BRE PROPERTIES INC /MD/, PRE 14A, 1997-02-25

BRE PROPERTIES INC /MD/
PRE 14A, 1997-02-25
REAL ESTATE INVESTMENT TRUSTS

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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
/ / Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2)

BRE PROPERTIES, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box): N/A

/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2), or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:* N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing party: N/A
(4) Date filed: N/A

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

* Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
PRELIMINARY PROXY MATERIALS

[LOGO]

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

BRE PROPERTIES, INC.

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

MARCH , 1997

Dear Shareholder:

It is a pleasure to invite you to attend our Annual Meeting of Shareholders
to be held on Thursday, April 10, 1997 at 10:00 a.m. San Francisco time, in the
Oak Room of the Westin St. Francis Hotel, 335 Powell Street, San Francisco,
California.

This booklet includes the notice of meeting and proxy statement, which
contain information about the formal business to be acted on by the
shareholders. The meeting will also feature a report on the operations of your
company, followed by a question and discussion period. After the meeting, you
will have the opportunity to speak informally with the directors and officers.

It is important that your shares be voted whether or not you plan to be
present at the meeting. Please complete, sign, date and return the enclosed form
of proxy promptly, or you may utilize our new telephone voting procedure. If you
attend the meeting and wish to vote your shares personally, you may revoke your
proxy.

Sincerely,

BRE PROPERTIES, INC.

Frank C. McDowell
PRESIDENT & CHIEF EXECUTIVE OFFICER
<PAGE>
BRE PROPERTIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

Notice is hereby given that the Annual Meeting of Shareholders of BRE
Properties, Inc. (the "company") will be held on Thursday, April 10, 1997 at
10:00 a.m. San Francisco time, in the Oak Room of the Westin St. Francis Hotel,
335 Powell Street, San Francisco, California, for the following purposes;

1. To elect three Class III directors for a term of three years.

2. To approve an amendment to the company's Articles of Incorporation
to increase the number of authorized shares of Common Stock from 50,000,000
to 100,000,000 shares.

3. To approve an amendment increasing the company's Amended and
Restated 1992 Employee Stock Plan from 750,000 to 1,750,000 shares.

4. To ratify the selection of Ernst & Young LLP as the company's
independent auditors for the year ending December 31, 1997.

5. To transact such other business as may properly come before the
meeting or any adjournment thereof.

Shareholders of record at the close of business on February 21, 1997 shall
be entitled to vote at the meeting.

By Order of the Board of Directors

LEROY E. CARLSON, SECRETARY

Dated: March , 1997
<PAGE>
BRE PROPERTIES, INC.
ONE MONTGOMERY STREET, SUITE 2500
TELESIS TOWER
SAN FRANCISCO, CA 94104-5525
TELEPHONE: (415) 445-6530
FACSIMILE: (415) 445-6505

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

PROXY STATEMENT

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

ANNUAL MEETING OF SHAREHOLDERS

The enclosed proxy is solicited by the Board of Directors of BRE Properties,
Inc., a Maryland corporation (the "company"), for use at the Annual Meeting of
Shareholders of the company (the "Annual Meeting") to be held on Thursday, April
10, 1997 at 10:00 a.m. San Francisco time, or at any adjournment thereof. The
meeting will be held in the Oak Room of the Westin St. Francis Hotel, 335 Powell
Street, San Francisco, California. At the meeting, holders of record of the
company's common stock ("Common Stock") at the close of business on February 21,
1997 (the "Record Date") will be entitled to vote. On that date, the company's
outstanding capital stock consisted of 33,003,785 shares of Common Stock,
entitled to one vote each at the meeting. All references herein to a number of
shares of Common Stock reflect the 100% stock dividend paid on June 27, 1996.

The cost of soliciting proxies in the enclosed form will be borne by the
company. Directors, officers and employees of the company may also, without
additional compensation, solicit proxies by mail, personal interview, telephone
and telecopy.

The company will request banks, brokerage houses and other institutions,
nominees or fiduciaries to forward the soliciting material to the beneficial
owners of shares and to obtain authorization for the execution of proxies. The
company will, upon request, reimburse banks, brokerage houses and other
institutions, nominees and fiduciaries for their reasonable expenses in
forwarding proxy materials to the beneficial owners. If a shareholder is a
participant in the Direct Stock Purchase & Dividend Reinvestment Plan, the proxy
card represents a voting instruction as to the number of full shares in the plan
account, as well as any shares held directly by the shareholder.

In lieu of mailing the proxy card in the postage-paid envelope provided,
shareholders of record can vote their shares by calling the toll-free telephone
number on the proxy card. The telephone voting procedure is designed to
authenticate shareholders by use of a control number. The procedure allows
shareholders to vote their shares and to confirm that their instructions have
been properly recorded. The company has been advised by counsel that the
procedures which have been put in place are consistent with the requirements of
applicable law. Specific instructions to be followed by any shareholder of
record interested in voting by telephone are set forth on the enclosed proxy
card.

All properly executed proxies delivered pursuant to this solicitation and
not revoked will be voted at the Annual Meeting as specified in the such
proxies. If no choice is specified, the shares represented by a signed proxy
will be voted for the election of the three nominees for Class III Director and
in favor of the proposals set forth in the notice attached hereto. The three
nominees for election as Class III Directors who receive the highest number of
votes therefor at the Annual Meeting shall be elected as directors (Proxy Item
No. 1). The affirmative votes of the holders of a majority of the shares of
Common Stock outstanding on the Record Date and entitled to vote at the meeting
shall be required to approve the increase in the authorized Common Stock (Proxy
Item No. 2). The affirmative votes of the holders of a majority of the shares
present and voting in person or by proxy at the Annual Meeting shall be required
to

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<PAGE>
approve both the increase in the shares subject to the Employee Stock Plan
(Proxy Item No. 3) and the selection of auditors (Proxy Item No. 4).

Votes at the Annual Meeting will be tabulated by one or more independent
inspectors of election appointed by the company. Abstentions and votes withheld
by brokers in the absence of instructions from street-name holders (broker
non-votes) will be included in the determination of shares present at the Annual
Meeting for purposes of determining the presence of a quorum, i.e., a majority
of the shares outstanding on the Record Date. Abstentions will be counted
towards the tabulation of votes cast on proposals submitted to shareholders and
will have the same effect as negative votes, while broker non-votes will not be
counted as votes cast for or against such matters.

Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
company a written notice of revocation or a duly executed proxy bearing a later
date, or by attending the meeting and voting in person.

The company's principal executive offices are located in One Montgomery
Street, Suite 2500, Telesis Tower, San Francisco, California 94104-5525.

This Proxy Statement and the enclosed proxy are scheduled to be mailed to
shareholders commencing on or about March , 1997.

2
<PAGE>
ELECTION OF BRE DIRECTORS
(PROXY ITEM NO. 1)

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

At the Annual Meeting, three Class III directors are to be elected for a
term of three years (expiring in the year 2000) or until the election and
qualification of their successors. The persons proposed for reelection as the
Class III directors are Frank C. McDowell, William E. Borsari and C. Preston
Butcher. The accompanying proxies solicited by the Board will (unless otherwise
directed, revoked or suspended) be voted for the reelection of Messrs. McDowell,
Borsari and Butcher, who are the present Class III directors.

In the unanticipated event that any 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 following table sets forth certain information as to the nominees, as
well as the other current members of the Board, including their age, 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
Securities Exchange Act of 1934 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 III DIRECTORS

<TABLE>
<CAPTION>
BOARD
PRINCIPAL BUSINESS EXPERIENCE DIRECTOR COMMITTEE
NAME DURING PAST FIVE YEARS AGE SINCE(1) MEMBERSHIP
- - ---------------------------- ------------------------------------------------- --- ----------- -----------------
<S> <C> <C> <C> <C>
Frank C. McDowell President and Chief Executive Officer of the 48 1995 Executive
company, since June 1995. Chief Executive Officer
and Chairman of Cardinal Realty Services, Inc.,
1992-95. Senior Vice President, Head of Real
Estate, First Interstate Bank of Texas, 1988-92.
William E. Borsari President, The Walters Management Company, a real 57 1992 Executive
estate asset management company, for more than
five years.
C. Preston Butcher President and Chief Executive Officer, Lincoln 58 1985 Executive
Property Company, N.C., Inc., real estate
developer, and President and Chief Executive
Officer, Lincoln Property Company Management
Services, Inc., real estate management company,
for more than five years. Director, The Charles
Schwab Corporation.
</TABLE>

3
<PAGE>
<TABLE>
<CAPTION>
BOARD
PRINCIPAL BUSINESS EXPERIENCE DIRECTOR COMMITTEE
NAME DURING PAST FIVE YEARS AGE SINCE(1) MEMBERSHIP
- - ---------------------------- ------------------------------------------------- --- ----------- -----------------
<S> <C> <C> <C> <C>
CLASS I DIRECTORS -- TERM EXPIRES IN 1998

Arthur G. von Thaden President and Chief Executive Officer of the 64 1981 Audit
company from 1970 to June 1995. Chief Executive
Officer, BankAmerica Realty Services, Inc., a
real estate investment advisory firm, from 1970
to 1987.
Malcolm R. Riley Partner, Riley/Pearlman Company, a shopping 64 1990 Compensation
center developer and manager, since 1986.
Chairman, La Cagnina/Riley & Associates, since
1994.
Roger P. Kuppinger Financial advisor to public and private 56 1995 Audit
companies, since February 1994. Senior Vice
President and Managing Director, Sutro & Co.,
Inc., an investment banking company, from 1969 to
February 1994. Director, Realty Income
Corporation.

CLASS II DIRECTORS -- TERM EXPIRES IN 1999

L. Michael Foley Principal, L. Michael Foley and Associates, real 58 1994 Audit,
estate and corporate consulting, since 1996. Compensation
Senior Vice President and Chief Financial
Officer, Coldwell Banker Corporation, 1995-1996.
Chairman and Chief Executive Officer, Sears
Savings Bank, 1989-93. Senior Executive Vice
President, Coldwell Banker Real Estate Group,
Inc., 1986-93. Executive Vice President, Homart
Development Co., 1983-1993.
John McMahan Chairman of the Board of the company. Managing 59 1993 Executive
Principal -- The McMahan Group, real estate
management consultants, since 1996. President,
John McMahan Associates, Inc., a management
consulting firm, and McMahan Real Estate
Securities, Inc., a real estate investment firm,
1994 to 1996. President and Chief Executive
Officer, Mellon/McMahan Real Estate Advisors,
Inc., a real estate advisory firm, 1990-94.
Gregory M. Simon Self employed as a private investor, since 1991. 55 1991 Compensation
Senior Vice President, H.F. Ahmanson & Co. and
Home Savings of America, from 1983 to 1991.
</TABLE>

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

(1) For Messrs. von Thaden and Butcher, includes service as a trustee of the
company's predecessor, BankAmerica Realty Investors. For Messrs. Kuppinger,
Simon and Borsari (who joined the Board in March 1996), includes service as
a trustee of Real Estate Investment Trust of California ("RCT").

4
<PAGE>
A description of the business experience of the other executive officers of
the company is contained in the company's annual report on Form 10-K for the
year ended December 31, 1996, filed with the Securities and Exchange Commission.
The company will provide, without charge, a copy of its Form 10-K upon the
written request of any shareholder solicited hereby made to the Secretary of the
company at the address set forth on page one of this Proxy Statement.

Mr. Butcher, a Class III director and a nominee for reelection, 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, 16 of these single purpose limited
partnerships have filed for protection under the Federal bankruptcy laws.

VOTE REQUIRED

The three nominees who receive the highest numbers of votes shall be elected
as Class III directors. The Board of Directors unanimously recommends that
shareholders vote FOR Messrs. McDowell, Borsari and Butcher.

BOARD AND COMMITTEE MEETINGS; COMPENSATION OF DIRECTORS

During the year ended December 31, 1996, the Board held 12 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 1996.

The Board 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 1996, the Audit Committee met three times.

The Executive Committee has all powers of the Board in the management and
affairs of the company, subject to limitations prescribed by the Board and by
Maryland law. The Executive Committee did not meet during 1996.

The Compensation Committee reviews the compensation of officers and
administers of the company's stock compensation option plans. The Compensation
Committee met twice during 1996.

The company has adopted a policy of paying retainer and meeting fees of
non-employee directors solely in stock options. Under the company's
800,000-share 1994 Non-Employee Director Stock Option Plan, for 1996 the eight
directors who were not employees each received a stock option to purchase 25,000
shares of Common Stock at $21.00 per share, the closing market price on October
16, 1996, the date of grant. This grant applied to all current directors except
Mr. McDowell. On April 29, 1996, the Board amended the Plan to provide an
additional annual stock option for 25,000 shares for the Chairman of the Board,
and on April 30, 1996 Mr. McMahan received this additional option for 25,000
shares at $17.69 per share (the market price on the grant date) for serving as
Chairman of the Board. The Director Stock Option Plan provides each non-employee
director annual stock options for 25,000 shares of Common Stock (50,000 shares
for the Chairman) in lieu of cash compensation, plus options for an additional
5,000 shares if for the preceding fiscal year the increase in the company's
funds from operations ("FFO") per share over the prior year places the company
at or above the 80th percentile in this category for the ten largest
publicly-traded multifamily real estate investment trusts. This target was met
for 1996 and these additional 5,000-share options have been granted to the eight
directors. Options granted under the Plan have a term of ten years and the
automatic annual grants become exercisable as to one-twelfth of the shares per
month, so that the options are fully vested by the first anniversary of the date
of grant. The directors are also reimbursed for their out-of-pocket expenses in
attending meetings.

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<PAGE>
The Board has adopted a share ownership guideline of 10,000 shares of Common
Stock for non-employee directors.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the company's
directors and executive officers, and persons who own more than ten percent
(10%) of a registered class of its equity securities, to file with the
Securities and Exchange Commission and the New York Stock Exchange initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the company.

To the company's knowledge, based solely on review of the copies of such
reports furnished to it and written representations that no other reports were
required during the year ended December 31, 1996, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten percent
shareholders were complied with; except that Mr. Simon inadvertently failed to
include in his initial report of beneficial ownership, two holdings of family
members totaling 6,386 shares of Common Stock, Mr. McDowell inadvertently filed
a late report showing the exercise of a stock option for 10,000 shares in August
1996, and Mr. Kuppinger inadvertently filed a late report showing his purchase
of 421 shares in December 1996 under the Direct Stock Purchase & Dividend
Reinvestment Plan.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth, as of February 13, 1997, information
regarding the beneficial ownership of Common Stock by each director, 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>
SHARES OF COMMON PERCENTAGE OF
STOCK OUTSTANDING SHARES
BENEFICIALLY OWNED
NAME CURRENT POSITION WITH COMPANY OWNED(1) BENEFICIALLY(1)(2)
- - -------------------------------------------------- ------------------------------- ---------------- ------------------
<S> <C> <C> <C>
Frank C. McDowell................................. Director, President and Chief 67,614(3) *
Executive Officer
William E. Borsari................................ Director 47,766(4) *
C. Preston Butcher................................ Director 44,417(5) *
L. Michael Foley.................................. Director 50,417(6) *
Roger P. Kuppinger................................ Director 38,823(7) *
John McMahan...................................... Chairman of the Board 63,333(8) *
Malcolm R. Riley.................................. Director 42,417(9) *
Gregory M. Simon.................................. Director 91,401(10) *
Arthur G. von Thaden.............................. Director 275,134(11) *
Jay W. Pauly...................................... Senior Executive Vice President 203,946(12) *
and Chief Operating Officer
Byron M. Fox...................................... Executive Vice President, 80,032(13) *
Acquisitions
LeRoy E. Carlson.................................. Executive Vice President and 144,305(14) *
Chief Financial Officer
John H. Nunn...................................... Senior Vice President, 116,854(15) *
Property Management
All directors and executive officers as a group
(13 persons).................................... 1,266,459(16) 3.8%
</TABLE>

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

(1) The amounts and percentages of Common Stock beneficially owned are reported
on the basis of regulations of the Securities and Exchange Commission
governing the determination of beneficial

6
<PAGE>
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. McDowell -- includes 8,164 shares held as restricted shares, 450 shares
held by Mr. McDowell's wife in which he disclaims any interest, and 55,000
shares acquired upon exercise of stock options that are collateral for
recourse loans from the company. See STOCK LOANS.

(4) Mr. Borsari -- includes 35,417 shares that may be purchased upon the
exercise of stock options that are currently exercisable or that will become
exercisable on or before April 14, 1997. Also includes 10,674 shares held in
an intervivos trust and 550 shares held by his wife.

(5) Mr. Butcher -- includes 2,000 shares held by Mr. Butcher's wife as her
separate property and 2,000 shares held by Mr. Butcher and his wife as
community property, as to which he has shared voting and investment power.
Also includes 40,417 shares that may be purchased upon the exercise of stock
options that are currently exercisable or that will become exercisable on or
before April 14, 1997.

(6) Mr. Foley -- includes 10,000 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 40,417 shares that may be purchased upon the exercise
of stock options that are currently exercisable or that will become
exercisable on or before April 14, 1997.

(7) Mr. Kuppinger -- includes 3,406 shares owned by a trust where he and his
wife are trustees and 35,417 shares that may be purchased upon the exercise
of stock options that are currently exercisable or that will become
exercisable on or before April 14, 1997.

(8) Mr. McMahan -- includes 63,333 shares that may be purchased upon the
exercise of stock options that are currently exercisable or that will become
exercisable on or before April 14, 1997.

(9) Mr. Riley -- includes 1,000 shares owned in joint tenancy by Mr. Riley and
his wife and 1,000 shares owned in a family partnership, as to which he has
shared voting and investment power. Also includes 40,417 shares that may be
purchased upon the exercise of stock options that are currently exercisable
or that will become exercisable on or before April 14, 1997.

(10) Mr. Simon -- includes 2,112 shares owned by his wife as separate property,
4,274 shares held in trust for his children where Mr. Simon is the trustee
and 35,417 shares that may be purchased upon the exercise of stock options
that are currently exercisable or that will become exercisable on or before
April 14, 1997.

(11) Mr. von Thaden -- includes 251 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 240,417 shares that may be purchased upon
the exercise of stock options that are currently exercisable or that will
become exercisable on or before April 14, 1997.

(12) Mr. Pauly -- includes 177,000 shares that may be purchased upon the
exercise of stock options that are currently exercisable or that will become
exercisable on or before April 14, 1997. Also includes 22,500 shares
acquired upon the exercise of stock options that are collateral for a
recourse loan from the company. See STOCK LOANS.

(13) Mr. Fox -- includes 56,500 shares that may be purchased upon the exercise
of stock options that are currently exercisable or that will become
exercisable on or before April 14, 1997. Also includes 4,600 shares held as
restricted shares, and 15,000 shares which Mr. Fox acquired upon exercise of
stock options that are collateral for recourse loans from the company. See
STOCK LOANS.

(14) Mr. Carlson -- includes 85,000 shares that may be purchased upon the
exercise of stock options that are currently exercisable or that will become
exercisable on or before April 14, 1997. Also includes 15,000 shares
acquired upon exercise of stock options that are collateral for recourse
loans from the company. See STOCK LOANS.

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<PAGE>
(15) Mr. Nunn -- includes 68,900 shares that may be purchased upon the exercise
of stock options that are currently exercisable or that will become
exercisable on or before April 14, 1997. Also includes 15,000 shares
acquired upon exercise of stock options that are collateral for recourse
loans from the company. See STOCK LOANS.

(16) Includes 950,650 shares that may be purchased upon the exercise of stock
options that are currently exercisable or that will become exercisable on or
before April 14, 1997. Also includes 12,764 shares held as restricted
shares.

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<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION

SUMMARY COMPENSATION TABLE

The following table shows the compensation for the past three years of the
company's Chief Executive Officer and the four other highest paid executive
officers for the year ended December 31, 1996 (the "named executive officers").

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS
------------------------------------------------------------
ANNUAL COMPENSATION RESTRICTED
NAME AND PRINCIPAL ------------------------- SHARE OPTIONS/ ALL OTHER
POSITION YEAR SALARY($) BONUS($) AWARDS($)(1) SARS(#) COMPENSATION($)(2)(3)(4)
- - -------------------------- ---- ---------- ---------- ------------- ------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Frank C. McDowell
President and Chief 1996 $ 313,998 $ 306,798 $ -0- 60,000 $ 9,312
Executive Officer (since 1995 167,914 153,484 125,011 140,000 -0-
June 5, 1995) 1994 -0- -0- -0- -0- -0-

Jay W. Pauly
Senior Executive Vice
President and Chief 1996(5) $ 234,644 $ 117,500 $ -0- 45,000(7) $ 5,354
Operating Officer (since 1995(6) 207,480 27,400 -0- -0- 6,049
March 15, 1996) 1994(6) 200,000 10,000 -0- -0- 4,087

LeRoy E. Carlson
Executive Vice President
and Chief Financial 1996(5) $ 215,754 $ 90,000 $ -0- 35,000(7) $ 4,863
Officer (since March 15, 1995(6) 200,000 22,113 -0- -0- 5,750
1996) 1994(6) 187,200 20,000 -0- -0- 6,513

Byron M. Fox 1996 $ 210,734 $ 80,000 $ -0- 20,000 $ 3,491
Executive Vice 1995 182,000 59,000 -0- 25,000 15,287
President, Acquisitions 1994 186,210 31,000 52,700 10,000 19,867

John H. Nunn
Senior Vice President, 1996(5) $ 156,175 $ 65,000 $ -0- 30,000(7) $ 4,863
Property Management 1995(6) 145,000 22,113 -0- -0- 3,675
(since March 15, 1996) 1994(6) 120,000 15,000 -0- -0- 4,800
</TABLE>

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

(1) The amounts reported represent the aggregate value of restricted share
awards at the date of award. In calendar 1996, 1995 and 1994, the named
executive officers received the following restricted share awards:

<TABLE>
<CAPTION>
1996 1995 1994
----- --------- ---------
<S> <C> <C> <C>
McDowell.............................................. -0- 8,164 -0-

Fox................................................... -0- -0- 3,400
</TABLE>

Except with respect to Mr. 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. McDowell's shares lapse on the third anniversary of the
grant date and may lapse upon termination of employment following a change
in control. See EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS -- MR. MCDOWELL. Dividends are paid on
restricted shares at the same rate and at the same time as on the Common
Stock.

9
<PAGE>
At December 31, 1996, the aggregate number and value of shares of restricted
stock (based on the market price of $24.75 per share at December 31, 1996)
held by each of the named executive officers was as follows:

<TABLE>
<CAPTION>
NUMBER VALUE
----------- ----------
<S> <C> <C>
McDowell................................................ 8,164 $ 202,059

Fox..................................................... 4,600 113,850
</TABLE>

(2) Consists of contributions to the company's defined contribution retirement
plan (401(k) Plan) on behalf of the named executive officers. Also includes,
the company's allocation of $1,250 for Mr. Fox in 1995, pursuant to the
Supplemental Retirement Plan, in order to provide all employees unfunded
supplemental retirement benefits equal to the benefits that would have been
received from company contributions to the 401(k) Plan absent the various
Internal Revenue Code contribution limitations. Includes for each of Messrs.
Pauly, Carlson and Nunn, the $2,613 benefit of an interest-free $50,000
loan, assuming a market interest rate equal to the company's borrowing cost.

(3) Does not include potential loan forgiveness. See STOCK LOANS. While the
amount to be forgiven is not yet determinable, the following amounts were
expensed for 1996 in accordance with the company's accounting policy: Mr.
McDowell, $62,037; Mr. Pauly, $21,349; Mr. Carlson, $14,252; Mr. Nunn,
$14,252 and Mr. Fox, $16,110. In addition, $43,539 and $6,461 were expensed
for Mr. McDowell and Mr. Fox, respectively, in 1995.

(4) Does not include the following one-time housing and relocation allowances in
1996 for expenses related to relocating to the San Francisco Bay Area: Mr.
Pauly, $85,112; Mr. Carlson, $44,982; and Mr. Nunn, $48,531. In 1995, Mr.
McDowell received $16,987 for housing and relocation expenses.

(5) Includes compensation from RCT for January 1 to March 15, 1996.

(6) Compensation from RCT.

(7) Does not include stock options for RCT shares, which the company assumed on
March 15, 1996 in the merger with RCT and were converted to options for
171,000 shares of Common Stock for Mr. Pauly, 114,000 shares for Mr. Carlson
and 96,900 shares for Mr. Nunn.

OPTION GRANTS IN 1996

The following table sets forth (i) grants of stock options made by the
company during 1996 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 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.

<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE
INDIVIDUAL GRANTS AT ASSUMED ANNUAL RATES
----------------------------------------------- OF STOCK PRICE
SHARES APPRECIATION
SUBJECT TO % OF TOTAL OPTIONS EXERCISE OR FOR OPTION TERM(3)
OPTIONS GRANTED TO BASE PRICE EXPIRATION ------------------------
NAME GRANTED(1)(2) EMPLOYEES IN 1996 ($/SH) DATE 5% 10%
- - ------------------------------ ------------- ------------------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Frank C. McDowell............. 60,000 16.5% $ 20.00 8/26/06 $ 754,674 $ 1,912,491
Jay W. Pauly.................. 45,000(4) 12.4% $ 17.75 3/15/06 502,230 1,273,002
Byron M. Fox.................. 20,000 5.5% $ 17.5625 4/29/06 220,899 559,802
LeRoy E. Carlson.............. 35,000(4) 9.6% $ 17.75 3/15/06 390,701 990,113
John H. Nunn.................. 30,000(4) 8.2% $ 17.75 3/15/06 334,886 846,668
</TABLE>

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

(1) All options shown in the table were granted under the company's Amended and
Restated 1992 Employee Stock Plan. The exercise price is 100% of fair market
value of the Common stock on the date of grant. All options held by Messrs.
McDowell, Pauly, Carlson and Nunn may become

10
<PAGE>
immediately exercisable upon termination of employment following a change in
control. See EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS. Messrs. Pauly, Carlson and Nunn immediately
exercised, upon grant, options for 15,000, 10,000 and 10,000 shares,
respectively. Mr. McDowell exercised his options immediately upon grant with
respect to 10,000 shares. See STOCK LOANS.

(2) Does not include options for an aggregate of 381,900 shares of Common Stock
at a weighted average price of $12.88 per share, which options were
originally for RCT shares and were assumed by the company in the merger with
RCT, including such options for Mr. Pauly for 171,000 shares of Common Stock
at $14.695 per share, for Mr. Carlson for 114,000 shares at $11.405 per
share, and for Mr. Nunn for 96,900 shares at $11.405 per share.

(3) Potential realizable value is calculated based on an assumption that the
price of the company'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 the company'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 the Common Stock and the continued employment of the
executive officer holding the option through its vesting period.

The following table shows what the stock price would be at 5% and 10% annual
appreciation from option prices of $17.56 and $20.00, respectively, over the
ten-year option term.

(4) Includes options to purchase 10,000 shares of Common Stock, which will vest
ratably over five years provided that, during the 12 month period commencing
March 15, 1996, (i) the company achieves net operating income equal to or
greater than the company's internal projection for such period; (ii)
management of all company and former RCT apartment properties is
consolidated into the company's San Francisco, California office without
adversely impacting revenues from such apartment properties; and (iii) the
company achieves a savings in operating costs of at least $1,000,000 as
compared to combined operating costs for the company and RCT in calendar
year 1995 (i.e., prior to the RCT merger). It is now anticipated that these
criteria will be satisfied and these options will vest over the five-year
period.

11
<PAGE>
AGGREGATED OPTION EXERCISES IN 1996 AND 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 1996 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 1996; and (iii) the aggregate dollar value of all such
unexercised options based on the excess of the market price of the Common Stock
over the exercise price of the option.

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF NUMBER OF UNEXERCISED IN-THE MONEY
SHARES OPTIONS AT 12/31/96 OPTIONS AT 12/31/96(2)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - -------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frank C. McDowell............... 10,000(3) -0- -0- 150,000(4) -0- $ 1,180,500
Jay W. Pauly.................... 15,000(3) -0- 171,000 30,000 $ 1,719,405 210,000
Byron M. Fox.................... -0- -0- 56,500 27,500 530,498 209,844
LeRoy E. Carlson................ 10,000(3) -0- 114,000 25,000 1,521,330 175,000
John H. Nunn.................... 10,000(3) -0- 96,900 20,000 1,293,131 140,000
</TABLE>

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

(1) Value realized is calculated by subtracting the total exercise price from
the market value of the underlying Common Stock on the date of exercise.
Because Messrs. McDowell, Pauly, Carlson and Nunn exercised these options on
the date of grant, the exercise price was equal to the market price at the
time of exercise.

(2) The market value of the company's Common Stock at December 31, 1996 was
$24.75 per share.

(3) These options were exercised immediately upon grant. See STOCK LOANS.

(4) Includes options for 100,000 shares granted in 1995 which vest in equal
installments on June 22, 1998, 1999 and 2000, and were subject to
termination on July 22, 2000 unless at any time prior to that date the
market price for the Common Stock exceeded $19.50 per share for ten
consecutive trading days; as this condition was satisfied during 1996, the
options are no longer subject to this early termination provision.

RETIREMENT PLAN (401(K) PLAN)

The company's Retirement Plan is intended to be a qualified retirement plan
under Section 401(k) of the Code. Under this plan, participating employees
(including the named executive officers) may contribute up to 6% of their
compensation, but not exceeding the amount allowed under applicable tax laws
($9,000 in calendar 1996), and the company contributes 25% of the employee's
contribution. All employees of the company with one year of service are eligible
to participate in the plan. The company's contributions on behalf of employees
who have been employed with the company (including RLF) for at least five years
are fully vested.

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

MR. MCDOWELL

Effective as of June 5, 1995 (the "Commencement Date"), the company 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 received an initial
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 Board, with emphasis on FFO per share
(the "Annual Criteria").

12
<PAGE>
STOCK LOAN. On the Commencement Date, Mr. McDowell received a loan of
$612,500 to exercise options to purchase 40,000 shares of Common Stock (at an
exercise price of $15.32 per share) issued on that date. The McDowell 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 McDowell
Stock Loan (the "Loan Amount") will be forgiven in accordance with the following
formulas (the "Performance Formulas"): (i) 20% of the Loan Amount will be
forgiven if the gross book value of the company'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 McDowell Stock Loan, there has been an increase
in FFO per share of 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 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 Common
Stock as of December 31 of each of the five preceding years (computed in each
case by dividing the market price of 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 the company upon
termination of Mr. McDowell's employment under the circumstances described in
CERTAIN SEVERANCE BENEFITS.

See also STOCK LOANS.

FUTURE AWARDS. Mr. McDowell will receive annual long-term incentive awards
which, assuming achievement of applicable performance goals, will provide Mr.
McDowell with the financial equivalent of (i) a forgivable performance-based
five-year loan to purchase 10,000 shares of Common Stock pursuant to an
immediately exercisable stock option, on terms similar to the McDowell Stock
Loan (See STOCK LOANS) and (ii) performance options to purchase 50,000 shares of
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.

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

(i) TERMINATION BY THE COMPANY 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 8,164 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 40,000 times the market value of the 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 8,164 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 Performance Formulas (the
"Performance Adjustment"), taking into consideration the number of full
months worked and the company's performance data through the last quarter
ended 45 days or more prior to the termination date.

13
<PAGE>
(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 McDowell Stock Loan would be forgiven based on
the 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 the company, no further
compensation would be payable to Mr. McDowell and the outstanding balance of
the McDowell 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 THE COMPANY WITHOUT CAUSE OR BY MR. MCDOWELL FOR GOOD
REASON. If Mr. McDowell is terminated without cause within 12 months
following a Change in Control (defined to include, without limitation, the
acquisition by a person or group of beneficial ownership of 50% or more of
the company's outstanding securities and certain changes in the Board of
Directors resulting from proxy contests or other actions by a person or
group with beneficial ownership of 5% or more of the company's outstanding
securities), or if Mr. McDowell terminates his employment for Good Reason
(defined as material changes in the executive's duties, responsibilities or
authority or the company's relocation of the executive outside of San
Francisco) 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
$306,798 and assuming average incentive compensation in the maximum amount
of $306,798, this payment would be $1,227,192) 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
McDowell Stock Loan would be forgiven based on the 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 ($613,596, assuming a
$306,798 base salary and maximum incentive bonus). The outstanding balance
of the McDowell Stock Loan would be due on such termination. Upon
termination for "cause" by the company within 12 months following a Change
in Control, no further compensation would be payable to Mr. McDowell and the
outstanding balance of the McDowell 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.

14
<PAGE>
MESSRS. PAULY, CARLSON AND NUNN

Effective on March 15, 1996, the date of the merger with RCT, the company
entered into employment agreements with Jay W. Pauly, LeRoy E. Carlson and John
H. Nunn. Each agreement is for an initial term of three years, with automatic
renewal on a year-to-year basis thereafter unless terminated in accordance with
its terms. Certain material terms of these agreements are as follows:

BASE SALARY. Mr. Pauly receives a base salary of $207,480 per year, Mr.
Carlson receives a base salary of $200,000 per year and Mr. Nunn receives a base
salary of $145,000 per year. Each base salary will be subject to review on or
about March 31 of each year with an expectation that base salary will increase
in an amount at least equal to any increase in the Consumer Price Index for the
San Francisco Bay Area over the preceding twelve months.

ANNUAL INCENTIVE BONUS. Each executive shall be eligible to receive an
annual incentive bonus targeted at 40% of base salary, in the case of Mr. Pauly,
and 30% of base salary, in the case of Messrs. Carlson and Nunn. The amount of
the annual bonus will be based on the achievement of predefined operating or
performance goals and other criteria to be established by the Chief Executive
Officer or the Compensation Committee of the Board.

INTEREST-FREE LOAN. Upon their employment Messrs. Pauly, Carlson and Nunn
each received a $50,000 interest-free recourse loan (an "Interest-Free Loan") to
be forgiven either on the fifth anniversary of the date of employment, or upon
earlier termination of employment under the circumstances described in CERTAIN
SEVERANCE BENEFITS.

15
<PAGE>
CERTAIN SEVERANCE BENEFITS. If, at any time during the initial three-year
term or any automatic renewal period, the employment of Messrs. Pauly, Carlson
or Nunn is terminated, he shall be entitled to receive the benefits described
below.

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

(i) TERMINATION BY THE COMPANY WITHOUT CAUSE. If the executive is
terminated without cause before the first anniversary date of the agreement, the
executive will receive a lump sum payment equal to two times his then base
salary multiplied by a fraction the numerator of which is the number of full
months remaining during the first 24 months of the term of employment and the
denominator of which is 24. In addition, the Interest-Free Loan will be forgiven
and the outstanding balance of the Stock Loans (see STOCK LOANS) will be reduced
to an amount equal to the number of shares of Common Stock acquired using
proceeds of the Stock Loan times the market price of such shares, with such
amount payable immediately. If such termination occurs after the first
anniversary date of the agreement, the executive will receive a lump sum payment
equal to his then annual 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). In addition, the Interest-Free Loan
will be forgiven and the Stock Loan will be forgiven based on a PRO RATA
application of the Performance Formulas (the "Pro Rata Calculation"), taking
into consideration the number of full months worked and the company'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, the executive or his estate will receive a lump sum payment equal
to the annual bonus the executive would have received for the fiscal year in
question (based on 40% of his then current base salary if death or disability
occurs within one year from the date of the agreement, or otherwise based on the
previous or average annual bonus amounts). In addition, the Interest-Free Loan
will be forgiven and the Stock Loan will be forgiven based on the Pro Rata
Calculation.

(iii) VOLUNTARY TERMINATION OR TERMINATION FOR CAUSE. Upon voluntary
termination or termination for "cause" by the company, no further compensation
will be payable to the executive and the outstanding balance of the
Interest-Free Loan and the Stock Loan, together with accrued but unpaid
interest, will be payable in full within 15 days of termination.

(b) TERMINATION FOLLOWING A CHANGE IN CONTROL.

(i) TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE FOR GOOD
REASON. If the executive is terminated without cause within 12 months following
a Change in Control or if the executive terminates his employment for Good
Reason within 12 months after a Change in Control, the executive will receive
the following benefits: (a) a lump sum payment equal to two times his then base
salary plus an amount equal to (x) two times the average of his annual bonus
over the most recent two years; or (y) two times the previous annual bonus if
only one annual bonus period has passed; or (z) his then base salary multiplied
by (A) in the case of Mr. Pauly, 0.8, and (B) in the case of Messrs. Carlson and
Nunn, 0.6, in the event the termination occurs prior to the first anniversary
date of employment; (b) all unvested stock options held by the executive would
vest and be exercisable for a period of three months; and (c) the Interest-Free
Loan would be forgiven and the Stock Loan would be forgiven based on the Pro
Rata Calculation, with any balance due immediately.

(ii) TERMINATION DUE TO DEATH OR DISABILITY. Upon termination due to death
or disability following a Change in Control, the executive will 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 the executive without Good
Reason within 12 months following a Change in Control, the executive will
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), or his then base
salary multiplied by (A) in the case of Mr. Pauly, 0.4, and (B) in the case of
Messrs. Carlson and Nunn, 0.3, in the event termination occurs within the first
year of

16
<PAGE>
employment. The outstanding balance of the Interest-Free Loan and the Stock
Loan, together with accrued but unpaid interest, will be due on such
termination. Upon termination for "cause" by the company within 12 months
following a Change in Control, no further compensation will be payable to the
executive and the outstanding balance of the Interest-Free Loan and the Stock
Loan, together with accrued but unpaid interest, will be payable in full within
15 days of termination.

Any of the foregoing amounts payable to Messrs. Pauly, Carlson and Nunn
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.

STOCK LOANS

Since 1995, the Board has approved five-year loans to the named executive
officers for the purpose of immediately exercising stock options granted on the
date of the loan (the "Stock Loans"). The first of these loans was granted to
Mr. McDowell on the date of his employment, and similar loans were granted to
Messrs. Pauly, Carlson and Nunn on the date of their employment, Mr. Fox was
granted a Stock Loan shortly after Mr. McDowell's initial loan. A provision in
Mr. McDowell's employment agreement entitles him to the financial equivalent of
an annual Stock Loan for 10,000 shares of Common Stock if certain company
performance goals are met. The Board has adopted the practice of making similar
performance grants to the other named executive officers.

The following table summarizes certain information concerning the Stock
Loans granted to date.

<TABLE>
<CAPTION>
TO EXERCISE
OPTION FOR INTEREST
LOAN AMOUNT NO. OF SHARES RATE(1)
----------- ------------- --------
<S> <C> <C> <C>
June 5, 1995
McDowell................................................ $ 612,500 40,000 8.25%
August 28, 1995
Fox..................................................... $ 159,063 10,000 8.25%
March 15, 1996(2)
Pauly................................................... $ 266,250 15,000 7.1%
Carlson................................................. 177,500 10,000 7.1%
Nunn.................................................... 177,500 10,000 7.1%
August 26, 1996
McDowell................................................ $ 200,000 10,000 6.6%
February 13, 1996
McDowell................................................ $ 123,125 5,000 5.4%
Pauly................................................... 184,188 7,500 5.4%
Carlson................................................. 123,125 5,000 5.4%
Nunn.................................................... 123,125 5,000 5.4%
Fox..................................................... 123,125 5,000 5.4%
</TABLE>

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

(1) Payable quarterly except for Mr. McDowell's loans, for which interest
accrues subject to forgiveness. The interest rate is equal to the dividend
yield on the Common Stock purchased, on the loan date.

(2) Does not include the $50,000 interest free loans to each of Messrs. Pauly,
Carlson and Nunn. See EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT and
CHANGE-IN-CONTROL ARRANGEMENTS-- MESSRS. PAULY, CARLSON AND NUNN--INTEREST
FREE LOAN.

The Stock Loans are collateralized by the purchased shares with full
recourse to the named executive officers. These loans are forgivable in whole or
in part upon the achievement of company performance goals related to growth in
assets, FFO per share and stock price and upon termination of employment,
similar to the forgiveness applicable to Mr. McDowell's June 5, 1995 loan as
described in EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS--MR. MCDOWELL--STOCK LOAN and MESSRS. PAULY,
CARLSON AND NUNN--CERTAIN SEVERANCE BENEFITS.

17
<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 the company's executive compensation program. The Committee is
composed entirely of outside directors.

The objective of the company'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 the company. As discussed in detail
below, the company'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, stock option grants
and incentive stock loans. 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 the
company's performance during the year and compensation data at companies that
are considered comparable. In reviewing the company's performance during 1996,
the Committee considered a variety of factors. The acquisition by merger of RCT
was completed in March 1996. As a result of the merger, the company added 22
wholly owned apartment communities (totaling approximately 3,600 units) and 18
commercial and retail properties to the portfolio. The merger also provided
increased depth in management and other resources which allowed the company to
internalize property management of all multi-family properties during the year
and to achieve operating and overhead efficiencies. During 1996, pursuant to the
company's strategy, nine other apartment communities comprising 3,156 units were
acquired and 14 commercial and retail properties were sold. FFO per share
increased approximately 13.5% from 1995 levels and the stock price (as adjusted
for the June 27, 1996 stock split) increased approximately 39% during the year.
Total shareholder return, taking into account dividends paid and stock price
appreciation, exceeded 40% for the year. In reviewing 1996 performance, the
Committee considered the extraordinary and non-recurring nature of certain
portfolio, organizational and operational changes resulting from the merger;
beyond this, the Committee considered the above factors as a whole without
assigning specific weights to particular factors.

It is the Committee's belief that, in light of current compensation levels
of the company's executive officers, the company will not be affected by the
provisions of Section 162(m) of the Code, which limits the deductibility of
certain executive compensation, during 1996. Therefore, the Committee has not
adopted a policy as to compliance with the requirements of Section 162(m).

BASE SALARY

Base salary levels of the company's key executives are largely determined
through an evaluation of the responsibilities of the position held and the
experience of the particular individuals and through a comparison with
comparable companies in the real estate industry. In its determination of
comparable companies, 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, during 1996, the Committee used salary survey data
supplied by an outside compensation consultant in establishing base salaries.
The executive officers' salaries, including those of the CEO and COO, were
generally set at the mid-range of the survey data.

18
<PAGE>
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. For 1996, incentive awards were based on the achievement of
predetermined corporate expectations and a subjective determination as to
individual performance. In addition, the Committee used survey data supplied
from the company's outside compensation consultant relative to total cash
compensation, including salary and cash incentive awards. For the executive
officers other than the CEO, targeted annual cash incentive awards are between
30% - 40% of base salary; for the CEO, the targeted annual cash incentive award
is 50% of base salary with a maximum annual award of 100% of base salary. The
company performance expectations were exceeded in all respects in 1996 and all
individual performance requirements were met. The Summary Compensation Table
shows cash incentive bonuses paid to the named executive officers for 1996 based
on such performance.

STOCK OPTIONS, INCENTIVE STOCK LOANS AND RESTRICTED SHARES

Stock options are designed to provide long-term (ten year) incentives and
rewards tied to the price of the 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 shareholders benefit from stock price appreciation, are
an important component of the company'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 Common Stock by executive officers. However, accumulation
and retention of shares of Common Stock by officers is encouraged.

Stock options are awarded annually following the close of each year. The
company does not adhere to any firmly established formulas for the issuance of
options. During 1996, 25 officers and other employees received stock option
grants. The Summary Compensation Table shows the options granted to the named
executive officers for 1996. 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 the company'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 the company's Common Stock.

Pursuant to the 1992 Employee Stock Plan, in 1996, the company funded
$821,250 aggregate principal amount of incentive stock loans to the named
executive officers. As more fully described in STOCK LOANS, these loans were
used to exercise some of the options granted to the named executive officers
under the Plan, and repayment of these loans may be forgiven in whole or in part
upon achievement of certain company performance goals. The Committee believes
that these loans, by encouraging management's acquisition and retention of
shares of Common Stock and by tying forgiveness to company performance, provide
even greater incentives for management to achieve both the company's long term
performance objectives and its current strategic goals.

The Committee may also award restricted shares as a compensation vehicle and
to retain key executive managers. Currently, seven 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 the
company's goals during the preceding year and the level of the officer's
responsibility. No restricted share awards were made to any officers or
employees of the company for 1996.

19
<PAGE>
CEO PERFORMANCE EVALUATION

For 1996, the Compensation Committee evaluated Mr. McDowell's performance
based on the factors discussed above under the caption "General," with
particular emphasis on the achievement of operating, portfolio and performance
objectives relative to the merger with RCT, growth in FFO per share and total
shareholder return and corporate performance relative to multi-family peer
groups. As a result of the company's significantly exceeding its corporate
expectations and objectives for 1996 and Mr. McDowell's individual performance,
he received 100% of his potential maximum annual cash incentive together with
the incentive stock loan and stock option grants described in Stock Loans and
Option Grants in 1996 Tables.

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

Malcolm R. Riley, Chairman
L. Michael Foley
Gregory M. Simon

COMPARATIVE STOCK PERFORMANCE

The line graph below compares the cumulative total shareholder return on the
Common Stock for the last five 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 the
Common Stock and in each index was $100 on December 31, 1991 and that all
dividends were reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
BRE S&P 500 NAREIT EQUITY REIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Properties,
Inc. Index w/o Healthcare Index
12/31/1991 $100.00 $100.00 $100.00
12/31/1992 123.22 107.61 120.66
12/31/1993 136.83 118.46 143.23
12/31/1994 135.55 120.02 147.52
12/31/1995 168.99 165.12 168.48
12/31/1996 250.20 211.13 229.82

12/31/1991
12/31/1992 Qtly
12/31/1993 Value
12/31/1994
12/31/1995
12/31/1996
$890.21
$979.62
$906.78
$909.50
$1,001.43
$1,201.96
$1,357.54
$1,547.69
$1,552.12
$1,515.43
$1,423.44
$1,396.94
$1,497.09
$1,533.14
$1,691.82
$1,867.16
$1,766.52
$2,078.38
$2,378.18
$2,556.66
$2,360.58
$2,415.47
$2,920.46
$2,895.58
$3,025.16
$2,366.20
$2,674.60
$2,821.82
$2,784.39
$2,859.99
$3,132.85
$3,446.26
$3,822.91
$3,876.51
$3,755.35
$3,978.14
$3,271.10
$3,678.05
$4,522.65
$4,489.45
$4,917.18
$5,521.02
$5,492.89
$5,322.38
$5,529.20
$6,178.07
$6,380.51
$6,529.15
$6,857.82
$7,040.59
$6,773.49
$6,526.29
$6,967.64
$6,787.80
$7,336.84
$7,983.67
$8,762.93
$8,888.54
$9,435.00
$9,706.21
</TABLE>

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

(1) Indicates appreciation of $100 invested on December 31, 1991 in the 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 159
companies with aggregate equity capitalization (excluding operating units)
of $73.6 billion.

20
<PAGE>
AMENDMENT OF ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK FROM 50,000,000 TO 100,000,000
(PROXY ITEM NO. 2)

GENERAL

The Board of Directors recommends that the company's Articles of
Incorporation be amended to increase the number of authorized shares of Common
Stock, $.01 par value, from 50,000,000 shares to 100,000,000 shares. As of
February 21, 1997, there were 33,003,785 shares of Common Stock outstanding and
an additional 3,091,222 shares were reserved for issuance upon exercise of
options outstanding or available for grant under the company's stock
compensation plans (assuming the shareholders approve increasing the 1992
Employee Stock Plan by 1,000,000 shares -- see Proxy Item No. 3). In addition,
1,481,310 shares were reserved for issuance under the company's Direct Stock
Purchase & Dividend Reinvestment Plan. Accordingly, 12,423,683 shares of Common
Stock are currently available for future purposes.

In addition to its authorized Common Stock, the company has authority to
issue 10,000,000 shares of preferred stock, $.01 par value, of which no shares
were issued and outstanding as of February 21, 1997.

REASONS FOR THE AMENDMENT

The Board recommends that the number of authorized but unissued shares of
Common Stock be increased to provide a sufficient number of shares available, as
the occasion may arise, for possible future financings and acquisitions, stock
dividends or splits and other proper corporate purposes. The company has filed a
shelf registration statement with the Securities and Exchange Commission for the
offering of up to $300 million of unsecured debt securities, Common Stock,
preferred stock, depositary shares and warrants to purchase shares of Common
Stock. Issuance of even the maximum amount of Common Stock pursuant to this
registration statement would not, however, require any increase in the
authorized shares. Nevertheless, while the company does not have any immediate
plans for any other transactions which would involve the issuance or reservation
of such additional shares, management of the company believes it is prudent to
increase the authorized Common Stock at this time so as to be in a position to
have flexibility to issue additional shares as favorable circumstances present
themselves. Management notes that in 1996 the company issued a total of
10,938,011 shares, primarily due to the merger with RCT.

The additional shares of Common Stock, if authorized, would have the same
rights and privileges as the shares of Common Stock presently outstanding and
could in the future be issued for any proper corporate purpose. Subject to the
rules of the New York Stock Exchange applicable to certain types of
transactions, the Board of Directors generally has the power and authority to
issue additional shares of Common Stock without shareholder approval. The Board
is not proposing the increase in authorized Common Stock with the intention of
discouraging tender offers or takeover attempts. However, in the event of an
unsolicited tender offer or takeover proposal, the increased number of shares
could give the Board greater flexibility to discourage or make more difficult an
attempt by a person or organization to gain control of the company.

To the extent additional shares of Common Stock are issued, each
shareholder's voting power and percentage interest in the company is diluted.
The shareholders of the company do not have any preemptive right to purchase or
subscribe for any part of any new or additional issuance of Common Stock.

RECOMMENDATION OF THE BOARD OF DIRECTORS; VOTE REQUIRED FOR APPROVAL

The Board of Directors has unanimously approved increasing the authorized
Common Stock and unanimously recommends that you vote FOR the proposed
amendment. The affirmative vote of a majority of the shares of Common Stock
outstanding on the Record Date is required to adopt this proposed amendment to
the Articles of Incorporation.

21
<PAGE>
ADDING 1,000,000 SHARES
TO THE AMENDED AND RESTATED
1992 EMPLOYEE STOCK PLAN
(PROXY ITEM NO. 3)

The company's Amended and Restated 1992 Employee Stock Plan (the "Plan")
provides for the grant of stock options, stock appreciation rights and
restricted and unrestricted stock to officers and other key employees of the
company for an aggregate of up to 750,000 shares of Common Stock. On February
24, 1997, the Board of Directors amended the Plan to (i) add 1,000,000 shares of
Common Stock to the Plan, and (ii) conform the Plan to recent amendments of SEC
Rule 16b-3. Such amendment increasing the Plan shares is subject to approval of
the company's shareholders.

The purpose of the Plan is to provide incentives to eligible employees by
providing them with a proprietary interest in the company. A copy of the Plan,
as proposed to be amended, is attached hereto. The following summary of certain
provisions of the Plan does not purport to be complete and is qualified in its
entirety by reference to the attached Plan.

ADMINISTRATION OF THE PLAN

The Plan provides that it shall be administered by the Board of Directors or
a committee of directors appointed by the Board. The Board has designated the
Compensation Committee (the "Committee") to administer the Plan. To the extent
that options and other awards granted under the Plan are intended to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Internal Revenue Code, the Plan will be administered by a committee of two or
more "outside directors" within the meaning of Code Section 162(m). Awards under
the Plan are intended to be exempt from the SEC's short-swing profit rule,
pursuant to SEC Rule 16b-3.

The Committee, or the full Board, is authorized to grant awards to eligible
employees, to determine the terms and conditions thereof, to determine which
persons meet the requirements with respect to eligibility, and to adopt rules
and regulations relating to the Plan. The individuals eligible to participate
are those key salaried employees, including officers and directors who are also
employees of the company, as the Committee shall determine.

SHARES AVAILABLE UNDER PLAN

To date, options and restricted stock have been awarded for all 750,000
shares under the Plan, and options for an additional 169,064 shares were granted
on January 27 and February 13, 1997. These additional options are conditioned on
shareholder approval of the Plan increase. See PARTICIPATION IN THE INCREASED
PLAN BY EXECUTIVE OFFICERS. The present amendment increases the Plan by
1,000,000 shares, including such 169,064 shares. If the 1,000,000 share Plan
increase is approved by the shareholders, there will be outstanding or
authorized for future grants a total of 3,091,222 shares of Common Stock,
including (i) outstanding Plan options for 788,886 shares (including such
169,064 shares) and 26,264 unvested restricted shares under the Plan, (ii)
830,936 shares available for future Plan grants, (iii) outstanding options and
restricted stock for a total of 255,500 shares under the company's 1984 plan,
which has expired, (iv) an option for 100,000 shares held by Mr. McDowell, (v)
the 800,000-share Non-Employee Director Stock Option, under which options for
420,000 shares are outstanding and options for 380,000 shares are available for
future grants, and (vi) outstanding options for 315,900 shares of Common Stock
of the total options for 381,900 shares which were assumed in the RCT merger on
March 15, 1996.

Each award under the Plan contains customary anti-dilution provisions which
are applicable in the event of a stock dividend, stock-split, conversion,
exchange, reclassification or substitution. In the event of any other change in
the corporate structure or outstanding shares, the Committee may make such
equitable adjustments to the number of shares and the class of shares available
under the Plan or to any outstanding award as it shall deem appropriate to
prevent dilution or enlargement of rights. Upon termination of any outstanding
Plan awards, the shares subject to those awards may again be made the subject of
additional Plan awards. The maximum number of shares which may be the subject of
options granted to any individual in any calendar year is 200,000 shares.

22
<PAGE>
TYPES OF AWARDS

STOCK OPTIONS. The Committee will have discretion to grant either
"incentive stock options" (within the meaning of Section 422 of the Code) or
non-qualified stock options. A further description of these two types of stock
options appears below under the heading CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
All option grants will be evidenced by written agreements in such form approved
by the Committee consistent with the terms of the Plan. The Committee will,
subject to the terms and conditions of the Plan, determine the terms and
conditions of option grants and the number of shares to be issued pursuant to
such options. The exercise price will be not less than the market value on the
grant date.

The Plan provides that the Committee may, in its discretion, provide that an
option may not be exercised in whole or in part for a specified period or
periods of time. Generally, options vest 20% per year beginning one year after
the grant date and expire ten years from the date of grant. Except as so
specified, an option may be exercised in whole or in part from time to time for
a period of up to ten years from the date of grant. In the discretion of the
Committee, an option may become immediately exercisable upon the occurrence of
certain events, including upon the death or permanent disability of an optionee
or upon a change in control (as defined in the Plan) of the company. In the
event of the optionee's termination of employment with the company, the option
shall also terminate unless extended by the Committee for up to seven months or
for up to 12 months following termination due to death or permanent disability,
and for a period of up to three years following retirement at or after normal
retirement age. In the event of a merger, sale of assets or certain other
corporate transactions, the Plan authorizes the Committee, in its discretion, to
either accelerate the vesting of outstanding options or cancel options which
were exercisable at any time prior to the effective date of such transaction.

Payment of the option price upon exercise of an option shall be in cash or,
in the discretion of the Committee, in shares of Common Stock already owned by
the optionee having a fair market value equal to the option price, or any
combination of cash and Common Stock having a combined value equal to the option
price. In the Committee's discretion, when already owned shares are delivered to
execute an option, only the net shares issued upon exercise will be deemed
utilized in the Plan. The option holder may in certain circumstances elect to
have shares withheld to satisfy tax withholding requirements in connection with
the exercise of an option. In the discretion of the Committee, an option
agreement may also provide for the extension of an interest-bearing loan from
the company to the optionee to finance exercise of an option, provided that the
term of the loan does not exceed ten years, the loan is with full recourse to
the optionee, and repayment of the loan is secured by the shares so acquired by
the optionee. The Company has extended such loans to the named executive
officers on terms described in STOCK LOANS, including forgiveness of all or part
of the loans if certain performance conditions are met. The Plan also provides
that the Committee may permit optionees to use cashless exercise methods that
are permitted by law and in connection therewith the company may establish a
cashless exercise program, including a program where the commissions on the sale
of stock subject to an exercised option are paid by the company.

In general, options are transferable only by will or by the laws of descent
and distribution and, during the lifetime of the optionee, the option shall be
exercisable only by the optionee or by his guardian or legal representative;
however, the Committee has the discretion to permit lifetime and death transfers
to the extent permitted by SEC Rule 16b-3 as in effect from time to time. Rule
16b-3 was amended recently to permit transferable options, and the Committee is
considering allowing the transfer of Plan options, including previously granted
options.

SHARE APPRECIATION RIGHTS (SARS). The Plan provides that the Committee may
grant SARs in connection with all or part of any option granted under the Plan.
The number of SARs granted to an optionee may not exceed the number of shares of
Common Stock which the optionee may then purchase upon exercise of the related
option or options.

The holder of an option and related SARs may elect to exercise the SARs or a
part thereof in lieu of exercising the option or its related portion. Upon any
exercise of SARs, the optionee must surrender the

23
<PAGE>
related option with respect to a number of shares equal to the number of SARs
exercised and, in exchange, the optionee will receive the excess of the fair
market value of the Common Stock covered by the portion of the option
surrendered over its option price. Payment of SARs may be made in shares of
Common Stock valued at fair market value or, in the discretion of the Committee,
in cash. In the event of the surrender of all or a portion of an option for
SARs, the shares represented by the portion surrendered will not be available
for reissuance under the Plan.

If SARs are granted with respect to an option, the existence of the SARs
will require charges to income for compensation expense based on the amount, if
any, by which the market price of the shares of Common Stock subject to the SARs
exceeds the option price over the period of the option.

RESTRICTED STOCK AWARDS. The Committee may grant restricted shares, i.e.,
shares of Common Stock which are subject to transfer restrictions determined by
the Committee in its sole discretion, and subject to substantial risk of
forfeiture unless and until specific conditions established by the Committee at
the time of grant are met. Such conditions may be based on continuing employment
or achievement of pre-established performance goals, or both, as determined by
the Committee. The specific categories of and procedures for establishing such
goals are set forth in Section 4.3 of the Plan. The Committee's discretion in
establishing performance goals would not be limited to Section 4.3 when an
employee's compensation amount is not expected to be subject to the deduction
limitations of Code Section 162(m).

Stock certificates for restricted shares shall be issued in the name of the
holder, but the certificates may be retained in escrow until such time as the
restrictions shall have lapsed. The holder of restricted shares shall have all
rights of a shareholder with respect to the Common Stock registered in his or
her name, including the voting and dividend rights, unless otherwise provided in
the restricted stock award.

SHARE AWARDS. The Plan also authorizes the Committee to award or offer
shares of Common Stock, either restricted or unrestricted, and as current or
deferred compensation, in lieu of all or any portion of the cash compensation to
which the employee is entitled, for a number of shares having a value on the
grant date equal to the amount of such cash compensation.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following discussion is based on federal income tax laws and regulations
as in effect on the date of this Proxy Statement and does not purport to be a
complete description of the federal income tax aspects of the Plan. No
information is provided herein with respect to estate, inheritance, or state or
local tax laws, although there may be certain tax consequences upon the receipt
or exercise of an award or the disposition of any of the acquired shares under
those laws. The exact federal income tax treatment of awards will depend on the
specific nature of any such award. An award may, depending on the conditions
applicable to the award, be taxable as an option, an award of restricted or
unrestricted shares, an award which is payable in cash, or otherwise.

INCENTIVE STOCK OPTIONS. Neither the grant nor the exercise of an incentive
stock option is taxable to the employee receiving the option. If the employee
holds the stock purchased upon exercise of an incentive stock option for at
least one year after the purchase of the stock and until at least two years
after the option was granted, his or her sale of the shares will produce
long-term capital gain or loss, and the company will not be entitled to any tax
deduction. However, if the employee sells or otherwise transfers the stock
before these holding periods have elapsed, he or she will generally be taxed at
ordinary income rates on the sale in the amount of the excess of the fair market
value of the stock when the option was exercised over the option exercise price,
and the company will be entitled to a tax deduction in the same amount. Any
remaining gain or loss will be short-term or long-term capital gain or loss as
the case may be.

NON-QUALIFIED OPTIONS. Although the grant of non-qualified stock options
under the Plan also is not generally taxable to the optionee, upon exercise the
optionee will be taxed at ordinary income rates on the excess of the fair market
value of the stock received over the option exercise price, and the company will
be

24
<PAGE>
entitled to a tax deduction in the same amount. The amount included in an
individual's income as a result of the exercise of a non-qualified option will
be treated as his or her basis in the shares acquired, and any remaining gain or
loss on the subsequent sale of the shares will be treated as long-term or
short-term capital gain or loss as the case may be.

RESTRICTED STOCK. The acquisition of restricted stock is not a taxable
event. When restrictions imposed upon the restricted stock expire, the holder
will recognize ordinary income in an amount equal to the excess, if any, of the
fair market value of the restricted stock on the date of such expiration over
the purchase price, if any, for the shares. The holder may, however, elect
within 30 days after the date of acquisition to recognize ordinary income on the
date of purchase in an amount equal to the excess of the fair market value of
the restricted stock on the date of grant, determined without regard to the
restrictions imposed on such shares, over the purchase price, if any, for the
shares. If and when the holder recognizes ordinary income attributable to the
restricted stock, the company will be entitled to a deduction for the same
amount.

SHARE APPRECIATION RIGHTS. The grant of an SAR is generally not a taxable
event for the grantee. Upon exercise of the SAR, the grantee will recognize
ordinary income in an amount equal to the amount of cash or stock received upon
such exercise, and the company will be entitled to a deduction for the same
amount.

OTHER AWARDS. Awards may be granted to employees under the Plan that do not
fall into the categories described above. The federal income tax treatment of
these awards will depend upon the specific terms of such awards. In general,
compensation in lieu of cash will be treated as ordinary, taxable income to the
employees and deducted by the company. The company will generally be required to
withhold applicable taxes with respect to any ordinary income recognized by a
participant in connection with awards made under the Plan. The Plan authorizes
employees to elect to have the company withhold shares from any award in the
amount of the tax withholding, in which event the company would then pay the
withholding amount in cash.

EXCESS PARACHUTE PAYMENTS. Where the terms of the agreements pursuant to
which specific awards made under the Plan provide for accelerated vesting or
payment of an award in connection with a change in ownership or control of the
company, certain amounts with respect to such awards may constitute "excess
parachute payments" under the golden parachute provisions of the Code. Pursuant
to such provisions, an employee will be subject to a 20% excise tax on any
excess parachute payment and the company will be denied any deduction with
respect to such excess parachute payment.

ALTERNATIVE MINIMUM TAX. The amount by which the fair market value of the
shares received upon exercise of an incentive option exceeds the exercise price
of the shares is included in the calculation of "alternative minimum taxable
income" of the optionee. The alternative minimum tax imposed on individual
taxpayers is equal to the amount by which 26% of alternative minimum taxable
income (28% for AMTI in excess of $175,000) exceeds the regular federal income
tax rate for a taxable year. For minimum tax purposes, the basis of stock
acquired through the exercise of an incentive stock option equals the fair
market value taken into account in determining the amount of the alternative
minimum taxable income. A portion of a taxpayer's minimum tax attributable to
certain items (including the spread on the exercise of an incentive stock
option) may be credited against the taxpayer's regular tax liability in later
years to the extent that the regular tax liability exceeds the alternative
minimum tax.

SECTION 162(M)COMPENSATION DEDUCTION LIMITATION. Stock options, SARs and
performance-based restricted stock granted under the Plan are intended to be
"performance-based compensation" and therefore not subject to the deduction
limitation of Code Section 162(m).

25
<PAGE>
ACCOUNTING

The company has elected to be governed by APB No. 25, so that there is no
earnings charge in connection with the grant or exercise of stock options
granted under the Plan. Effective for 1996, however, FAS 123 requires companies
to show in a footnote to their financial statements the proforma effect that
option grants would have had on earnings if the "value" of the stock options
were treated as compensation expense. See Note 7 of the Notes to Financial
Statements in the company's 1996 annual report to shareholders. Restricted and
unrestricted stock grants under the Plan would, however, involve an earnings
charge, as would SARs as discussed above.

AMENDMENT AND DURATION OF THE PLAN

The Plan expires September 27, 2002. The Plan may be terminated or amended
by the Board at any time; however, any modification or amendment requiring
shareholder approval under the rules and regulations of the New York Stock
Exchange or pursuant to Rule 16b-3 of the Exchange Act or Section 162(m) of the
Code will be subject to shareholder approval within one year of the adoption of
such amendment.

RECENT STOCK PRICE

The closing price of the Common Stock on February 21, 1997, as reported by
the New York Stock Exchange, was $23.875 per share.

PARTICIPATION IN THE INCREASED PLAN BY EXECUTIVE OFFICERS

On January 27, 1997, the Committee granted options for a total of 127,000
shares at $25.00 per share (the market price on that date), none of which was
granted to an executive officer. On February 13, 1997, the Committee granted
options for a total of 137,500 shares at $24.625 per share (the market price on
that date) to the named executive officers, as follows:

<TABLE>
<CAPTION>
SHARES SUBJECT TO
OPTIONS GRANTED
-----------------
<S> <C>
Frank C. McDowell........................................................... 30,000
Jay W. Pauly................................................................ 32,500
LeRoy E. Carlson............................................................ 25,000
John H. Nunn................................................................ 25,000
Byron Fox................................................................... 25,000
</TABLE>

Of the above options for a total of 264,500 shares, options for 27,500 shares
were exercised by the five named executive officers on the grant date (see STOCK
LOANS) and options for 169,064 shares exceeded the current plan authorization
and would be cancelled pro rata for each individual if the proposed amendment
increasing the Plan is not approved by the shareholders.

26
<PAGE>
Future awards under the Plan are not presently determinable, including
grants to executive officers. See, however, STOCK LOANS regarding possible
future performance grants to the named executive officers. The following table
sets forth information regarding grants under the Plan in 1996 to (i) each named
executive officer, (ii) all current executive officers as a group, and (iii) all
non-executive officer employees as a group.

<TABLE>
<CAPTION>
SHARES SUBJECT WEIGHTED AVERAGE DOLLAR VALUE
TO OPTIONS EXERCISE PRICE OF
GRANTED PER SHARE(1) OPTIONS(2)
---------------- ---------------- ------------
<S> <C> <C> <C>
Frank C. McDowell.............................................. 60,000(3) $ 20.00 $ 237,500
Jay W. Pauly................................................... 45,000(4) 17.75 210,000
LeRoy E. Carlson............................................... 35,000(3) 17.75 175,000
John H. Nunn................................................... 30,000(3) 17.75 140,000
Byron Fox...................................................... 20,000 17.5625 143,750
All current executive officers as a group
(five persons)............................................... 190,000 906,250
All employees who are not executive officers
(20 persons)................................................. 174,000 17.90 1,191,900
</TABLE>

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

(1) Equal to the market price for the Common Stock on the date of grant.

(2) Equal to the market price on December 31, 1996 of $24.75 per share less the
exercise price, multiplied by the number of shares (excluding those shares
exercised as noted in (3) and (4) below).

(3) Includes 10,000 shares for options which were immediately exercised upon
grant. See STOCK LOANS.

(4) Includes 15,000 shares for options which were immediately exercised upon
grant. See STOCK LOANS.

RECOMMENDATION OF THE BOARD OF DIRECTORS; VOTE REQUIRED FOR APPROVAL

The Board of Directors has unanimously approved increasing the authorized
Plan shares and unanimously recommends that you vote FOR the proposed amendment.
The affirmative vote of a majority of the shares of Common Stock represented at
the Annual Meeting and voted with respect to this proposal, if a quorum is
present, is required to adopt this proposed amendment to the Plan.

27
<PAGE>
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
(PROXY ITEM NO. 4)

Ernst & Young LLP, independent auditors, provided auditing services to the
company during the year ended December 31, 1996. The directors have selected
Ernst & Young LLP to audit the financial statements of the company for 1997 and
recommend to the shareholders that such selection be ratified. The affirmative
vote of a majority of the shares represented at the Annual Meeting and voted
with respect to this proposal, if a quorum is present, is sufficient to ratify
such selection. Representatives of Ernst & Young LLP will be present at the
Annual Meeting, with the opportunity to make a statement if they so desire. Such
representatives will also be available to respond to appropriate questions. The
Board unanimously recommends a vote FOR this proposal.

PRINCIPAL SHAREHOLDERS

The following table indicates the only person known by the company to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock as of
December 31, 1996 and the percentage of the 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.

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS OF COMMON STOCK PERCENTAGE OF SHARES
- - ------------------------------------- ----------------- ---------------------
<S> <C> <C>
State Farm Insurance Companies
One State Farm Plaza
Bloomington, Illinois 61701 4,168,958 12.7%
</TABLE>

SHAREHOLDER PROPOSALS

Any shareholder who wishes to submit a proposal for presentation at the next
Annual Meeting of Shareholders must submit the proposal to BRE Properties, Inc.,
One Montgomery Street, Suite 2500, Telesis Tower, San Francisco, CA 94104-5525,
Attention: Secretary. Such proposal must be received not later than October ,
1997 for inclusion, if appropriate, in the company's proxy statement and form of
proxy relating to next year's Annual Meeting.

OTHER MATTERS

It is not expected that any matters other than those described in this Proxy
Statement will be brought before the Annual Meeting.

March , 1997

By Order of the Board of Directors

28
<PAGE>
BRE PROPERTIES, INC.
AMENDED AND RESTATED
1992 EMPLOYEE STOCK PLAN
ARTICLE I
GENERAL

1.1 PURPOSE OF THE PLAN. The purpose of the 1992 Employee Stock Plan (the
"Plan") is to provide officers and other key employees of the company with
incentives to continue their employment with the company and to afford them the
opportunity to acquire a continuing stock ownership interest in the company,
thereby providing them a proprietary interest in the success of the company.

1.2 DEFINITIONS. As used in the Plan and the related Award Agreements, the
following terms will have the meanings stated below:

(a) "Award" means any Option, SAR, Shares or Restricted Shares granted
pursuant to the Plan.

(b) "Award Agreement" means the written agreement between the company
and an employee pursuant to which an Award may be granted. The Committee
shall determine the terms of each Award Agreement, subject to the terms and
conditions of the Plan.

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

(e) "Company" means BRE Properties, Inc., a Maryland corporation.

(f) "Committee" means the Compensation Committee appointed by the Board
to administer the Plan. The Committee shall consist solely of two or more
members of the Board who are not employees. The Board shall have the power
from time to time to add or remove members of the Committee and to fill
vacancies arising for any reason.

(g) "Exchange Act" means the Securities Exchange Act of 1934.

(h) The "Fair Market Value" of a Share on any date means the closing
price per Share on the New York Stock Exchange for that day (or, if no
Shares were publicly traded on that Exchange on that date, the next
preceding day that Shares were so traded on that Exchange).

(i) "Incentive Stock Option" or "ISO" means an Option that meets the
requirements of Section 422 of the Code.

(j) "Non-qualified Stock Option" or "NQSO" means an Option that is not
intended to qualify as an ISO.

(k) "Option" means an option to purchase Shares and shall be either an
ISO or a NQSO.

(l) "Optionee" means the holder of an Option.

(m) "Option Price" means the price to be paid for Shares upon exercise
of an Option as determined in accordance with Section 2.2.

(n) "Restricted Shareholder" shall have the meaning set forth in Section
4.1.

(o) "Restricted Shares" means Shares issued pursuant to Article IV.

(p) "Share Appreciation Right" or "SAR" means rights granted pursuant to
Article III.

(q) "Shares" means shares of common stock, $.01 par value, of the
company.

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<PAGE>
(r) "Subsidiary" means any corporation in which the company owns,
directly or indirectly, stock possessing more than 50 percent of the total
combined voting power of all classes of stock.

1.3 ADMINISTRATION OF PLAN.

(a) The Plan shall be administered by the Committee. Subject to the
provisions of the Plan, the Committee shall have the sole authority to
determine:

(i) The employees to whom Awards shall be granted;

(ii) The number of Shares or Restricted Shares to be covered by an
Award;

(iii) Whether and to what extent an Optionee may use already-owned
Shares in payment of the Option Price upon exercise of Options;

(iv) Which Options granted shall be ISOs and which shall be NQSOs;

(v) The Option Price;

(vi) The period and conditions, if any, under which each Award shall
vest or be exercisable; and

(vii) The terms and conditions of each Award Agreement between the
company and each employee.

(b) The Committee's decision construing, interpreting and administering
the Plan shall be conclusive and binding on all parties. No member of the
Committee or the Board shall be liable for any action taken or determination
made in good faith with respect to the Plan or to any Award granted pursuant
to the Plan.

1.4 ELIGIBILITY. The individuals who shall be eligible to participate in
the Plan shall be those key salaried employees, including officers and directors
if they are employees, of the company, or of any Subsidiary, as the Committee
shall determine during the period of the Plan. Awards under the Plan may be made
to the same eligible employee on more than one occasion.

1.5 TYPES OF GRANTS AND AWARDS UNDER PLAN. Awards under the Plan may be in
the form of Options, SARs, Shares and Restricted Shares. Options may be granted
with or without related SARs. SARs may be granted only with respect to a related
Option. The date of grant of an Award hereunder shall be deemed to be the date
of action by the Committee, notwithstanding that issuance may be conditioned on
the execution of an Award Agreement.

1.6 TRANSFERABILITY. Except as permitted by the Committee in accordance
with the rules and regulations promulgated under the Exchange Act with respect
to any exemption from the short swing profit provisions of Section 16(b) of that
Act, Awards under the Plan shall not be transferable by the holder other than by
will or the laws of descent and distribution and shall be exercisable during the
holders lifetime only by the holder or the holders guardian or legal
representative. This restriction shall apply to all employees receiving grants
under the Plan, whether or not the employee is subject to Section 16(b).

1.7 SHARES SUBJECT TO PLAN. The maximum number of Shares which may be
issued under the Plan shall be 1,750,000, subject to adjustment in accordance
with Section 6.4. In the event that any outstanding Award shall expire or
terminate for any reason, the Shares or Restricted Shares allocable to the
unused or forfeited portion of that Award may again be available for additional
Awards under the Plan. However, in the event of a surrender of an Option, or a
portion of it, for SARs, the Shares represented by the Option or that part of it
which is so surrendered shall not be available for reissuance under the Plan.

1.8 EFFECTIVE DATE AND TERM OF PLAN.

(a) The Plan, as amended hereby, shall be effective and shall be deemed
to have been amended on February 24, 1997, if within twelve months after
that date the Plan has been approved by the

A-2
<PAGE>
affirmative vote of the holders of a majority of those outstanding shares of
voting stock of the company voting in person or by proxy at a duly held
shareholder meeting; if not so approved, the increase in the number of
Shares covered by the Plan shall not become effective.

(b) The Board may terminate the Plan at any time. If not sooner
terminated by the Board, the Plan will expire on September 27, 2002.
Expiration or termination of the Plan will not affect the validity of any
Awards then outstanding.

ARTICLE II
STOCK OPTIONS

2.1 OPTION AGREEMENTS. The grant of an Option shall be evidenced by a
written Option Agreement. Each Option Agreement shall state the number of Shares
subject to the Option, the Option Price, the option period, the method of
exercise, the manner of payment, the restrictions on transfer, and such other
terms and conditions as the Committee shall determine consistent with the Plan.
The maximum number of Shares for which Options may be granted under the Plan to
any employee in any calendar year is 200,000 Shares.

2.2 OPTION PRICE. The price to be paid for Shares upon the exercise of an
Option shall be fixed by the Committee at the time the Option is granted, but
shall in no event be less than 100% of the Fair Market Value of the Shares on
the date the Option is granted.

2.3 DURATION OF OPTION. No Option shall be exercisable after the
expiration of ten years from the date of grant.

2.4 DATE OF EXERCISE. Any Option may be exercised at any time following
the date of grant, in whole or in part, unless the Committee shall otherwise
provide for vesting or other restrictions under which an Option may be exercised
by the Optionee, in whole or in part. In the discretion of the Committee, an
Option may become immediately and fully exercisable upon the occurrence of
certain times or events, including, without limitation, (i) in the event of
death or permanent disability of the Optionee or (ii) upon the occurrence of a
change of control of the company. For purposes of the Plan, a change of control
shall be deemed to occur if any person or group together with its affiliates and
associates (other than the company or any of its subsidiaries or employee
benefit plans), after the effective date of the Plan, acquires direct or
indirect beneficial ownership of 32 percent or more of the then outstanding
Shares or commences a tender or exchange offer for 40 percent or more of the
then outstanding Shares. The terms "group," "affiliates," "associates" and
"beneficial ownership" shall have the meanings ascribed to them in the rules and
regulations promulgated under the Exchange Act.

2.5 METHOD OF EXERCISE. The Committee shall establish procedures governing
the exercise of an Option consistent with the purposes of the Plan. Such
procedures may include, without limitation, delivery to the company of written
notice of exercise accompanied by payment in full of the Option Price for the
Shares to which the exercise relates and payment of any amount necessary to
satisfy any withholding tax liability that may result from exercise of the
Option.

2.6 PAYMENT OF OPTION PRICE. Upon exercise of an Option, the Option Price
for the Shares to which the exercise relates shall be paid in full in cash or,
as specified in the Option Agreement or as otherwise permitted by the Committee
at the time of exercise, (i) by delivering to the company already-owned Shares
having a Fair Market Value equal to the Option Price on the date of exercise,
(ii) by cashless exercise methods which are permitted by law, including, without
limitation, methods whereby a broker sells the Shares to which the exercise
relates or holds them as collateral for a margin loan, delivers the Option Price
to the company, and delivers the remaining proceeds to the Optionee (and in
connection therewith the company may establish a cashless exercise program
including a program where the commissions on the sale of Shares to which the
exercise relates are paid by the company), or (iii) by any combination of cash
and already-owned Shares or such cashless exercise methods having a combined
value equal to the Option

A-3
<PAGE>
Price. In the discretion of the Committee, already-owned Shares must have been
owned by the Optionee at the time of exercise for at least the period of time
specified by the Committee (which generally shall be not less than six months).
Whenever payment of the Option Price would require delivery of a fractional
Share, the Optionee shall deliver the next lower whole number of Shares and a
cash payment shall be made by the Optionee for the balance of the Option Price.

2.7 OPTION EXERCISE LOANS. An Option Agreement may provide for the
extension of a loan from the company to the Optionee to finance exercise of the
Option. Any such loan shall have a term that does not exceed ten years, shall be
secured by a pledge of the Shares acquired pursuant to exercise of the Option,
shall be with full recourse against the Optionee, shall bear interest at rates
determined by the Committee, and shall contain such other terms and conditions
as the Committee shall determine consistent with the Plan.

2.8 TERMINATION OF EMPLOYMENT. Options shall normally terminate
immediately upon termination of an Optionee's employment with the company for
any reason, or not more than three months following the date of termination if
permitted by the Committee, acting in its discretion. However, (i) if an
Optionee dies or becomes permanently disabled while in the continuous employ of
the company, the Committee may in its discretion allow the Optionee or the
Optionee's estate, personal or legal representative or beneficiary, to exercise
the Option (to the same extent the Optionee could have exercised it on the date
of death or permanent disability) for a period of up to twelve months from the
date of death or disability and (ii) if an Optionee retires at or after normal
retirement age the Committee may in its discretion allow the Optionee to
exercise the Option (to the same extent the Optionee could have exercised it on
the date of retirement) for a period of up to three years from the date of
retirement, but, in either (i) or (ii), not beyond the original option term.

ARTICLE III
SHARE APPRECIATION RIGHTS

3.1 GRANT OF SARS. Share appreciation rights may be granted in connection
with all or any part of any Option granted under the Plan. The number of SARs
granted to an Optionee shall not exceed the number of Shares which the optionee
may purchase upon exercise of the related Option. SARs granted under the Plan
shall be included in the related Option Agreement between the company and the
Optionee.

3.2 EXERCISE OF SARS. A holder of SARs may exercise such rights, in whole
or in part, in lieu of exercise of the related Option, only to the same extent
and subject to the same conditions as the related Option is then exercisable and
unexercised. At the time of exercise, the Optionee shall surrender the Option
with respect to the number of Shares equal to the number of SARs exercised and
shall receive in return the number of Shares or amount of cash determined
pursuant to Section 3.3. The number of Shares available for the grant of future
Options and SARs under the Plan shall be reduced by the number of Shares with
respect to which an Option is so surrendered. The Committee, in its discretion,
may prescribe terms, conditions and limitations on the exercise of SARs.

3.3 PAYMENT OF SARS. Upon exercise of SARs, in consideration of the
surrender of the related Option, the holder thereof shall be entitled to
receive, with respect to each such right, an amount equal to the excess of the
Fair Market Value of one Share at the time of exercise over the Option Price per
Share for the Shares subject to the related Option and SAR being exercised. This
amount shall be payable as the Optionee shall elect, in cash, Shares or any
combination of cash and Shares; provided, however, that the Committee shall have
sole discretion to consent to or disapprove any election to receive cash in full
or partial payment of such amount. If the Optionee is to receive all or any
portion of such amount in Shares, the number of Shares shall be determined by
dividing such amount or portion thereof by the Fair Market Value per Share at
the time of exercise. If the number of Shares so determined is not a whole
number, such number shall be reduced to the next lower whole number.

A-4
<PAGE>
ARTICLE IV
RESTRICTED SHARES

4.1 AWARD OF RESTRICTED SHARES. The Committee may, from time to time and
subject to the provisions of the Plan and such other terms and conditions as the
Committee may prescribe, award Shares to be held under the restrictions set
forth in this Article IV to any eligible employee of the company. Upon making
such an award, the company shall cause to have Restricted Shares issued and
registered in the name of the employee to whom Restricted Shares are awarded
(the "Restricted Shareholder").

4.2 RESTRICTIONS. Restricted Shares shall be subject to forfeiture upon
such terms and conditions, e.g., continued employment and performance goals, and
to such restrictions against sale, transfer or other disposition as may be
determined by the Committee at the time Restricted Shares are awarded. The
Committee may, in its discretion, remove, modify or accelerate the release of
restrictions on any Restricted Shares, including upon a change of control as
defined in Section 2.4.

4.3 PERFORMANCE GOALS.

(a) When the Committee determines to provide for forfeiture of
Restricted Shares based on performance goals, and when in the Committee's
judgment the provisions of Code Section 162(m) may be applicable to an Award
of Restricted Stock, the Committee shall be guided by this Section 4.3. The
Committee shall establish performance goals prior to the start of the
restriction period; provided that such goals may be established after the
start of the fiscal year but while the outcome of the performance goal is
substantially uncertain to the extent permitted under proposed or final
regulations issued under Section 162(m).

(b) Each performance goal shall identify one or more business criterion
that is to be monitored during the restriction period. Such criteria may
include, among other things, any of the following:

<TABLE>
<S> <C>
Funds from operations per share Net income
Return non net assets Earnings per share
Operating ratios Debt reduction
Cash flow Return on investment
Shareholder return Revenue
Revenue growth
</TABLE>

(c) The Committee shall determine the target level of performance that
must be achieved with respect to each criterion that is identified in a
performance goal in order for a performance goal to be treated as attained.

4.4 FORFEITURE OF RESTRICTED SHARES. In the event of the forfeiture of any
Restricted Shares, the company shall have the right to reacquire all or any
portion of such Shares, as determined by the Committee in its sole discretion,
without the payment of consideration in any form to such Restricted Shareholder,
and the Restricted Shareholder shall unconditionally forfeit any right, title or
interest to such Restricted Shares. All forfeited Restricted Shares shall be
transferred and delivered to the company. The Committee may, in its sole
discretion, waive in writing the company's right to reacquire some or all of a
holder's Restricted Shares, whereupon such shares shall become fully vested in
such Restricted Shareholder.

4.5 ESCROW. In order to administer the provisions of this Article IV the
stock certificates evidencing Restricted Shares, although issued in the name of
the Restricted Shareholder, shall be held by the company in escrow subject to
delivery to the Restricted Shareholder upon vesting. An employee's receipt of an
award of Restricted Shares pursuant to the Plan shall constitute the grant of an
irrevocable power of attorney to the company to permit the transfer and delivery
to the company of any or all Restricted Shares which are forfeited to the
company.

A-5
<PAGE>
4.6 DIVIDENDS ON RESTRICTED SHARES. While the Restricted Shares are held
in escrow, all cash dividends the company pays on the Restricted Shares shall be
subject to such terms, conditions and restrictions on payment as the Committee
shall determine, and shall be delivered directly to the Restricted Shareholder,
to the escrow account, or otherwise held in the manner specified by the
Committee. Share dividends or other dividends in kind on any Restricted Shares
held in escrow shall be paid into such escrow in the name of the Restricted
Shareholder and shall be subject to the same restrictions on disposition and
forfeiture provisions applicable to the Restricted Shares on which such dividend
was paid.

ARTICLE V
OTHER STOCK-BASED AWARDS

The Committee, in its discretion, may grant Awards under the Plan in the
form of Shares, either current or deferred, restricted or unrestricted, and in
tandem or combination with, or as an alternative to, any other employee
compensation plan of the company.

ARTICLE VI
MISCELLANEOUS

6.1 NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, or otherwise delivered by hand or messenger or facsimile
transmission, addressed

(a) if to the company, at
BRE Properties, Inc.
Telesis Tower, Suite 2500
One Montgomery Street
San Francisco, CA 94104-5525
Attn: Secretary

(b) If to the Award holder, at the last address shown on the company's
personnel records, or

6.2 AMENDMENT OR TERMINATION. The Board may, at any time and from time to
time, modify, amend, suspend or terminate the Plan in any respect. Amendments to
the Plan shall be subject to stockholder approval to the extent required to
comply with any exemption to the short swing-profit provisions of Section 16(b)
of the Exchange Act pursuant to rules and regulations promulgated thereunder,
with the exclusion for performance-based compensation under Code Section 162(m),
or with the rules and regulations of any securities exchange on which the Shares
are listed. The Board may also modify or amend the terms and conditions of any
outstanding Award, subject to the consent of the holder and consistent with the
provisions of the Plan.

6.3 LEAVE OF ABSENCE. The Committee shall be entitled to make such rules,
regulations and determinations as it deems appropriate under the Plan in respect
of any leave of absence from the company taken by the recipient of any grant
under the Plan. Without limiting the generality of the foregoing, the Committee
shall be entitled to determine (a) whether or not any such leave of absence
shall be treated as a termination of employment with the company within the
meaning of the Plan and (b) the impact, if any, of any such leave of absence on
grants and awards under the Plan.

A-6
<PAGE>
6.4 RECAPITALIZATION. In the event of any change in capitalization which
affects the Shares, whether by stock dividend, stock distribution, stock split,
subdivision or combination of Shares, reclassification, merger or consolidation
or otherwise, such proportionate adjustments, if any, as the Committee in its
discretion deems appropriate to reflect such change shall be made with respect
to the total number of Shares in respect of which Awards may be granted under
the Plan, the number of Shares covered by each outstanding Award and the Option
Price per Share under each Option and related SAR; however, any fractional
shares resulting from any such adjustment shall be eliminated.

6.5 REORGANIZATION. If the company merges or consolidates with another
corporation and is not the surviving corporation, or if the company is
liquidated or sells or otherwise disposes of substantially all its assets while
unexercised Options remain outstanding under the Plan, (a) subject to the
provisions of clause (c) below, after the effective date of the merger,
consolidation, liquidation, sale or other disposition, as the case may be, each
holder of any outstanding Option shall be entitled, upon exercise of an Option,
to receive, in lieu of Shares, the number and class or classes of shares of
stock or other securities or property to which the holder would have been
entitled if, immediately prior to the merger, consolidation, liquidation, sale
or other disposition, the holder had been the holder of record of a number of
Shares equal to the number of Shares as to which the Option may be exercised;
(b) the Committee may in its discretion waive any limitations set out in or
imposed pursuant to this Plan so that all Options, from and after a date prior
to the effective date of the merger, consolidation, liquidation, sale or other
disposition, as the case may be, specified by the Committee, shall be
exercisable in full; and (c) all outstanding options which are exercisable at
any time prior to the effective date of any merger consolidation, liquidation,
sale or other disposition may be canceled by the Committee in its discretion, as
of such effective date.

6.6 GENERAL RESTRICTION. Each Award under the Plan shall be subject to the
requirement that, if at any time the Committee shall determine that (a) the
listing, registration or qualification of the related Shares upon any securities
exchange or under any state or federal law, (b) the consent or approval of any
government regulatory body, or (c) an agreement by the recipient of an Award
restricting disposition of Shares, is necessary or desirable as a condition of,
or in connection with, the making of an Award or the issue for purchase of
Shares thereunder, then such grant shall not be effective in whole or in part
unless such listing, registration, qualification, consent, approval or agreement
shall have been effected or obtained free of any conditions not acceptable to
the Committee.

6.7 WITHHOLDING TAXES. The company, with the approval of the Committee,
may, at the request of an employee, retain Shares which would otherwise be
delivered to the employee upon exercise of an Option or SAR or vesting of
Restricted Shares or other Award, to satisfy any withholding tax liability that
may result from such exercise or vesting. The Shares shall be valued for this
purpose at their Fair Market Value on the date of the exercise or vesting, as
the case may be. Whenever, under the Plan, payments by the company are made in
cash, such payments shall be net of an amount sufficient to satisfy any federal,
state and/or local withholding tax requirements.

6.8 NO RIGHT TO EMPLOYMENT. Nothing in the Plan nor in any agreement
entered into pursuant to the Plan shall confer upon any Award holder the right
to continue in the employment of the company, nor affect any right which the
company may have to terminate the employment of such person.

6.9 RIGHTS AS STOCKHOLDER. No Optionee shall have rights as a stockholder
with respect to Shares acquired under the Plan unless and until the certificates
for such Shares are delivered to him or her.

6.10 EXCHANGE ACT. With respect to persons subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successor under the Exchange Act. To
the extent any provision of the Plan or action by the Plan administrators fails
to so comply, it shall be deemed null and void, to the extent permitted by law
and deemed advisable by the Committee.

A-7
<PAGE>

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

PROXY CARD

BRE PROPERTIES, INC.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Frank C. McDowell, John McMahan and
LeRoy E. Carlson, or any of them, as proxies, with full power of
substitution, to vote as directed all shares of common stock of BRE
Properties, Inc. at the Annual Meeting of shareholders of BRE Properties,
Inc. to be held at the Westin St. Francis Hotel, 335 Powell Street, San
Francisco, California at 10:00 a.m., Pacific time, on April 10, 1997. This
Proxy authorize(s) each designated proxy to vote at his or her discretion on
any other matter that may properly come before the Meeting or any adjournment
thereof. If this card contains no specific voting instructions, my (our)
shares will be voted FOR election of all nominees for Director and FOR Items
2, 3 and 4.

(continued, and to be signed and dated, on the reverse side).

- - --------------------------------------------------------------------------------
FOLD AND DETACH HERE

<PAGE>

- - --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PLEASE MARK
EACH ITEM LISTED BELOW. YOUR VOTE AS
INDICATED IN
THIS EXAMPLE /X/

1. ELECTION OF DIRECTORS

FOR all WITHHOLD AUTHORITY *EXCEPTIONS Nominees: 01 Frank C. McDowell,
nominees to vote for all 02 William E. Borsari, and
listed to nominees listed to 03 C. Preston Butcher
the right the right
(INSTRUCTIONS: To withhold
authority to vote for any
individual nominee, mark the
"Exceptions" box and write that
nominee's name in the space
provided below.)

/ / / / / / *Exceptions____________________

2. APPROVAL OF INCREASING 3. APPROVAL OF INCREASING 4. RATIFICATION OF THE
THE AUTHORIZED COMMON THE 1992 EMPLOYEE SELECTION OF ERNST &
STOCK STOCK OPTION PLAN YOUNG LLP TO SERVE AS
INDEPENDENT AUDITORS
FOR THE YEAR ENDING
DECEMBER 31, 1997

FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
/ / / / / / / / / / / / / / / / / /

Please sign exactly as
name appears on this
proxy. When signing as
attorney, executor,
administrator, trustee,
custodian, guardian or
corporate officer,
give full title. If
more than one trustee,
all should sign.

Date: ______________, 19__
__________________________
Signature of Shareholder
__________________________

Votes MUST be Indicated in
Black or Blue Ink.

Sign, Date and Return this
Proxy Card Promptly Using
the Enclosed Envelope
- - --------------------------------------------------------------------------------
FOLD AND DETACH HERE

HELP US SAVE MONEY -- VOTE BY TELEPHONE

*** IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS BELOW ***

Have your proxy in hand. Decide how you wish to vote.

BULLET On a Touch Tone Telephone call Toll Free 1-888-457-2962 24 hours per
day - 7 days a week.

BULLET You will be asked to enter a Control number

OPTION #1 To vote as the Board of Directors recommends on ALL proposals:
Press 1 now, if you wish to vote on each proposal separately:
press 0 now.

WHEN YOU PRESS 1, YOUR VOTE WILL BE CONFIRMED AND CAST AS YOU DIRECTED. END OF
CALL

OPTION #2 IF YOU SELECTED A VOTE ON EACH PROPOSAL SEPARATELY, YOU WILL HEAR
THESE INSTRUCTIONS

Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees,
press 9; To WITHHOLD FOR AN INDIVIDUAL nominee, press 0. Please make your
selection now.

To withhold for individual nominees please enter the two digit number that
appears next to the nominee you DO NOT wish to vote for. Once you have
completed voting for Directors, press 0.

Proposal 2: You may make your selection any time: To vote For, press 1;
Against, press 9; Abstain press 0.

The instructions are the same for all remaining proposal(s).

YOUR VOTE SELECTION WILL BE REPEATED AND YOU WILL HAVE AN
OPPORTUNITY TO CONFIRM IT.

IF YOU VOTE BY TELEPHONE, THERE IS NO NEED FOR YOU TO MAIL BACK YOUR PROXY.
THANK YOU FOR VOTING