BRE PROPERTIES INC /MD/, DEF 14A, 1998-03-18

BRE PROPERTIES INC /MD/
DEF 14A, 1998-03-18
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:

[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

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

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

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

[X] No fee required.

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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>

LOGO
BRE PROPERTIES, INC.

March 16, 1998

Dear Shareholder:

It is a pleasure to invite you to attend our Annual Meeting of Shareholders
to be held on Tuesday, April 14, 1998 at 10:00 a.m. Pacific 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 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.

At the Annual Meeting, you will be asked to vote on: (i) electing two Class I
directors for a term of three years, (ii) approving an amendment increasing the
Company's Amended and Restated Non-Employee Director Stock Option Plan from
800,000 shares to 1,550,000 shares and modifying certain other provisions of
the Plan as described herein, and (iii) such other matters as may properly come
before the meeting.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE TWO
DIRECTOR NOMINEES AND TO APPROVE THE OTHER ITEM TO BE VOTED ON AT THE ANNUAL
MEETING.

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 telephone voting procedure, as
more fully described in this document. If you attend the meeting and wish to
vote your shares personally, you may revoke any previously executed proxy.

Please vote promptly and we look forward to seeing you at the Annual Meeting.

Sincerely,

BRE Properties, Inc.

LOGO
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 April 14, 1998 at 10:00 a.m.
Pacific time, in the Oak Room of the Westin St. Francis Hotel, 335 Powell
Street, San Francisco, California, for the following purposes;

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

2. To approve amendments to the Amended and Restated Non-Employee Director
Stock Option Plan, including increasing the Plan from 800,000 to
1,550,000 shares.

3. 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 March 2, 1998 are
entitled to vote at the meeting.

By Order of the Board of Directors

LeRoy E. Carlson,
Secretary

Dated: March 16, 1998
<PAGE>

BRE PROPERTIES, INC.
44 MONTGOMERY STREET, 36TH FLOOR
SAN FRANCISCO, CA 94104-4809
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 April 14,
1998 at 10:00 a.m. Pacific 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 March 2,
1998 (the "Record Date") are entitled to vote. On that date, the Company's
outstanding capital stock consisted of 41,881,084 shares of Common Stock, each
of which is entitled to one vote at the meeting.

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 Company's 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 on your proxy card.
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 such proxies.
If no choice is specified, the shares represented by a signed proxy will be
voted for the election of the two nominees for Class I Director, in favor of
the other proposal set forth in the notice attached hereto, and in the proxy
holder's discretion upon such other business as may properly come before the
meeting. The two nominees for election as Class I 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 present and voting in person or by proxy at the Annual
Meeting, provided a quorum is present and voting, shall be required to approve
amendment of the Amended and Restated Non-Employee Director Stock Option Plan
(Proxy Item No. 2).

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

1
<PAGE>

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. Shares held by broker-dealers as to
which beneficial owners have not delivered voting instructions may be voted by
such broker-dealers in the election of directors and on Proxy Item No. 2.

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 44 Montgomery
Street, 36th Floor, San Francisco, California 94104-4809. The Company's
telephone number is (415) 445-6530.

This Proxy Statement and the enclosed proxy card are scheduled to be mailed
to shareholders commencing on or about March 18, 1998.

2
<PAGE>

ELECTION OF DIRECTORS
(PROXY ITEM NO. 1)

The Company's Board of Directors (the "Board") consists of eight members,
divided into three classes, designated Class I, Class II and Class III. The
Articles of Incorporation provide that there shall be from three to 15
directors, as determined from time to time by the Board. Currently, there are
two Class I directors, three Class II directors and three Class III directors.

At the Annual Meeting, two Class I directors are to be elected for a term of
three years (expiring in the year 2001) or until the election and
qualification of their successors. The persons proposed for reelection as the
Class I directors are Arthur G. von Thaden and Roger P. Kuppinger. The
accompanying proxies solicited by the Board will (unless otherwise directed,
revoked or suspended) be voted for the reelection of Messrs. von Thaden and
Kuppinger, who are the present Class I 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 or, if none, the
size of the Board will be reduced.

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 I DIRECTORS:

<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE BOARD
DURING PAST FIVE DIRECTOR COMMITTEE
NAME YEARS AGE SINCE(1) MEMBERSHIP
---- ----------------------------- --- -------- ----------
<C> <S> <C> <C> <C>
Arthur G. von Thaden President and Chief Executive 65 1981 Audit*,
Officer of the Company from Asset Management
1970 to June 1995. Chief
Executive Officer,
BankAmerica Realty Services,
Inc., a real estate
investment advisory firm,
from 1970 to 1987.
Roger P. Kuppinger Financial advisor to public and 57 1995 Audit,
private companies, since Strategic Planning,
February 1994. Senior Vice Capital Markets*
President and Managing
Director, Sutro & Co., Inc.,
an investment banking company,
from 1969 to February 1994.
Director, Realty Income
Corporation.
</TABLE>

3
<PAGE>

<C> <S> <C> <C> <C>
L. Michael Foley Principal, L. Michael Foley and 59 1994 Audit,
Associates, real estate and Compensation*,
corporate consulting, since Strategic Planning,
1996. Senior Vice President Capital Markets
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 60 1993 Executive*,
Company. Managing Principal, Strategic Planning*,
The McMahan Group, real estate Capital Markets,
strategic management Compensation
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 56 1991 Strategic Planning,
investor, since 1991. Senior Compensation,
Vice President, H.F. Acquisitions*
Ahmanson & Co. and Home
Savings of America, from
1983 to 1991. Officer and
Director, Golden Orange
Broadcasting, a privately
held corporation.

CLASS III DIRECTORS--TERM EXPIRES IN 2000:

Frank C. McDowell President and Chief Executive 49 1995 Executive
Officer of the 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 Chairman or President, The 59 1992 Executive,
Walters Management Company, a Strategic Planning,
real estate asset management Asset Management*
company, for more than five
years.
</TABLE>

4
<PAGE>

<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE BOARD
DURING PAST FIVE DIRECTOR COMMITTEE
NAME YEARS AGE SINCE(1) MEMBERSHIP
---- ----------------------------- --- -------- ----------
<C> <S> <C> <C> <C>
C. Preston Butcher President and Chief Executive 59 1985 Executive,
Officer, Lincoln Property Acquisitions,
Company, N.C., Inc., a real Asset Management
estate developer, and
President and Chief Executive
Officer, Lincoln Property
Company Management Services,
Inc., a real estate management
company, for more than five
years. Director, The Charles
Schwab Corporation.
</TABLE>
- --------
* Denotes committee chairman.

(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"), which merged with the Company in March 1996.

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, 1997, 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
Investor Relations Department of the Company at the address set forth on page
one of this Proxy Statement.

Mr. Butcher, a Class III director, 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 two nominees who receive the highest numbers of votes shall be elected
as Class I directors. The Board of Directors unanimously recommends that the
shareholders vote FOR Messrs. von Thaden and Kuppinger.

BOARD AND COMMITTEE MEETINGS; COMPENSATION OF DIRECTORS

During the year ended December 31, 1997, the Board held 10 regular meetings
and five special meetings. All of the directors attended 75% or more of the
meetings of the Board and the committees on which they served during 1997.

In response to the Company's rapid growth since 1995, the Board has created
several committees in order to more effectively direct and review the
Company's operations and strategic outlook. In addition, the committees allow
management timely interface and response to factors affecting the ongoing
operations of the Company. Further, management regularly consults with
committee chairmen to review possible actions and seek counsel. Where
appropriate, the Board delegates authority to committees (within specified
parameters) to finalize the execution of various Board functions. While the
committee structure has improved the level of Board oversight, it has also
greatly increased the effort and time required of Board members who serve on
the various committees.

The Board has established the following committees: Audit, Executive,
Compensation, Strategic Planning, Capital Markets, Acquisition and Asset
Management. The present members of these committees are indicated in the
preceding section of this Proxy Statement.

5
<PAGE>

The Audit Committee reviews the consolidated financial statements and
accounting policies with both management and the independent auditors. Such
review includes an assessment as to whether the consolidated financial
statements are complete and consistent with information known to them and
reflect appropriate accounting principles. The Audit Committee also reviews
the insurable risks impacting the Company and the management thereof. The
Audit Committee meets with the independent auditors in preparation for, and in
review of, the annual audit. During 1997, the Audit Committee met four 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 met once during 1997.

The Compensation Committee reviews the compensation of officers and the
management succession plan, administers the Company's stock compensation plans
and nominates directors. The Compensation Committee met numerous times on an
informal basis and met formally four times during 1997.

The Strategic Planning Committee supplements and assists the full Board in
the review and definition of a strategic plan for the Company, including such
considerations as growth, geographic concentration and asset type. Further,
the Strategic Planning Committee conducts an ongoing evaluation and assessment
of the Company's prospects and future in the industry. The Strategic Planning
Committee met formally two times during 1997.

The Capital Markets Committee reviews and establishes a capital market
strategy and directs and implements such strategy. Further, the Capital
Markets Committee is delegated certain powers from time to time in the
execution of the financial affairs of the Company. The Capital Markets
Committee met formally five times during 1997 and had extensive informal
meetings.

The Acquisition Committee reviews, analyzes and recommends to the Board
whether proposed acquisitions should be undertaken. This process includes site
visits to properties and meeting with management and staff to review potential
acquisitions. The Acquisition Committee held informal meetings approximately
two times per month and reported its activity to the Board at regular Board
meetings and met formally two times during 1997.

The Asset Management Committee reviews property performance and annual
budgets and determines which assets should be divested. The Asset Management
Committee met formally two times during 1997 and held numerous informal
meetings, including meeting with management and several property tours.

The Company has adopted a policy of paying retainer and meeting fees of non-
employee directors solely in at-market stock options. Activity in 1997 under
the Company's Amended and Restated Non-Employee Director Stock Option Plan was
as follows:

<TABLE>
<CAPTION>
SHARES PER TOTAL EXERCISE PRICE
GRANT DATE GRANT (1) DIRECTOR GRANTED PER SHARE
---------- ------------ ---------- ------- --------------
<S> <C> <C> <C> <C>
2/24/97..................... Incentive(2) 5,000 40,000 $24.25
4/30/97..................... Chairman 25,000 25,000 $23.50
10/16/97.................... Annual 25,000 175,000 $27.88
</TABLE>
- --------
(1) Options apply to all directors except Mr. McDowell.

(2) Granted for 1996 performance as further described below.

The Non-Employee 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. 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,

6
<PAGE>

so that the options are fully vested by the first anniversary of the date of
grant. The additional 5,000-share grant related to the FFO per share increase
(if such requirement has been met) vests immediately. The directors are also
reimbursed for their out-of-pocket expenses in attending meetings. See
proposed changes to the Plan at AMENDING THE AMENDED AND RESTATED NON-EMPLOYEE
DIRECTOR STOCK OPTION PLAN (Proxy Item No. 2).

The Board had previously adopted a share ownership guideline of 10,000
shares of Common Stock for non-employee directors who currently serve on the
Board. This guideline has been revised and now targets each new director to
own within three years of joining the Board a number of shares of Common Stock
equal to $150,000 divided by the price of the Common Stock.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

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, 1997, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten
percent shareholders were complied with; except that Mr. Kuppinger
inadvertently filed a late report showing his purchase of 405 shares in
January 1997 under the Company's Direct Stock Purchase & Dividend Reinvestment
Plan.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth, as of March 3, 1998, 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
CURRENT POSITION WITH BENEFICIALLY BENEFICIALLY
NAME COMPANY OWNED(1) OWNED (1)(2)
---- --------------------- ------------ ------------------
<C> <S> <C> <C>
Frank C. McDowell................... Director, President and 92,614 (3)
Chief Executive Officer
William E. Borsari.................. Director 73,702 (4)
C. Preston Butcher.................. Director 68,166 (5)
L. Michael Foley.................... Director 74,166 (6)
Roger P. Kuppinger.................. Director 66,606 (7)
John McMahan........................ Chairman of the Board 103,749 (8)
Gregory M. Simon.................... Director 115,150 (9)
Arthur G. von Thaden................ Director 117,988(10)
Jay W. Pauly........................ Senior Executive Vice 228,446(11)
President and Chief
Operating Officer
LeRoy E. Carlson.................... Executive Vice President 124,315(12)
and Chief Financial
Officer
Byron M. Fox........................ Executive Vice 99,717(13)
President, Acquisitions
John H. Nunn........................ Senior Vice President, 68,854(14)
Property Management
All directors and executive officers
as a group (14 persons)............ 1,814,709(15) 4.2%
</TABLE>

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<PAGE>

- --------
(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 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 15,000 shares that may be purchased upon the
exercise of stock options that are currently exercisable on or before May
2, 1998. Also includes 8,164 shares held as restricted shares, 450 shares
held by Mr. McDowell's wife in which he disclaims any interest and 65,000
shares acquired upon exercise of stock options that are collateral for
recourse loans from the Company. See Stock Loans.

(4) Mr. Borsari--includes 59,166 shares that may be purchased upon the
exercise of stock options that are currently exercisable or that will
become exercisable on or before May 2, 1998. Also includes 12,168 shares
held in an intervivos trust and 956 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 64,166 shares that may be purchased upon the
exercise of stock options that are currently exercisable or that will
become exercisable on or before May 2, 1998.

(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 64,166 shares that may be purchased upon the
exercise of stock options that are currently exercisable or that will
become exercisable on or before May 2, 1998.

(7) Mr. Kuppinger--includes 7,440 shares owned by a trust where he and his
wife are trustees and 59,166 shares that may be purchased upon the
exercise of stock options that are currently exercisable or that will
become exercisable on or before May 2, 1998.

(8) Mr. McMahan--includes 103,749 shares that may be purchased upon the
exercise of stock options that are currently exercisable or that will
become exercisable on or before May 2, 1998.

(9) 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 59,166 shares that may be purchased upon the exercise of
stock options that are currently exercisable or that will become
exercisable on or before May 2, 1998.

(10) Mr. von Thaden--includes 252 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 79,166 shares that may be purchased
upon the exercise of stock options that are currently exercisable or that
will become exercisable on or before May 2, 1998.

(11) Mr. Pauly--includes 194,000 shares that may be purchased upon the
exercise of stock options that are currently exercisable or that will
become exercisable on or before May 2, 1998. Also includes 30,000 shares
acquired upon exercise of stock options that are collateral for recourse
loans from the Company and 4,446 shares owned by an intervivos trust
where Mr. Pauly and his wife are trustees. See Stock Loans.

(12) Mr. Carlson--includes 50,166 shares that may be purchased upon the
exercise of stock options that are currently exercisable or that will
become exercisable on or before May 2, 1998. Also includes 20,000 shares
acquired upon exercise of stock options that are collateral for recourse
loans from the Company. See Stock Loans.

(13) Mr. Fox--includes 76,000 shares that may be purchased upon the exercise
of stock options that are currently exercisable or that will become
exercisable on or before May 2, 1998. Also includes 4,000 shares held as
restricted shares, and 15,000 shares acquired upon exercise of stock
options that are collateral for recourse loans from the Company. See
Stock Loans.

(14) Mr. Nunn--includes 15,900 shares that may be purchased upon the exercise
of stock options that are currently exercisable or that will become
exercisable on or before May 2, 1998. Also includes 20,000 shares
acquired upon exercise of stock options that are collateral for recourse
loans from the Company. See Stock Loans.

8
<PAGE>

(15) Includes 839,805 shares that may be purchased upon the exercise of stock
options that are currently exercisable or that will become exercisable on
or before May 2, 1998. Also includes 12,164 shares held as restricted
shares and 581,236 units of interest in a subsidiary of the Company held
by two non-named executive officers which are exchangeable into common
stock on a 1:1 basis starting November 18, 1998.

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, 1997 (the "named executive
officers").

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS
-------------------------------------------------
ANNUAL
COMPENSATION RESTRICTED
NAME AND ------------------ SHARE OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($)(1) SARS(#) COMPENSATION($)(2)(3)(4)
------------------ ---- --------- -------- ------------ -------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Frank C. McDowell....... 1997 $348,001 $348,001 $ -- 30,000 $29,834
President and Chief 1996 $313,998 $306,798 -- 60,000 $ 2,250
Executive Officer 1995 $167,914 $153,484 $125,011 140,000 --
(since June 5, 1995)
Jay W. Pauly............ 1997 $244,658 $122,500 $ -- 32,500 $ 5,675
Senior Executive Vice 1996(5) $234,644 $117,500 -- 45,000(7) $ 4,863
President and Chief 1995(6) $207,480 $ 27,400 -- -- $ 6,049
Operating Officer
(since March 15, 1996)
LeRoy E. Carlson........ 1997 $225,672 $100,000 $ -- 25,000 $ 5,673
Executive Vice 1996(5) $215,754 $ 90,000 -- 35,000(7) $ 4,863
President and Chief 1995(6) $200,000 $ 22,113 -- -- $ 5,750
Financial Officer
(since March 15, 1996)
Byron M. Fox............ 1997 $215,517 $ 55,000 $ -- 25,000 $12,478
Executive Vice 1996 $210,734 $ 80,000 -- 20,000 $ 2,250
President,
Acquisitions 1995 $175,370 $ 59,000 -- 25,000 $15,287
John H. Nunn............ 1997 $174,229 $ 40,000 $ -- 25,000 $ 5,675
Senior Vice President, 1996(5) $156,175 $ 65,000 -- 30,000(7) $ 4,863
Property Management 1995(6) $145,000 $ 22,113 -- -- $ 3,675
(since March 15, 1996)
</TABLE>
- --------
(1) Represents the aggregate value of restricted share awards at the date of
award. In 1997, 1996 and 1995, the named executive officers received the
following restricted share awards:

<TABLE>
<CAPTION>
1997 1996 1995
---- ---- -----
<S> <C> <C> <C>
McDowell................................................. -- -- 8,164
</TABLE>

The restrictions on Mr. McDowell's shares lapse on the third anniversary
of the grant date and may lapse earlier 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, 1997, the aggregate number and value of shares of
restricted stock (based on the market price of $28.25 per share at December
31, 1997) held by each of the named executive officers was as follows:

<TABLE>
<CAPTION>
NUMBER VALUE
------ --------
<S> <C> <C>
McDowell................................................. 8,164 $230,633
Fox...................................................... 4,000 $113,000
</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 payments of $27,459 and $10,103 in 1997 for Messrs.
McDowell and Fox, respectively, representing the value of the Supplemental
Retirement Plan ("SERP") which they would have received had the SERP not
been terminated in 1996. Previously, Mr. Fox was credited $10,303 and
$1,250 for service in 1996 and 1995, respectively, pursuant to the SERP.
Additionally includes for each of Messrs. Pauly, Carlson and Nunn for 1997
and 1996, the $3,300 and $2,613 benefit, respectively, 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:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Mr. McDowell....................................... $63,583 $62,037 $45,639
Mr. Pauly.......................................... $29,352 $21,349 --
Mr. Carlson........................................ $19,725 $14,252 --
Mr. Fox............................................ $18,434 $16,110 $ 6,461
Mr. Nunn........................................... $19,725 $14,252 --
</TABLE>

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

(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 1997

The following table sets forth (i) grants of stock options made by the
Company during 1997 to each of the named executive officers which grants were
based on the Company's and their individual performance for 1996; (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>
INDIVIDUAL GRANTS
--------------------------------------------
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF
% OF TOTAL STOCK PRICE
SHARES OPTIONS APPRECIATION
SUBJECT TO GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS EMPLOYEES BASE PRICE EXPIRATION -------------------
NAME GRANTED(1) IN 1997 ($/SH) DATE 5% 10%
---- ---------- ---------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Frank C. McDowell....... 30,000 7.5% $24.625 2/13/07 $464,596 $1,177,377
Jay W. Pauly............ 32,500 8.2% $24.625 2/13/07 $503,312 $1,275,492
LeRoy E. Carlson........ 25,000 6.3% $24.625 2/13/07 $387,163 $ 981,148
Byron M. Fox............ 25,000 6.3% $24.625 2/13/07 $387,163 $ 981,148
John H. Nunn............ 25,000 6.3% $24.625 2/13/07 $387,163 $ 981,148
</TABLE>

10
<PAGE>

- --------
(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 the
fair market value of the Common Stock on the date of grant. All options
held by Messrs. McDowell, Pauly, Carlson and Nunn may become immediately
exercisable upon termination of employment following a change in control.
See Employment Contracts and Termination of Employment and Change-in-
Control Arrangements. Messrs. McDowell, Pauly, Carlson and Nunn
immediately exercised, upon grant, options for 5,000, 7,500, 5,000 and
5,000 shares, respectively. See Stock Loans.

(2) Potential realizable value is calculated based on an assumption that the
price of the Company's Common Stock appreciates at the annual rates 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 the option price of $24.625 over the ten-year
option term.

OPTION GRANTS ON MARCH 2, 1998

On March 2, 1998, the following options were granted to the named executive
officers, based on the Company's and their individual performance in 1997:

<TABLE>
<CAPTION>
OPTIONS
NAME GRANTED
---- -------
<S> <C>
Frank C. McDowell............................................. 135,000(1)
Jay W. Pauly.................................................. 32,500(2)
LeRoy E. Carlson.............................................. 30,000(3)
Byron M. Fox.................................................. 15,000
John H. Nunn.................................................. 25,000(3)
</TABLE>

The above options were granted at the then market price of $26.875.
- --------
(1) Includes 10,000 shares exercised immediately related to a stock loan (see
Stock Loans).
(2) Includes 7,500 shares exercised immediately related to a stock loan (see
Stock Loans).
(3) Includes 5,000 shares exercised immediately related to a stock loan (see
Stock Loans).

11
<PAGE>

AGGREGATED OPTION EXERCISES IN 1997 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 1997 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 1997; 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 12/31/97 OPTIONS AT 12/31/97(3)
ACQUIRED ON VALUE ------------------------- -------------------------
EXERCISE(1) REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frank C. McDowell....... 5,000 -- 10,000 165,000 $ 82,500 $1,714,375
Jay W. Pauly............ 7,500 -- 185,000 41,000 $2,464,905 $ 258,625
LeRoy E. Carlson........ 39,000 $470,730 93,000 32,000 $1,484,100 $ 198,500
Byron M. Fox............ 5,000 -- 68,000 36,000 $ 863,341 $ 243,500
John H. Nunn............ 37,000 $443,040 76,900 28,000 $1,219,240 $ 156,500
</TABLE>
- --------
(1) The amounts shown for Messrs. McDowell, Pauly and Fox represent the
immediate exercise of stock options granted, which shares represent
collateral for stock loans. The amounts shown for Messrs. Carlson and Nunn
include 5,000 shares each which represent the immediate exercise of
options granted, which shares represents collateral for stock loans. See
Stock Loans.

(2) Value realized is calculated by subtracting the total exercise price from
the market value of the underlying Common Stock on the date of exercise.
For the options exercised for stock loans on the date of grant, the
exercise price was thus equal to the market price at the time of exercise.

(3) The market value of the Company's Common Stock at December 31, 1997 was
$28.25 per share.

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
($9,500 in calendar 1997), 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 RCT) for at least
five years are fully vested.

In November 1997, the Company amended this plan, effective January 1, 1998,
to increase the Company's matching to 75% of the employee's contribution,
decrease the percentage of employee contributions eligible for Company
matching to 4% and shorten the eligibility requirement to six months.

STOCK LOANS

Since 1995, the Board has approved five-year loans aggregating $3,008,564 to
the named executive officers for the purpose of immediately exercising a
portion of 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.
See Employment Contracts and Termination of Employment and Change-in-Control
Arrangements--Mr. McDowell--Future Awards. The Board has adopted the practice
of making similar annual performance grants to the other named executive
officers.

12
<PAGE>

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

<TABLE>
<CAPTION>
TO EXERCISE
LOAN OPTION FOR INTEREST
DATE AMOUNT NO. OF SHARES RATE(1)
---- -------- ------------- --------
<S> <C> <C> <C>
March 2, 1998:
McDowell................................. $268,750 10,000 5.4%
Pauly.................................... $201,563 7,500 5.4%
Carlson.................................. $134,375 5,000 5.4%
Nunn..................................... $134,375 5,000 5.4%
February 13, 1997:
McDowell................................. $123,125 5,000 5.4%
Pauly.................................... $184,188 7,500 5.4%
Carlson.................................. $123,125 5,000 5.4%
Fox...................................... $123,125 5,000 5.4%
Nunn..................................... $123,125 5,000 5.4%
August 26, 1996:
McDowell................................. $200,000 10,000 6.6%
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 28, 1995:
Fox...................................... $159,063 10,000 7.9%
June 5, 1995:
McDowell................................. $612,500 40,000 8.25%
</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 $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 Loans.

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, growth in FFO per share relative to peers and stock price multiple
relative to peers, and upon termination of employment, and under certain
circumstances 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 Certain
Severance Benefits and Messrs. Pauly, Carlson and Nunn--Certain Severance
Benefits. Although the measurement period of one goal has occurred, pursuant
to the terms of the loans there is no forgiveness until the five-year term is
over.

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 receives a current base
salary of $348,917 per year and is eligible to receive an annual incentive
bonus targeted at 50% of base salary and 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").

13
<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"). 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 is $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 the
Common Stock for the two year period ending April 30, 1997 which is at or
above the 80th percentile of the ten largest publicly-traded multifamily real
estate investment trusts (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 (see Option Grants in
1997).

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, 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, 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.

(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.

14
<PAGE>

(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 (based on his current base salary of $348,917 and assuming average
incentive compensation in the maximum amount of $348,917, this payment would
be $1,395,668) 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 his 8,164 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 ($697,834, assuming a
$348,917 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.

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 two 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 current base salary of $260,000 per year,
Mr. Carlson receives a current base salary of $237,500 per year and Mr. Nunn
receives a current base salary of $200,000 per year. Each base salary will be
subject to review 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.

15
<PAGE>

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 Loans. 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. See also Stock Loans.

Certain Severance Benefits. If, at any time during any automatic one-year
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, 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. In addition, the Interest-Free Loan will be
forgiven and the Stock Loans 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 the previous or average annual bonus amounts)
calculated on a prorated basis to the date of termination. In addition, the
Interest-Free Loan will be forgiven and the Stock Loans 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 Loans, 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 two times the average of his annual
bonus over the most recent two years; (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 Loans 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, reduced on a pro-rated
basis to the date of termination.

(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. The
outstanding balance of the Interest-Free Loan and the Stock Loans, 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

16
<PAGE>

the executive and the outstanding balance of the Interest-Free Loan and the
Stock Loans, 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.

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, stock option grants,
incentive stock loans and, on occasion, restricted share grants (see 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 against previously defined objectives
and compensation data at companies that are considered comparable. In
reviewing the Company's performance during 1997, the Committee considered a
variety of additional factors, including the November 1997 transaction with
Trammell Crow Residential-West. That transaction added 17 completed apartment
communities totaling 4,786 units and eight communities under construction
comprising approximately 2,445 units. Further, the Company added development
and construction experience to the Company's management and third party
property management capabilities. During 1997, pursuant to the Company's
strategy, other apartment communities comprising 1,631 units were acquired and
10 commercial and retail properties were sold. FFO per share increased
approximately 12.9% from 1996 levels and the stock price increased
approximately 14.1% during the year. Total shareholder return, taking into
account dividends paid and stock price appreciation, was approximately 19.7%
for the year.

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. 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 (see Comparative Stock Performance). Salary
information about comparable companies is surveyed by reference to public
disclosures made by companies in the real estate industry. In addition, during
1997, the Committee used salary survey data supplied by an outside
compensation consultant.

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 1997, 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

18
<PAGE>

cash incentive award is 50% of base salary with a maximum annual award of 100%
of base salary. Overall, the Company performance expectations were exceeded in
all material respects in 1997. The Summary Compensation Table shows cash
incentive bonuses paid to the named executive officers for 1997 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. 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 strongly 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 to employees. During 1997, a total 30 officers and other employees
received stock option grants. In 1998, the Company extended the program of
granting stock options to additional qualified employees at the community
management level and above. The Summary Compensation Table shows the options
granted to the named executive officers for 1997. In determining the size of
the grants to the named executive officers, the Committee assessed relative
levels of responsibility, Company and individual performance and the long-term
incentive practices 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 1997, the Company funded
$676,688 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 and the Company's
performance compared to the ten largest multifamily REITs. 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.

Under the 1992 Plan, the Committee may also award restricted shares as
compensation, but has elected instead to concentrate incentive awards in stock
options and stock loans. Currently, seven officers, each of whom is a vice
president or higher of the Company, hold restricted share awards. No
restricted share awards were made to any officers or employees of the Company
in 1997.

CEO PERFORMANCE EVALUATION

For 1997, the 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, 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 exceeding
its corporate expectations and objectives for 1997 and Mr. McDowell's
individual performance, which the Committee considered exceptional, 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 on March 2, 1998.

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

L. Michael Foley, Chairman
Gregory M. Simon
John McMahan

19
<PAGE>

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, 1992 and that
all dividends were reinvested.
LOGO

<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BRE Properties, Inc. .... $100.00 $111.00 $109.94 $137.34 $202.67 $242.82
S&P 500 Index............ $100.00 $110.09 $111.54 $153.47 $188.71 $241.82
NAREIT Equity REIT
without
Healthcare Index........ $100.00 $118.55 $119.50 $141.38 $191.93 $228.13
</TABLE>
- --------
(1) Indicates appreciation of $100 invested on December 31, 1992 in the Common
Stock, S&P 500, and NAREIT Equity REIT Without Health Care Total Return
Index securities, assuming reinvestment of dividends.

(2) The NAREIT Equity REIT Without Health Care Total Return Index includes 169
companies with aggregate equity capitalization (excluding operating units)
of $121.8 billion.

20
<PAGE>

AMENDING THE AMENDED AND
RESTATED NON- EMPLOYEE
DIRECTOR STOCK OPTION PLAN
(PROXY ITEM NO. 2)

The Company's Amended and Restated Non-Employee Director Stock Option Plan
(the "Plan") provides for the grant of stock options to non-employee directors
of the Company in lieu of cash compensation. On March 2, 1998, the Board of
Directors amended the Plan subject to approval of the Company's shareholders.

The Plan was originally adopted and approved by the shareholders in 1994. On
March 12, 1996, the shareholders approved amendments to the Plan providing for
(a) automatic annual grants of options to purchase 25,000 shares of Common
Stock to each non-employee director of the Company, such options to be in lieu
of annual retainer and meeting fees and (b) annual incentive grants of
additional options for 5,000 shares to each non-employee director following
any year that a stated performance standard is met. The currently proposed
amendment includes (i) increasing the shares available under the Plan from
800,000 to 1,550,000 shares of Common Stock, (ii) providing for additional
option grants for up to 8,000 shares per year per non-employee director for
service on Board committees, (iii) modifying the annual incentive grant
formula to provide for options for up to 5,000 shares per year, (iv) providing
for payment of the exercise price and tax withholding using shares of Common
Stock owned by a director, (v) providing for "reload" option grants in order
to incentivize the directors to exercise options at an early date and to
retain shares acquired upon the exercise of options, (vi) providing for
acceleration of vesting of Plan options upon a change in control (as defined
in the Plan) or upon a merger or similar transaction where the Company is not
the surviving entity unless the transaction does not involve a change in
control and the surviving entity assumes the options, and (vii) updating and
conforming the Plan to recent amendments to SEC Rule 16b-3.

The purpose of the Plan is to attract and retain experienced and
knowledgeable persons to serve as directors through participation in stock
ownership of the Company. The following summary of certain provisions of the
amended Plan does not purport to be complete and is qualified in its entirety
by reference to the Plan document, which is appended to this proxy statement.

The Plan is designed to compensate the non-employee directors with stock
options in lieu of annual retainer and Board and committee meeting fees. In
addition to conserving cash, the Board believes that the Plan will increase
the directors' proprietary interest in the Company and help align their
interests with those of the shareholders. The number of annual options is
based upon an estimated valuation of the options in comparison to the cash
retainer and meeting fees that might otherwise be payable to the directors in
light of their time commitment and contributions to the Company, which
includes monthly Board meetings and numerous committee meetings (see Board and
Committee Meetings; Compensation of Directors). Valuation changes in future
years would not, however, affect the number of options granted.

ANNUAL STOCK OPTIONS

Options for 25,000 shares of Common Stock are automatically granted to each
director who is not an employee, on the date he or she becomes a director, and
for an additional 25,000 shares on each subsequent anniversary date. The
Chairman of the Board receives annual options totaling 50,000 shares. The
proposed amendment adds additional annual option grants for 2,000 shares for
each Board committee a non-employee director (other than the Chairman of the
Board) serves and 6,000 shares for serving as chairman of a committee, subject
to a maximum of 8,000 shares annually for all committee service.

ANNUAL INCENTIVE GRANTS

If during the preceding year the growth in the Company's FFO per share, as
determined by reference to the Company's annual consolidated financial
statements, placed the Company above the 80th percentile in this category for
the ten largest publicly traded multifamily REITs, the Plan provides for an
option for an additional

21
<PAGE>

5,000 shares, to be granted annually to each non-employee director. The
proposed amendment provides that, beginning for 1998, if the growth in FFO per
share placed the Company between the 50th and 80th percentile, the grant would
be reduced ratably from 5,000 shares, so that at or below the 50th percentile
the option would be for zero shares and at or above the 80th percentile the
option would be for 5,000 shares. These options are fully vested upon grant.

RELOAD OPTIONS

The proposed amendment adds a reload option feature to the Plan. When a non-
employee director exercises a Plan option (including an option granted prior
to the proposed Plan amendment) using already-owned shares of Common Stock,
the director will automatically receive a new option for the amount of shares
so delivered plus any shares delivered, or withheld from the exercise, to pay
applicable withholding taxes. This reload option will be at strike price equal
to the then current market price and have a term expiring on the same date as
the original option that was exercised. The reload option will only vest and
become exercisable if the director holds the "new" shares acquired upon
exercise of the original option for 18 months or, if sooner, until 12 months
prior to the expiration date of the reload option. However, a reload option
will vest earlier upon either (i) a change in control (as defined in Plan
subparagraph 4(e)), (ii) a director's retirement from the Board, or (iii) the
director's death or disability, or personal hardship as determined by the
Compensation Committee. The exercise of a reload option using stock will
result in a further reload option being granted. Reload options will not be
granted when a Plan option is exercised by a person who is no longer a
director.

The Board believes that the availability of reload options under the Plan
will encourage directors to exercise their options at an early date rather
than wait until near expiration, in that the reload concept in effect affords
the directors the benefit of the original option for the entire option term,
while permitting them to increase their current share holdings.

OPTION TERMS

As provided under the existing Plan, all options granted under the Plan must
have an exercise price which is not less than the fair market value of the
shares on the date of grant, which is defined in the Plan as the closing sale
price on the NYSE on the date of grant. Options granted under the Plan, other
than reload options, have a term of ten years and 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; except for the incentive grants,
which are fully vested when made. Once vested, the options remain exercisable
for the duration of the ten-year option term. Plan options are not
transferable in any manner other than by will or the laws of descent and
distribution or as permitted in the Compensation Committee's discretion. As
proposed to be amended, the Plan allows the directors to pay the exercise
price of options by delivering to the Company, instead of cash, shares of
Common Stock they already own with a fair market value equal to the exercise
price. The amended Plan also allows the directors to elect to pay tax
withholding on exercise of their options by (i) having the Company withhold
from an exercise shares of Common Stock with a fair market value equal to the
tax withholding amount or (ii) the director delivering to the Company other
shares which the director already owns; the Company then remits to the taxing
authorities cash equal to the value of the shares withheld or delivered.

SHARES AVAILABLE UNDER THE PLAN

Under the proposed amendment, up to 1,490,000 shares of Common Stock will be
available for stock options under the Plan, subject to anti-dilution
adjustments, after deducting Plan options for 60,000 shares which previously
have been exercised. At March 2, 1998, options were outstanding under the Plan
for a total of 600,000 shares and options for 140,000 shares were available
for future grant. If the proposed 750,000-share increase is approved by the
shareholders, there will be authorized for future issuance under the Plan a
total of 890,000 shares, of which options for approximately 40,000 shares for
committee service will be granted on the date of shareholder approval of the
amended Plan. When already-owned shares are delivered to pay the exercise
price of a Plan option, only the net shares issued upon exercise will be
deemed utilized in the Plan; therefore, reload options granted in respect of
shares delivered upon exercise of an option will not utilize additional Plan
shares. Any shares subject to an option (other than a reload option) that
expires or terminates shall again be available for grant under the Plan.

22
<PAGE>

In addition to the Plan, the Company also has outstanding options, or
authorized for future option grants, a total of 1,977,165 shares of Common
Stock, consisting of (i) 1,642,105 shares under the Company's 1984 and 1992
employee stock plans, and (ii) various non-plan options totaling 335,060
shares, including an option for 100,000 shares held by Mr. McDowell and
options totaling 211,060 shares held by Messrs. Pauly, Carlson and Nunn which
were assumed in the RCT merger on March 15, 1996.

DURATION OF THE PLAN

The Plan expires October 1, 2005, although shares of Common Stock can be
issued after that date pursuant to options granted prior to expiration of the
Plan.

ADMINISTRATION OF THE PLAN

The Plan provides that it will be administered by the Board of Directors or
the Compensation Committee. Because of the Plan's automatic formula
provisions, administration does not involve decisions with regard to the
granting of stock options. However, the Board or the Compensation Committee is
authorized to make certain determinations and to do all things necessary or
desirable in connection with the administration of the Plan.

AMENDMENT AND TERMINATION

The Board of Directors may amend or terminate the Plan at any time, except
that no amendment of the Plan may become effective without the approval of the
shareholders if such amendment increases the maximum number of shares which
may be purchased pursuant to the Plan, changes the purchase price of Plan
options, or changes the option term or the expiration date of the Plan. A
prior provision prohibiting amendment more than once every six months has been
deleted in the amended Plan consistent with changes to SEC Rule 16b-3.

FEDERAL INCOME TAX CONSEQUENCES

Options granted under the Plan are subject to the federal income tax
consequences applicable to non-qualified stock options. In brief, although the
grant of non-qualified stock options 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 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.

ACCOUNTING CONSEQUENCES

Under generally accepted accounting principles, as currently applied, there
would be no accounting charge incurred by the Company with respect to options
granted or exercised under the Plan. However, under Financial Accounting
Standard 123 there is footnote disclosure in the Company's financial
statements of the assumed value of the options granted, including reload
option grants.

OPTIONS GRANTED TO NON-EMPLOYEE DIRECTORS UNDER THE PLAN

The following table shows the annual options which may be granted under the
Plan to the present non-employee directors in lieu of cash compensation,
excluding any reload grants.

<TABLE>
<CAPTION>
NUMBER OF SHARES
---------------------------------
BOARD COMMITTEE INCENTIVE
SERVICE SERVICE(1) GRANT(2)
------- ------------ ------------
<S> <C> <C> <C>
Chairman of the Board........................ 50,000 None up to 5,000
Other Non-Employee Directors................. 25,000 up to 8,000 up to 5,000
All Non-Employee Directors as a group (7
persons).................................... 200,000 up to 48,000 up to 35,000
</TABLE>

23
<PAGE>

- --------
(1) Grants for 1998 are to be made upon the date of shareholder approval of
the amended plan.

(2) Assuming the FFO growth per share criterion is achieved.

VOTE REQUIRED FOR APPROVAL; RECOMMENDATION OF BOARD OF DIRECTORS

The approval of a majority of the shares present and voting at the meeting
is required to approve the amended Plan. The Board of Directors has
unanimously approved the amended Plan and unanimously recommends that
shareholders vote FOR the amended Plan. If the amended Plan is not approved by
the shareholders, the Plan as previously in effect will remain in effect.

PRINCIPAL SHAREHOLDERS

The following table indicates the only persons known by the Company to be
the beneficial owner of more than 5% of the outstanding shares of Common Stock
as of December 31, 1997 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 OF PERCENTAGE
NAME AND ADDRESS COMMON STOCK OF SHARES
---------------- ------------ ----------
<S> <C> <C>
Prudential Life Insurance Company of America......... 3,713,313 8.9%
751 Broad Street
Newark, NJ 07102-3777
State Farm Insurance Companies....................... 3,518,958 8.4%
One State Farm Plaza
Bloomington, IL 61701
</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., 44 Montgomery Street, 36th Floor, San Francisco, CA 94104-4809,
Attention: Secretary. Such proposal must be received not later than
November 16, 1998 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 16, 1998

By Order of the Board of Directors

24
<PAGE>

BRE PROPERTIES, INC.
AMENDED AND RESTATED
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(AS AMENDED MARCH 2, 1998)

1. PURPOSE OF THE PLAN. The purpose of the Non-Employee Director Stock
Option Plan (the "Plan") is to attract and retain the services of experienced
and knowledgeable non-employee directors, to encourage them to devote their
utmost effort and skill to the advancement and betterment of the Company, and
to permit them to participate in the ownership of the Company through stock
compensation in lieu of cash compensation. This plan amends the Company's
Amended and Restated Non-Employee Director Stock Option Plan, as amended prior
to March 2, 1998.

2. DEFINITIONS. As used in the Plan and the related Option agreements, the
following terms will have the meaning stated below:

(a) "Board" means the Board of Directors of the Company.

(b) A "Change in Control" occurs when any person or group, together with
its affiliates and associates (other than the Company or any of its
subsidiaries or employee benefit plans), 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 under the Exchange Act.

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

(e) "Committee" means the Board or its Compensation Committee appointed
by the Board to administer the Plan.

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

(g) 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).

(h) "Non-Employee Director" means a member of the Board who is not an
employee of the Company.

(i) "Option" means an option to purchase Shares.

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

(k) "Option Price" means the price to be paid for Shares upon exercise of
an Option.

(l) "Shares" means shares of common stock $.01 par value per share of the
Company.

(m) "Subsidiary" means any corporation or other entity in which the
Company owns, directly or indirectly, more than 50 percent of the total
combined voting power.

3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the Committee shall have the
power to interpret the Plan and prescribe, amend and rescind rules and
regulations relating to it.

4. PARTICIPATION IN THE PLAN.

(a) Annual Grants in Lieu of Director Fees. Non-Employee Directors shall
receive the following Options in lieu of cash for serving on the Board and
attending meetings of the Board.

A-1
<PAGE>

(i) Initial Grants Upon Becoming a Non-Employee Director. Any person
who becomes a Non-Employee Director shall automatically receive an
Option for 25,000 Shares effective as of the date of their appointment
or election to the Board.

(ii) Subsequent Annual Grants. In addition to the Option grant
provided for in subparagraph (i) above, each Non-Employee Director
shall automatically receive an additional Option for 25,000 shares on
each anniversary of the date of grant of the Option received pursuant
to subparagraph (i) above.

(b) Additional Annual Grant for Chairman of the Board. The Chairman of the
Board shall receive, in addition to the annual Option granted under
subparagraph (a), an Option for 25,000 Shares upon becoming Chairman and an
additional Option for 25,000 Shares on each subsequent anniversary date.

(c) Additional Annual Grants for Committee Membership. For serving on Board
committees, Non-Employee Directors (other than the Chairman of the Board)
shall receive an additional annual Option for 2,000 Shares for each committee
the director serves on, or for 6,000 Shares for serving as chairman of a
committee, to be granted initially on the date this amended Plan is approved
by the shareholders of the Company and thereafter on the date a director joins
a committee or becomes chairman, and on each subsequent anniversary of the
initial grant date; provided that, no individual shall receive annual Options
for more than 8,000 Shares pursuant to this subparagraph 4(c).

(d) Annual Incentive Grants. In addition to the Options granted pursuant to
subparagraphs (a)-(c) above, each Non-Employee Director shall receive an
Option for the number of Shares set forth in the table below, following any
fiscal year of the Company that the growth in the Company's funds from
operations per share from the prior year, as determined by reference to the
Company's annual consolidated financial statements, exceeds the 50th
percentile of the ten largest publicly-traded multifamily Real Estate
Investment Trusts based on total assets:

<TABLE>
<CAPTION>
PERCENTILE NO. OF SHARES
---------- -------------
<C> <S>
80-100 5,000
50-80 5,000 multiplied by X/30, with X equal to the percentile
above 50 (e.g., the 70th percentile = 20/30 x 5,000 = 3,333
Shares)
0-50 zero
</TABLE>

The grant date for Options granted pursuant to this paragraph shall be the
date, following publication of the Company's annual consolidated financial
statements, that the reference information for the comparison REITs first
becomes available.

(e) Reload Grants. In the event an Optionee (1) exercises, in whole or in
part, any Option granted under this Plan (including an Option granted under
this Section 4(e)) by delivering (or attesting to ownership of) Shares instead
of paying cash, as permitted by subparagraph 7(c), or (2) pays tax withholding
by delivering Shares, or having Shares withheld, as permitted by subparagraph
7(g), the Optionee, if then still a Non-Employee Director, shall automatically
receive on the date of such exercise a new Option (a "Reload Option") to
purchase additional Shares equal to the number of Shares so delivered to, or
withheld by, the Company. The Reload Option shall have an exercise price equal
to the Fair Market Value per Share on the date the Reload Option is granted,
shall expire the same date as the expiration date of the original Option so
exercised, and shall vest and become exercisable if the Optionee holds all of
the new Shares purchased (net of Shares withheld to pay taxes) under the
original Option until the first to occur of (i) 18 months after grant of the
Reload Option or (ii) 12 months before the expiration of the Reload Option.
However, a Reload Option shall vest sooner upon the occurrence of any of the
following: (a) a Change in Control, (b) the Optionee's retirement from the
Board, or (c) the Optionee's death, disability, or personal hardship as
determined by the Committee.

5. SHARES SUBJECT TO PLAN. The maximum number of Shares which may be issued
pursuant to Options under the Plan shall be 1,550,000, subject to adjustment
in accordance with Section 8. In the event that any

A-2
<PAGE>

outstanding Option (other than a Reload Option) shall expire or terminate for
any reason, the Shares allocable to the unused portion of that Option will
again be available for additional Options under the Plan. If an Option is
exercised by delivery of Shares as permitted by subparagraph 7(c), only the
number of Shares issued upon exercise net of the Shares so delivered shall be
deemed utilized for purposes of determining the maximum number of Shares
available for future Options under the Plan.

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, Options granted 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 holder's lifetime only by the holder or the holder's
guardian or legal representative.

7. TERMS AND CONDITIONS OF OPTIONS. The Options granted hereunder will not
be "incentive stock options" under Section 422 of the Code. 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, any
restrictions on transfer, and such other terms and conditions as the Committee
shall determine consistent with the Plan and the following:

(a) Option Price. The price to be paid for Shares upon the exercise of an
Option shall be 100% of the Fair Market Value of the Shares on the date the
Option is granted.

(b) Expiration of Option. No Option shall be exercisable after the
expiration of ten years from the date of grant. A Reload Option shall
expire as provided in subparagraph 4(e).

(c) 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 (i) in
cash or (ii) by delivery to the Company (including delivery by attestation
of ownership) of Shares owned by the Optionee and valued at Fair Market
Value on the date of exercise; provided that, any such already-owned Shares
delivered to pay the exercise price, if originally acquired by the Optionee
from the Company, shall have been held at least six months.

(d) Vesting of Options. Each Option granted under subparagraphs 4(a)-(c)
shall vest and become exercisable as to 1/12 of the shares subject to the
Option on each monthly anniversary date beginning on the grant date of the
Option, subject to the Optionee's continuing service as a director,
chairman or committee member, so that an Option shall have become fully
vested one year after the grant date; provided that upon a Change in
Control, all unvested options shall become fully vested. Incentive grants
under subparagraph 4(d) shall be fully vested upon grant. A Reload Option
shall vest as provided in subparagraph 4(e).

(e) Termination of Director Status. Termination of an Optionee's status
as a director of the Company shall not affect the ability of the Optionee
or the Optionee's estate to exercise, until the expiration date thereof,
any Options which have vested prior to the termination date.

(f) Rights as Shareholder. No Optionee shall have rights as a shareholder
with respect to Shares acquired under the Plan unless and until the stock
certificates for such Shares are delivered to him or her.

(g) Tax Withholding. Option exercises are subject to withholding of all
applicable taxes, which withholding shall be satisfied by the Optionee's
cash remittance or (to the extent permitted by the Committee) through the
delivery or surrender to the Company of Shares, valued at Fair Market
Value, which the Optionee owned prior to exercise or to which the Optionee
is otherwise entitled upon exercise of an Option; provided that, any such
already-owned Shares delivered to pay withholding taxes, if originally
acquired by the Optionee from the Company, shall have been held at least
six months.

8. CAPITAL ADJUSTMENTS; REORGANIZATION. The aggregate number of Shares with
respect to which Options may be granted hereunder, the number of Shares
thereof covered by each outstanding Option and the purchase price per Share
shall be proportionately adjusted for changes in the capitalization of the
Company resulting from a recapitalization, reorganization, merger,
consolidation, exchange of shares, stock dividend, stock A-3
<PAGE>

split, reverse stock split, or other subdivision or consolidation of shares or
the like. No fractional shares shall be issued, and any fractional shares
resulting from the adjustments contemplated by this subparagraph shall be
eliminated from the respective Option.

If the Company merges or consolidates with another entity and is not the
surviving entity, or if the Company is liquidated or sells or otherwise
disposes of substantially all its assets while unexercised Options remain
outstanding under the Plan, then either (a) 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; or (b) all Options, from and after a date at least 30 days prior to
the effective date of the merger, consolidation, liquidation, sale or other
disposition, as the case may be, shall be exercisable in full and all
outstanding Options which are so exercisable prior to the effective date of
such merger consolidation, liquidation, sale or other disposition may be
canceled by the Committee in its discretion, as of such effective date.

9. EXCHANGE ACT SECTION 16. 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.

10. DURATION OF THE PLAN. This Amended and Restated Plan, as amended March
2, 1998, shall be deemed effective on March 2, 1998, if no later than March 1,
1999 the Plan has been approved by the affirmative vote of a majority of the
outstanding shares of voting stock of the Company present and voting in person
or by proxy at a duly held shareholder meeting. If not so approved, the Plan
as previously amended shall remain in effect. The Plan shall terminate on
October 1, 2005, but may be sooner terminated by the Board at any time.
Expiration, termination or amendment of the Plan will not affect any Options
then outstanding.

11. AMENDMENT OF THE PLAN. The Board may amend or terminate the Plan at any
time; provided, however, that no such amendment shall, without the approval of
the holders of a majority of the outstanding shares of voting stock of the
Company present and voting at a duly held shareholder meeting, (i) increase
the maximum number of Shares which may be purchased pursuant to the Plan, (ii)
change the purchase price, or (iii) change the Option period or increase the
time limitation on the grant of Options under the Plan.

A-4
<PAGE>

LOGO

LOGO
PRINTED ON RECYCLED PAPER
<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. the undersigned is
entitled to vote at the Annual Meeting of Shareholders of BRE Properties, Inc.
The Meeting will be held at the Westin St. Francis Hotel, 335 Powell Street, San
Francisco, California at 10:00 a.m., Pacific time, on April 14, 1998. By signing
this proxy, the undersigned also authorizes 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 Item 2.

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

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

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

1. ELECTION OF DIRECTORS
<S> <C> <C> <C>
FOR all WITHHOLD AUTHORITY *EXCEPTIONS Nominees: 01 Arthur G. von
nominees to vote for all nominees Thaden and 02 Roger P.
listed to listed to the right Kuppinger
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 _______________________________
</TABLE>
- -----------------------------------
2. APPROVAL OF INCREASING AND
AMENDING THE AMENDED AND
RESTATED DIRECTOR STOCK
OPTION PLAN

FOR AGAINST ABSTAIN
/ / / / / /
<PAGE>

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.

Dated: ______________, 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 -

VOTE BY TELEPHONE

QUICK * * * EASY * * * IMMEDIATE

Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.

. You will be asked to enter a Control Number which is located in the box in the
lower right hand corner of this form.

OPTION #1: To vote as the Board of Directors recommends on ALL proposals:
- --------------------------------------------------------------------------
Press 1.
--------

WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.

OPTION #2: If you choose to vote on each proposal separately, press 0. You
- ----------------------------------------------------------------------------
will hear these instruction:
----------------------------

Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees,
press 9.

To Withhold FOR AN INDIVIDUAL nominee, press 0 and listen to the
instructions.

Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.

WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.

PLEASE DO NOT RETURN THE ABOVE PROXY CARD IF VOTED BY PHONE.
------------------------------------------------------------

CALL * * TOLL FREE * * ON A TOUCH TONE TELEPHONE CONTROL NUMBER

1-800-840-1208 ANYTIME

THERE IS NO CHARGE TO YOU FOR THIS CALL.