BRE PROPERTIES INC /MD/, 10-K, 1996-08-19

BRE PROPERTIES INC /MD/
10-K, 1996-08-19
REAL ESTATE INVESTMENT TRUSTS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
( ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
(X) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the five months ended December 31, 1995

Commission File No. 0-5303

BRE PROPERTIES, INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Maryland 94-1722214
- ------------------------------------- ------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)

One Montgomery Street
Telesis Tower, Suite 2500
San Francisco, California 94104-5525
- ------------------------------------- ------------------------------
(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
- ------------------- -----------------------------------------
Class A common stock, $.01 par value 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 (SECTION 229.405 OF THIS CHAPTER) 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 August 14, 1996, the aggregate market value of the registrant's shares of
Class A common stock, $.01 par value, held by nonaffiliates of the registrant
was approximately $690,600,000. At that date 32,692,336 shares were outstanding.

<PAGE>

DOCUMENTS INCORPORATED BY REFERENCE

The description of BRE Common Stock contained in BRE's Proxy Statement dated
August 17, 1987, under the heading "Proposal to Incorporate the Trust in
Delaware - Description of BARI - Delaware Common Stock," and BRE's Proxy
Statement dated October 12, 1993, under the heading "Amendment of Restated
Certificate of Incorporation to Increase the Number of Authorized Shares of
Class A Common Stock".

Proxy and Registration Statements on Form S-4 filed on December 22, 1995, as
amended February 9, 1996 pages 108-110, 112-121, 122-123 and 129 as attached
in Exhibits 99.1-99.4.

Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1996.

Current Report on Form 8-K dated April 1, 1996, as amended by Form 8-K/A dated
May 18, 1996.

Registration on Form S-8 dated April 2, 1996.

Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 1996.

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

<PAGE>
- --------------------------------------------------------------------------------

PART I
- --------------------------------------------------------------------------------

ITEM 1. BUSINESS

CORPORATE PROFILE

BRE Properties, Inc. ("BRE" or the "company"), formerly a Delaware corporation
that reincorporated in Maryland in March 1996, is a self-administered equity
real estate investment trust which primarily owns and operates multifamily
properties in the western United States. At December 31, 1995, BRE had ownership
interests in 8,794 garden apartment units (5,475 wholly owned and 3,319 on land
leased to others) in California, Arizona, Washington and Oregon. On that date,
BRE also held ownership interests in thirteen commercial and retail properties
(including two held in partnerships in which the company is a limited partner).
Founded in 1970, the company has paid 102 consecutive quarterly dividends to
shareholders since it commenced operations.

On March 15, 1996, Real Estate Investment Trust of California, a California real
estate investment trust ("RCT"), merged with and into BRE (the "Merger"), in
accordance with the terms and conditions of the Agreement and Plan of the Merger
dated October 11, 1995. The Merger was treated as a purchase for accounting
purposes.

Pursuant to the Merger with RCT on March 15, 1996, BRE (i) acquired $274,400,000
in equity investments in real estate, (ii) assumed secured and unsecured RCT
notes payable of $95,400,000, and other liabilities totaling $8,000,000, and
(iii) issued 5,342,218 shares of Class A common stock valued at $171,000,000 for
the conversion of RCT shares of beneficial interest.

STRATEGIC FOCUS

The key aspects of the company's strategy include a focus on the acquisition of
multifamily properties; an accelerated, but orderly, disposition of industrial
properties; increased access to the capital markets for financing; and the
internalization of property management.

STRUCTURE AND INVESTMENT POLICY

BRE has operated since its July 1970 inception as a real estate investment trust
pursuant to Sections 856-860 of the Internal Revenue Code, as amended. Its
long-range investment policy emphasizes the purchase of fee ownership of both
land and improvements, primarily in multifamily communities located in the
Western United States. Among other things, this policy is designed 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 otherwise

<PAGE>

warrant, if it determines that such changes are in the best interests of the
company and its shareholders.

CHANGE IN FISCAL YEAR

On May 20, 1996, the company announced that it would change its fiscal year-end
to December 31 from July 31. The new accounting period will begin with the
quarter ending June 30, 1996. The report covering the transition period from
August 1, 1995 through December 31, 1995, referred to herein as "Transition
1995", is filed with this Form 10-K.

REVENUES AND OCCUPANCY

The following table shows the percentage of the company's total rental revenues
contributed by certain classes of properties during the five months ended
December 31, 1995, and the fiscal years ended July 31, 1995, 1994, and 1993,
respectively. It also shows the overall occupancy levels for these classes of
properties at December 31, 1995.

PERCENT OF REVENUES
OVERALL ---------------------------------
OCCUPANCY AT Dec. July July July
Type of Property DEC. 31, 1995 1995 1995 1994 1993
- ----------------- ------------- ---- ---- ---- ----
Multifamily 95% 79% 77% 71% 63%
Commercial and retail 97% 21 23 29 37
--- --- --- --- ---
Total Portfolio 95% 100% 100% 100% 100%
---------- ---- ---- --- ---
---------- ---- ---- --- ---

The weighted average occupancy is calculated by multiplying the occupancy
for each property by its square footage and dividing by the total square
footage in the portfolio.

PORTFOLIO AT DECEMBER 31, 1995

At December 31, 1995, the company's portfolio of income-producing real estate
included, as a percent of cost, the following investments:

PERCENT PERCENT
NUMBER OF OF NUMBER OF OF
PROPERTIES COST PROPERTIES COST
---------- ------- ---------- --------
Multifamily 25 72% California 23 63%
Commercial Arizona 11 22
and retail 13 28 Washington 3 11
-- ---
Oregon 1 4
----- ---
TOTAL: 38 100% TOTAL: 38 100%
-- --- ----- ---
-- --- ----- ---

See Items 2 and 7 of this report for a description of the company's individual
investments and of certain developments during the year with respect to these
investments.

4
<PAGE>

COMPETITIVE CONDITIONS

BRE competes with many similar domestic and foreign real estate companies for
investments in quality properties and for tenants to occupy the space in its
multifamily complexes, commercial and retail projects.

EMPLOYEES

As of December 31, 1995, the company had 21 employees. The company also has
engaged 10 independent property management firms to manage 27 of its apartment
and multi-tenant commercial properties.

The Merger between BRE and RCT in March 1996 provided BRE with the management
capabilities and personnel to begin the internalization of the property
management functions. Following the Merger, the total number of BRE employees
grew from 21 to approximately 323 individuals as of July 31, 1996.

POTENTIAL ENVIRONMENTAL RISKS

Investments in real property create a potential for environmental liability on
the part of the owner of, or any mortgage lender on, such real property. If
hazardous substances are discovered on or emanating from any of the company's
properties, the owner or operator of the property (including the company) may be
held strictly liable for all costs and liabilities relating to such hazardous
substances. The company's current policy is to obtain a Phase I environmental
study on each property it seeks to acquire and to proceed accordingly. The
company currently carries no insurance for environmental liabilities, although
policies in effect in earlier years may in some cases provide coverage for
environmental liabilities which may have occurred during the earlier policy
periods.

RECENT DEVELOPMENTS

For additional information regarding the Merger, see Note 12 of Notes to the
Financial Statements contained in Item 8 of this document.

For information regarding acquisitions, reference is made to Management's
Discussion and Analysis in Item 2 of the Quarterly Reports on Form 10-Q for the
fiscal quarters ended January 31, 1996 and April 30, 1996, which information is
incorporated herein by reference to excerpts of the Form 10-Qs.

5
<PAGE>

ITEM 2. PROPERTIES

GENERAL

In addition to the information set forth in this Item 2, information on the
company's portfolio is set forth in Schedule III under Item 14(d).

The company carries earthquake insurance on all of its properties. The annual
aggregate limits for flood and earthquake coverage (after payment of
deductibles) are $5,000,000 (in California) and $10,000,000 (outside of
California). On June 3, 1996, the Company increased its coverage to an
aggregate limit of $50,000,000 for flood and earthquake coverage (after
payment of deductibles of 2% of damages.)

MULTIFAMILY PROPERTIES

As reflected in the following chart, during the five months ended December 31,
1995 and the last five fiscal years ended July 31, multifamily properties have
increased as a percentage of the company's portfolio of income producing
properties and revenues:
<TABLE>
<CAPTION>

DECEMBER 31 JULY 31
- ------------------------------------------------- ----------------------------------------------
1995 1995 1994 1993 1992 1991
- ------------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Percentage of portfolio at cost 72% 68% 62% 53% 41% 38%
Revenues generated 79% 77% 71% 63% 58% 54%

</TABLE>

From August 1995 through December 1995, revenue from the multifamily properties
in the portfolio increased $580,000 or 3.4%, compared to the same period in
1994. Multifamily property operating expenses also grew but at a lower rate
(2.6%). This resulted in higher net operating income of 3.8% for this segment
of the portfolio during the five months ended December 31, 1995 compared to the
five months ended December 31, 1994.

COMMERCIAL AND RETAIL PROPERTIES

A majority of the company's commercial and retail properties (i.e. properties
other than multifamily) are leased to tenants under long-term operating leases.
For additional information regarding these leases, see Note 3 of Notes to the
Financial Statements included in Item 8. At December 31, 1995, the company had
approximately 13 separate leases with approximately 12 tenants in its commercial
properties.

Of the company's eight fully occupied light-industrial, warehouse/distribution
and office properties, two have multiple tenants, each with one tenant occupying
more than 50% of the net rental space, and six have single tenants.

One light industrial property, Irvine Spectrum (50,000 square feet in Irvine,
California) was sold for $4 million on October 24, 1995. The sale was
structured as a tax-deferred exchange for the 189-unit Candlewood North
Apartment community which was acquired in February 1996.

In September 1995, the company completed the sale of Pomona Warehouse
(358,000 square feet in Pomona, California) which had been vacant since
December 1993. The proceeds were used for a tax-deferred exchange into the
240-unit apartment community Newport Landing Phase I, in Glendale, Arizona.

<PAGE>

HEADQUARTERS

The company maintains its corporate headquarters at One Montgomery Street, Suite
2500, Telesis Tower, San Francisco, California. A sublease with Wells Fargo
Bank, for an eleven-year term, is for 10,142 rentable square feet at annual per
square foot rents which began at $23 and rise to $34 in the tenth year. The
lease term ends December 17, 1998.

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, individually or in the
aggregate, will have a material effect on the company's results of operations,
cash flows, liquidity or financial position.

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

Results of the matters submitted to the vote of security holders contained under
the caption "Submission of Matters to a Vote of Security Holders" on page 13 in
Item 4 of the April 30, 1996 10-Q are incorporated herein by reference.

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

The shares of the company's Class A common stock are traded on the New York
Stock Exchange under the symbol BRE. As of December 31, 1995, there were
approximately 22,000 recordholders of the company's shares of Class A common
stock. The prices and dividends below retroactively reflect the two for one
stock split discussed in Note 12 to Notes to Financial Statements.
<TABLE>
<CAPTION>

TRANSITION 1995 FISCAL 1995 FISCAL 1994
----------------------------------------------------------------------------------------
Stock Price Dividends Stock Price Dividends Stock Price Dividends

---------------- ---------------- --------------
High Low Paid High Low Paid High Low Paid
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
August 1 through
October 31 $17.00 $15.75 $.315 - - - - - -
November 1 through
December 31 18.69 15.82 .315 - - - - - -
First Quarter
(October 31) - - - $15.69 $15.00 $.300 $17.75 $16.63 $.300
Second Quarter
(January 31) - - - 15.63 15.13 .300 17.82 16.57 .300
Third Quarter
(April 30) - - - 15.94 15.07 .315 17.13 15.25 .300
Fourth Quarter
(July 31) - - - 16.19 14.94 .315 15.75 15.13 .300

</TABLE>

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>

Transition Years ended July 31
---------------------------------------------------------
(DOLLAR AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA) 1995 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Revenues $28,006 $62,594 $53,579 $44,695 $39,639 $40,190

Net income 9,238 23,555 22,305 26,482 20,292 15,342
Plus: Net (loss) gain on sales of
investments 899 (2,370) (548) (9,869) (5,697) -
Depreciation and amortization 3,294 7,658 6,674 5,453 4,629 4,666
Provision for investment losses - 2,000 - - - -
---------------------------------------------------------------------
Funds from operations 13,431 30,843 28,431 22,066 19,224 20,008
Dividends paid 13,823 26,885 26,200 20,066 19,004 18,989
Payout ratio 103% 87% 92% 91% 99% 95%

PER SHARE DATA
Income before (loss) gain on sales of $.46 $1.06 $1.00 $.95 $.92 $.97
investments
Net (loss) gain on sales of investments (.04) .11 .02 .56 .36 -
Provision for possible investment losses - (.09) - - - -
---------------------------------------------------------------------
Net income .42 1.08 1.02 1.51 1.28 .97
Dividends paid .63 1.23 1.20 1.20 1.20 1.20
Average shares outstanding 21,980 21,882 21,866 17,548 15,840 15,824

FINANCIAL POSITION
Total assets $354,895 $347,886 $322,895 $299,932 $208,882 $210,005
Real estate portfolio, before depreciation 371,438 378,356 326,628 284,134 221,965 213,871
Cash and short-term investments 16,057 4,462 28,938 45,109 9,846 14,445
Long-term debt 112,290 100,828 73,944 46,692 62,974 65,636
Shareholders' equity 239,248 242,942 245,485 249,262 142,295 140,850

</TABLE>

<PAGE>

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

December 31, 1995

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and short-term investments totaled $16,057,000 at December
31, 1995, up from $4,462,000 at July 31, 1995. In addition to the $16,057,000
in cash and short-term investments, $3,854,000 was in escrow for completion of a
tax-deferred exchange.

During the five months ended December 31, 1995, BRE borrowed, on a
non-recourse basis, $12,000,000 secured by the Verandas Apartments in Union
City, California. The loan has a 10-year term, with amortization based on 30
years, and a fixed interest rate of 7.3%. The balloon payment at maturity is
$10,732,000. Depending on market conditions at maturity, the Company may
choose, among other things, to renegotiate the terms with the existing
lender, refinance the property with another lender or sell assets to repay
the balloon amounts.

Also during Transition 1995, BRE completed the tax deferred exchange of the
vacant Pomona Warehouse property in Pomona, California for the 240-unit Phase I
of Newport Landing Apartments in Glendale, Arizona. The loss on the disposition
of the Pomona Warehouse was $93,000.

In addition, $3,854,000 has been placed in escrow from the proceeds of the
disposition of the vacant Irvine Spectrum property in Irvine, California. The
proceeds were invested on a tax-deferred basis in Candlewood North Apartments in
February 1996. The loss on the disposition of the Irvine Spectrum Property was
$819,000.

An additional $400,000 was invested during Transition 1995 in tenant
improvements at commercial and retail properties, and $202,000 was invested in
improvements to existing apartments.

In addition, as more fully discussed in Note 12 of Notes to Financial
Statements, BRE has committed a total of $127,532,000 for the purchase of seven
multifamily communities. Five of these communities were purchased between
February and July 1996 for $90,982,000 with cash, proceeds from tax-deferred
exchange, and drawings on the Company's lines of credit. The remaining
acquisitions will be funded through a combination of tax-deferred exchanges,
cash and borrowings.

Reference is made to Note 12 of Notes to Financial Statements for discussion of
property dispositions occurring subsequent to December 31, 1995.

In addition to cash and short-term investments, the Company had available bank
lines of credit totaling $30,000,000 as of December 31, 1995. There were no
borrowings under the lines of credit at December 31, 1995. As of July 31, 1996,
the amount available under bank lines of credit was raised to $100,000,000 as a
result of the Merger and in order to finance apartment acquisitions described
above.

RESULTS OF OPERATIONS

Net income for the five months ended December 31, 1995 was $9,238,000 ($.42 per
share), compared to $10,782,000 ($.49 per share) for the same period in 1994.
Included in the Transition 1995 results were net losses on sales of investments
of $899,000 ($.04 per share), compared to net gains on sales of investments of
$1,250,000 ($.06 per share) for the same period in 1994.

Funds from operations totaled $13,431,000 for Transition 1995, up 6% from the
same period in 1994. Funds from operations is defined as net income (computed
in accordance with generally accepted accounting principles), excluding gains
(or losses) from debt restructuring and sales of property, plus provisions for
depreciation, amortization and possible investment losses. Because
income-producing properties are typically evaluated without taking into account
non-cash charges such as provisions for depreciation, amortization and possible
investment losses, management believes that funds from operations is an
appropriate supplemental measure of the Company's operating performance.

<PAGE>

Reference is made to Item 1 under the caption "Revenues and Occupancy" for the
overall occupancy levels by class of property.

REVENUE

Total revenues, of which approximately 96% represents rental revenues, rose 11%
from the comparable period in 1994. The increase is primarily the result of
apartment communities acquired with high occupancy levels over the past year.

EXPENSES

Operating expenses of rental properties for Transition 1995 increased 14% from
the comparable period in 1994, primarily due to expenses on the new apartment
acquisitions. General and administrative expenses were $1,475,000 for
Transition 1995, slightly up from the comparable period in 1994 due to higher
salaries and employee benefits due to a larger staff to accommodate growth.

Commencing August 1, 1995, BRE began allocating a portion of its salaries,
employee benefits and other personnel costs to the real estate expense of the
properties in the portfolio. While this reclassification does not change BRE's
net income or funds from operations, such allocation reduces reported general
and administrative expenses and increases real estate expense by an equal
amount. Management believes that this allocation is consistent with industry
practices and will provide better matching of the revenue generated by the
properties and the expenses required to generate that revenue. The amounts
reclassified from general and administrative expenses to real estate expenses
under this allocation method were $666,000 for the five-month period.

As more fully discussed in Note 12 of Notes to Financial Statements, on October
11, 1995 BRE entered into the Merger Agreement with RCT.

Interest expense was $3,547,000 for the five month period. Interest expense has
increased on an annualized basis as a reflection of new mortgage loans, assumed
since August 1, 1994, on Camino Seco Village, Colonia del Rio, Fountain Plaza,
Hacienda del Rio, Oracle Village, Spring Hill and Verandas Apartments. The
principal of these loans totaled approximately $27,939,000.

GAIN (LOSS) ON SALES

A loss of $912,000 was recorded during Transition 1995 on the previously
discussed sales of Pomona Warehouse and Irvine Spectrum. Offsetting the losses
was the $13,000 increase in the reported gain on Marymoor Warehouse, sold in
November 1994.

DIVIDENDS

The $.63 per share dividend for Transition 1995 was approximately 103% of
funds from operations as two quarters' dividends were paid during the
five-month period. The dividend exceeded reportable net income. Reference is
made to Note 12 to Notes to Financial Statements for discussion of the stock
split and dividends declared and paid subsequent to December 31, 1995.

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.

<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) EXECUTIVE OFFICERS.

The following persons were executive officers of the company as of December 31,
1995:

Age at
Name December 31, 1995 Position(s)
- --------------------------------------------------------------------------------
Frank C. McDowell 47 President, Chief Executive Officer and
Director
Arthur G. von Thaden 63 Chairman and Director
Byron M. Fox 56 Executive Vice President
Ronald P. Wargo 52 Senior Vice President
Howard E. Mason, Jr. 63 Senior Vice President, Finance
Ellen G. Breslauer 48 Secretary and Treasurer
- --------------------------------------------------------------------------------

Mr. McDowell was appointed to his current position on June 5, 1995, at which
time Mr. von Thaden, who had been President and Chief Executive Officer, became
chairman. Mr. Fox and Mr. Wargo were appointed to their positions in October of
1992. All of the other executive officers have held their respective positions
since September 30, 1987. 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. ("Cardinal"), a Columbus, Ohio-based
apartment management company and owner of multifamily housing. At December
31, 1994, Cardinal ranked as the nation's 19th largest owner of apartments
and as the 15th largest apartment management company. 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 Science Degree
and a Masters of Business Administration Degree, both from the University
of Texas, Austin.

Mr. von Thaden served as Chief Executive Officer of the company and its
former advisor from inception in 1970. Mr. von Thaden became a Director in
1981. Mr. von Thaden holds a Bachelor of Arts Degree from Trinity College.
Mr. von Thaden retired from the company as of January 17, 1996, but
continues to serve as a director.

Mr. Fox was employed by BRE and appointed Senior Vice President in December
1987. From 1977 to 1987, he was Vice President and General Manager of
Dillingham Investment Corporation, a Hawaii land-investment firm. Mr. Fox
holds a Bachelor of Arts Degree from Colgate University and a Master of
Business Administration Degree from Harvard Business School.

Mr. Wargo, employed in 1978, was appointed Senior Vice President in charge
of Asset Management in 1992. He holds the Certified Property Manager (CPM)
designation awarded by the Institute of Real Estate Management. Mr. Wargo
holds a Bachelor of Science Degree from LaSalle College and a Master of
Business Administration Degree from Columbia University.

<PAGE>

Mr. Mason was Senior Vice President, Finance from October 1980, and has
been chief financial and accounting officer from inception in 1970. He is
a Certified Public Accountant and served as Controller for Henry Doelger
Builder, Inc. from 1965 to 1970. Mr. Mason holds a Bachelor of Arts Degree
from Menlo College and a Master of Business Administration Degree from San
Francisco State University. Mr. Mason will retire from the company on
September 1, 1996.

Ms. Breslauer was appointed Secretary in September 1987 after becoming
Treasurer in 1981. She was employed by the company in 1971 and is a
Certified Public Accountant. A Phi Beta Kappa graduate, Ms. Breslauer holds
a Bachelor of Arts Degree and a Master of Business Administration from the
University of California, Berkeley. Ms. Breslauer retired from the company
on March 1, 1996.

Concurrent with the Merger on March 15, 1995 three executives of RCT
were added to BRE management: Jay W. Pauly as Senior Executive Vice
President and Chief Operating Officer; LeRoy E. Carlson as Executive Vice
President and Chief Financial Officer; and John H. Nunn as Senior Vice
President, Property Management. In addition, three directors of REIT-Cal
were appointed to the BRE Board of Directors, increasing BRE's Board from
six to nine members.

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

(b) DIRECTORS. The information required by this Item is hereby incorporated by
reference to the company's Proxy Statement pages 108 through 110 under the
heading "Election of BRE Directors" and the caption "Compliance with Section
16(a) of the Securities and Exchange Act of 1934" filed with the Securities
and Exchange Commission, included as Exhibit 99.1 of this Report.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is hereby incorporated herein by
reference to the Proxy Statement pages 112 through 121 under the captions
"BRE Executive Compensation and Other Information", and "Compensation
Committee Report on Executive Compensation of Executive Officers," included
as Exhibit 99.2 of this Report.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The information required by this Item is hereby incorporated herein by reference
to the Proxy and Registration Statement, pages 122 through 123 under the heading
"Election of Directors" and page 129 under the heading "Principal Shareholder
of BRE," included as Exhibits 99.3 and 99.4 of this Report.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Reference is made to the information contained in Note 10 of Notes to Financial
Statements, under the caption "Related Party Transactions," which information is
incorporated herein by reference.

<PAGE>
PART IV

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

(a) 1. See Index to Financial Statements and

2. Financial Statement Schedule. Such Financial
Statements and Schedule are incorporated herein by reference. All
schedules other than those indicated under Index to Financial
Statements have been omitted since they are not required, not
applicable, or the information is included in the financial
statements or notes thereto.

3. See Index to Exhibits immediately following the signature page.
Each of the exhibits listed is incorporated by reference.

(b) Reports on Form 8-K filed during Transition 1995 are: None.

(d) See Index to Financial Statements and Financial Schedule.

ITEM 14(a) INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULE

(1) Financial Statements:

Report of Independent Auditors
Balance Sheets at December 31, 1995, July 31, 1995,
and July 31, 1994
Statements of Income for the five months ended
December 31, 1995, and for the three years ended
July 31, 1995, 1994, and 1993
Statements of Cash Flows for the five months ended
December 31, 1995, and for the three years ended
July 31, 1995, 1994, and 1993
Statement of Stockholders' Equity for the five months ended
December 31, 1995, and for the three years
ended July 31, 1995, 1994, and 1993
Note to Financial Statements

(2) Financial Statement Schedule:

Schedule III - Real Estate and Accumulated Depreciation

<PAGE>

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.

BRE PROPERTIES, INC.

Dated: August 15, 1996 /s/ Frank C. McDowell
-------------------------
Frank C. McDowell
President

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 August 15, 1996
- ------------------------- (Principal Executive Officer)
Frank C. McDowell

/s/ LeRoy E. Carlson Executive Vice President August 15, 1996
- ------------------------- (Principal Financial and
LeRoy E. Carlson Accounting Officer)

/s/ John McMahan Chairman and Director
- -------------------------
John McMahan

/s/ William E. Borsari Director August 15, 1996
- -------------------------
William E. Borsari

/s/ C. Preston Butcher Director August 15, 1996
- -------------------------
C. Preston Butcher

/s/ L. Michael Foley Director August 15, 1996
- -------------------------
L. Michael Foley

/s/ Roger P. Kuppinger Director August 15, 1996
- -------------------------
Roger P. Kuppinger

/s/ Malcolm R. Riley Director August 15, 1996
- -------------------------
Malcolm R. Riley

/s/ Gregory M. Simon Director August 15, 1996
- -------------------------
Gregory M. Simon

/s/ Arthur G. von Thaden Director August 15, 1996
- -------------------------
Arthur G. von Thaden

<PAGE>

REPORT OF INDEPENDENT AUDITORS

Shareholders and Directors
BRE Properties, Inc.

We have audited the accompanying balance sheets of BRE Properties, Inc. as of
December 31, 1995, July 31, 1995 and July 31, 1994, and the related statements
of income, shareholders' equity, cash flows and the related financial schedule
for the five months ended December 31, 1995 and each of the three years in the
period ended July 31, 1995. 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 schedule based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and related schedule
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
related schedule. 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 financial statements referred to above present fairly, in
all material respects, the financial position of BRE Properties, Inc. at
December 31, 1995, July 31, 1995 and July 31, 1994, and the results of its
operations and its cash flows for the five months ended December 31, 1995 and
each of the three years in the period ended July 31, 1995, in conformity with
generally accepted accounting principles. 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.

Ernst & Young LLP

San Francisco, California
August 9 , 1996

<PAGE>

BALANCE SHEETS
BRE Properties, Inc.

DEC. 31 July 31
---------- ---------------------
(Dollar amounts in thousands) 1995 1995 1994
- ---------------------------------------------------------- --------------------
ASSETS

Investments in rental properties:

Multifamily properties $ 267,847 $ 258,299 $ 204,560

Commercial and retail properties 102,269 118,876 120,959

Less: Accumulated depreciation and
amortization (48,036) (47,811) (41,264)
---------- ---------- ----------
322,080 329,364 284,255

Investments in limited partnerships 1,322 1,181 1,109
---------- ---------- ----------
Real Estate portfolio 323,402 330,545 285,364

Mortgage loans, net 5,727 6,159 3,516
---------- ---------- ----------

329,129 336,704 288,880

Cash and other short-term investments 16,057 4,462 28,938

Other 9,709 6,720 5,077
---------- ---------- ----------
TOTAL ASSETS $ 354,895 $ 347,886 $ 322,895
---------- ---------- ----------
---------- ---------- ----------

LIABILITIES AND SHAREHOLDERS' EQUITY

Mortgage loans payable $ 112,290 $ 100,828 $ 73,944

Accounts payable and other liabilities 3,357 4,116 3,466
---------- ---------- ----------
Total liabilities 115,647 104,944 77,410

Shareholders' equity:

Class A common stock, $.01 par value,
50,000,000 shares authorized.

Shares issued and outstanding: 21,941,730
at December 1995; 21,924,130 at July 31,
1995 and 21,832,966 at July 31, 1994 219 219 219

Additional paid-in capital 212,908 212,017 211,230

Undistributed net realized gain on sales of
properties 26,121 30,706 34,036
---------- ---------- ----------
Total shareholders' equity 239,248 242,942 245,485
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 354,895 $ 347,886 $ 322,895
---------- ---------- ----------
---------- ---------- ----------

See notes to financial statements

<PAGE>

STATEMENTS OF INCOME
BRE Properties, Inc.
<TABLE>
<CAPTION>

EXPENSES
Real estate expenses 9,553 19,643 16,970 12,886
Provision for depreciation and amortization 3,294 7,658 6,674 5,453
Interest expense 3,547 7,117 4,547 6,551
General and administrative 1,475 4,991 3,631 3,192
----------- ----------- ----------- ----------
Total expenses 17,869 39,409 31,822 28,082
----------- ----------- ----------- ----------
Income before (loss) gain on sales of investments in rental properties 10,137 23,185 21,757 16,613
Net (loss) gain on sales of investments (899) 2,633 626 10,966
Less: Related advisory fee - (263) (78) (1,097)
----------- ----------- ----------- ----------
Net (loss) gain on sales of investments (899) 2,370 548 9,869
----------- ----------- ----------- ----------
Provision for possible investment losses - (2,000) - -
----------- ----------- ----------- ----------
NET INCOME $9,238 $23,555 $22,305 $26,482
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------

Net income per share:
Income before (loss) gain on sales of investments $0.46 $1.06 $1.00 $.95
Net (loss) gain on sales of investments (.04) .11 .02 .56
Provision for possible investment losses - (.09) - -
----------- ----------- ----------- ----------
NET INCOME PER SHARE $0.42 $1.08 $1.02 $1.51
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
</TABLE>

See notes to financial statements

<PAGE>

STATEMENTS OF CASH FLOWS
BRE Properties, Inc.
<TABLE>
<CAPTION>

FIVE MONTHS
ENDED DEC. 31 Years ended July 31
------------------ ----------------------------------------
(Dollar amounts in thousands) 1995 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $9,238 $23,555 $22,305 $26,482
Non-cash revenues and expenses included in income:
Net gain on tax-deferred exchanges - (2,370) - (9,339)
Net loss (gain) on sales of investments 899 - (548) (530)
Provision for depreciation and amortization 3,294 7,658 6,674 5,453
Provision for possible investment losses - 2,000 - -
Decrease (Increase) in other assets (454) (1,643) (661) 671
Increase (decrease) in accounts payable and other liabilities (759) 650 (522) 375
Other (increase) (191) (517) 844 (2,099)
----------- ----------- ----------- -----------
Cash flows generated by operating activities 12,027 29,333 28,092 21,013
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Rental property activity:
Funds deposited in escrow for tax deferred exchange 3,854 - - -
Property purchased - (17,623) (37,106) (30,149)
Subsequent improvements to property purchased - (131) (229) -
Apartment Expansion (754) (1,688) (4,451) -
Invested in property acquired through tax-deferred - - - -
exchange:
Mortgage loan proceeds - - - (17,500)
Cash (111) (248) - (1,556)
Space preparation and tenant improvements:
Shopping centers (399) (2,935) (1,224) (1,329)
Light industrial and warehouse (1) (765) (1,642) (396)
Reconditioning of light industrial and warehouse buildings - (122) (838) (34)
Improvements to existing apartments (202) (251) (222) (71)
Proceeds from sales of property - - 9,189 -
New mortgage loans funded - (3,100) - -
Principal payments and satisfaction on mortgage loans receivable 432 207 320 418
Capitalized costs of future merger (1,166) - - -
----------- ----------- ----------- -----------
Net cash flows generated by (used in) investing activities 1,653 (26,656) (36,203) (50,617)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Mortgage loans payable:
New mortgage loans 12,000 - 19,718 36,442
Prepayments - - (1,017) (5,147)
Other principal payments (539) (1,055) (689) (694)
Proceeds from grants of restricted shares and exercises of options 277 787 128 64
Net proceeds from public stock offering - - - 54,971
Redemption of 9.5% debentures - - - (703)
Dividends paid (13,823) (26,885) (26,200) (20,066)
----------- ----------- ----------- -----------
Net cash flows (used in) generated by financing activities (2,085) (27,153) (8,060) 64,867
----------- ----------- ----------- -----------
Increase (decrease) in cash and short-term investments 11,595 (24,476) (16,171) 35,263
Balance at beginning of period 4,462 28,938 45,109 9,846
----------- ----------- ----------- -----------
Balance at end of period $16,057 $4,462 $28,938 $45,109
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>

See notes to financial statements

<PAGE>

STATEMENTS OF SHAREHOLDERS' EQUITY
BRE Properties, Inc.

ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period/year 212,017 211,230 211,102 110,591
Sale of shares 614 - - 54,971
Conversion of debentures - - - 45,476
Restricted shares granted and stock options exercised 277 787 128 64
----------- ----------- ----------- -----------
Balance at end of period/year 212,908 212,017 211,230 211,102
----------- ----------- ----------- -----------

UNDISTRIBUTED NET REALIZED GAIN ON SALES OF PROPERTIES
Balance at beginning of period/year 30,706 34,036 37,931 31,515
Net income for period/year 9,238 23,555 22,305 26,482
Cash dividends paid - $.63 per share August 1,1995 to
December 31,1995; $1.23 per share in the fiscal year ended
July 31,1995; and $1.20 per share in fiscal years ended
July 31,1994 and 1993 (13,823) (26,885) (26,200) (20,066)
----------- ----------- ----------- -----------
Balance at end of period/year 26,121 30,706 34,036 37,931
----------- ----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY $239,248 $242,942 $245,485 $249,252
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>

See notes to financial statements

<PAGE>

1. COMPANY

BRE Properties, Inc. ("BRE" or "the Company") is a self-administered real estate
investment trust ("REIT") which owns and operates multifamily communities and
other income producing properties in the Western United States. At December 31,
1995, BRE's portfolio consisted of 38 properties, including 25 multifamily
communities (aggregating 8,794 units, consisting of 5,475 wholly owned units and
3,319 units on land leased to others) and 13 commercial and retail properties
(including 2 held in partnerships in which BRE is a limited partner). Of these
properties, 23 are located in California, 11 in Arizona, 3 in Washington and 1
in Oregon. The 38 properties contain, in the aggregate, approximately 8,650,000
net rentable square feet of improvements on approximately 511 acres of land.

In March 1996, BRE merged with Real Estate Investment Trust of California
("RCT"). This and other subsequent events are disclosed in Note 12.

2. ACCOUNTING POLICIES

CHANGE IN YEAR-END AND TRANSITION PERIOD FINANCIAL REPORT

In May 1996, BRE elected to change its year end from July 31 to December 31,
effective December 31, 1995. The change was made to better align BRE's
reporting periods with those of its industry peer group. In connection with the
year-end change, the five-month period from August 1 through December 31, 1995
is being reported in this transition 10K.

Comparable condensed results for the five month period from August 1 through
December 31, 1994 are as follows:

(Unaudited)
---------
August 1 through December 31, 1994
----------------------------------
Revenues $25,213,000
Income before gain on sales 9,532,000
Net gain on sales 1,250,000
---------
Net income $10,782,000

Net income per share:
Income before gain on sales $.436
Net gain on sales .057
----
Net income $.493

<PAGE>

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 exist which may indicate that it is probable that the
sum of expected future cash flows (undiscounted) from a rental property are less
than its carrying value. Upon determination that such impairment has occurred,
rental properties are reduced to net realizable value. 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 5 to 25 years for other property.

Developments are generally considered placed in service as the property is ready
for occupancy.

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 course of business, BRE will receive offers for sale of its properties,
either solicited or unsolicited. For those offers which are accepted, the buyer
will usually require a due diligence period before consummation of the
transaction; it is not unusual for matters to arise which result in withdrawal
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 underway.

No properties are considered "held for sale" for this purpose as of December 31,
1995.

RENTAL EXPENSES AND CAPITALIZED COSTS

For apartment properties, costs of replacements, such as appliances, carpets and
drapes, are expensed. Leasing commissions and tenant improvement costs for
retail and commercial and industrial properties are expensed when the lease term
is less than five years and capitalized on leases of five years or more and
amortized using the straight-line method over the lease terms which range from 5
to 25 years. For all properties, improvements and betterments that increase the
value of the property or extend its life are capitalized.

<PAGE>

CASH AND OTHER SHORT-TERM INVESTMENTS

BRE considers highly liquid short-term investments with initial maturities of
three months or less to be cash equivalents. Financial instruments which
potentially subject BRE to concentrations of credit risk include cash and short-
term investments. BRE places its cash deposits and temporary cash investments
with creditworthy, high quality financial institutions. The concentration of
such deposits and temporary cash investments is not deemed to create a
significant risk to BRE.

DEFERRED COSTS

Included in other assets are costs incurred in obtaining debt financing which
are deferred and amortized over the terms of the respective debt agreements.
Related amortization expense is included in interest expense (non-cash) in the
accompanying statements of operations. Net deferred financing costs included in
Other Assets in the accompanying balance sheets are $758,000, $764,000 and
$703,000 as of December 31, 1995 and July 31, 1995 and 1994, respectively.

INCOME TAXES

BRE has elected to be taxed as a 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, all 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 financial statements.

(LOSSES) GAINS ON SALES OF INVESTMENTS IN RENTAL PROPERTIES

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

NET INCOME PER SHARE
Beginning August 1, 1995, net income per share is based upon the simple
weighted average shares outstanding during the five month period ended
December 31, 1995. For the years ended July 31, 1995, 1994 and 1993, the
calculation included common stock equivalents. The effect of excluding
common stock equivalents from the calculation beginning August 1, 1995 is
less than 3% and is not material to the financial statement presentation.

Net income per share on a fully diluted basis is presented if dilution is
greater than 3%. Such dilution only occurred in 1993 when fully diluted net
income per share was $2.74.

<PAGE>

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair values of BRE's financial instruments, including cash and other short-
term investments, accounts receivable, mortgage loans receivable, accounts
payable, other accrued expenses, mortgage loans payable, lines of credit and
other financial instruments, approximate their carrying or contract values based
on their nature, terms, and interest rates which approximate current market
rates.

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.

RECLASSIFICATION

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

Commencing August 1, 1995, BRE began reallocating a portion of its salaries,
employee benefits and other personnel costs from general and administrative to
real estate expense to better reflect the functional nature of the underlying
activity. While this reclassification does not change BRE's net income or funds
from operations, such allocation reduces reported general and administrative
expenses and increases real estate expense by an equal amount. Management
believes that this allocation is consistent with industry practices and will
provide better matching of the revenue generated by the properties and the
expenses required to generate that revenue.

NEW ACCOUNTING STANDARDS

In March 1995, the Financial Accounting Standards Board issued Statement No.
121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF. This statement requires the recording of impairment
losses on long-lived assets used in operations when indicators of impairment are
present and when the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amounts. The statement also requires
that assets held for disposal be carried at the lower of the carrying amount or
fair value less cost to sell. Depreciation on these assets is discontinued.
For this purpose, management must commit to a plan to sell or abandon the asset
and it must be actively marketed for sale in the near future. BRE adopted
Statement 121 in 1996 and there was no effect from the adoption of the standard.

<PAGE>

In October 1995, the Financial Accounting Standards Board issued Statement No.
123, ACCOUNTING FOR STOCK-BASED COMPENSATION. This statement establishes a
fair value based method of accounting for employee stock based compensation
plans, and also permits companies to continue to apply the intrinsic value based
methodology, providing certain pro-forma disclosures are made. BRE will adopt
the standard in 1996 through disclosure only.

3. INVESTMENTS IN RENTAL PROPERTY

Investments in rental property consist of the following:

Commercial
Multifamily and Retail Total
----------- ---------- -----
December 31, 1995:
- ------------------
Land $58,032,000 $16,566,000 $74,598,000
Improvements 209,815,000 85,703,000 295,518,000
--------------- --------------- ---------------
Subtotal 267,847,000 102,269,000 370,116,000
Accumulated Depreciation (22,641,000) (25,395,000) (48,036,000)
--------------- --------------- ---------------
Total $245,206,000 $76,874,000 $322,080,000
--------------- --------------- ---------------
--------------- --------------- ---------------

July 31, 1995:
- --------------
Land $56,166,000 $22,102,000 $78,268,000
Improvements 202,133,000 96,774,000 298,907,000
--------------- --------------- ---------------
Subtotal 258,299,000 118,876,000 377,175,000
Accumulated Depreciation (20,485,000) (27,326,000) (47,811,000)
--------------- --------------- ---------------
Total $237,814,000 $91,550,000 $329,364,000
--------------- --------------- ---------------
--------------- --------------- ---------------

July 31, 1994:
- --------------
Land $45,836,000 $22,704,000 $68,540,000
Improvements 158,724,000 98,255,000 256,979,000
--------------- --------------- ---------------
Subtotal 204,560,000 120,959,000 325,519,000
Accumulated Depreciation (15,750,000) (25,514,000) (41,264,000)
--------------- --------------- ---------------
Total $188,810,000 $95,445,000 $284,255,000
--------------- --------------- ---------------
--------------- --------------- ---------------

Included in the above multifamily amounts at December 31, 1995 of $245,206,000
are land and improvements which are leased to entities under long-term operating
leases expiring in various years through 2018. The entities have improved the
land with buildings. BRE's carrying value for the land and its own improvements
at December 31, 1995 is $85,194,000, which is net of accumulated depreciation
and amortization of $25,394,000.

<PAGE>

The future minimum lease payments to be received from the entities under these
operating leases at December 31, 1995 are as follows:

(In thousands)
1996 $11,498
1997 10,260
1998 9,158
1999 8,524
2000 5,999
Thereafter 26,583
------
$72,022
------
------

Rental income attributable to apartment leases is recorded when due from the
tenants and is recognized monthly as it is earned, which is not materially
different than on a straight-line basis. Rental income attributable to
commercial and industrial leases is recorded ratably over the lease term.

Leases with tenants at wholly owned shopping centers provide for percentage
rents based upon the gross revenue of the tenants. These percentage rents are
in excess of stipulated minimums. Percentage rents under these operating
leases, which are included in rental income, amounted to:
<TABLE>
<CAPTION>

(In thousands) Five months ended For the year ended For the year ended For the year ended
----------------- ------------------ ------------------ ------------------
December 31, 1995 July 31, 1995 July 31, 1994 July 31, 1993
----------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Percentage rent
portion attributable to:
Land leases $2,313 $5,098 $4,783 $4,682
Wholly owned real estate 91 188 285 374
Properties sold - - - 279
---------------------------------------------------------------------------------------------
Total percentage rent $2,404 $5,286 $5,068 $5,335
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
</TABLE>

4. MORTGAGE LOANS RECEIVABLE

BRE has various mortgage loans and notes receivable which are to be paid in
monthly installments through July 1997. The notes bear interest at rates
ranging from ten to twelve percent. Amounts remaining due to BRE at December
31, 1995 aggregate $6,977,000. The allowance for possible investment losses was
$1,250,000 as of December 31 and July 31, 1995 and $1,000,000 as of July 31,
1994. All loans are secured by real estate.

<PAGE>

5. LINES OF CREDIT

At December 31, 1995, two banks had extended to BRE unsecured lines of credit
aggregating $30,000,000 and expiring on March 1, 1996. No borrowings under these
lines of credit were outstanding during the five months ended December 31, 1995
or during the fiscal years ended July 31, 1995 and 1994. In connection with
these arrangements, a fee is charged on the committed amounts. Such fee totaled
$67,000 for the five months ended December 31, 1995.

6. MORTGAGE LOANS PAYABLE

BRE has acquired certain investments in rental property which are subject to
existing mortgage loans payable and has obtained mortgage loans on other
investments. The following data pertains to mortgage loans payable at December
31, 1995, and at July 31, 1995 and 1994, respectively:

(In thousands) December 31, 1995 July 31, 1995 July 31, 1994
- -------------- ----------------- ------------- -------------
Mortgage loans payable $112,290 $100,828 $73,944
Cost of investments in real estate
securing mortgage loans payable $173,904 $157,320 $119,523
Annual principal and interest
payments $9,769 $8,642 $6,574
Remaining terms of mortgage
loans payable 2-33 years 3-34 years 1-11 years
Interest rates 6.5 - 8.4% 5.5 - 8.4% 5.6 - 8.4%

Included in the $112,290,000 mortgage loans payable is $9,240,000 of tax-exempt
debt with a variable interest rate, which was 5.35% at December 31, 1995. The
effective interest rate on this debt is 6.24%, which includes amortization of
related fees and costs. Interest on all other mortgage loans is fixed.

Scheduled principal payments required on mortgage loans payable for the next
five years are as follows:

(In thousands)
- --------------
1996 $1,443
1997 $2,545
1998 $1,554
1999 $1,678
2000 $35,548
Thereafter $69,522
---------------
Total $112,290
---------------
---------------

<PAGE>

Interest expense on mortgage loans payable excluding amortization of related
costs aggregated $3,480,000 for the five month period ended December 31, 1995,
and $6,981,000, $4,429,000 and $2,930,000 for the years ended July 31, 1995,
1994, and 1993, respectively. Total interest paid on long-term debt did not
differ materially from interest expense.

7. STOCK OPTION PLANS

EMPLOYEE PLAN

The 1984 and 1992 Stock Option Plans ("Plans") provide for the issuance of
Incentive Stock Options, Non-Qualified Stock Options, and Restricted Shares.
The maximum number of shares that may be issued under the Plans is 1,350,000.
The option price may not be less than the fair market value of a share on the
date that the option is granted. Changes in options outstanding during the
period ended December 31, 1995 and the years ended July 31, 1995, 1994 and 1993
were as follows:

AUGUST - 1995 1994 1993
-------- ---- ---- ----
DECEMBER 1995
-------------
Balance at beginning of year 590,200 479,200 374,040 315,700
Granted 95,000 176,000 113,000 112,000
Exercised (12,000) 65,000 3,840 (39,660)
Canceled (5,000) - (4,000) (14,000)
----------- ----------- ----------- ----------
Balance at end of year 668,200 590,200 479,200 374,040
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
Exercisable - 398,700 312,200 220,040
Restricted shares granted 5,600 26,164 5,700 4,000
Shares available for granting
future options 448,336 543,936 746,100 860,800

In addition to the options granted under the Plans, the Directors granted an
option for 100,000 shares (at $15.32) to the President and Chief Executive
Officer. This option was registered with the Securities and Exchange Commission
on a Form S-8 and is not part of the Plans.

At December 31, 1995, the price of shares under option ranged from $12.97 to
$17.59, with an average price of $15.56. Expiration dates ranged from August
24, 1996 through August 27, 2005. Stock options were exercised during the
period on options originally granted at $14.47.

In addition, at December 31, 1995, 44,864 Restricted Shares were outstanding at
grant prices ranging from $14.09 to $17.59 per share.

<PAGE>

NON-EMPLOYEE DIRECTOR STOCK PLAN

The 1994 Non-Employee Director Stock Plan provides for the issuance of 5,000
Non-Qualified Stock Options per year to each non-employee member of the board of
directors. The maximum number of shares that may be issued under the Plan is
250,000. As with the Employee Plan, 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 during the period ended December 31, 1995 and the year ended
July 31, 1995 were as follows:

DECEMBER 31, 1995 July 31, 1995
----------------- -------------
Balance at beginning of period 20,000 -
Granted 100,000 25,000
Canceled - (5,000)
Granted to RCT Board members 75,000 -
------------- -------------
Balance at end of period 195,000 20,000
------------- -------------
------------- -------------
Exercisable - -
Shares available for granting future
options 55,000 230,000

At December 31, 1995, the prices of shares under option were $15.25 and $16.63,
with expiration dates of September 25, 2004 and October 15, 2005, respectively.

8. SHAREHOLDER RIGHTS

On August 14, 1989, the Directors adopted a Shareholder Rights Plan and declared
a dividend distribution of one Right for each share of BRE's common stock
outstanding on September 7, 1989. The Rights entitle the holders to purchase,
under certain conditions, shares of common stock at a cash purchase price of
$45.00 per share, subject to adjustment. The Rights may also, under certain
conditions, entitle the holders to receive common stock, or other consideration,
having a value equal to two times the exercise price of each Right. The Rights
are redeemable by BRE at a price of $.005 per Right. If not so redeemed, the
Rights expire on September 7, 1999.

9. RETIREMENT PLAN

BRE has a defined contribution retirement plan covering all employees with more
than one year of continuous full-time employment. In addition to employee
elective deferrals, BRE currently contributes an amount equal to 10% of the
compensation expense of participating employees. The amounts contributed were
$83,000 for the five months ended December 31,1995, and $139,000, $145,000, and
$113,000 for the years ended July 31, 1995, 1994, and 1993, respectively.

<PAGE>

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. The portions of the loans
expected to be forgiven are expensed currently as compensation. At December
31, 1995, the carrying amount of the loans was $721,650. The amounts of such
loans expected to be forgiven and treated as compensation expense were $29,809
and $20,416 for the five months ended December 31, 1995 and for the year ended
July 31, 1995, respectively. Interest income, which would be immaterial to BRE,
is not being recognized on the loans. These receivables are presented as assets
rather than reclassified as reductions to equity because such reclassifications
would be immaterial.

11. LITIGATION

BRE 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, individually or in the aggregate,
will have a material effect on BRE's results of operations or financial
position.

12. SUBSEQUENT EVENTS

MERGER WITH RCT

On March 15, 1996, RCT merged with and into BRE ("the Merger"). Following
consummation of the Merger, BRE changed its state of domicile from Delaware to
Maryland, amended the BRE Certificate of Incorporation to authorize preferred
stock, and approved the Amended and Restated Non-Employee Director Stock Option
Plan. The Merger was completed in accordance with the terms and conditions of
the Agreement and Plan of Merger dated October 11, 1995, as amended ("the Merger
Agreement"). Under the terms of the Merger Agreement, upon the Merger, each
issued and outstanding share of beneficial interest of RCT was converted into
the right to receive .57 of a share of BRE common stock. The Merger was
unanimously approved by the boards of both companies and by the requisite vote
of the shareholders of both. The Merger has been accounted for in 1996 as a
purchase business combination.

<PAGE>

ACQUISITIONS OF REAL ESTATE

BRE purchased the following rental properties subsequent to December 31, 1995:

Property Name Location Time of Acquisition Number
------------- -------- ------- ----------- ------
Purchase Price of Units
-------- ----- --------

<S> <C> <C> <C> <C>
Candlewood North Apartments Northridge, California February 1996 $10,625,000 189

Ballinger Commons Seattle, Washington April 1996 $29,370,000 485

Thrasher's Mill Bothell, Washington April 1996 $10,287,000 214

Berkshire Court Portland, Oregon July 1996 $16,400,000 266

Arcadia Cove Phoenix, Arizona July 1996 $24,300,000 432
------------
$90,982,000
</TABLE>

DISPOSITIONS OF REAL ESTATE

In July 1996, BRE sold land held in Daly City for $58,000,000. As both the tax
and book basis of the land was $7,425,000, the one-time gain on sale is
approximately $50,485,000. Also in July 1996, BRE sold a portfolio of seven
light industrial properties. Proceeds on the sale approximated the carrying
value of the properties.

COMMITMENTS

BRE has committed to purchase the following rental properties as of July 31,
1996:

<TABLE>
<CAPTION>
Expected
--------
Date of Projected Number
------ --------- ------
Property Name Location Purchase Cost of Units
------------- -------- -------- ---- --------

<S> <C> <C> <C> <C>
Mid-
Newport Landing Apartments II Glendale, Arizona 1996 $12,900,000 240

Late
Sycamore Valley Apartments Fountain Valley, California 1996 $23,650,000 440
</TABLE>

<PAGE>

BORROWINGS SUBSEQUENT TO YEAR-END

BRE entered into several bank lines of credit in 1996 totaling $100,000,000. In
conjunction with the acquisitions above, BRE utilized these lines of credit by
borrowing $26,000,000 and $13,000,000 under separate credit facilities. As of
July 31, 1996, $53,000,000 was outstanding on the lines of credit.

DIVIDENDS PAID SUBSEQUENT TO YEAR-END AND STOCK SPLIT

On February 26, 1996, the Directors declared a dividend of $.315 per share,
payable March 28, 1996 to shareholders of record March 8, 1996. In addition,
pursuant to the Merger Agreement, the Directors declared a special dividend of
$.0245 per share, payable March 28, 1996 to shareholders of record March 14,
1996.

On May 20, 1996, the Directors declared a dividend of $.33 per share, payable
June 27, 1996 to shareholders of record June 7, 1996. Also on May 20, 1996,
the Directors approved a two-for-one stock split to be effected in the form
of a stock dividend to shareholders of record June 7, 1996, payable on June
27, 1996. All share and per share information in these financial statements
has been retroactively restated for the stock split.

<PAGE>

13. SELECTED QUARTERLY DATA (UNAUDITED)

The following tables set forth the quarterly results of operations of the
Company for the five months ended December 31, 1995 and the two years ended July
31, 1995 and 1994:

Transition 1995 Year ended July 31, 1995
------------------------------------------------------------
2 mos. Qtr. end Quarter ended
------------------------------------------------------------
Dec. 31, Oct. 31, July 31, Apr. 30, Jan. 31, Oct. 31,
(In thousands, except per share data) 1995 1995 1995 1995 1995 1994
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUE $11,831 $16,175 $16,183 $15,931 $15,791 $14,689

Income before (loss) gain on sales of
investments in rental properties 4,237 5,900 5,993 5,793 5,942 $5,457
Net (loss) gain on sales of investments - (899) - 1,120 1,250 -
Provision for possible investment losses - - - (2,000) - -
------------------------------------------------------------
Net income $4,237 $5,001 $5,993 $4,913 $7,192 $5,457
------------------------------------------------------------
------------------------------------------------------------

PER SHARE
Income before (loss) gain on sales of
investments in rental properties $.19 $.27 $.28 $.27 $.28 $.25
Net (loss) gain on sales of investments - (.04) - .05 .05 -
Provision for possible investment losses - - - (.09) - -
------------------------------------------------------------
Net income $.19 $.23 $.28 $.23 $.33 $.25
------------------------------------------------------------
------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
Year ended July 31, 1994
------------------------------------------
Quarter ended
------------------------------------------
July 31, Apr. 30, Jan. 31, Oct. 31,
(In thousands, except per share data) 1994 1994 1994 1993
------------------------------------------
<S> <C> <C> <C> <C>
Revenue $14,370 $13,184 $13,285 $12,740

Income before gain on sales of investments in rental
properties 5,873 5,412 5,479 4,993
Net gain on sales of investments 395 - 153 -
------------------------------------------
Net income $6,268 $5,412 $5,632 $4,993
------------------------------------------
------------------------------------------

PER SHARE
Income before gain on sales of investments in rental
properties $.27 $.25 $.25 $.23
Net gain on sales of investments .02 - .01 -
------------------------------------------
Net income $.29 $.25 $.26 $.23
------------------------------------------
------------------------------------------
</TABLE>

<PAGE>

BRE PROPERTIES, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
(000) OMITTED

INITIAL COST TO COMPANY
-----------------------
COST
CAPITALIZED
DATES ACQUIRED/ BUILDINGS AND SUBSEQUENT TO DEPRECIABLE
NAME LOCATION CONSTRUCTED LAND IMPROVEMENTS ACQUISITIONS LIVES- YEARS
- ---- -------- ----------- ---- ------------ ------------ ------------

<S> <C> <C> <C> <C> <C> <C>
Montanosa San Diego, California 1992/1989-90 $6,005 $24,065 $169 40
Mira Mesa San Diego, California 1993/ 4,869 19,493 134 40
Cimmaron, Hacienda, Westpark) 1985-1987
Selby Ranch Sacramento, California 1986/1971-74 2,660 18,340 231 40
Parkwood Mill Creek, Washington 1989/1989 3,947 15,811 38 40
Scottsdale Cove Scottsdale, Arizona 1991-94/ 3,243 14,468 19 40
1992-94
Shadowbrook Redmond, Washington 1987/1986 3,605 12,709 138 40
The Verandas Union City, California 1993/1989 3,233 12,932 63 40
Terra Nova Villas Chula Vista, California 1994/1985 2,925 11,699 52 40
Brookdale Glen Portland, Oregon 1993/1985 2,797 11,188 58 40
Hacienda del Rio Tucson, Arizona 1994/1983 1,859 7,437 28 40
Colonia del Rio Tucson, Arizona 1994/1985 1,774 7,094 20 40
SpringHill Tucson, Arizona 1994/1987 1,733 6,933 26 40
Casas Lindas Tucson, Arizona 1994/1987 1,513 6,051 17 40
Westlake Village Daly City, California 1972/1951-71 7,425
Winchester San Diego, California 1994/1987 1,482 5,928 40
Sharon Green Menlo Park, California 1971/1970 1,250 5,770 205 45
Camino Seco Village Tucson, Arizona 1995/1984 1,335 5,360 9 40
Oracle Village Tucson, Arizona 1994/1983 1,209 4,837 17 40
Citywalk Seattle, Washington 1988/1988 1,123 4,276 10 40
Fountain Plaza Tucson, Arizona 1994/1975 907 3,628 23 40
Village Green La Habra, California 1972/1971 372 2,763 296 45
Villa Serra Cupertino, California 1973/1970 900
Newport Landing Glendale, Arizona 1995/1987 1,866 7,465 15 40
-------- ------------ ------------

SUBTOTAL-APARTMENTS 58,032 208,247 1,568
-------- ------------ ------------

The Hub Fremont, California 1973/1961-87 5,494 5,822 30,563 30-40
El Camino Woodland Hills, California 1971/1970 1,500 10,037 4,042 40
-------- ----------- ------------
SUBTOTAL-SHOPPING CENTERS 6,994 15,859 34,605
-------- ----------- ------------

<PAGE>

GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1995
--------------------------------------------------
BUILDINGS
AND ACCUMULATED
NAME LOCATION LAND IMPROVEMENTS TOTAL DEPRECIATION ENCUMBRANCES
- ---- -------- ---- ------------ ----- ------------ ------------

<S> <C> <C> <C> <C> <C> <C>
Montanosa San Diego, California $6,005 $24,234 $30,239 $1,814 $17,033
Mira Mesa San Diego, California 4,869 19,627 24,496 1,102 13,212
Cimmaron, Hacienda, Westpark)
Selby Ranch Sacramento, California 2,660 18,571 21,231 4,457 12,679
Parkwood Mill Creek, Washington 3,947 15,849 19,796 2,437
Scottsdale Cove Scottsdale, Arizona 3,243 14,487 17,730 1,013
1992-94
Shadowbrook Redmond, Washington 3,605 12,847 16,452 2,728
The Verandas Union City, California 3,233 12,995 16,228 865 11,982
Terra Nova Villas Chula Vista, California 2,925 11,751 14,676 513 9,240
Brookdale Glen Portland, Oregon 2,797 11,246 14,043 771
Hacienda del Rio Tucson, Arizona 1,859 7,465 9,324 217 5,587
Colonia del Rio Tucson, Arizona 1,774 7,114 8,888 222 5,252
SpringHill Tucson, Arizona 1,733 6,959 8,692 217 5,315
Casas Lindas Tucson, Arizona 1,513 6,068 7,581 214
Westlake Village Daly City, California 7,425 7,425 *
Winchester San Diego, California 1,482 5,928 7,410 261
Sharon Green Menlo Park, California 1,250 5,975 7,225 2,997 19,253
Camino Seco Village Tucson, Arizona 1,335 5,369 6,704 56 4,217
Oracle Village Tucson, Arizona 1,209 4,854 6,063 151 4,171
Citywalk Seattle, Washington 1,123 4,286 5,409 827
Fountain Plaza Tucson, Arizona 907 3,651 4,558 106 3,126
Village Green La Habra, California 372 3,059 3,431 1,626
Villa Serra Cupertino, California 900 900 **
Newport Landing Glendale, Arizona 1,866 7,480 9,346 47
-------- -------- ------------ ------------ ------------

Subtotal-Apartments 58,032 209,815 267,847 22,641 111,067
-------- -------- ------------ ------------ ------------

The Hub Fremont, California 5,494 36,385 41,879 12,144
El Camino Woodland Hills, California 1,500 14,079 15,579 2,285 1,223
-------- -------- ------------ ------------ ------------

Subtotal-Shopping Centers 6,994 50,464 57,458 14,429 1,223
-------- -------- ------------ ------------ ------------

</TABLE>

* Subordinated land lease
** Nonsubordinated land lease

<PAGE>

BRE PROPERTIES, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
(000) OMITTED

INITIAL COST TO COMPANY
-----------------------
COST
CAPITALIZED
DATES ACQUIRED/ BUILDINGS AND SUBSEQUENT TO
NAME LOCATION CONSTRUCTED LAND IMPROVEMENTS ACQUISITIONS
---- -------- ----------- ---- ------------ ------------
<S> <C> <C> <C> <C> <C>
OTHER INCOME-PRODUCING PROPERTY

Sorrento Technology San Diego, California 1989/1985 4,046 5,520 $700
LSI Logic Fremont, California 1982/1982-84 1,323 2,458 2,105
Fremont 3 Fremont, California 1982/1982-84 1,128 2,096 2,529
Westridge San Diego, California 1985/1984 1,072 4,300 108
Oak Creek II Milipitas, California 1984/1980 552 4,048 238
525 Almanor Sunnyvale, California 1971/1967-92 300 1,475 2,422
Peppertree Hayward, California 1981/1981 539 2,000 1,336
Oak Creek I Milipitas, California 1984/1980 379 2,780 73
Santa Clara Office Mountain View, California 1972/1971 233 703 348
-------- --------- ---------

SUBTOTAL-OTHER 9,572 25,380 9,859
-------- --------- ---------

TOTAL $74,598 $249,486 $46,032
-------- --------- ---------
-------- --------- ---------

GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1995
--------------------------------------------------

BUILDINGS
DEPRECIABLE AND ACCUMULATED
NAME LOCATION LIVES-YEARS LAND IMPROVEMENTS TOTAL DEPRECIATION ENCUMBRANCES
---- -------- ----------- ---- ------------ ----- ------------ ------------
<C> <C> <C> <C> <C> <C>
OTHER INCOME-PRODUCING PROPERTY

Sorrento Technology San Diego, California 40 4,046 6,220 10,266 1,094
LSI Logic Fremont, California 35 1,323 4,563 5,886 1,670
Fremont 3 Fremont, California 35 1,128 4,625 5,753 1,595
Westridge San Diego, California 35 1,072 4,408 5,480 1,117
Oak Creek II Milipitas, California 35 552 4,286 4,838 1,330
525 Almanor Sunnyvale, California 45 300 3,897 4,197 1,239
Peppertree Hayward, California 35 539 3,336 3,875 1,387
Oak Creek I Milipitas, California 35 379 2,853 3,232 918
Santa Clara Office Mountain View, California 45 233 1,051 1,284 616
-------- --------- --------- ---------

SUBTOTAL-OTHER 9,572 35,239 44,811 10,966
-------- --------- --------- --------- ---------

TOTAL $74,598 $295,518 $370,116 $48,036 $112,290
-------- --------- --------- --------- ---------
-------- --------- --------- --------- ---------

</TABLE>

See Note A of Notes to Financial Statements for information related to lives on
which depreciation is computed, and Note E of Notes to Financial Statements
concerning encumbrances at December 31, 1995.

<PAGE>

BRE PROPERTIES INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
(000 OMITTED)

The activity in equity investments and related depreciation for the period ended
December 31, 1995 and the three years ended
July 31, 1995 is summarized as follows:

Dec. 31 July 31
---------- ----------
EQUITY INVESTMENTS 1995 1995
---------- ----------
<S> <C> <C>
Balance at beginning of year $377,175 $325,519
Plus: Cash expenditures 621 23,515
Acquisition through tax-deferred exchanges:
Mortgage loan
Value of property exchanged 8,882 5,860
Cash 449 248
Assumption of bond and mortgage debt 27,939

Less: Cost of properties disposed of through tax-deferred exchanges (4,156)
Properties sold (17,011)
Reduction in carrying value (1,750)
---------- ----------
Balance at period end $370,116 $377,175
---------- ----------

ACCUMULATED DEPRECIATION
Balance at beginning of year $47,811 $41,264
Plus: Provision during the year through charges to income 3,294 7,658

Less: Fully amortized leasing commissions on expired leases (74)
Accumulated depreciation on exchanged properties (3,069) (1,037)
Accumulated depreciation on properties sold
---------- ----------

Balance at end of period $48,036 $47,811
---------- ----------
---------- ----------

Approximate aggregate cost for federal income tax purposes $0.00 $314,868
---------- ----------
---------- ----------

July 31
----------------------------
EQUITY INVESTMENTS 1994 1993
---------- ----------
<S> <C> <C>
Balance at beginning of year $282,012 $220,577
Plus: Cash expenditures 45,712 31,979
Acquisition through tax-deferred exchanges:
Mortgage loan 17,500
Value of property exchanged 11,000
Cash 1,556
Assumption of bond and mortgage debt 9,240

Less: Cost of properties disposed of through tax-deferred exchanges (600)
Properties sold (11,445)
Reduction in carrying value
---------- ----------
Balance at period end $325,519 $282,012
---------- ----------
---------- ----------

ACCUMULATED DEPRECIATION
Balance at beginning of year $37,563 $32,270
Plus: Provision during the year through charges to income 6,674 5,453

Less: Fully amortized leasing commissions on expired leases (112) (160)
Accumulated depreciation on exchanged properties
Accumulated depreciation on properties sold (2,861)
---------- ----------

Balance at end of period $41,264 $37,563
---------- ----------
---------- ----------

Approximate aggregate cost for federal income tax purposes $265,735 $222,229
---------- ----------
---------- ----------

</TABLE>

<PAGE>

INDEX TO EXHIBITS
PAGE (BY
SEQUENTIAL
EXHIBIT NUMBERING
NUMBER IDENTITY OF EXHIBIT SYSTEM)
- ------- ---------------------------------------------------------------------

3.1 Restated Certificate of Incorporation (Previously filed
on October 13, 1994 in the Exhibits to Form 10-K and
incorporated by reference herein.) --
3.2 By-Laws (Previously filed as amended on February 26, 1993
in the Exhibits to Form S-3 (File No. 33058802) 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 Form 10-K and
incorporated by reference herein.) --
10.2 1992 Employee Stock Option Plan, as amended and restated to
date --
10.3 1994 Non-Employee Director Stock Plan (Previously filed
on October 23, 1994 (Previously filed on October 23, 1995
in the Exhibits to Form 10-K and incorporated by reference
herein.) --
10.4 1992 Payroll Investment Plan (Previously filed on October
19, 1992 in the Exhibits to Form 10-K and incorporated by
reference herein.) --
10.5 Form of Indemnification Agreement (Previously filed on
September 25, 1986, as amended, in Exhibits to Form S-4
(File No. 33-9014) and incorporated by reference herein.) --
10.8 Employment agreement with Frank C. McDowell (Previously
filed on October 23, 1995 in the Exhibits to Form 10-K and
incorporated by reference herein.) --
10.9 Supplemental Executive Retirement Benefit agreement with
Arthur G. von Thaden (Previously filed on October 24, 1988
in the Exhibits to Form 10-K and incorporated by reference
herein.) --
10.10 Supplemental Executive Retirement Benefit agreement with
Howard E. Mason, Jr. (Previously filed on October 24, 1988
in the Exhibits to Form 10-K and incorporated by reference
herein.) --
10.11 BRE Properties, Inc. Retirement Plan (Previously filed on
October 24, 1988 in the Exhibits to Form 10-K and incorporated
by reference herein.) --
10.12 BRE Properties, Inc. Supplemental ERISA Retirement Plan
(Previously filed on October 23, 1995 in the Exhibits to
Form 10-K and incorporated by reference herein.) --
10.13 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
Form 10-K and incorporated by reference herein.) --
10.14 Form of deferred compensation agreement with Eugene P. Carver
(Previously filed on October 13, 1994 in the Exhibits to Form
10-K and incorporated by reference herein.) --
11 Computation of earnings per share
27 Financial Data Schedule
99.1 Election of BRE Directors
99.2 BRE Executive Compensation and Officer Information
99.3 Security Ownership of BRE Management
99.4 Principal Shareholder of BRE

<PAGE>

BRE PROPERTIES, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
- --------------------------------------------------------------------------------

STATEMENT OF EARNINGS PER SHARE

Average shares outstanding are computed by adding the shares outstanding at each
month end and dividing that result by the number of months elapsed in the year-
to-date period.

Primary Earnings per Share:

Transition For the year ended
period July 31
------------ --------------------------------------------
1995 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average shares outstanding 21,942,000 21,882,000 21,866,000 17,548,000

Net income before (loss) gain on
sales of investments (a) $ 10,137,000 $ 23,185,000 $21,757,000 $16,613,000
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------

Computation $ .46 $ 1.06 $1.00 $.95
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
Net (loss) gain on sales of
investments (a) $ (899,000) $370,000 $548,000 $9,869,000
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------

Computation $ (.04) $ .02 $ .02 $ .56
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------

EARNINGS PER SHARE (a) $ .42 $ 1.08 $1.02 $1.51
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------

</TABLE>

Additional Primary Computation:

Transition For the year ended
period July 31
----------------------------------------------------------
1995 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average shares outstanding 21,942,000 21,882,000 21,866,000 17,548,000
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------

Additional adjustment for
dilutive effect of outstanding
options (as determined by the
application of the treasury
stock method): 43,000 17,000 37,000 49,000
------------- ------------- ------------- ------------
Weighted average number of
shares outstanding, as adjusted 21,985,000 21,899,000 21,933,000 17,597,000
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
Primary earnings per share, as
adjusted - Net income (b) $ .42 $ 1.08 $ 1.02 $1.50
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
</TABLE>

<PAGE>

BRE PROPERTIES, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

FULLY DILUTED EARNINGS PER SHARE

Transition For the year ended
period July 31
------------ --------------------------------------------
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (a) $9,238,000 $23,555,000 $22,305,000 $26,482,000
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------

Average shares outstanding 21,942,000 21,882,000 21,866,000 17,548,000
Additional dilutive effect of
outstanding options (as
determined by the application
of the treasury stock method) 104,000 23,000 37,000 53,000
------------- ------------- ------------- ------------
Weighted average number of
shares, as adjusted 22,046,000 21,905,000 21,903,000 17,601,000
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
Fully diluted earnings per
share - Net income (b) $ .42 $ 1.08 $ 1.02 1.50
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
</TABLE>

(a) These amounts agree with the related amounts in the Statements of Income.
(b) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion
No. 15 because it results in dilution of less than 3%.

<PAGE>

EXHIBIT 99.1

ELECTION OF BRE DIRECTORS

(BRE PROXY ITEM NO. 3)

BRE's Board of Directors (the "Board") consists of six members, divided
into three classes, designated Class I, Class II and Class III. Currently, there
are two Class I directors, two Class II directors and two Class III directors.

At the BRE Annual Meeting, two Class II directors are to be elected for a
term of three years (expiring 1998) or until the election and qualification of
their successors. The persons proposed for reelection as the Class II directors
of BRE are Mr. L. Michael Foley and Mr. John McMahan. The accompanying proxies
solicited by the BRE Board of Directors will (unless otherwise directed, revoked
or suspended) be voted for the reelection of Messrs. Foley and McMahan, who are
the present Class II directors of BRE and were appointed by the Board of
Directors in 1994 and 1993, respectively. See also "BRE Annual Meeting -- Record
Date; Voting Rights; Proxies."

In the unanticipated event that either nominee should become unavailable
for election or upon election should be unable to serve, the proxies will be
voted for the election of such other person or persons as shall be determined by
the persons named in the proxy in accordance with their judgment.

The Merger Agreement provides that upon consummation of the Merger, BRE's
Board will be increased by adding three persons who currently are trustees of
RCT. At that time, it is anticipated that the BRE Board, without shareholder
vote, will appoint Mr. Kuppinger as an additional Class I director (term
expiring in 1997), Mr. Simon as an additional Class II director (1998) and Mr.
Borsari as an additional Class III director (1996). See "Interests of Certain
Persons in the Merger."

The following table sets forth certain information as to the nominees, as
well as the other current members of the Board and the three RCT directors
proposed to be appointed to the Board following the Merger, including their
ages, principal business experience during the past five years, the year they
each first became a director, Board committee membership and other directorships
currently held in companies with a class of securities registered pursuant to
Section 12 of the Exchange Act or subject to the requirements of Section 15(d)
of that Act or any company registered as an investment company under the
Investment Company Act of 1940.

NOMINEES - CLASS II DIRECTORS

PRINCIPAL BUSINESS EXPERIENCE DIRECTOR BOARD COMMITTEE
NAME DURING PAST FIVE YEARS AGE SINCE (1) MEMBERSHIP
---- ----------------------------------------- --- --------- ---------------
<S> <C> <C> <C> <C>
L. Michael Foley . . . . Senior Vice President and Chief Financial 57 1994 Audit,
Officer, Coldwell Banker Corporation, Compensation
since 1995. Consultant, L. Michael Fo-
ley & Associates, 1994-95. Consultant,
Sears Roebuck and Co., 1993-94. Chair-
man and Chief Executive Officer, Sears
Savings Bank, 1989-93. Senior Executive
Vice President, Coldwell Banker Real Es-
tate Group, Inc., 1986-93.

<PAGE>

PRINCIPAL BUSINESS EXPERIENCE DIRECTOR BOARD COMMITTEE
NAME DURING PAST FIVE YEARS AGE SINCE (1) MEMBERSHIP
---- ----------------------------------------- --- --------- ---------------
John McMahan . . . . . . President, John McMahan Associates, 58 1993 Audit,
Inc., a management consulting firm, and Compensation,
McMahan Real Estate Securities, Inc., a Executive
real estate investment firm, since 1994.
President and Chief Executive Officer,
Mellon/McMahan Real Estate Advisors,
Inc., a real estate advisory firm, 1990-94.
Chairman, Peregrine Real Estate Trust,
and Trustee, California Real Estate In-
vestment Trust. Trustee, Mellon Partici-
pating Mortgage Trust, Inc., a real estate
investment trust.

OTHER CURRENT MEMBERS OF THE BOARD

CLASS III - TERM EXPIRES IN 1996

C. Preston Butcher . . . President and Chief Executive Officer, 56 1985 Audit,
Lincoln Property Company, N.C., Inc.,re- Compensation
al estate developer, and President and
Chief Executive Officer, Lincoln Proper-
ty Company Management Services, Inc.,
real estate management company, for
more than five years. Director, The
Charles Schwab Corporation.

Frank C. McDowell. . . . President and Chief Executive Officer 47 June 1995 Executive
of BRE, since June 1995. Chief Executive
Officer and Chairman of Cardinal Realty
Services, Inc., 1992-95. Senior Vice Presi-
dent, Head of Real Estate, First Inter-
state Bank of Texas, 1988-92.

CLASS I - TERM EXPIRES IN 1997

Arthur G. von Thaden . . Chairman of the Board of BRE. President 63 1981 Executive
and Chief Executive Officer of BRE from
1970 to June 1995. Chief Executive Of-
ficer, BankAmerica Realty Services, Inc.,
a real estate investment advisory firm,
from 1970 to September 1987.

Malcolm R. Riley . . . . Partner, Riley/Pearlman Company, a shop- 63 1990 Audit,
ping center developer and manager, since Compensation,
1986. President, Plaza Management Executive
Company, a wholly owned subsidiary of
Riley/Pearlman, since 1992, and Chair-
man, La Cagnina/Riley & Associates,
since 1994.

<PAGE>

PROPOSED MEMBERS OF THE BOARD TO BE ADDED FOLLOWING THE MERGER

William E. Borsari . . . President, The Walters Management 56
Company, a real estate asset manage-
ment company, for more than five years.

CLASS I - TERM EXPIRES IN 1997

Roger P. Kuppinger . . . Financial advisor to public and private 55
companies, since February 1994. Senior
Vice President and Managing Director,
Sutro & Co., Inc., an investment banking
company, from 1969 to February 1994.
Director, Harlyn Products, and Director,
Realty Income Corporation.

CLASS II - TERM EXPIRES IN 1998

Gregory M. Simon . . . . Self employed in the development of and 54
investment in real estate, since 1991. Se-
nior Vice President, H.F. Ahmanson &
Co. and Home Savings of America, from
1983 to 1991.

</TABLE>

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

(1) Years indicated are calendar years. For Messrs. von Thaden and Butcher,
includes service as a trustee of BRE's predecessor, BankAmerica Realty
Investors.

A description of the business experience of the other executive officers of
BRE is contained in BRE's annual report on Form 10-K for the year ended July 31,
1995, filed with the Securities and Exchange Commission. See "Incorporation by
Reference."

Mr. Butcher, a Class III director of BRE, is a managing general partner in
approximately 240 partnerships which act as the general partner of single
purpose limited partnerships, each of which owns a rental real estate property.
To date, 14 of these single purpose limited partnerships have filed for
protection under the Federal bankruptcy laws.

VOTE REQUIRED

The two nominees who receive the highest numbers of votes shall be elected
as Class II directors. The Board of Directors unanimously recommends that
shareholders vote FOR Messrs. Foley and McMahan.

BOARD AND COMMITTEE MEETINGS; COMPENSATION OF DIRECTORS

During BRE's fiscal year ended July 31, 1995, the Board held 14 meetings.
All of the directors attended 75% or more of the meetings of the Board and each
of the committees on which they served during fiscal 1995, except Mr. McMahan.

The Board of Directors has established an Audit Committee, an Executive
Committee and a Compensation Committee. The present members of these committees
are indicated in the preceding section of this Proxy Statement. There is no
Nominating Committee.

The Audit Committee reviews the annual financial statements with both
management and the independent auditors. Such review includes an assessment as
to whether the financial statements are complete and consistent with information
known to them and reflect appropriate accounting principles. The Audit Committee
meets annually with the independent auditors in preparation for, and in review
of, the annual audit. During fiscal 1995, the Audit Committee met twice.

<PAGE>

EXHIBIT 99.2

BRE EXECUTIVE COMPENSATION AND OTHER INFORMATION

SUMMARY COMPENSATION TABLE

The following table shows the compensation for the past three fiscal years
of BRE's Chief Executive Officer and each other executive officer with salary
and bonus of over $100,000 for the fiscal year ended July 31, 1995 (the "named
executive officers").

LONG-TERM COMPENSATION AWARDS
ANNUAL COMPENSATION ---------------------------------------------
----------------------- RESTRICTED SHARE OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS ($)(1) ARS (#) COMPENSATION(2)
- --------------------------- ---- --------- -------- ---------------- -------- ---------------

<S> <C> <C> <C> <C> <C> <C>
Arthur G. von Thaden 1995 $262,500 $108,000 $ 68,200 35,000 $16,163
President and Chief 1994 260,417 -0- 21,113 35,000 21,559
Executive Officer 1993 247,883 95,000 19,125 35,000 22,034
until June 5, 1995, then
Chairman
Frank C. McDowell 1995 $ 33,333 $ -0- $125,011 70,000 $ -0-
President and Chief 1994
Executive Officer 1993
(since June 5, 1995)
Byron M. Fox 1995 $169,792 $ 62,000 $ 52,700 5,000 $17,834
Executive Vice President, 1994 159,375 -0- 10,556 3,000 21,320
Acquisitions and Asset 1993 151,667 45,000 9,563 5,000 17,582
Management
Howard E. Mason, Jr. 1995 $108,833 $ 38,000 $ 34,100 5,000 $11,068
Senior Vice President, 1994 102,167 -0- 10,556 2,500 14,326
Finance 1993 98,000 30,000 9,563 3,000 10,611
Ronald P. Wargo 1995 $113,333 $ 48,000 $ 49,600 5,000 $11,573
Senior Vice President, 1994 103,333 -0- 14,075 4,000 15,572
Asset Management 1993 93,500 40,000 6,375 5,000 9,941
Ellen G. Breslauer 1995 $ 88,833 $ 30,000 $ 31,000 3,000 $8,712
Secretary and Treasurer 1994 82,417 -0- 7,038 2,000 11,479
1993 78,917 27,000 6,375 2,500 8,049

</TABLE>

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

(1) The amounts reported represent the aggregate value of restricted share
awards at the date of award. In fiscal 1995, 1994 and 1993, the named
executive officers received the following numbers of restricted share
awards:

1995 1994 1993
----- ---- ----
von Thaden. 2,200 600 600
McDowell. . 4,082 -0- -0-
Fox . . . . 1,700 300 300
Mason . . . 1,100 300 300
Wargo . . . 1,600 400 200
Breslauer . 1,000 200 200

Except with respect to Messrs. von Thaden and McDowell, the restrictions
imposed on these restricted share awards severally lapse on the fifth
anniversary of the date of grant or, if earlier, upon normal retirement, death
or disability. The restrictions on Mr. von Thaden's shares were terminated upon
his retirement on December 31, 1995. The restrictions on Mr. McDowell's shares
lapse on the third anniversary of the grant date and may lapse upon termination
of employment following a change in control of BRE. See BRE EMPLOYMENT CONTRACTS
AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS, below. Ms.
Breslauer has announced her retirement effective March 1, 1996. Dividends are
paid on restricted shares at the same rate and at the same time as on the BRE
Common Stock.

<PAGE>

At July 31, 1995, the aggregate number and value of shares of restricted
stock (based on the market price of $31.50 at July 31, 1995) held by each of the
named executive officers was as follows:

NUMBER VALUE
------ ----------
von Thaden . 5,200 $163,800
McDowell . . 4,082 128,583
Fox. . . . . 2,900 91,350
Mason. . . . 2,400 75,600
Wargo. . . . 2,400 75,600
Breslauer. . 1,500 47,250

(2) Consists of BRE's contributions to its defined contribution retirement plan
(401(k) Plan) on behalf of the named executive officers. Also includes
$1,250 for Mr. Fox representing BRE's allocation for him pursuant to the
Supplemental Retirement Plan which BRE established beginning with the
fiscal year ended July 31, 1995 in order to provide all employees, other
than Messrs. von Thaden and Mason (see SUPPLEMENTAL RETIREMENT BENEFITS,
below), unfunded supplemental retirement benefits equal to the benefits
that would have been received from BRE contributions to the 401(k) Plan
absent the various contribution limitations.

OPTION GRANTS IN FISCAL 1995

The following table sets forth (i) all individual grants of stock options
made by BRE during fiscal 1995 to each of the named executive officers; (ii) the
ratio that the number of options granted to each individual bears to the total
number of options granted to all BRE employees, (iii) the exercise price and
expiration date of these options; and (iv) the estimated potential realizable
values assuming certain stock price appreciation over the ten-year option term.

POTENTIAL REALIZED VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION FOR
OPTION TERM
INDIVIDUAL GRANTS (2)
-------------------------------------------------------- ------------------------
% OF TOTAL
OPTIONS
GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED (#) IN FISCAL 1995 ($/SH) DATE 5% 10%
---- ---------- -------------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
(1)
Arthur G. von Thaden. . . 35,000 25.4% $31.00 8/28/04 $ 682,351 $1,729,211
Frank C. McDowell . . . . 70,000 50.7% 30.63 6/04/05 1,348,193 3,416,585
Byron M. Fox. . . . . . . 5,000 3.6% 31.00 8/28/04 97,479 247,030
Howard E. Mason, Jr.. . . 5,000 3.6% 31.00 8/28/04 97,479 247,030
Ronald P. Wargo . . . . . 5,000 3.6% 31.00 8/28/04 97,479 247,030
Ellen G. Breslauer. . . . 3,000 2.2% 31.00 8/28/04 58,487 148,218

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

</TABLE>

(1) All options shown in the table were granted under BRE's 1992 Employee Stock
Plan (the "1992 Plan"), except for options for 50,000 shares granted to Mr.
McDowell. The exercise price is 100% of fair market value on the date of
grant. The options vest 50% on each of the first and second anniversary
dates of grant (except as described below for Mr. McDowell's options) and
expire ten years from the date of grant. The option price is payable in
cash or by delivery of previously acquired shares of BRE Common Stock, and
the option holder may in certain circumstances elect to have shares
withheld to satisfy tax withholding requirements in connection with the
exercise of options. Options granted may become immediately exercisable in
certain events such as an optionee's retirement, death or disability, or in
connection with a merger, acquisition or "change in control" as defined in
the 1992 Plan. All options held by Mr. McDowell may become immediately
exercisable upon termination of employment following a change in control of
BRE.

<PAGE>

Mr. von Thaden's options became fully vested on his retirement as a BRE
employee on December 31, 1995. See BRE EMPLOYMENT CONTRACTS AND TERMINATION
OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS, below. Mr. McDowell
exercised his options immediately upon grant with respect to 20,000 shares.
See the following table. Mr. McDowell's options for the remaining 50,000
shares vest in equal installments on June 22, 1998, 1999 and 2000. Any
portion of these options then remaining unexercised will terminate on July
22, 2000, unless at any time prior to that date the market price for the
BRE Common Stock has exceeded $39.00 per share for ten consecutive trading
days.

(2) Potential realizable value is calculated based on an assumption that the
price of BRE's Common Stock appreciates at the annual rate shown (5% and
10%), compounded annually, from the date of grant of the option until the
end of the option term (ten years). The value is net of the exercise price
but is not adjusted for the taxes that would be due upon exercise. The 5%
and 10% assumed rates of appreciation are mandated by the rules of the
Securities and Exchange Commission and do not represent BRE's estimate or
projection of future stock prices. Actual gains, if any, upon future
exercise of any of these options will depend on the actual performance of
BRE's Common Stock and the continued employment of the executive officer
holding the option through its vesting period. At 5% annual appreciation
from $31.00 over a ten-year term, the stock price would be $50.50. At 10%
annual appreciation from $31.00 over a ten-year term, the stock price would
be $80.41. Using a base of $30.63, the stock price would be $49.88 after
five years and $79.43 after ten years.

AGGREGATED OPTION EXERCISES IN FISCAL 1995 AND FISCAL YEAR-END OPTION VALUES

The following table sets forth (i) the number of shares received and the
aggregate dollar value realized in connection with each exercise of outstanding
stock options during fiscal year 1995 by each of the named executive officers;
(ii) the total number of all outstanding unexercised options held by the named
executive officers as of the end of fiscal year 1995; and (iii) the aggregate
dollar value of all such unexercised options based on the excess of the market
price of the BRE Common Stock over the exercise price of the option.

VALUE OF UNEXERCISED
NUMBER OF IN-THE MONEY
SHARES NUMBER OF UNEXERCISED OPTIONS AT 7/31/95
ACQUIRED OPTIONS AT 7/31/95 (2)
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
(1)
Arthur G. von Thaden. . . 12,500 $1,563 118,000 52,500 $189,831 $17,500
Frank C. McDowell . . . . 20,000 -0- -0- 50,000 -0- 43,750
Byron M. Fox. . . . . . . -0- -0- 18,000 6,500 33,841 2,500
Howard E. Mason, Jr.. . . -0- -0- 11,250 6,250 13,124 2,500
Ronald P. Wargo . . . . . -0- -0- 17,800 7,000 24,674 2,500
Ellen G. Breslauer. . . . -0- -0- 12,400 4,000 20,243 1,500

</TABLE>
- -------------------

(1) Value realized is calculated by subtracting the total exercise price from
the market value of the underlying BRE Common Stock on the date of
exercise. Because Mr. McDowell purchased 20,000 shares on the date of grant
of his options, the exercise price was equal to the market price at the
time of exercise. Mr. McDowell was granted a loan of $612,500 by BRE
representing the full exercise price for the 20,000 shares. See BRE
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS, below. As a result of his option exercise, Mr. McDowell
increased his holdings of BRE Common Stock by 20,000 shares.

(2) The market value of BRE's Common Stock at July 31, 1995 was $31.50 per
share.

<PAGE>

BRE EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

MR. MCDOWELL
Effective as of June 5, 1995 (the "Commencement Date"), BRE entered into a
five-year employment agreement with Mr. McDowell. Certain material terms of the
agreement are as follows:

BASE SALARY AND ANNUAL INCENTIVE BONUS. Mr. McDowell will receive a base
salary of $300,000 per year and is eligible to receive an annual incentive bonus
of up to 100% of base salary based on achievement of predefined operating or
performance criteria established by the BRE Board, with emphasis on FFO (the
"Annual Criteria").

STOCK LOAN. On the Commencement Date, Mr. McDowell received a loan (the
"Employment Stock Loan") of $612,500 to exercise options to purchase 20,000
shares of BRE Common Stock (at an exercise price of $30.625 per share) issued on
that date. The Employment Stock Loan bears interest at 8.25% per annum,
compounded annually, with all principal and accrued interest payable in full on
June 5, 2000 (the "Payment Date"); provided, however, that repayment of any
principal and accrued interest under the Employment Stock Loan (the "Loan
Amount") will be forgiven in accordance with the following formulas (the "BRE
Performance Formulas"): (i) 20% of the Loan Amount will be forgiven if the gross
book value of BRE's equity investments in real estate, investments in limited
partnerships and mortgages have a value of $937 million or more on the Payment
Date, and a pro rata portion of 20% of the Loan Amount will be forgiven if such
value is between $791 million and $937 million; (ii) 20% of the Loan Amount will
be forgiven on the Payment Date if, on the second anniversary date of the
Employment Stock Loan, there has been an increase in FFO per share of BRE Common
Stock for the two year period ending April 30, 1997 which is at or above the
80th percentile of the Indexed REITs for a comparable period, and a pro rata
portion of 20% of the Loan Amount will be forgiven if any such increase is
within the 50th and 80th percentiles; (iii) 30% of the Loan Amount will be
forgiven if, on the Payment Date, there has been an increase in FFO per share of
BRE Common Stock for the three year period ending April 30, 2000 which is at or
above the 80th percentile of the Indexed REITs, and a pro rata portion of 30% of
the Loan Amount will be forgiven if any such increase is within the 50th and
80th percentiles; and (iv) 30% of the Loan Amount will be forgiven if, as of the
Payment Date, the average of the FFO multiples of BRE Common Stock as of
December 31 of each of the five preceding years (computed in each case by
dividing the market price of BRE Common Stock on the last trading day of the
calendar year by the preceding twelve months' FFO) is at or above the 80th
percentile of the average multiple of the Indexed REITs for the same five year
period, and a pro rata portion of 30% of the Loan Amount will be forgiven if
such multiple is within the 50th and 80th percentiles. In addition, repayment of
a pro rata portion of the Loan Amount will be forgiven by BRE upon termination
of Mr. McDowell's employment with BRE under the circumstances described in
CERTAIN SEVERANCE BENEFITS, below.

STOCK OPTIONS AND RESTRICTED STOCK GRANTS. On the Commencement Date, Mr.
McDowell received options to purchase 50,000 shares of BRE Common Stock at an
exercise price of $30.63 per share. One-third of such options vest on each of
June 22, 1998, 1999 and 2000; provided, however, that any unexercised options
terminate on July 22, 2000 if the Market Value of BRE Common Stock has not
exceeded $39.00 per share for ten consecutive trading days during the five year
employment term. On the Commencement Date, Mr. McDowell was also awarded 4,082
Restricted Shares, all of which shall vest on the third anniversary of the
Commencement Date.

FUTURE AWARDS. Beginning with the fiscal year commencing August 1, 1996
and for each subsequent fiscal year, Mr. McDowell will receive annual long term
incentive awards which, assuming achievement of all applicable performance
goals, will provide Mr. McDowell with the financial equivalent of (i) a
forgivable performance based five-year loan to purchase 5,000 shares of BRE
Common Stock and (ii) performance options to purchase 25,000 shares of BRE
Common Stock at Market Value on the date of award.

CERTAIN SEVERANCE BENEFITS. If, at any time during the five year
employment term, the employment of Mr. McDowell is terminated, he shall be
entitled to receive the benefits described below.

<PAGE>

(a) TERMINATION OTHER THAN IN CONNECTION WITH A CHANGE IN CONTROL.

(i) TERMINATION BY BRE WITHOUT CAUSE. If Mr. McDowell is terminated
without cause before June 5, 1997, he will receive a lump sum payment equal
to 1.5 times his then base salary, all vesting restrictions on the 4,082
Restricted Shares awarded on the Commencement Date would be eliminated and
the Loan Amount would be reduced to an amount equal to the product of
20,000 times the Market Value of BRE Common Stock on the date of
termination, with the balance of the Loan Amount payable immediately. If
such termination occurs after June 5, 1997, Mr. McDowell would receive a
lump sum payment equal to his then base salary plus an amount equal to the
average of his annual bonus over the most recent two years (or the previous
annual bonus if only one annual bonus period has passed), all vesting
restrictions on the 4,082 Restricted Shares awarded to him on the
Commencement Date would be eliminated and the Loan Amount would be reduced
based on a pro rata application of the BRE Performance Formulas (the "BRE
Performance Adjustment"), taking into consideration the number of full
months worked and BRE's performance data through the last quarter ended 45
days or more prior to the termination date.

(ii) TERMINATION DUE TO DEATH OR DISABILITY. Upon termination due to
death or disability, Mr. McDowell or his estate will receive a lump sum
payment equal to the estimated annual bonus he would have received for the
fiscal year in question (based on actual performance relative to the Annual
Criteria for the fiscal year and Mr. McDowell's contribution to the date of
death or disability), calculated on a prorated basis to the date of
termination. In addition, the Employment Stock Loan would be forgiven based
on the BRE Performance Adjustment, with any balance payable 15 days after
termination.

(iii) VOLUNTARY TERMINATION OR TERMINATION FOR CAUSE. Upon voluntary
termination or termination for "cause" by BRE, no further compensation
would be payable to Mr. McDowell and the outstanding balance of the
Employment Stock Loan, together with accrued but unpaid interest, would be
payable in full within 15 days of termination.

(b) TERMINATION FOLLOWING A CHANGE IN CONTROL.

(i) TERMINATION BY BRE WITHOUT CAUSE OR BY MR. MCDOWELL FOR GOOD
REASON. If Mr. McDowell is terminated without cause within 12 months
following a Change in Control, or if Mr. McDowell terminates his employment
for "Good Reason" within 12 months after a Change in Control, he would
receive the following benefits: (a) a lump sum payment equal to (x) two
times his then base salary plus an amount equal to two times the average of
his annual bonus over the most recent two years, or his previous annual
bonus if only one annual bonus period has passed (based on his current base
salary of $300,000 and assuming average incentive compensation in the
maximum amount of $300,000, this payment would be $1,200,000) plus (y) the
estimated annual bonus he would have received for the fiscal year in
question (based on actual performance relative to the Annual Criteria for
the fiscal year and Mr. McDowell's contribution to date), calculated on a
prorated basis to the date of termination; (b) all unvested stock options
held by Mr. McDowell would vest and be exercisable for a period of three
months; (c) all vesting restrictions on the Restricted Shares would be
eliminated; and (d) the Employment Stock Loan would be forgiven based on
the BRE Performance Adjustment, with any balance payable upon termination.

(ii) TERMINATION DUE TO DEATH OR DISABILITY. Upon termination due to
death or disability following a Change in Control, Mr. McDowell or his
estate would receive the same benefits described in paragraph (a)(ii)
above.

(iii) VOLUNTARY TERMINATION WITHOUT GOOD REASON OR TERMINATION FOR
CAUSE. Upon voluntary termination of employment by Mr. McDowell without
Good Reason within 12 months following a Change in Control, he would
receive a lump sum payment equal to his then base salary plus an amount
equal to the average of his annual bonus over the most recent two years, or
the previous annual bonus if only one annual bonus period has passed
($600,000, assuming a

<PAGE>

$300,000 base salary and maximum incentive bonus). The outstanding balance
of the Employment Stock Loan would be due on such termination. Upon
termination for "cause" by BRE within 12 months following a Change in
Control, no further compensation would be payable to Mr. McDowell and the
outstanding balance of the Employment Stock Loan, together with accrued but
unpaid interest, would be payable in full within 15 days of termination.

Any of the foregoing amounts payable to Mr. McDowell following a Change in
Control are subject to reduction to the extent such payments would constitute
"parachute payments" as defined in Section 280G of the Code.

MR. VON THADEN

On December 19, 1994, BRE entered into an agreement with Mr. von Thaden
contemplating his retirement on December 31, 1995. Pursuant to that agreement,
BRE agreed to the acceleration of vesting of all stock options and restricted
stock held by Mr. von Thaden as of the retirement date, and to allow exercise of
such options for up to three years following that date (but not beyond the
original term of any such option). Mr. von Thaden relinquished the position of
Chief Executive Officer and became Chairman of the Board on June 5, 1995, when
Mr. McDowell became the Chief Executive Officer, and Mr. von Thaden retired as a
BRE employee on December 31, 1995, resulting in acceleration of the existing
4,000 shares of BRE restricted stock and stock options for 17,500 shares of BRE
Common Stock, although he remains a director of BRE. BRE agreed to maintain Mr.
von Thaden's compensation and benefits through December 31, 1995 at the same
levels as existed on December 19, 1994.

SUPPLEMENTAL RETIREMENT BENEFITS

In 1988, BRE established an unfunded plan to provide supplemental
retirement benefits to Mr. von Thaden and Howard E. Mason, Jr. This plan
generally provides for the payment of supplemental benefits to each of Mr. von
Thaden and Mr. Mason in an amount equal to the greater of (i) the excess of the
benefits he would have received under the defined benefit pension plan of
BankAmerica Corporation (assuming his employment with BRE's predecessor,
BankAmerica Realty Services, Inc., had continued until retirement at his BRE
earnings levels) over the benefits he is entitled to receive under BRE's 401(k)
Plan or (ii) the benefits he would have received from BRE's contributions to the
401(k) Plan absent the various contribution limitations. These supplemental
benefits are payable upon termination of employment in any actuarially
equivalent form.

The established supplemental benefits payable to Mr. von Thaden on his
retirement on December 31, 1995 are annual payments of $11,600 as a life
annuity, with a minimum of five years of payments (i.e., a five year certain and
life annuity) or, in lieu of annual payments, a lump sum of $100,100. Assuming
retirement prior to age 65, the maximum estimated supplemental benefits payable
to Mr. Mason are annual payments of $1,540 as a life annuity, with a minimum of
five years of payments (i.e., a five year certain and life annuity) or, in lieu
of annual payments, a lump sum of $13,500. Assuming retirement at age 65, the
estimated supplemental benefits payable to Mr. Mason are annual payments of
$1,380 as a life annuity, with a minimum of five years of payments (i.e., a five
year certain and life annuity) or, in lieu of annual payments, a lump sum of
$11,600.

See also footnote 2 of the SUMMARY COMPENSATION TABLE, above, regarding the
BRE Supplemental Retirement Plan adopted beginning with the fiscal year ended
July 31, 1995.

<PAGE>

COMPENSATION COMMITTEE REPORT ON COMPENSATION
OF EXECUTIVE OFFICERS

COMPENSATION POLICIES AFFECTING EXECUTIVE OFFICERS

GENERAL

The Compensation Committee of the Board of Directors (the "Committee")
administers BRE's executive compensation program. The Committee is composed
entirely of outside directors.

The objective of BRE's executive compensation program is to develop and
maintain executive reward programs which contribute to the enhancement of
shareholder value, while attracting, motivating and retaining key executives who
are essential to the long-term success of BRE. As discussed in detail below,
BRE's executive compensation program consists of both fixed (base salary) and
variable (incentive) compensation elements. Variable compensation consists of
annual cash incentives, restricted share grants and stock option grants. These
elements are designed to operate on an integrated basis and together comprise
total compensation value.

Each year, the Committee reviews executive compensation in light of BRE's
performance during the last fiscal year and compensation data at companies that
are considered comparable. In reviewing BRE's performance during fiscal 1995,
the Committee considered a variety of factors. Funds from operations increased
8% from $28,431,000 in fiscal 1994 to $30,843,000 in fiscal 1995. The real
estate portfolio grew 16% from $326,628,000 to $378,356,000. The market price of
BRE's Common Stock increased 2% during the year, from $30.88 to $31.50. In
reviewing BRE performance, the Committee considered these factors as a whole
without assigning specific weights to particular factors.

It is the Committee's belief that, in light of the current compensation
levels of BRE's executive officers, none of BRE's executive officers will be
affected by the provisions of Section 162(m) of the Code, which limits the
deductibility of certain executive compensation during 1995. Therefore, the
Committee has not adopted a policy as to compliance with the requirements of
Section 162(m).

BASE SALARY

Base salary levels of BRE's key executives are largely determined through
comparison with comparable companies in the real estate industry. For this
purpose, the Committee gives primary consideration to companies included in the
equity REIT peer group used for the five-year comparison of total shareholder
return. Salary information about comparable companies is surveyed by reference
to public disclosures made by companies in the real estate industry. In
addition, the Committee from time to time obtains information about comparable
salary levels from an outside compensation consultant.

For fiscal 1995, base salaries of BRE's executive officers were set to
approximate the 50th percentile of the survey data.

ANNUAL CASH INCENTIVES

The annual cash incentive is designed to provide a short-term (one-year)
incentive to executive officers based on a percentage of the individual's base
salary. Incentive awards are based on the achievement of predetermined corporate
and individual performance goals. For the CEO, the relative weights of the
corporate and individual performance measures are 75% to BRE's goals and 25% to
the individual's goals. For the Executive Vice President and the Senior Vice
Presidents, the relative weights are 50% to BRE's goals and 50% to the
individual's goals, and for vice presidents and other officers who participate
in the bonus program, the relative weights are 25% BRE goals and 75% individual
goals. Specific individual goals for each executive are established at the
beginning of the year (by the Committee in the case of the CEO and by the CEO in
all other cases) and are tied to the functional responsibilities of each
executive. Individual goals may include objective and subjective factors, such
as improving the performance of assets managed by the executive, successful
acquisitions or sales, development of leadership skills and personal training
and education. BRE's goals are

<PAGE>

based on operating performance, as measured by a predetermined increase in FFO.
Other than the allocation between individual and BRE goals, no specific weights
are assigned to the individual goals. In addition, no bonus awards are made if a
minimum level of FFO is not met.

In fiscal 1995, BRE and certain of the individual performance targets were
met. The Summary Compensation Table shows cash bonuses paid to the named
executive officers for fiscal 1995.

STOCK OPTIONS AND RESTRICTED SHARES

Stock options are designed to provide long-term (ten year) incentives and
rewards tied to the price of BRE's common stock. Given the fluctuations of the
stock market, stock price performance and financial performance are not always
consistent. The Committee believes that stock options, which provide value to
participants only when BRE's shareholders benefit from stock price appreciation,
are an important component of BRE's annual executive compensation program. The
number of options or shares currently held by an officer is not a factor in
determining individual grants, and the Committee has not established any target
level of ownership of BRE Common Stock by BRE's executive officers. However,
accumulation and retention of shares of BRE stock by officers is encouraged.

Stock options are awarded annually in the first month following the close
of each fiscal year. BRE does not adhere to any firmly established formulas for
the issuance of options. During fiscal 1995, ten senior officers received stock
option grants. The Summary Compensation Table shows the options granted to the
named executive officers for fiscal 1995. In determining the size of the grants
to the named executive officers, the Committee assessed relative levels of
responsibility and the long-term incentive practice of other comparable
companies.

In accordance with the provisions of BRE's 1992 Employee Stock Plan, the
exercise price of all options granted was equal to the market value of the
underlying Common Stock on the date of grant. Accordingly, the value of these
grants to the officers is dependent solely upon the future growth and share
value of BRE's Common Stock.

The Committee also awards restricted shares as a compensation vehicle and
to retain key executive managers. Currently ten officers, each of whom is an
assistant vice president or higher of BRE, hold awards. The number of restricted
shares covered by each award is determined by the Committee in its discretion
and generally reflects the extent of the officer's success in achieving BRE's
goals during the preceding year and the level of the officer's responsibility.
The Summary Compensation Table shows restricted share awards made to the named
executive officers for fiscal 1995.

All awards of restricted shares over the past three fiscal years have
provided for vesting at the end of a period of five years. Since the holder of
restricted shares would generally forfeit them if he or she were to leave BRE
prior to vesting, the Committee believes these awards are a significant factor
in the retention of key employees and support a long-term view among the
officers.

CHIEF EXECUTIVE OFFICER'S COMPENSATION

ARTHUR G. VON THADEN

The Committee based the fiscal 1995 compensation of Arthur G. von Thaden,
BRE's chief executive officer until June 5, 1995, on the policies described
above and on the terms of Mr. von Thaden's employment contract. In December
1994, BRE entered into an agreement with Mr. Von Thaden contemplating his
retirement on December 31, 1995. Pursuant to that agreement, BRE agreed to
continue to pay Mr. von Thaden's then present compensation and benefits through
December 31, 1995, to provide for the acceleration of vesting of stock options
and restricted stock held by Mr. von Thaden as of the retirement date, and to
allow the exercise of such options for up to three years following that date
(but not beyond the original term of any such option). In making these
arrangements with Mr. von Thaden, the Committee took into account the terms of
his employment contract and his expected continued contribution to BRE to the
retirement date, the importance of his assistance to BRE's new Chief Executive
Officer to make a smooth transition of responsibility and his past contributions
to BRE.

<PAGE>

FRANK C. MCDOWELL

Following announcement that Arthur G. von Thaden would be retiring as Chief
Executive Officer, the Board of Directors appointed a Search Committee (the
"Search Committee") to conduct a search for a new Chief Executive Officer. In
connection with its search, the Search Committee engaged an executive search
firm to identify possible candidates and it reviewed carefully the available
information regarding the compensation of the chief executive officers of other
publicly held real estate firms, including those firms emphasizing ownership of
multifamily properties. In connection with these activities, the Search
Committee determined that the compensation package for BRE's new Chief Executive
Officer would require an increase in the base salary over that paid to Mr. von
Thaden. In addition, in order to closely align the Chief Executive Officer's
interest with that of the shareholders, the package would include long term
incentives designed to provide significant rewards upon achievement of
meaningful corporate objectives, including growth in assets, FFO and stock
price.

On June 5, 1995, Mr. Frank C. McDowell became BRE's Chief Executive
Officer. Mr. McDowell was identified as the person who could best lead BRE in
its efforts to reposition itself as a multifamily REIT and to increase its asset
size and equity. The Search Committee believed that Mr. McDowell's experience as
Chief Executive Officer of Cardinal Realty Services, Inc., which included
oversight responsibility of a 35,000 unit apartment portfolio, as well as his
real estate, lending and public company experience would be well suited to BRE's
needs. Effective as of June 5, 1995, BRE entered into a five year employment
agreement with Mr. McDowell providing, among other things, for an annual base
salary of $300,000 and an annual incentive bonus of up to 100% of base salary
upon achievement of predefined operating or performance criteria, a five year
stock loan of $612,500 which may be forgiven based on achievement during the
employment term of various BRE performance formulas based on asset growth,
increases in FFO and multiples of FFO, options to purchase 50,000 shares of
common stock (subject to vesting and certain termination provisions if BRE's
stock price does not exceed $39 per share for ten consecutive days during the
employment term) and a grant of 4,082 restricted shares. See BRE EMPLOYMENT
CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS,
above, for additional information regarding Mr. McDowell's employment agreement,
including the weighting of various BRE performance factors.

The foregoing report is given by the members of the Compensation Committee,
namely:

Malcolm R. Riley, Chairman
C. Preston Butcher
L. Michael Foley
John McMahan

<PAGE>

COMPARATIVE STOCK PERFORMANCE
The line graph below compares the cumulative total shareholder return on
BRE Common Stock for the last five fiscal years with the cumulative total return
on the S&P 500 Index and the NAREIT Equity REIT Without Health Care Total Return
Index over the same period. This comparison assumes that the value of the
investment in BRE's Common Stock and in each index was $100 on July 31, 1990 and
that all dividends were reinvested.

[GRAPH] 7/31/90 7/31/91 7/31/92 7/31/93 7/31/94 7/31/95
- --------------------------------------------------------------------------
BRE Properties, Inc. $100 $119.87 $139.09 $167.93 $160.44 $177.03
- --------------------------------------------------------------------------
S&P 500 Index $100 $112.78 $127.17 $138.20 $145.37 $183.31
- --------------------------------------------------------------------------
NAREIT Equity REIT $100 $103.01 $119.75 $154.82 $160.71 $168.99
Without Health Care
Total Return Index (*)
- --------------------------------------------------------------------------

- -----------
(1) Indicates appreciation of $100 invested on July 31, 1990 in BRE Common
Stock, S&P 500, and NAREIT Equity REIT Without Health Care Total Return
Index securities, assuming reinvestment of dividends.

* The NAREIT Equity REIT Without Health Care Total Return Index includes 169
companies with aggregate equity capitalization (excluding operating units)
of $40.6 billion.

<PAGE>
EXHIBIT 99.3

SECURITY OWNERSHIP OF BRE MANAGEMENT

The following table sets forth, as of September 5, 1995, information
regarding the beneficial ownership of BRE Common Stock by each director of BRE,
by each named executive officer (as hereinafter defined) and by all directors
and executive officers as a group. The amounts shown are based upon information
provided by the individuals named.

<TABLE>
<CAPTION>
PERCENTAGE
OF
OUTSTANDING
SHARES OF SHARES
COMMON STOCK OWNED
CURRENT POSITION BENEFICIALLY OWNED BENEFICIALLY
NAME WITH COMPANY (1) (1)(2)
- ---- ----------------------------- ------------------ ------------
<S> . . . . . . . . . . . . . . . . . <C> <C> <C>
Arthur G. von Thaden . . . . . . . . . Director and Chairman 185,535(3) 1.7%
Frank C. McDowell. . . . . . . . . . . Director, President and Chief
Executive Officer 24,082(4) *
C. Preston Butcher . . . . . . . . . . Director 3,250(5) *
John McMahan . . . . . . . . . . . . . Director 3,250(7) *
Malcolm R. Riley . . . . . . . . . . . Director 2,250(8) *
Byron M. Fox . . . . . . . . . . . . . Executive Vice President 31,083(9) *
Howard E. Mason, Jr. . . . . . . . . . Senior Vice President, Finance 26,536(10) *
Ronald P. Wargo. . . . . . . . . . . . Senior Vice President 26,956(11) *
Ellen G. Breslauer . . . . . . . . . . Secretary and Treasurer 24,364(12) *
All BRE directors and executive
officers as a group (ten persons) . . 331,556(13) 3.0%

- --------------------
</TABLE>

(1) The amounts and percentages of BRE Common Stock beneficially owned are
reported on the basis of regulations of the Securities and Exchange
Commission governing the determination of beneficial ownership of
securities. Except as otherwise indicated, each individual has sole voting
and sole investment power with regard to the shares owned.

(2) Except where otherwise indicated, does not exceed 1%.

(3) Mr. von Thaden -- includes 378 shares held by Mr. von Thaden's wife in her
Individual Retirement Account, as to which Mr. von Thaden has no voting or
investment power. Also includes 168,000 shares that may be purchased upon
the exercise of stock options that are currently exercisable. See also
BRE EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS -- MR. VON THADEN, above.

(4) Mr. McDowell -- includes 4,082 shares held as restricted shares and
20,000 shares which Mr. McDowell acquired June 5, 1995 upon exercise of
stock options granted to him at the time of his employment that are
collateral for a recourse loan from BRE. The interest rate on the five-year
loan is 8.25%, equal to the initial dividend yield on the shares so
purchased. The loan, initially for $612,500, may be forgiven in whole or in
part upon the achievement of company performance goals related to growth in
assets, FFO per share and stock price. See also BRE EMPLOYMENT CONTRACTS
AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS --
MR. MCDOWELL, above.

(5) Mr. Butcher -- includes 1,000 shares held by Mr. Butcher's wife as her
separate property and 1,000 shares held by Mr. Butcher and his wife as
community property, as to which he has shared voting and investment power.
Also includes 1,250 shares that may be purchased upon the exercise of stock
options that are currently exercisable or that will become exercisable on
or before November 2, 1995.

<PAGE>

(6) Mr. Foley -- includes 3,000 shares owned by a family trust of which
Mr. Foley and his wife are trustees, as to which he has shared voting and
investment power, and 1,250 shares that may be purchased upon the exercise
of stock options that are currently exercisable or that will become
exercisable on or before November 2, 1995.

(7) Mr. McMahan -- owned in joint tenancy by Mr. McMahan and his wife, as to
which he has shared voting and investment power. Also includes 1,250 shares
that may be purchased upon the exercise of stock options that are currently
exercisable or that will become exercisable on or before November 2, 1995.

(8) Mr. Riley -- includes 500 shares owned in joint tenancy by Mr. Riley and
his wife and 500 shares owned in a family partnership, as to which he has
shared voting and investment power. Also includes 1,250 shares that may be
purchased upon the exercise of stock options that are currently exercisable
or that will become exercisable on or before November 2, 1995.

(9) Mr. Fox -- includes 22,000 shares that may be purchased upon the exercise
of stock options that are currently exercisable or that will become
exercisable on or before November 2, 1995. Also includes 2,600 shares held
as restricted shares, and 5,000 shares which Mr. Fox acquired August 28,
1995 upon exercise of stock options that are collateral for a recourse loan
from BRE. The interest rate on the five-year loan is 8.25%, equal to the
initial dividend yield on the shares so purchased. The loan, initially for
$159,063, may be forgiven in whole or in part upon the achievement of
company performance goals related to growth in assets, FFO per share and
stock price similar to those applicable to forgiveness of Mr. McDowell's
loan as described in BRE EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS -- MR. MCDOWELL, above.

(10) Mr. Mason -- includes 826 shares held by the estate of the late Mrs. Mason
and 700 shares held by the estate as custodian for itself and Mrs. Mason's
sisters. With respect to these 700 shares, Mr. Mason has shared voting and
investment power. Also includes 15,000 shares that may be purchased upon
the exercise of stock options that are currently exercisable or that will
become exercisable on or before November 2, 1995. Also includes
2,400 shares held as restricted shares.

(11) Mr. Wargo -- includes 21,300 shares that may be purchased upon the
exercise of stock options that are currently exercisable or that will
become exercisable on or before November 2, 1995. Also includes 2,800
shares held as restricted shares.

(12) Ms. Breslauer -- includes 798 shares held by Ms. Breslauer's husband in
his Individual Retirement Account, as to which Ms. Breslauer has shared
investment power and no voting power. Also includes 6,294 shares held by
Ms. Breslauer and her husband as community property, as to which she has
shared voting and investment power. Also includes 14,900 shares that may be
purchased upon the exercise of stock options that are currently exercisable
or that will become exercisable on or before November 2, 1995. Also
includes 1,800 shares held as restricted shares.

(13) Includes 228,700 shares that may be purchased upon the exercise of stock
options that are currently exercisable or that will become exercisable on
or before November 2, 1995. Also includes 17,682 shares held as restricted
shares.

<PAGE>

EXHIBIT 99.4

PRINCIPAL SHAREHOLDER OF BRE

The following table indicates the only person known by BRE to be the
beneficial owner of more than 5% of the outstanding shares of BRE Common Stock
as of the BRE Record Date and the percentage of all outstanding shares of Common
Stock that such shares represented at that date, based on information furnished
by such holder or contained in filings made with the Securities and Exchange
Commission.

Number of
Shares Percentage
Name and Address of Common Stock of Shares
---------------- --------------- ----------
State Farm Insurance Companies 2,409,479 22%
One State Farm Plaza
Bloomington, Illinois 61701

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> AUG-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 16,057
<SECURITIES> 0
<RECEIVABLES> 5,727
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 370,116
<DEPRECIATION> (48,036)
<TOTAL-ASSETS> 354,895
<CURRENT-LIABILITIES> 3,357
<BONDS> 112,290
0
0
<COMMON> 219
<OTHER-SE> 239,029
<TOTAL-LIABILITY-AND-EQUITY> 354,895
<SALES> 0
<TOTAL-REVENUES> 28,006
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 15,221
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,547
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,238
<EPS-PRIMARY> .42
<EPS-DILUTED> .42

</TABLE>