 148 40
Shaliko......... Rocklin, CA 1996/1990 2,049 8,198 180 40
Rocklin Gold.... Rocklin, CA 1996/1990 1,558 6,232 123 40
Quail Chase..... Folsom, CA 1996/1990 1,303 5,211 162 40
Arbor Point..... Rancho Cordova, CA 1997/1988 1,814 7,256 1,578 40
Overlook at Blue
Ravine*......... Folsom, CA 1997/1991 6,050 24,203 424 40
-------- ---------- -------
Sacramento 20,202 88,515 5,238
======== ========== =======
Scottsdale
Cove............ Scottsdale, AZ 1991-94/1992-94 3,243 14,468 466 40
Fairway
Crossings....... Phoenix, AZ 1996/1985 3,657 14,629 198 40
Newport
Landing......... Glendale, AZ 1995-96/1987-96 4,467 18,171 536 40
Posada Del
Este............ Phoenix, AZ 1996/1981 1,670 6,679 577 40
Park
Scottsdale...... Scottsdale, AZ 1996/1979 1,320 5,279 127 40
Shadow Bend..... Scottsdale, AZ 1996/1982 1,284 5,134 203 40
Arcadia Cove.... Phoenix, AZ 1996/1996 4,909 19,902 344 40
Pinnacle at S.
Mountain I &
II*............. Phoenix, AZ 1997/1996 11,062 44,257 240 40
Pinnacle at
Union Hills*.... Phoenix, AZ 1997/1996 4,626 18,507 75 40
Pinnacle at
Towne Center*... Phoenix, AZ 1998/1998 6,688 27,631 (118) 40
Pinnacle
Terrace*........ Chandler, AZ 1998/1998 4,561 18,793 35 40
-------- ---------- -------
Phoenix 47,487 193,450 2,683
======== ========== =======
Hacienda Del
Rio............. Tucson, AZ 1994/1983 1,859 7,437 255 40
Springhill...... Tucson, AZ 1994/1987 1,733 6,933 218 40
Fountain Plaza.. Tucson, AZ 1994/1975 907 3,628 229 40
Colonia Del
Rio............. Tucson, AZ 1994/1985 1,774 7,094 114 40

Gross Amount at Which Carried at December 31, 1999
----------------------------------------------------------
Buildings & Accumulated
Name Land Improvements Total Depreciation Encumbrances
---- -------- ------------ ---------- ------------ ------------

APARTMENTS
Selby Ranch..... 2,660 20,695 23,355 (6,408) 11,749
Hazel Ranch..... 2,471 10,153 12,624 (973)
Canterbury
Downs........... 2,297 9,338 11,635 (877)
Shaliko......... 2,049 8,378 10,427 (797)
Rocklin Gold.... 1,558 6,355 7,913 (601)
Quail Chase..... 1,303 5,373 6,676 (518)
Arbor Point..... 1,814 8,834 10,648 (407)
Overlook at Blue
Ravine*......... 6,050 24,627 30,677 (1,350)
-------- ------------ ---------- ------------ ------------
Sacramento 20,202 93,753 113,955 (11,931) 11,749
======== ============ ========== ============ ============
Scottsdale
Cove............ 3,243 14,934 18,177 (2,514)
Fairway
Crossings....... 3,657 14,827 18,484 (1,404)
Newport
Landing......... 4,467 18,707 23,174 (1,662)
Posada Del
Este............ 1,670 7,256 8,926 (664)
Park
Scottsdale...... 1,320 5,406 6,726 (512)
Shadow Bend..... 1,284 5,337 6,621 (511)
Arcadia Cove.... 4,909 20,246 25,155 (1,663)
Pinnacle at S.
Mountain I &
II*............. 11,062 44,497 55,559 (2,375) 25,469
Pinnacle at
Union Hills*.... 4,626 18,582 23,208 (995)
Pinnacle at
Towne Center*... 6,688 27,513 34,201 (842) 18,960
Pinnacle
Terrace*........ 4,561 18,828 23,389 (559)
-------- ------------ ---------- ------------ ------------
Phoenix 47,487 196,133 243,620 (13,701) 44,429
======== ============ ========== ============ ============
Hacienda Del
Rio............. 1,859 7,692 9,551 (991) 5,352
Springhill...... 1,733 7,151 8,884 (944) 5,062
Fountain Plaza.. 907 3,857 4,764 (500) 3,022
Colonia Del
Rio............. 1,774 7,208 8,982 (942) 5,004

54

BRE PROPERTIES, INC.

SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION--(Continued)

December 31, 1999
(Dollar amounts in thousands)

Initial Cost to Costs
Company Capitalized
Dates --------------------- Subsequent Depreciable
Acquired/ Buildings & to Lives--
Name Location Constructed Land Improvements Acquisition Years
---- -------- ------------ -------- ------------ ----------- -----------

APARTMENTS
Camino Seco
Village......... Tucson, AZ 1994/1984 1,335 5,360 149 40
Casas Lindas.... Tucson, AZ 1994/1987 1,513 6,051 202 40
Oracle Village.. Tucson, AZ 1994/1983 1,209 4,837 277 40
Pinnacle
Heights*........ Tucson, AZ 1997/1995 4,625 18,504 218 40
Pinnacle
Canyon*......... Tucson, AZ 1997/1996 3,218 12,876 244 40
-------- ---------- -------
Tucson 18,173 72,720 1,906
======== ========== =======
Ballinger
Commons......... Seattle, WA 1996/1989 5,824 23,519 554 40
Shadowbrook..... Redmond, WA 1987-98/1986 4,776 17,415 561 40
Parkwood........ Mill Creek, WA 1989/1989 3,947 15,811 244 40
Thrasher's
Mill............ Bothell, WA 1996/1988 2,031 8,223 222 40
Citywalk........ Seattle, WA 1988/1988 1,123 4,276 132 40
Park at
Dashpoint....... Federal Way, WA 1997/1989 3,074 12,411 281 40
Montebello...... Kirkland, WA 1998/1998 6,680 27,274 91 40
Brentwood....... Kent, WA 1998/1991 1,387 5,574 142 40
Park Highland... Bellevue, WA 1998/1993 5,602 22,483 58 40
-------- ---------- -------
Seattle 34,444 136,986 2,285
======== ========== =======
Brookdale Glen.. Portland, OR 1993/1985 2,797 11,188 864 40
Berkshire
Court........... Wilsonville, OR 1996/1996 3,284 13,200 105 40
Carriage House.. Vancouver, WA 1998/1993 1,827 7,579 30 40
-------- ---------- -------
Portland 7,908 31,967 999
======== ========== =======
Desert Lakes.... Las Vegas, NV 1996/1991 2,779 11,116 460 40
Cypress
Springs......... Las Vegas, NV 1996/1993 1,965 7,861 63 40
Tango........... Las Vegas, NV 1996/1990 1,729 6,916 90 40
Talavera........ Las Vegas, NV 1997/1996 5,237 20,996 95 40
Pinnacle
Flamingo West... Las Vegas, NV 1999 5,745 24,220 -- 40
-------- ---------- -------
Las Vegas 17,455 71,109 708
======== ========== =======

Gross Amount at Which Carried at December 31, 1999
----------------------------------------------------------
Buildings & Accumulated
Name Land Improvements Total Depreciation Encumbrances
---- -------- ------------ ---------- ------------ ------------

APARTMENTS
Camino Seco
Village......... 1,335 5,509 6,844 (613) 4,018
Casas Lindas.... 1,513 6,253 7,766 (843)
Oracle Village.. 1,209 5,114 6,323 (658) 3,977
Pinnacle
Heights*........ 4,625 18,722 23,347 (1,006)
Pinnacle
Canyon*......... 3,218 13,120 16,338 (701) 11,470
-------- ------------ ---------- ------------ ------------
Tucson 18,173 74,626 92,799 (7,198) 37,905
======== ============ ========== ============ ============
Ballinger
Commons......... 5,824 24,073 29,897 (2,189)
Shadowbrook..... 4,776 17,976 22,752 (4,349) 3,298
Parkwood........ 3,947 16,055 20,002 (4,060)
Thrasher's
Mill............ 2,031 8,445 10,476 (778)
Citywalk........ 1,123 4,408 5,531 (1,273)
Park at
Dashpoint....... 3,074 12,692 15,766 (812)
Montebello...... 6,680 27,365 34,045 (1,235)
Brentwood....... 1,387 5,716 7,103 (213)
Park Highland... 5,602 22,541 28,143 (851)
-------- ------------ ---------- ------------ ------------
Seattle 34,444 139,271 173,715 (15,760) 3,298
======== ============ ========== ============ ============
Brookdale Glen.. 2,797 12,052 14,849 (1,993)
Berkshire
Court........... 3,284 13,305 16,589 (1,133)
Carriage House.. 1,827 7,609 9,436 (321) 5,032
-------- ------------ ---------- ------------ ------------
Portland 7,908 32,966 40,874 (3,447) 5,032
======== ============ ========== ============ ============
Desert Lakes.... 2,779 11,576 14,355 (1,095)
Cypress
Springs......... 1,965 7,924 9,889 (754)
Tango........... 1,729 7,006 8,735 (666)
Talavera........ 5,237 21,091 26,328 (1,496)
Pinnacle
Flamingo West... 5,745 24,220 29,965 (561)
-------- ------------ ---------- ------------ ------------
Las Vegas 17,455 71,817 89,272 (4,572) --
======== ============ ========== ============ ============

55

BRE PROPERTIES, INC.

SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION--(Continued)

December 31, 1999
(Dollar amounts in thousands)

Initial Cost to Costs
Company Capitalized
Dates --------------------- Subsequent Depreciable
Acquired/ Buildings & to Lives--
Name Location Constructed Land Improvements Acquisition Years
---- -------- ----------- -------- ------------ ----------- -----------

APARTMENTS
Pinnacle Fort
Union*.......... Salt Lake City, UT 1997/1997 3,008 12,034 86 40
Pinnacle
Reserve*........ Salt Lake City, UT 1997/1997 8,698 34,781 912 40
Pinnacle
Lakeside*....... Salt Lake City, UT 1997/1985 3,217 12,876 1,039 40
Pinnacle Canyon
View*........... Orem, UT 1998/1998 5,049 20,927 (130) 40
Pinnacle
Mountain View*.. Clearfield, UT 1998/1998 5,030 20,684 426 40
-------- ---------- -------
Salt Lake City 25,002 101,302 2,333
======== ========== =======
Pinnacle at High
Desert*......... Albuquerque, NM 1997/1995 8,851 35,415 183 40
Pinnacle View*.. Albuquerque, NM 1997/1985 2,287 9,157 725 40
Pinnacle
Estates*........ Albuquerque, NM 1998/1998 5,046 20,721 594 40
Pinnacle at High
Resort*......... Rio Rancho, NM 1998/1998 5,118 20,615 878 40
-------- ---------- -------
Albuquerque 21,302 85,908 2,380
======== ========== =======
The Landing Bear
Creek........... Lakewood, CO 1998/1996 3,666 14,777 98 40
Pinnacle Hunters
Glen*........... Thornton, CO 1998/1998 4,387 17,908 901 40
-------- ---------- -------
Denver 8,053 32,685 999
======== ========== =======
Subtotal 326,728 1,326,357 37,477
Other
Buena Ventura
Medical......... 1996/1960 1,200 -- --
-------- ---------- -------
Subtotal 1,200 -- --
-------- ---------- -------
Total $327,928 $1,326,357 $37,477
======== ========== =======

Gross Amount at Which Carried at December 31, 1999
----------------------------------------------------------
Buildings & Accumulated
Name Land Improvements Total Depreciation Encumbrances
---- -------- ------------ ---------- ------------ ------------

APARTMENTS
Pinnacle Fort
Union*.......... 3,008 12,120 15,128 (646)
Pinnacle
Reserve*........ 8,698 35,693 44,391 (1,883)
Pinnacle
Lakeside*....... 3,217 13,915 17,132 (803) 8,960
Pinnacle Canyon
View*........... 5,049 20,797 25,846 (636)
Pinnacle
Mountain View*.. 5,030 21,110 26,140 (520)
-------- ------------ ---------- ------------ ------------
Salt Lake City 25,002 103,635 128,637 (4,488) 8,960
======== ============ ========== ============ ============
Pinnacle at High
Desert*......... 8,851 35,598 44,449 (1,904)
Pinnacle View*.. 2,287 9,882 12,169 (519)
Pinnacle
Estates*........ 5,046 21,315 26,361 (406)
Pinnacle at High
Resort*......... 5,118 21,493 26,611 (407)
-------- ------------ ---------- ------------ ------------
Albuquerque 21,302 88,288 109,590 (3,236) --
======== ============ ========== ============ ============
The Landing Bear
Creek........... 3,666 14,875 18,541 (740)
Pinnacle Hunters
Glen*........... 4,387 18,809 23,196 (361)
-------- ------------ ---------- ------------ ------------
Denver 8,053 33,684 41,737 (1,101) --
======== ============ ========== ============ ============
Subtotal 326,728 1,363,834 1,690,562 (109,623) 211,403
Other
Buena Ventura
Medical......... 1,200 -- 1,200 --
-------- ------------ ---------- ------------ ------------
Subtotal 1,200 -- 1,200 -- --
-------- ------------ ---------- ------------ ------------
Total $327,928 $1,363,834 $1,691,762 $(109,623) $211,403
======== ============ ========== ============ ============

- -----
* Property held by a consolidated subsidiary of the Company
** These properties are also collateral for the loan shown on the Cimmaron
property.

56

BRE PROPERTIES, INC.

SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
(Amounts in thousands)

The activity in investments in rental properties and related depreciation
for the three-year period ended December 31, 1999 is as follows:

Investments in rental properties:

Years ended December 31,
----------------------------------
1999 1998 1997
---------- ---------- ----------

Balance at beginning of year.............. $1,618,461 $1,259,941 $ 813,768
Investments acquired in the Transaction... -- -- 382,766
Investments purchased..................... 59,206 165,162 152,700
Transfers from (to) construction in
progress and other miscellaneous
capitalization........................... 3,301 215,866 (764)
Investments sold.......................... (6,525) (32,867) (95,095)
Capital expenditures...................... 4,715 3,694 1,988
Rehabilitation expenditures............... 12,604 6,665 4,578
---------- ---------- ----------
Balance at end of year.................... $1,691,762 $1,618,461 $1,259,941
========== ========== ==========

Accumulated Depreciation:

Years ended December 31,
----------------------------------
1999 1998 1997
---------- ---------- ----------

Balance at beginning of year.............. $ 75,838 $ 49,721 $ 49,690
Depreciation expense...................... 35,524 27,763 17,938
Transfers of other miscellaneous
capitalization........................... -- -- (317)
Other depreciation........................ (1,301) (492) --
Accumulated depreciation on investments
sold..................................... (438) (1,154) (17,590)
---------- ---------- ----------
Balance at end of year.................... $ 109,623 $ 75,838 $ 49,721
========== ========== ==========

57

INDEX TO EXHIBITS

Exhibit
Number Identity of Exhibit
------- -------------------

3.0 Amended and Restated Articles of Incorporation (Previously filed on
April 1, 1996 as Exhibit 3.1 to the Company's Current Report on Form
8-K and incorporated by reference herein.)

3.1 Articles of Amendment (Previously filed on April 28, 1997 as Exhibit
4.2 to the Company's Form S-3 (No. 333-24915), as amended, and
incorporated by reference herein.)

3.2 Articles Supplementary to the Amended and Restated Articles of
Incorporation of the Registrant classifying and designating the
Series A Preferred Stock (Previously filed on January 29, 1999 as
Exhibit 4.1 to the Company's Current Report on Form 8-K and
incorporated by reference herein.)

3.3 Certificate of Correction (Previously filed on January 29, 1999 as
Exhibit 1.3 to the Company's Form 8-A and incorporated by reference
herein.)

3.4 Amended and Restated By-Laws (Previously filed on August 14, 1998 as
Exhibit 3(ii) to the Company's Form 10-Q and incorporated by
reference herein.)

4.0 Indenture dated as of June 23, 1997 between the Company and Chase
Trust Company of California relating to the $50 million principal
amount of the Company's 7.2% Notes due 2007 (Previously filed on June
23, 1997 as Exhibit 4.1 to the Company's Current Report on Form 8-K
and incorporated by reference herein.)

4.1 First Supplemental Indenture dated as of April 23, 1998 between the
Company and Chase Manhattan Bank and Trust Company, National
Association, as successor trustee (Previously filed on May 14, 1998
as Exhibit 4.1 to the Company's Form 10-Q and incorporated by
reference herein.)

4.2 Form of Note due 2007 (Previously filed on June 23, 1997 as Exhibit
4.2 to the Company's Current Report on Form 8-K and incorporated by
reference herein.)

4.3 Form of Note due 2013 (Previously filed on February 19, 1998 as
Exhibit 4.2 of the Company's Current Report on Form 8-K and
incorporated by reference herein.)

4.4 Rights Agreement between the Company and Bank of America, N.T. & S.A.,
dated August 14, 1989 (Previously filed on August 14, 1989 as Exhibit
4.1 to the Company's Current Report on Form 8-K and incorporated by
reference herein.)

4.5 Supplement to Rights Agreement between the Company and Chemical Trust
Company of California dated July 30, 1992 (Previously filed on April
10, 1997 as Exhibit 4.4 to the Company's Registration Statement on
Form S-3 (No. 333-24915), as amended, and incorporated by reference
herein.)

10.1 1984 Stock Option Plan, as amended to date (Previously filed on
October 19, 1992 in the Exhibits to the Company's Form 10-K and
incorporated by reference herein.)

10.2 1992 Employee Stock Option Plan, as amended and restated to date
(Previously filed on October 19, 1992 in the Exhibits to the
Company's Form 10-K and incorporated by reference herein.)

10.3 1992 Payroll Investment Plan (Previously filed on October 19, 1992 in
the Exhibits to the Company's Form 10-K and incorporated by reference
herein.)

10.4 Employment agreement with Frank C. McDowell (Previously filed on
October 23, 1995 as Exhibit 10.8 to the Company's Form 10-K and
incorporated by reference herein.)

10.5 BRE Properties, Inc. Retirement Plan (Previously filed on October 24,
1988 in the Exhibits to the Company's Form 10-K and incorporated by
reference herein.)

10.6 BRE Properties, Inc. Supplemental ERISA Retirement Plan (Previously
filed on October 23, 1995 as Exhibit 10.12 to the Company's Form 10-K
and incorporated by reference herein.)

10.7 Sublease with Wells Fargo Bank on 10,142 square feet at Suite 2500,
One Montgomery Street, San Francisco, California (Previously filed on
October 24, 1988 in the Exhibits to the Company's Form 10-K and
incorporated by reference herein.)

58

Exhibit
Number Identity of Exhibit
------- -------------------

10.8 Form of deferred compensation agreement with Eugene P. Carver
(Previously filed on October 13, 1994 as Exhibit 10.10 to the Company's
Form 10-K and incorporated by reference herein.)

10.9 Treasury Lock Swap Transaction (Previously filed on November 13, 1996
as Exhibit 10.16 to the Company's Form 10-Q and incorporated by
reference herein.)

10.10 Employment agreement with Jay W. Pauly (Previously filed on December
22, 1995 in the Company's Form S-4 (File No. 33-65365) and
incorporated by reference herein.)

10.11 Employment agreement with LeRoy E. Carlson (Previously filed on
December 22, 1995 in the Company's Form S-4 (File No. 33-65365) and
incorporated by reference herein.)

10.12 Employment agreement with John H. Nunn (Previously filed on December
22, 1995 in the Company's Form S-4 (File No. 33-65365) and
incorporated by reference herein.)

10.13 Dividend Reinvestment Plan (Previously filed on August 9, 1996 in the
Exhibits to Form S-3 (File No. 333-09945) and incorporated by
reference herein.)

10.14 1991 Stock Option Plan for Real Estate Investment Trust of California
(Previously filed on February 19, 1997 as Exhibit 10.22 to the
Company's Form 10-K, as amended by the Report on the Company's Form
10-K/A filed on April 25, 1997 and incorporated by reference herein.)

10.15 Loan Agreement between The Prudential Insurance Company of America, as
Lender and Real Estate Investment Trust of California, as Borrower,
dated as of January 31, 1994 (Previously filed on February 19, 1997
as Exhibit 10.30 to the Company's Form 10-K, as amended by the Report
on the Company's Form 10-K/A filed on April 25, 1997 and incorporated
by reference herein.)

10.16 First Amendment to Loan Agreement by and between The Prudential
Insurance Company of America and Real Estate Investment Trust of
California, dated July 7, 1995 (Previously filed on February 19, 1997
as Exhibit 10.31 to the Company's Form 10-K, as amended by the Report
on the Company's Form 10-K/A filed on April 25, 1997 and incorporated
by reference herein.)

10.17 Second Amendment to Loan Agreement by and between The Prudential
Insurance Company of America and the Company, dated April 30, 1996
(Previously filed on February 19, 1997 as Exhibit 10.32 to the
Company's Form 10-K, as amended by the Report on the Company's
Form 10-K/A filed on April 25, 1997 and incorporated by reference
herein.)

10.18 Third Amendment to Loan Agreement by and between The Prudential
Insurance Company of America and the Company, dated November 20, 1996
(Previously filed on February 19, 1997 as Exhibits 10.33 to the
Company's Form 10-K, as amended by the Report on the Company's
Form 10-K/A filed on April 25, 1997 and incorporated by reference
herein.)

10.19 Loan Agreement between The Prudential Insurance Company of America, as
Lender and Real Estate Investment Trust of California, as Borrower,
dated as of July 7, 1995 (Previously filed on February 19, 1997 as
Exhibit 10.34 to the Company's Form 10-K, as amended by the Report on
the Company's Form 10-K/A filed on April 25, 1997 and incorporated by
reference herein.)

10.20 First Amendment to Loan Agreement by and between The Prudential
Insurance Company of America and the Company, dated July 7, 1995
(Previously filed on February 19, 1997 as Exhibit 10.35 to the
Company's Form 10-K, as amended by the Report on the Company's Form
10-K/A filed on April 25, 1997 and incorporated by reference herein.)

10.21 Second Amendment to Loan Agreement by and between The Prudential
Insurance Company of America and the Company, dated April 30, 1996
(Previously filed on February 19, 1997 as Exhibit 10.36 to the
Company's Form 10-K, as amended by the Report on the Company's
Form 10-K/A filed on April 25, 1997 and incorporated by reference
herein)

10.22 Fourth Amendment to Loan Agreement by and between The Prudential
Insurance Company of America and the Company, dated February 25, 1997
(Previously filed on August 12, 1997 as Exhibit 10.37 to the
Company's Form 10-Q and incorporated by reference herein.)

59

Exhibit
Number Identity of Exhibit
------- -------------------

10.23 Third Amendment to Loan Agreement by and between The Prudential
Insurance Company of America and the Company, dated February 25, 1997
(Previously filed on August 12, 1997 as Exhibit 10.38 to the
Company's Form 10-Q and incorporated by reference herein.)

10.24 Fifth Amendment to Loan Agreement by and between The Prudential
Insurance Company of America and the Company, dated June 30, 1997
(Previously filed on August 12, 1997 as Exhibit 10.39 to the
Company's Form 10-Q and incorporated by reference herein.)

10.25 Fourth Amendment to Loan Agreement by and between The Prudential
Insurance Company of America and the Company, dated June 30, 1997
(Previously filed on August 12, 1997 as Exhibit 10.40 to the
Company's Form 10-Q and incorporated by reference herein.)

10.26 Amended and Restated 1992 Employee Stock Plan (Previously filed on
November 14, 1997 as Exhibit 10.44 to the Company's Form 10-Q and
incorporated by reference herein.)

10.27 Contribution Agreement dated as of September 29, 1997 between the
Company, BRE Property Investors LLC and the TCR Signatories
(Previously filed on November 14, 1997 as Exhibit 10.45 to the
Company's Form 10-Q and incorporated by reference herein.)

10.28 The Registration Rights Agreement among the Company, BRE Property
Investors LLC and the other signatories thereto dated November 18,
1997 (Previously filed on December 3, 1997 as Exhibit 4.6 to the
Company's Registration Statement on Form S-3 (No. 333-41433), as
amended, and incorporated by reference herein.)

10.29 Amended and Restated Limited Liability Company Agreement of BRE
Property Investors LLC, dated as November 18, 1997, by and among BRE
Properties, Inc., and the other parties named therein (Previously
filed on December 18, 1997 as Exhibit 10.1 to the Company's Current
Report on Form 8-K and incorporated by reference herein.)

10.30 Unsecured Line of Credit Loan Agreement, dated as of November 17,
1997, by and between the Company, and Bank of America National Trust
and Savings Association (Previously filed on December 18, 1997 as
Exhibit 10.3 to the Company's Current Report on Form 8-K and
incorporated by reference herein.)

10.31 The Registration Rights Agreement between the Company and Legg Mason
Unit Investment Trust Series 7, Legg Mason REIT Trust, December 1997
Series, dated as of December 23, 1997, (Previously filed on January
27, 1998 as Exhibit 4.6 of the Company's Registration Statement on
Form S-3 (No. 333-44997), as amended, and incorporated by reference
herein.)

10.32 Amended and Restated Credit agreement with Sanwa Bank, dated December
31, 1997 (Previously filed on March 26, 1998 as Exhibit 10.35 to the
Company's Form 10-K and incorporated by reference herein.)

10.33 Treasury rate guarantee hedge with Morgan Stanley, dated November 21,
1997 (Previously filed on March 26, 1998 as Exhibit 10.36 to the
Company's Form 10-K and incorporated by reference herein.)

10.34 Office Lease between OTR, an Ohio general partnership and the Company
dated September 26, 1997 (Previously filed on March 26, 1998 as
Exhibit 10.37 to the Company's Form 10-K and incorporated by
reference herein.)

10.35 Loan Modification Agreement to syndicate loan to the Company made by
various financial institutions with Bank of America NT&SA as agent.
(Previously filed on March 26, 1998 as Exhibit 10.38 to the Company's
Form 10-K and incorporated by reference herein.)

10.36 Employment agreement with Bruce C. Ward (Previously filed on March 26,
1998 as Exhibit 10.39 to the Company's Form 10-K and incorporated by
reference herein.)

10.37 Amended and Restated Non-Employee Director Stock Option Plan as
amended March 2, 1998 (Previously filed on May 14, 1998 as Exhibit
10.1 to the Company's Form 10-Q and incorporated by reference
herein.)

60

Exhibit
Number Identity of Exhibit
------- -------------------

10.38 First Amendment to Credit Agreement with Sanwa Bank dated June 3, 1998
(Previously filed on August 14, 1998 as Exhibit 10.1 to the Company's
Form 10-Q and incorporated by reference herein.)

10.39 Form of Indemnification Agreement (Previously filed on August 14, 1998
as Exhibit 10.2 to the Company's Form 10-Q and incorporated by
reference herein.)

10.40 Amended and Restated Line of Credit with Bank of America dated October
21, 1998 (Previously filed on November 13, 1998 as Exhibit 10.1 to
the Company's Form 10-Q and incorporated by reference herein.)

10.41 1999 BRE Stock Incentive Plan (Previously filed on August 16, 1999 as
Exhibit 10.1 to the Company's Form 10-Q and incorporated by reference
herein.)

10.42 Amended and Restated Non-Employee Director Stock Option Plan
(Previously filed on August 16, 1999 as Exhibit 10.2 to the Company's
Form 10-Q and incorporated by reference herein.)

10.43 First Amendment Agreement dated as of February 4, 2000 to Amended and
Restated Unsecured Line of Credit Agreement dated October 21, 1998.

10.44 BRE Properties Inc. Deferred Compensation Plan effective January 1,
2000

12 Statements re: computation of ratios

21 Subsidiaries of the Registrant

23.1 Consent of Ernst & Young LLP

27 Financial Data Schedule

61