<PAGE>
   
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
                                   FORM 10-K
 
(Mark One)
 
<TABLE>
<S><C>
(X)       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                      FOR THE YEAR ENDED DECEMBER 31, 1996
                                       OR
( )          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                           COMMISSION FILE NO. 0-5305
</TABLE>
 
                              BRE PROPERTIES, INC.
 
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                            <C>
                  Maryland                                      94-1722214
       (STATE OR OTHER JURISDICTION OF            (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
        INCORPORATION OR ORGANIZATION)
 
            One Montgomery Street
          Telesis Tower, Suite 2500
          San Francisco, California                             94104-5525
  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                      (ZIP CODE)
</TABLE>
 
                                 (415) 445-6530
 
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
 
          Securities registered pursuant to Section 12(b) of the Act:
 
<TABLE>
<CAPTION>
TITLE OF EACH CLASS                                                      NAME OF EACH EXCHANGE ON WHICH REGISTERED
--------------------------------------------------------  --------------------------------------------------------
<S>                                                       <C>
Common Stock, $.01 par value                                                               New York Stock Exchange
Common Stock Purchase Rights                                                               New York Stock Exchange
</TABLE>
 
    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
 
   
                        Yes [X]                   No [ ]
    
 
    INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K (SECTION 229.405 OF THIS CHAPTER) IS NOT CONTAINED HEREIN,
AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE
PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS
FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [   ]
 
    At February 5, 1997, the aggregate market value of the registrant's shares
of Common Stock, $.01 par value, held by nonaffiliates of the registrant was
approximately $835,580,000. At that date 32,919,093 shares were outstanding.
 
--------------------------------------------------------------------------------
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<PAGE>
                      DOCUMENTS INCORPORATED BY REFERENCE
 
    Portions of the Proxy Statement for the Annual Meeting of Shareholders of
BRE Properties, Inc. (the "Company") to be filed within 120 days of December 31,
1996 (the "Proxy Statement") are incorporated by reference in Part III of this
report.
 
                           FORWARD-LOOKING STATEMENTS
 
   
    In addition to historical information, certain sections of this Annual
Report contain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, such as those pertaining to the Company's capital resources, profitability
and portfolio performance. Forward-looking statements involve numerous risks and
uncertainties. The following factors, among others discussed herein, could cause
actual results and future events to differ materially from those set forth or
contemplated in the forward-looking statements: defaults or non-renewal of
leases, increased interest rates and operating costs, failure to obtain
necessary outside financing, difficulties in identifying properties to acquire
and in effecting acquisitions, failure to qualify as a real estate investment
trust under the Internal Revenue Code of 1986, as amended (the "Code"),
environmental uncertainties, risks related to natural disasters, financial
market fluctuations, changes in real estate and zoning laws and increases in
real property tax rates. The success of the Company also depends upon the trends
of the economy, including interest rates, income tax laws, governmental
regulation, legislation, population changes and those risk factors discussed
elsewhere in this Annual Report. Readers are cautioned not to place undue
reliance on forward-looking statements, which reflect management's analysis only
as the date hereof. The Company assumes no obligation to update forward-looking
statements. See also the Company's reports to be filed from time to time with
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934.
    
 
                                       2
<PAGE>
                              BRE PROPERTIES, INC.
 
                                     PART I
 
ITEM 1. BUSINESS
 
CORPORATE PROFILE
   
    BRE Properties, Inc. ("BRE" or the "Company"), formerly a Delaware
corporation that reincorporated in Maryland in March 1996, is a
self-administered equity real estate investment trust which primarily owns and
operates multifamily properties in the Western United States. At December 31,
1996, BRE's multifamily portfolio consisted of 12,212 wholly owned units in
California, Nevada, Arizona, Washington and Oregon. On that date, BRE also owned
15 commercial and retail properties and held one land lease. In addition, at
December 31, 1996, BRE held limited partnership interests in two shopping
centers and one apartment community. Founded in 1970, the Company has paid 106
consecutive quarterly dividends to shareholders since it commenced operations.
    
 
   
    On March 15, 1996, Real Estate Investment Trust of California, a California
real estate investment trust ("RCT"), merged with and into BRE (the "Merger"),
in accordance with the terms and conditions of the Agreement and Plan of Merger
dated October 14, 1995. The Merger was treated as a purchase for accounting
purposes.
    
 
   
    Pursuant to the Merger, BRE (i) acquired approximately $274,400,000
aggregate book value in equity investments in real estate, including 22
apartment communities (totaling approximately 3,600 units) and 18 commercial and
retail properties, (ii) assumed secured and unsecured RCT notes payable of
approximately $95,400,000, and other liabilities totaling approximately
$8,000,000, and (iii) issued 10,684,436 shares of the Company's common stock,
$.01 par value per share ("Common Stock"), valued at approximately $171,000,000
upon conversion of RCT's then outstanding shares of beneficial interest.
    
 
   
    During 1996, in addition to the properties acquired in the Merger, the
Company (i) acquired nine apartment communities comprising 3,156 units at an
aggregate gross cost of approximately $230,000,000 and (ii) sold 14 commercial
and retail properties, and the ground lease underlying one apartment community,
at an aggregate gross sales price of approximately $108,000,000.
    
 
   
    The key aspects of the Company's strategy include a focus on the acquisition
of multifamily properties in the Western United States; an orderly disposition
of commercial and retail properties; and increased access to the capital markets
for debt and equity financing.
    
 
STRUCTURE AND INVESTMENT POLICY
 
   
    BRE is a real estate investment trust under Sections 856-860 of the Internal
Revenue Code, as amended (the "Code"). Its long-range investment policy
emphasizes the purchase of fee ownership of both land and improvements,
primarily in multifamily communities located in the Western United States. Among
other things, this policy is designed to enable management to monitor
developments in local real estate markets and to take an active role in managing
the Company's properties and improving their performance. The policy is subject
to ongoing review by the Board of Directors and may be modified in the future to
take into account changes in business or economic conditions, as circumstances
warrant.
    
 
                                       3
<PAGE>
REVENUES AND OCCUPANCY
 
   
    The following table shows the percentage of the Company's total rental
revenues contributed by certain classes of properties during the years ended
December 31, 1996, 1995 and 1994, respectively. It also shows the average
occupancy levels for these classes of properties at December 31, 1996.
    
 
   
<TABLE>
<CAPTION>
                                                                                      PERCENT OF TOTAL
                                                                                       REVENUES YEAR
                                                              AVERAGE OCCUPANCY(1)   ENDED DECEMBER 31,
                                                              --------------------   ------------------
TYPE OF PROPERTY                                                 DEC. 31, 1996       1996   1995   1994
------------------------------------------------------------  --------------------   ----   ----   ----
<S>                                                           <C>                    <C>    <C>    <C>
Multifamily.................................................          96%             77%    76%    71%
Commercial and retail.......................................          93              15     20     25
</TABLE>
    
 
   
(1) For multifamily properties, portfolio occupancy is calculated by dividing
    the total occupied units by the total units in the portfolio. For commercial
    and retail properties, portfolio occupancy is calculated by dividing the
    total occupied square footage by the total square footage in the portfolio.
    
 
PORTFOLIO AT DECEMBER 31, 1996
 
    At December 31, 1996, the Company's portfolio of income-producing real
estate included, as a percent of cost, the following investments:
 
   
<TABLE>
<CAPTION>
                                 NUMBER OF     PERCENT OF
                                PROPERTIES        COST
                                -----------    ----------
<S>                             <C>            <C>
Properties owned by the
  Company:
 
  Multifamily.................          54(1)         87%
  Commercial and retail.......          15            13
 
Properties held in
  partnerships (2):
 
  Multifamily.................           1             *
  Commercial and retail.......           2             *
                                       ---           ---
Total number
  of investments..............          72           100%
                                       ---           ---
                                       ---           ---
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                 NUMBER OF     PERCENT OF
                                PROPERTIES        COST
                                -----------   -------------
<S>                             <C>           <C>
Properties owned by the
  Company:
 
  California..................          42(1)           61%
  Arizona.....................          17              21
  Washington..................           5              10
  Nevada......................           3               4
  Oregon......................           2               4
 
Properties held in
  partnerships (2):
 
  California..................           1               *
  Arizona.....................           2               *
                                       ---             ---
 
Total number of
  investments.................          72             100%
                                       ---             ---
                                       ---             ---
</TABLE>
    
 
------------------------
 
   
*   Less than one percent.
    
 
   
(1) Includes one land lease.
    
 
   
(2) Properties held by partnerships in which the Company has a minority interest
    as a limited partner.
    
 
   
    See Items 2 and 7 of this report for a description of the Company's
individual investments and certain developments during the year with respect to
these investments.
    
 
EMPLOYEES
 
    As of December 31, 1996, the Company had approximately 345 employees. None
of the employees is unionized.
 
                                       4
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
 
    The following persons were executive officers of the Company as of December
31, 1996:
 
<TABLE>
<CAPTION>
                                   AGE AT DECEMBER 31,
NAME                                      1996                                     POSITION(S)
-------------------------------  -----------------------  -------------------------------------------------------------
<S>                              <C>                      <C>
Frank C. McDowell..............                48         President, Chief Executive Officer and Director
Jay W. Pauly...................                54         Senior Executive Vice President and Chief Operating Officer
Byron M. Fox...................                57         Executive Vice President, Acquisitions and Portfolio Strategy
LeRoy E. Carlson...............                51         Executive Vice President, Chief Financial Officer and
                                                            Secretary
John H. Nunn...................                38         Senior Vice President, Property Management
</TABLE>
 
   
    Mr. McDowell was appointed to his current position in June, 1995. Mr. Fox
was appointed to his current position in October, 1992. Messrs. Pauly, Carlson
and Nunn joined the Company in connection with the Merger in March, 1996. Set
forth below is information regarding the business experience of each of the
executive officers:
    
 
    From 1992 to 1995, Mr. McDowell was Chief Executive Officer and Chairman of
Cardinal Realty Services, Inc. ("Cardinal"), a Columbus, Ohio-based apartment
management company and owner of multifamily housing. From 1988 to 1992, Mr.
McDowell was Senior Vice President, Head of Real Estate of First Interstate Bank
of Texas. Mr. McDowell holds a Bachelor of Science Degree and a Master of
Business Administration Degree, both from the University of Texas, Austin.
 
   
    Mr. Pauly served as President and Chief Executive Officer of RCT from 1993
until the Merger in 1996. Prior to joining RCT, from 1990 to 1992 Mr. Pauly
served as First Vice President and was on the Executive Committee of Home
Savings of America ("Home Savings") and served as Chief Executive Officer of
Ahmanson Commercial Development Company, Ahmanson Residential Development
Company and Ahmanson Ranch. From 1986 to 1990, he was Senior Vice President,
Director of Real Estate Services for Home Savings, responsible for REO, Major
Loan Workouts, Asset Valuation, Premises Owned, Property Management and Leasing
and Environmental Risk Management. Prior to joining Home Savings, Mr. Pauly was
President and CEO of McFly, Inc., a company specializing in restaurant
development and hospitality industry investments. Mr. Pauly holds a Bachelor's
Degree in Industrial Engineering and a Master's Degree in Business
Administration both from Stanford University.
    
 
    Mr. Fox served as a Senior Vice President of the Company from December 1987
until September 1992. From 1977 to 1987, he was Vice President and General
Manager of Dillingham Investment Corporation, a Hawaii land investment firm. Mr.
Fox holds a Bachelor of Arts Degree from Colgate University and a Master of
Business Administration Degree from Harvard Business School.
 
    Mr. Carlson served as Vice President and Chief Financial Officer of RCT from
1980 to 1996. Prior to joining RCT, Mr. Carlson was the Chief Financial Officer
of the William Walters Company, a large asset management company based in Los
Angeles, California. He is a licensed Certified Public Accountant in the State
of California. Mr. Carlson holds a Bachelor's Degree from the University of
Southern California.
 
    Mr. Nunn served as Vice President of Property Management of RCT from 1990 to
1996. Prior to joining RCT, Mr. Nunn was a Vice President and Property Manager
for the William Walters Company from 1986 to 1990. From 1981 to 1986 Mr. Nunn
was the Property Manager for the M.F. Daily Investment Company in Camarillo,
California. Mr. Nunn holds a Bachelor's Degree from California State University
at Long Beach.
 
    There is no family relationship among any of the Company's executive
officers or Directors.
 
                                       5
<PAGE>
   
                                  RISK FACTORS
    
 
   
    This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual events, developments and results could differ
materially from those anticipated or projected in the forward-looking statements
as a result of certain factors listed below and elsewhere in this document.
However, because the Company operates in a rapidly changing environment, there
can be no assurance that the following factors include all material risks to the
Company at any given time. See "Forward-Looking Statements."
    
 
REAL ESTATE INVESTMENT RISKS
 
GENERAL
 
    Real property investments are subject to varying degrees of risk. The yields
available from equity investment in real estate depend upon the amount of
revenues generated and expenses incurred. If properties do not generate revenues
sufficient to meet operating expenses, including debt service and capital
expenditures, the Company's results of operations and ability to make
distributions to its shareholders will be adversely affected. The performance of
the economy in each of the areas in which the properties are located affects
occupancy, market rental rates and expenses and, consequently, has an impact on
the revenues from the properties and their underlying values. The financial
results of major local employers also may have an impact on the revenues and
value of certain properties.
 
   
    Revenues from properties may be further adversely affected by a variety of
factors, including the general economic climate, local conditions in the areas
in which properties are located, such as oversupply of space or a reduction in
the demand for rental space, the attractiveness of the properties to residents
or users, competition from other available space, the ability of the Company to
provide adequate facilities maintenance, services and amenities, and insurance
premiums and real estate taxes. The Company's revenues would also be adversely
affected if residents or users were unable to pay rent or the Company was unable
to rent apartments or commercial properties on favorable terms. If the Company
were unable to promptly relet or renew the leases for a significant number of
apartment units or commercial properties, or if the rental rates upon such
renewal or reletting were significantly lower than expected rates, then the
Company's funds from operations would, and ability to make expected
distributions to shareholders may, be adversely affected. There is also a risk
that as leases on the properties expire, residents or users will vacate or enter
into new leases on terms that are less favorable to the Company. Operating
costs, including real estate taxes, insurance and maintenance costs, and
mortgage payments, if any, do not, in general, decline when circumstances cause
a reduction in income from a property. If a property is mortgaged to secure
payment of indebtedness, and the Company is unable to meet its mortgage
payments, a loss could be sustained as a result of foreclosure on the property.
In addition, revenues from properties and real estate values are also affected
by such factors as applicable laws, including tax laws, interest rate levels and
the availability of financing.
    
 
    In the normal course of business, the Company typically evaluates potential
acquisitions, enters into non-binding letters of intent, and may, at any time,
enter into contracts to acquire and may acquire additional properties. However,
no assurance can be given that the Company will have the financial resources to
make suitable acquisitions or that properties that satisfy the Company's
investment policies will be available for acquisition. Acquisitions of
properties entail risks that investments will fail to perform in accordance with
expectations. Such risks may include that construction costs may exceed original
estimates, possibly making a project uneconomical, financing may not be
available on favorable terms or at all and construction and lease-up may not be
completed on schedule. Estimates of the costs of improvements to bring an
acquired property up to standards established for the market position intended
for that property may prove inaccurate. In addition, there are general real
estate investment risks associated with any new real estate investment. Although
the Company undertakes an evaluation of the physical condition of each new
investment before it is acquired, certain defects or necessary repairs may not
be detected until
 
                                       6
<PAGE>
   
after the investment is acquired, which could significantly increase the
Company's total acquisition costs and which could have a material adverse effect
on the Company and its ability to make distributions to shareholders.
    
 
ILLIQUIDITY OF REAL ESTATE AND REINVESTMENT RISK
 
   
    Real estate investments are relatively illiquid and, therefore, tend to
limit the ability of the Company to adjust its portfolio in response to changes
in economic or other conditions. Additionally, the Code places certain limits on
the number of properties a REIT may sell without adverse tax consequences. To
effect its current operating strategy, the Company has in the past raised, and
will seek to continue to raise additional acquisition funds, both through
outside financing and through the orderly disposition of commercial and retail
properties, and, depending upon interest rates, current acquisition
opportunities and other factors, generally to reinvest the proceeds in
multifamily properties. In this respect, in the markets the Company has targeted
for future acquisition of multifamily properties, there is considerable buying
competition from other real estate companies, many of whom may have greater
resources, experience or expertise than the Company. In many cases, this
competition for acquisition properties has resulted in an increase in property
prices and a decrease in property yields. Due to the relatively low
capitalization rates currently prevailing in the pricing of potential
acquisitions of multifamily properties which meet the Company's investment
criteria, no assurance can be given that the proceeds realized from the
disposition of commercial and retail properties can be reinvested to produce
economic returns comparable to those being realized from the properties disposed
of, or that the Company will be able to acquire properties meeting its
investment criteria. To the extent that the Company is unable to reinvest
proceeds from the disposition of commercial and retail properties, or if
properties acquired with such proceeds produce a lower rate of return than the
properties disposed of, such results may have a material adverse effect on the
Company and its ability to make distributions to shareholders. In addition, a
delay in reinvestment of such proceeds may have a material adverse effect on the
Company and its ability to make distributions to shareholders.
    
 
   
    The Company may seek to structure future dispositions as tax-free exchanges,
where appropriate, utilizing the nonrecognition provisions of Section 1031 of
the Code to defer income taxation on the disposition of the exchanged property.
For an exchange of such properties to qualify for tax-free treatment under
Section 1031 of the Code, certain technical requirements must be met. For
example, both the property exchanged and the property acquired must be held for
use in a trade or business or for investment, and the property acquired must be
identified within 45 days, and must be acquired within 180 days, after the
transfer of the exchanged property. If the technical requirements of Section
1031 of the Code are not met, then the exchanged property will be treated as
sold in a taxable transaction for a sales price equal to the fair market value
of the property received, in which event a distribution of cash to the
shareholders may be required to avoid a corporate-level income tax on the
resulting capital gain. Given the competition for properties meeting the
Company's investment criteria, it may be difficult for the Company to identify
suitable properties within the foregoing time frames in order to meet the
requirements of Section 1031. Even if a suitable tax-deferred exchange can be
structured, as noted above, no assurance can be given that the proceeds of any
of these dispositions will be reinvested to produce economic returns comparable
to those currently being realized from the properties which were disposed of.
    
 
COMPETITION
 
   
    All of the properties currently owned by the Company are located in
developed areas. There are numerous other multifamily properties and real estate
companies, many of which have greater financial and other resources than the
Company, within the market area of each of the properties which will compete
with the Company for tenants and development and acquisition opportunities. The
number of competitive multifamily properties and real estate companies in such
areas could have a material effect on (i) the Company's ability to rent the
apartments and the rents charged and (ii) development and
    
 
                                       7
<PAGE>
   
acquisition opportunities. The activities of these competitors could cause the
Company to pay a higher price for a new property than it otherwise would have
paid or may prevent the Company from purchasing a desired property at all, which
could have a material adverse effect on the Company and its ability to make
distributions to shareholders.
    
 
GEOGRAPHIC CONCENTRATION; DEPENDENCE ON WESTERN UNITED STATES REGIONS
 
   
    The Company's portfolio is principally located in the San Francisco Bay
Area, San Diego, Tucson, Phoenix/Scottsdale, Seattle, Portland, the Los Angeles
metropolitan area, Sacramento and Las Vegas. The Company's performance could be
adversely affected by economic conditions in, and other factors relating to,
these geographic areas, including supply and demand for apartments in these
areas, zoning and other regulatory conditions and competition from other
properties and alternative forms of housing. In that regard, certain of these
areas (particularly the Los Angeles and San Diego metropolitan areas) have in
the recent past experienced economic recessions and depressed conditions in the
local real estate markets. To the extent general economic or social conditions
in any of these areas deteriorate or any of these areas experiences natural
disasters, the value of the portfolio, the Company's results of operations and
its ability to make distributions to shareholders could be adversely affected.
    
 
RISKS OF REAL ESTATE DEVELOPMENT AND ACQUISITION
 
    Although the Company currently has no properties under development, the
Company may in the future seek to develop properties when market and economic
conditions warrant.
 
   
    Real estate development involves significant risks in addition to those
involved in the ownership and operation of real estate. While the Company's
policies with respect to development activities are intended to limit some of
the risks otherwise associated with such activities, the Company nevertheless is
subject to certain risks, including lack of financing, construction delays,
budget overruns and lease-up. The occurrence of any of these risks could have a
material adverse effect on the Company and its ability to make distributions to
shareholders.
    
 
    It is expected that, in the future, the Company's evaluation of real
property acquisition opportunities will be based, in part, upon the cost to
finance the acquisition and the yield expected to be derived from the ongoing
ownership of such real property. If the Company is unable to obtain sufficient
capital on acceptable terms, its ability to acquire new real estate or implement
other aspects of its objectives and strategies will be impaired. In addition,
even if sufficient capital is available on reasonable terms, no assurance can be
given that the costs to maintain the property so acquired or the yields actually
derived from the property will not deviate materially from expectations.
 
UNINSURED LOSS; LIMITED COVERAGE
 
   
    The Company carries comprehensive liability, fire, extended coverage and
rental loss insurance with respect to its properties with certain policy
specifications, limits and deductibles. While the Company currently carries
flood and earthquake insurance for its properties with an aggregate annual limit
of $50 million, subject to substantial deductibles, no assurance can be given
that such coverage will be available on acceptable terms or at an acceptable
cost, or at all, in the future, or if obtained, that the limits of those
policies will cover the full cost of repair or replacement of covered
properties. In addition, there may be certain extraordinary losses (such as
those resulting from civil unrest) that are not generally insured (or fully
insured against) because they are either uninsurable or not economically
insurable. Should an uninsured or underinsured loss occur to a property, the
Company could be required to use its own funds for restoration or lose all or
part of its investment in, and anticipated revenues from, the property and would
continue to be obligated on any mortgage indebtedness on the property. Any such
loss could have a material adverse effect on the Company and its ability to make
distributions to shareholders.
    
 
                                       8
<PAGE>
CHANGE IN LAWS
 
   
    Increases in real estate taxes and income, service and transfer taxes cannot
always be passed through to residents or users in the form of higher rents, and
may adversely affect the Company's cash available for distribution and its
ability to make distributions to shareholders. Similarly, changes in laws
increasing the potential liability for environmental conditions existing on
properties or increasing the restrictions on discharges or other conditions, as
well as changes in laws affecting development, construction and safety
requirements, may result in significant unanticipated expenditures, which could
have a material adverse effect on the Company and its ability to make
distributions to shareholders. In addition, future enactment of rent control or
rent stabilization laws or other laws regulating multifamily housing may reduce
rental revenues or increase operating costs.
    
 
LAWS BENEFITING DISABLED PERSONS
 
   
    A number of federal, state and local laws (including the Americans with
Disabilities Act) and regulations exist that may require modifications to
existing buildings or restrict certain renovations by requiring improved access
to such buildings by disabled persons. Legislation or regulations adopted in the
future may impose further burdens or restrictions on the Company with respect to
improved access by disabled persons. The costs of compliance with these laws and
regulations may be substantial, and limits or restrictions on completion of
certain renovations may limit implementation of the Company's investment
strategy in certain instances or reduce overall returns on its investments,
which could have a material adverse effect on the Company and its ability to
make distributions to shareholders. The Company reviews its properties
periodically to determine the level of compliance and, if necessary, takes
appropriate action to bring such properties into compliance. The Company's
management believes, based on property reviews to date, that the costs of such
compliance should not have a material adverse effect on the Company. Such
conclusions are based upon currently available information and data, and no
assurance can be given that further review and analysis of the Company's
properties, or future legal interpretations or legislative changes, will not
significantly increase the costs of compliance.
    
 
REAL ESTATE FINANCING RISKS
 
DEBT FINANCING AND DEBT MATURITIES
 
   
    The Company is subject to the normal risks associated with debt financing,
including the risk that the Company's cash flow will be insufficient to meet
required payments of principal and interest, the risk that indebtedness on its
properties, or unsecured indebtedness, will not be able to be renewed, repaid or
refinanced when due or that the terms of any renewal or refinancing will not be
as favorable as the terms of such indebtedness. If the Company were unable to
refinance its indebtedness on acceptable terms, or at all, the Company might be
forced to dispose of one or more of the properties on disadvantageous terms,
which might result in losses to the Company, which losses could have a material
adverse effect on the Company and its ability to make distributions to
shareholders. Furthermore, if a property is mortgaged to secure payment of
indebtedness and the Company is unable to meet mortgage payments, the mortgagee
could foreclose upon the property, appoint a receiver and receive an assignment
of rents and leases or pursue other remedies, all with a consequent loss of
revenues and asset value to the Company. Foreclosures could also create taxable
income without accompanying cash proceeds, thereby hindering the Company's
ability to meet the REIT distribution requirements of the Code.
    
 
RISK OF RISING INTEREST RATES
 
   
    The Company has incurred and expects in the future to incur indebtedness
which bears interest at a variable rate. Accordingly, increases in interest
rates would increase the Company's interest costs (to the extent that the
related indebtedness was not protected by interest rate protection
arrangements), which could have a material adverse effect on the Company and its
ability to make distributions to shareholders
    
 
                                       9
<PAGE>
or cause the Company to be in default under certain debt instruments. In
addition, an increase in market interest rates may lead holders of the Company's
Common Stock to demand a higher yield on their shares from distributions by the
Company, which could adversely affect the market price for the Common Stock.
 
ADDITIONAL DEBT
 
   
    The Company currently funds acquisition opportunities partially through
borrowings (including its lines of credit) as well as from other sources such as
sales of non-core properties. The organizational documents of the Company do not
contain any limitation on the amount of indebtedness that the Company may incur.
Accordingly, the Company could become more highly leveraged, resulting in an
increase in debt service, which could have a material adverse effect on the
Company and its ability to make distributions to shareholders and in an
increased risk of default on its obligations.
    
 
ENVIRONMENTAL RISKS
 
   
    Under various federal, state and local laws, ordinances and regulations, a
current or previous owner or operator of real estate may be liable for the costs
of removal or remediation of certain hazardous or toxic substances in, on,
around or under such property. Such laws often impose such liability without
regard to whether the owner or operator knew of, or was responsible for, the
presence of such hazardous or toxic substances. The presence of, or failure to
remediate properly, such substances may adversely affect the owner's or
operator's ability to sell or rent the affected property or to borrow using such
property as collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic substances may also be liable for the costs of removal or
remediation of such substances at a disposal or treatment facility, whether or
not such facility is owned or operated by such person. Certain environmental
laws impose liability for release of asbestos-containing materials into the air,
and third parties may also seek recovery from owners or operators of real
properties for personal injury associated with asbestos-containing materials and
other hazardous or toxic substances. The operation and subsequent removal of
certain underground storage tanks are also regulated by federal and state laws.
In connection with the current or former ownership (direct or indirect),
operation, management, development and/or control of real properties, the
Company may be considered an owner or operator of such properties or as having
arranged for the disposal or treatment of hazardous or toxic substances and,
therefore, may be potentially liable for removal or remediation costs, as well
as certain other costs, including governmental fines, and claims for injuries to
persons and property.
    
 
   
    The Company's current policy is to obtain a Phase I environmental study on
each property it seeks to acquire and to proceed accordingly. No assurance can
be given, however, that the Phase I environmental studies or other environmental
studies undertaken with respect to any of the Company's current or future
properties will reveal all or the full extent of potential environmental
liabilities, that any prior owner or operator of a property did not create any
material environmental condition unknown to the Company, that a material
environmental condition does not otherwise exist as to any one or more of such
properties or that environmental matters will not have a material adverse effect
on the Company and its ability to make distributions to shareholders. The
Company currently carries no insurance for environmental liabilities.
    
 
   
    Certain environmental laws impose liability on a previous owner of property
to the extent that hazardous or toxic substances were present during the prior
ownership period. A transfer of the property does not relieve an owner of such
liability. Thus, the Company may have liability with respect to properties
previously sold by its predecessors.
    
 
PROVISIONS WHICH COULD LIMIT A CHANGE IN CONTROL OR DETER A TAKEOVER
 
    In order to maintain its qualification as a REIT, not more than 50% in value
of the outstanding capital stock of the Company may be owned, actually or
constructively, by five or fewer individuals (as defined in the Code to include
certain entities). In order to protect the Company against risk of losing its
status as a
 
                                       10
<PAGE>
   
REIT due to a concentration of ownership among its shareholders, the Articles of
Incorporation of the Company provide, among other things, that if the Board of
Directors determines, in good faith, that direct or indirect ownership of the
Company's stock has or may become concentrated to an extent that would prevent
the Company from qualifying as a REIT, the Board of Directors may prevent the
transfer of stock or call for redemption (by lot or other means affecting one or
more shareholders selected in the sole discretion of the Board of Directors) of
a number of shares sufficient in the opinion of the Board of Directors to
maintain or bring the direct or indirect ownership of the stock into conformity
with the requirements for maintaining REIT status. These limitations may have
the effect of precluding acquisition of control of the Company by a third party
without consent of the Board of Directors.
    
 
   
    In addition, certain other provisions contained in the Company's Articles of
Incorporation and Bylaws, as well as its shareholder rights plan, may have the
effect of discouraging a third party from making an acquisition proposal for the
Company and may thereby inhibit a change in control of the Company. For example,
such provisions may (i) deter tender offers for Common Stock, which offers may
be attractive to the shareholders, or (ii) deter purchases of large blocks of
Common Stock, thereby limiting the opportunity for shareholders to receive a
premium for their Common Stock over then-prevailing market prices.
    
 
TAX RISKS
 
TAX LIABILITIES AS A CONSEQUENCE OF FAILURE TO QUALIFY AS A REIT
 
    Although management believes that the Company is organized and is operating
so as to qualify as a REIT under the Code, no assurance can be given that the
Company has in fact operated or will be able to continue to operate in a manner
so as to qualify or remain so qualified. Qualification as a REIT involves the
application of highly technical and complex Code provisions for which there are
only limited judicial or administrative interpretations and the determination of
various factual matters and circumstances not entirely within the Company's
control. For example, in order to qualify as a REIT, at least 95% of the
Company's taxable gross income in any year must be derived from qualifying
sources and the Company must make distributions to shareholders aggregating
annually at least 95% of its REIT taxable income (excluding net capital gains).
In addition, no assurance can be given that new legislation, new regulations,
administrative interpretations or court decisions will not change the tax laws
with respect to qualification as a REIT or the federal income tax consequences
of such qualification.
 
   
    If the Company fails to qualify as a REIT, the Company will be subject to
federal income tax (including any applicable alternative minimum tax) on its
taxable income at corporate rates. In addition, unless entitled to relief under
certain statutory provisions, the Company would also be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification is lost. This treatment would reduce funds available for
investment or distributions to shareholders because of the additional tax
liability to the Company for the year or years involved. In addition,
distributions to shareholders would no longer be required to be made. To the
extent that distributions to shareholders would have been made in anticipation
of qualifying as a REIT, the Company might be required to borrow funds or to
liquidate certain of its investments to pay the applicable tax.
    
 
ITEM 2.  PROPERTIES
 
GENERAL
 
    In addition to the information set forth in this Item 2, information on the
Company's portfolio is set forth in Schedule III under Item 14(d).
 
   
    The Company carries comprehensive liability, fire, extended coverage and
rental loss insurance with respect to its properties with certain policy
specifications, limits and deductibles, which the Company deems reasonable. In
addition, the Company currently carries flood and earthquake coverage with an
annual aggregate limit of $50,000,000 (after policy deductibles of 2% of
damages).
    
 
                                       11
<PAGE>
MULTIFAMILY PROPERTIES
 
    As reflected in the following chart, during the five years in the period
ended December 31, 1996, multifamily properties have increased as a percentage
of the Company's portfolio of income producing properties and revenues:
 
   
<TABLE>
<CAPTION>
MULTIFAMILY PROPERTIES                                          1996         1995         1994         1993         1992
-----------------------------------------------------------     -----        -----        -----        -----        -----
<S>                                                          <C>          <C>          <C>          <C>          <C>
 
Percentage of portfolio at cost, as of December 31.........          87%          72%          65%          55%          46%
 
Percentage of total revenue, for the year ended December
  31.......................................................          77%          76%          71%          51%          53%
</TABLE>
    
 
   
    During 1996, multifamily revenues as a percentage of total revenues did not
increase in proportion to the increase in the relative size of the multifamily
portfolio due to the timing of purchases of multifamily properties and the sales
of commercial properties.
    
 
COMMERCIAL AND RETAIL PROPERTIES
 
   
    During 1996, BRE continued its orderly disposition of commercial and retail
properties, including commercial and retail properties acquired in the Merger.
At December 31, 1996 there were fifteen such properties (plus two held in
partnerships in which the Company is a limited partner). For additional
information regarding leases on the commercial and retail properties, see Note 3
to Notes to Financial Statements. No one resident or user accounted for more
than 10% of revenues for fiscal year 1996.
    
 
HEADQUARTERS
 
    The Company maintains its corporate headquarters at One Montgomery Street,
Suite 2500, Telesis Tower, San Francisco, California pursuant to a sublease with
Wells Fargo Bank. The sublease has an eleven-year term, and covers 10,142
rentable square feet at annual per square foot rents which began at $23 and rise
to $34 in the tenth year of the lease. The lease term ends December 17, 1998.
 
ITEM 3.  LEGAL PROCEEDINGS
 
   
    The Company is defending various claims and legal actions that arise from
its normal course of business, including certain environmental actions. While it
is not feasible to predict or determine the ultimate outcome of these matters,
in the opinion of management, none of these actions will have a material adverse
effect on the Company.
    
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    None.
 
                                       12
<PAGE>
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
 
   
    The Company's Common Stock is traded on the New York Stock Exchange (the
"NYSE") under the symbol BRE. As of February 5, 1997, there were approximately
6,500 recordholders of the Company's Common Stock and the last reported sales
price on the NYSE was $25.625. The number of holders does not include persons
whose shares are held of record by a broker or clearing agency, but does include
each such broker or clearing agency as one recordholder. As of February 5, 1997,
there were approximately 29,000 shareholders of the Company's Common Stock. The
high and low last reported sales prices on the NYSE and dividends paid set forth
below retroactively reflect the two-for-one stock split discussed in Note 2 to
Notes to Financial Statements. Additionally, in order to maintain the Company's
status as a REIT, the Code requires dividends of at least 95% of the Company's
taxable income, see Note 2 to Notes to Financial Statements.
    
 
<TABLE>
<CAPTION>
                                                                            YEARS ENDED DECEMBER 31,
                                                      --------------------------------------------------------------------
                                                                    1996                               1995
                                                      ---------------------------------  ---------------------------------
                                                          STOCK PRICE                        STOCK PRICE
                                                      --------------------   DIVIDENDS   --------------------   DIVIDENDS
                                                        HIGH        LOW        PAID        HIGH        LOW        PAID
                                                      ---------  ---------  -----------  ---------  ---------  -----------
<S>                                                   <C>        <C>        <C>          <C>        <C>        <C>
First Quarter.......................................  $   19.08  $   17.63   $   .3395   $   15.97  $   15.25   $   .3150
Second Quarter......................................  $   19.58  $   17.44   $   .3330   $   15.58  $   14.94   $   .3150
Third Quarter.......................................  $   21.50  $   19.50   $   .3300   $   16.88  $   15.38   $   .3150
Fourth Quarter......................................  $   24.75  $   20.13   $   .3300   $   18.07  $   15.88   $   .3150
</TABLE>
 
ITEM 6. SELECTED FINANCIAL DATA
 
   
    The following selected financial data for each of the five years in the
period ended December 31, 1996 have been derived from the financial statements
of the Company which have been recast to give effect to the change in the
Company's fiscal year, see Note 2 to Notes to Financial Statements. The selected
financial data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto included elsewhere in this report.
The 1996 results have been significantly impacted by the Merger and numerous
    
 
                                       13
<PAGE>
   
acquisitions and dispositions as discussed in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and notes thereto included elsewhere in this report and, therefore,
are not directly comparable to prior years.
    
 
   
<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                           --------------------------------------------------------------------
                                               1996          1995          1994          1993          1992
                                           ------------  ------------  ------------  ------------  ------------
                                                      (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                        <C>           <C>           <C>           <C>           <C>
OPERATING RESULTS
Revenues.................................  $  101,651    $   65,387    $   56,970    $   49,806    $   39,829
Net income...............................      89,839        22,010        24,212        20,037        28,737
Less:
Net gain on sales of investments.........      52,825           221         1,646           506        14,199
Plus:
Depreciation and amortization............      13,283         7,864         7,080         6,097         4,787
Provision for investment losses..........       --            2,000         --            --            --
                                           ------------  ------------  ------------  ------------  ------------
Funds from operations *..................  $   50,297    $   31,653    $   29,646    $   25,628    $   19,325
Net cash flows generated from operating
  activities.............................  $   43,898    $   26,032    $   29,786    $   24,571    $   23,743
Dividends paid...........................  $   39,849    $   27,596    $   26,210    $   23,659    $   19,011
Dividends paid as a percentage of funds
  from operations........................          79%           87%           88%           92%           98%
Weighted average number of shares
  outstanding............................      30,520        21,905        21,840        20,150        15,840
PER SHARE DATA
Income before gain on sales of
  investments............................  $     1.21    $     1.09    $     1.03    $      .97    $      .92
Net gain on sales of investments.........        1.73           .01           .08           .02           .90
Provision for possible investment
  losses.................................       --            (.09)         --            --            --
                                           ------------  ------------  ------------  ------------  ------------
Net income...............................  $     2.94    $     1.01    $     1.11    $      .99    $     1.82
Dividends paid...........................  $     1.33    $     1.26    $     1.20    $     1.20    $     1.20
FINANCIAL POSITION
Total assets.............................  $  783,714    $  354,895    $  343,853    $  293,628    $  231,477
Real estate portfolio, before
  depreciation...........................  $  816,389    $  371,438    $  373,676    $  310,003    $  252,239
Cash and short-term investments..........  $      184    $   16,057    $    3,887    $   13,742    $    4,830
Long-term debt...........................  $  311,985    $  112,290    $   97,169    $   45,416    $   80,155
Shareholders' equity.....................  $  464,114    $  239,248    $  243,436    $  245,156    $  148,164
</TABLE>
    
 
------------------------
 
*   Industry analysts generally consider Funds from Operations ("FFO") to be an
    appropriate measure of the performance of an equity REIT. FFO is defined by
    the National Association of Real Estate Investment Trusts as net income
    (loss) (computed in accordance with generally accepted accounting
    principles) excluding gains or losses from debt restructuring and sales of
    property, plus depreciation and amortization of real estate assets. FFO does
    not represent cash generated from operating activities in accordance with
    generally accepted accounting principles, and therefore should not be
    considered as a substitute for net income as a measure of results of
    operations or for cash flow from operations as a measure of liquidity.
 
                                       14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS
 
OVERVIEW
 
   
    BRE Properties, Inc. (the "Company") is a regionally focused,
self-administered equity real estate investment trust which primarily owns and
manages a portfolio of apartment communities in nine major markets of the
Western United States. The Company also owns a number of commercial and retail
properties. The Company's revenues consist primarily of rental income (92% of
total revenues in 1996 and 96% in each of 1995 and 1994) derived from its
portfolio of income-producing properties. Other income includes interest from
secured notes receivable and, to a lesser extent, income from partnership
investments. The policy of the Company is to emphasize cash flows from
operations rather than the realization of capital gains through property
dispositions. As dispositions of real estate assets are made, the Company
typically seeks to reinvest net proceeds from sales in income-producing real
estate.
    
 
   
    The Company's strategic plan emphasizes equity investments in apartment
communities, located across Western markets, and the orderly redeployment of
retail and commercial property investments into apartment investments. Pursuant
to this strategy, the Company merged with Real Estate Investment Trust of
California on March 15, 1996. As a result of the Merger, the Company added 22
wholly owned apartment communities (totaling approximately 3,600 units) and 18
commercial and retail properties to the portfolio. The Merger also provided
increased depth in management and other resources which allowed the Company to
internalize property management during 1996.
    
 
   
    The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this Form 10-K.
Financial information for 1995 and 1994 has been recast to conform to the
presentation of 1996 financial information, see Note 2 to Notes to Financial
Statements. Certain statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Although the Company
believes that the expectations reflected in such forward-looking statements are
based on reasonable assumptions, such statements are subject to risks and
uncertainties, including those discussed elsewhere in this Form 10-K, that could
cause actual results to differ materially from those projected.
    
 
   
RESULTS OF OPERATIONS
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
    
 
REVENUES
 
    Total revenues (excluding net gain on sales of investments in rental
properties) were $101,651,000 in 1996 compared to $65,387,000 in 1995 and
$56,970,000 in 1994. Revenues in 1996 increased primarily as a result of the
Merger and new multifamily property acquisitions which were offset in part by
the disposition
 
                                       15
<PAGE>
of certain retail and commercial properties. A summary of revenues for the years
ended December 31, 1996, 1995 and 1994 is as follows:
 
   
<TABLE>
<CAPTION>
                                1996      % OF TOTAL      1995      % OF TOTAL      1994      % OF TOTAL
                               TOTAL       REVENUES       TOTAL      REVENUES       TOTAL      REVENUES
                             ----------  -------------  ---------  -------------  ---------  -------------
                                                        (DOLLARS IN THOUSANDS)
<S>                          <C>         <C>            <C>        <C>            <C>        <C>
REVENUES:
Multifamily rental.........  $   77,834           77%   $  49,918           76%   $  40,504           71%
Commercial and retail
  rental...................      15,301           15       12,947           20       14,232           25
Other income...............       8,516            8        2,522            4        2,234            4
                             ----------          ---    ---------          ---    ---------          ---
Total revenue..............  $  101,651          100%   $  65,387          100%   $  56,970          100%
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                            % CHANGE FROM
                                              PRIOR YEAR
                                          ------------------
                                          1996   1995   1994
                                          ----   ----   ----
<S>                                       <C>    <C>    <C>
Multifamily rental......................   56%    23%    59%
Commercial and retail rental............   18%    (9%)  (36%)
Other income............................  238%    13%    (1%)
Total revenue...........................   55%    15%    14%
</TABLE>
    
 
   
    Multifamily rental revenues have increased in each of the last two years
primarily due to property acquisitions, including for 1996 the 22 apartment
communities acquired in the Merger and nine other direct apartment investments,
which contributed approximately $21,200,000 and $10,400,000, respectively, to
1996 revenue and were offset in part by the sale of the Westlake Village
property in 1996. Multifamily rental revenue in 1996 also benefited from an
increase in average occupancy (calculated as shown below) and a 4% average
increase in rental rates in 1996 when compared to 1995 for properties held
during both years. Multifamily rental revenue increased in 1995 as compared to
1994 primarily due to investments in a portfolio of Tucson, Arizona apartment
properties (the "Tucson Portfolio") during 1994, which were held for the entire
year in 1995. The Tucson Portfolio included seven properties and was acquired
for approximately $51,000,000; six communities were purchased in 1994 and one in
1995.
    
 
   
    Revenues from commercial and retail properties increased 18% in 1996 when
compared to 1995, primarily due to the 18 properties in these categories
acquired by the Company in the Merger (which properties contributed
approximately $5,500,000 in revenues during 1996), offset in part by property
sales. Revenues from commercial and retail properties decreased $1,285,000 in
1995 compared to 1994 due primarily to property sales in 1994. Commercial and
retail revenues as a percentage of total revenues have declined in each of the
last two years as a result of the Company's strategy emphasizing redeployment of
these investments into apartment communities. In addition, commercial and retail
properties in California markets experienced rental rate and occupancy weakness
for each of 1996, 1995 and 1994.
    
 
   
    Portfolio occupancy rates as of December 31, 1996, 1995 and 1994 were as
follows:
    
 
   
<TABLE>
<CAPTION>
                                          1996   1995   1994
                                          ----   ----   ----
<S>                                       <C>    <C>    <C>
Multifamily.............................   96%    93%    95%
Commercial and retail...................   93%    96%    69%
</TABLE>
    
 
    For multifamily properties, portfolio occupancy is calculated by dividing
the total occupied units by the total units in the portfolio. For commercial and
retail properties, portfolio occupancy is calculated by dividing the total
occupied square footage by the total square footage in the portfolio.
 
                                       16
<PAGE>
   
    The following table summarizes, by property classification, portfolio
acquisitions and dispositions for the years ended December 31, 1996, 1995 and
1994 (dollar amounts are gross acquisition costs in the case of acquisitions and
gross sales prices in the case of property sales):
    
 
   
<TABLE>
<CAPTION>
                                                   1996           1995           1994
                                               -------------  -------------  ------------
ACQUISITION/DISPOSITION SUMMARY                 #      $       #      $       #      $
---------------------------------------------  ---  --------  ---  --------  ---  -------
                                                         (DOLLARS IN THOUSANDS)
<S>                                            <C>  <C>       <C>  <C>       <C>  <C>
Multifamily
  Property acquisitions (1)..................   31  $446,412    2  $ 16,023    8  $72,240
  Property dispositions (2)..................    1    58,000  --      --     --        --
Commercial and retail
  Property acquisitions (3)..................   18    56,443  --      --     --        --
  Property dispositions......................   14    49,600    2    15,406    2   11,911
</TABLE>
    
 
------------------------
 
(1) Includes, for 1996, 22 properties acquired in the Merger with an aggregate
    cost of $216,612,000 as determined under the purchase method of accounting.
 
   
(2) Represents sale of the Company's ground lease interest at Westlake Village
    Apartments, Daly City, California.
    
 
   
(3) Represents, for 1996, 18 properties acquired in the Merger with an aggregate
    cost of $56,443,000, as determined under the purchase method of accounting.
    
 
EXPENSES
 
    REAL ESTATE EXPENSES
 
   
    Real estate expenses for rental properties (which include maintenance and
repairs, utilities, on-site staff payroll, property taxes, insurance,
advertising and other direct operating expenses) for the year ended December 31,
1996 increased 44% to $31,030,000 from 1995 primarily due to expenses of the 40
properties acquired in the Merger and nine new multifamily property
acquisitions. Real estate expenses as a percentage of rental revenues decreased
from 34% in 1995 to 33% in 1996. Although not measurable with precision,
management believes that this decrease resulted in part from the internalization
of property management and economies of scale derived from increased
concentration of assets in the Company's markets. Real estate expenses increased
by 25% to $21,540,000 in the year ended December 31, 1995 from $17,256,000 for
the prior year due largely to the addition of the Tucson Portfolio, which was
held for the entire year in 1995.
    
 
    PROVISION FOR DEPRECIATION AND AMORTIZATION
 
   
    The provision for depreciation and amortization increased by $5,419,000 for
the year ended December 31, 1996 from that of 1995. The increase in 1996
resulted from properties acquired in the Merger and additional multifamily
property acquisitions, offset in part by dispositions of commercial and retail
properties. The provision for depreciation and amortization for the year ended
December 31, 1995 increased $784,000 compared to 1994 due largely to the
acquisition of the Tucson Portfolio in 1994, which resulted in expense for the
entire year of 1995 and only for a portion of the year in 1994.
    
 
    INTEREST EXPENSE
 
   
    Interest expense was $16,325,000 for the year ended December 31, 1996, up
from $7,973,000 in 1995. This increase was due primarily to interest on
indebtedness assumed in the Merger totaling $95,400,000 and interest on
subsequent borrowings on the Company's lines of credit to fund multifamily
property acquisitions. At December 31, 1996, the Company's total indebtedness
(including indebtedness assumed in the Merger) was $311,985,000. The $2,374,000
increase in 1995 interest expense over 1994 was due
    
 
                                       17
<PAGE>
   
primarily to interest on borrowings in connection with the acquisition of the
Tucson Portfolio of approximately $27,939,000 for 12 months during 1995 and the
addition in 1995 of a new $12,000,000 secured loan.
    
 
    GENERAL AND ADMINISTRATIVE
 
   
    General and administrative costs were $3,999,000 (3.9% of total revenues),
$4,221,000 (6.5% of total revenues) and $4,469,000 (7.8% of total revenues), for
the three years ended December 31, 1996, 1995 and 1994, respectively. The
decrease in 1996 compared to 1995 is primarily from reductions in costs of
administering the Company's day to day operations due to, among other things,
the reorganization of the Company's asset management staff to handle direct
property management duties which were previously handled by outside property
management firms and, to a lesser extent, improved efficiencies in operating
systems, computer systems and software upgrades. The decrease in 1995 compared
to 1994 is due largely to legal expenses incurred in 1994 in connection with
certain litigation and recovered in part in 1995 from the Company's insurance
carriers, offset in part by certain non-recurring financial advisory costs
incurred in 1995.
    
 
    NET GAIN ON SALES OF INVESTMENT IN RENTAL PROPERTIES
 
   
    The net gain on sales in 1996 of approximately $52,825,000 was primarily due
to the sale of the Westlake Village leased land property (total sale price of
approximately $58,000,000) and the 525 Almanor industrial warehouse property
(total sale price of approximately $6,300,000). The net loss on sales (including
provision for possible investment losses) in 1995 of approximately $1,779,000
was due to the sale of the then-vacant Pomona Warehouse property and Irvine
Spectrum property. The net gain of approximately $1,646,000 in 1994 was due to
the sale of the Marymoor and 515 Ellis properties. All of these sales were
structured as tax-deferred exchanges, with the proceeds thereof applied toward
new investments in apartment communities. As of December 31, 1996, the Company
had gains on sales totaling approximately $121,000,000 which have been deferred
for federal and state income tax purposes since the Company's organization in
1970.
    
 
    IMPACT OF INFLATION
 
    Over 75% of the Company's total revenues for 1996 were derived from
apartment properties. Due to the short-term nature of most apartment leases
(typically one year or less), the Company may seek to adjust rents to help
counter the impact of inflation upon renewal of existing leases or commencement
of new leases, although there can be no assurance that the Company will be able
to adjust rents in response to inflation. In addition, occupancy rates may also
fluctuate due to short-term leases which permit apartment residents to leave at
the end of each lease term at minimal cost to the resident.
 
    LIQUIDITY AND CAPITAL RESOURCES
 
   
    At December 31, 1996, the Company's cash and cash equivalents totaled
$184,000, down from $16,057,000 at the end of 1995. Borrowings under the
Company's lines of credit totaled $124,000,000 at December 31, 1996, compared to
no such borrowings at December 31 of the previous year. Lines of credit are
available to pay dividends to shareholders, to fund capital improvements and
operating expenses, as well as to fund new acquisitions. The Company typically
reduces lines of credit with cash balances as available.
    
 
   
    Borrowings of up to $150,000,000 are available under the Company's lines of
credit, with $26,000,000 available at December 31, 1996. The current lines of
credit expire in April 1998 as to $120,000,000 and April 1999 as to $30,000,000.
The lines of credit bear interest at prime or LIBOR plus 1.0% as to $30,000,000
and LIBOR plus 1.125% as to $120,000,000. Costs of the lines of credit are
0.125% per annum on the total commitment amount and an unuse fee of 0.125% per
annum as to amounts not outstanding on the $120,000,000 line.
    
 
                                       18
<PAGE>
   
    Pursuant to the Merger, the Company assumed $73,000,000 of unsecured
indebtedness which bears interest at 7.44% per annum as to $55,000,000 and 7.88%
per annum as to $18,000,000. This indebtedness is to be repaid through scheduled
principal payments in the years from 2000 to 2005. At December 31, 1996, the
Company also had outstanding mortgage indebtedness of $114,985,000 at interest
rates ranging from 6.5% to 8.4%, with remaining terms of from one to 31 years.
    
 
    For additional information regarding the Company's lines of credit,
unsecured notes payable and mortgage loans payable, including scheduled
principal payments over the next five years, see Notes 5 and 6 to Notes to
Financial Statements. Certain of the Company's indebtedness contains financial
covenants as to minimum net worth, interest coverage ratios, maximum secured
debt and total debt to capital, among others. The Company was in compliance with
all such covenants during the year ended December 31, 1996.
 
   
    During 1996, the Company entered into an unsecured treasury lock swap
agreement in the notional amount of $50,000,000. This transaction is intended to
reduce the Company's overall exposure to interest rate changes, see Note 2 to
Notes to Financial Statements.
    
 
   
    The Company purchased nine apartment investments for a total purchase price
of approximately $230,000,000 in 1996. These acquisitions were funded with
proceeds of property sales (totaling approximately $104,000,000 after sales
expenses during 1996) and additional borrowings under the Company's lines of
credit. The Company was committed to purchase two apartment communities totaling
803 units for approximately $85,000,000 as of December 31, 1996; one of these
properties (totaling approximately 350 units) was acquired in February 1997 for
approximately $26,000,000 using proceeds from the Company's lines of credit.
Purchase of the remaining property is subject to satisfactory completion of the
Company's due diligence investigation of the property, and there can be no
assurance that this purchase will in fact be consummated. This purchase, if
completed, is expected to close before June 30, 1997.
    
 
   
    The Company believes that its cash flow and cash available from lines of
credit will be sufficient to meet its short-term liquidity needs during 1997,
which include normal recurring expenses, debt service requirements, budgeted
expenditures for improvements to certain properties and distributions required
to maintain the Company's REIT qualification under the Internal Revenue Code.
However, the Company anticipates that it will continue to require outside
sources of financing to meet its long-term liquidity needs, such as scheduled
debt repayments, property acquisitions and development activities.
    
 
   
    On February 11, 1997, the Company increased its lines of credit from
$150,000,000 to $200,000,000 for a period of 180 days on terms substantially
similar to those described above. Also subsequent to December 31, 1996, the
Company filed a shelf registration statement with the Securities and Exchange
Commission for up to $300 million of unsecured debt securities, Common Stock,
preferred stock, depositary shares or warrants to purchase shares of Common
Stock.
    
 
DIVIDENDS
 
   
    A cash dividend has been paid to shareholders each quarter since the
Company's inception in 1970. Dividends per share were $1.33 in 1996, $1.26 in
1995 and $1.20 in 1994. Total dividends paid to
shareholders for the three years ended December 31, 1996, 1995 and 1994 were
$39,849,000, $27,596,000 and $26,210,000, respectively.
    
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
   
    See the Index to Financial Statements. Such Financial Statements and
Schedules are incorporated herein by reference.
    
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE
 
    None.
 
                                       19
<PAGE>
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
(a) EXECUTIVE OFFICERS. See "Executive Officers of the Registrant" in Part I of
    this report.
 
   
(b) DIRECTORS. The information required by this Item is incorporated herein by
    reference to the Company's Proxy Statement, relating to the Company's 1997
    Annual Meeting of Shareholders, under the headings "Election of BRE
    Directors" and "Compliance with Section 16(a) of the Securities Exchange Act
    of 1934," to be filed with the Securities and Exchange Commission within 120
    days of December 31, 1996.
    
 
ITEM 11. EXECUTIVE COMPENSATION
 
   
    The information required by this Item is incorporated herein by reference to
the Company's Proxy Statement, relating to the Company's 1997 Annual Meeting of
Shareholders, under the headings "Executive Compensation and Other Information"
and "Board and Committee Meetings; Compensation of Directors," to be filed with
the Securities and Exchange Commission within 120 days of December 31, 1996.
    
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT.
 
   
    The information required by this Item is incorporated herein by reference to
the Company's Proxy Statement, relating to the Company's 1997 Annual Meeting of
Shareholders, under the headings "Security Ownership of Management" and
"Principal Shareholders," to be filed with the Securities and Exchange
Commission within 120 days of December 31, 1996.
    
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
   
    The information required by this Item is incorporated herein by reference to
the Company's Proxy Statement, relating to the Company's 1997 Annual Meeting of
Shareholders, under the heading "Employment Contracts and Termination of
Employment and Change in Control Arrangements--Mr. McDowell-- Stock Loan," to be
filed with the Securities and Exchange Commission within 120 days of December
31, 1996.
    
 
                                       20
<PAGE>
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
    (a)  FINANCIAL STATEMENTS
 
   
<TABLE>
<S>        <C>                                                                    <C>
1.         Financial Statements:
 
           Report of Independent Auditors
 
           Balance Sheets at December 31, 1996 and 1995
 
           Statements of Income for the years ended December 31, 1996, 1995
               and 1994
 
           Statements of Cash Flows for the years ended December 31, 1996,
               1995 and 1994
 
           Statements of Shareholders' Equity for the years ended December 31,
               1996, 1995 and 1994
 
           Notes to Financial Statements
 
2.         Financial Statement Schedule:
 
           Schedule III--Real Estate and Accumulated Depreciation
 
3.         See Index to Exhibits immediately following the Financial Statements.
             Each of the exhibits listed is incorporated herein by reference.
</TABLE>
    
 
    (b)  REPORTS ON FORM 8-K
 
         On October 16, 1996, the Registrant filed a report on Form 8-K relating
         to its purchase of the Foster's Landing Apartments. The Registrant
         filed financial statements related thereto pursuant to a Report on Form
         8-K/A filed on December 11, 1996.
 
         On January 14, 1997, the Registrant filed a report on Form 8-K relating
         to its purchase of the Promontory Point Apartments. The Registrant
         filed financial statements related thereto pursuant to a Report on Form
         8-K/A filed on February 13, 1997.
 
    (c)  EXHIBITS
 
   
         See Index to Exhibits.
    
 
    (d)  FINANCIAL STATEMENT SCHEDULES
 
   
         See Index to Financial Statements and Financial Schedule.
    
 
                                       21
<PAGE>
                                   SIGNATURES
 
    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
<TABLE>
<S>                                            <C>
                                               BRE PROPERTIES, INC.
</TABLE>
 
<TABLE>
<S>                                            <C>
Dated: February 13, 1997                       /s/ FRANK C. MCDOWELL
                                               ----------------------------------------
                                               Frank C. McDowell, President
</TABLE>
 
    Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
 
   
          SIGNATURE                       TITLE                    DATED
------------------------------  --------------------------  -------------------
 
/s/ FRANK C. MCDOWELL           President and Director
------------------------------    (Principal                 February 13, 1997
Frank C. McDowell                 Executive Officer)
 
                                Executive Vice President
/s/ LEROY E. CARLSON              (Principal
------------------------------    Financial and Accounting   February 13, 1997
LeRoy E. Carlson                  Officer)
 
/s/ JOHN MCMAHAN
------------------------------  Chairman and Director        February 13, 1997
John McMahan
 
/s/ WILLIAM E. BORSARI
------------------------------  Director                     February 13, 1997
William E. Borsari
 
/s/ C. PRESTON BUTCHER
------------------------------  Director                     February 13, 1997
C. Preston Butcher
 
/s/ L. MICHAEL FOLEY
------------------------------  Director                     February 13, 1997
L. Michael Foley
 
/s/ ROGER P. KUPPINGER
------------------------------  Director                     February 13, 1997
Roger P. Kuppinger
 
/s/ MALCOLM R. RILEY
------------------------------  Director                     February 13, 1997
Malcolm R. Riley
 
/s/ GREGORY M. SIMON
------------------------------  Director                     February 13, 1997
Gregory M. Simon
 
/s/ ARTHUR G. VON THADEN
------------------------------  Director                     February 13, 1997
Arthur G. von Thaden
    
 
                                       22
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS
 
To the Shareholders and Directors of
BRE Properties, Inc.:
 
    We have audited the accompanying balance sheets of BRE Properties, Inc. as
of December 31, 1996 and 1995, and the related statements of income,
shareholders' equity, cash flows and the related financial schedule for each of
the three years in the period ended December 31, 1996. These financial
statements and the related schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and the related financial schedule based on our audits.
 
    We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the related
financial schedule are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
 
    In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of BRE Properties, Inc. at
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles. Also, in our opinion, the related
financial schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
 
   
                                             /s/ Ernst & Young LLP
    
 
San Francisco, California
January 14, 1997
Except for Note 13, as to which the date is
February 12, 1997
 
                                       23
<PAGE>
                              BRE PROPERTIES, INC.
 
                                 BALANCE SHEETS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
                                     ASSETS
 
   
<TABLE>
<CAPTION>
                                                                                                 DECEMBER 31,
                                                                                            ----------------------
                                                                                               1996        1995
                                                                                            ----------  ----------
<S>                                                                                         <C>         <C>
Investments in rental properties:
  Multifamily.............................................................................  $  710,240  $  267,847
  Commercial and retail...................................................................     103,528     102,269
  Less: Accumulated depreciation and amortization.........................................     (49,690)    (48,036)
                                                                                            ----------  ----------
                                                                                               764,078     322,080
Investments in limited partnerships.......................................................       2,621       1,322
                                                                                            ----------  ----------
  Real estate portfolio...................................................................     766,699     323,402
Mortgage loans, net.......................................................................       9,716       5,727
                                                                                            ----------  ----------
                                                                                               776,415     329,129
Cash and short-term investments...........................................................         184      16,057
Other assets..............................................................................       7,115       9,709
                                                                                            ----------  ----------
      TOTAL ASSETS........................................................................  $  783,714  $  354,895
                                                                                            ----------  ----------
                                                                                            ----------  ----------
 
                        LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage loans payable....................................................................  $  114,985  $  112,290
Unsecured notes payable...................................................................      73,000      --
Borrowings on unsecured lines of credit...................................................     124,000      --
Accounts payable and other liabilities....................................................       7,615       3,357
                                                                                            ----------  ----------
      Total liabilities...................................................................     319,600     115,647
Shareholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized in 1996. No shares
  outstanding at December 31, 1996........................................................      --          --
Common stock, $.01 par value, 50,000,000 shares authorized. Shares issued and outstanding:
  32,879,741 at December 31, 1996; 21,941,730 at December 31, 1995........................         329         219
Additional paid-in capital................................................................     387,674     212,908
Accumulated net income in excess of cumulative dividends..................................      76,111      26,121
                                                                                            ----------  ----------
      Total shareholders' equity..........................................................     464,114     239,248
                                                                                            ----------  ----------
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..........................................  $  783,714  $  354,895
                                                                                            ----------  ----------
                                                                                            ----------  ----------
</TABLE>
    
 
                       See notes to financial statements
 
                                       24
<PAGE>
                              BRE PROPERTIES, INC.
                              STATEMENTS OF INCOME
 
<TABLE>
<CAPTION>
                                                                                      YEARS ENDED DECEMBER 31,
                                                                                  --------------------------------
                                                                                     1996       1995       1994
                                                                                  ----------  ---------  ---------
                                                                                       (IN THOUSANDS, EXCEPT
                                                                                          PER SHARE DATA)
<S>                                                                               <C>         <C>        <C>
REVENUE
Rental income:
  Multifamily...................................................................  $   77,834  $  49,918  $  40,504
  Commercial and retail.........................................................      15,301     12,947     14,232
Other income....................................................................       8,516      2,522      2,234
                                                                                  ----------  ---------  ---------
    Total revenue...............................................................     101,651     65,387     56,970
                                                                                  ----------  ---------  ---------
EXPENSES
Real estate expenses............................................................      31,030     21,540     17,256
Provision for depreciation and amortization.....................................      13,283      7,864      7,080
Interest expense................................................................      16,325      7,973      5,599
General and administrative......................................................       3,999      4,221      4,469
                                                                                  ----------  ---------  ---------
    Total expenses..............................................................      64,637     41,598     34,404
                                                                                  ----------  ---------  ---------
Income before net gain on sales of investments in rental properties and
  provision for possible investment losses......................................      37,014     23,789     22,566
Net gain on sales of investments in rental properties...........................      52,825        221      1,646
Provision for possible investment losses........................................      --         (2,000)    --
                                                                                  ----------  ---------  ---------
    NET INCOME..................................................................  $   89,839  $  22,010  $  24,212
                                                                                  ----------  ---------  ---------
                                                                                  ----------  ---------  ---------
 
Net income per share:
  Income before net gain on sales of investments in rental properties and
    provision for possible investment losses....................................  $     1.21  $    1.09  $    1.03
  Net gain on sales of investments in rental properties.........................  $     1.73  $     .01  $     .08
  Provision for possible investment losses......................................      --          ($.09)    --
                                                                                  ----------  ---------  ---------
    NET INCOME PER SHARE........................................................  $     2.94  $    1.01  $    1.11
                                                                                  ----------  ---------  ---------
                                                                                  ----------  ---------  ---------
</TABLE>
 
                       See notes to financial statements
 
                                       25
<PAGE>
                              BRE PROPERTIES, INC.
 
                            STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                    YEARS ENDED DECEMBER 31,
                                                                               -----------------------------------
                                                                                  1996         1995        1994
                                                                               -----------  ----------  ----------
                                                                                 (IN THOUSANDS, EXCEPT PER SHARE
                                                                                              DATA)
<S>                                                                            <C>          <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................................................  $    89,839  $   22,010  $   24,212
Adjustments to reconcile net income to net cash generated by operating
  activities:
  Net gain on sales of investments...........................................      (52,825)       (221)     (1,646)
  Provision for depreciation and amortization................................       13,283       7,864       7,080
  Provision for possible investment losses...................................      --            2,000      --
(Increase) decrease in other assets..........................................        1,522      (4,694)      1,225
(Decrease) increase in accounts payable and other liabilities................       (3,932)        109         192
Net (increase) in mortgage loans.............................................       (3,989)     (1,036)     (1,277)
                                                                               -----------  ----------  ----------
Net cash flows generated by operating activities.............................       43,898      26,032      29,786
                                                                               -----------  ----------  ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Property purchased.........................................................     (230,967)    (16,023)    (72,240)
  Capital expenditures--multifamily..........................................         (748)       (505)       (264)
  Capital expenditures--commercial and retail................................         (757)     (1,662)     (4,870)
  Proceeds from sales of property, net.......................................      104,379      15,406      11,911
                                                                               -----------  ----------  ----------
Net cash flows used in investing activities..................................     (128,093)     (2,784)    (65,463)
                                                                               -----------  ----------  ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Mortgage loans payable:
  New mortgage loans.........................................................      --           16,227      52,914
  Principal payments.........................................................       (1,450)     (1,107)     (1,163)
Lines of credit:
  Advances...................................................................      127,300      --          --
  Principal repayments.......................................................      (21,500)     --          --
Proceeds from grants of restricted shares and exercises of options...........        3,821       1,399         280
Dividends paid...............................................................      (39,849)    (27,596)    (26,210)
                                                                               -----------  ----------  ----------
Net cash flows generated by (used in) financing activities...................       68,322     (11,077)     25,821
                                                                               -----------  ----------  ----------
(Decrease) increase in cash and short-term investments.......................      (15,873)     12,171      (9,856)
Balance at beginning of period...............................................       16,057       3,886      13,742
                                                                               -----------  ----------  ----------
BALANCE AT END OF PERIOD.....................................................  $       184  $   16,057  $    3,886
                                                                               -----------  ----------  ----------
                                                                               -----------  ----------  ----------
</TABLE>
 
                       See notes to financial statements
 
                                       26
<PAGE>
                              BRE PROPERTIES, INC.
 
                       STATEMENTS OF SHAREHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                                                               YEARS ENDED DECEMBER 31,
                                                                      -------------------------------------------
                                                                          1996           1995           1994
                                                                      -------------  -------------  -------------
                                                                             (DOLLAR AMOUNTS IN THOUSANDS)
<S>                                                                   <C>            <C>            <C>
COMMON STOCK SHARES
  Balance at beginning of year......................................     21,941,730     21,850,966     21,832,966
  Issuance of shares pursuant to merger.............................     10,684,436             --             --
  Restricted shares granted and stock options exercised.............        246,451         90,764         18,000
  Shares issued pursuant to dividend reinvestment plan..............          7,124             --             --
                                                                      -------------  -------------  -------------
  Balance at end of year............................................     32,879,741     21,941,730     21,850,966
                                                                      -------------  -------------  -------------
                                                                      -------------  -------------  -------------
 
COMMON STOCK
  Balance at beginning of year......................................  $         219  $         219  $         219
  Issuance of shares pursuant to merger.............................            107             --             --
  Restricted shares granted and stock options exercised.............              3             --             --
  Shares issued pursuant to dividend reinvestment plan..............             --             --             --
                                                                      -------------  -------------  -------------
  Balance at end of year............................................            329            219            219
                                                                      -------------  -------------  -------------
ADDITIONAL PAID-IN CAPITAL
  Balance at beginning of year......................................        212,908        211,510        211,231
  Issuance of shares pursuant to merger.............................        170,948             --             --
  Restricted shares granted and stock options exercised.............          3,681          1,398            279
  Shares issued pursuant to dividend reinvestment plan..............            137             --             --
                                                                      -------------  -------------  -------------
  Balance at end of year............................................        387,674        212,908        211,510
                                                                      -------------  -------------  -------------
ACCUMULATED NET INCOME IN EXCESS OF CUMULATIVE DIVIDENDS
  Balance at beginning of year......................................         26,121         31,707         33,705
  Net income for year...............................................         89,839         22,010         24,212
  Cash dividends paid--$1.3295 per share for the year ended December
    31, 1996; $1.26 per share for the year ended December 31, 1995
    and $1.20 per share for the year ended December 31, 1994........        (39,849)       (27,596)       (26,210)
                                                                      -------------  -------------  -------------
  Balance at end of year............................................         76,111         26,121         31,707
                                                                      -------------  -------------  -------------
    TOTAL SHAREHOLDERS' EQUITY......................................  $     464,114  $     239,248  $     243,436
                                                                      -------------  -------------  -------------
                                                                      -------------  -------------  -------------
</TABLE>
 
    For the years ended December 31, 1996, 1995 and 1994, the tax components of
its dividends are as follows (unaudited):
 
<TABLE>
<CAPTION>
                                                               ORDINARY        LONG-TERM        RETURN OF
                                                                INCOME        CAPITAL GAIN       CAPITAL
                                                             -------------  ----------------  --------------
<S>                                                          <C>            <C>               <C>
December 31, 1996..........................................          92%              1%               7%
December 31, 1995..........................................          94%             --                6%
December 31, 1994..........................................          86%              4%              10%
</TABLE>
 
                       See notes to financial statements
 
                                       27
<PAGE>
                              BRE PROPERTIES, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
 
1. COMPANY
 
    BRE Properties, Inc. ("BRE" or "the Company") is a self-administered real
estate investment trust ("REIT") which owns and operates multifamily communities
and other income producing properties in the Western United States. At December
31, 1996, BRE's portfolio consisted of 72 properties, including 53 wholly owned
multifamily communities (aggregating 12,212 units), 15 commercial and retail
properties, one land lease and three properties held in partnerships in which
BRE is a limited partner. Of these properties, 43 are located in California, 19
in Arizona, five in Washington, three in Nevada and two in Oregon. The 72
properties contain, in the aggregate, approximately 12,887,000 net rentable
square feet of improvements on approximately 866 acres of land.
 
    MERGER WITH REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
 
    On March 15, 1996, Real Estate Investment Trust of California ("RCT") merged
with and into BRE ("the Merger"). Following consummation of the Merger, BRE
changed its state of incorporation from Delaware to Maryland, amended the BRE
Certificate of Incorporation to authorize preferred stock, and approved the
Amended and Restated Non-Employee Director Stock Option Plan. The Merger was
completed in accordance with the terms and conditions of the Agreement and Plan
of Merger dated October 11, 1995, as amended ("the Merger Agreement"). Under the
terms of the Merger Agreement, upon the Merger, each issued and outstanding
share of beneficial interest of RCT was converted into the right to receive 1.14
shares of BRE Common Stock (.57 of a share of BRE Common Stock prior to the
stock split; see Note 2--Stock Split). The Merger was unanimously approved by
the Boards of both companies and by the requisite vote of the shareholders of
both. The Merger has been accounted for in 1996 as a purchase business
combination.
 
    Pursuant to the Merger with RCT on March 15, 1996, BRE (i) acquired
$274,400,000 aggregate book value in equity investments in real estate, (ii)
assumed secured and unsecured RCT notes payable of $95,400,000, and other
liabilities totaling $8,000,000, and (iii) issued 10,684,436 shares of Common
Stock valued at $171,000,000 for the conversion of RCT shares of beneficial
interest.
 
2. ACCOUNTING POLICIES
 
    RENTAL PROPERTY
 
    Rental property is recorded at cost less accumulated depreciation less an
adjustment, if any, for impairment. Rental properties are evaluated for
impairment when conditions exist which may indicate that it is probable that the
sum of expected future cash flows (undiscounted) from a rental property during
the expected holding period is less than its carrying value. Upon determination
that such impairment has occurred, rental properties are reduced to fair value.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets, which range from 35 to 45 years for buildings and 5 to 25
years for other property.
 
    Development projects are generally considered placed in service as the
property becomes ready for occupancy.
 
    REAL ESTATE HELD FOR SALE
 
    Real estate classified as held for sale is stated at the lower of its
carrying amount or estimated fair value less disposal costs. Depreciation is not
recorded on assets classified as held for sale.
 
                                       28
<PAGE>
                              BRE PROPERTIES, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
2. ACCOUNTING POLICIES (CONTINUED)
    In the normal course of business, BRE will receive offers for sale of its
properties, either solicited or unsolicited. For those offers which are
accepted, the prospective buyer will usually require a due diligence period
before consummation of the transaction. It is not unusual for matters to arise
which result in the withdrawal or rejection of the offer during this process. As
a result, real estate is not classified as "held for sale" until it is likely,
in the opinion of management, that a property will be disposed of in the near
term, even if sales negotiations for such property are currently under way. No
properties are considered "held for sale" for this purpose as of December 31,
1996 or 1995.
 
    RENTAL EXPENSES AND CAPITALIZED COSTS
 
    For multifamily properties, costs of replacements, such as appliances,
carpets and drapes, are expensed. Leasing commissions and tenant improvement
costs for retail and commercial properties are expensed when the lease term is
less than five years and capitalized on leases of five years or more and
amortized using the straight-line method over the lease terms, which range from
5 to 40 years. For all properties, improvements and betterments that increase
the value of the property or extend its life are capitalized.
 
    CASH AND SHORT-TERM INVESTMENTS
 
    BRE considers highly liquid short-term investments with initial maturities
of three months or less to be cash equivalents. Financial instruments which
potentially subject BRE to concentrations of credit risk include cash and
short-term investments. BRE places its cash deposits and temporary cash
investments with creditworthy, high-quality financial institutions. Cash and
cash equivalent balances are held with various financial institutions and may at
times exceed the applicable Federal Deposit Insurance Corporation limit of
$100,000.
 
    DEFERRED COSTS
 
    Included in other assets are costs incurred in obtaining debt financing that
are deferred and amortized over the terms of the respective debt agreements.
Related amortization expense is included in interest expense (non-cash) in the
accompanying statements of operations. Net deferred financing costs included in
Other Assets in the accompanying balance sheets are $850,000 and $758,000 as of
December 31, 1996 and 1995, respectively.
 
    INCOME TAXES
 
    BRE has elected to be taxed as a REIT under the Internal Revenue Code of
1986, as amended ("the Code"). As a result, BRE will not be subject to federal
taxation at the corporate level to the extent it distributes, annually, at least
95% of its REIT taxable income, as defined by the Code, to its shareholders and
satisfies certain other requirements. In addition, the states in which BRE owns
and operates real estate properties have provisions equivalent to the federal
REIT provisions. Accordingly, no provision has been made for federal or state
income taxes in the accompanying financial statements.
 
    GAINS ON SALES OF INVESTMENTS IN RENTAL PROPERTIES
 
    Sales are generally recorded at the close of escrow or after title has been
transferred to the buyer and after appropriate payments have been received and
other criteria have been met.
 
                                       29
<PAGE>
                              BRE PROPERTIES, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
2. ACCOUNTING POLICIES (CONTINUED)
    NET INCOME PER SHARE
 
    Net income per share is based upon the simple weighted average shares
outstanding. The effect of excluding Common Stock equivalents from the
calculation is less than 3% and is not material to the financial statement
presentation. Net income per share on a fully diluted basis is presented if
dilution is greater than 3%.
 
    FAIR VALUE OF FINANCIAL INSTRUMENTS
 
    The fair values of BRE's financial instruments, including cash and other
short-term investments, accounts receivable, mortgage loans receivable, accounts
payable, other accrued expenses, mortgage loans payable, lines of credit and
other financial instruments, approximate their carrying or contract values based
on their nature, terms, and interest rates which approximate current market
rates.
 
   
    On August 29, 1996 BRE entered into a Treasury Lock Swap Agreement in the
notional amount of $50,000,000 with a large, credit worthy bank. BRE did not
provide any collateral for this transaction. The rate is fixed at 7.05% as
compared to the rate on a United States Government 10-Year Treasury Note on June
30, 1997. The Treasury Lock Swap transaction is intended to reduce BRE's overall
exposure to interest rate changes in anticipation of future fixed rate
financing. Had the transaction been settled as of December 31, 1996, BRE would
have been required to pay approximately $380,000. Any future gain or loss on the
swap transaction will be deferred and will be amortized over the term of the
debt as an adjustment to its interest rate yield.
    
 
    USE OF ESTIMATES
 
    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
    RECLASSIFICATION AND CHANGE IN FISCAL YEAR
 
    Certain reclassifications have been made to the prior years' financial
statements to conform to the presentation of the current period financial
statements.
 
    Commencing August 1, 1995, BRE began reallocating a portion of its salaries,
employee benefits and other personnel costs from general and administrative to
real estate expense to better reflect the functional nature of the underlying
activity. While this reclassification does not change BRE's net income or funds
from operations, such allocation reduces reported general and administrative
expenses and increases real estate expense by an equal amount. Management
believes that this allocation is consistent with industry practices and will
provide better matching of the revenue generated by the properties and the
expenses required to generate that revenue.
 
    BRE has elected to recast the full comparative periods pursuant to the
change made in May 1996 in the fiscal year to a calendar year end effective
December 31, 1995. Therefore, amounts presented reflect the financial position
and results of operations from January 1, 1996 to December 31, 1996 and the
 
                                       30
<PAGE>
                              BRE PROPERTIES, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
2. ACCOUNTING POLICIES (CONTINUED)
comparative period for the prior years. Certain reclassifications have been made
to the 1995 and 1994 financial statements to conform to the presentation of the
1996 financial statements.
 
    STOCK SPLIT
 
    On May 20, 1996, the Board of Directors approved a two-for-one stock split
effected in the form of a stock dividend to shareholders of record on June 7,
1996, payable on June 27, 1996. All share and per share amounts in these
financial statements have been retroactively restated for the stock split.
 
3. INVESTMENTS IN RENTAL PROPERTIES
 
    Investments in rental properties consist of the following:
<TABLE>
<CAPTION>
                                                              COMMERCIAL AND
DECEMBER 31, 1996                              MULTIFAMILY        RETAIL           TOTAL
--------------------------------------------  --------------  ---------------  --------------
<S>                                           <C>             <C>              <C>
Land........................................  $  139,770,000   $  18,764,000   $  158,534,000
Improvements................................     570,470,000      84,764,000      655,234,000
                                              --------------  ---------------  --------------
Subtotal....................................     710,240,000     103,528,000      813,768,000
Accumulated depreciation....................     (33,096,000)    (16,594,000)     (49,690,000)
                                              --------------  ---------------  --------------
Total.......................................  $  677,144,000   $  86,934,000   $  764,078,000
                                              --------------  ---------------  --------------
                                              --------------  ---------------  --------------
 
<CAPTION>
 
DECEMBER 31, 1995
--------------------------------------------
<S>                                           <C>             <C>              <C>
Land........................................  $   58,032,000   $  16,566,000   $   74,598,000
Improvements................................     209,815,000      85,703,000      295,518,000
                                              --------------  ---------------  --------------
Subtotal....................................     267,847,000     102,269,000      370,116,000
Accumulated depreciation....................     (22,641,000)    (25,395,000)     (48,036,000)
                                              --------------  ---------------  --------------
Total.......................................  $  245,206,000   $  76,874,000   $  322,080,000
                                              --------------  ---------------  --------------
                                              --------------  ---------------  --------------
</TABLE>
 
    The future minimum lease payments to be received from lessees under
operating leases at December 31, 1996 are as follows:
 
<TABLE>
<S>                                                              <C>
1997...........................................................  $11,432,000
1998...........................................................  10,296,000
1999...........................................................   8,658,000
2000...........................................................   6,835,000
2001...........................................................   5,852,000
Thereafter.....................................................  23,344,000
                                                                 ----------
Total..........................................................  $66,417,000
                                                                 ----------
                                                                 ----------
</TABLE>
 
   
    Leases with residents or users at wholly owned shopping centers provide for
percentage rents based upon the gross revenue of the residents or users. These
percentage rents are in excess of stipulated
    
 
                                       31
<PAGE>
                              BRE PROPERTIES, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
3. INVESTMENTS IN RENTAL PROPERTIES (CONTINUED)
minimums. Percentage rents under these operating leases, which are included in
rental income, amounted to:
 
<TABLE>
<CAPTION>
                                                          1996          1995          1994
                                                      ------------  ------------  ------------
<S>                                                   <C>           <C>           <C>
Percentage rent portion attributable to:
  Land leases*......................................  $  3,044,000  $  5,313,000  $  4,926,000
  Wholly owned real estate..........................       403,000       183,000       245,000
                                                      ------------  ------------  ------------
Total percentage rent...............................  $  3,447,000  $  5,496,000  $  5,171,000
                                                      ------------  ------------  ------------
                                                      ------------  ------------  ------------
</TABLE>
 
------------------------
 
*   Consists largely of percentage rent from the Westlake Village property which
    was sold in July, 1996.
 
    BRE's carrying value of its assets exceeds the tax basis by $121,180,000.
 
    During the year ended December 31, 1996, approximately $65,000,000 of
taxable gain was deferred under Section 1031 of the Internal Revenue Code for
certain properties sold.
 
4. MORTGAGE LOANS RECEIVABLE
 
    BRE has various mortgage loans and notes receivable which are to be paid in
monthly installments through 2008. The notes bear interest at rates ranging from
eight to twelve percent. Amounts remaining due to BRE at December 31, 1996 and
1995 aggregate $10,966,000 and $6,977,000, respectively. The allowance for
possible investment losses was $1,250,000 as of December 31, 1996 and 1995. All
loans are secured by real estate.
 
5. LINES OF CREDIT AND UNSECURED NOTES PAYABLE
 
    At December 31, 1996, two banks had extended to BRE unsecured lines of
credit aggregating $150,000,000, with $30,000,000 expiring in April, 1999 and
$120,000,000 expiring in April, 1998. Borrowings totaled $124,000,000 at
December 31, 1996. No borrowings under these lines of credit were outstanding
during the years ended December 31, 1995 or 1994. In connection with these
arrangements, a fee is charged on the committed amounts. The weighted average
interest rate was 6.6% in the year ended December 31, 1996. Additionally, at
December 31, 1996, there were $73,000,000 in unsecured notes outstanding with an
average interest rate of 7.69% with interest only due until 1999. These
unsecured notes are to be repaid through scheduled principal payments from 2000
through 2005.
 
   
    The lines of credit and unsecured note agreements contain various covenants
which include, among other factors, tangible net worth and requirements to
maintain certain financial ratios. BRE was in compliance with such covenants as
of December 31, 1996.
    
 
                                       32
<PAGE>
                              BRE PROPERTIES, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
6. MORTGAGE LOANS PAYABLE
 
    BRE has acquired certain investments in rental property which are subject to
existing mortgage loans payable and has obtained mortgage loans on other
investments. The following data pertains to mortgage loans payable at December
31, 1996, and 1995, respectively:
 
<TABLE>
<CAPTION>
                                                                        DECEMBER 31,
                                                               ------------------------------
                                                                    1996            1995
                                                               --------------  --------------
<S>                                                            <C>             <C>
Mortgage loans payable.......................................  $  114,985,000  $  112,290,000
 
Cost of investments in real estate securing mortgage loans
  payable....................................................  $  182,729,000  $  173,904,000
 
Annual principal and interest payments.......................  $   10,137,000  $    9,769,000
 
Remaining terms of mortgage loans payable....................    1 - 31 years    2 - 33 years
 
Interest rates...............................................      6.5 - 8.4%      6.5 - 8.4%
</TABLE>
 
    Included in the $114,985,000 mortgage loans payable is $9,240,000 of
tax-exempt debt with a variable interest rate, which was 4.20% at December 31,
1996. The effective interest rate on this debt is 6.20%, which includes
amortization of related fees and costs. Interest on all other mortgage loans is
fixed.
 
    Scheduled principal payments required on lines of credit, unsecured notes
payable and mortgage loans payable for the next five years are as follows:
 
<TABLE>
<S>                                                             <C>
1997..........................................................  $ 2,655,000
1998..........................................................   95,675,000
1999..........................................................   35,739,000
2000..........................................................   45,436,000
2001..........................................................   11,392,000
Thereafter....................................................  121,088,000
                                                                -----------
Total.........................................................  $311,985,000
                                                                -----------
                                                                -----------
</TABLE>
 
    Interest expense on mortgage loans and unsecured notes payable including
amortization of related costs aggregated $12,328,000, $7,824,000 and $5,466,000
for the years ended December 31, 1996, 1995 and 1994, respectively. Total
interest paid on long-term debt did not differ materially from interest expense.
 
7. STOCK OPTION PLANS
 
    BRE has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25), and related Interpretations
in accounting for its employee and non-employee director stock options because,
as discussed below, the alternative fair value accounting provided for under
Financial Accounting Standards Board Statement No. 123, "Accounting and
Disclosure of Stock-Based Compensation" ("Statement 123"), requires the use of
option valuation models that were not developed for use in valuing employee and
non-employee director stock options. Under APB 25, because the exercise price
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
 
                                       33
<PAGE>
                              BRE PROPERTIES, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
7. STOCK OPTION PLANS (CONTINUED)
    EMPLOYEE PLAN
 
    The 1984 and 1992 Stock Option Plans ("Plans") provide for the issuance of
Incentive Stock Options, Non-Qualified Stock Options, and Restricted Shares. The
maximum number of shares that may be issued under the Plans is 1,350,000. The
option price may not be less than the fair market value of a share on the date
that the option is granted and the options generally vest over five years.
Changes in options outstanding during years ended December 31, 1996, 1995 and
1994 were as follows:
 
   
<TABLE>
<CAPTION>
                                                                        YEARS ENDED DECEMBER 31,
                                                 -----------------------------------------------------------------------
                                                          1996                     1995                    1994
                                                 -----------------------  ----------------------  ----------------------
                                                              WEIGHTED                WEIGHTED                WEIGHTED
                                                               AVERAGE                 AVERAGE                 AVERAGE
                                                              EXERCISE                EXERCISE                EXERCISE
                                                   SHARES       PRICE      SHARES       PRICE      SHARES       PRICE
                                                 ----------  -----------  ---------  -----------  ---------  -----------
<S>                                              <C>         <C>          <C>        <C>          <C>        <C>
Balance at beginning of period.................     668,200   $   15.62     635,200   $   15.55     479,200   $   15.57
Granted........................................     354,000   $   18.13     115,000   $   15.94     156,000   $   15.50
Exercised......................................    (259,100)  $   15.27     (75,000)  $   15.44          --          --
Canceled.......................................     (10,500)  $   17.18      (7,000)  $   14.46          --          --
                                                 ----------  -----------  ---------  -----------  ---------  -----------
Balance at end of period.......................     752,600   $   16.90     668,200   $   15.62     635,200   $   15.55
                                                 ----------  -----------  ---------  -----------  ---------  -----------
                                                 ----------  -----------  ---------  -----------  ---------  -----------
Exercisable....................................     438,766   $   16.04     550,200   $   15.58     423,700   $   15.30
Restricted shares granted......................          --          --      13,764          --      18,000          --
Shares available for granting future options...     105,436          --     448,336          --     590,100          --
Weighted average fair value of options granted
  during the year..............................  $     3.66               $    2.34               $    2.07
</TABLE>
    
 
   
    At December 31, 1996, the exercise price of shares under option ranged from
$12.97 to $20.00, with a weighted average exercise price of $16.90. Expiration
dates range from August 24, 1997 through August 26, 2006 and the weighted
average remaining contractual life of these options is 8.8 years. Stock options
were exercised during 1996 on options originally granted from $12.97 to $17.75.
    
 
   
    In addition to the options granted under the Plans, the following stock
options are also outstanding: An option for 100,000 shares (at $15.32) is held
by the President and Chief Executive Officer. This option was registered with
the Securities and Exchange Commission on a Form S-8 and is not part of the
Plans. This option had a fair value of $2.28 in 1995, the year of the grant. In
conjunction with the Merger, options on 381,900 BRE shares equivalent to options
previously granted under the RCT plan were issued to officers with exercise
prices ranging from $11.41 to $14.70.
    
 
   
    In addition to the above, there were 26,264 Restricted Shares outstanding at
December 31, 1996.
    
 
    NON-EMPLOYEE DIRECTOR STOCK PLAN
 
    The 1994 Non-Employee Director Stock Plan, as amended in 1996, provides for
the issuance of 25,000 Non-Qualified Stock Options per year to each non-employee
member of the Board of Directors and an additional 25,000 shares to the Chairman
of the Board of Directors. The maximum number of shares that may be issued under
the Plan is 800,000. As with the Employee Plan, the option price may not be less
than
 
                                       34
<PAGE>
                              BRE PROPERTIES, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
7. STOCK OPTION PLANS (CONTINUED)
the fair market value of a share on the date the option is granted. Changes in
options outstanding for the years ended December 31, 1996, 1995 and 1994 were as
follows:
 
   
<TABLE>
<CAPTION>
                                                                         YEARS ENDED DECEMBER 31,
                                                  ----------------------------------------------------------------------
                                                           1996                    1995                    1994
                                                  ----------------------  ----------------------  ----------------------
                                                              WEIGHTED                WEIGHTED                WEIGHTED
                                                               AVERAGE                 AVERAGE                 AVERAGE
                                                              EXERCISE                EXERCISE                EXERCISE
                                                   SHARES       PRICE      SHARES       PRICE      SHARES       PRICE
                                                  ---------  -----------  ---------  -----------  ---------  -----------
<S>                                               <C>        <C>          <C>        <C>          <C>        <C>
Balance at beginning of period..................    195,000   $   16.48      20,000   $   15.25      --       $  --
Granted.........................................    225,000       20.63     175,000       16.63      20,000       15.25
Canceled........................................     --          --          --          --          --          --
                                                  ---------  -----------  ---------  -----------  ---------  -----------
Balance at end of period........................    420,000   $   18.71     195,000   $   16.48      20,000   $   15.25
                                                  ---------  -----------  ---------  -----------  ---------  -----------
                                                  ---------  -----------  ---------  -----------  ---------  -----------
Exercisable.....................................    244,999   $   17.18      49,166   $   16.06       5,000   $   15.25
Shares available for granting future options....    380,000                  55,000                 230,000
Weighted average fair value of options granted
  during the year...............................  $    4.17               $    2.47               $    1.95
</TABLE>
    
 
    At December 31, 1996, the exercise prices of shares under option ranged
between $15.25 and $21.00, with expiration dates from September 25, 2004 to
October 15, 2006. The options vest ratably over one year. The weighted average
remaining contractual life of these options is 9.2 years.
 
    Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if BRE had accounted for
the employee and non-employee director stock options granted only in the years
ending December 31, 1996, 1995 and 1994 under the fair value method of that
Statement. The impact on the years ending December 31, 1996, 1995 and 1994 of
options granted prior to 1994 has been excluded from this presentation. The fair
value for these options was estimated as of the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions for the years ending December 31, 1996, 1995 and 1994:
 
<TABLE>
<CAPTION>
                                                                    YEARS ENDED DECEMBER 31,
                                                                 -------------------------------
                                                                   1996       1995       1994
                                                                 ---------  ---------  ---------
<S>                                                              <C>        <C>        <C>
Risk-free interest rate........................................      7.12%      7.12%      7.12%
Dividend yield.................................................       5.6%       7.1%       7.8%
Volatility.....................................................        .26        .26        .26
Weighted average option life...................................    9 years    9 years    9 years
</TABLE>
 
   
    The Black-Scholes option pricing model was developed for use in estimating
the fair market value of traded options which have no vesting restrictions and
are fully transferable. In addition, option valuation models require the input
of highly subjective assumptions, including the expected stock price volatility.
Because the above stock option plans have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of the above stock option plans.
    
 
                                       35
<PAGE>
                              BRE PROPERTIES, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
7. STOCK OPTION PLANS (CONTINUED)
    For purposes of pro forma disclosures, the estimated fair value of the
options is amortized over the options' vesting period. BRE's pro forma
information, as if the Company had adopted Statement 123 as discussed above,
follows:
 
<TABLE>
<CAPTION>
                                                           YEARS ENDED DECEMBER 31,
                                                  -------------------------------------------
                                                      1996           1995           1994
                                                  -------------  -------------  -------------
<S>                                               <C>            <C>            <C>
Pro forma net income............................  $  88,720,000  $  21,606,000  $  24,159,000
Pro forma earnings per share*...................          $2.91          $0.97          $1.10
</TABLE>
 
------------------------
 
*   Weighted average outstanding shares are used in the calculation as the
    dilutive effect of Common Stock equivalents is less than 3%.
 
8. SHAREHOLDER RIGHTS
 
    On August 14, 1989, the Directors adopted a Shareholder Rights Plan and
declared a dividend distribution of one Right for each share of BRE's Common
Stock outstanding on September 7, 1989. The Rights entitle holders to purchase,
under certain conditions, shares of Common Stock at a cash purchase price of
$45.00 per share, subject to adjustment. The Rights may also, under certain
conditions, entitle the holders to receive Common Stock, or other consideration,
having a value equal to two times the exercise price of each Right. The Rights
are redeemable by BRE at a price of $.005 per Right. If not so redeemed, the
Rights expire on September 7, 1999.
 
9. RETIREMENT PLAN
 
    BRE has a defined contribution retirement plan covering all employees with
more than one year of continuous full-time employment. In addition to employee
elective deferrals, BRE contributed an amount equal to 10% of the compensation
expense of participating employees until March 15, 1996; thereafter BRE's
contribution was limited to 1.5% of the participating employee's salary. The
amounts contributed were $78,000, $164,000 and $143,000 for the years ended
December 31, 1996, 1995 and 1994, respectively.
 
10. RELATED PARTY TRANSACTIONS
 
   
    Certain executives of BRE have purchased stock, the consideration for which
was interest-bearing recourse loans. The loans may be forgiven in whole or in
part upon the achievement of certain performance goals for BRE related to growth
in assets, funds from operations and stock price. A portion of the loans
expected to be forgiven are expensed currently as compensation. At December 31,
1996, the carrying amount of the loans was $1,235,000. The amounts of such loans
expected to be forgiven and treated as compensation expense were $128,000 and
$50,000 for the years ended December 31, 1996 and 1995, respectively. These
receivables are presented as assets rather than reclassified as reductions to
equity because such reclassifications would be immaterial.
    
 
11. LITIGATION
 
   
    BRE is defending various claims and legal actions that arise from its normal
course of business, including certain environmental actions. While it is not
feasible to predict or determine the ultimate outcome of these matters, in the
opinion of management, none of these actions will have a material adverse effect
on BRE's results of operations or financial position.
    
 
                                       36
<PAGE>
                              BRE PROPERTIES, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
12. PROFORMA INFORMATION (UNAUDITED)
 
    The following table sets forth the results of operations as if the Merger
with RCT had occurred on January 1, 1995:
 
<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31,
                                                                -----------------------------
                                                                     1996           1995
                                                                --------------  -------------
<S>                                                             <C>             <C>
Revenues......................................................  $  110,110,000  $  99,434,000
Income before gain on sales...................................  $   40,804,000  $  34,353,000
Net income....................................................  $   93,629,000  $  41,952,000
Net income per share:
  Income before gain on sales.................................           $1.25          $1.05
  Net income..................................................           $2.86          $1.29
</TABLE>
 
    The unaudited pro forma statements of operations are presented for
comparative purposes only and are not necessarily indicative of what the actual
results of BRE would have been for the periods presented had the Merger occurred
on those dates, nor do they purport to represent the results of future periods.
The unaudited pro forma condensed statements should be read in conjunction with,
and are qualified in their entirety by, the respective historical financial
statements and notes thereto of BRE and RCT.
 
13. SUBSEQUENT EVENTS
 
   
    As of December 31, 1996, the Company was committed to purchase two
multifamily communities comprising approximately 800 units for a total price of
approximately $85,000,000. These purchase commitments are subject to the
satisfactory completion of the Company's due diligence process. At February 12,
1997, neither of these purchases had been finalized.
    
 
   
    On January 23, 1997, the Company filed a registration statement on Form S-3
with the Securities and Exchange Commission for the issuance of up to
$300,000,000 of unsecured debt securities, Common Stock, preferred stock,
depositary shares or warrants to purchase Common Stock.
    
 
   
    On February 11, 1997, the Company temporarily increased its lines of credit
from a total of $150,000,000 to $200,000,000 under the same terms of the lines
of credit existing at December 31, 1996. The additional $50,000,000 is available
for 180 days.
    
 
                                       37
<PAGE>
                              BRE PROPERTIES, INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31, 1996
                                                    -------------------------------------------------------------
                                                    QUARTER ENDED   QUARTER ENDED   QUARTER ENDED   QUARTER ENDED
                                                      MARCH 31         JUNE 30      SEPTEMBER 30     DECEMBER 31
                                                    -------------   -------------   -------------   -------------
<S>                                                 <C>             <C>             <C>             <C>
Revenues..........................................     $18,825         $26,849         $26,269         $29,708
Income before gain on sales.......................       7,385           9,852           9,767          10,010
Net income........................................       7,384          10,078          59,119          13,258
Net income per share:
  Income before gain on sales.....................        $.31            $.30            $.30            $.30
  Net income......................................        $.31            $.31           $1.92            $.40
</TABLE>
 
<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31, 1995
                                                    -------------------------------------------------------------
                                                    QUARTER ENDED   QUARTER ENDED   QUARTER ENDED   QUARTER ENDED
                                                      MARCH 31         JUNE 30      SEPTEMBER 30     DECEMBER 31
                                                    -------------   -------------   -------------   -------------
<S>                                                 <C>             <C>             <C>             <C>
Revenues..........................................     $15,925         $15,862         $16,542         $17,058
Income before gain on sales.......................       5,700           5,794           6,052           6,243
Net income........................................       6,819           3,794           6,052           5,345
Net income per share:
  Income before gain on sales.....................        $.27            $.26            $.28            $.28
  Net income......................................        $.32            $.17            $.28            $.24
</TABLE>
 
                                       38
<PAGE>
                              BRE PROPERTIES, INC
             SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
                               DECEMBER 31, 1996
                                 (000S OMITTED)
   
<TABLE>
<CAPTION>
                                                               INITIAL COST TO COMPANY
                                                                                              COSTS
                                                   DATES       ------------------------    CAPITALIZED
                                                 ACQUIRED/                 BUILDINGS &    SUBSEQUENT TO      DEPRECIABLE
NAME                            LOCATION        CONSTRUCTED      LAND     IMPROVEMENTS     ACQUISITION       LIVES-YEARS
-------------------------  ------------------  --------------  ---------  -------------  ---------------  -----------------
<S>                        <C>                 <C>             <C>        <C>            <C>              <C>
APARTMENTS
  Sharon Green...........  Menlo Park, CA          1971/1970   $   1,250    $   5,770       $     205                45
  The Verandas...........  Union City, CA          1993/1989       3,233       12,932              64                40
  Foster's Landing.......  Foster City, CA         1996/1987      11,741       47,849                                40
  Promontory Point.......  San Ramon, CA           1996/1992       8,724       34,895                                40
  Montanosa..............  San Diego, CA        1992/1989-90       6,005       24,065             172                40
  Lakeview Village.......  Spring Valley, CA       1996/1985       3,977       15,910              33                40
  Terra Nova Villas......  Chula Vista, CA         1994/1985       2,925       11,699              65                40
                           San Diego, CA       1993/1985-1987      4,869       19,493             152                40
  Mira Mesa
    (Cimarron, Hacienda,
    Westpark)............
  Canyon Villas..........  Chula Vista, CA         1996/1981       3,064       12,258              99                40
  Winchester.............  San Diego, CA           1994/1987       1,482        5,928               1                40
  Countryside Village....  El Cajon, CA            1996/1989       1,002        4,007              36                40
  Windrush Village.......  Colton, CA              1996/1985       3,747       14,989               5                40
  Village Green..........  La Habra, CA            1972/1971         372        2,763             303                45
  Candlewood North.......  Northridge, CA      1996/1964-1995      2,110        8,477                                40
  Park Glenn.............  Camarillo, CA           1996/1963       1,750        7,000              23                40
  The Summit.............  Chino Hills, CA         1996/1989       1,839        7,354               9                40
  Santa Paula Village....  Santa Paula, CA         1996/1970         550        2,200               1                40
                           Fountain Valley,
  Sycamore Valley........  CA                      1996/1969       4,617       18,691                                40
 
<CAPTION>
 
                                   GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1996
                           -------------------------------------------------------------------
                                       BUILDINGS &               ACCUMULATED
NAME                         LAND     IMPROVEMENTS     TOTAL    DEPRECIATION    ENCUMBRANCES
-------------------------  ---------  -------------  ---------  -------------  ---------------
<S>                        <C>        <C>            <C>        <C>            <C>
APARTMENTS
  Sharon Green...........  $   1,250    $   5,975    $   7,225    $  (3,146)      $  18,937
  The Verandas...........      3,233       12,996       16,229       (1,190)         11,865
  Foster's Landing.......     11,741       47,849       59,590         (294)         --
  Promontory Point.......      8,724       34,895       43,619       --              --
  Montanosa..............      6,005       24,237       30,242       (2,420)         16,866
  Lakeview Village.......      3,977       15,943       19,920         (315)         --
  Terra Nova Villas......      2,925       11,764       14,689         (807)          9,240
                               4,869       19,645       24,514       (1,593)         12,976
  Mira Mesa
    (Cimarron, Hacienda,
    Westpark)............
  Canyon Villas..........      3,064       12,357       15,421         (243)         --
  Winchester.............      1,482        5,929        7,411         (410)         --
  Countryside Village....      1,002        4,043        5,045          (79)         --
  Windrush Village.......      3,747       14,994       18,741         (297)         --
  Village Green..........        372        3,066        3,438       (1,703)         --
  Candlewood North.......      2,110        8,477       10,587         (177)         --
  Park Glenn.............      1,750        7,023        8,773         (139)         --
  The Summit.............      1,839        7,363        9,202         (146)         --
  Santa Paula Village....        550        2,201        2,751          (44)         --
 
  Sycamore Valley........      4,617       18,691       23,308         (156)         --
</TABLE>
    
<PAGE>
                              BRE PROPERTIES, INC
             SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
                               DECEMBER 31, 1996
                                 (000S OMITTED)
   
<TABLE>
<CAPTION>
                                                         INITIAL COST
                                                          TO COMPANY            COSTS
                                                      -------------------    CAPITALIZED
                                    DATES ACQUIRED/          BUILDINGS &    SUBSEQUENT TO   DEPRECIABLE
NAME                  LOCATION        CONSTRUCTED     LAND   IMPROVEMENTS    ACQUISITION    LIVES-YEARS
-----------------  --------------  -----------------  -----  ------------   -------------   -----------
<S>                <C>             <C>                <C>    <C>            <C>             <C>
Selby Ranch......  Sacramento, CA  1986/1971-1974     2,660     18,340            291           40
Hazel Ranch......  Fair Oaks, CA   1996/1985          2,471      9,885              6           40
Canterbury
  Downs..........  Roseville, CA   1996/1993          2,297      9,190             50           40
Shaliko..........  Rocklin, CA     1996/1990          2,049      8,198              3           40
Rocklin Gold.....  Rocklin, CA     1996/1990          1,558      6,232              4           40
Quail Chase......  Folsom, CA      1996/1990          1,303      5,211              5           40
Scottsdale
  Cove...........  Scottsdale, AZ  1991-94/1992-1994  3,243     14,468             39           40
Fairway
  Crossings......  Phoenix, AZ     1996/1985          3,657     14,629             17           40
Newport Landing..  Glendale, AZ    1995-96/1987-1996  4,467     18,171                          40
Brentwood........  Phoenix, AZ     1996/1980          1,712      6,849             17           40
Posada del
  Este...........  Phoenix, AZ     1996/1981          1,670      6,679             20           40
Park
  Scottsdale.....  Scottsdale, AZ  1996/1979          1,319      5,279             32           40
Los Senderos.....  Phoenix, AZ     1996/1980          1,284      5,134             10           40
Shadow Bend......  Scottsdale, AZ  1996/1982          1,284      5,134              8           40
Monte Vista......  Phoenix, AZ     1996/1972           315       1,260              4           40
Arcadia Cove.....  Phoenix, AZ     1996/1996          4,909     19,902                          40
Hacienda del
  Rio............  Tucson, AZ      1994/1983          1,859      7,437             78           40
Springhill.......  Tucson, AZ      1994/1987          1,733      6,933             33           40
Fountain Plaza...  Tucson, AZ      1994/1975           907       3,628             34           40
Colonia del
  Rio............  Tucson, AZ      1994/1985          1,774      7,094             46           40
Camino Seco
  Village........  Tucson, AZ      1995/1984          1,335      5,360             15           40
Casas Lindas.....  Tucson, AZ      1994/1987          1,513      6,051             22           40
Oracle Village...  Tucson, AZ      1994/1983          1,209      4,837             24           40
Ballinger
  Commons........  Seattle, WA     1996/1989          5,824     23,519                          40
Shadowbrook......  Redmond, WA     1987/1986          3,605     12,709            152           40
Parkwood.........  Mill Creek, WA  1989/1989          3,947     15,811             45           40
 
<CAPTION>
 
                      GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1996
                   --------------------------------------------------------
                          BUILDINGS &            ACCUMULATED
NAME               LAND   IMPROVEMENTS   TOTAL   DEPRECIATION  ENCUMBRANCES
-----------------  -----  ------------   ------  -----------   ------------
<S>                <C>    <C>            <C>     <C>           <C>
Selby Ranch......  2,660     18,631      21,291    (4,919)        12,450
Hazel Ranch......  2,471      9,891      12,362      (196)        --
Canterbury
  Downs..........  2,297      9,240      11,537      (182)        --
Shaliko..........  2,049      8,201      10,250      (162)        --
Rocklin Gold.....  1,558      6,236       7,794      (123)        --
Quail Chase......  1,303      5,216       6,519      (103)        --
Scottsdale
  Cove...........  3,243     14,507      17,750    (1,384)        --
Fairway
  Crossings......  3,657     14,646      18,303      (291)        --
Newport Landing..  4,467     18,171      22,638      (236)        --
Brentwood........  1,712      6,866       8,578      (136)        --
Posada del
  Este...........  1,670      6,699       8,369      (132)        --
Park
  Scottsdale.....  1,320      5,310       6,630      (104)        --
Los Senderos.....  1,284      5,144       6,428      (102)        --
Shadow Bend......  1,284      5,142       6,426      (102)        --
Monte Vista......   315       1,264       1,579       (25)        --
Arcadia Cove.....  4,909     19,902      24,811      (137)        --
Hacienda del
  Rio............  1,859      7,515       9,374      (404)         5,534
Springhill.......  1,733      6,966       8,699      (391)         5,259
Fountain Plaza...   907       3,662       4,569      (197)         3,103
Colonia del
  Rio............  1,774      7,140       8,914      (400)         5,197
Camino Seco
  Village........  1,335      5,375       6,710      (190)         4,173
Casas Lindas.....  1,513      6,073       7,586      (366)        --
Oracle Village...  1,209      4,861       6,070      (273)         4,128
Ballinger
  Commons........  5,824     23,519      29,343      (403)        --
Shadowbrook......  3,605     12,861      16,466    (3,052)        --
Parkwood.........  3,947     15,856      19,803    (2,832)        --
</TABLE>
    
<PAGE>
                              BRE PROPERTIES, INC
             SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
                               DECEMBER 31, 1996
                                 (000S OMITTED)
   
<TABLE>
<CAPTION>
                                                                       INITIAL COST
                                                                        TO COMPANY              COSTS
                                                                  -----------------------    CAPITALIZED
                                                DATES ACQUIRED/             BUILDINGS &     SUBSEQUENT TO   DEPRECIABLE
NAME                            LOCATION          CONSTRUCTED      LAND     IMPROVEMENTS     ACQUISITION    LIVES-YEARS
------------------------  --------------------  ---------------   -------  --------------   -------------   -----------
<S>                       <C>                   <C>               <C>      <C>              <C>             <C>
Thrasher's Mill.........  Bothell, WA           1996/1988           2,031         8,223                        40
Citywalk................  Seattle, WA           1988/1988           1,123         4,276            11          40
Brookdale Glen..........  Portland, OR          1993/1985           2,797        11,188            94          40
Berkshire Court.........  Wilsonville, OR       1996/1996           3,284        13,200                        40
Desert Lakes............  Las Vegas, NV         1996/1991           2,779        11,116           361          40
Cypress Springs II......  Las Vegas, NV         1996/1993           1,965         7,861            --          40
Tango...................  Las Vegas, NV         1996/1990           1,729         6,916            10          40
Villa Serra.............  Cupertino, CA         1973/1970             900                          --
Construction in progress
  and other.............  Various               Various                --           872                       Var.
                                                                  -------       -------        ------
Subtotal--Apartments....                                          139,769       567,872         2,599
                                                                  -------       -------        ------
SHOPPING CENTERS
The Hub.................  Fremont, CA           1973/1961-87        5,494         5,822        31,060        30-40
Santa Fe Springs
  Plaza.................  Santa Fe Springs, CA  1996/1985           3,411        13,643             8          40
El Camino...............  Woodland Hills, CA    1971/1970           1,500        10,037         4,011          40
Elsinore Valley
  Center................  Lake Elsinore, CA     1996/1981             446         1,786            --          40
Central Shopping
  Center................  Ventura, CA           1996/1985           1,060         4,240            73          40
Vista Village Center....  Valencia, CA          1996/1989             600         2,400            31          40
                                                                  -------       -------        ------
Subtotal--Shopping
  Centers...............                                           12,511        37,928        35,183
                                                                  -------       -------        ------
 
<CAPTION>
 
                               GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1996
                          -------------------------------------------------------------
                                    BUILDINGS &              ACCUMULATED
NAME                       LAND     IMPROVEMENTS     TOTAL   DEPRECIATION  ENCUMBRANCES
------------------------  -------  --------------   -------  -----------   ------------
<S>                       <C>      <C>              <C>      <C>           <C>
Thrasher's Mill.........    2,031         8,223      10,254       (141)           --
Citywalk................    1,123         4,287       5,410       (934)           --
Brookdale Glen..........    2,797        11,282      14,079     (1,052)           --
Berkshire Court.........    3,284        13,200      16,484       (137)           --
Desert Lakes............    2,779        11,477      14,256       (221)           --
Cypress Springs II......    1,965         7,861       9,826       (156)           --
Tango...................    1,729         6,926       8,655       (137)        4,152
Villa Serra.............      900            --         900         --            --
Construction in progress
  and other.............       --           872         872       (317)           --
                          -------       -------     -------  -----------   ------------
Subtotal--Apartments....  139,770       570,470     710,240    (33,096)      113,880
                          -------       -------     -------  -----------   ------------
SHOPPING CENTERS
The Hub.................    5,494        36,882      42,376    (13,260)           --
Santa Fe Springs
  Plaza.................    3,411        13,651      17,062       (285)           --
El Camino...............    1,500        14,048      15,548     (2,664)        1,105
Elsinore Valley
  Center................      446         1,786       2,232        (21)           --
Central Shopping
  Center................    1,060         4,313       5,373        (84)           --
Vista Village Center....      600         2,431       3,031        (48)           --
                          -------       -------     -------  -----------   ------------
Subtotal--Shopping
  Centers...............   12,511        73,111      85,622    (16,362)        1,105
                          -------       -------     -------  -----------   ------------
</TABLE>
    
<PAGE>
                              BRE PROPERTIES, INC
             SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
                               DECEMBER 31, 1996
                                 (000S OMITTED)
   
<TABLE>
<CAPTION>
                                                                 INITIAL COST
                                                                  TO COMPANY             COSTS
                                                            ----------------------    CAPITALIZED
                                          DATES ACQUIRED/             BUILDINGS &    SUBSEQUENT TO   DEPRECIABLE
NAME                        LOCATION        CONSTRUCTED       LAND    IMPROVEMENTS    ACQUISITION    LIVES/YEARS
-----------------------  ---------------  ---------------   --------  ------------   -------------   -----------
<S>                      <C>              <C>               <C>       <C>            <C>             <C>
COMMERCIAL/
  INDUSTRIAL
 
  Montalvo
    Industrial.........  Oxnard, CA       1996/1965-             200         800            42           40
                                            1984
 
  Santa Ana
    Industrial.........  Santa Ana, CA    1996/1985              312         805            --           40
 
  Coast Auto Center....  Ventura, CA      1996/1992              260       1,040            38           40
 
  Hawthorne/Del Amo
    Retail.............  Torrance, CA     1996/1985            1,500          --            --           40
 
  Santa Paula
    Commercial.........  Santa Paula, CA  1996/1963               60         240            23           40
 
  Vagabond Motor
    Hotel..............  Ventura, CA      1996/1921              600          --            --           40
 
  Buenaventura Medical
    Clinic.............  Ventura, CA      1996/1960            1,200          --            --           40
 
  Skypark Professional
    Building...........  Torrance, CA     1996/1978            1,134       4,538           178           40
 
  Valencia Medical
    Center.............  Valencia, CA     1996/1985              987       3,949            --           40
                                                            --------  ------------   -------------
 
  Subtotal--Commercial/
    Industrial.........                                        6,253      11,372           281
                                                            --------  ------------   -------------
 
      Total............                                     $158,533    $617,172        $38,063
                                                            --------  ------------   -------------
                                                            --------  ------------   -------------
 
<CAPTION>
 
                              GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1996
                         -------------------------------------------------------------
                                   BUILDINGS &              ACCUMULATED
NAME                       LAND    IMPROVEMENTS    TOTAL    DEPRECIATION  ENCUMBRANCES
-----------------------  --------  ------------   --------  -----------   ------------
<S>                      <C>       <C>            <C>       <C>           <C>
COMMERCIAL/
  INDUSTRIAL
  Montalvo
    Industrial.........       200         842        1,042        (16)            --
 
  Santa Ana
    Industrial.........       312         805        1,117         (5)            --
  Coast Auto Center....       260       1,078        1,338        (21)            --
  Hawthorne/Del Amo
    Retail.............     1,500          --        1,500         --             --
  Santa Paula
    Commercial.........        60         263          323         (5)            --
  Vagabond Motor
    Hotel..............       600          --          600         --             --
  Buenaventura Medical
    Clinic.............     1,200          --        1,200         --             --
  Skypark Professional
    Building...........     1,134       4,716        5,850       (101)            --
  Valencia Medical
    Center.............       987       3,949        4,936        (84)            --
                         --------  ------------   --------  -----------   ------------
  Subtotal--Commercial/
    Industrial.........     6,253      11,653       17,906       (232)            --
                         --------  ------------   --------  -----------   ------------
      Total............  $158,534    $655,234     $813,768   $(49,690)      $114,985
                         --------  ------------   --------  -----------   ------------
                         --------  ------------   --------  -----------   ------------
</TABLE>
    
<PAGE>
                              BRE PROPERTIES, INC.
 
             SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
 
                               DECEMBER 31, 1996
                                 (000S OMITTED)
 
    The activity in investments in rental properties and related depreciation
for the three year period ended December 31, 1996 is as follows:
 
INVESTMENTS IN RENTAL PROPERTIES:
 
   
<TABLE>
<CAPTION>
                                                                          YEARS ENDED DECEMBER 31,
                                                                     ----------------------------------
                                                                        1996        1995        1994
                                                                     ----------  ----------  ----------
<S>                                                                  <C>         <C>         <C>
Balance at beginning of year.......................................  $  370,116  $  372,478  $  308,906
Investments acquired in merger (excluding partnership
  investments).....................................................     273,055          --          --
Investments purchased..............................................     230,967      16,023      72,240
Transfers from Construction in progress............................       1,550          --          --
Investments sold...................................................     (63,425)    (18,802)    (13,802)
Reduction in carrying value........................................          --      (1,750)         --
Capital Expenditures...............................................       1,505       2,167       5,134
                                                                     ----------  ----------  ----------
Balance at end of year.............................................  $  813,768  $  370,116  $  372,478
                                                                     ----------  ----------  ----------
                                                                     ----------  ----------  ----------
</TABLE>
    
 
ACCUMULATED DEPRECIATION:
 
<TABLE>
<CAPTION>
                                                                            YEARS ENDED DECEMBER 31,
                                                                        --------------------------------
                                                                           1996       1995       1994
                                                                        ----------  ---------  ---------
<S>                                                                     <C>         <C>        <C>
Balance at beginning of year..........................................  $   48,036  $  43,789  $  40,246
Depreciation expense..................................................      13,283      7,864      7,080
Accumulated depreciation on Investments sold..........................     (11,629)    (3,617)    (3,537)
                                                                        ----------  ---------  ---------
Balance at end of year................................................  $   49,690  $  48,036  $  43,789
                                                                        ----------  ---------  ---------
                                                                        ----------  ---------  ---------
</TABLE>
<PAGE>
                               INDEX TO EXHIBITS
 
   
<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                                         IDENTITY OF EXHIBIT
-----------  --------------------------------------------------------------------------------------------
<S>          <C>                                                                                           <C>
       3.1   Restated Certificate of Incorporation (Previously filed on March 15, 1995 in the Exhibits to
               Form 8-K and incorporated by reference herein.)...........................................
       3.2   By-Laws (Previously filed on December 22, 1995 in the Exhibits to Form S-4 (File No.
               33-65365) and incorporated by reference herein.)..........................................
      10.1   1984 Stock Option Plan, as amended to date (Previously filed on October 19, 1992 in the
               Exhibits to Form 10-K and incorporated by reference herein.)..............................
      10.2   1992 Employee Stock Option Plan, as amended and restated to date (Previously filed on
               October 19, 1992 in the Exhibits to Form 10-K and incorporated by reference herein.)......
      10.3   1994 Non-Employee Director Stock Plan (Previously filed on October 23, 1994 in the Exhibits
               to Form 10-K and incorporated by reference herein.).......................................
      10.4   1992 Payroll Investment Plan (Previously filed on October 19, 1992 in the Exhibits to Form
               10-K and incorporated by reference herein.)...............................................
      10.5   Form of Indemnification Agreement (Previously filed on September 25, 1986, as amended, in
               Exhibits to Form S-4 (File No. 33-9014) and incorporated by reference herein.)............
      10.8   Employment agreement with Frank C. McDowell (Previously filed on October 23, 1995 in the
               Exhibits to Form 10-K and incorporated by reference herein.)..............................
      10.9   Supplemental Executive Retirement Benefit agreement with Arthur G. von Thaden (Previously
               filed on October 24, 1988 in the Exhibits to Form 10-K and incorporated by reference
               herein.)..................................................................................
     10.10   Supplemental Executive Retirement Benefit agreement with Howard E. Mason, Jr. (Previously
               filed on October 24, 1988 in the Exhibits to Form 10-K and incorporated by reference
               herein.)..................................................................................
     10.11   BRE Properties, Inc. Retirement Plan (Previously filed on October 24, 1988 in the Exhibits
               to Form 10-K and incorporated by reference herein.).......................................
     10.12   BRE Properties, Inc. Supplemental ERISA Retirement Plan (Previously filed on October 23,
               1995 in the Exhibits to Form 10-K and incorporated by reference herein.)..................
     10.13   Sublease with Wells Fargo Bank on 10,142 square feet at Suite 2500, One Montgomery Street,
               San Francisco, California (Previously filed on October 24, 1988 in the Exhibits to Form
               10-K and incorporated by reference herein.)...............................................
     10.14   Form of deferred compensation agreement with Eugene P. Carver (Previously filed on October
               13, 1994 in the Exhibits to Form 10-K and incorporated by reference herein.)..............
     10.15   Amended and Restated Non-Employee Director Stock Option Plan, as amended (Previously filed
               on December 22, 1995 in the Exhibits to Form S-4 (File No. 33-65365) and incorporated by
               reference herein.)........................................................................
     10.16   Amendment to the Amended and Restated Non-Employee Director Stock Option Plan, dated as of
               April, 1996...............................................................................
     10.17   Treasury Lock Swap Transaction (Previously filed on November 13, 1996 in the Exhibits to
               Form 10-Q and incorporated by reference herein.)..........................................
     10.18   Employment agreement with Jay W. Pauly (Previously filed on December 22, 1995 in the
               Exhibits to Form S-4 (File No. 33-65365) and incorporated by reference herein.)...........
</TABLE>
    
<PAGE>
   
<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                                         IDENTITY OF EXHIBIT
-----------  --------------------------------------------------------------------------------------------
<S>          <C>                                                                                           <C>
     10.19   Employment agreement with LeRoy E. Carlson (Previously filed on December 22, 1995 in the
               Exhibits to Form S-4 (File No. 33-65365) and incorporated by reference herein.)...........
     10.20   Employment agreement with John H. Nunn (Previously filed on December 22, 1995 in the
               Exhibits to Form S-4 (File No. 33-65365) and incorporated by reference herein.)...........
     10.21   Dividend Reinvestment Plan (Previously filed on August 9, 1996 in the Exhibits to Form S-3
               (File No. 333-09945) and incorporated by reference herein.)...............................
     10.22   1991 Stock Option Plan for Real Estate Investment Trust of California.......................
     10.23   Sanwa Bank California Credit Agreement, dated April 9, 1996.................................
     10.24   First Amendment to Sanwa Bank California Credit Agreement, dated December 12, 1996..........
     10.25   Unsecured Line of Credit Loan Agreement by and between BRE Properties, Inc., as Borrower and
               Bank of America National Trust and Savings Association, as Lender, dated April 4, 1996....
     10.26   Modification Agreement to Syndicate Loan to BRE Properties, Inc. made by various financial
               institutions with Bank of America NT & SA as Agent........................................
     10.27   Second Modification Agreement Regarding Unsecured Line of Credit to BRE Properties, Inc.
               made by various financial institutions with Bank of America NT & SA as Agent..............
     10.28   Unsecured Line of Credit Loan Agreement by and between BRE Properties, Inc., as Borrower,
               and Bank of America National Trust and Savings Association, as Lender, dated as of
               February 11, 1997.........................................................................
     10.29   Modification Agreement to Syndicate Loan to BRE Properties, Inc. made by various financial
               institutions with Bank of America NT & SA as Agent........................................
     10.30   Loan Agreement between The Prudential Insurance Company of America, as Lender and Real
               Estate Investment Trust of California, as Borrower, dated as of January 31, 1994..........
     10.31   First Amendment to Loan Agreement by and between The Prudential Insurance Company of America
               and Real Estate Investment Trust of California, dated July 7, 1995 .......................
     10.32   Second Amendment to Loan Agreement by and between The Prudential Insurance Company of
               America and BRE Properties, Inc., dated April 30, 1996....................................
     10.33   Third Amendment to Loan Agreement by and between The Prudential Insurance Company of America
               and BRE Properties, Inc., dated November 20, 1996.........................................
     10.34   Loan Agreement between The Prudential Insurance Company of America, as Lender and Real
               Estate Investment Trust of California, as Borrower, dated as of July 7, 1995..............
     10.35   First Amendment to Loan Agreement by and between The Prudential Insurance Company of America
               and BRE Properties, Inc., dated April 30, 1996............................................
     10.36   Second Amendment to Loan Agreement by and between The Prudential Insurance Company of
               America and BRE Properties, Inc., dated November 20, 1996.................................
        11   Computation of earnings per share...........................................................
        21   Subsidiaries of the Registrant (Previously filed on October 13, 1994 in the Exhibits to Form
               10-K and incorporated by reference herein.)...............................................
      23.1   Consent of Ernst & Young LLP................................................................
        27   Financial Data Schedule.....................................................................
</TABLE>