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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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Form 10-K



FOR ANNUAL AND TRANSITIONAL REPORTS PURSUANT TO SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934



(Mark One)



|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ------------------------------------------------------------------------------------



| |  | For the fiscal year ended December 31, 2004
| |  | -------------------------------------------



OR



| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------



Commission File No. 1-14306



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BRE PROPERTIES, INC.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Maryland                                                       |  | 94-1722214                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)



44 Montgomery
Street, 36th Floor

San Francisco, California 94104-4809

(Address of Principal Executive Offices) (Zip Code)



(415) 445-6530

(Registrants telephone number, including area code)





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



|                                                                                                                                                                                             |  |                                                                                                
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------
|Title of each class                                                                                                                                                                          |  | Name of each exchange on which registered                                                      
|Common Stock, $0.01 par value 8.08% Series B Cumulative Redeemable Preferred Stock 6.75% Series C Cumulative Redeemable Preferred Stock
6.75% Series D Cumulative Redeemable Preferred Stock |  | New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange



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



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



Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act rule 12b-2).  Yes x    No ̈



At June 30, 2004, the aggregate market value of the registrants shares of Common Stock par value, $.01 per share, held
by non-affiliates of the registrant was approximately $1,744,000,000. At that date 50,178,878 shares were outstanding.



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DOCUMENTS INCORPORATED BY REFERENCE



Portions of the Proxy Statement for the Annual Meeting of Shareholders of BRE Properties, Inc. to be filed within 120 days
of December 31, 2004 are incorporated by reference in Part III of this report.



FORWARD-LOOKING STATEMENTS



In addition to historical information, we have made forward-looking statements in this Annual Report on Form 10-K. These forward-looking statements pertain to, among other things, our capital resources, portfolio performance and results of
operations. Forward-looking statements involve numerous risks and uncertainties. You should not rely on these statements as predictions of future events because we cannot assure you that the events or circumstances reflected in the statements can be
achieved or will occur. Forward-looking statements are identified by words such as believes, expects, may, will, should, seeks, approximately, intends,
plans, pro forma, estimates or anticipates or their negative form or other variations, or by discussions of strategy, plans or intentions. Forward-looking statements are based on assumptions, data or
methods that may be incorrect or imprecise or incapable of being realized. The following factors, among others, could affect actual results and future events: defaults or 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 successfully integrate acquired properties and operations, inability to dispose of assets that no longer meet our
investment criteria under acceptable terms and conditions, risks and uncertainties affecting property development and construction (including construction delays, cost overruns, inability to obtain necessary permits and public opposition to such
activities), failure to qualify as a real estate investment trust under the Internal Revenue Code of 1986, as amended, environmental uncertainties, risks related to natural disasters, financial market fluctuations, changes in real estate and zoning
laws and increases in real property tax rates. Our success also depends on general economic trends, including interest rates, income tax laws, governmental regulation, legislation, population changes and other factors, including those risk factors
discussed in the section entitled Risk Factors in this report as they may be updated from time to time by our subsequent filings with the Securities and Exchange Commission. Do not rely solely on forward-looking statements, which only
reflect managements analysis. We assume no obligation to update forward-looking statements.



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BRE PROPERTIES, INC.

PART I



Item
1.    BUSINESS



References in the
Annual Report on Form 10-K to BRE, we or us refer to BRE Properties, Inc., a Maryland corporation.



Corporate Profile



We are a self-administered equity real estate investment trust, or REIT, focused on the development, acquisition and management of multifamily apartment
communities in seven targeted metropolitan markets of the Western United States. At December 31, 2004, our multifamily portfolio had real estate assets with a net book value of approximately $2.5 billion, which included: 85 wholly or majority owned
completed multifamily communities, aggregating 24,198 units in California, Arizona, Washington, Utah and Colorado; two multifamily communities owned through joint venture agreements, comprised of 488 apartment units; and eight apartment communities
in various stages of construction and development totaling 2,051 units. We have been a publicly traded company since our founding in 1970 and have paid 137 consecutive quarterly dividends to our shareholders since inception.



Our business touches one of the most personal aspects of our customers
livesthe place they call home. We believe this creates not just a responsibility, but an opportunity to set ourselves apart by seeing things from our residents point of view and putting them first in all we do. The power of this
viewpoint is that what is good for our resident is good for our company. As we build relationships with the people and communities we serve, we set ourselves apart in the marketplace and create long-term, income-producing investments for our
shareholders. Our principal operating objective is to maximize the economic returns of our apartment communities so as to provide our shareholders with the greatest possible total return and value. To achieve this objective, we pursue the following
primary strategies and goals:



| |  |  | Maintain balance sheet strength and maximize financial flexibility to provide continued access to attractively priced capital for strategic growth opportunities;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Communicate a clear, results-oriented strategic direction based on the five-year plan developed by our Board of Directors and Management, that is the driver behind all key
decisions;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Manage our business to yield a compelling combination of income and growth by achieving and maintaining high occupancy levels, dynamic pricing, and operating margin expansion
through operating efficiencies and cost controls, and deploying new and recycled capital to supply constrained markets of the Western United States;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Respond openly and honestly to all investors by disclosing financial results comprehensively and efficiently, and making our business transparent to investors through our
public disclosure; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Create a valuable customer experience that focuses on services from residents point of view, and generates increased profitability from resident retention and
referrals.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We believe we can best achieve our
objectives by developing, acquiring and internally managing high-quality apartment communities in high-demand, supply-constrained locations in the most attractive places to live in the Western United States. Our communities are generally near the
business, transportation, employment and recreation centers essential to customers who value the convenience, service and flexibility of rental living. Recognizing that customers have many housing choices, we focus on developing and acquiring
apartment homes with customer-defined amenities and providing professional management services, delivered by well-trained associates. We have concentrated our investment and business focus in the Western United States because of certain
characteristics of these markets that we find attractive, including the propensity to rent and a housing supply that currently cannot keep pace with population and employment growth. From time to time, we dispose



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of assets that do not meet our long-term investment criteria, recycling the capital derived from property sales into apartment communities in
supply-constrained locations that offer higher long-term return opportunities.



Events During 2004



On January 29, 2004, we
redeemed all 2,150,000 shares of 8.50% Series A Cumulative Redeemable Preferred Stock at a redemption price of $25.17118 per share. The redemption price was equal to the original issuance price of $25.00 per share, plus accrued and unpaid dividends
to the redemption date. We expensed the original preferred stock issuance costs during the fourth quarter of 2003, when we announced the redemption.



On March 15, 2004, we closed an offering of 4,000,000 shares of 6.75% Series C Cumulative Redeemable Preferred Stock at a public offering price of $25 per
share. The preferred shares trade on the New York Stock Exchange under the symbol BRE_prc. Net proceeds from the offering, after all discounts, commissions and issuance costs, totaled approximately $96,436,000 and were used for general corporate
purposes.



On March 17, 2004, we closed an offering of
$100,000,000 of dual-tranche Medium-Term Notes under a medium term note program initiated in 2001. The offering included $50,000,000 of five-year notes with a coupon rate of 3.58%, and $50,000,000 of 10-year notes with a coupon rate of 4.70%. Net
proceeds from the offering, after all discounts, commissions and issuance costs, totaled approximately $99,437,000 and were used for general corporate purposes.



During the first quarter of 2004, we increased the size of our secured credit facility with Fannie Mae (serviced by Prudential Multifamily Mortgage,
Inc.) from $100,000,000 to $140,000,000. Borrowings under the secured credit facility totaled $140,000,000 at December 31, 2004. The credit facility is secured by nine multifamily communities, which are held by a consolidated subsidiary of BRE. The
average borrowing rate was 2.3% for 2004, including the facility fee.



On December 9, 2004, we closed an offering of 3,000,000 shares of 6.75% Series D Cumulative Redeemable Preferred Stock at a public offering price of $25 per share. The preferred shares trade on the New York Stock Exchange under the symbol
BRE_prd. Net proceeds from the offering, after all discounts, commissions and issuance costs, totaled approximately $72,436,000 and were used for general corporate purposes.



On May 20, 2004, we amended our Articles of Incorporation to provide for our moving from a staggered board structure toward
the election of all directors annually. Under the amendment, each of the classes of directors currently in office will serve out the balance of their current three-year terms, and afterwards their successors will be elected for one-year terms.



During 2004, we acquired six communities totaling 1,559 units
for approximately $268,200,000. During first quarter 2004, we acquired four communities with an aggregate purchase price of $68,700,000: Summerwind Townhomes, with 200 units; Regency Palm Court, with 116 units; Windsor Court, with 95 units; and
Tiffany Court, with 101 units, all located in Los Angeles, California. During the third and fourth quarters of 2004, we acquired two communities with a total of 423 units on contiguous parcels of land located in Redmond, Washington for an aggregate
purchase price of approximately $62,400,000. Management of the two communities has been combined, so that they are now treated as one communityEvergreen Apartments. In December 2004, we acquired Villa Azure Apartments, with 624 units located
in Los Angeles, California, for a purchase price of $137,100,000.



During 2004, we completed three development communities: Pinnacle at Westridge, with 234 units in Valencia, California; Pinnacle at Talega Phase II, with 110 units in San Clemente, California; and Pinnacle at Fullerton, with 192 units in
Fullerton, California. Lease-up is complete at Talega II and Fullerton, and Westridge is 87% occupied as of December 31, 2004.



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During 2004, we sold three communities totaling 878 units: Pinnacle Stonecreek, with 226 units located in
Phoenix Arizona; Pinnacle Reserve, with 492 units located in the Salt Lake City, Utah area; and Pinnacle Fort Union with 160 units, also located in Salt Lake City, Utah. The three communities were sold for an aggregate gross sales price of
approximately $98,625,000, resulting in a net gain on sale of approximately $19,925,000.



During 2004, we completed the Chief Executive Officer transition from Frank C. McDowell to Constance B. Moore. During 2004, Mr. McDowell served as Vice Chairman and CEO, and Ms. Moore served as President and Chief
Operating Officer. At the end of the year, the transition was deemed complete. Mr. McDowell retired on January 1, 2005, and Ms. Moore became President and CEO on that date.



Events During 2003



On April 4, 2003, we amended and restated our revolving unsecured credit facility through April 2006, maintaining an interest rate of LIBOR plus 0.70%,
plus a fee of 0.20% payable on the unused portion of the credit facility. The average borrowing rate was 2.7% for 2003 and 2.9% for 2004. We also elected to reduce the borrowing capacity from $450,000,000 to $350,000,000 on the unsecured credit
facility at that time.



On May 2, 2003, we established a
$100,000,000 Fannie Mae secured credit facility. The secured credit facility matures in 2008 and was originally secured by five multifamily communities. Borrowings under the facility bear interest at variable rates with maturities from one to nine
months, plus a facility fee of up to 0.65%. The average borrowing rate, including the facility fee, was 2.1% in 2003. Drawings on the lines of credit are available to fund our investment activities and for general corporate purposes.



On September 16, 2003, we closed a public offering of 3,000,000 shares of our
common stock. The shares were offered to the public through the underwriter at a public offering price of $33.10 per share. Subsequent to the end of the third quarter 2003, the underwriter exercised its over-allotment option to purchase an
additional 450,000 shares. Net proceeds from the offeringafter all discounts, commissions and issuance coststotaled approximately $112,300,000 and were used for general corporate purposes.



During 2003, we acquired three properties totaling 1,038 units for
approximately $116,200,000. The properties are: Corona Pointe, acquired September 15, 2003, with 714 units located in Riverside, California; The Enclave at Town Square, acquired October 31, 2003, with 124 units located in Chino Hills, California;
and Canyon Creek, acquired December 18, 2003, with 200 units located in Northridge, California.



During 2003, we also completed the development and lease-up of two communities: Pinnacle Denver Tech Center, with a total of 420 units located in the
Denver suburb of Greenwood Village, Colorado; and Pinnacle Talega Phase I, with 252 units located in San Clemente, California. Both communities went through the lease-up phase during 2003 and were stabilized as of December 31, 2003.



During 2003, we sold three communities totaling 1,100 units: Berkshire Court,
with 250 units, located in the Portland Oregon metro area and Brookdale Glenn with 354 units, also located in Portland, Oregon; and Newport Landing, with 480 units, located in the Phoenix suburb of Glendale, Arizona. The sale of the two Portland
area assets completed our exit from that market. The three communities were sold for an aggregate gross sales price of approximately $72,600,000, resulting in a net gain on sale of approximately $23,147,000.



During 2003, we settled a lawsuit that was filed by an unrelated third party
in 2002 regarding the Pinnacle at MacArthur Place joint venture agreement. Under the terms of the settlement, we paid the third party $6,500,000 and retained full ownership of the asset. Also during 2003, we reached a settlement agreement regarding
a class action lawsuit that was brought against us with respect to application fees charged residents from August 1998 to August 2003. Under terms of the settlement, we agreed to establish a $200,000 fund to reimburse the subject applicants up to
$5.00 per applicant, and to pay certain related administration charges and legal expenses. Both settlement amounts, including all related legal and administrative costs, aggregate $7,305,000 and are reported as other expenses on the consolidated
income statement.



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In November of 2003, we announced a one-year executive succession plan, culminating with the retirement
of Frank C. McDowell, BREs President and Chief Executive Officer, from the role of Chief Executive Officer at the end of 2004. On January 1, 2004, Mr. McDowell assumed the role of Vice Chairman and CEO, and Constance B. Moore became BREs
President and Chief Operating Officer. Ms. Moore was named President and CEO on January 1, 2005.



Events During 2002



On
March 12, 2002, we issued $150,000,000 of five-year 5.95% senior unsecured notes in an underwritten public offering. On August 20, 2002, we issued $150,000,000 of seven-year 5.75% senior unsecured notes in an underwritten public offering. Net
proceeds from the sales of these notes totaled approximately $297,407,000, after deducting the underwriting discounts and commissions and our offering expenses, and were used to repay a portion of the borrowings under our existing unsecured credit
facility.



On June 20, 2002, we closed the underwritten public
offering of three million shares of 8.08% Series B Cumulative Redeemable Preferred Stock at a public offering price of $25 per share. The Series B Preferred Stock will be redeemable at $25 per share on or after June 20, 2007. The preferred shares
trade on the NYSE under the symbol BRE_prb. Net proceeds from the offering totaled $72,291,000, after deducting the underwriting discounts and commissions and our offering expenses, and were used to invest in additional multifamily communities and,
pending such use, to temporarily repay borrowings under our then-existing unsecured credit facility.



During 2002, we consolidated five joint venture investments, transferring the assets from equity interests in real estate joint ventures to direct
investments in real estate. With respect to two of the joint ventures, the consolidation reflected our acquisition of our joint venture partners ownership interest in the properties. These properties are: Pinnacle at Blue Ravine, a 260-unit
apartment community located in Folsom, California; and Pinnacle Sonata, a 268-unit community located in Bothell, Washington. The acquisition price for our partners ownership interests was $56,520,000.



With respect to two of the joint ventures, the consolidation reflected the
termination of the joint venture arrangements prior to funding. These properties are: Pinnacle at Stonecreek, a 226-unit community located in Phoenix, Arizona; and Pinnacle at the Creek, a 216-unit community located in the Denver suburb of Aurora,
Colorado. The effect of the consolidation was an increase to direct investments in real estate of $48,515,000, a reduction of equity interests in and advances to real estate joint ventures of $26,297,000 and an assumption of secured indebtedness
totaling $22,218,000. After consolidating these assets we paid down $6,722,000 of the related secured indebtedness.



With respect to the remaining joint venture property: Pinnacle at MacArthur Place, a 253-unit community located in the South Coast Metro Area of Orange
County, California, the consolidation resulted from a dispute between us and our joint venture partner that prevented the closing and funding of the joint venture. As noted above, we settled the litigation in 2003. The effect of the consolidation
was an increase to direct investments in real estate of $64,227,000, a reduction of equity interests in and advances to real estate joint ventures of $24,227,000 and an assumption of secured indebtedness totaling $40,000,000.



During 2002, we acquired an additional four properties totaling 848 units for
approximately $100,000,000. The properties include: Bernardo Crest, with 216 units located in San Diego, California; Mission Trails, with 208 units also located in San Diego; Boulder Creek, with 264 units in Riverside, California; and Emerald Pointe
Apartments, with 160 units located in Diamond Bar, California.



During 2002, we also completed the construction of Pinnacle at Otay Ranch I and II, with a total of 364 units located in the San Diego suburb of Chula Vista, California; and Pinnacle at Lake Washington, with 180 units located in the Seattle
suburb of Renton, Washington. We directly own both communities.



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During 2002, we sold three communities totaling 663 units: The Arbors at Warner Center, with 250 units,
located in the Los Angeles metro area of Woodland Hills, California; Pinnacle Lakeside, with 253 units, located in Salt Lake City, Utah; and Carriage House, with 160 units, located in the Portland, Oregon metro area. The communities were sold for an
aggregate gross sales price of approximately $58,300,000, resulting in a net gain on sale of $10,067,000. In connection with these transactions, we repaid approximately $13,216,000 in related secured mortgage debt.



Competition



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



Structure, Tax Status and Investment Policy



We believe we are organized and operate so as to qualify as a real estate investment trust, or REIT, under Sections 856-860 of the Internal Revenue Code
of 1986, as amended. If we qualify as a REIT, we generally will not be subject to Federal income tax to the extent we distribute 100% of our taxable income to our shareholders. REITs are subject to a number of complex organizational and operational
requirements. If we fail to qualify as a REIT, our taxable income may be subject to income tax at regular corporate rates. See Risk FactorsTax Risks.



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



Employees



As of December 31, 2004, we had 805 employees. None of our employees are covered by collective bargaining agreements.



Company Website



To view our current and periodic reports free of charge, please go to our website at www.breproperties.com. We make
these postings as soon as reasonably practicable after our filings with the SEC. Our website contains copies of our Corporate Governance Guidelines, our Code of Business Conduct and Ethics and the charters of each of our Audit and Compensation,
Nominating and Governance Committees. This information is also available in print to any shareholder who requests it by contacting us at BRE Properties, Inc., 44 Montgomery St., 36th Floor, San Francisco, California, 94104, attention: Investor
Relations. Information contained on our website is not and should not be deemed a part of this report or a part of any other report or filing with the SEC.



Investment Portfolio



See Part I, Item 2 (Properties) and Part II, Item 7 (Managements Discussion and Analysis of Financial Condition and Results of
Operations) of this report for a description of our individual investments and certain



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developments during the year with respect to these investments. See Part IV, Item 15, Schedule III (financial statement schedule), for additional information
about our portfolio, including locations, costs and encumbrances.



Additionally, see Part II, Item 8 and Part IV, Item 15(d) of this report for our consolidated financial statements.



Executive Officers



The following persons were executive officers of BRE as of February 15, 2005:



|                     |  |                         |  |                                                                
|-------------------- |  | ----------------------- |  | ---------------------------------------------------------------
|Name                 |  | Age at February 15,2005 |  | Position(s)                                                    
|Constance B. Moore   |  | 49                      |  | President, Chief Executive Officer and Director                
|Edward F. Lange, Jr. |  | 45                      |  | Executive Vice President, Chief Financial Officer and Secretary
|Bradley P. Griggs    |  | 47                      |  | Executive Vice President, Chief Investment Officer             
|Deirdre A. Kuring    |  | 43                      |  | Executive Vice President, Asset Management                     



In November of 2003,
we announced a one-year executive succession plan, culminating with the retirement of Frank C. McDowell, our former President and Chief Executive Officer, from the position of Chief Executive Officer at the end of 2004. On January 1, 2004, Mr.
McDowell assumed the role of Vice Chairman and Chief Executive Officer, and Constance B. Moore became our president and Chief Operating Officer. Ms. Moore was named President and Chief Executive Officer on January 1, 2005.



Ms. Moore joined the company in July of 2002 as an Executive Vice President
and Chief Operating Officer. On January 1, 2004, Ms. Moore became BREs President and Chief Operating Officer, assuming day-to-day operating responsibility for the Company. Ms. Moore was named President and CEO on January 1, 2005. Ms. Moore
held several executive positions with Security Capital Group & Affiliates, an international real estate operating and investment management company, from 1993 to July 2002, including Co-Chairman and Chief Operating Officer of Archstone
Communities Trust, a Colorado-based multifamily REIT. Ms. Moore holds a Bachelors Degree in Business Administration from San Jose State University and a Master of Business Administration Degree from the University of California, Berkeley.



Mr. Lange has been in his current position since June 2000. He
served as Executive Vice President and Chief Financial Officer at Health Care REIT, Inc., an Ohio-based senior housing real estate investment trust, from 1996 to June 2000. Mr. Lange holds a Master of Business Administration Degree from the
University of Connecticut and a Bachelors Degree in Urban Planning from the University of Massachusetts.



Mr. Griggs has been in his current position since December 2000. He served as a Senior Vice President of Development for Homestead Village, Inc., an
operator of extended stay lodging properties and a subsidiary of Security Capital Group, Inc. from 1995 to December 2000. Mr. Griggs holds a Bachelors Degree in Architecture from the California Polytechnic State University, in San Luis Obispo,
California and is a registered California Architect.



Ms.
Kuring was promoted to Executive Vice President in January 2003, and has served as an executive officer of BRE since November 2001. She served as Divisional Vice President, Pacific Northwest and Utah, from August 2000 to October 2001. From 1996 to
August 2000, Ms. Kuring was a vice president for Archstone Communities Trust, a Colorado-based multifamily real estate investment trust. She holds a Bachelors Degree in Business Administration from Seattle University and is a Certified
Property Manager.



There is no family relationship among any of
our executive officers or Directors.



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RISK FACTORS



The following discussion should be read in conjunction with the consolidated financial statements and notes thereto
appearing elsewhere in this Annual Report on Form 10-K.



Risks Due to
Investment in Real Estate



Decreased revenues or
increased operating expenses may cause decreased yields from an investment in real property.



Real property investments are subject to varying degrees of risk. The yields available from investments in real estate depend upon the amount of revenues
generated and expenses incurred. If properties do not generate revenues sufficient to meet operating expenses, including debt service and capital expenditures, our results from operations and ability to make distributions to our 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. These factors consequently can have an impact on revenues from the properties and their
underlying values. The financial results and labor decisions of major local employers may also have an impact on the revenues from and value of certain properties.



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



If we are unable to implement our growth strategy, or if we fail to identify, acquire or integrate new acquisitions, our results may suffer.



Our future growth will be dependent upon a number of factors, including our ability to identify acceptable properties for development and acquisition,
complete acquisitions and developments on favorable terms, successfully integrate acquired and newly developed properties, and obtain financing to support expansion. We cannot assure that we will be successful in implementing our growth strategy,
that growth will continue at historical levels or at all, or that any expansion will improve operating results. The failure to identify, acquire and integrate new properties effectively could have a material adverse effect on us and our ability to
make distributions to our shareholders and to pay amounts due on our debt.



Development and construction projects may not be completed or completed successfully.



As a general matter, property development and construction projects typically have a higher, and sometimes substantially higher, level of risk than the
acquisition of existing properties. We intend to actively pursue development and construction of multifamily apartment communities. We cannot assure that we will complete



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development of the properties currently under development or any other development project that we may undertake. Risks associated with our development and
construction activities may include the following:



| |  |  | development opportunities may be abandoned;
| | - |  | -------------------------------------------



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



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



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



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



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



In addition, development and construction activities, regardless of whether or not they are ultimately successful, typically require a substantial portion
of managements time and attention. Development and construction activities are also subject to risks relating to the inability to obtain, or delays in obtaining, all necessary zoning, land-use, building, occupancy, and other required
governmental permits and authorizations.



Investments in
newly acquired properties may not perform in accordance with our expectations.



In the normal course of business, we typically evaluate potential acquisitions, enter into non-binding letters of intent, and may, at any time, enter into contracts to acquire and may acquire additional properties.
However, we cannot assure that we will have the financial resources to make suitable acquisitions or those properties that satisfy our investment policies will be available for acquisition. Acquisitions of properties entail risks that investments
will fail to perform in accordance with expectations. Estimates of the costs of improvements to bring an acquired property up to standards established for the market position intended for that property might prove inaccurate. Other risks may include
rehabilitation costs exceeding original estimates, possibly making a project uneconomical; financing not being available on favorable terms or at all; and rehabilitation and lease-up not being completed on schedule. In addition, there are general
real estate investment risks associated with any new real estate investment, including environmental risks. Although we undertake an evaluation of the physical condition of each new investment before it is acquired, certain defects or necessary
repairs may not be detected until after the investment is acquired. This could significantly increase our total acquisition costs, which could have a material adverse effect on us and our ability to make distributions to our shareholders and pay
amounts due on our debt.



Illiquidity of real estate and
reinvestment risk may reduce economic returns to investors.



Real estate investments are relatively illiquid and, therefore, tend to limit our ability to adjust our portfolio in response to changes in economic or other conditions. Additionally, the Internal Revenue Code places certain limits on the
number of properties a REIT may sell without adverse tax consequences. To effect our current operating strategy, we have in the past raised, and will seek to continue to raise additional funds, both through outside financing and through the orderly
disposition of assets that no longer meet our investment criteria. Depending upon interest rates, current development and acquisition opportunities and other factors, generally we will reinvest the proceeds in additional multifamily properties,
although such funds may be employed in other uses. In the markets we have targeted for future acquisition of multifamily properties, there is considerable buying competition from other real estate companies, many of who may have greater resources,
experience or expertise than we. In many cases, this competition for acquisition properties has resulted in an increase in property prices and a decrease in property yields. Due to the relatively low capitalization rates currently prevailing in the
pricing of potential acquisitions of multifamily properties which meet our investment criteria, we cannot assure that the proceeds realized from the disposition of assets, which no longer meet our investment criteria, can be reinvested to produce



10



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economic returns comparable to those being realized from the properties disposed of, or that we will be able to acquire properties meeting our investment
criteria. If we are unable to reinvest proceeds from the assets that no longer meet our investment criteria, or if properties acquired with such proceeds produce a lower rate of return than the properties disposed of, our results of operations may
be materially affected. In addition, a delay in reinvestment of such proceeds may have a material adverse effect on us.



We may seek to structure future dispositions as tax-free exchanges, where appropriate, utilizing the non-recognition provisions of Section 1031 of the
Internal Revenue Code to defer income taxation on the disposition of the exchanged property. For an exchange of these properties to qualify for tax-free treatment under Section 1031 of the Internal Revenue Code, certain technical requirements must
be met. Given the competition for properties meeting our investment criteria, it may be difficult for us to identify suitable properties within the applicable time frames in order to meet the requirements of Section 1031 of the Internal Revenue
Code. Even if we can structure a suitable tax-deferred exchange, as noted above, we cannot assure that we will reinvest the proceeds of any of these dispositions to produce economic returns comparable to those currently being realized from the
properties which were disposed of.



Substantial competition
among multifamily properties and real estate companies may adversely affect our rental revenues and development and acquisition opportunities.



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



Our operations are
concentrated in the Western United States; we are subject to general economic conditions in the regions in which we operate.



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



Our insurance coverage is limited and may not cover all losses to our properties.



We carry comprehensive liability, fire, mold, extended coverage and rental loss insurance with respect to our properties with certain policy
specifications, limits and deductibles. While as of December 31, 2004, we carried flood and earthquake insurance for our properties with an aggregate annual limit of $100,000,000, subject to substantial deductibles, we cannot assure that this
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 or terrorist acts) that are not generally insured (or fully insured against) or underinsured losses (such as those resulting from claims in connection with the occurrence of
mold, asbestos, and



11



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lead) because they are either uninsurable or not economically insurable. Should an uninsured or underinsured loss occur to a property, we could be required
to use our own funds for restoration or lose all or part of our investment in, and anticipated revenues from, the property and would continue to be obligated on any mortgage indebtedness on the property. Any such loss could have a material adverse
effect on us and our ability to make distributions to our shareholders and pay amounts due on our debt.



One property, Red Hawk Ranch Apartments, a 453-unit operating community in Fremont, California, requires extensive replacement work to correct damage we
believe was caused by construction defects. We estimate that the costs of remediation will approximate up to $26,000,000. We are currently pursuing litigation against the third party builder and various sub-contractors. However, we may be required
to seek insurance coverage for some or all of the remediation costs. If we are not able to recover these costs either through litigation or from our insurance coverage, it would not have a material adverse effect on our results of operations.



Adverse changes in laws may affect our potential liability
relating to our properties and our operations.



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



Compliance with laws benefiting disabled persons may require us to make significant unanticipated expenditures or impact
our investment strategy.



A number of federal, state and
local laws (including the Americans with Disabilities Act) and regulations exist that may require modifications to existing buildings or restrict certain renovations by requiring improved access to such buildings by disabled persons and may require
other structural features which add to the cost of buildings under construction. Legislation or regulations adopted in the future may impose further burdens or restrictions on us with respect to improved access by disabled persons. The costs of
compliance with these laws and regulations may be substantial, and limits or restrictions on construction or completion of certain renovations may limit implementation of our investment strategy in certain instances or reduce overall returns on our
investments, which could have a material adverse effect on us and our ability to make distributions to our shareholders and to pay amounts due on our debt. We review our properties periodically to determine the level of compliance and, if necessary,
take appropriate action to bring such properties into compliance. We believe, based on property reviews to date, that the costs of such compliance should not have a material adverse effect on us. These conclusions are based upon currently available
information and data, and we cannot assure that further review and analysis of our properties, or future legal interpretations or legislative changes, will not significantly increase the costs of compliance.



The operations of BRE Property Investors LLC are limited.



Thirteen of our properties are held by BRE Property Investors LLC, which
is referred to in this Annual Report on Form 10-K as the operating company. We are the sole managing member of the operating company and, as of December 31, 2004, held approximately a 92% equity interest in it. Third parties as non-managing members
hold the remaining equity interests in the operating company.



Under the terms of the limited liability company agreement governing the operations of the operating company, the operating company is required to maintain certain debt service coverage, debt-to-asset and other



12



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financial ratios intended to protect the members rights to receive distributions. In addition, with respect to the outstanding debt for certain
properties, the operating company is restricted from repaying its debt or taking certain other specified actions that could have adverse tax consequences for the members. Further, we, as the managing member, are restricted from taking certain other
specified actionseither absolutely or without the consent of a majority in interest of the non-managing members (or of the non-managing members affected thereby)including, but not limited to, any actions:



| |  |  | that would make it impossible to carry out the business of the operating company;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | that would subject a non-managing member to liability as a managing member; or
| | - |  | ------------------------------------------------------------------------------



| |  |  | that would cause the operating company to institute bankruptcy proceedings or permit an automatic judgment to be entered against it by a creditor.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



The requirement to maintain financial ratios and the restrictions on the
actions of the operating company and us as managing member could have a material adverse affect on us and our ability to make distributions to our shareholders and to pay amounts due on our debt.



Further, under the terms of the operating companys limited liability
company agreement, the operating company must obtain the consent of a majority in interest of the non-managing members in order to:



| |  |  | dispose of any of the properties held by the operating company (of which there are 13 properties with a gross cost of $364,376,000) in a taxable sale or exchange prior to respective
dates which are specified in the operating companys limited liability company agreement for each of the properties, ranging from eight to 10 years from November 18, 1997, or
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | dissolve the operating company other than in certain limited circumstances specified in the operating companys limited liability company agreement, such as a sale of all or
substantially all of our assets, or any merger, consolidation or other combination by us with or into another person, or reclassification, recapitalization or change of our outstanding equity interests.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



These restrictions on our ability to dispose of a portion of our properties
and to dissolve the operating company, even when such a disposition or dissolution of the operating company would be in our best interest, could have a material adverse effect on us and our ability to make distributions to our shareholders and to
pay amounts due on our debt.



The operating company also must
distribute all available cash (as defined in the operating companys limited liability company agreement) on a quarterly basis as follows: first, a priority distribution to members (other than us) until each member has received, cumulatively on
a per operating company unit basis, distributions equal to the cumulative dividends declared with respect to one share of BRE common stock over the corresponding period (subject to adjustment from time to time as applicable to account for stock
dividends, stock splits and similar transactions affecting BRE common stock); and second, the balance to us.



If the operating companys available cash in any quarterly period is insufficient to permit distribution of the full amount of the priority
distribution described above for that quarter, we are required to make a capital contribution to the operating company in an amount equal to the lesser of:



| |  |  | the amount necessary to permit the full priority distribution, or
| | - |  | -----------------------------------------------------------------



| |  |  | an amount equal to the sum of any capital expenditures made by the operating company plus the sum of any payments made by the operating company on account of any loans to or
investments in, or any guarantees of the obligations of, BRE or our affiliates for that quarterly period.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We may not voluntarily withdraw from the operating company or transfer all or any portion of our interest in the operating company without the consent of
all of the non-managing members, except in certain limited



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circumstances, such as a sale of all or substantially all of our assets, or any merger, consolidation or other combination by us with or into another person,
or any reclassification, recapitalization or change of our outstanding equity interests. Such restrictions on our withdrawal as the managing member of the operating company, and on our ability to transfer our interest in the operating company, could
have a material adverse effect on us and our ability to make distributions to our shareholders and to pay amounts due on our debt.



Survey exceptions to certain title insurance policies may result in incomplete coverage in the event of a claim.



We have not obtained updated surveys for all of the properties we have
acquired or developed. Because updated surveys were not always obtained, the title insurance policies obtained by us may contain exceptions for matters that an updated survey might have disclosed. Such matters might include such things as boundary
encroachments, unrecorded easements or similar matters, which would have been reflected on a survey. Moreover, because no updated surveys were prepared for some properties, we cannot assure that the title insurance policies in fact cover the
entirety of the real property, buildings, fixtures, and improvements which we believe they cover, any of which could have a material adverse effect on us.



Risks Due to Real Estate Financing



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



We may be unable to renew, repay or refinance our outstanding debt.



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



Rising interest rates would increase the cost of our variable rate debt.



We have incurred and expect in the future to incur indebtedness and interest
rate hedges that bear interest at variable rates. Accordingly, increases in interest rates would increase our interest costs, which could have a material adverse effect on us and our ability to make distributions to our shareholders or cause us to
be in default under certain debt instruments. In addition, an increase in market interest rates may lead holders of our common



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shares to demand a higher yield on their shares from distributions by us, which could adversely affect the market price for our common stock.



We may incur additional debt in the future.



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



The restrictive terms of certain of our indebtedness may cause
acceleration of debt payments.



At December 31, 2004, we
had outstanding borrowings of approximately $1.4 billion. Our indebtedness contains financial covenants as to minimum net worth, interest coverage ratios, maximum secured debt, and total debt to capital, among others. In the event that an event of
default occurs, our lenders may declare borrowings under the respective loan agreements to be due and payable immediately, which could have a material adverse effect on us and our ability to make distributions to our shareholders and to pay amounts
due on our debt.



Failure to hedge effectively against
interest rates may adversely affect results of operations.



We sometimes seek to take advantage of interest rate volatility by using interest rate hedging arrangements, such as interest rate cap agreements and interest rate swap agreements, with the objective of lowering our overall borrowing costs.
These agreements involve risks, such as the risk that the counterparties may fail to honor their obligations under these arrangements, that these arrangements may not be effective in reducing our borrowing costs, and that a court could rule that
such an agreement is not legally enforceable. Hedging may reduce overall returns on our investments. Failure to hedge effectively may materially adversely affect our results of operations.



Potential Liability Under Environmental Laws



Under various federal, state and local laws, ordinances and regulations, a
current or previous owner or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances in, on, around or under such property. Such laws often impose such liability without regard to
whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. The presence of, or failure to remediate properly, hazardous or toxic substances may adversely affect the owners or
operators ability to sell or rent the affected property or to borrow using the 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 hazardous or toxic substances at a disposal or treatment facility, whether or not the facility is owned or operated by the 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. Federal and state laws also regulate the operation and
subsequent removal of certain underground storage tanks. In connection with the current or former ownership (direct or indirect), operation, management, development and/or control of real properties, we may be considered an owner or operator of such
properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, may be potentially liable for removal or remediation costs, as well as certain other costs, including governmental fines, and claims for
injuries to persons and property.



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Our current policy is to obtain a Phase I environmental study on each property we seek to acquire and to
proceed accordingly. We cannot assure, however, that the Phase I environmental studies or other environmental studies undertaken with respect to any of our current or future properties will reveal:



| |  |  | all or the full extent of potential environmental liabilities;
| | - |  | --------------------------------------------------------------



| |  |  | that any prior owner or operator of a property did not create any material environmental condition unknown to us;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | that a material environmental condition does not otherwise exist as to any one or more of such properties; or
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | that environmental matters will not have a material adverse effect on us and our ability to make distributions to our shareholders and to pay amounts due on our debt.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



Recently
there has been an increasing number of lawsuits against owners and managers of multifamily properties alleging personal injury and property damage caused by the presence of mold in residential real estate. Some of these lawsuits have resulted in
substantial monetary judgments or settlements. Insurance carriers have reacted to these liability awards by excluding mold related claims from standard policies and pricing mold endorsements separately. We have obtained a separate pollution
insurance policy that covers mold-related claims and have adopted programs designed to minimize the existence of mold in any of our properties as well as guidelines for promptly addressing and resolving reports of mold. To the extent not covered by
our pollution policy, the presence of significant mold could expose us to liability from residents and others if property damage, health concerns, or allegations thereof, arise.



Risks Associated with Our Disclosure Controls and Procedures and Internal Control over Financial Reporting



Our business could be adversely impacted if we have deficiencies in our
disclosure controls and procedures or internal control over financial reporting.



The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements or misrepresentations. As part of managements
on-going review of our accounting policies and internal control over financial reporting, on January 31, 2005, management determined that there was a material weakness in our internal control over financial reporting related to recognition of
certain costs and expenses as incurred rather than as paid. This weakness resulted in certain expenses being recorded out of period and led to the restatement in this Annual Report on Form 10-K of our results for the years ended December 31, 2003,
2002, 2001 and 2000, and the interim periods presented herein. In connection with correcting this error, management has taken appropriate action to modify our system of internal control over financial reporting to remediate the material weakness.
While management will continue to review the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we can not assure you that our disclosure controls and procedures or internal control over financial
reporting will be effective in accomplishing all control objectives all of the time. Other deficiencies, particularly a material weakness, in internal control over financial reporting which may occur in the future could result in misstatements of
our results of operations, restatements of our financial statements, a decline in our stock price, or otherwise materially adversely affect our business, reputation, results of operation, financial condition or liquidity.



Ranking of Securities and Subordination of Claims



A portion of our operations is conducted through our subsidiaries, including
the operating company. Our cash flow and the consequent ability to make distributions and other payments on our equity securities and to



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service our debt will be partially dependent upon the earnings of our subsidiaries and the distribution of those earnings to us, or upon loans or other
payments of funds made by our subsidiaries to us. In addition, debt or other arrangements of our subsidiaries may impose restrictions that affect, among other things, our subsidiaries ability to pay dividends or make other distributions or
loans to us.



Likewise, a portion of our consolidated assets is
owned by our subsidiaries, effectively subordinating certain of our unsecured indebtedness to all existing and future liabilities, including indebtedness, trade payables, lease obligations and guarantees of our subsidiaries. The operating company
has guaranteed amounts due under our $350,000,000 bank credit facility with a syndicate of banks. Likewise, any other of our subsidiaries with assets or net income which, when multiplied by our effective percentage ownership interest in such
subsidiary exceeds $30,000,000 or 5% of our consolidated net income, respectively, is required to guarantee the repayment of borrowings under the credit facility. The operating company and other of our subsidiaries may also, from time to time,
guarantee other of our indebtedness. Therefore, our rights and rights of our creditors, including the holders of other unsecured indebtedness, to participate in the assets of any subsidiary upon the latters liquidation or reorganization will
be subject to the prior claims of such subsidiarys creditors, except to the extent that we may ourselves be a creditor with recognized claims against the subsidiary, in which case our claims would still be effectively subordinate to any
security interests in or mortgages or other liens on the assets of such subsidiary and would be subordinate to any indebtedness of such subsidiary senior to that held by us.



Provisions in our Charter and Bylaws That Could Limit a Change in Control or Deter a Takeover



In order to maintain our qualification as a REIT, not more than 50% in value
of our outstanding capital stock may be owned, actually or constructively, by five or fewer individuals (as defined in the Internal Revenue Code to include certain entities). In order to protect us against risk of losing our status as a REIT due to
a concentration of ownership among our shareholders, our charter provides that any shareholder must, upon demand, disclose to our board of directors in writing such information with respect to such shareholders direct and indirect ownership of
the shares of our stock as we deem necessary to permit us to comply or to verify compliance with the REIT provisions of the Internal Revenue Code, or the requirements of any other taxing authority. Our charter further provides, among other things,
that if our board of directors determines, in good faith, that direct or indirect ownership of BRE stock has or may become concentrated to an extent that would prevent us from qualifying as a REIT, our board of directors may prevent the transfer of
BRE stock or call for redemption (by lot or other means affecting one or more shareholders selected in the sole discretion of our board of directors) of a number of shares of BRE stock sufficient in the opinion of our board of directors to maintain
or bring the direct or indirect ownership of BRE stock into conformity with the requirements for maintaining REIT status. These limitations may have the effect of precluding acquisition of control of us by a third party without consent of our board
of directors.



In addition, certain other provisions contained
in our charter and bylaws may have the effect of discouraging a third-party from making an acquisition proposal for us and may thereby inhibit a change in control. Our charter includes provisions granting our board of directors the authority to
issue preferred stock from time to time and to establish the terms, preferences and rights of such preferred stock without the approval of our shareholders, restrictions on our shareholders ability to remove directors and fill vacancies on our
board of directors, restrictions on unsolicited business combinations and restrictions on our shareholders ability to amend our charter. Our bylaws contain restrictions on our shareholders ability to call special meetings of our board of
directors and to take action without a meeting, provisions granting our board of directors the power to amend our bylaws, provisions allowing our board of directors to increase its size, and restrictions on the transfer of shares of our capital
stock with respect to the preservation of our REIT status. Such provisions may deter tender offers for BRE stock, which offers may be attractive to our shareholders, or deter purchases of large blocks of BRE stock, thereby limiting the opportunity
for shareholders to receive a premium for their shares of BRE stock over then-prevailing market prices.



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Tax Risks



We may be subject to tax liabilities if we fail to qualify as a REIT.



Although management believes that we are organized and are operating so as to qualify as a REIT under the Internal Revenue
Code, we cannot assure that we have in fact operated or will be able to continue to operate in a manner so as to qualify or remain so qualified. Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code
provisions for which there are only limited judicial or administrative interpretations and the determination of various factual matters and circumstances not entirely within our control. For example, in order to qualify as a REIT, at least 95% of
our taxable gross income in any year must be derived from qualifying sources, and we must make distributions to shareholders aggregating annually at least 90% of our REIT taxable income (excluding net capital gains). Thus, to the extent revenues
from non-qualifying sources such as income from third-party management represents more than 5% of our gross income in any taxable year, we will not satisfy the 95% income test and may fail to qualify as a REIT, unless certain relief provisions
apply. Even if those relief provisions apply, a tax would be imposed with respect to our excess non-qualifying income, which could have a material adverse effect on us and our ability to make distributions to our shareholders and to pay amounts due
on our debt. Additionally, in order to qualify as a REIT, we must meet certain tests with respect to the nature of our assets. If we fail to meet any of the asset tests and do not cure such failure within the applicable period, unless certain relief
provisions apply, we would not qualify as a REIT, which could have a material adverse effect on us and our ability to make distributions to our shareholders and to pay amounts due on our debt.



If we fail to qualify as a REIT, we will be subject to federal income tax
(including any applicable alternative minimum tax) on our taxable income at corporate rates, which would likely have a material adverse effect on us, our share price and our ability to make distributions to our shareholders and to pay amounts due on
our debt. In addition, unless entitled to relief under certain statutory provisions, we would also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost. This treatment would
reduce funds available for investment or distribution to our shareholders because of the additional tax liability to us for the year or years involved. In addition, we would no longer be required to make distributions to our shareholders. To the
extent that distributions to our shareholders would have been made in anticipation of qualifying as a REIT, we might be required to borrow funds or to liquidate certain investments to pay the applicable tax. Finally, we cannot assure 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.



Item 2.    PROPERTIES



General



In addition to the information in this Item 2, certain information regarding our property portfolio is contained in Schedule
III (financial statement schedule) under Part IV, Item 15(d).



Multifamily
Property Data



Our multifamily properties represent 100%
of our real estate portfolio and 99% of our total revenue.



|                                                             |  |      |   |  |      |   |  |      |   |  |      |   |  |      |  
|------------------------------------------------------------ |  | ---- | - |  | ---- | - |  | ---- | - |  | ---- | - |  | ---- | -
|Multifamily Properties                                       |  | 2004 |   |  | 2003 |   |  | 2002 |   |  | 2001 |   |  | 2000 |  
|Percentage of total portfolio at cost, as of December 31     |  | 100  | % |  | 100  | % |  | 100  | % |  | 100  | % |  | 100  | %
|Percentage of total revenues, for the year ended December 31 |  | 99   | % |  | 99   | % |  | 99   | % |  | 99   | % |  | 98   | %



No single multifamily
property accounted for more than 10% of revenues in any of the five years ended December 31, 2004.



18



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The following table discloses certain operating data about our consolidated multifamily units:



|                              |  |              |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|----------------------------- |  | ------------ | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ | - |  | - | ------ | -
|                              |  | December 31, |       
|                              |  | 2004         |        |   | 2003 |   |        | 2002 |  |   | 2001   |   |  | 2000 |       
|Total number of units         |  |              | 24,198 |   |      |   | 22,981 |      |  |   | 22,371 |   |  |      | 20,419 |   |  |   | 20,195 |  
|Portfolio occupancy1          |  |              | 94     | % |      |   | 94     | %    |  |   | 94     | % |  |      | 94     | % |  |   | 96     | %
|Average monthly rent per unit |  | $            | 1,133  |   |      | $ | 1,078  |      |  | $ | 1,114  |   |  | $    | 1,141  |   |  | $ | 1,084  |  
|Total number of properties    |  |              | 85     |   |      |   | 80     |      |  |   | 81     |   |  |      | 72     |   |  |   | 72     |  



This table summarizes
data about our operating multifamily properties:



|                          |  |                       |   |  |                   |   |  |        |  |                      |  |            |   |  |              |      
|------------------------- |  | --------------------- | - |  | ----------------- | - |  | ------ |  | -------------------- |  | ---------- | - |  | ------------ | -----
|Market                    |  | Percentageof Revenue2 |   |  | Percentageof NOI2 |   |  | Units  |  | Number ofCommunities |  | Occupancy3 |   |  | Market Rent4
|Los Angeles/Orange County |  | 28                    | % |  | 28                | % |  | 6,825  |  | 25                   |  | 95         | % |  | $            | 1,265
|San Diego                 |  | 19                    | % |  | 20                | % |  | 3,711  |  | 13                   |  | 95         | % |  | $            | 1,331
|San Francisco Bay Area    |  | 18                    | % |  | 18                | % |  | 3,488  |  | 10                   |  | 94         | % |  | $            | 1,348
|Seattle                   |  | 13                    | % |  | 12                | % |  | 3,572  |  | 14                   |  | 94         | % |  | $            | 967  
|Sacramento                |  | 8                     | % |  | 8                 | % |  | 2,156  |  | 10                   |  | 94         | % |  | $            | 1,017
|Phoenix                   |  | 7                     | % |  | 7                 | % |  | 2,214  |  | 6                    |  | 95         | % |  | $            | 786  
|Denver                    |  | 5                     | % |  | 5                 | % |  | 1,620  |  | 5                    |  | 93         | % |  | $            | 798  
|Salt Lake City            |  | 2                     | % |  | 2                 | % |  | 612    |  | 2                    |  | 95         | % |  | $            | 753  
|                          |  |                       |   |  |                   |   |  |        |  |                      |  |            |   |  |              |      
|Total/Weighted Average    |  | 100                   | % |  | 100               | % |  | 24,198 |  | 85                   |  | 94         | % |  | $            | 1,133

---

|1 |  | Portfolio occupancy is calculated by dividing the total occupied units by the total units in
the portfolio at the end of the year. Apartment units are generally leased to residents for rental terms not exceeding one year.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2 |  | Represents the aggregate revenue and net operating income (NOI) from properties in each
market divided by the total revenue and net operating income of multifamily properties for the year ended December 31, 2004, and includes the results of properties acquired and developed during 2004 from the date of acquisition and completion.
Excludes revenues and NOI from properties sold during 2004. Accordingly, these results do not reflect a full year of operations for properties acquired or completed in 2004.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3 |  | Represents average physical occupancy for all stabilized properties for the twelve months
ended December 31, 2004. The total is a weighted average by units for all communities shown.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4 |  | Represents average prevailing market rent per unit for the twelve months ended December 31,
2004. The total is a weighted average by units for all communities shown.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



The following table summarizes our same-store operating results. Same-store properties are defined as properties that have been completed, stabilized and owned by us for at least two years.



|                                       |  |              |    |  |            |    |  |            |    |  |            |   |  |            |  
|-------------------------------------- |  | ------------ | -- |  | ---------- | -- |  | ---------- | -- |  | ---------- | - |  | ---------- | -
|                                       |  | December 31, |   
|                                       |  | 2004         |    |  | 2003       |    |  | 2002       |    |  | 2001       |   |  | 2000       |  
|                                       |  |              |    |  | (Restated) |    |  | (Restated) |    |  | (Restated) |   |  | (Restated) |  
|Number of same-store units             |  | 19,012       |    |  | 18,656     |    |  | 18,563     |    |  | 17,782     |   |  | 17,775     |  
|Same-store units % of total units      |  | 79           | %  |  | 81         | %  |  | 83         | %  |  | 87         | % |  | 88         | %
|Same-store revenue increase (decrease) |  | 0            | %  |  | (4         | %) |  | (3         | %) |  | 6          | % |  | 7          | %
|Same-store expense increase            |  | 3            | %  |  | 2          | %  |  | 2          | %  |  | 3          | % |  | 3          | %
|Same-store NOI (decrease) increase     |  | (1           | %) |  | (6         | %) |  | (5         | %) |  | 7          | % |  | 9          | %



Our business focus is
the ownership and operation of multifamily communities; we evaluate performance and allocate resources primarily based on the net operating income (NOI) of an individual multifamily community. We define NOI as the excess of all revenue
generated by the community (primarily rental revenue) less direct real estate expenses. Accordingly, NOI does not take into account community-specific costs such as



19



---

depreciation, capitalized expenditures and interest expense. NOI, including NOI from discontinued operations, totaled approximately $207,000,000;
$194,000,000 (restated) and $199,000,000 (restated) for the years ended December 31, 2004, 2003, and 2002, respectively.



A reconciliation of net income available to common shareholders to NOI for the three years ended December 31, 2004 is as follows:



|                                                              |  |                         |         |   |            |   |         |            |  |   |         |  
|------------------------------------------------------------- |  | ----------------------- | ------- | - | ---------- | - | ------- | ---------- |  | - | ------- | -
|                                                              |  | Years ended December 31 |        
|                                                              |  | 2004                    |         |   | 2003       |   |         | 2002       | 
|                                                              |  | (amounts in thousands)  |        
|                                                              |  |                         |         |   | (Restated) |   |         | (Restated) | 
|Net income available to common shareholders                   |  | $                       | 61,427  |   |            | $ | 70,175  |            |  | $ | 87,171  |  
|Interest, including discontinued operations                   |  |                         | 66,826  |   |            |   | 59,617  |            |  |   | 57,132  |  
|Provision for depreciation, including discontinued operations |  |                         | 64,212  |   |            |   | 53,352  |            |  |   | 47,535  |  
|Minority interests in income from consolidated subsidiaries   |  |                         | 2,509   |   |            |   | 3,196   |            |  |   | 3,682   |  
|(Gain) on sales of investments and rental properties          |  |                         | (19,925 | ) |            |   | (23,147 | )          |  |   | (14,929 | )
|General and administrative                                    |  |                         | 12,657  |   |            |   | 10,260  |            |  |   | 10,716  |  
|Dividends attributable to preferred stock                     |  |                         | 12,114  |   |            |   | 10,629  |            |  |   | 7,765   |  
|Redemption related preferred stock issuance costs             |  |                         |        |   |            |   | 2,166   |            |  |   |        |  
|Other expenses                                                |  |                         | 6,807   |   |            |   | 7,305   |            |  |   |        |  
|                                                              |  |                         |         |   |            |   |         |            |  |   |         |  
|Net operating income                                          |  | $                       | 206,627 |   |            | $ | 193,553 |            |  | $ | 199,072 |  
|                                                              |  |                         |         |   |            |   |         |            |  |   |         |  



We consider community
level and portfolio-wide NOI to be an appropriate supplemental measure to net income because it helps both investors and management to understand the core property operations prior to the allocation of general and administrative costs. This is more
reflective of the operating performance of the real estate, and allows for an easier comparison of the operating performance of single assets or groups of assets. In addition, because prospective buyers of real estate have different overhead
structures, with varying marginal impact to overhead by acquiring real estate, NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or groups of assets.



However, because NOI excludes depreciation and does not capture the change in
the value of our communities resulting from operational use and market conditions, nor the level of capital expenditures required to adequately maintain the communities (all of which have real economic effect and could materially impact our results
from operations), the utility of NOI as a measure of our performance is limited. Other equity REITs may not calculate NOI consistently with our definition and, accordingly, our NOI may not be comparable to such other REITs NOI. Accordingly,
NOI should be considered only as a supplement to net income as a measure of our performance. NOI should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends
or make distributions. NOI also should not be used as a supplement to or substitute for cash flow from operating activities (computed in accordance with GAAP).



Properties Completed during 2004



During 2004, we completed three development communities: Pinnacle at Westridge, with 234 units in Valencia, California; Pinnacle at Talega Phase II, with
110 units in San Clemente, California; and Pinnacle at Fullerton, with 192 units in Fullerton, California.



Development Properties



The following table provides data on our eight multifamily properties that are currently under various stages of development and construction. Completion of the development properties is subject to a number of risks and uncertainties,
including construction delays and cost overruns. We cannot assure that these properties will be



20



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completed, or that they will be completed by the estimated dates, or for the estimated amounts, or will contain the number of proposed units shown in the
table below.



|                                           |  |                   |  |                          |  |                                         |        |                      |   |                             |  |                            |         |  |        
|------------------------------------------ |  | ----------------- |  | ------------------------ |  | --------------------------------------- | ------ | -------------------- | - | --------------------------- |  | -------------------------- | ------- |  | -------
|(Dollar amounts in millions) Property Name |  | Location          |  | Proposed Number of Units |  | CostsIncurred to Date December 31,2004 |        | Estimated Total Cost |   | Estimated Cost to Complete  |  | Estimated Completion Date1
|Direct Investment                          |  |                   |  |                          |  |                                         |        |                      |   |                             |  |                            |         |  |        
|The Heights                                |  | Chino Hills, CA   |  | 208                      |  | $                                       | 27.5   |                      | $ | 38.9                        |  | $                          | 11.4    |  | 4Q/2005
|Bridgeport Cove                            |  | Santa Clarita, CA |  | 188                      |  |                                         | 18.7   |                      |   | 40.5                        |  |                            | 21.8    |  | 3Q/2006
|Galleria at Towngate                       |  | Moreno Valley, CA |  | 268                      |  |                                         | 11.4   |                      |   | 39.2                        |  |                            | 27.8    |  | 3Q/2006
|Renaissance at Uptown Orange               |  | Orange, CA        |  | 460                      |  |                                         | 33.7   |                      |   | 104.1                       |  |                            | 70.4    |  | 2Q/2007
|The Stuart at Sierra Madre Villa           |  | Pasadena, CA      |  | 188                      |  |                                         | 17.6   |                      |   | 54.2                        |  |                            | 36.6    |  | 2Q/2007
|                                           |  |                   |  |                          |  |                                         |        |                      |   |                             |  |                            |         |  |        
|Total Construction in Progress             |  |                   |  | 1,312                    |  | $                                       | 108.92 |                      | $ | 276.9                       |  | $                          | 168.0   |  |        
|                                           |  |                   |  |                          |  |                                         |        |                      |   |                             |  |                            |         |  |        
|                                           |  |                   |  |                          |  |                                         |        |                      |   |                             |  |                            |         |  |        
|Property Name                              |  | Location          |  | Proposed Number of Units |  | CostsIncurred to Date December 31,2004 |        | Estimated Total Cost |   | Estimated ConstructionStart |  |                           
|Land under development3                    |  |                   |  |                          |  |                                         |        |                      |   |                             |  |                            |         |  |        
|Bay Vista Apartments                       |  | Emeryville, CA    |  | 224                      |  | $                                       | 12.8   |                      | $ | 60.0                        |  |                            | 3Q/2005 |  |        
|Belcarra Apartments                        |  | Bellevue, WA      |  | 320                      |  |                                         | 21.8   |                      |   | 71.4                        |  |                            | 2Q/2006 |  |        
|Denny Way Apartments                       |  | Seattle, WA       |  | 195                      |  |                                         | 8.6    |                      |   | 47.8                        |  |                            | 2Q/2006 |  |        
|                                           |  |                   |  |                          |  |                                         |        |                      |   |                             |  |                            |         |  |        
|Total Land Under Development               |  |                   |  | 739                      |  | $                                       | 43.2   |                      | $ | 179.2                       |  |                            |         |  |        
|                                           |  |                   |  |                          |  |                                         |        |                      |   |                             |  |                            |         |  |        

---

|1 |  | Completion is defined as our estimate of when an entire project will have a final
certificate of occupancy issued and be ready for occupancy. Completion dates have been updated to reflect our current estimates of receipt of final certificates of occupancy, which are dependent on several factors, including construction delays and
the inability to obtain necessary public approvals.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2 |  | Reflects all recorded costs incurred as of December 31, 2004, recorded on our consolidated
balance sheet as direct investments in real estate-construction in progress.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3 |  | Land under development represents projects in various stages of pre-development, development,
and initial construction, for which construction or supply contracts have not yet been finalized. As these contracts are finalized, projects are transferred to construction in progress on our consolidated balance sheet.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Insurance, Property Taxes and Income Tax Basis



We carry comprehensive liability, fire, pollution, extended coverage and
rental loss insurance on our properties with certain policy specifications, limits and deductibles. In addition, at December 31, 2004, we carried flood and earthquake coverage with an annual aggregate limit of $100,000,000 (after policy deductibles
ranging from 2%-5% of damages). Management believes the properties are adequately covered by such insurance.



Property taxes on portfolio properties are assessed on asset values based on the valuation method and tax rate used by the respective jurisdictions. The
gross carrying value of our direct investments in operating rental properties was $2,538,171,000 as of December 31, 2004. On the same date our assets had an underlying federal income tax basis of approximately $2,298,831,000, reflecting, among other
factors, the carryover of basis on tax-deferred exchanges.



Headquarters



We lease our corporate headquarters at 44 Montgomery
Street, 36th Floor, San Francisco, California, 94104-4809, from OTR, an Ohio general partnership. The lease covers 15,170 rentable square feet at annual per square foot rents, which were $43.00 as of December 31, 2004. The lease term ends on January
31, 2006. We



21



---

have executed a new lease, which will move our corporate headquarters to 525 Market Street, 4th Floor, San Francisco, CA 94104-4809. The lease covers 28,339
rentable square feet at annual per square foot rents, which average $25.76 for the lease term. The lease term is 126 months commencing August 1, 2005. We also maintain regional offices in: Seattle, Washington; Irvine and San Diego, California;
Phoenix, Arizona; and Denver, Colorado.



Item
3.    LEGAL PROCEEDINGS



On April 14,
1997, we purchased Red Hawk Ranch Apartments, a 453-unit operating community in Fremont, California, from an unrelated third party builder. The community now requires extensive replacement work to correct damage we believe was caused by construction
defects. On March 18, 2003, we filed suit in the Alameda County Superior Court against the builder and other parties to protect against statutes of limitation. We have conducted testing to determine the extent of the damage. Based upon the testing
that has been performed to date, we have discovered that the exterior shell of each building at the community has been compromised. As a result, during second quarter 2004 we expanded the size and scope of the lawsuit.



We plan to commence reconstruction during the first six months of 2005 and
expect to have the community restored during the next 18 to 21 months. We are actively pursuing the litigation against the third party builder and various sub-contractors.



While management expects that costs of remediation will approximate up to $26,000,000, and future plaintiff litigation costs
may exceed $3 million, due to the preliminary nature of the damage assessment, claims and litigation, it is not possible to predict or determine the outcome of legal actions, nor is it reasonably possible to accurately estimate the full range of
costs associated with the matter at this time.



In addition to
the legal proceeding described above, we are defending various claims and legal actions that arise in our normal course of business. 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 us.



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



None.



22



---

PART II



Item 5.    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES

|
|

Our common stock is traded on the New York Stock Exchange under the symbol BRE.
As of February 11, 2005, there were approximately 4,700 recordholders of BREs common stock and the last reported sales price on the NYSE was $39.82. The number of holders does not include shares held of record by a broker or clearing agency,
but does include each such broker or clearing agency as one recordholder. As of February 11, 2005, there were approximately 21,000 beneficial holders of BREs common stock.



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



|               |  |                          |       |                |   |             |      |                |        |  |   |       |  |   |       |  |   |       
|-------------- |  | ------------------------ | ----- | -------------- | - | ----------- | ---- | -------------- | ------ |  | - | ----- |  | - | ----- |  | - | ------
|               |  | Years ended December 31,
|               |  | 2004                     |       | 2003          
|               |  | Stock Price              |       | Dividends Paid |   | Stock Price |      | Dividends Paid
|               |  | High                     |       | Low            |   |             | High |                | Low    | 
|First Quarter  |  | $                        | 34.98 |                | $ | 31.97       |      | $              | 0.4875 |  | $ | 32.08 |  | $ | 28.15 |  | $ | 0.4875
|Second Quarter |  | $                        | 35.18 |                | $ | 29.90       |      | $              | 0.4875 |  | $ | 33.30 |  | $ | 29.52 |  | $ | 0.4875
|Third Quarter  |  | $                        | 38.76 |                | $ | 33.83       |      | $              | 0.4875 |  | $ | 34.90 |  | $ | 31.95 |  | $ | 0.4875
|Fourth Quarter |  | $                        | 42.54 |                | $ | 38.12       |      | $              | 0.4875 |  | $ | 34.45 |  | $ | 31.20 |  | $ | 0.4875



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



During the three months ended December 31, 2004, an aggregate 1,661 limited partnership units in BRE Property Investors LLC were exchanged for shares of
BRE common stock. For the year ended December 31, 2004, an aggregate 9,336 limited partnership units in BRE Property Investors LLC were exchanged for shares of BRE common stock. The exchange of limited partnership units for shares of our common
stock was exempt from the registration requirements of the Securities Act pursuant to Section 4(2) of the Securities Act and Rule 506 of Regulation D.



23



---

Item 6.    SELECTED FINANCIAL DATA



The selected financial data below should be read in conjunction with
Managements Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes. The results are affected by numerous acquisitions and dispositions as discussed in
Managements Discussion and Analysis of Financial Condition and Results of Operations. Therefore, the consolidated financial statements and notes thereto included elsewhere in this report are not directly comparable to prior years.
In addition, the selected financial data as of and for the years ended December 31, 2003, 2002, 2001 and 2000 have been restated to reflect certain adjustments to our consolidated financial statements. See Note 2 to the consolidated financial
statements included in Part IV, Item 15 of this Annual Report on Form 10-K for more information.





|                                                                                          |  |                                               |           |   |            |    |           |            |  |    |            |   |  |            |           |   |  |    |           |  
|----------------------------------------------------------------------------------------- |  | --------------------------------------------- | --------- | - | ---------- | -- | --------- | ---------- |  | -- | ---------- | - |  | ---------- | --------- | - |  | -- | --------- | -
|                                                                                          |  | 2004                                          |           |   | 2003       |    |           | 2002       |  |    | 2001       |   |  | 2000       |          
|                                                                                          |  | (Amounts in thousands, except per share data) |          
|                                                                                          |  |                                               |           |   | (Restated) |    |           | (Restated) |  |    | (Restated) |   |  | (Restated) |          
|Operating Results                                                                         |  |                                               |           |   |            |    |           |            |  |    |            |   |  |            |           |   |  |    |           |  
|Rental and ancillary revenues                                                             |  | $                                             | 280,642   |   |            | $  | 256,230   |            |  | $  | 242,258    |   |  | $          | 225,395   |   |  | $  | 217,114   |  
|Revenues from discontinued operations                                                     |  |                                               | 16,551    |   |            |    | 18,553    |            |  |    | 31,602     |   |  |            | 30,518    |   |  |    | 29,236    |  
|Partnership and other income                                                              |  |                                               | 3,190     |   |            |    | 2,344     |            |  |    | 4,347      |   |  |            | 7,763     |   |  |    | 7,127     |  
|                                                                                          |  |                                               |           |   |            |    |           |            |  |    |            |   |  |            |           |   |  |    |           |  
|Total revenues                                                                            |  | $                                             | 300,383   |   |            | $  | 277,127   |            |  | $  | 278,207    |   |  | $          | 263,676   |   |  | $  | 253,477   |  
|                                                                                          |  |                                               |           |   |            |    |           |            |  |    |            |   |  |            |           |   |  |    |           |  
|Net income available to common shareholders                                               |  | $                                             | 61,427    |   |            | $  | 70,175    |            |  | $  | 87,171     |   |  | $          | 78,971    |   |  | $  | 36,521    |  
|Plus:                                                                                     |  |                                               |           |   |            |    |           |            |  |    |            |   |  |            |           |   |  |    |           |  
|Net (gain) loss on sales of investments and rental properties                             |  |                                               | (19,925   | ) |            |    | (23,147   | )          |  |    | (14,929    | ) |  |            | 327       |   |  |    | 35,693    |  
|Depreciation from continuing operations                                                   |  |                                               | 61,296    |   |            |    | 49,644    |            |  |    | 41,500     |   |  |            | 34,527    |   |  |    | 32,478    |  
|Depreciation from discontinued operations                                                 |  |                                               | 2,916     |   |            |    | 3,708     |            |  |    | 6,035      |   |  |            | 5,801     |   |  |    | 4,947     |  
|Depreciation related to unconsolidated entities                                           |  |                                               | 1,013     |   |            |    | 1,094     |            |  |    | 1,332      |   |  |            | 1,490     |   |  |    | 197       |  
|Minority interest convertible into common shares                                          |  |                                               | 1,915     |   |            |    | 2,216     |            |  |    | 2,963      |   |  |            | 3,413     |   |  |    | 4,614     |  
|                                                                                          |  |                                               |           |   |            |    |           |            |  |    |            |   |  |            |           |   |  |    |           |  
|Funds from operations (FFO) 1                                                             |  | $                                             | 108,642   |   |            | $  | 103,690   |            |  | $  | 124,072    |   |  | $          | 124,529   |   |  | $  | 114,450   |  
|                                                                                          |  |                                               |           |   |            |    |           |            |  |    |            |   |  |            |           |   |  |    |           |  
|Other expenses2                                                                           |  | $                                             | 6,807     |   |            | $  | 7,305     |            |  | $  |           |   |  | $          | 7,163     |   |  | $  | 8,765     |  
|Net cash flows generated by operating activities                                          |  | $                                             | 136,205   |   |            | $  | 114,995   |            |  | $  | 137,177    |   |  | $          | 133,638   |   |  | $  | 120,884   |  
|Net cash flows used in investing activities                                               |  | ($                                            | 327,114   | ) |            | ($ | 146,363   | )          |  | ($ | 209,983    | ) |  | ($         | 184,776   | ) |  | ($ | 103,022   | )
|Net cash flows generated by (used in) financing activities                                |  | $                                             | 189,804   |   |            | $  | 31,580    |            |  | $  | 69,807     |   |  | $          | 54,768    |   |  | ($ | 31,412    | )
|Dividends paid to common and preferred shareholders and distributions to minority members |  | $                                             | 112,330   |   |            | $  | 105,829   |            |  | $  | 101,163    |   |  | $          | 95,025    |   |  | $  | 88,700    |  
|Weighted average shares outstandingbasic                                                 |  |                                               | 50,200    |   |            |    | 47,070    |            |  |    | 45,860     |   |  |            | 46,235    |   |  |    | 45,181    |  
|Dilutive effect of stock options                                                          |  |                                               | 625       |   |            |    | 375       |            |  |    | 350        |   |  |            | 400       |   |  |    | 350       |  
|                                                                                          |  |                                               |           |   |            |    |           |            |  |    |            |   |  |            |           |   |  |    |           |  
|Weighted average shares outstandingdiluted (EPS)                                         |  |                                               | 50,825    |   |            |    | 47,445    |            |  |    | 46,210     |   |  |            | 46,635    |   |  |    | 45,531    |  
|PlusOperating Company Units3                                                             |  |                                               | 985       |   |            |    | 1,145     |            |  |    | 1,560      |   |  |            | 1,875     |   |  |    | 2,739     |  
|                                                                                          |  |                                               |           |   |            |    |           |            |  |    |            |   |  |            |           |   |  |    |           |  
|Weighted average shares outstandingdiluted (FFO)                                         |  |                                               | 51,810    |   |            |    | 48,590    |            |  |    | 47,770     |   |  |            | 48,510    |   |  |    | 48,270    |  
|Shares outstanding at end of period                                                       |  |                                               | 50,419    |   |            |    | 49,992    |            |  |    | 45,871     |   |  |            | 45,807    |   |  |    | 45,895    |  
|Operating company units outstanding at end of period                                      |  |                                               | 1,019     |   |            |    | 973       |            |  |    | 1,206      |   |  |            | 1,639     |   |  |    | 2,287     |  
|Net income per sharebasic                                                                |  |                                               | $1.22     |   |            |    | $1.49     |            |  |    | $1.90      |   |  |            | $1.71     |   |  |    | $0.81     |  
|Net income per shareassuming dilution                                                    |  |                                               | $1.21     |   |            |    | $1.48     |            |  |    | $1.89      |   |  |            | $1.69     |   |  |    | $0.80     |  
|Dividends paid to common shareholders                                                     |  |                                               | $1.95     |   |            |    | $1.95     |            |  |    | $1.95      |   |  |            | $1.86     |   |  |    | $1.70     |  
|Balance sheet information and other data                                                  |  |                                               |           |   |            |    |           |            |  |    |            |   |  |            |           |   |  |    |           |  
|Real estate portfolio, net of depreciation                                                |  | $                                             | 2,480,417 |   |            | $  | 2,184,947 |            |  | $  | 2,064,009  |   |  | $          | 1,824,811 |   |  | $  | 1,679,644 |  
|Total assets                                                                              |  | $                                             | 2,518,941 |   |            | $  | 2,233,264 |            |  | $  | 2,112,116  |   |  | $          | 1,883,114 |   |  | $  | 1,726,557 |  
|Total debt                                                                                |  | $                                             | 1,378,566 |   |            | $  | 1,192,329 |            |  | $  | 1,173,764  |   |  | $          | 1,008,431 |   |  | $  | 825,253   |  
|Minority interest                                                                         |  | $                                             | 35,675    |   |            | $  | 38,859    |            |  | $  | 45,147     |   |  | $          | 52,151    |   |  | $  | 69,712    |  
|Shareholders equity                                                                      |  | $                                             | 1,046,647 |   |            | $  | 956,803   |            |  | $  | 847,601    |   |  | $          | 782,186   |   |  | $  | 798,223   |  

---

|1 |  | FFO is used by industry analysts and investors as a supplemental performance measure of an equity REIT. FFO is defined by the National Association of Real Estate
Investment Trusts as net income or loss (computed in accordance with accounting principles generally accepted in the United States) excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated real
estate assets, plus depreciation and amortization of real estate assets and adjustments for unconsolidated partnerships and joint ventures. We calculate FFO in accordance with the NAREIT definition.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



24



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| |  | We believe that FFO is a meaningful supplemental measure of our operating performance because historical cost accounting for real estate assets in accordance with GAAP assumes that
the value of real estate assets diminishes predictably over time, as reflected through depreciation. Because real estate values have historically risen or fallen with market conditions, management considers FFO an appropriate supplemental
performance measure because it excludes historical cost depreciation, as well as gains or losses related to sales of previously depreciated property, from GAAP net income. By excluding depreciation and gains or losses on sales of real estate,
management uses FFO to measure returns on its investments in real estate assets. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions
nor the level of capital expenditures to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations, the utility of FFO as a measure of our performance is
limited. Management also believes that FFO, combined with the required GAAP presentations, is useful to investors in providing more meaningful comparisons of the operating performance of a companys real estate between periods or as compared to
other companies. FFO does not represent net income or cash flows from operations as defined by GAAP and is not intended to indicate whether cash flows will be sufficient to fund cash needs. It should not be considered an alternative to net income as
an indicator of a REITs operating performance or to cash flows as a measure of liquidity. Our FFO may not be comparable to the FFO of other REITs due to the fact that not all REITs use the NAREIT definition.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2 |  | Other expenses for 2004 represent a CEO retirement charge of $4.1M and Red Hawk Ranch litigation and consulting costs totaling $2.7M. Other expenses for 2003
represent settlement charges and fees related to the Pinnacle at MacArthur joint venture dispute and class action application fee suit. Other expenses for 2001 and 2000 represent losses from Velocity HSI, Inc., our former Internet business that was
spun off on August 15, 2000.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3 |  | Under SFAS 128, Earnings per Share, common share equivalents deemed to be anti-dilutive are
excluded from the diluted per share calculations.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------



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



The Managements Discussion and Analysis of Financial Condition and Results of Operations set forth in this Item 7 has been restated to reflect certain adjustments to our consolidated financial statements for
2003 and 2002, contained in this Annual Report on Form 10-K. See Note 2 to the consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.



Executive Summary



We are a self-administered equity real estate investment trust or REIT focused on the development, acquisition and management of multifamily
apartment communities in seven metropolitan markets of the Western United States. At December 31, 2004, our portfolio had real estate assets with a net book value of approximately $2.5 billion that included 85 wholly or majority owned completed
apartment communities, aggregating 24,198 units; two multifamily communities owned in joint ventures, comprised of 488 apartment units; and eight apartment communities in various stages of construction and development, totaling 2,051 units. We earn
revenue and generate cash primarily by collecting monthly rent from our apartment residents.



Our 2003 and 2002 operating results reflect deteriorating national and regional economic conditions and the corresponding impact on our market level rents and occupancy, with modest recovery reflected in 2004.
Operating metrics toward the end of 2000, including market rents, occupancy and turnover, reflected national and regional economic cycles at peak levels, just prior to entering a recessionary phase. Recessionary pressures and weakening employment
conditions that accelerated during 2001 continued throughout 2002 and 2003, resulting in depressed market rents, flat average occupancy levels and higher than normal resident turnover levels. In 2004, the economic factors stabilized in most of our
markets, resulting in flat to modest improvement in operating metrics.



25



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We have experienced sustained growth in our Southern California markets, which comprised 48% of our real
estate net operating income in 2004. Market rents in Southern California have increased 12% over the past three years and occupancy and turnover have remained stable. Management has focused its efforts on growth in the Southern California markets
due to these market dynamics, and has acquired 2,174 units, completed the development of 788 units and commenced construction on another 1,312 units in the region during the last two years.



Economic conditions and continued job losses had the greatest impact in our
San Francisco Bay Area market. During 2004, market level rents in our San Francisco Bay Area communities continued to decline from 2000 peak levels. Market rent in our Bay Area portfolio peaked in the third quarter of 2000 at approximately $2,000
per unit and has declined sequentially each of the past four years, to an average of $1,348 per unit in 2004. Management does not expect market rents to recover in this region until there is discernable job growth. We continue to closely monitor and
act upon the key operating metrics  market rent, occupancy, and turnover  in each of our markets.



Our 85 wholly or majority owned apartment communities can be categorized as follows to better understand our overall results:



| |  |  | 19,012 units in 68 communities were completed and stabilized for all of 2004 and 2003 (same-store communities);
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | 2,597 units in nine communities were acquired in 2004 or 2003 and as a result did not have comparable year-over-year operating results;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 1,208 units in four development communities were completed and stabilized during 2004 and 2003 and as a result did not have comparable year-over-year operating results;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 928 units in three communities are classified as held for sale at December 31, 2004; and
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | 453 units in one community require significant reconstruction.
| | - |  | --------------------------------------------------------------



In addition to year-over-year economic operating performance, our results of operations for the three years ended December 31, 2004 were affected by
income derived from acquisitions and completions of apartment communities, offset by the cost of capital associated with financing these transactions. Our book capitalization grew to $2.5 billion at December 31, 2004, from $1.8 billion at December
31, 2001, reflecting capital raised through offerings of debt, perpetual preferred stock and common stock.



RESULTS OF OPERATIONS



Comparison
of the Years ended December 31, 2004, 2003 and 2002



Revenues



Total revenues were $300,383,000 in 2004, $277,127,000 in
2003, and $278,207,000 in 2002, including revenues from discontinued operations. The increase in rental and ancillary income in 2004 and 2003 was primarily derived from properties acquired, developed, and consolidated during the past three years.
Same-store communities in 2004 produced a modest increase of $482,000 (0.2%) as compared to 2003. The 2004 increase in same-store revenues followed two years of declining same-store revenues, (4%) and (3%) for the
years ended December 31, 2003 and 2002, respectively. A summary of revenues for the years ended December 31, 2004, 2003 and 2002 follows:



|                                      |  |            |             |                    |     |   |            |   |                    |  |     |            |  |                    |             |  |     |  
|------------------------------------- |  | ---------- | ----------- | ------------------ | --- | - | ---------- | - | ------------------ |  | --- | ---------- |  | ------------------ | ----------- |  | --- | -
|                                      |  | 2004 Total |             | % of TotalRevenues |     |   | 2003 Total |   | % of TotalRevenues |  |     | 2002 Total |  | % of TotalRevenues |            
|Rental income                         |  | $          | 267,997,000 |                    | 89  | % |            | $ | 244,982,000        |  | 88  | %          |  | $                  | 232,029,000 |  | 84  | %
|Ancillary income                      |  |            | 12,645,000  |                    | 4   | % |            |   | 11,248,000         |  | 4   | %          |  |                    | 10,229,000  |  | 4   | %
|Revenues from discontinued operations |  |            | 16,551,000  |                    | 6   | % |            |   | 18,553,000         |  | 7   | %          |  |                    | 31,602,000  |  | 11  | %
|Partnership income                    |  |            | 1,558,000   |                    |    | % |            |   | 882,000            |  |    | %          |  |                    | 3,393,000   |  | 1   | %
|Other income                          |  |            | 1,632,000   |                    | 1   | % |            |   | 1,462,000          |  | 1   | %          |  |                    | 954,000     |  |    | %
|                                      |  |            |             |                    |     |   |            |   |                    |  |     |            |  |                    |             |  |     |  
|Total revenue                         |  | $          | 300,383,000 |                    | 100 | % |            | $ | 277,127,000        |  | 100 | %          |  | $                  | 278,207,000 |  | 100 | %
|                                      |  |            |             |                    |     |   |            |   |                    |  |     |            |  |                    |             |  |     |  



26



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Rental and Ancillary Income



As described above, the increase in rental and ancillary revenues primarily relates to acquired and developed communities.
The following table summarizes our multifamily property acquisitions, development properties completed and dispositions for the years ended December 31, 2004, 2003 and 2002 (dollar amounts are gross acquisition costs in the case of acquisitions,
total delivered cost in the case of completed development communities and gross sales prices in the case of property dispositions):



|                                 |  |            |  |             |  |            |  |             |  |            |  |            
|-------------------------------- |  | ---------- |  | ----------- |  | ---------- |  | ----------- |  | ---------- |  | -----------
|                                 |  | 2004       |  | 2003        |  | 2002      
|                                 |  | # of units |  | $           |  | # of units |  | $           |  | # of units |  | $          
|Multifamily                      |  |            |  |             |  |            |  |             |  |            |  |            
|Property acquisitions            |  | 1,559      |  | 268,218,000 |  | 1,038      |  | 116,183,000 |  | 1,376      |  | 156,500,000
|Development properties completed |  | 536        |  | 107,800,000 |  | 672        |  | 97,900,000  |  | 1,013      |  | 168,000,000
|Property dispositions            |  | 878        |  | 98,600,000  |  | 1,100      |  | 72,600,000  |  | 663        |  | 58,300,000 



The property
acquisitions and development properties completed, noted above, are considered Non same-store communities and increased rental and ancillary revenues by $23,930,000 and $22,160,000 for the years ended December 31, 2004 and 2003,
respectively. In 2004, on a same-store basis, rental and ancillary revenues increased $482,000, or 0.2%, primarily due to stable to slightly positive operating metrics. Monthly market rents in the same-store portfolio grew to
$1,116 per unit from $1,104 in 2003. Due to the staggered nature of lease expiration dates, market rent increases are not immediately reflected in actual leased rents. As a result, leased rent per unit per month grew only $4 from 2003 to 2004. In
2003, increased revenues from non same-store communities were offset by negative same-store operating results. On a same-store basis, rental and ancillary revenues decreased $8,188,000, or 4%, from 2002 to 2003
primarily due to average market rent per unit decreasing approximately 4%.



|                                                                                                  |  |                          |            |                          |    |            |  
|------------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | ------------------------ | -- | ---------- | -
|                                                                                                  |  | 2004 Increase/(Decrease) |            | 2003 Increase/(Decrease) |   
|Same-store Communities                                                                            |  | $                        | 482,000    |                          | ($ | 8,188,000  | )
|Non Same-store Communities                                                                        |  |                          | 23,930,000 |                          |    | 22,160,000 |  
|                                                                                                  |  |                          |            |                          |    |            |  
|Total increase in rental and ancillary revenues (excluding revenues from discontinued operations) |  | $                        | 24,412,000 |                          | $  | 13,972,000 |  
|                                                                                                  |  |                          |            |                          |    |            |  



|                                                                         |  |      |   |  |      |   |  |      |  
|------------------------------------------------------------------------ |  | ---- | - |  | ---- | - |  | ---- | -
|                                                                         |  | 2004 |   |  | 2003 |   |  | 2002 |  
|Number of wholly or majority owned operating properties at December 31,. |  | 85   |   |  | 80   |   |  | 81   |  
|Average portfolio occupancy rates for operating properties               |  | 94   | % |  | 94   | % |  | 94   | %



Portfolio occupancy is
calculated by dividing the total occupied units by the total units in stabilized communities in the portfolio.



Partnership income



Partnership income totaled $1,558,000; $882,000 and $3,393,000 for the years ended December 31, 2004, 2003 and 2002, respectively. The increase in 2004
from 2003 is driven by gains on the sales of underlying assets in an unconsolidated partnership in 2004. The decrease in 2003 from 2002 is driven by the consolidation of five previously unconsolidated communities during 2002, which resulted in fewer
partnerships contributing partnership income.



27



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Expenses



Real estate expenses



|A |  | summary of real estate expenses, excluding discontinued operations, follows:
|- |  | ----------------------------------------------------------------------------

|
|

|                                                                            |  |      |            |   |            |   |            |            |  |   |            |  
|--------------------------------------------------------------------------- |  | ---- | ---------- | - | ---------- | - | ---------- | ---------- |  | - | ---------- | -
|                                                                            |  | 2004 |            |   | 2003       |   |            | 2002       | 
|                                                                            |  |      |            |   | (Restated) |   |            | (Restated) | 
|Real estate expenses                                                        |  | $    | 88,433,000 |   |            | $ | 77,599,000 |            |  | $ | 68,347,000 |  
|Percent of total revenues (excluding revenues from discontinued operations) |  |      | 31         | % |            |   | 30         | %          |  |   | 28         | %
|Same-store expense % change                                               |  |      | 3          | % |            |   | 2          | %          |  |   | 2          | %



Real estate expenses
for multifamily rental properties (which include repairs and maintenance, utilities, on-site staff payroll, property taxes, insurance, advertising and other direct operating expenses) increased $10,834,000 or 14% for the year ended December 31,
2004, as compared to the prior year. The 1,559 units acquired and 536 units developed in 2004, combined with 2003 acquisition and development units operating for a full year, drive the year-over-year increase. Additionally, same-store
expenses increased by $2,249,000, or 3% in 2004, primarily driven by an increase in repairs and maintenance expenses. The overall level of same-store expense increase was consistent with historical levels. In 2003, real estate expenses
increased by $9,252,000 or 14% because of the 1,710 units acquired or developed in 2003, combined with 2002 acquisition and development units operating for a full year.



Provision for depreciation



The provision for depreciation, excluding depreciation from discontinued operations, increased by $11,652,000 (23%) for the year ended December 31,
2004 compared to 2003, and increased by $8,144,000 (20%) for the year ended December 31, 2003 compared to 2002. The increases in 2004 and 2003 resulted primarily from higher depreciable bases on new property acquisitions and development properties
completed. Additionally, depreciation recorded in 2004 includes $2,600,000 in accelerated depreciation recorded on components of our Red Hawk Ranch community that require reconstruction.



Interest expense



During the past three years, our interest expense has increased due to higher average debt balances to support our acquisition and development activities
and a reduced level of capitalized interest. Capitalized interest decreased during both 2004 and 2003 due to the delivery and completion of certain properties in construction. Weighted average interest rates did not change from 2003 to 2004, and
decreased from 6.0% in 2002 to 5.6% in 2003. Interest expense, excluding interest expense from discontinued operations, for the years ended December 31, 2004, 2003 and 2002 follows:



|                                   |  |      |            |   |      |   |            |      |  |   |             |  
|---------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ----------- | -
|                                   |  | 2004 |            |   | 2003 |   |            | 2002 | 
|Interest on unsecured senior notes |  | $    | 56,025,000 |   |      | $ | 52,683,000 |      |  | $ | 46,043,000  |  
|Interest on mortgage loans payable |  |      | 7,301,000  |   |      |   | 8,723,000  |      |  |   | 12,867,000  |  
|Interest on lines of credit        |  |      | 9,663,000  |   |      |   | 7,136,000  |      |  |   | 9,211,000   |  
|                                   |  |      |            |   |      |   |            |      |  |   |             |  
|Total interest incurred            |  | $    | 72,989,000 |   |      | $ | 68,542,000 |      |  | $ | 68,121,000  |  
|Capitalized interest               |  |      | (6,163,000 | ) |      |   | (9,117,000 | )    |  |   | (12,015,000 | )
|                                   |  |      |            |   |      |   |            |      |  |   |             |  
|Total interest expense             |  | $    | 66,826,000 |   |      | $ | 59,425,000 |      |  | $ | 56,106,000  |  
|                                   |  |      |            |   |      |   |            |      |  |   |             |  



28



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Year-end debt balances at December 31, 2004, 2003 and 2002 follow:



|                                                             |  |      |               |   |      |   |               |      |  |   |               |  
|------------------------------------------------------------ |  | ---- | ------------- | - | ---- | - | ------------- | ---- |  | - | ------------- | -
|                                                             |  | 2004 |               |   | 2003 |   |               | 2002 | 
|Unsecured senior notes                                       |  | $    | 848,201,000   |   |      | $ | 763,915,000   |      |  | $ | 774,570,000   |  
|Lines of credit                                              |  |      | 327,000,000   |   |      |   | 296,000,000   |      |  |   | 181,000,000   |  
|Mortgage loans payable                                       |  |      | 203,365,000   |   |      |   | 132,414,000   |      |  |   | 218,194,000   |  
|                                                             |  |      |               |   |      |   |               |      |  |   |               |  
|Total debt                                                   |  | $    | 1,378,566,000 |   |      | $ | 1,192,329,000 |      |  | $ | 1,173,764,000 |  
|                                                             |  |      |               |   |      |   |               |      |  |   |               |  
|Weighted average interest rate for all debt at end of period |  |      | 5.6           | % |      |   | 5.6           | %    |  |   | 6.0           | %
|                                                             |  |      |               |   |      |   |               |      |  |   |               |  



General and
administrative expenses



General and administrative
expenses for the three years ended December 31, 2004 were as follows:



|                                                                                    |  |      |            |   |            |   |            |            |  |   |            |  
|----------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---------- | - | ---------- | ---------- |  | - | ---------- | -
|                                                                                    |  | 2004 |            |   | 2003       |   |            | 2002       | 
|                                                                                    |  |      |            |   | (Restated) |   |            | (Restated) | 
|General and administrative expenses                                                 |  | $    | 12,657,000 |   |            | $ | 10,260,000 |            |  | $ | 10,716,000 |  
|As a percentage of total revenues (including revenues from discontinued operations) |  |      | 4.2        | % |            |   | 3.7        | %          |  |   | 3.9        | %



The increase in 2004
is primarily due to increases in compensation, costs associated with compliance with Sarbanes Section 404, other professional fees and insurance costs. In addition, in 2003 we began expensing the cost associated with stock options in accordance with
FAS 123. Stock option expense included in general and administrative expense totaled $904,000 and $454,000 for the years ended December 31, 2004 and 2003, respectively.



Office rent totaling $1,179,000; $1,283,000 and $1,213,000 for the years ended December 31, 2004, 2003 and 2002,
respectively, is included in general and administrative expense.



Net gain (loss) on sales of investments



During 2002, we sold our minority partnership interest in a commercial property for a net gain on sale of approximately $7,200,000. We also sold our investment in shares of common stock of Corrigo, Inc., a non-affiliated technology company,
for a loss of $800,000. In addition, we sold excess land at a loss of approximately $1,500,000. These three transactions completed the disposition of our non-multifamily investments and resulted in a net gain of approximately $4,900,000.



Other expenses



Other expenses of $6,807,000 in 2004 include a CEO retirement charge of
$4,080,000 and $2,727,000 for legal and consulting charges related to Red Hawk Ranch. On December 13, 2004, the board of directors determined the leadership transition between the CEO, Mr. Frank McDowell, and Ms. Constance Moore was complete. As a
result, future service by Mr. McDowell as an executive consultant, as specified in his Executive Transition Employment Agreement, was no longer viewed as necessary. The board and Mr. McDowell mutually agreed to exercise the early termination without
cause provision of this agreement, such that Mr. McDowell retired from BRE and the board effective January 1, 2005. The early termination resulted in a one-time charge of approximately $4,080,000 during fourth quarter 2004, rather than recognizing a
monthly expense over the next two years of service by Mr. McDowell. The charge is comprised of approximately $2,050,000 in cash payments and $2,030,000 in non-cash charges related to the fair value of stock options and restricted shares that vested
under the agreement.





29



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Also included in Other expenses in 2004 are legal and consulting charges related to the Red Hawk Ranch
litigation totaling $2,727,000. The expense represents litigation and consulting costs incurred in connection with the construction defect litigation we are pursuing against the builder of our Red Hawk Ranch Community, located in Fremont,
California. The charges reported include litigation costs and consulting fees incurred to date during destructive testing, to determine the extent of the damage and required reconstruction.



Other expenses in 2003 represent legal settlement charges that are outside
our normal course of business. During 2003, we executed a settlement agreement in connection with litigation with an unrelated third party regarding the Pinnacle at MacArthur Place joint venture agreement. Under the terms of the settlement
agreement, we paid the third party $6,500,000 and retained full ownership of the asset. Pinnacle at MacArthur Place is a recently developed and stabilized, 253-unit community in Santa Ana, California. Also during 2003, we reached a settlement
agreement regarding a class action lawsuit brought against us with respect to application fees charged to residents from August 1998 to August 2003. Under the terms of the settlement, we agreed to establish a $200,000 fund to reimburse prior
applicants up to $5.00 per applicant, and to pay certain related administration charges and legal expenses. The combined settlement amounts, legal fees and related expenses aggregate $7,305,000, and are reported as other expenses on our consolidated
statement of income.



Minority interests in income



Minority interests in income relate to the earnings
attributable to the minority members of our consolidated subsidiaries and were $2,509,000 for the year ended December 31, 2004, down from $3,196,000 and $3,682,000 for the years ended December 31, 2003 and 2002, respectively. Minority interests and
consequently, minority interests in income declined each year as operating company unit holders of BRE Property Investors LLC exchanged their units for shares of BRE common stock. Conversions of operating company units to common shares totaled
9,336; 233,083 and 433,112 for the years ended December 31, 2004, 2003 and 2002, respectively.



Discontinued operations



SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, requires the results of operations for properties sold during
the period or designated as held for sale at the end of the period to be classified as discontinued operations. The property-specific components of net earnings that are classified as discontinued operations include all property-related revenues and
operating expenses, depreciation expense recognized prior to the classification as held for sale, and property-specific interest expense to the extent there is secured debt on the property. In addition, the net gain or loss on the eventual disposal
of properties held for sale is reported as discontinued operations.



During 2004, we sold three operating communities with a total of 878 units. The communities were sold for an aggregate gross sales price of approximately $98,600,000, resulting in a net gain on sale of approximately $19,925,000. At December
31, 2004, three operating communities were classified as held for sale under the provisions of SFAS 144. No depreciation has been recorded on these communities since October 2004.



During 2003, we sold three operating communities with a total of 1,100 units. The communities were sold for an aggregate
gross sales price of approximately $72,600,000, resulting in a net gain on sale of approximately $23,100,000. During 2002, we sold three operating communities with a total of 663 units. The communities were sold for an aggregate gross sales price of
approximately $59,300,000, resulting in a net gain on sale of approximately $10,100,000.



The net gain on sale and the combined results of operations for these twelve communities for each year presented are included in discontinued operations on the consolidated statements of income. These amounts totaled
$28,237,000; $31,825,000 and $23,820,000 for the years 2004, 2003 and 2002, respectively. The assets held for sale at December 31, 2004 have also been reclassified as held for sale on the consolidated balance sheets at December 31, 2003.





30



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Dividends attributable to preferred stock



Dividends attributable to preferred stock represent the dividends on our
8.50% Series A, 8.08% Series B, 6.75% Series C and 6.75% Series D Cumulative Redeemable Preferred Stock. Dividend payments totaled $11,791,000; $10,629,000 and $7,765,000 for the years 2004, 2003 and 2002, respectively. On January 29, 2004, we
redeemed all 2,150,000 outstanding shares of our 8.50% Series A Cumulative Redeemable Preferred Stock. The Series C offering closed on March 15, 2004 and the Series D offering closed on December 9, 2004. Accrued and unpaid dividends on the Series D
preferred shares total $323,000 as of December 31, 2004.



In
connection with the issuance of the Series A Cumulative Redeemable Preferred Stock in January 1999, we incurred approximately $2,166,000 in issuance costs and recorded such costs as a reduction of shareholders equity. Upon announcing the
redemption of these shares in December 2003, we recorded a charge to write off these issuance costs. The charge is treated as a preferred stock dividend on the consolidated statements of income.



Net income available to common shareholders



As a result of the various factors mentioned above, net income available to
common shareholders for the year ended December 31, 2004 was $61,427,000, or $1.21 per diluted share, as compared with $70,175,000, or $1.48 per diluted share for the year ended December 31, 2003 and $87,171,000, or $1.89 per diluted share for the
year ended December 31, 2002.



Liquidity and Capital Resources



Depending upon the availability and cost of external
capital, we anticipate making additional investments in multifamily apartment communities. These investments are expected to be funded through a variety of sources. These sources may include internally generated cash, temporary borrowings under our
revolving unsecured line of credit, proceeds from asset sales, public and private offerings of debt and equity securities, and in some cases the assumption of secured borrowings. To the extent that these additional investments are initially financed
with temporary borrowings under our revolving unsecured line of credit, we anticipate that permanent financing will be provided through a combination of public and private offerings of debt and equity securities, proceeds from asset sales and
secured debt. We believe our liquidity and various sources of available capital are sufficient to fund operations, meet debt service and dividend requirements, and finance future investments.



On March 15, 2004, we closed an offering of 4,000,000 shares of 6.75% Series
C Cumulative Redeemable Preferred Stock at a public offering price of $25 per share. Net proceeds from the offeringafter all discounts, commissions and issuance coststotaled approximately $96,436,000 and were used for general corporate
purposes.



On December 9, 2004, we closed an offering of
3,000,000 shares of 6.75% Series D Cumulative Redeemable Preferred Stock at a public offering price of $25 per share. Net proceeds from the offeringafter all discounts, commissions and issuance coststotaled approximately $72,436,000 and
were used for general corporate purposes.



On March 17, 2004,
we closed an offering of $100,000,000 of dual-tranche Medium-Term Notes under a medium term note program initiated in 2001. The offering included $50,000,000 of five-year notes with a coupon rate of 3.58%, and $50,000,000 of 10-year notes with a
coupon rate of 4.70%.



Proceeds from these offerings have been
used for general corporate purposes, including the repayment of debt, redemption of equity securities, funding for development activities and financing for acquisitions. Pending these uses, we initially used the proceeds from these offerings to
reduce borrowings under our revolving unsecured credit facility.





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During the first quarter of 2004, we increased the size of our secured credit facility with Fannie Mae
(serviced by Prudential Multifamily Mortgage, Inc.) from $100,000,000 to $140,000,000. Borrowings under the secured credit facility totaled $140,000,000 at December 31, 2004. The credit facility is secured by nine multifamily communities, which are
held by a consolidated subsidiary of BRE. Current borrowings under the facility bear interest at variable rates with maturities from one to nine months, plus a facility fee of 0.65%. Our borrowing cost, including interest, margin and fees, averaged
2.3% for the twelve months ended December 31, 2004. We also have the option to convert variable-rate borrowings to fixed-rate borrowings. Subject to the terms of the facility, we have the option to increase its size to $250,000,000. Drawings on the
line of credit are available to fund our investment activities and for general corporate purposes, and the facility matures in 2008.



During the second half of 2003, we closed an offering of 3,450,000 shares of our common stock at a public offering price of $33.10 per share. Net proceeds
from the offeringafter all discounts, commissions and anticipated issuance coststotaled approximately $112,338,000. Proceeds from the offering were used for general corporate purposes, including the repayment of debt, redemption of
equity securities, and funding for development activities and financing for acquisitions.



We amended and restated our revolving unsecured credit facility on April 4, 2003, extending the maturity date from December 2003 to April 2006, with an option to extend the term one year beyond the maturity date. We
also elected to reduce the borrowing capacity from $450,000,000 to $350,000,000 at that time. The interest rate on the line of credit was maintained at LIBOR plus 0.70%, plus a fee of 0.20% payable on the unused portion of the credit facility. Our
pricing spread above LIBOR is dependent upon our credit ratings and can range from 0.50% to 1.45%. Our average cost on the unsecured line of credit for the twelve months ended December 31, 2004 was 2.89%.



Borrowings under our revolving unsecured line of credit totaled $187,000,000
at December 31, 2004, compared to $196,000,000 at December 31, 2003. Drawings on the revolving unsecured line of credit are available to fund our investment activities and general corporate purposes. We typically reduce our outstanding balance on
the revolving unsecured line of credit with available cash balances.



We had a total of $848,000,000 in unsecured senior notes (excluding a basis adjustment of $201,000 from hedging activities) at December 31, 2004, consisting of the following:



|                                     |  |                               |             |              |      |  
|------------------------------------ |  | ----------------------------- | ----------- | ------------ | ---- | -
|Maturity                             |  | Unsecured Senior Note Balance |             | InterestRate |     
|July 2005                            |  | $                             | 18,000,000  |              | 4.64 | %
|March 2007                           |  |                               | 150,000,000 |              | 5.95 | %
|June 2007                            |  |                               | 50,000,000  |              | 7.20 | %
|March 2009                           |  |                               | 50,000,000  |              | 3.58 | %
|September 2009                       |  |                               | 150,000,000 |              | 5.75 | %
|January 2011                         |  |                               | 250,000,000 |              | 7.45 | %
|February 2013                        |  |                               | 130,000,000 |              | 7.13 | %
|March 2014                           |  |                               | 50,000,000  |              | 4.70 | %
|                                     |  |                               |             |              |      |  
|Total/Weighted Average Interest Rate |  | $                             | 848,000,000 |              | 6.37 | %
|                                     |  |                               |             |              |      |  



In addition, at
December 31, 2004, we had mortgage indebtedness totaling $203,063,000 (excluding a basis adjustment of $302,000 from hedging activities) at an average interest rate of 5.77%, and remaining terms of from less than one to eight years.



As of December 31, 2004, we had total outstanding debt balances of
$1,378,566,000 and total outstanding shareholders equity and minority interests of $1,082,322,000, representing a debt to total book capitalization ratio of approximately 56%.



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Our indebtedness contains financial covenants as to minimum net worth, interest coverage ratios, maximum
secured debt and total debt to capital, among others. We were in compliance with all such financial covenants throughout the year ended December 31, 2004.



We anticipate that we will continue to require outside sources of financing to meet our long-term liquidity needs beyond 2004, including scheduled debt
repayments, construction funding and property acquisitions. At December 31, 2004, we had an estimated cost of $168,000,000 to complete existing construction in progress, with funding estimated from 2005 through 2007.



Scheduled contractual obligations required for the next five years and
thereafter are as follows:



|                            |  |                        |           |                 |   |           |  |           |         |                  |   |         |  |   |        
|--------------------------- |  | ---------------------- | --------- | --------------- | - | --------- |  | --------- | ------- | ---------------- | - | ------- |  | - | -------
|Contractual Obligations     |  | Total                  |           | Less than1 year |   | 1-3 years |  | 3-5 years |         | More than5 years
|                            |  | (amounts in thousands)
|Long-Term Debt Obligations  |  | $                      | 1,378,566 |                 | $ | 51,749    |  | $         | 416,324 |                  | $ | 380,545 |  | $ | 529,948
|Operating Lease Obligations |  |                        | 8,962     |                 |   | 1,464     |  |           | 1,363   |                  |   | 1,372   |  |   | 4,763  
|                            |  |                        |           |                 |   |           |  |           |         |                  |   |         |  |   |        
|Total                       |  | $                      | 1,387,528 |                 | $ | 53,213    |  | $         | 417,687 |                  | $ | 381,917 |  | $ | 534,711
|                            |  |                        |           |                 |   |           |  |           |         |                  |   |         |  |   |        



We manage joint
venture investments that are recorded under the equity method of accounting with total assets of approximately $41,700,000 as of December 31, 2004. These joint ventures carry debt totaling approximately $19,000,000, none of which is guaranteed by us
at December 31, 2004.



During the first quarter of 2004, we
filed a new shelf registration statement with the Securities and Exchange Commission under which we may issue up to $700,000,000 of securities, including debt securities, common stock and preferred stock. Our recent preferred stock offering totaling
$75,000,000 reduced the amount available for future issuances under this registration statement to $625,000,000. Depending upon market conditions, we may issue securities under this or under future registration statements. Proceeds from issuances
under our existing shelf registration statement may be used for general corporate purposes, including investing in additional multifamily communities, funding development activities, capital expenditures, redemption of securities, increasing our
working capital and repaying indebtedness. Pending the application of the net proceeds, we may invest the proceeds in investment-grade, interest-bearing securities or temporarily reduce borrowings under our revolving unsecured line of credit.



We continue to consider other sources of possible funding,
including further joint ventures and additional secured construction debt. We own unencumbered real estate assets that could be sold, contributed to joint ventures or used as collateral for financing purposes (subject to certain lender restrictions)
and have encumbered assets with significant equity that could be further encumbered should other sources of capital not be available.



Critical Accounting Policies



We define critical accounting policies as those that require managements most difficult, subjective or complex judgments. A summary of our critical
accounting policies follows. Additional discussion of accounting policies that we consider significant, including further discussion of the critical accounting policies described below, can be found in the notes to our consolidated financial
statements.



Restatement of Real Estate Expense, General and
Administrative Expense and Construction in Progress



This
Annual Report on Form 10-K restates previously issued financial statements for the fiscal years ended December 31, 2000 through December 31, 2003, and the quarterly periods ended March 31, 2004, June 30, 2004 and September 30, 2004, to properly
reflect accruals of payroll and certain other real estate costs and expenses at the end of each reporting period. During managements review of our accounting policies and internal control over financial reporting, management determined that we
should have recognized these costs as incurred rather than as paid. Our management determined that the internal control deficiency that resulted in this restatement



33



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represents a material weakness, as defined by the Public Company Accounting Oversight Boards Auditing Standard No. 2. In connection with correcting
this error, management has taken appropriate action to modify our system of internal control over financial reporting to remediate this internal control deficiency. Going forward, management will estimate and record accruals for payroll and the
other real estate expenses that were not previously accounted for in this manner, as well as for development and construction costs for services performed but not yet billed, at the end of each reporting period. A description of this control
deficiency and the related remediation measures that have been undertaken by us is set forth in Part II, Item 9A, Controls and Procedures of this Form 10-K.



Investments in Rental Properties



Rental properties are recorded at cost, less accumulated depreciation, less an adjustment, if any, for impairment. A land value is assigned based on the
purchase price if land is acquired separately, or based on market research if acquired in a merger or in an operating community acquisition. We have a development group which manages the design, development and construction of our apartment
communities. Projects under development are carried at cost, including direct and indirect costs incurred to ready the assets for their intended use and which are specifically identifiable, including capitalized interest and property taxes until
units are placed in service. Direct investment development projects are considered placed in service as certificates of occupancy are issued and the units become ready for occupancy. Depreciation begins as units are placed in service. Land acquired
for development is capitalized and reported as Land under development until the development plan for the land is formalized. Once the development plan is determined and construction contracts are signed, the costs are transferred to the
balance sheet line item Construction in progress. Costs of replacements, such as appliances, carpets and drapes, are expensed. Improvements and betterments that increase the value of the property or extend its useful life are
capitalized.



Depreciation is computed on a straight-line basis
over the estimated useful lives of the assets, which generally range from 35 to 45 years for buildings and three to ten years for other property. The determination as to whether expenditures should be capitalized or expensed, and the period over
which depreciation is recognized, requires managements judgment.



In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, our investments in real estate are periodically evaluated for indicators of impairment. The evaluation of impairment and the
determination of values are based on several factors, and future events could occur which would cause management to conclude that indicators of impairment exist and a reduction in carrying value to estimated fair value is warranted. There were no
assets for which an adjustment for impairment in value was made in 2004, 2003 or 2002.



In the normal course of business, we will receive offers for sale of our properties, either solicited or unsolicited. For those offers that are accepted, the prospective buyer will usually require a due diligence
period before consummation of the transaction. It is not unusual for matters to arise that result in the withdrawal or rejection of the offer during this process. We classify real estate as held for sale when all criteria under SFAS No.
144 have been met.



SFAS No. 144 also requires that the assets
and liabilities and the results of operations of any communities that have been sold, or otherwise qualify as held for sale, be presented as discontinued operations in our consolidated financial statements in all periods presented. The community
specific 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.



Derivatives and Hedging Activities



We use derivative financial instruments in the normal course of business
with the objective of lowering our overall borrowing costs. As of December 31, 2004, we had four interest rate swap agreements with a notional



34



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value aggregating approximately $49,000,000, which are used to attain a floating rate of interest on a portion of our fixed rate debt, maturing in 2005.
These derivatives qualify for hedge accounting as discussed in Note 9 to the consolidated financial statements included in this Form 10-K. A third party values the instruments. The values of these derivatives will change over time as cash receipts
and payments are made and as market conditions change.



Stock-Based Compensation



Effective January 1,
2003, we adopted the fair value recognition provisions of Statement of Accounting Standard (SFAS) No. 123, Accounting for Stock-Based Compensation (SFAS 123), as amended by SFAS 148, Accounting for Stock Based
Compensation-Transition and Disclosure (SFAS 148). We have adopted the prospective method as provided for in SFAS 148, under which the provisions of SFAS 123 are applied prospectively to all awards granted, modified or settled after January 1,
2003. Prior to 2003, we accounted for stock-based compensation under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, which resulted in no expense
recognition. Under SFAS 123, we include in general and administrative expense a charge based on the implied value of options vesting in the current period. The change in accounting method did not have a material impact on our consolidated financial
statements. The options are valued using the Black-Scholes option-pricing model.



On December 16, 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based
Compensation. SFAS 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. Generally, the approach in SFAS 123(R) is similar to the approach described in SFAS 123. However, SFAS 123(R) requires all
share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. We expect to adopt SFAS 123(R) on July 1, 2005 and
do not expect adoption to have a material impact on our consolidated financial statements.



Consolidation



In
January 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51 (FIN 46). In December 2003, the FASB
modified FIN 46 to make technical corrections and address implementation issues that had arisen. FIN 46 provides a new framework for identifying variable interest entities (VIEs) and determining when a company should include the assets, liabilities,
noncontrolling interests and results of activities of a VIE in its consolidated financial statements. FIN 46 applies immediately to arrangements created after January 31, 2003 and, with respect to arrangements created before February 1, 2003, the
interpretation was applied to BRE as of January 1, 2003. Under FIN 46, a VIE is created when (i) the equity investment at risk in the entity is not sufficient to permit the entity to finance its activities without additional subordinated financial
support from other parties, or (ii) the entitys equity holders as a group either: (a) lack direct or indirect ability to make decisions about the entity, (b) are not obligated to absorb expected losses of the entity if they occur, or (c) do
not have the right to receive expected residual returns of the entity if they occur. If an entity is deemed to be a VIE pursuant to FIN 46, the enterprise that is deemed to absorb a majority of the expected losses, receive a majority of the
entitys expected residual returns, or both, is considered the primary beneficiary and must consolidate the VIE. Expected losses and residual returns for VIEs are calculated based on the probability of estimated future cash flows as defined in
FIN 46. The adoption of FIN 46 did not have any effect on BREs financial position or results of operations.



Based on the provisions of FIN 46, we have concluded that under certain circumstances when we (i) enter into option agreements for the purchase of land
from an entity and pay a non-refundable deposit or (ii) enter into an arrangement with a financial partner for the formation of joint ventures which engage in multifamily real estate projects, a VIE may be created under condition (ii) in the
previous paragraph. For each VIE created, we



35



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compute expected losses and residual returns based on the probability of future cash flows. If we are determined to be the primary beneficiary of the VIE,
the assets, liabilities and operations of the VIE will be consolidated with our financial statements.



We consolidate entities not deemed as VIEs which we have the ability to control. Our consolidated financial statements include the accounts of BRE and
controlled subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation.



Impact of Inflation



Approximately 99% of our total revenues for 2004 were derived from apartment properties. Due to the short-term nature of most apartment unit leases
(typically one year or less), we may seek to adjust rents to mitigate the impact of inflation upon renewal of existing leases or commencement of new leases, although we cannot assure that we will be able to adjust rents in response to inflation. In
addition, market rates may also fluctuate due to short-term leases and other permitted and non-permitted lease terminations.



Dividends Paid to Common and Preferred Shareholders and Distributions to Minority Members



A cash dividend has been paid to common shareholders each quarter since our inception in 1970. The payment of distributions
by BRE is at the discretion of the Board of Directors and depends on numerous factors, including our cash flow, financial condition and capital requirements, REIT provisions of the Internal Revenue Code and other factors. Cash dividends per common
share were $1.95 in 2004, 2003, and 2002. Total cash dividends paid to common shareholders for the three years ended December 31, 2004, 2003 and 2002 were $98,015,000; $91,994,000 and $89,614,000, respectively. In 2004, 2003 and 2002, respectively,
$11,791,000; $10,629,000 and $7,765,000 in dividends were paid to preferred shareholders.



Distributions to minority members and operating company unit holders were $2,524,000 in 2004, $3,206,000 in 2003, and $3,784,000 in 2002.



Item 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Market risks relating to our operations result primarily from changes in
short-term LIBOR interest rates. We do not have any direct foreign exchange or other significant market risk.



Our exposure to market risk for changes in interest rates relates primarily to our lines of credit. We primarily enter into fixed and variable rate debt
obligations to support general corporate purposes, including acquisitions and development, capital expenditures and working capital needs. We continuously evaluate our level of variable rate debt with respect to total debt and other factors,
including our assessment of the current and future economic environment. We utilize four interest rate swap agreements to attain a floating rate of interest on a portion of our fixed rate debt. The objective of the agreements is to lower our overall
borrowing costs. The swaps hedge the fair market value of a portion of our debt. We do not use derivatives for trading or speculative purposes. The hedges are perfectly effective and, therefore, changes in the derivative fair value and the change in
fair value of the hedged items during the hedging period exactly offset with no valuation impact on our current earnings. The notional amount of the interest rate swaps and their termination dates, shown in the table below, match the principal
amounts and maturities of the hedged fixed rate debt balances. As a result of the interest rate swaps, the effective interest rate for the twelve months ended December 31, 2004 on the aggregate hedged debt was reduced from a weighted average stated
rate of 7.46% to 4.26%. The fair value of the interest rate swaps was approximately $503,000 at December 31, 2004.



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Table of Interest Rate Swaps:



|              |  |                             |        |                            |      |   |                           |       |    |                          |      |   |                                |      |  
|------------- |  | --------------------------- | ------ | -------------------------- | ---- | - | ------------------------- | ----- | -- | ------------------------ | ---- | - | ------------------------------ | ---- | -
|Maturity      |  | NotionalAmount(inthousands) |        | Fixed InterestRate on Debt |      |   | Fixed RateReceived onSWAP |       |    | Variable RatePaid onSWAP |      |   | Effective InterestRate on Debt |     
|February 2005 |  | $                           | 10,355 |                            | 7.00 | % |                           | (4.45 | %) |                          | 1.44 | % |                                | 3.99 | %
|July 2005     |  |                             | 10,099 |                            | 7.36 | % |                           | (4.64 | %) |                          | 1.44 | % |                                | 4.16 | %
|July 2005     |  |                             | 18,000 |                            | 7.88 | % |                           | (4.70 | %) |                          | 1.46 | % |                                | 4.64 | %
|October 2005  |  |                             | 10,555 |                            | 7.30 | % |                           | (4.78 | %) |                          | 1.47 | % |                                | 3.99 | %
|              |  |                             |        |                            |      |   |                           |       |    |                          |      |   |                                |      |  
|              |  | $                           | 49,009 |                            | 7.46 | % |                           | (4.65 | %) |                          | 1.45 | % |                                | 4.26 | %



The fair values of our
financial instruments (including such items in the financial statement captions as cash, other assets, accounts payable and accrued expenses, and lines of credit) approximate their carrying or contract values based on their nature, terms and
interest rates that approximate current market rates. The fair value of mortgage loans payable and unsecured senior notes is estimated using discounted cash flow analyses with an interest rate similar to that of current market borrowing
arrangements. The estimated fair value of our mortgage loans and unsecured senior notes is approximately $1,121,712,000 at December 31, 2004, as compared with a carrying value of $1,051,566,000 at that date.



We had $399,803,000 and $386,560,000 in variable rate debt outstanding at
December 31, 2004 and 2003, respectively. A hypothetical 10% adverse change in interest rates would have had an annualized unfavorable impact of approximately $1,100,000 on our earnings and cash flows based on these period-end debt levels and our
average variable interest rates for each of the twelve months ended December 31, 2004 and 2003. We cannot predict the effect of adverse changes in interest rates on our variable rate debt and, therefore, our exposure to neither market risk, nor can
we assure that fixed rate, long-term debt will be available to us at advantageous pricing. Consequently, future results may differ materially from the estimated adverse changes discussed above.



Item 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



See Part IV, Item 15. Our Consolidated Financial Statements and Schedules
are incorporated herein by reference.



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



None.



Item 9A.    CONTROLS AND PROCEDURES



We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, and that such information is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls
and procedures. Also, we have investments in certain unconsolidated entities. As we do not control these entities, our disclosure controls and procedures with respect to such entities are necessarily substantially more limited than those we maintain
with respect to our consolidated subsidiaries.



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As of December 31, 2004, the end of the quarter and fiscal year covered by this report, management
conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. As a result of the
material weakness in our internal control over financial reporting described below under Managements Report on Internal Control over Financial Reporting, our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were not effective at a reasonable assurance level as of December 31, 2004. As described below under Changes in Internal Control over Financial Reporting, management believes the changes made to
internal control over financial reporting have remediated the material weakness as of March 14, 2005. We continue to review and document our disclosure controls and procedures and may from time to time make changes aimed at enhancing their
effectiveness and to ensure that our systems evolve with our business.



Managements Report on Internal Control over Financial Reporting



Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over
financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:



| | (1) |  | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of our company;
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) |  | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of our company are being made only in accordance with authorizations of management and our board of directors; and
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) |  | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of company assets that could have a material effect on our
financial statements.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Internal control over
financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject
to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material
misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the
process safeguards to reduce, though not eliminate, this risk.



Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2004, using the framework set forth in the report entitled Internal ControlIntegrated Framework published by the
Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on this assessment, we identified the following matter.



Historically, we analyzed our accounts payable and accrued expense accounts related to payroll and certain real estate costs and expenses by evaluating
whether the corresponding expenses were fairly stated (e.g., by analyzing whether our operating results included 12 months of expenses for the yearly periods or three months of expenses for the quarterly periods). However, our procedures did not
include a detailed review of ending liability balances for these specific costs and expenses, which resulted in these amounts being recorded when they were paid rather than incurred. During managements testing of internal control over
financial reporting in 2004 to support our year-end assessment, as required by Section 404 of the Sarbanes-Oxley Act of 2002, management



38



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determined that a control deficiency existed in that the expenses recorded in each period should have been recognized in the period they were incurred,
rather than the period they were paid.



In response to this
determination, management re-examined year-end liability amounts for these costs and expenses for fiscal 2000, 2001, 2002 and 2003. Based upon the analyses, management has concluded that this control deficiency did not result in material
misstatements to previously reported quarterly or annual financial statements, as the historical amounts by which expenses and liability balances were misstated were not material to our financial condition, results of operations, or cash flows.
However, adjusting for the cumulative effect of the errors in the fourth quarter of 2004 would have been material to that quarter.



Accordingly, we restated in this Annual Report on Form 10-K the financial results for the fiscal years ended December 31, 2000, through December 31, 2003
filed on Form 10-K, and the quarterly periods ended March 31, 2004, June 30, 2004, and September 30, 2004 filed on Form 10-Q to adjust for the misstatements caused by this control deficiency.



Under PCAOB Auditing Standard No. 2 (PCAOB Std. No. 2), the Public
Company Accounting Oversight Board (PCAOB) has defined a material weakness in internal control over financial reporting as a significant deficiency, or combination of significant deficiencies, that results in more than
a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The PCAOB has also stated that the restatement of previously issued financial statements to reflect the
correction of a misstatement is a significant deficiency and a strong indicator of a material weakness. Based on PCAOB Std. No. 2, management determined that the internal control deficiency regarding our policies, procedures
and processes for accounts payable and accrued expenses, which led to the restatements, constituted a material weakness as of December 31, 2004.



Management has concluded, based on PCAOB Std. No. 2 and the material weakness in our internal control over financial reporting described above, that our
internal control over financial reporting was not effective as of December 31, 2004. Ernst & Young LLP, the registered public accounting firm that audited the financial statements included in this Annual Report on Form 10-K, has issued an
attestation report on managements assessment of our internal control over financial reporting which appears on pages 40 through 41.



Changes in Internal Control over Financial Reporting



In response to the material weakness in internal control over financial reporting described above under Managements Report on Internal Control
over Financial Reporting, management has revised its policies, procedures, and processes in order to strengthen controls relating to the accounting for accounts payable and accrued expenses. On January 27, 2005, management established formal
policies and procedures related to the estimation of accounts payable and accrued expenses for payroll, and real estate costs and expenses that were previously recorded as paid rather than as incurred, to be performed at the end of each reporting
period. These written procedures include preparation of detailed estimates of costs incurred but not billed or paid at the end of each reporting period, and managements review of the estimates on a quarterly basis. Management has also changed
the procedures for analyzing certain accrued expenses to include detailed analyses of accrued liability amounts in addition to analysis of the related expense balances. Management believes that the new policies and procedures are designed to avoid
the reoccurrence of the circumstances that resulted in the restatement.



Management believes these measures have remediated the material weakness and that, as of March 14, 2005, there are no material weaknesses in the Companys internal control over financial reporting. However, we cannot assure you that
our internal control over financial reporting will be effective in accomplishing all control objectives all of the time. See Part I, Item 1. Risk FactorsRisks Associated with Our Restatement.



Other than as described above, there have been no significant changes in our
internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



39



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and Shareholders

of BRE Properties, Inc.



We have audited managements assessment, included in the accompanying Managements Report on Internal Control Over Financial Reporting, that BRE
Properties, Inc. did not maintain effective internal control over financial reporting as of December 31, 2004, because of the effect of the material weakness identified in managements assessment relating to policies, procedures, and processes
for accounts payable and accrued expenses that resulted in the recording of certain expenses when they were paid rather than incurred, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). BRE Properties, Inc.s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting. Our responsibility is to express an opinion on managements assessment and an opinion on the effectiveness of the companys internal control over financial reporting based on our audit.



We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, evaluating managements assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures
as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.



A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.



Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.



A material
weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The following
material weakness has been identified and included in managements assessment. Historically, management analyzed its accounts payable and accrued expense accounts related to payroll and certain real estate costs and expenses by evaluating
whether the corresponding expenses were fairly stated (e.g., by analyzing whether operating results included 12 months of expenses). However, the companys procedures did not include a detailed review of ending liability balances for these
specific costs and expenses, which resulted in amounts being recorded when they were paid rather than incurred. To correct for the misstatements caused by this practice, the Company restated the financial results for the fiscal years ended December
31, 2000, through December 31, 2003, filed on Form 10-K and the quarterly periods ended March 31, 2004, June 30, 2004, and September 30, 2004 filed on Form 10-Q. Management determined that the internal



40



---

control deficiency regarding its policies, procedures and processes for accounts payable and accrued expenses, which led to the restatements, constituted a
material weakness as of December 31, 2004. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2004 financial statements, and this report does not affect our report dated
February 24, 2005 on those financial statements.



In our
opinion, managements assessment that BRE Properties, Inc. did not maintain effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the COSO criteria. Also, in our
opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, BRE Properties, Inc. has not maintained effective internal control over financial reporting as of December 31,
2004, based on the COSO criteria.



ERNST & YOUNG LLP



San Francisco, California

February 24, 2005



41



---

PART III



Item 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT



| | (a) |  | Identification of Directors.    The information required by this Item is incorporated herein by reference to our Proxy Statement relating to our 2005
Annual Meeting of Shareholders, under the headings Election of Directors and Section 16(a) Beneficial Ownership Reporting Compliance, to be filed with the Securities and Exchange Commission within 120 days of December 31,
2004. A summary of the directors and their principal business for the last five years follows:
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|L. Michael Foley   |  | Mr. Foley is Chairman of the Board of BRE. Mr. Foley has served as a director of BRE since 1994. He has been Principal, L. Michael Foley and Associates, real estate and corporate consulting,
since 1996 and was a director and Executive Committee member of Western Property Trust, from 1999 to 2000. Mr. Foley was Senior Vice President and Chief Financial Officer, Coldwell Banker Corporation, from 1995 to 1996 and he served as Chairman and
Chief Executive Officer, Sears Savings Bank, from 1989 to 1993. Mr. Foley is 66 years old.                                     
|                   | 
|William E. Borsari |  | Mr. Borsari has served as a director of BRE or its predecessor since 1992. He is currently self-employed, and a private investor. He was the former Chairman or President, The Walters
Management Company, a real estate asset management company, for more than five years. Mr. Borsari is 66 years old.                                                                                                                                                                                                                                                                              
|                   | 
|Robert A. Fiddaman |  | Mr. Fiddaman has served as a director of BRE since 1998. He is currently self-employed, and a private investor. He was the former board chairman of SSR Realty Advisors, a real estate
investment and management firm, from 1996 to 1998. Mr. Fiddaman served as President and Chief Executive Officer of Metric Realty, a real estate investment and management company from 1993 to 1996. Mr. Fiddaman is 67 years old.                                                                                                                                                              
|                   | 
|Roger P. Kuppinger |  | Mr. Kuppinger has served as a director of BRE or its predecessor since 1995. He has been President, The Kuppinger Company, a private financial advisor to public and private companies, since
February 1994. Mr. Kuppinger is also a director for Realty Income Corporation, a California-based retail real estate investment trust. He served as Senior Vice President and Managing Director, Sutro & Co., Inc., an investment banking company,
from 1969 to February 1994. Mr. Kuppinger is 64 years old.                                                                            
|                   | 
|Edward E. Mace     |  | Mr. Mace has served as a director of BRE since 1998. He has been President, Vail Resorts Lodging Company and Rock Resorts International LLC (both subsidiaries of Vail Resorts, Inc.), since
2001. Previously, Mr. Mace served as President and Chief Executive Officer of Fairmont Hotels & ResortsU.S. /Mexico division, from 2000 to 2001 and as President and Chief Executive Officer of Fairmont Hotels, from 1996 to 2000. He was the
midwest regional director of management consulting for the Real Estate Industry Group of KPMG from 1994 to 1996. Mr. Mace is 53 years old.
|                   | 
|John McMahan       |  | Mr. McMahan is a former Chairman of the Board of BRE. He has served as a director of BRE since 1993. He has been Executive Director, The Center for Real Estate Enterprise Management, since
2000 and Managing Principal, The McMahan Group, real estate strategic management consultants, since 1996. Previously, Mr. McMahan served as President, John McMahan Associates, Inc., a management consulting firm, and McMahan Real Estate Securities,
Inc., a real estate investment firm, from 1994 to 1996. Mr. McMahan is 67 years old.                                              



42



---

|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Matthew Medeiros   |  | Mr. Medeiros was appointed to the Board of BRE on March 11, 2005. He is President, Chief Executive Officer and Director of SonicWALL, a global Internet security company, since 2003.
Previously, he was Chief Executive Officer of Philips Components, a division of Royal Philips Electronics, a consumer electronics company, since 1998. Mr. Medeiros served as Chairman of the Board, LG.Philips LCD, a liquid crystal display joint
venture from 2001 to 2002. Mr. Medeiros is 48 years old.
|                   | 
|Constance B. Moore |  | Ms. Moore was promoted to President and Chief Executive Officer of BRE in January of 2005. She joined BRE as a director and Chief Operating Officer in 2002. Ms. Moore previously held several
executive positions with Security Capital Group & Affiliates, an international real estate operating and investment management company, from 1993 to 2002, including co-chairman and Chief Operating Officer of Archstone Communities Trust. Ms.
Moore is 49 years old.                            
|                   | 
|Jeanne R. Myerson  |  | Ms. Myerson joined BREs Board of Directors in 2002. She has been President & Chief Executive Officer of The Swig Company, a private real estate investment firm, since 1997.
Previously, she was President and Chief Executive Officer of The Bailard, Biehl & Kaiser REIT from 1993 to 1997. Ms. Myerson is 52 years old.                                                                                                                                                                       
|                   | 
|Gregory M. Simon   |  | Mr. Simon has served as a director of BRE or its predecessor since 1991. He has also been self-employed as a private investor since 1991. He was Senior Vice President, H.F. Ahmanson & Co.
and Home Savings of America, from 1983 to 1991. Mr. Simon is also an Officer and Director for Golden Orange Broadcasting, a privately held corporation. Mr. Simon is 63 years old.                                                                                                                    



| | (b) |  | Identification of Executive Officers.    See Executive Officers of the Registrant in Part I of this report.
| | --- |  | -------------------------------------------------------------------------------------------------------------



Item 11.    EXECUTIVE COMPENSATION



The information required by this Item is incorporated herein by reference
from our Proxy Statement, relating to our 2005 Annual Meeting of Shareholders, under the headings Executive Compensation and Other Information and Election of DirectorsBoard and Committee Meetings; Compensation of
Directors, to be filed with the Securities and Exchange Commission within 120 days of December 31, 2004.



Item 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT



The information required by this Item is incorporated herein by reference from our Proxy Statement, relating to our 2005 Annual Meeting of Shareholders,
under the heading Security Ownership of Certain Beneficial Owners and Management to be filed with the Securities and Exchange Commission within 120 days of December 31, 2004.



Item 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



The information required by this Item is incorporated herein by reference
from our Proxy Statement, relating to our 2005 Annual Meeting of Shareholders, under the headings Certain Relationships and Related Transactions, to be filed with the Securities and Exchange Commission within 120 days of December 31,
2004.



Item 14.    PRINCIPAL ACCOUNTANT FEES AND
SERVICES



The information required by this Item is
incorporated by reference from our Proxy Statement, relating to our 2005 Annual Meeting of Shareholders, under the heading Report of the Audit Committee, to be filed with the Securities and Exchange Commission within 120 days of December
31, 2004.



43



---

PART IV



Item 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K



(a)  Financial Statements



| | 1.  Financial |  | Statements:
| | ------------- |  | -----------



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Report of Independent Registered Public Accounting Firm  Consolidated Balance Sheets at December 31, 2004 and
2003 (Restated)  Consolidated
Statements of Income for the years ended December 31, 2004, 2003 (Restated) and 2002 (Restated)  Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 (Restated) and 2002 (Restated)  Consolidated Statements of Shareholders Equity
for the years ended December 31, 2004, 2003 (Restated) and 2002 (Restated)  Notes to Consolidated Financial Statements (Restated)



| | 2.  Financial |  | Statement Schedule:
| | ------------- |  | -------------------



|                                                                                                                                                                                                                                                                                                 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Schedule IIIReal Estate and Accumulated Depreciation  All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and, therefore, have been omitted.



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



(b)  Exhibits



See Index to Exhibits.



(c)  Financial Statement Schedules



See Index to Financial Statements and Financial Statement
Schedule.



44



---

SIGNATURES



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



Dated March 15, 2005



BRE PROPERTIES, INC.By:

/S/    CONSTANCE B.
MOOREConstance B. Moore President and Chief Executive Officer




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



|                                                |  |                                                                                                              |  |               
|----------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | --------------
|Name                                            |  | Title                                                                                                        |  | Date          
|                                                |  |                                                                                                             
|/s/    CONSTANCE B.
MOOREConstance B. Moore     |  | President, Chief Executive Officer and Director (Principal Executive Officer)                                |  | March 15, 2005
|                                                |  |                                                                                                             
|/s/    EDWARD F. LANGE, JR.Edward F. Lange, Jr. |  | Executive Vice President, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) |  | March 15, 2005
|                                                |  |                                                                                                             
|/s/    L. MICHAEL FOLEYL. Michael Foley         |  | Chairman and Director                                                                                        |  | March 15, 2005
|                                                |  |                                                                                                             
|/s/    WILLIAM E. BORSARIWilliam E. Borsari     |  | Director                                                                                                     |  | March 15, 2005
|                                                |  |                                                                                                             
|/s/    ROBERT A. FIDDAMANRobert A. Fiddaman     |  | Director                                                                                                     |  | March 15, 2005
|                                                |  |                                                                                                             
|/s/    ROGER P. KUPPINGERRoger P. Kuppinger     |  | Director                                                                                                     |  | March 15, 2005
|                                                |  |                                                                                                             
|/s/    EDWARD E. MACEEdward E. Mace             |  | Director                                                                                                     |  | March 15, 2005
|                                                |  |                                                                                                             
|/s/    JOHN MCMAHANJohn Mcmahan                 |  | Director                                                                                                     |  | March 15, 2005
|                                                |  |                                                                                                             
|/s/    JEANNE R. MYERSONJeanne R. Myerson       |  | Director                                                                                                     |  | March 15, 2005
|                                                |  |                                                                                                             
|/s/    GREGORY M. SIMONGregory M. Simon         |  | Director                                                                                                     |  | March 15, 2005



45



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and Shareholders of

BRE Properties, Inc.



We have audited the accompanying consolidated balance sheets of BRE Properties, Inc. as of December 31, 2004 and 2003, and the related consolidated
statements of income, shareholders equity, and cash flows for each of the three years in the period ended December 31, 2004. Our audits also included the financial statement schedules listed in the Index at Item 15(a). These financial
statements and schedules are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.



We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of BRE Properties, Inc. at December 31, 2004 and 2003, and the consolidated
results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when
considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.



As discussed in Note 2 to the consolidated financial statements, the Company has restated the consolidated financial statements for the years ended
December 31, 2003 and 2002.



We also have audited, in
accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of BRE Properties Inc.s internal control over financial reporting as of December 31, 2004, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2005, expressed an unqualified opinion on managements assessment of the effectiveness of
internal control over financial reporting and an adverse opinion on the effectiveness of internal control over financial reporting.



/s/    ERNST & YOUNG LLP



San Francisco, California

February 24, 2005



46



---

BRE PROPERTIES, INC.



CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands, except per share data)



|                                                                                                                                                                                                                                                    |  |              |           |   |            |   |           |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | - | ---------- | - | --------- | -
|                                                                                                                                                                                                                                                    |  | December 31, |          
|                                                                                                                                                                                                                                                    |  | 2004         |           |   | 2003       |  
|                                                                                                                                                                                                                                                    |  |              |           |   | (Restated) |  
|A S S E T S                                                                                                                                                                                                                                         |  |              |           |   |            |   |           |  
|Real estate portfolio                                                                                                                                                                                                                               |  |              |           |   |            |   |           |  
|Direct investments in real estate:                                                                                                                                                                                                                  |  |              |           |   |            |   |           |  
|Investments in rental properties                                                                                                                                                                                                                    |  | $            | 2,538,171 |   |            | $ | 2,209,650 |  
|Construction in progress                                                                                                                                                                                                                            |  |              | 108,930   |   |            |   | 104,531   |  
|Less:    Accumulated depreciation                                                                                                                                                                                                                   |  |              | (280,498  | ) |            |   | (229,983  | )
|                                                                                                                                                                                                                                                    |  |              |           |   |            |   |           |  
|                                                                                                                                                                                                                                                    |  |              | 2,366,603 |   |            |   | 2,084,198 |  
|                                                                                                                                                                                                                                                    |  |              |           |   |            |   |           |  
|Equity interests in and advances to real estate joint ventures:                                                                                                                                                                                     |  |              |           |   |            |   |           |  
|Investments in rental properties                                                                                                                                                                                                                    |  |              | 10,227    |   |            |   | 10,391    |  
|Real estate held for sale, net                                                                                                                                                                                                                      |  |              | 60,383    |   |            |   | 61,394    |  
|Land under development                                                                                                                                                                                                                              |  |              | 43,204    |   |            |   | 28,964    |  
|                                                                                                                                                                                                                                                    |  |              |           |   |            |   |           |  
|Total real estate portfolio                                                                                                                                                                                                                         |  |              | 2,480,417 |   |            |   | 2,184,947 |  
|Other assets                                                                                                                                                                                                                                        |  |              | 38,524    |   |            |   | 48,317    |  
|                                                                                                                                                                                                                                                    |  |              |           |   |            |   |           |  
|Total assets                                                                                                                                                                                                                                        |  | $            | 2,518,941 |   |            | $ | 2,233,264 |  
|                                                                                                                                                                                                                                                    |  |              |           |   |            |   |           |  
|L I A B I L I T I E S  A N D  S H A R E H O L D E R S  E
 Q U I T Y                                                                                                                                                                                |  |              |           |   |            |   |           |  
|Unsecured senior notes                                                                                                                                                                                                                              |  | $            | 848,201   |   |            | $ | 763,915   |  
|Mortgage loans payable                                                                                                                                                                                                                              |  |              | 203,365   |   |            |   | 132,414   |  
|Unsecured line of credit                                                                                                                                                                                                                            |  |              | 187,000   |   |            |   | 196,000   |  
|Secured line of credit                                                                                                                                                                                                                              |  |              | 140,000   |   |            |   | 100,000   |  
|Accounts payable and accrued expenses                                                                                                                                                                                                               |  |              | 58,053    |   |            |   | 45,273    |  
|                                                                                                                                                                                                                                                    |  |              |           |   |            |   |           |  
|Total liabilities                                                                                                                                                                                                                                   |  |              | 1,436,619 |   |            |   | 1,237,602 |  
|                                                                                                                                                                                                                                                    |  |              |           |   |            |   |           |  
|Minority interests                                                                                                                                                                                                                                  |  |              | 35,675    |   |            |   | 38,859    |  
|                                                                                                                                                                                                                                                    |  |              |           |   |            |   |           |  
|Shareholders equity:                                                                                                                                                                                                                               |  |              |           |   |            |   |           |  
|Preferred stock, $0.01 par value; 10,000,000 shares authorized at both December 31, 2004 and 2003; 10,000,000 and 5,150,000 shares with $25
liquidation preference; issued and outstanding at December 31, 2004 and December 31, 2003, respectively |  |              | 100       |   |            |   | 52        |  
|Common stock, $0.01 par value; 100,000,000 shares authorized at both December 31, 2004 and 2003; 50,418,529 and 49,992,198 shares issued and
outstanding at December 31, 2004 and December 31, 2003, respectively.                                  |  |              | 504       |   |            |   | 500       |  
|Additional paid-in capital                                                                                                                                                                                                                          |  |              | 1,068,613 |   |            |   | 943,064   |  
|Accumulated net income (less than) in excess of cumulative dividends                                                                                                                                                                                |  |              | (20,565   | ) |            |   | 16,023    |  
|Stock purchase loans to executives                                                                                                                                                                                                                  |  |              | (2,005    | ) |            |   | (2,836    | )
|                                                                                                                                                                                                                                                    |  |              |           |   |            |   |           |  
|Total shareholders equity                                                                                                                                                                                                                          |  |              | 1,046,647 |   |            |   | 956,803   |  
|                                                                                                                                                                                                                                                    |  |              |           |   |            |   |           |  
|Total liabilities and shareholders equity                                                                                                                                                                                                          |  | $            | 2,518,941 |   |            | $ | 2,233,264 |  
|                                                                                                                                                                                                                                                    |  |              |           |   |            |   |           |  



See Accompanying Notes
to Consolidated Financial Statements



47



---

BRE PROPERTIES, INC.



CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)



|                                                                                                               |  |                          |         |   |            |   |         |            |  |   |         |  
|-------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---------- | - | ------- | ---------- |  | - | ------- | -
|                                                                                                               |  | Years ended December 31, |        
|                                                                                                               |  | 2004                     |         |   | 2003       |   |         | 2002       | 
|                                                                                                               |  |                          |         |   | (Restated) |   |         | (Restated) | 
|Revenue                                                                                                        |  |                          |         |   |            |   |         |            |  |   |         |  
|Rental income                                                                                                  |  | $                        | 267,997 |   |            | $ | 244,982 |            |  | $ | 232,029 |  
|Ancillary income                                                                                               |  |                          | 12,645  |   |            |   | 11,248  |            |  |   | 10,229  |  
|                                                                                                               |  |                          |         |   |            |   |         |            |  |   |         |  
|Total rental revenue                                                                                           |  |                          | 280,642 |   |            |   | 256,230 |            |  |   | 242,258 |  
|                                                                                                               |  |                          |         |   |            |   |         |            |  |   |         |  
|Expenses                                                                                                       |  |                          |         |   |            |   |         |            |  |   |         |  
|Real estate                                                                                                    |  |                          | 88,433  |   |            |   | 77,599  |            |  |   | 68,347  |  
|Provision for depreciation                                                                                     |  |                          | 61,296  |   |            |   | 49,644  |            |  |   | 41,500  |  
|Interest                                                                                                       |  |                          | 66,826  |   |            |   | 59,425  |            |  |   | 56,106  |  
|General and administrative                                                                                     |  |                          | 12,657  |   |            |   | 10,260  |            |  |   | 10,716  |  
|Other expenses                                                                                                 |  |                          | 6,807   |   |            |   | 7,305   |            |  |   |        |  
|                                                                                                               |  |                          |         |   |            |   |         |            |  |   |         |  
|Total expenses                                                                                                 |  |                          | 236,019 |   |            |   | 204,233 |            |  |   | 176,669 |  
|                                                                                                               |  |                          |         |   |            |   |         |            |  |   |         |  
|Other income                                                                                                   |  |                          | 1,632   |   |            |   | 1,462   |            |  |   | 954     |  
|Income before gain on sales of investments, minority interests, partnership income and discontinued operations |  |                          | 46,255  |   |            |   | 53,459  |            |  |   | 66,543  |  
|Net gain on sales of investments                                                                               |  |                          |        |   |            |   |        |            |  |   | 4,862   |  
|Minority interests in income                                                                                   |  |                          | (2,509  | ) |            |   | (3,196  | )          |  |   | (3,682  | )
|Partnership income                                                                                             |  |                          | 1,558   |   |            |   | 882     |            |  |   | 3,393   |  
|                                                                                                               |  |                          |         |   |            |   |         |            |  |   |         |  
|Income from continuing operations                                                                              |  |                          | 45,304  |   |            |   | 51,145  |            |  |   | 71,116  |  
|Net gain on sales of discontinued operations                                                                   |  |                          | 19,925  |   |            |   | 23,147  |            |  |   | 10,067  |  
|Discontinued operations, net                                                                                   |  |                          | 8,312   |   |            |   | 8,678   |            |  |   | 13,753  |  
|                                                                                                               |  |                          |         |   |            |   |         |            |  |   |         |  
|Income from discontinued operations                                                                            |  |                          | 28,237  |   |            |   | 31,825  |            |  |   | 23,820  |  
|Net Income                                                                                                     |  | $                        | 73,541  |   |            | $ | 82,970  |            |  | $ | 94,936  |  
|Redemption related preferred stock issuance costs                                                              |  |                          |        |   |            |   | 2,166   |            |  |   |        |  
|Dividends attributable to preferred stock                                                                      |  |                          | 12,114  |   |            |   | 10,629  |            |  |   | 7,765   |  
|                                                                                                               |  |                          |         |   |            |   |         |            |  |   |         |  
|Net income available to common shareholders                                                                    |  | $                        | 61,427  |   |            | $ | 70,175  |            |  | $ | 87,171  |  
|                                                                                                               |  |                          |         |   |            |   |         |            |  |   |         |  
|Basic earnings per share from continuing operations                                                            |  | $                        | 0.66    |   |            | $ | 0.81    |            |  | $ | 1.38    |  
|Basic earnings per share from discontinued operations                                                          |  | $                        | 0.56    |   |            | $ | 0.68    |            |  | $ | 0.52    |  
|                                                                                                               |  |                          |         |   |            |   |         |            |  |   |         |  
|Basic earnings per share                                                                                       |  | $                        | 1.22    |   |            | $ | 1.49    |            |  | $ | 1.90    |  
|                                                                                                               |  |                          |         |   |            |   |         |            |  |   |         |  
|Diluted earnings per share from continuing operations                                                          |  | $                        | 0.65    |   |            | $ | 0.81    |            |  | $ | 1.37    |  
|Diluted earnings per share from discontinued operations                                                        |  | $                        | 0.56    |   |            | $ | 0.67    |            |  | $ | 0.52    |  
|                                                                                                               |  |                          |         |   |            |   |         |            |  |   |         |  
|Diluted earnings per share                                                                                     |  | $                        | 1.21    |   |            | $ | 1.48    |            |  | $ | 1.89    |  
|                                                                                                               |  |                          |         |   |            |   |         |            |  |   |         |  
|Weighted average common shares outstandingbasic                                                               |  |                          | 50,200  |   |            |   | 47,070  |            |  |   | 45,860  |  
|Weighted average common shares outstandingdiluted                                                             |  |                          | 50,825  |   |            |   | 47,445  |            |  |   | 46,210  |  



See Accompanying Notes
to Consolidated Financial Statements



48



---

BRE PROPERTIES, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)



|                                                                                                            |  |                          |          |   |            |   |          |            |  |   |          |  
|----------------------------------------------------------------------------------------------------------- |  | ------------------------ | -------- | - | ---------- | - | -------- | ---------- |  | - | -------- | -
|                                                                                                            |  | Years ended December 31, |         
|                                                                                                            |  | 2004                     |          |   | 2003       |   |          | 2002       | 
|                                                                                                            |  |                          |          |   | (Restated) |   |          | (Restated) | 
|Cash flows from operating activities                                                                        |  |                          |          |   |            |   |          |            |  |   |          |  
|Net income                                                                                                  |  | $                        | 73,541   |   |            | $ | 82,970   |            |  | $ | 94,936   |  
|Adjustments to reconcile net income to net cash flows generated by operating activities:                    |  |                          |          |   |            |   |          |            |  |   |          |  
|Net gain on sales of discontinued operations                                                                |  |                          | (19,925  | ) |            |   | (23,147  | )          |  |   | (10,067  | )
|Net gain on sales of investments                                                                            |  |                          |         |   |            |   |         |            |  |   | (4,862   | )
|Partnership income                                                                                          |  |                          | (1,558   | ) |            |   | (882     | )          |  |   | (3,393   | )
|Provision for depreciation                                                                                  |  |                          | 61,296   |   |            |   | 49,644   |            |  |   | 41,500   |  
|Depreciation from discontinued operations                                                                   |  |                          | 2,916    |   |            |   | 3,708    |            |  |   | 6,035    |  
|Noncash stock based compensation expense                                                                    |  |                          | 3,468    |   |            |   | 1,082    |            |  |   | 349      |  
|Minority interests in income                                                                                |  |                          | 2,509    |   |            |   | 3,196    |            |  |   | 3,682    |  
|Decrease (increase) in other assets                                                                         |  |                          | 1,228    |   |            |   | 638      |            |  |   | (354     | )
|Increase (decrease) in accounts payable and accrued expenses                                                |  |                          | 12,730   |   |            |   | (2,214   | )          |  |   | 9,351    |  
|                                                                                                            |  |                          |          |   |            |   |          |            |  |   |          |  
|Net cash flows generated by operating activities                                                            |  |                          | 136,205  |   |            |   | 114,995  |            |  |   | 137,177  |  
|                                                                                                            |  |                          |          |   |            |   |          |            |  |   |          |  
|Cash flows from investing activities                                                                        |  |                          |          |   |            |   |          |            |  |   |          |  
|Multifamily communities purchased                                                                           |  |                          | (268,218 | ) |            |   | (116,183 | )          |  |   | (100,023 | )
|Multifamily communities purchased from joint venture partners                                               |  |                          |         |   |            |   |         |            |  |   | (56,510  | )
|Proceeds from sales of rental property, net                                                                 |  |                          | 96,185   |   |            |   | 71,482   |            |  |   | 43,103   |  
|Proceeds from sales of investments                                                                          |  |                          |         |   |            |   |         |            |  |   | 16,200   |  
|Rehabilitation expenditures and other                                                                       |  |                          | (18,088  | ) |            |   | (10,670  | )          |  |   | (6,501   | )
|Capital expenditures                                                                                        |  |                          | (17,971  | ) |            |   | (10,390  | )          |  |   | (8,276   | )
|Additions to direct investment construction in progress                                                     |  |                          | (54,276  | ) |            |   | (60,897  | )          |  |   | (69,165  | )
|Advances to unconsolidated joint venturesconstruction in progress                                          |  |                          |         |   |            |   |         |            |  |   | (20,614  | )
|Reimbursements of construction in progress from unconsolidated joint ventures                               |  |                          |         |   |            |   |         |            |  |   | 13,753   |  
|Additions to land under development                                                                         |  |                          | (70,720  | ) |            |   | (20,729  | )          |  |   | (24,264  | )
|Distributions from unconsolidated joint ventures, net                                                       |  |                          | 5,974    |   |            |   | 1,024    |            |  |   | 3,256    |  
|Investment in and advances to Internet business                                                             |  |                          |         |   |            |   |         |            |  |   | (942     | )
|                                                                                                            |  |                          |          |   |            |   |          |            |  |   |          |  
|Net cash flows used in investing activities                                                                 |  |                          | (327,114 | ) |            |   | (146,363 | )          |  |   | (209,983 | )
|                                                                                                            |  |                          |          |   |            |   |          |            |  |   |          |  
|Cash flows from financing activities                                                                        |  |                          |          |   |            |   |          |            |  |   |          |  
|Principal payments on mortgage loans and unsecured senior notes                                             |  |                          | (17,167  | ) |            |   | (95,195  | )          |  |   | (53,169  | )
|Issuance of unsecured senior notes, net                                                                     |  |                          | 99,437   |   |            |   |         |            |  |   | 297,407  |  
|Proceeds from new mortgage loans                                                                            |  |                          | 74,160   |   |            |   |         |            |  |   |         |  
|Lines of credit:                                                                                            |  |                          |          |   |            |   |          |            |  |   |          |  
|Advances                                                                                                    |  |                          | 364,000  |   |            |   | 323,000  |            |  |   | 390,000  |  
|Repayments                                                                                                  |  |                          | (333,000 | ) |            |   | (208,000 | )          |  |   | (524,000 | )
|Renewal fees                                                                                                |  |                          | (388     | ) |            |   | (4,011   | )          |  |   |         |  
|Repurchase of common shares                                                                                 |  |                          |         |   |            |   | (724     | )          |  |   | (19,370  | )
|Proceeds from exercises of stock options, net                                                               |  |                          | 7,837    |   |            |   | 9,787    |            |  |   | 3,909    |  
|Proceeds from common equity offering, net of issuance costs                                                 |  |                          |         |   |            |   | 112,338  |            |  |   |         |  
|Proceeds from preferred equity offerings, net of issuance costs                                             |  |                          | 168,872  |   |            |   |         |            |  |   | 72,291   |  
|Redemption of preferred stock                                                                               |  |                          | (53,750  | ) |            |   |          |            |  |   |          |  
|Cash dividends paid to common shareholders                                                                  |  |                          | (98,015  | ) |            |   | (91,994  | )          |  |   | (89,614  | )
|Cash dividends paid to preferred shareholders                                                               |  |                          | (11,791  | ) |            |   | (10,629  | )          |  |   | (7,765   | )
|Distributions to Operating Company unit holders                                                             |  |                          | (1,888   | ) |            |   | (2,215   | )          |  |   | (2,963   | )
|Distributions to other minority members                                                                     |  |                          | (636     | ) |            |   | (991     | )          |  |   | (821     | )
|Redemption of minority member interest                                                                      |  |                          | (8,114   | ) |            |   |         |            |  |   |         |  
|Contributions from minority members                                                                         |  |                          |         |   |            |   |         |            |  |   | 4,751    |  
|Other, net                                                                                                  |  |                          | 247      |   |            |   | 214      |            |  |   | (849     | )
|                                                                                                            |  |                          |          |   |            |   |          |            |  |   |          |  
|Net cash flows generated by financing activities                                                            |  |                          | 189,804  |   |            |   | 31,580   |            |  |   | 69,807   |  
|                                                                                                            |  |                          |          |   |            |   |          |            |  |   |          |  
|(Decrease) Increase in cash                                                                                 |  |                          | (1,105   | ) |            |   | 212      |            |  |   | (2,999   | )
|Balance at beginning of year                                                                                |  |                          | 1,105    |   |            |   | 893      |            |  |   | 3,892    |  
|                                                                                                            |  |                          |          |   |            |   |          |            |  |   |          |  
|Balance at end of year                                                                                      |  | $                        |         |   |            | $ | 1,105    |            |  | $ | 893      |  
|                                                                                                            |  |                          |          |   |            |   |          |            |  |   |          |  
|Supplemental disclosure of noncash investing and financing activity                                         |  |                          |          |   |            |   |          |            |  |   |          |  
|Transfers of direct investments in real estate-construction in progress to investments in rental properties |  | $                        | (107,711 | ) |            | $ | (57,601  | )          |  | $ | (94,459  | )
|                                                                                                            |  |                          |          |   |            |   |          |            |  |   |          |  
|Transfer of land under development to direct investments in real estateconstruction in progress            |  | $                        | 56,364   |   |            | $ | 6,899    |            |  | $ | 32,967   |  
|                                                                                                            |  |                          |          |   |            |   |          |            |  |   |          |  
|Change in accrued development costs for construction in progress and land under development                 |  | $                        | 1,354    |   |            | $ | (1,666   | )          |  | $ | 3,461    |  
|                                                                                                            |  |                          |          |   |            |   |          |            |  |   |          |  
|(Decrease) increase in carrying value of debt attributed to hedging activities                              |  | $                        | (1,756   | ) |            | $ | (1,240   | )          |  | $ | 3,500    |  
|                                                                                                            |  |                          |          |   |            |   |          |            |  |   |          |  
|Minority interest unit (issuances) conversions to common shares                                             |  | $                        | (1,877   | ) |            | $ | 6,277    |            |  | $ | 11,663   |  
|                                                                                                            |  |                          |          |   |            |   |          |            |  |   |          |  



See Accompanying Notes
to Consolidated Financial Statements



49



---

BRE PROPERTIES, INC.



CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

(Dollar amounts in thousands, except share and per share data)



|                                                                                                                            |  |                          |            |   |            |   |            |            |  |   |            |  
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ---------- | - | ---------- | ---------- |  | - | ---------- | -
|                                                                                                                            |  | Years ended December 31, |           
|                                                                                                                            |  | 2004                     |            |   | 2003       |   |            | 2002       | 
|                                                                                                                            |  |                          |            |   | (Restated) |   |            | (Restated) | 
|Common stock shares                                                                                                         |  |                          |            |   |            |   |            |            |  |   |            |  
|Balance at beginning of year                                                                                                |  |                          | 49,992,198 |   |            |   | 45,870,723 |            |  |   | 45,807,191 |  
|Stock options exercised, net of shares tendered                                                                             |  |                          | 343,232    |   |            |   | 407,734    |            |  |   | 355,052    |  
|Conversion of operating company units to common shares                                                                      |  |                          | 9,336      |   |            |   | 233,083    |            |  |   | 433,112    |  
|Shares repurchased and retired                                                                                              |  |                          |           |   |            |   | (25,500    | )          |  |   | (685,200   | )
|Common stock offering                                                                                                       |  |                          |           |   |            |   | 3,450,000  |            |  |   |           |  
|Issuance of restricted shares                                                                                               |  |                          | 52,780     |   |            |   | 59,268     |            |  |   | 1,700      |  
|Shares issued pursuant to dividend reinvestment plan                                                                        |  |                          | 38,320     |   |            |   |           |            |  |   |           |  
|Other                                                                                                                       |  |                          | (17,337    | ) |            |   | (3,110     | )          |  |   | (41,132    | )
|                                                                                                                            |  |                          |            |   |            |   |            |            |  |   |            |  
|Balance at end of year                                                                                                      |  |                          | 50,418,529 |   |            |   | 49,992,198 |            |  |   | 45,870,723 |  
|                                                                                                                            |  |                          |            |   |            |   |            |            |  |   |            |  
|Preferred stock shares                                                                                                      |  |                          |            |   |            |   |            |            |  |   |            |  
|Balance at beginning of year                                                                                                |  |                          | 5,150,000  |   |            |   | 5,150,000  |            |  |   | 2,150,000  |  
|Redemption of 8.50% Series A Cumulative Redeemable                                                                          |  |                          | (2,150,000 | ) |            |   |            |            |  |   |            |  
|Issuance of 6.75% Series C Cumulative Redeemable                                                                            |  |                          | 4,000,000  |   |            |   |            |            |  |   |            |  
|Issuance of 6.75% Series D Cumulative Redeemable                                                                            |  |                          | 3,000,000  |   |            |   |            |            |  |   |            |  
|Issuance of 8.08% Series B Cumulative Redeemable                                                                            |  |                          |           |   |            |   |           |            |  |   | 3,000,000  |  
|                                                                                                                            |  |                          |            |   |            |   |            |            |  |   |            |  
|Balance at end of year                                                                                                      |  |                          | 10,000,000 |   |            |   | 5,150,000  |            |  |   | 5,150,000  |  
|                                                                                                                            |  |                          |            |   |            |   |            |            |  |   |            |  
|Common stock                                                                                                                |  |                          |            |   |            |   |            |            |  |   |            |  
|Balance at beginning of year                                                                                                |  | $                        | 500        |   |            | $ | 459        |            |  | $ | 458        |  
|Common stock offering                                                                                                       |  |                          |           |   |            |   | 34         |            |  |   |           |  
|Stock options exercised                                                                                                     |  |                          | 3          |   |            |   | 4          |            |  |   | 4          |  
|Conversion of operating company units to common shares                                                                      |  |                          |           |   |            |   | 2          |            |  |   | 4          |  
|Issuance of restricted and performance shares                                                                               |  |                          | 1          |   |            |   | 1          |            |  |   |           |  
|Shares repurchased and retired                                                                                              |  |                          |           |   |            |   |           |            |  |   | (7         | )
|                                                                                                                            |  |                          |            |   |            |   |            |            |  |   |            |  
|Balance at end of year                                                                                                      |  | $                        | 504        |   |            | $ | 500        |            |  | $ | 459        |  
|                                                                                                                            |  |                          |            |   |            |   |            |            |  |   |            |  
|Preferred stock                                                                                                             |  |                          |            |   |            |   |            |            |  |   |            |  
|Balance at beginning of year                                                                                                |  | $                        | 52         |   |            | $ | 52         |            |  | $ | 22         |  
|Redemption of 8.50% Series A Cumulative Redeemable                                                                          |  |                          | (22        | ) |            |   |           |            |  |   |           |  
|Issuance of 8.08% Series B Cumulative Redeemable                                                                            |  |                          |           |   |            |   |           |            |  |   | 30         |  
|Issuance of 6.75% Series C Cumulative Redeemable                                                                            |  |                          | 40         |   |            |   |           |            |  |   |           |  
|Issuance of 6.75% Series D Cumulative Redeemable                                                                            |  |                          | 30         |   |            |   |           |            |  |   |           |  
|                                                                                                                            |  |                          |            |   |            |   |            |            |  |   |            |  
|Balance at end of year                                                                                                      |  | $                        | 100        |   |            | $ | 52         |            |  | $ | 52         |  
|                                                                                                                            |  |                          |            |   |            |   |            |            |  |   |            |  
|Additional paid-in capital                                                                                                  |  |                          |            |   |            |   |            |            |  |   |            |  
|Balance at beginning of year                                                                                                |  | $                        | 943,064    |   |            | $ | 812,431    |            |  | $ | 744,037    |  
|Common stock offering                                                                                                       |  |                          |           |   |            |   | 112,304    |            |  |   |           |  
|Stock options and restricted shares                                                                                         |  |                          | 10,808     |   |            |   | 10,501     |            |  |   | 5,058      |  
|Conversion of operating company units to common shares                                                                      |  |                          | 251        |   |            |   | 6,275      |            |  |   | 11,659     |  
|Shares repurchased and retired                                                                                              |  |                          |           |   |            |   | (724       | )          |  |   | (19,363    | )
|Issuance of preferred stock                                                                                                 |  |                          | 168,802    |   |            |   |           |            |  |   | 72,261     |  
|Redemption of preferred stock                                                                                               |  |                          | (53,728    | ) |            |   |            |            |  |   |            |  
|Redemption related preferred stock issuance costs                                                                           |  |                          |           |   |            |   | 2,166      |            |  |   |           |  
|Other                                                                                                                       |  |                          | (584       | ) |            |   | 111        |            |  |   | (1,221     | )
|                                                                                                                            |  |                          |            |   |            |   |            |            |  |   |            |  
|Balance at end of year                                                                                                      |  | $                        | 1,068,613  |   |            | $ | 943,064    |            |  | $ | 812,431    |  
|                                                                                                                            |  |                          |            |   |            |   |            |            |  |   |            |  
|Accumulated net income (less than) in excess of cumulative dividends                                                        |  |                          |            |   |            |   |            |            |  |   |            |  
|Balance at beginning of year                                                                                                |  | $                        | 16,023     |   |            | $ | 37,842     |            |  | $ | 40,285     |  
|Net income for year                                                                                                         |  |                          | 73,541     |   |            |   | 82,970     |            |  |   | 94,936     |  
|Cash dividends declared to common shareholders: $1.95 per common share for the years ended December 31, 2004, 2003 and 2002 |  |                          | (98,015    | ) |            |   | (91,994    | )          |  |   | (89,614    | )
|Cash dividends declared to preferred shareholders (see Note 11)                                                             |  |                          | (12,114    | ) |            |   | (10,629    | )          |  |   | (7,765     | )
|Redemption related preferred stock issuance costs                                                                           |  |                          |           |   |            |   | (2,166     | )          |  |   |           |  
|                                                                                                                            |  |                          |            |   |            |   |            |            |  |   |            |  
|Balance at end of year                                                                                                      |  | $                        | (20,565    | ) |            | $ | 16,023     |            |  | $ | 37,842     |  
|                                                                                                                            |  |                          |            |   |            |   |            |            |  |   |            |  
|Stock purchase loans to executives                                                                                          |  |                          |            |   |            |   |            |            |  |   |            |  
|Balance at beginning of year                                                                                                |  | $                        | (2,836     | ) |            | $ | (3,183     | )          |  | $ | (2,616     | )
|Additional loans granted                                                                                                    |  |                          |           |   |            |   |           |            |  |   | (1,104     | )
|Maturities and reserves on loans                                                                                            |  |                          | 831        |   |            |   | 347        |            |  |   | 537        |  
|                                                                                                                            |  |                          |            |   |            |   |            |            |  |   |            |  
|Balance at end of year                                                                                                      |  | $                        | (2,005     | ) |            | $ | (2,836     | )          |  | $ | (3,183     | )
|                                                                                                                            |  |                          |            |   |            |   |            |            |  |   |            |  
|Total shareholders equity                                                                                                  |  | $                        | 1,046,647  |   |            | $ | 956,803    |            |  | $ | 847,601    |  
|                                                                                                                            |  |                          |            |   |            |   |            |            |  |   |            |  



See Accompanying Notes
to Consolidated Financial Statements



50



---

BRE PROPERTIES, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.    Company



BRE Properties, Inc., a Maryland corporation (BRE or the Company), was formed in 1970. BRE is a self-administered real estate
investment trust (REIT) focused on the development, acquisition and management of multifamily apartment communities in the Western United States. At December 31, 2004, BREs portfolio, owned directly or through wholly or majority
owned subsidiaries, consisted of 85 multifamily communities (aggregating 24,198 units), classified as direct investments in real estate-investments in rental properties on the accompanying consolidated balance sheets. Of these properties, 58 were
located in California, 14 in Washington, six in Arizona, five in Colorado and two in Utah. In addition, at December 31, 2004, there were eight properties under various stages of construction and development aggregating an estimated 2,051 units,
including five directly owned properties with 1,312 units classified as direct investments in real estate-construction in progress and three land parcels estimated to have 739 units which are classified as land under development. BRE also holds a
35% interest and is the managing member of two real estate joint ventures that own two multifamily properties with a total of 488 units, and a 15% joint venture interest in a multifamily portfolio totaling 3,443 units managed by a third party at
December 31, 2004.



The Operating Company



In November 1997, BRE acquired 16 completed properties and eight development
properties from certain entities of Trammell Crow Residential-West (the Transaction) pursuant to a definitive agreement (the Contribution Agreement). BRE paid a total of approximately $160,000,000 in cash and issued
$100,000,000 in common stock based on a stock price of $26.93 per share, as provided for in the Contribution Agreement. In addition, certain entities received Operating Company Units (OC Units) valued at $76,000,000 in BRE Property
Investors LLC (the Operating Company), a Delaware limited liability company and a majority owned subsidiary of BRE. The Operating Company assumed approximately $120,000,000 in debt in connection with this purchase. BRE is the sole
managing member and majority owner of the Operating Company at December 31, 2004. Substantially all of the properties acquired in the Transaction are owned by the Operating Company, which was formed by BRE for the purpose of acquiring the properties
in the Transaction.



The OC Units held by non-managing members
are included in minority interests in the Companys consolidated financial statements. Starting in November 1999, non-managing members of the Operating Company can exchange their units for cash in an amount equal to the market value of such
common stock at the time of the exchange or, at the option of the Company, common stock of BRE on a 1:1 basis. As of December 31, 2004, 2,210,488 OC Units have been exchanged for common stock. The non-managing members are entitled to priority
distributions regardless of the cash flows of the Operating Company. The Operating Company is also required to maintain certain financial ratios to protect the non-managing members distributions. Further, the Company has certain restrictions
from selling assets of the Operating Company in a taxable sale for a period ranging from eight to ten years from the date of the Transaction. The Operating Company will continue until the earlier of conversion of all non-managing member OC Units, or
September 25, 2012. The Operating Company has also guaranteed the repayment of the Companys $350,000,000 unsecured line of credit.



2.    Summary of Significant Accounting Policies



Restatement



On January 31, 2005, the Company announced a restatement of payroll and certain other real estate expenses, as well as construction in progress, to ensure
accruals were properly reflected at the end of each reporting period. During managements review of the Companys accounting policies and internal control over financial reporting, management determined that the Company should have
recognized these costs as incurred,



51



---

rather than as paid. Management has concluded that this control deficiency did not result in material misstatements to previously reported quarterly or
annual financial statements, as the historical amounts by which expenses and liability balances were misstated were not material to our financial condition, results of operations, or cash flows. However, adjusting for the cumulative effect of the
errors in fourth quarter of 2004 would have been material to that quarter. Accordingly, the Company determined to restate the financial statements for the fiscal years ended December 31, 2000, through December 31, 2003 filed on Form 10-K, and the
quarterly periods ended March 31, 2004, June 30, 2004, and September 30, 2004 filed on Form 10-Q to adjust for these out of period items. The interim periods have also been restated to record in the first and second quarters of 2004 expenses
incurred during these quarters and previously expensed in the third quarter 2004 relating to litigation charges associated with our Red Hawk Ranch community, as more fully described in Note 19 below. The impact of the restatement on the prior
balance sheets and statements of income included in these financial statements is set forth below.



Impact of Restatement on Consolidated Balance Sheets



|                                      |  |                                               |           |                   |   |                       |  |             |           |  |   |          
|------------------------------------- |  | --------------------------------------------- | --------- | ----------------- | - | --------------------- |  | ----------- | --------- |  | - | ---------
|                                      |  | December 31, 2003                             |           | December 31, 2002
|                                      |  | As PreviouslyReported                         |           | As Restated       |   | As PreviouslyReported |  | As Restated
|                                      |  | (amounts in thousands, except per share data)
|Total real estate portfolio           |  | $                                             | 2,180,903 |                   | $ | 2,184,947             |  | $           | 2,061,678 |  | $ | 2,064,009
|Other assets                          |  | $                                             | 47,062    |                   | $ | 48,317                |  | $           | 47,035    |  | $ | 48,157   
|Total assets                          |  | $                                             | 2,227,965 |                   | $ | 2,233,264             |  | $           | 2,108,713 |  | $ | 2,112,116
|Accounts payable and accrued expenses |  | $                                             | 36,233    |                   | $ | 45,273                |  | $           | 38,618    |  | $ | 45,654   
|Total liabilities                     |  | $                                             | 1,228,562 |                   | $ | 1,237,602             |  | $           | 1,212,382 |  | $ | 1,219,418
|Total shareholders equity            |  | $                                             | 960,544   |                   | $ | 956,803               |  | $           | 851,184   |  | $ | 847,601  



The impact of the
restatement resulted in a decrease in shareholders equity as of January 1, 2002 of $2,710.



Impact of Restatement on Consolidated Statements of Income



|                                              |  |                                               |        |                                     |   |                       |  |             |        |  |   |       
|--------------------------------------------- |  | --------------------------------------------- | ------ | ----------------------------------- | - | --------------------- |  | ----------- | ------ |  | - | ------
|                                              |  | For the Year EndedDecember 31, 2003           |        | For the Year EndedDecember 31, 2002
|                                              |  | As PreviouslyReported                         |        | As Restated                         |   | As PreviouslyReported |  | As Restated
|                                              |  | (amounts in thousands, except per share data)
|Real estate expenses1                         |  | $                                             | 82,873 |                                     | $ | 82,832                |  | $           | 73,164 |  | $ | 73,168
|General and administrative expense            |  | $                                             | 10,062 |                                     | $ | 10,260                |  | $           | 9,847  |  | $ | 10,716
|Net income available to common shareholders   |  | $                                             | 70,333 |                                     | $ | 70,175                |  | $           | 88,044 |  | $ | 87,171
|Earnings per share:                           |  |                                               |        |                                     |   |                       |  |             |        |  |   |       
|Basic earnings from continuing operations     |  | $                                             | 0.81   |                                     | $ | 0.81                  |  | $           | 1.40   |  | $ | 1.38  
|Basic earnings from discontinued operations   |  |                                               | 0.68   |                                     |   | 0.68                  |  |             | 0.52   |  |   | 0.52  
|                                              |  |                                               |        |                                     |   |                       |  |             |        |  |   |       
|Basic earnings per share                      |  | $                                             | 1.49   |                                     | $ | 1.49                  |  | $           | 1.92   |  | $ | 1.90  
|                                              |  |                                               |        |                                     |   |                       |  |             |        |  |   |       
|Diluted earnings from continuing operations   |  | $                                             | 0.80   |                                     | $ | 0.81                  |  | $           | 1.39   |  | $ | 1.37  
|Diluted earnings from discontinued operations |  |                                               | 0.68   |                                     |   | 0.67                  |  |             | 0.52   |  |   | 0.52  
|                                              |  |                                               |        |                                     |   |                       |  |             |        |  |   |       
|Diluted earnings per share                    |  | $                                             | 1.48   |                                     | $ | 1.48                  |  | $           | 1.91   |  | $ | 1.89  
|                                              |  |                                               |        |                                     |   |                       |  |             |        |  |   |       

---

|1 |  | $5,233 and $4,821 of real estate expenses for the years ended December 31, 2003 and 2002, respectively, were reclassified to discontinued operations during 2004, as
the related assets were sold or classified as held for sale at December 31, 2004. This reclassification was unrelated to the restatement.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Consolidation



In January 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 46,
Consolidation of Variable Interest Entities, an interpretation of ARB No. 51 (FIN 46). In December 2003, the FASB modified FIN 46 to make technical corrections and address implementation issues that had arisen. FIN 46
provides a new framework for identifying variable interest entities (VIEs) and determining when a company should include the assets, liabilities, noncontrolling interests and results of activities of a VIE in its consolidated financial statements.
FIN 46 applies immediately to arrangements created after January 31, 2003 and, with respect to arrangements created before February 1, 2003, the interpretation was applied to the Company as of January 1, 2003. Under FIN 46, a VIE is created when (i)
the equity investment at risk in the entity is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, or (ii) the entitys equity holders as a group either: (a) lack
direct or indirect ability to make decisions about the entity, (b) are not obligated to absorb expected losses of the entity if they occur, or (c) do not have the right to receive expected residual returns of the entity if they occur. If an entity
is deemed to be a VIE pursuant to FIN 46, the enterprise that is deemed to absorb a majority of the expected losses, receive a majority of the entitys expected residual returns, or both, is considered the primary beneficiary and must
consolidate the VIE. Expected losses and residual returns for VIEs are calculated based on the probability of estimated future cash flows as defined in FIN 46. The adoption of FIN 46 did not have any effect on BREs financial position or
results of operations.



Based on the provisions of FIN 46, the
Company has concluded that under certain circumstances when the Company (i) enters into option agreements for the purchase of land from an entity and pays a non-refundable deposit or (ii) enters into an arrangements with a financial partner for the
formation of joint ventures which engage in multifamily real estate projects, A VIE may be created under condition (ii) in the previous paragraph. For each VIE created, the Company will compute expected losses and residual returns based on the
probability of future cash flows. If the Company is determined to be the primary beneficiary of the VIE, the assets, liabilities and operations of the VIE will be consolidated with the Companys financial statements.



For any unconsolidated joint venture arrangements existing as of January 1,
2004, the Company has evaluated whether such joint venture arrangements represent variable interest entities in which the Company is the primary beneficiary. The Company concluded that no VIEs existed in which it is the primary beneficiary. The
Company did not enter into any new joint venture arrangements during 2004.



At December 31, 2004, BRE has made non-refundable cash deposits for three purchase option agreements totaling approximately $1,788,000, which are included in Other assets on the consolidated balance sheet. The
aggregate purchase price of properties under option is approximately $73,500,000. The option deposits generally represent the Companys maximum exposure to loss if it elects not to purchase the optioned property. Based on analysis performed
under FIN 46, the Company is not the primary beneficiary in any of the arrangements as of December 31, 2004.



BRE consolidates entities not deemed as VIEs that it has the ability to control. The accompanying consolidated financial statements include the accounts
of the Company, the Operating Company and other controlled subsidiaries. At December 31, 2004, BRE owned 92% of the Operating Company. All significant intercompany balances and transactions have been eliminated in consolidation.



Use of Estimates



The preparation of consolidated financial statements, in accordance with
accounting principles generally accepted in the United States of America, requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent
assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to acquiring, developing and assessing the carrying values of its real estate properties, its investments in and advances to joint ventures
and affiliates, and its qualification as a REIT. The Company bases its estimates on historical experience,



53



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current market conditions, and various other assumptions that are believed to be reasonable under the circumstances. Actual results may vary from those
estimates and those estimates could vary under different assumptions or conditions.



Investments in Rental Properties



Rental properties are recorded at cost, less accumulated depreciation, less an adjustment, if any, for impairment. All properties are held for leasing activities. A land value is assigned based on the purchase price
if land is acquired separately, or based on market research if acquired in a merger or in an operating community acquisition. BRE has a development group which manages the design, development and construction of its apartment communities. Projects
under development are carried at cost, including direct and indirect costs incurred to ready the assets for their intended use and which are specifically indentifiable, including capitalized interest and property taxes until units are placed in
service. Direct investment development projects are considered placed in service as certificates of occupancy are issued and the units become ready for occupancy. Depreciation begins as units are placed in service. Land acquired for development is
capitalized and reported as Land under development until the development plan for the land is formalized. Once the development plan is determined and construction contracts are signed, the costs are transferred to the balance sheet line
item Construction in progress. Costs of replacements, such as appliances, carpets and drapes, are expensed. Improvements and betterments that increase the value of the property or extend its useful life are capitalized.



Under subcontractor agreements during the development and construction of an
apartment community, a designated percentage of the subcontracted fee is retained until the end of the project to ensure the subcontractor completes their task to the Companys approval. The Company records retention payable when the amount
becomes a probable and estimable liability. Because the nature of the contracted work is to extend the useful life or make ready the subject property for its intended use, the offsetting debit upon recording the liability is to the basis of the
community. The retention liability is relieved when paid upon satisfaction of the contract.



Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, which generally range from 35 to 45 years for buildings and three to ten years for other property.



The Company adopted Statement of Financial Accounting Standards (SFAS) No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets, in 2002. SFAS No. 144 provides additional guidance on the recognition and measurement of the impairment of long-lived assets to be held and used, and
requires that the assets and liabilities and the results of operations of any communities that have been sold, or otherwise qualify as held for sale, be presented as discontinued operations in all periods presented.



The Company periodically evaluates its long-lived assets, including its
investments in rental properties, for impairment indicators. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions, the expected holding period of each asset and legal
and environmental concerns. Future events could occur which would cause the Company to conclude that impairment indicators exist and an impairment loss is warranted. There were no assets for which an adjustment for impairment in value was made in
2004, 2003 or 2002.



In the normal course of business, BRE will
receive offers for sale of its properties, either solicited or unsolicited. For those offers that are accepted, the prospective buyer will usually require a due diligence period before consummation of the transaction. It is not unusual for matters
to arise that result in the withdrawal or rejection of the offer during this process. The Company classifies real estate as held for sale when all of the following criteria have been met: management has committed to a plan to sell the
asset, the asset is available for immediate sale in its present condition, an active program to locate a buyer has been initiated, the sale of the asset is probable within one year, the asset is being actively marketed for sale at a price that is
reasonable in relation to its current fair value, and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.



54



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Specific components of net income that are presented as discontinued operations include the held for sale
or discontinued communities operating results, depreciation and interest expense to the extent there is a secured loan on the property. In addition, the net gain or loss on the eventual disposal of communities held for sale will be presented
as income from discontinued operations when recognized. Real estate assets held for sale are measured at the lower of the carrying amount or the fair value less the cost to sell. Subsequent to classification of a community as held for sale, no
further depreciation is recorded on the assets. Sales are generally recorded after title has been transferred to the buyer and after appropriate payments have been received and other criteria met.



Equity Interests in Real Estate Joint Ventures



The Companys investments in non-controlled real estate joint ventures
and joint ventures which are VIEs in which the Company is not the primary beneficiary are recorded under the equity method of accounting on the accompanying consolidated financial statements. Investments in real estate joint ventures that are
managed or are being developed by the Company are included in equity interests in and advances to real estate joint ventures. Investments in real estate joint ventures managed by third parties are included in other assets because such investments do
not represent a core activity within BREs overall real estate investment strategy.



Conversion of Operating Company Units



Conversions of Operating Company units are accounted for at book value, with the minority interest amount for the related converted unit being reclassified to Common stock and Additional paid in capital.



Rental Revenue



Rental income is recorded when due from residents and is recognized monthly
as it is earned, which is not materially different than on a straight-line basis as lease terms are generally for periods of one year or less. There were no contingent rental payments or percentage rents in the three years ended December 31, 2004.



Cash



The Company maintains its cash at financial institutions. The combined
account balances at one or more institutions periodically exceed the Federal Depository Insurance Corporation (FDIC) insurance coverage, and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of
FDIC insurance coverage. The Company believes that the risk is not significant, as the Company places its cash deposits and temporary cash investments with financial institutions believed by management to be creditworthy and of high quality. As of
December 31, 2004, the Company has a negative cash balance related to bank overdraft. This balance is included in Accounts payable and accrued expenses on the 2004 consolidated balance sheet. The positive cash balance at December 31, 2003, is
included in Other assets on the 2003 consolidated balance sheet.



Deferred Costs



Included in other assets are
costs incurred in obtaining debt financing that are deferred and amortized over the terms of the respective debt agreements as interest expense. Related amortization expense is included in interest expense in the accompanying consolidated statements
of income. Net deferred financing costs included in Other assets in the accompanying consolidated balance sheets are $11,159,000 and $13,488,000 as of December 31, 2004 and 2003, respectively. Amortization of deferred costs is included in interest
expense and totaled $3,298,000 and $3,874,000 for the years ended December 31, 2004 and 2003, 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,



55



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at least 100% 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 at the REIT level in the accompanying consolidated financial
statements.



Fair Value of Financial Instruments



The fair values of BREs financial instruments,
including such items in the consolidated financial statement captions as other assets (which includes cash, mortgages receivable and interest rate swaps), and lines of credit, approximate their carrying or contract values based on their nature,
terms and interest rates that approximate current market rates. The fair value of mortgage loans payable and unsecured senior notes is estimated using discounted cash flow analyses with an interest rate similar to that of current market borrowing
arrangements. The fair value of the Companys mortgage loans payable and unsecured senior notes was approximately $1,121,712,000 and $941,191,000 at December 31, 2004 and 2003, respectively.



Derivative instruments and hedging activities



BRE has four interest rate swap contracts that attain a floating rate of
interest on a portion of its fixed rate debt. BRE designated these derivative instruments to be utilized as fair value hedges in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended.
Under SFAS No. 133, the resulting assets or liabilities attributed to derivative instruments are carried on BREs consolidated financial statements at their estimated fair values. The hedges are perfectly effective and, therefore, changes in
the derivative fair value and the change in fair value of the hedged items during the hedging period exactly offset with no impact on BREs current earnings.



Stock-based compensation



Effective January 1, 2003, BRE adopted the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation (SFAS
No. 123), as amended by SFAS No. 148, Accounting for Stock Based Compensation-Transition and Disclosure (SFAS No. 148). Under the fair value method compensation cost is measured at the grant date based on the value of the award and is
recognized over the service period, which is usually the vesting period. BRE has adopted the prospective method as provided for in SFAS No. 148, under which the provisions of SFAS No. 123 will be applied prospectively to all awards granted, modified
or settled after January 1, 2003. Therefore, the cost related to stock-based compensation included in the determination of consolidated net income for the years ended December 31, 2004 and 2003 is less than that which would have been recognized if
the fair value method had been applied to all awards in prior years. Prior to 2003, BRE accounted for stock-based compensation under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, and related Interpretations. As discussed under Recently Issued Accounting Pronouncements, SFAS No. 123 was revised in 2004, effective July 1, 2005. Awards under BREs option plans vest over periods ranging from one
to five years.



56



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The following table illustrates the pro forma effect on consolidated net income and earnings per share of
applying the recognition provisions of SFAS No. 123 to all outstanding awards in each period.



|                                                                                                       |  |                         |            |   |            |   |            |            |  |   |            |  
|------------------------------------------------------------------------------------------------------ |  | ----------------------- | ---------- | - | ---------- | - | ---------- | ---------- |  | - | ---------- | -
|                                                                                                       |  | Years ended December 31 |           
|                                                                                                       |  | 2004                    |            |   | 2003       |   |            | 2002       | 
|                                                                                                       |  |                         |            |   | (Restated) |   |            | (Restated) | 
|Net income available to common shareholders, as reported                                               |  | $                       | 61,427,000 |   |            | $ | 70,175,000 |            |  | $ | 87,171,000 |  
|Add: Stock-based compensation expense included in reported net income                                  |  |                         | 2,085,000  |   |            |   | 455,000    |            |  |   |           |  
|Deduct: Total stock-based compensation expense determined under fair value based method for all awards |  |                         | (2,997,000 | ) |            |   | (3,438,000 | )          |  |   | (4,558,000 | )
|                                                                                                       |  |                         |            |   |            |   |            |            |  |   |            |  
|Pro forma net income                                                                                   |  | $                       | 60,515,000 |   |            | $ | 67,192,000 |            |  | $ | 82,613,000 |  
|                                                                                                       |  |                         |            |   |            |   |            |            |  |   |            |  
|Earnings per share:                                                                                    |  |                         |            |   |            |   |            |            |  |   |            |  
|Basicas reported                                                                                      |  |                         | $1.22      |   |            |   | $1.49      |            |  |   | $1.90      |  
|Basicpro forma                                                                                        |  |                         | $1.21      |   |            |   | $1.43      |            |  |   | $1.80      |  
|Dilutedas reported                                                                                    |  |                         | $1.21      |   |            |   | $1.48      |            |  |   | $1.89      |  
|Dilutedpro forma                                                                                      |  |                         | $1.19      |   |            |   | $1.42      |            |  |   | $1.79      |  



The fair value for
these options was estimated as of the date of grant using a Black-Scholes option pricing model, with the following weighted average assumptions for the years ended December 31, 2004, 2003, and 2002:



|                             |  |                         |   |  |         |   |  |         |  
|---------------------------- |  | ----------------------- | - |  | ------- | - |  | ------- | -
|                             |  | Years ended December 31 |  
|                             |  | 2004                    |   |  | 2003    |   |  | 2002    |  
|Risk-free interest rate      |  | 3.22                    | % |  | 3.44    | % |  | 4.34    | %
|Dividend yield               |  | 6.50                    | % |  | 6.50    | % |  | 6.50    | %
|Volatility                   |  | .20                     |   |  | .20     |   |  | .20     |  
|Weighted average option life |  | 5 years                 |   |  | 7 years |   |  | 7 years |  



The effect of pro
forma application of SFAS 123 is not necessarily representative of the effect on consolidated net income for future periods.



The Black-Scholes option-pricing model was developed for use in estimating the fair market value of traded options that have no vesting restrictions and
are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the above stock option plans have characteristics significantly different from
those of traded options, and because, in managements opinion, changes in the subjective input assumptions can materially affect the fair value estimate, the existing models do not necessarily provide a reliable single measure of the fair value
of the above stock option plans.



Reclassifications



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



Reportable Segments



SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, requires certain descriptive information to be provided
about an enterprises reportable segments. BRE has determined that it has only one operating and reportable segment, multifamily communities, which comprised 98% of BREs



57



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consolidated assets at December 31, 2004 and 2003 and approximately 99% of its total consolidated revenues for the three years ended December 31, 2004.



Concentration Risk



All multifamily communities owned by the Company are located in the Western
United States, in three general markets that it defines as California, Pacific Northwest, and Mountain/Desert States. All revenues are from external customers and there are no revenues from transactions with other segments. There are no residents
that contributed 10% or more of BREs total revenues in the years ended December 31, 2004, 2003 or 2002.



Recently Issued Accounting Pronouncements



On December 16, 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based Payment, which is a
revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. Generally, the approach in SFAS No. 123(R) is similar to the approach
described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an
alternative. We expect to adopt SFAS No. 123(R) on July 1, 2005.



The Company adopted the fair-value-based method of accounting for share-based payments effective January 1, 2003 using the prospective method described in SFAS No. 148, Accounting for Stock-Based CompensationTransition and
Disclosure. Currently, the Company uses the Black-Scholes formula to estimate the value of stock options granted to employees and expects to continue to use this acceptable option valuation model upon the required adoption of SFAS No. 123(R)
on July 1, 2005. Because SFAS No. 123(R) must be applied not only to new awards but to previously granted awards that are not fully vested on the effective date, and because the Company adopted SFAS No. 123 using the prospective transition method
(which applied only to award granted, modified or settled after the adoption date), compensation cost for some previously granted awards that were not recognized under SFAS No. 123 will be recognized under SFAS No. 123(R). The Company does not
believe the adoption of SFAS No. 123(R) will have a material impact on its financial statements or results of operations.



3.    Real Estate Portfolio



The components of direct investments in real estateinvestments in rental properties follow:



|                           |  |             |               |   |      |   |               |  
|-------------------------- |  | ----------- | ------------- | - | ---- | - | ------------- | -
|                           |  | December 31 |              
|                           |  | 2004        |               |   | 2003 |  
|Land                       |  | $           | 475,461,000   |   |      | $ | 396,987,000   |  
|Buildings and improvements |  |             | 2,062,710,000 |   |      |   | 1,812,663,000 |  
|                           |  |             |               |   |      |   |               |  
|Subtotal                   |  |             | 2,538,171,000 |   |      |   | 2,209,650,000 |  
|Accumulated depreciation   |  |             | (280,498,000  | ) |      |   | (229,983,000  | )
|                           |  |             |               |   |      |   |               |  
|Total                      |  | $           | 2,257,673,000 |   |      | $ | 1,979,667,000 |  
|                           |  |             |               |   |      |   |               |  



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A roll-forward of direct investments in real estate-construction in progress follows:



|                                                                                                            |  |             |              |   |            |   |             |  
|----------------------------------------------------------------------------------------------------------- |  | ----------- | ------------ | - | ---------- | - | ----------- | -
|                                                                                                            |  | December 31 |             
|                                                                                                            |  | 2004        |              |   | 2003       |  
|                                                                                                            |  |             |              |   | (Restated) |  
|Opening balance                                                                                             |  | $           | 104,531,000  |   |            | $ | 93,207,000  |  
|Costs incurred to projects under construction                                                               |  |             | 55,746,000   |   |            |   | 62,026,000  |  
|Transfers of construction in progress to direct investments in real estateinvestments in rental properties |  |             | (107,711,000 | ) |            |   | (57,601,000 | )
|Transfers from land under development to direct investments in real estateconstruction in progress         |  |             | 56,364,000   |   |            |   | 6,899,000   |  
|                                                                                                            |  |             |              |   |            |   |             |  
|Ending balance                                                                                              |  | $           | 108,930,000  |   |            | $ | 104,531,000 |  
|                                                                                                            |  |             |              |   |            |   |             |  



BREs carrying
value of its assets exceeded the tax basis by approximately $239,000,000 (unaudited) at December 31, 2004.



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



As of December 31, 2004, BRE had two joint venture arrangements in which its capital interest is 35%; these joint ventures are managed by the Company (the
joint ventures). Such arrangements are accounted for using the equity method. Each of the joint ventures contains a single multifamily community that was developed by BRE and completed in 2001. BREs investment in the joint ventures
totals $10,227,000 and $10,391,000 as of December 31, 2004 and 2003, respectively and is shown as Equity interests in and advances to real estate joint ventures-investments in rental properties on BREs consolidated balance sheets.
The communities had a total cost of approximately $43,657,000. The joint ventures carry secured, non-recourse loans totaling $18,988,000, that mature in 2011 and bear interest at rates of 7.25% and 8.0%. BRE has not guaranteed repayment of the joint
venture debt. BRE and third-party members have funded the equity. For these joint ventures, BREs recognition of development and construction fees and responsibility to fund costs incurred above an agreed upon level during the construction
period resulted in a disproportionate capital account balance between BRE and the third-party member compared to each members percent interest. This amount differs from the amount of the underlying equity in the net assets of the applicable
joint ventures and is being depreciated over 40 years.



In
addition to the joint ventures discussed above, the Company also has an investment in a real estate joint venture managed by a third-party (non-managed joint venture). During 2000 and 2001, BRE sold a total of 22 communities in Tucson, Albuquerque,
Las Vegas, and Phoenix. The Company contributed a portion of the proceeds to a joint venture related to the buyer for a 15% equity interest in order to facilitate the sale of 85% of these assets. The Companys investment in the non-managed
joint venture consists of a 15% equity interest in a portfolio of multifamily properties managed by a third-party (G&I III Residential Portfolio, LLC). The Companys investment approximates $5,279,000 and $10,783,000 at December 31, 2004
and 2003, respectively, and is included in Other assets as this investment does not represent a core activity within BREs overall real estate investment strategy. The joint venture has a total of 13 apartment communities totaling
3,443 units (unaudited) as of December 31, 2004.



The
Companys share of income from equity investments in all three joint ventures totaled $1,558,000; $882,000 and $3,393,000 for the years ended December 31, 2004, 2003 and 2002, respectively.



59



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5.    Other Assets



The components of other assets follow:



|                                                              |  |             |            |            |   |           
|------------------------------------------------------------- |  | ----------- | ---------- | ---------- | - | ----------
|                                                              |  | December 31
|                                                              |  | 2004        |            | 2003      
|                                                              |  |             |            | (Restated)
|Prepaid loan fees, net                                        |  | $           | 11,159,000 |            | $ | 13,488,000
|Accounts and mortgages receivable                             |  |             | 8,267,000  |            |   | 9,502,000 
|Predevelopment and escrow deposits                            |  |             | 5,728,000  |            |   | 3,972,000 
|Investment in G&I III Residential Portfolio, LLC (see Note 4) |  |             | 5,279,000  |            |   | 10,783,000
|Furniture and equipment, net                                  |  |             | 3,122,000  |            |   | 3,658,000 
|Cash                                                          |  |             |           |            |   | 1,105,000 
|Other                                                         |  |             | 4,969,000  |            |   | 5,809,000 
|                                                              |  |             |            |            |   |           
|Total Other Assets                                            |  | $           | 38,524,000 |            | $ | 48,317,000
|                                                              |  |             |            |            |   |           



6.    Mortgage
Loans Payable and Secured Line of Credit



The following
data pertain to BREs secured debt at December 31, 2004 and 2003:



|                                                                                                |  |              |             |   |      |   |             |  
|----------------------------------------------------------------------------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                                                                                                |  | December 31, |            
|                                                                                                |  | 2004         |             |   | 2003 |  
|Fixed rate secured mortgage loans                                                               |  | $            | 148,763,000 |   |      | $ | 75,769,000  |  
|Variable rate secured mortgage loans                                                            |  |              | 23,290,000  |   |      |   | 23,290,000  |  
|Secured mortgage loans subject to floating rate swaps                                           |  |              | 31,312,000  |   |      |   | 33,355,000  |  
|Secured line of credit                                                                          |  |              | 140,000,000 |   |      |   | 100,000,000 |  
|                                                                                                |  |              |             |   |      |   |             |  
|Total Secured Debt                                                                              |  | $            | 343,365,000 |   |      | $ | 232,414,000 |  
|                                                                                                |  |              |             |   |      |   |             |  
|Net book value of investments in real estate securing mortgage loans and secured line of credit |  | $            | 565,016,000 |   |      | $ | 364,310,000 |  
|Remaining terms of mortgage loans payable                                                       |  |              | 1-8 years   |   |      |   | 1-7 years   |  
|Average interest rate on fixed rate mortgages                                                   |  |              | 6.6         | % |      |   | 7.8         | %
|Average interest rate on variable rate mortgages                                                |  |              | 2.6         | % |      |   | 3.1         | %
|Average interest rate on variable secured line of credit                                        |  |              | 2.3         | % |      |   | 2.1         | %
|Average interest rate on mortgages subject to floating rate swaps                               |  |              | LIBOR + 2.6 | % |      |   | LIBOR + 2.6 | %



Future scheduled
principal payments are included in Note 7.



BRE has entered
into three fixed to floating interest rate swap agreements on secured debt with a notional amount totaling $31,009,000 and $32,010,000 at December 31, 2004 and 2003, respectively. The difference between the secured debt carrying values of
$31,311,000 and $33,355,000 at December 31, 2004 and 2003, respectively, and the notional amounts are due to basis adjustments from hedging activities of $302,000 in 2004 and $1,345,000 in 2003, respectively. The related debt matures in 2005.



During 2003, BRE established a Fannie Mae credit facility
maturing in 2008 with borrowings of $100,000,000 and option to increase the size to $250,000,000. During the first quarter of 2004, BRE increased the size of the facility from $100,000,000 to $140,000,000. Borrowings under the secured line of credit
totaled $140,000,000 and $100,000,000 at December 31, 2004 and 2003, respectively. Nine multifamily communities with a net carrying value of $237,534,000 secured the credit facility at December 31, 2004. Five multifamily communities with a net
carrying value of $171,518,000 secured the credit facility at December 31, 2003. The borrowing cost, including interest, margin and fees, is currently 2.3%. Subject to the terms of the facility, the Company has the option to convert variable-rate
borrowings to fixed-rate borrowings.



60



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7.    Unsecured Senior Notes and Unsecured Line of Credit



The following table pertains to BREs unsecured senior notes and
unsecured line of credit at December 31, 2004 and 2003:



|                                                              |  |              |               |   |      |   |             |  
|------------------------------------------------------------- |  | ------------ | ------------- | - | ---- | - | ----------- | -
|                                                              |  | December 31, |              
|                                                              |  | 2004         |               |   | 2003 |  
|Fixed rate unsecured notes                                    |  | $            | 830,000,000   |   |      | $ | 730,000,000 |  
|Unsecured line of credit                                      |  |              | 187,000,000   |   |      |   | 196,000,000 |  
|Unsecured notes subject to floating rate swaps                |  |              | 18,201,000    |   |      |   | 33,915,000  |  
|                                                              |  |              |               |   |      |   |             |  
|Total unsecured debt                                          |  | $            | 1,035,201,000 |   |      | $ | 959,915,000 |  
|                                                              |  |              |               |   |      |   |             |  
|Average interest rate on fixed rate unsecured notes           |  |              | 6.7           | % |      |   | 6.9         | %
|Average interest rate on unsecured line of credit             |  |              | 2.9           | % |      |   | 2.7         | %
|Average interest rate on notes subject to floating rate swaps |  |              | LIBOR + 3.2   | % |      |   | LIBOR + 3.3 | %



As of December 31,
2004, BRE had an unsecured line of credit expiring in April 2006, for up to $350,000,000. Borrowings totaled $187,000,000 and $196,000,000 at December 31, 2004 and 2003, respectively. The interest rate on the line of credit is currently based on
LIBOR plus 70 basis points, plus a fee of 0.20% payable on the unused portion. The average interest rate was approximately 2.9% and 2.7% for the years ended December 31, 2004 and 2003, respectively. Under the unsecured line of credit, BRE has
capacity for up to $35,000,000 in letters of credit, which to the extent issued reduce capacity under the unsecured line of credit. As of December 31, 2004, BRE has unused letter of credit capacity totaling approximately $9,800,000. BRE enters into
letters of credit for various general corporate purposes.



BRE
has entered into fixed to floating interest rate swap agreements on unsecured notes with a notional amounts totaling $18,000,000 and $33,000,000 at December 31, 2004 and 2003, respectively. The difference between the carrying amounts of unsecured
notes of $18,201,000 and $33,915,000 at December 31, 2004 and 2003, respectively, and the notional amounts are due to basis adjustments from hedging activities totaling $201,000 in 2004 and $915,000 in 2003, respectively. The remaining debt matures
in 2005.



The unsecured line of credit and unsecured senior
note agreements contain various covenants that include, among other factors, tangible net worth and requirements to maintain certain financial ratios. BRE was in compliance with all such financial covenants throughout the years ended December 31,
2004 and 2003.



Scheduled principal payments required on the
lines of credit, unsecured senior notes payable and mortgage loans payable for the next five years and thereafter are as follows.



|           |  |   |              
|---------- |  | - | -------------
|2005       |  | $ | 51,749,000   
|2006       |  |   | 202,101,000  
|2007       |  |   | 214,223,000  
|2008       |  |   | 161,881,000  
|2009       |  |   | 218,664,000  
|Thereafter |  |   | 529,948,000  
|           |  |   |              
|Total      |  | $ | 1,378,566,000
|           |  |   |              



The 2006 amount
includes the $187,000,000 balance at December 31, 2004 on the unsecured line of credit. The 2008 amount includes the $140,000,000 balance at December 31, 2004 on the secured line of credit. Interest expense, excluding interest from discontinued
operations, on mortgage loans, lines of credit and unsecured senior notes, including amortization of related issuance costs, aggregated $72,989,000; $68,542,000 and $68,121,000 for the years ended December 31, 2004, 2003 and 2002, respectively.
Capitalized interest was $6,163,000; $9,117,000 and $12,015,000 for the years ended December 31, 2004, 2003 and 2002, respectively. Excluding capitalized interest, cash paid for interest totaled $66,235,000; $59,856,000 and $51,526,000 in 2004,
2003, and 2002, respectively.



61



---

8.    Accounts Payable and Accrued Expenses



The components of accounts payable and accrued expenses follow:



|                                            |  |             |            |            |   |           
|------------------------------------------- |  | ----------- | ---------- | ---------- | - | ----------
|                                            |  | December 31
|                                            |  | 2004        |            | 2003      
|                                            |  |             |            | (Restated)
|Accrued interest payable                    |  | $           | 19,491,000 |            | $ | 18,457,000
|Security deposits                           |  |             | 8,115,000  |            |   | 7,152,000 
|Accrued employee benefits                   |  |             | 7,837,000  |            |   | 5,366,000 
|Bank overdraft in excess of cash            |  |             | 5,891,000  |            |   |          
|Accrued development costs                   |  |             | 5,575,000  |            |   | 4,221,000 
|Retention payable                           |  |             | 2,947,000  |            |   | 4,025,000 
|Property taxes payable                      |  |             | 2,945,000  |            |   | 2,187,000 
|Other                                       |  |             | 5,252,000  |            |   | 3,865,000 
|                                            |  |             |            |            |   |           
|Total Accounts Payable and Accrued Expenses |  | $           | 58,053,000 |            | $ | 45,273,000
|                                            |  |             |            |            |   |           



9.    Derivative Instruments and Hedging Activities



The Company enters into interest rate swaps with the objective of lowering its overall borrowing costs. The notional amount of the interest rate swaps utilized in the fair value hedges is approximately $49,000,000,
with maturity dates in 2005. The principal amount of debt being hedged equals the notional amounts of the interest rate swaps. The fair value hedges convert debt with a weighted average fixed rate of 7.46% to a floating rate equal to LIBOR plus an
average spread of 2.8%, which resulted in an effective rate of 4.3% for the year ended December 31, 2004. The fair value of the interest rate swaps at December 31, 2004 and 2003 was $503,000 and $2,260,000, respectively, and is recorded in other
assets on the consolidated balance sheets. At December 31, 2004, offsetting amounts of $302,000 and $201,000 have been recorded as an increase to mortgage loans payable and unsecured senior notes, respectively. At December 31, 2003, offsetting
amounts of $1,345,000 and $915,000 have been recorded as an increase to mortgage loans payable and unsecured senior notes, respectively. To determine the fair values of derivatives, BRE uses market valuations provided by third parties.



10.    Discontinued Operations



The results of operations for properties sold during the period or
designated as held for sale at the end of the period are required to be classified as discontinued operations. The property-specific components of net earnings that are classified as discontinued operations include operating results, depreciation
expense and interest expense as well as the net gain on the disposal. At December 31, 2004, BRE had three operating apartment communities classified as held for sale, which are expected to be sold to unrelated third parties within six months after
December 31, 2004. The estimated proceeds less anticipated costs to sell the assets held for sale at December 31, 2004 are greater than the carrying values as of December 31, 2004, and therefore no provisions for possible losses were recorded.



During the fourth quarter of 2004, BRE sold three operating
communities with 878 units for gross proceeds of approximately $98,600,000, resulting in a gain on sale of approximately $19,925,000. During the first six months of 2003, BRE sold three operating communities with 1,100 units for gross proceeds of
approximately $72,700,000, resulting in a gain on sale of approximately $23,100,000. During the fourth quarter of 2002, BRE sold three operating communities with a total of 663 units for an aggregate sales price of approximately $58,300,000,
resulting in a net gain on sale of $10,100,000.



62



---

The following is a breakdown of the results of operations and net gain on the sales from the nine
properties sold during the three years ended December 31, 2004, and the three properties held for sale at December 31, 2004:



|                                         |  |                         |            |   |            |   |            |            |  |   |             |  
|---------------------------------------- |  | ----------------------- | ---------- | - | ---------- | - | ---------- | ---------- |  | - | ----------- | -
|                                         |  | Years ended December 31 |           
|                                         |  | 2004                    |            |   | 2003       |   |            | 2002       | 
|                                         |  |                         |            |   | (Restated) |   |            | (Restated) | 
|Rental income                            |  | $                       | 16,551,000 |   |            | $ | 18,553,000 |            |  | $ | 31,602,000  |  
|Real estate expenses                     |  |                         | (5,323,000 | ) |            |   | (5,975,000 | )          |  |   | (10,788,000 | )
|Interest expense                         |  |                         |           |   |            |   | (192,000   | )          |  |   | (1,026,000  | )
|Provision for depreciation               |  |                         | (2,916,000 | ) |            |   | (3,708,000 | )          |  |   | (6,035,000  | )
|Gain on sales of discontinued operations |  |                         | 19,925,000 |   |            |   | 23,147,000 |            |  |   | 10,067,000  |  
|                                         |  |                         |            |   |            |   |            |            |  |   |             |  
|Total discontinued operations            |  | $                       | 28,237,000 |   |            | $ | 31,825,000 |            |  | $ | 23,820,000  |  
|                                         |  |                         |            |   |            |   |            |            |  |   |             |  



11.    Preferred Stock



The following table presents the Companys issued and outstanding Preferred Shares as of December 31, 2004 and 2003:



|                                                                                                                                                       |  |                           |  |                                |        |                                 |   |             |                                 |  |   |            
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------- |  | ------------------------------ | ------ | ------------------------------- | - | ----------- | ------------------------------- |  | - | -----------
|                                                                                                                                                       |  | OptionalRedemptionDate(1) |  | AnnualDividendRate perShare(2) |        | Outstanding atDecember 31, 2004 |   |             | Outstanding atDecember 31, 2003
|Preferred Stock, nonvoting, $0.01 par value; 10,000,000 shares authorized:                                                                             |  |                           |  |                                |        |                                 |   |             |                                 |  |   |            
|8.50% Series A cumulative redeemable, liquidation preference $25.00 per share, 2,150,000 shares outstanding at December 31,
2003                       |  | January 2004              |  | $                              | 2.1250 |                                 | $ |            | (3)                             |  | $ | 53,750,000 
|8.08% Series B cumulative redeemable, liquidation preference $25.00 per share, 3,000,000 shares outstanding at December 31, 2004 and December
31, 2003 |  | June 2007                 |  | $                              | 2.0200 |                                 |   | 75,000,000  |                                 |  |   | 75,000,000 
|6.75% Series C cumulative redeemable, liquidation preference $25.00 per share, 4,000,000 shares outstanding at December 31,
2004                       |  | March 2009                |  | $                              | 1.6875 |                                 |   | 100,000,000 | (4)                             |  |   |           
|6.75% Series D cumulative redeemable, liquidation preference $25.00 per share, 3,000,000 shares outstanding at December 31,
2004                       |  | December 2009             |  | $                              | 1.6875 |                                 |   | 75,000,000  | (5)                             |  |   |           
|                                                                                                                                                       |  |                           |  |                                |        |                                 |   |             |                                 |  |   |            
|                                                                                                                                                       |  |                           |  |                                |        |                                 | $ | 250,000,000 |                                 |  | $ | 128,750,000
|                                                                                                                                                       |  |                           |  |                                |        |                                 |   |             |                                 |  |   |            

---

|(1) |  | On or after the redemption date, all series may be redeemed for cash at the option of the Company, in whole or in part, at a redemption price equal to the
liquidation price per share, plus accrued and unpaid dividends, if any.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Dividends on all series of Preferred Shares are payable quarterly. All series of preferred stock rank prior to the Companys common stock with respect to the
payment of dividends and the distribution of assets in the event of liquidation, dissolution or winding up. Each series of preferred stock ranks on parity with the others.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



63



---

|(3) |  | On January 29, 2004, the Company redeemed all of its outstanding Series A Cumulative
Redeemable Preferred Stock at a redemption price of $25.17118 per share. The redemption totaled $54,118,000, and was comprised of the liquidation value of $53,750,000 ($25.00 per share), plus accrued and unpaid dividends totaling $368,000 ($0.17118
per share) to the redemption date. Original preferred stock issuance costs totaling $2,166,000 were expensed during the fourth quarter of 2003 when the Company announced the redemption.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | On March 15, 2004, the Company closed on an offering of 4,000,000 shares of 6.75% Series C Cumulative Redeemable Preferred Stock at public offering price of $25 per
share. Net proceeds from the offering, after all discounts, commissions and issuance costs, totaled approximately $96,436,000 and were used for general corporate purposes. Dividends incurred and paid totaled $5,363,000 ($1.34 per share) in 2004.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | On December 9, 2004, the Company closed on an offering of 3,000,000 shares of 6.75% Series D Cumulative Redeemable Preferred Stock at a public offering price of $25
per share. Net proceeds from the offering, after all discounts, commissions and issuance costs, totaled approximately $72,436,000 and were used for general corporate purposes. Accrued and unpaid dividends on the Series D preferred shares totals
$323,000 ($0.11 per share) as of December 31, 2004.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



12.    Stock Option Plans



Employee Plans



The 1992 Stock Option Plan and
the 1999 BRE Stock Incentive Plan, as amended (the Plans) provide for the issuance of incentive stock options, non-qualified stock options, share appreciation rights, restricted shares and other grants. The maximum number of shares that
may be issued under the Plans is 5,850,000. 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 three to five years. Shareholders initially adopted the
1999 BRE Stock Incentive Plan in 1999 and approved the plan as amended in 2001. The 1999 BRE Stock Incentive Plan, as amended, allows for grants of up to 3,500,000 shares. Through 2002, certain key employees were allowed to exercise options with a
reload provision; 409,216 reload grants were made in 2002. The reload program was suspended in 2003. Changes in options outstanding during the years ended December 31, 2004, 2003 and 2002 were as follows:



|                                                                         |  |                         |   |      |                              |       |                   |           |   |                              |   |                   |  |           |                                 |  |   |      
|------------------------------------------------------------------------ |  | ----------------------- | - | ---- | ---------------------------- | ----- | ----------------- | --------- | - | ---------------------------- | - | ----------------- |  | --------- | ------------------------------- |  | - | -----
|                                                                         |  | Years ended December 31
|                                                                         |  | 2004                    |   | 2003 |                              | 2002 
|                                                                         |  | Sharesunderoption       |   |      | Weightedaverageexerciseprice |       | Sharesunderoption |           |   | Weightedaverageexerciseprice |   | Sharesunderoption |  |           | Weighted average exercise price
|Balance at beginning of period                                           |  | 2,134,159               |   |      | $                            | 28.97 |                   | 2,190,566 |   |                              | $ | 28.38             |  | 2,011,157 |                                 |  | $ | 26.59
|Granted                                                                  |  | 600,000                 |   |      | $                            | 32.45 |                   | 456,500   |   |                              | $ | 29.79             |  | 1,091,976 |                                 |  | $ | 30.12
|Exercised                                                                |  | (554,444                | ) |      | $                            | 28.96 |                   | (373,726  | ) |                              | $ | 26.49             |  | (711,670  | )                               |  | $ | 26.47
|Cancelled                                                                |  | (97,250                 | ) |      | $                            | 28.70 |                   | (139,181  | ) |                              | $ | 29.13             |  | (200,897  | )                               |  | $ | 26.65
|                                                                         |  |                         |   |      |                              |       |                   |           |   |                              |   |                   |  |           |                                 |  |   |      
|Balance at end of period                                                 |  | 2,082,465               |   |      | $                            | 29.99 |                   | 2,134,159 |   |                              | $ | 28.97             |  | 2,190,566 |                                 |  | $ | 28.38
|                                                                         |  |                         |   |      |                              |       |                   |           |   |                              |   |                   |  |           |                                 |  |   |      
|Exercisable                                                              |  | 1,257,613               |   |      | $                            | 29.24 |                   | 778,447   |   |                              | $ | 28.91             |  | 286,061   |                                 |  | $ | 26.72
|Weighted average estimated fair value of options granted during the year |  |                         |   |      | $                            | 2.68  |                   |           |   |                              | $ | 2.55              |  |           |                                 |  | $ | 2.98 



At December 31, 2004,
the exercise price of shares under option ranged from $22.40 to $33.80, with a weighted average exercise price of $29.99. The exercise price of all options granted in the years ended December 31, 2004, 2003 and 2002 was equal to the market price on
the date of grant. Expiration dates range from 2005 through 2014; the weighted average remaining contractual life of these options is seven years. Stock options were exercised during 2004 on options originally granted with exercise prices ranging
from $22.40 to $33.80. At December 31, 2004, there were 96,240 restricted shares outstanding under the Plans. There were 44,100; 49,939 and 1,700 restricted shares granted in 2004, 2003 and 2002, respectively. The fair value of restricted shares
awarded totaled $1,431,000; $1,507,0000 and $56,000 in 2004, 2003 and 2002, respectively.



64



---

Non-Employee Director Stock Option and Restricted Stock Plan



The Second Amended and Restated Non-Employee Director Stock Option and
Restricted Stock Plan, approved by shareholders in May of 2003, provides for: (1) annual grants of restricted stock with a market price-based value of $35,000 per year per non-employee director; (2) annual option or share appreciation right grants
with an aggregate Black-Scholes-based value of $35,000 per year per non-employee director; (3) discretionary annual grants for service as Chairman of the Board or Lead Director of restricted stock and options or share appreciation rights with an
aggregate value of up to $35,000 per year; and (4) annual grants for service as a Board committee chairman of restricted stock and options and/or share appreciation rights with an aggregate Black-Scholes value of $7,000 per year per committee
chairman. In May of 2003, the Board of Directors suspended use of a reload provision that granted an additional 377,915 options in 2002. The maximum number of shares that may be issued under this plan is 2,300,000. As with the Plans, the option
price may not be less than the fair market value of a share on the date the option is granted. Changes in options outstanding for the years ended December 31, 2004, 2003 and 2002 were as follows:



|                                                                         |  |                         |   |      |                              |       |                   |           |   |                              |   |                   |  |           |                                 |  |   |      
|------------------------------------------------------------------------ |  | ----------------------- | - | ---- | ---------------------------- | ----- | ----------------- | --------- | - | ---------------------------- | - | ----------------- |  | --------- | ------------------------------- |  | - | -----
|                                                                         |  | Years ended December 31
|                                                                         |  | 2004                    |   | 2003 |                              | 2002 
|                                                                         |  | Sharesunderoption       |   |      | Weightedaverageexerciseprice |       | Sharesunderoption |           |   | Weightedaverageexerciseprice |   | Sharesunderoption |  |           | Weighted average exercise price
|Balance at beginning of period                                           |  | 1,591,404               |   |      | $                            | 29.70 |                   | 1,666,080 |   |                              | $ | 29.53             |  | 1,507,315 |                                 |  | $ | 28.16
|Granted                                                                  |  | 94,999                  |   |      | $                            | 34.45 |                   | 118,846   |   |                              | $ | 32.24             |  | 657,751   |                                 |  | $ | 30.86
|Exercised                                                                |  | (265,643                | ) |      | $                            | 30.37 |                   | (145,980  | ) |                              | $ | 30.16             |  | (438,035  | )                               |  | $ | 26.83
|Cancelled                                                                |  |                        |   |      |                              |      |                   | (47,542   | ) |                              | $ | 28.44             |  | (60,951   | )                               |  | $ | 29.61
|                                                                         |  |                         |   |      |                              |       |                   |           |   |                              |   |                   |  |           |                                 |  |   |      
|Balance at end of period                                                 |  | 1,420,760               |   |      | $                            | 29.89 |                   | 1,591,404 |   |                              | $ | 29.70             |  | 1,666,080 |                                 |  | $ | 29.53
|                                                                         |  |                         |   |      |                              |       |                   |           |   |                              |   |                   |  |           |                                 |  |   |      
|Exercisable                                                              |  | 1,373,258               |   |      | $                            | 29.74 |                   | 1,291,284 |   |                              | $ | 29.44             |  | 1,137,388 |                                 |  | $ | 28.88
|Weighted average estimated fair value of options granted during the year |  |                         |   |      | $                            | 3.17  |                   |           |   |                              | $ | 2.51              |  |           |                                 |  | $ | 2.93 



At December 31, 2004,
the exercise prices of shares under option ranged between $16.50 and $34.45, with expiration dates from 2005 to 2014. The exercise price of all options granted in the years ended December 31, 1997 through 2004 was equal to the market price on the
date of grant. The options vest ratably over one year. The weighted average remaining contractual life of these options is six years. At December 31, 2004, there were 8,680 restricted shares outstanding under the Plan. There were 8,680; 9,329 and 0
restricted shares granted in 2004, 2003 and 2002, respectively. The fair value of restricted shares awarded totaled $299,000 and $302,000 in 2004 and 2003, respectively.



Direct Stock Purchase and Dividend Reinvestment Plan



In 1996, the Company instituted a direct stock purchase and dividend reinvestment plan (the DRIP) in which
shareholders may purchase either newly issued or previously issued shares. There is no discount on shares purchased through the DRIP. The total amount of shares authorized under the DRIP is 1,500,000; from inception through December 31, 2004,
160,321 new shares have been issued.



65



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13.    Earnings per Share



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



|                                                                                                       |  |      |             |   |            |   |             |            |  |   |             |  
|------------------------------------------------------------------------------------------------------ |  | ---- | ----------- | - | ---------- | - | ----------- | ---------- |  | - | ----------- | -
|                                                                                                       |  | 2004 |             |   | 2003       |   |             | 2002       | 
|                                                                                                       |  |      |             |   | (Restated) |   |             | (Restated) | 
|Numerator:                                                                                             |  |      |             |   |            |   |             |            |  |   |             |  
|Net income available to common shareholders                                                            |  | $    | 61,427,000  |   |            | $ | 70,175,000  |            |  | $ | 87,171,000  |  
|Less adjustment for earnings and gains from discontinued operations, net                               |  |      | (28,237,000 | ) |            |   | (31,825,000 | )          |  |   | (23,820,000 | )
|                                                                                                       |  |      |             |   |            |   |             |            |  |   |             |  
|Numerator for basic and diluted earnings per share from continuing operations                          |  | $    | 33,190,000  |   |            | $ | 38,350,000  |            |  | $ | 63,351,000  |  
|                                                                                                       |  |      |             |   |            |   |             |            |  |   |             |  
|Denominator:                                                                                           |  |      |             |   |            |   |             |            |  |   |             |  
|Denominator for basic earnings per shareweighted average shares                                       |  |      | 50,200,000  |   |            |   | 47,070,000  |            |  |   | 45,860,000  |  
|Effect of dilutive securities:                                                                         |  |      |             |   |            |   |             |            |  |   |             |  
|Stock options                                                                                          |  |      | 625,000     |   |            |   | 375,000     |            |  |   | 350,000     |  
|                                                                                                       |  |      |             |   |            |   |             |            |  |   |             |  
|Denominator for diluted earnings per share adjusted for weighted average shares and assumed conversion |  |      | 50,825,000  |   |            |   | 47,445,000  |            |  |   | 46,210,000  |  
|                                                                                                       |  |      |             |   |            |   |             |            |  |   |             |  
|Basic earnings per share from continuing operations                                                    |  | $    | 0.66        |   |            | $ | 0.81        |            |  | $ | 1.38        |  
|Basic earnings per share from discontinued operations                                                  |  |      | 0.56        |   |            |   | 0.68        |            |  |   | 0.52        |  
|                                                                                                       |  |      |             |   |            |   |             |            |  |   |             |  
|Basic earnings per share                                                                               |  | $    | 1.22        |   |            | $ | 1.49        |            |  | $ | 1.90        |  
|                                                                                                       |  |      |             |   |            |   |             |            |  |   |             |  
|Diluted earnings per share from continuing operations                                                  |  | $    | 0.65        |   |            | $ | 0.81        |            |  | $ | 1.37        |  
|Diluted earnings per share from discontinued operations                                                |  |      | 0.56        |   |            |   | 0.67        |            |  |   | 0.52        |  
|                                                                                                       |  |      |             |   |            |   |             |            |  |   |             |  
|Diluted earnings per share                                                                             |  | $    | 1.21        |   |            | $ | 1.48        |            |  | $ | 1.89        |  
|                                                                                                       |  |      |             |   |            |   |             |            |  |   |             |  



Under FASB Statement
No. 128, Earnings per Share, the effect of anti-dilutive operating company units has been excluded from the diluted earnings per share calculation.



14.    Retirement Plan



BRE has a 401K defined contribution retirement plan covering all employees with more than six months of continuous full-time employment. In addition to
employee elective deferrals, in 2004, 2003 and 2002, BRE contributed up to 3% of the employees compensation up to $6,000 per employee. The aggregate amounts contributed and recognized as expense by BRE were $472,000; $335,000 and $341,000 for
the years ended December 31, 2004, 2003 and 2002, respectively.



15.    Related Party Transactions



Certain executives of BRE have purchased stock, the consideration for which was interest-bearing recourse loans. Loans were issued from 2000 through July 2002, at which time the loan program was suspended. The loans are due five years from
the date of issuance and do not have forgiveness provisions. At December 31, 2004 and 2003, the carrying amount of the loans was $2,005,000 and $2,836,000, respectively. Interest income from the notes totaled $90,000; $163,000 and $200,000 for the
years ended December 31, 2004, 2003 and 2002, respectively.



BRE had notes receivable from third party minority interest members of limited liability company subsidiaries of the company totaling $7,601,000 and $7,640,000 at December 31, 2004 and 2003, respectively.



66



---

The amounts are recorded in Other assets on the consolidated balance sheets. Interest income from the notes totaled $488,000; $346,000 and $232,000 for the
years ended December 31, 2004, 2003 and 2002, respectively.



16.    Retirement Charge



During fourth quarter 2004, the Company recognized a charge associated with the retirement of the Companys former CEO, which totaled approximately $4,100,000 and is included in Other expenses on the Consolidated Statements of Income.
The charge is comprised of approximately $2,100,000 in cash payments and $2,000,000 in noncash charges related to the fair value of stock options and restricted shares that vested under the terms of the retirement agreement. The noncash portion of
the expense includes the acceleration of unvested option awards that were previously accounted for under both FAS 123 and APB 25.



17.    Commitments and Contingencies



Commitments



During the years ended December 31, 2004, 2003 and 2002, total operating lease payments incurred for office space, including of real estate taxes,
insurance, repairs and utilities, aggregated $1,179,000; $1,283,000 and $1,213,000, respectively.



The minimum future basic aggregate rental commitment under the Companys operating leases is as follows:



|           |  |   |          
|---------- |  | - | ---------
|2005       |  | $ | 1,464,000
|2006       |  |   | 716,000  
|2007       |  |   | 647,000  
|2008       |  |   | 680,000  
|2009       |  |   | 692,000  
|Thereafter |  |   | 4,763,000
|           |  |   |          
|Total      |  | $ | 8,962,000
|           |  |   |          



Contingencies



As of December 31, 2004, there were no pending legal
proceedings to which the Company is a party or of which any of its properties is the subject, the adverse determination of which the Company anticipates would have a material adverse effect upon its consolidated financial condition and results of
operations.



Red Hawk Ranch



On April 14, 1997, BRE purchased Red Hawk Ranch Apartments, a 453-unit
operating apartment community in Fremont, California, from an unrelated third party builder. The community now requires extensive replacement work to correct damage BRE believes was caused by construction defects. On March 18, 2003, BRE filed suit
in the Alameda County Superior Court against the builder and other parties to protect against statutes of limitation. BRE has conducted testing to determine the extent of the damage. Based upon the testing that has been performed to date, BRE has
discovered that the exterior shell of each building at the community has been compromised. As a result, during second quarter 2004, the Company expanded the size and scope of its lawsuit.



Litigation and consulting charges recognized during 2004 totaled $2,727,000 and are reported as Other expenses on the
Consolidated Statement of Income. The charges reported in 2004 include litigation costs and consulting fees incurred to date during destructive testing to determine the extent of the damage and required reconstruction.



67



---

BRE plans to commence reconstruction as soon as possible and expects to have the community restored
during the next 18 to 21 months. BRE is actively pursuing the litigation against the third party builder and various sub-contractors.



Under the provisions of FAS 144, BRE has performed an impairment analysis on Red Hawk Ranch Apartments using undiscounted cash flows, which reflect the
anticipated decreased net operating income during reconstruction. No impairment charge was deemed necessary based on this analysis. The net book value of the components of the buildings that are damaged and being replaced approximate $9,400,000 and
are being depreciated over the reconstruction period. Additional depreciation recognized during 2004 totaled approximately $2,600,000. During reconstruction, costs that extend the useful life of the asset, increase its value or enhance safety of the
community will be capitalized. All other costs, including legal and consulting, will be expensed as incurred.



While BREs management expects that costs of remediation will approximate up to $26,000,000 (unaudited), and future plaintiff litigation costs may
exceed $3,000,000 (unaudited), due to the preliminary nature of the damage assessment, claims and litigation, it is not possible to predict or determine the outcome of legal actions, nor is it reasonably possible to accurately estimate the full
range of costs associated with the matter at this time.



18.    Legal Settlements



Pinnacle at MacArthur Place



On June 29, 2000,
BRE entered into an Agreement for Formation of Limited Liability Company and Contribution of Project with an unrelated third party. The agreement contemplated that upon the completion of the Pinnacle at MacArthur Place apartment community and
satisfaction of other conditions, BRE would contribute the project to a joint venture in which BRE and a third party would be members. The closing deadline under the agreement was April 1, 2002. However, due to disagreements between BRE and the
third party regarding their respective rights and obligations under the agreement, the closing did not occur.



On April 1, 2002, the third party brought litigation against BRE in the United States District Court for the Central District of California, Santa Ana
Division. The lawsuit sought specific performance of the agreement or, in the alternative, damages. BRE filed a counterclaim for a declaration that it was not, in fact, obligated to enter into the transaction under the terms demanded by the third
party. In 2003, BRE and the third party reached a settlement agreement. Under the terms of the settlement, BRE paid the third party $6,500,000 and retained ownership of the asset.



Application Fee Suit



Also during 2003, BRE reached a settlement agreement regarding a class action lawsuit that was brought against BRE with respect to application fees
charged residents from August 1998 to August 2003. Under terms of the settlement, BRE agreed to establish a $200,000 fund to reimburse prior applicants up to $5.00 per applicant, and to pay certain related administration charges and legal expenses.



The combined settlement amounts, legal fees and related
expense for the 2003 suits aggregate $7,305,000 and are reported as Other expenses on the Consolidated Statement of Income.



19.    Supplemental Financial Data (Unaudited)



The following quarterly financial data for the quarters ended March 31, June 30, September 30 and December 31, 2003 and March 31, June 30 and September
30, 2004 have been restated to record payroll and certain real estate costs and expenses during the quarters in which they were incurred, rather than during the quarters in which they were paid, as previously reported. For more information, see Note
2 above.



68



---

In addition, during the third quarter of 2004, BRE expensed $1,792,000 in litigation and consulting
charges relating to the Red Hawk Ranch construction defect lawsuit. Portions of that charge (in the amounts of $850,000 and $515,000 respectively) were incurred in the first and second quarters of 2004 and recognized as capitalized costs, however,
such costs should have been expensed in those periods. In connection with the restatement described above, management determined to record in the first and second quarter of 2004, the charges incurred during those quarters that were previously
recorded during the third quarter of 2004.



|                                                        |  |                                               |        |   |                      |   |        |                           |  |   |                           |   |  |   |        |  
|------------------------------------------------------- |  | --------------------------------------------- | ------ | - | -------------------- | - | ------ | ------------------------- |  | - | ------------------------- | - |  | - | ------ | -
|                                                        |  | Year ended December 31, 2004                  |       
|                                                        |  | Quarter endedMarch 31                         |        |   | Quarter endedJune 30 |   |        | Quarter endedSeptember 30 |  |   | Quarter ended December 31 |  
|                                                        |  | (Restated)                                    |        |   | (Restated)           |   |        | (Restated)                |  |   |                           |  
|                                                        |  | (amounts in thousands, except per share data) |       
|Revenues*                                               |  | $                                             | 67,249 |   |                      | $ | 70,434 |                           |  | $ | 71,706                    |   |  | $ | 71,253 |  
|Income from continuing operations                       |  | $                                             | 11,744 |   |                      | $ | 14,399 |                           |  | $ | 12,856                    |   |  | $ | 6,305  |  
|Discontinued operations                                 |  |                                               | 2,038  |   |                      |   | 2,021  |                           |  |   | 1,827                     |   |  |   | 22,351 |  
|Preferred stock dividends                               |  |                                               | (2,183 | ) |                      |   | (3,203 | )                         |  |   | (3,203                    | ) |  |   | (3,526 | )
|                                                        |  |                                               |        |   |                      |   |        |                           |  |   |                           |   |  |   |        |  
|Net income available to common shareholders             |  | $                                             | 11,599 |   |                      | $ | 13,217 |                           |  | $ | 11,480                    |   |  | $ | 25,130 |  
|                                                        |  |                                               |        |   |                      |   |        |                           |  |   |                           |   |  |   |        |  
|Basic earnings per share from continuing operations     |  | $                                             | 0.19   |   |                      | $ | 0.22   |                           |  | $ | 0.19                      |   |  | $ | 0.06   |  
|Basic earnings per share from discontinued operations   |  |                                               | 0.04   |   |                      |   | 0.04   |                           |  |   | 0.04                      |   |  |   | 0.44   |  
|                                                        |  |                                               |        |   |                      |   |        |                           |  |   |                           |   |  |   |        |  
|Basic earnings per share                                |  | $                                             | 0.23   |   |                      | $ | 0.26   |                           |  | $ | 0.23                      |   |  | $ | 0.50   |  
|                                                        |  |                                               |        |   |                      |   |        |                           |  |   |                           |   |  |   |        |  
|Diluted earnings per share from continuing operations   |  | $                                             | 0.19   |   |                      | $ | 0.22   |                           |  | $ | 0.19                      |   |  | $ | 0.05   |  
|Diluted earnings per share from discontinued operations |  |                                               | 0.04   |   |                      |   | 0.04   |                           |  |   | 0.04                      |   |  |   | 0.44   |  
|                                                        |  |                                               |        |   |                      |   |        |                           |  |   |                           |   |  |   |        |  
|Diluted earnings per share                              |  | $                                             | 0.23   |   |                      | $ | 0.26   |                           |  | $ | 0.23                      |   |  | $ | 0.49   |  
|                                                        |  |                                               |        |   |                      |   |        |                           |  |   |                           |   |  |   |        |  
|                                                        | 
|                                                        |  | Year ended December 31, 2003                  |       
|                                                        |  | Quarter endedMarch 31                         |        |   | Quarter endedJune 30 |   |        | Quarter endedSeptember 30 |  |   | Quarter ended December 31 |  
|                                                        |  | (Restated)                                    |        |   | (Restated)           |   |        | (Restated)                |  |   | (Restated)                |  
|                                                        |  | (amounts in thousands, except per share data) |       
|Revenues*                                               |  | $                                             | 62,155 |   |                      | $ | 63,540 |                           |  | $ | 65,119                    |   |  | $ | 65,416 |  
|Income from continuing operations                       |  | $                                             | 15,324 |   |                      | $ | 6,384  |                           |  | $ | 15,300                    |   |  | $ | 14,136 |  
|Discontinued operations                                 |  |                                               | 12,327 |   |                      |   | 15,710 |                           |  |   | 1,868                     |   |  |   | 1,920  |  
|Preferred stock dividends                               |  |                                               | (2,657 | ) |                      |   | (2,657 | )                         |  |   | (2,657                    | ) |  |   | (4,823 | )
|                                                        |  |                                               |        |   |                      |   |        |                           |  |   |                           |   |  |   |        |  
|Net income available to common shareholders             |  | $                                             | 24,994 |   |                      | $ | 19,437 |                           |  | $ | 14,511                    |   |  | $ | 11,233 |  
|                                                        |  |                                               |        |   |                      |   |        |                           |  |   |                           |   |  |   |        |  
|Basic earnings per share from continuing operations     |  | $                                             | 0.27   |   |                      | $ | 0.08   |                           |  | $ | 0.27                      |   |  | $ | 0.19   |  
|Basic earnings per share from discontinued operations   |  |                                               | 0.27   |   |                      |   | 0.34   |                           |  |   | 0.04                      |   |  |   | 0.04   |  
|                                                        |  |                                               |        |   |                      |   |        |                           |  |   |                           |   |  |   |        |  
|Basic earnings per share                                |  | $                                             | 0.54   |   |                      | $ | 0.42   |                           |  | $ | 0.31                      |   |  | $ | 0.23   |  
|                                                        |  |                                               |        |   |                      |   |        |                           |  |   |                           |   |  |   |        |  
|Diluted earnings per share from continuing operations   |  | $                                             | 0.27   |   |                      | $ | 0.08   |                           |  | $ | 0.27                      |   |  | $ | 0.18   |  
|Diluted earnings per share from discontinued operations |  |                                               | 0.27   |   |                      |   | 0.34   |                           |  |   | 0.04                      |   |  |   | 0.04   |  
|                                                        |  |                                               |        |   |                      |   |        |                           |  |   |                           |   |  |   |        |  
|Diluted earnings per share                              |  | $                                             | 0.54   |   |                      | $ | 0.42   |                           |  | $ | 0.31                      |   |  | $ | 0.22   |  
|                                                        |  |                                               |        |   |                      |   |        |                           |  |   |                           |   |  |   |        |  

---

|* |  | Revenue totals do not include revenues from discontinued operations, other income and partnership income.
|- |  | ---------------------------------------------------------------------------------------------------------



69



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For the years ended December 31, 2004, 2003 and 2002, the federal income tax components of the
Companys dividends on the common and preferred stock were as follows (unaudited).



|                                                   |  |                |   |  |                      |   |  |                              |   |  |                   |  
|-------------------------------------------------- |  | -------------- | - |  | -------------------- | - |  | ---------------------------- | - |  | ----------------- | -
|                                                   |  | OrdinaryIncome |   |  | Long TermCapitalGain |   |  | UnrecapturedSection 1250Gain |   |  | Return ofCapital  |  
|Common Stock                                       |  |                |   |  |                      |   |  |                              |   |  |                   |  
|December 31, 2004                                  |  | 60             | % |  | 16                   | % |  | 9                            | % |  | 15                | %
|December 31, 2003                                  |  | 61             | % |  | 33                   | % |  | 6                            | % |  |                  | %
|December 31, 2002                                  |  | 80             | % |  | 15                   | % |  | 5                            | % |  |                  | %
|                                                   |  |                |   | 
|                                                   |  | OrdinaryIncome |   |  | Long TermCapitalGain |   |  | UnrecapturedSection 1250Gain |   |  | Return of Capital |  
|Cumulative Redeemable Preferred Stock (all series) |  |                |   |  |                      |   |  |                              |   |  |                   |  
|December 31, 2004                                  |  | 70             | % |  | 19                   | % |  | 11                           | % |  |                  | %
|December 31, 2003                                  |  | 61             | % |  | 33                   | % |  | 6                            | % |  |                  | %
|December 31, 2002                                  |  | 80             | % |  | 15                   | % |  | 5                            | % |  |                  | %



70



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BRE PROPERTIES, INC.



SCHEDULE IIIREAL ESTATE AND ACCUMULATED DEPRECIATION



December 31, 2004

(Dollar amounts in thousands)



|                             |  |                   |  |                            |        |                         |        |                                         |   |                         |        |                                                    |        |                         |    |        |   |                         |         |   |              |         |   |         |         |   |         |   |        |   |       
|---------------------------- |  | ----------------- |  | -------------------------- | ------ | ----------------------- | ------ | --------------------------------------- | - | ----------------------- | ------ | -------------------------------------------------- | ------ | ----------------------- | -- | ------ | - | ----------------------- | ------- | - | ------------ | ------- | - | ------- | ------- | - | ------- | - | ------ | - | ------
|                             |  |                   |  |                            |        | Initial Cost to Company |        | CostsCapitalizedSubsequenttoAcquisition |   | DepreciableLives Years |        | Gross Amount at Which Carried at December 31, 2004
|Name                         |  | Location          |  | Dates Acquired/Constructed |        | Land                    |        | Buildings &Improvements                 |   |                         |        | Land                                               |        | Buildings &Improvements |    | Total  |   | AccumulatedDepreciation |         |   | Encumbrances
|APARTMENTS                   |  |                   |  |                            |        |                         |        |                                         |   |                         |        |                                                    |        |                         |    |        |   |                         |         |   |              |         |   |         |         |   |         |   |        |   |       
|Sharon Green                 |  | Menlo Park, CA    |  | 1971/1970                  |        | $                       | 1,250  |                                         | $ | 5,770                   |        | $                                                  | 8,618  |                         | 45 |        | $ | 1,250                   |         | $ | 14,388       |         | $ | 15,638  |         | $ | (7,667  | ) |        |   |       
|Verandas                     |  | Union City, CA    |  | 1993/1989                  |        |                         | 3,233  |                                         |   | 12,932                  |        |                                                    | 2,394  |                         | 40 |        |   | 3,233                   |         |   | 15,326       |         |   | 18,559  |         |   | (4,568  | ) |        | $ | 10,711
|Fosters Landing             |  | Foster City, CA   |  | 1996/1987                  |        |                         | 11,742 |                                         |   | 47,846                  |        |                                                    | 6,262  |                         | 40 |        |   | 11,742                  |         |   | 54,108       |         |   | 65,850  |         |   | (11,523 | ) |        |   |       
|Pinnacle Crow Canyon         |  | San Ramon, CA     |  | 1996/1992                  |        |                         | 8,724  |                                         |   | 34,895                  |        |                                                    | 3,337  |                         | 40 |        |   | 8,724                   |         |   | 38,232       |         |   | 46,956  |         |   | (7,589  | ) |        |   |       
|Blue Rock I & II *           |  | Vallejo, CA       |  | 1998/1986                  |        |                         | 6,836  |                                         |   | 27,352                  |        |                                                    | 2,919  |                         | 40 |        |   | 6,836                   |         |   | 30,271       |         |   | 37,107  |         |   | (6,165  | ) |        |   | 23,290
|Lakeshore Landing            |  | San Mateo, CA     |  | 1998/1988                  |        |                         | 8,547  |                                         |   | 34,228                  |        |                                                    | 3,013  |                         | 40 |        |   | 8,547                   |         |   | 37,241       |         |   | 45,788  |         |   | (7,851  | ) |        |   |       
|Red Hawk Ranch               |  | Fremont, CA       |  | 1998/1995                  |        |                         | 11,747 |                                         |   | 47,082                  |        |                                                    | 2,792  |                         | 40 |        |   | 11,747                  |         |   | 49,874       |         |   | 61,621  |         |   | (12,547 | ) |        |   |       
|Deer Valley *                |  | San Rafael, CA    |  | 1998/1996                  |        |                         | 6,042  |                                         |   | 24,169                  |        |                                                    | 1,826  |                         | 40 |        |   | 6,042                   |         |   | 25,995       |         |   | 32,037  |         |   | (4,612  | ) |        |   |       
|Pinnacle City Centre*        |  | Hayward, CA       |  | 2000/2000                  |        |                         | 4,903  |                                         |   | 22,999                  |        |                                                    | 154    |                         | 40 |        |   | 4,903                   |         |   | 23,153       |         |   | 28,056  |         |   | (2,731  | ) |        |   |       
|Sun Pointe Village           |  | Fremont, CA       |  | 2000/1989                  |        |                         | 12,638 |                                         |   | 50,690                  |        |                                                    | 1,646  |                         | 40 |        |   | 12,638                  |         |   | 52,336       |         |   | 64,974  |         |   | (5,745  | ) |        |   | **    
|                             |  |                   |  |                            |        |                         |        |                                         |   |                         |        |                                                    |        |                         |    |        |   |                         |         |   |              |         |   |         |         |   |         |   |        |   |       
|San Francisco Bay Area       |  |                   |  | $                          | 75,662 |                         | $      | 307,963                                 |   | $                       | 32,961 |                                                    |        |                         | $  | 75,662 |   | $                       | 340,924 |   | $            | 416,586 |   | $       | (70,998 | ) |         | $ | 34,001
|                             |  |                   |  |                            |        |                         |        |                                         |   |                         |        |                                                    |        |                         |    |        |   |                         |         |   |              |         |   |         |         |   |         |   |        |   |       
|Montanosa                    |  | San Diego, CA     |  | 1992/1989-90               |        | $                       | 6,005  |                                         | $ | 24,065                  |        | $                                                  | 5,410  |                         | 40 |        | $ | 6,005                   |         | $ | 29,475       |         | $ | 35,480  |         | $ | (8,958  | ) |        | $ | 33,598
|Esplanade                    |  | San Diego, CA     |  | 1993/1985                  |        |                         | 4,868  |                                         |   | 19,493                  |        |                                                    | 2,874  |                         | 40 |        |   | 4,868                   |         |   | 22,367       |         |   | 27,235  |         |   | (6,381  | ) |        |   | 10,391
|Terra Nova Villas            |  | Chula Vista, CA   |  | 1994/1985                  |        |                         | 2,925  |                                         |   | 11,699                  |        |                                                    | 1,652  |                         | 40 |        |   | 2,925                   |         |   | 13,351       |         |   | 16,276  |         |   | (3,478  | ) |        |   |       
|Winchester                   |  | San Diego, CA     |  | 1994/1987                  |        |                         | 1,482  |                                         |   | 5,928                   |        |                                                    | 643    |                         | 40 |        |   | 1,482                   |         |   | 6,571        |         |   | 8,053   |         |   | (1,755  | ) |        |   |       
|Canyon Villa                 |  | Chula Vista, CA   |  | 1996/1981                  |        |                         | 3,064  |                                         |   | 12,258                  |        |                                                    | 1,802  |                         | 40 |        |   | 3,064                   |         |   | 14,060       |         |   | 17,124  |         |   | (3,187  | ) |        |   |       
|Lakeview Village             |  | Spring Valley, CA |  | 1996/1985                  |        |                         | 3,977  |                                         |   | 15,910                  |        |                                                    | 1,812  |                         | 40 |        |   | 3,977                   |         |   | 17,722       |         |   | 21,699  |         |   | (4,069  | ) |        |   |       
|Countryside Village          |  | El Cajon, CA      |  | 1996/1989                  |        |                         | 1,002  |                                         |   | 4,007                   |        |                                                    | 633    |                         | 40 |        |   | 1,002                   |         |   | 4,640        |         |   | 5,642   |         |   | (1,109  | ) |        |   |       
|Cambridge Park *             |  | San Diego, CA     |  | 1998/1998                  |        |                         | 7,628  |                                         |   | 30,521                  |        |                                                    | 3,760  |                         | 40 |        |   | 7,628                   |         |   | 34,281       |         |   | 41,909  |         |   | (5,108  | ) |        |   |       
|Reflections                  |  | San Diego, CA     |  | 1999/1989                  |        |                         | 6,928  |                                         |   | 27,686                  |        |                                                    | 1,713  |                         | 40 |        |   | 6,928                   |         |   | 29,399       |         |   | 36,327  |         |   | (3,861  | ) |        |   |       
|Pinnacle at Carmel Creek     |  | San Diego, CA     |  | 2000/2000                  |        |                         | 4,744  |                                         |   | 45,430                  |        |                                                    | 4,047  |                         | 40 |        |   | 4,744                   |         |   | 49,477       |         |   | 54,221  |         |   | (5,050  | ) |        |   |       
|Pinnacle at OtayRanch I & II |  | Chula Vista, CA   |  | 2002/2002                  |        |                         | 8,928  |                                         |   | 43,388                  |        |                                                    | 1,844  |                         | 40 |        |   | 8,928                   |         |   | 45,232       |         |   | 54,160  |         |   | (3,430  | ) |        |   |       
|Mission Trails               |  | San Diego, CA     |  | 2002/1987                  |        |                         | 5,315  |                                         |   | 21,310                  |        |                                                    | 1,157  |                         | 40 |        |   | 5,315                   |         |   | 22,467       |         |   | 27,782  |         |   | (1,530  | ) |        |   |       
|Bernardo Crest               |  | San Diego, CA     |  | 2002/1988                  |        |                         | 6,016  |                                         |   | 24,115                  |        |                                                    | 1,806  |                         | 40 |        |   | 6,016                   |         |   | 25,921       |         |   | 31,937  |         |   | (1,815  | ) |        |   |       
|                             |  |                   |  |                            |        |                         |        |                                         |   |                         |        |                                                    |        |                         |    |        |   |                         |         |   |              |         |   |         |         |   |         |   |        |   |       
|San Diego                    |  |                   |  |                            |        | $                       | 62,882 |                                         | $ | 285,810                 |        | $                                                  | 29,153 |                         |    |        | $ | 62,882                  |         | $ | 314,963      |         | $ | 377,845 |         | $ | (49,731 | ) |        | $ | 43,989
|                             |  |                   |  |                            |        |                         |        |                                         |   |                         |        |                                                    |        |                         |    |        |   |                         |         |   |              |         |   |         |         |   |         |   |        |   |       
|Village Green                |  | La Habra, CA      |  | 1972/1971                  |        | $                       | 372    |                                         | $ | 2,763                   |        | $                                                  | 1,482  |                         | 40 |        | $ | 372                     |         | $ | 4,245        |         | $ | 4,617   |         | $ | (2,656  | ) |        |   |       
|Candlewood North             |  | Northridge, CA    |  | 1996/1964-95               |        |                         | 2,110  |                                         |   | 8,477                   |        |                                                    | 697    |                         | 40 |        |   | 2,110                   |         |   | 9,174        |         |   | 11,284  |         |   | (2,033  | ) |        |   |       



71



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BRE PROPERTIES, INC.



SCHEDULE IIIREAL ESTATE AND ACCUMULATED DEPRECIATION



December 31, 2004

(Dollar amounts in thousands)





|                                   |  |                            |         |                            |   |                        |        |                                          |        |                        |  |                                                    |       |                         |    |       |         |                         |   |         |              |   |         |         |  |   |        |   |  |  |       
|---------------------------------- |  | -------------------------- | ------- | -------------------------- | - | ---------------------- | ------ | ---------------------------------------- | ------ | ---------------------- |  | -------------------------------------------------- | ----- | ----------------------- | -- | ----- | ------- | ----------------------- | - | ------- | ------------ | - | ------- | ------- |  | - | ------ | - |  |  | ------
|                                   |  |                            |         |                            |   | Initial Cost toCompany |        | CostsCapitalizedSubsequentto Acquisition |        | DepreciableLivesYears |  | Gross Amount at Which Carried at December 31, 2004
|Name                               |  | Location                   |         | Dates Acquired/Constructed |   | Land                   |        | Buildings &Improvements                  |        |                        |  | Land                                               |       | Buildings &Improvements |    | Total |         | AccumulatedDepreciation |   |         | Encumbrances
|APARTMENTS                         |  |                            |         |                            |   |                        |        |                                          |        |                        |  |                                                    |       |                         |    |       |         |                         |   |         |              |   |         |         |  |   |        |   |  |  |       
|Sycamore Valley                    |  | Fountain Valley, CA        |         | 1996/1969                  |   |                        | 4,617  |                                          |        | 18,691                 |  |                                                    | 3,534 |                         | 40 |       |         | 4,617                   |   |         | 22,225       |   |         | 26,842  |  |   | (4,783 | ) |  |  |       
|Windrush Village                   |  | Colton, CA                 |         | 1996/1985                  |   |                        | 3,747  |                                          |        | 14,989                 |  |                                                    | 1,171 |                         | 40 |       |         | 3,747                   |   |         | 16,160       |   |         | 19,907  |  |   | (3,653 | ) |  |  |       
|The Summit                         |  | Chino Hills, CA            |         | 1996/1989                  |   |                        | 1,838  |                                          |        | 7,354                  |  |                                                    | 898   |                         | 40 |       |         | 1,838                   |   |         | 8,252        |   |         | 10,090  |  |   | (1,847 | ) |  |  | **    
|Parkside Terrace *                 |  | Santa Ana, CA              |         | 1998/1986                  |   |                        | 3,016  |                                          |        | 12,180                 |  |                                                    | 1,482 |                         | 40 |       |         | 3,016                   |   |         | 13,662       |   |         | 16,678  |  |   | (2,628 | ) |  |  |       
|Parkside Village *                 |  | Riverside, CA              |         | 1998/1987                  |   |                        | 3,417  |                                          |        | 13,674                 |  |                                                    | 1,178 |                         | 40 |       |         | 3,417                   |   |         | 14,852       |   |         | 18,269  |  |   | (2,790 | ) |  |  |       
|Parkside Court *                   |  | Santa Ana, CA              |         | 1998/1987                  |   |                        | 2,013  |                                          |        | 8,632                  |  |                                                    | 1,088 |                         | 40 |       |         | 2,013                   |   |         | 9,720        |   |         | 11,733  |  |   | (1,870 | ) |  |  |       
|Villa Siena                        |  | Costa Mesa, CA             |         | 2000/1974                  |   |                        | 4,853  |                                          |        | 19,739                 |  |                                                    | 8,510 |                         | 40 |       |         | 4,853                   |   |         | 28,249       |   |         | 33,102  |  |   | (3,464 | ) |  |  |       
|Cortesia at Rancho Santa Margarita |  | Rancho Santa Margarita, CA |         | 2000/1999                  |   |                        | 7,740  |                                          |        | 30,982                 |  |                                                    | 1,649 |                         | 40 |       |         | 7,740                   |   |         | 32,631       |   |         | 40,371  |  |   | (3,331 | ) |  |  |       
|Pinnacle at Laguna Niguel          |  | Laguna Niguel, CA          |         | 2001/1988                  |   |                        | 12,571 |                                          |        | 50,308                 |  |                                                    | 2,425 |                         | 40 |       |         | 12,571                  |   |         | 52,733       |   |         | 65,305  |  |   | (4,461 | ) |  |  |       
|Boulder Creek                      |  | Riverside, CA              |         | 2002/1985                  |   |                        | 3,564  |                                          |        | 14,306                 |  |                                                    | 1,179 |                         | 40 |       |         | 3,564                   |   |         | 15,485       |   |         | 19,049  |  |   | (1,096 | ) |  |  |       
|Emerald Pointe *                   |  | Diamond Bar, CA            |         | 20021989                   |   |                        | 5,052  |                                          |        | 20,248                 |  |                                                    | 1,610 |                         | 40 |       |         | 5,052                   |   |         | 21,858       |   |         | 26,910  |  |   | (1,581 | ) |  |  |       
|Pinnacle at MacArthur Place        |  | South Coast Metro, CA      |         | 2002/2002                  |   |                        | 8,155  |                                          |        | 54,257                 |  |                                                    | 2,274 |                         | 40 |       |         | 8,155                   |   |         | 56,531       |   |         | 64,686  |  |   | (2,901 | ) |  |  |       
|Pinnacle River Walk                |  | Riverside, CA              |         | 2003/1986                  |   |                        | 14,604 |                                          |        | 58,237                 |  |                                                    | 3,459 |                         | 40 |       |         | 14,604                  |   |         | 61,696       |   |         | 76,299  |  |   | (1,995 | ) |  |  |       
|Canyon Creek                       |  | Northridge, CA             |         | 2003/1986                  |   |                        | 6,152  |                                          |        | 24,650                 |  |                                                    | 1,102 |                         | 40 |       |         | 6,152                   |   |         | 25,752       |   |         | 31,904  |  |   | (652   | ) |  |  |       
|Enclave at Town Square             |  | Chino Hills, CA            |         | 2003/1987                  |   |                        | 2,473  |                                          |        | 10,069                 |  |                                                    | 1,307 |                         | 40 |       |         | 2,473                   |   |         | 11,376       |   |         | 13,849  |  |   | (396   | ) |  |  |       
|Summerwind Townhomes               |  | Harbor City, CA            |         | 2004/1987                  |   |                        | 6,950  |                                          |        | 27,879                 |  |                                                    | 829   |                         | 40 |       |         | 6,950                   |   |         | 28,708       |   |         | 35,658  |  |   | (700   | ) |  |  | **    
|Regency Palm Court                 |  | Los Angeles, CA            |         | 2004/1987                  |   |                        | 2,049  |                                          |        | 8,277                  |  |                                                    | 457   |                         | 40 |       |         | 2,049                   |   |         | 8,734        |   |         | 10,783  |  |   | (200   | ) |  |  | **    
|Windsor Court                      |  | Los Angeles, CA            |         | 2004/1987                  |   |                        | 1,638  |                                          |        | 6,631                  |  |                                                    | 405   |                         | 40 |       |         | 1,638                   |   |         | 7,036        |   |         | 8,674   |  |   | (163   | ) |  |  | **    
|Tiffany Court                      |  | Los Angeles, CA            |         | 2004/1987                  |   |                        | 3,033  |                                          |        | 12,211                 |  |                                                    | 137   |                         | 40 |       |         | 3,033                   |   |         | 12,348       |   |         | 15,381  |  |   | (228   | ) |  |  | **    
|Pinnacle at Fullerton              |  | Fullerton, CA              |         | 2004/2004                  |   |                        | 7,087  |                                          |        | 37,013                 |  |                                                    | 16    |                         | 40 |       |         | 7,087                   |   |         | 37,029       |   |         | 44,116  |  |   | (577   | ) |  |  |       
|Pinnacle at Talega I & II          |  | San Clemente, CA           |         | 2004/2004                  |   |                        | 17,125 |                                          |        | 48,171                 |  |                                                    | 882   |                         | 40 |       |         | 17,125                  |   |         | 49,053       |   |         | 66,178  |  |   | (1,514 | ) |  |  |       
|Pinnacle at Westridge              |  | Valencia, CA               |         | 2004/2004                  |   |                        | 11,253 |                                          |        | 31,785                 |  |                                                    | 48    |                         | 40 |       |         | 11,253                  |   |         | 31,833       |   |         | 43,086  |  |   | (303   | ) |  |  |       
|Villa Azure                        |  | Los Angeles, CA            |         | 2004/2001                  |   |                        | 40,560 |                                          |        | 96,565                 |  |                                                    |      |                         | 40 |       |         | 40,560                  |   |         | 96,565       |   |         | 137,125 |  |   |       |   |  |  | 74,160
|                                   |  |                            |         |                            |   |                        |        |                                          |        |                        |  |                                                    |       |                         |    |       |         |                         |   |         |              |   |         |         |  |   |        |   |  |  |       
|Los Angeles/Orange County          |  | $                          | 175,989 |                            | $ | 638,088                |        | $                                        | 37,819 |                        |  |                                                    | $     | 175,989                 |    | $     | 675,907 |                         | $ | 851,896 |              | $ | (45,822 | )       |  | $ | 74,160
|                                   |  |                            |         |                            |   |                        |        |                                          |        |                        |  |                                                    |       |                         |    |       |         |                         |   |         |              |   |         |         |  |   |        |   |  |  |       



72



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BRE PROPERTIES, INC.



SCHEDULE IIIREAL ESTATE AND ACCUMULATED DEPRECIATION



December 31, 2004

(Dollar amounts in thousands)





|                                 |  |                |  |                            |  |                        |        |                                          |   |                        |  |                                                    |        |                         |    |       |   |                         |  |   |              |  |   |         |  |   |         |   |  |   |       
|-------------------------------- |  | -------------- |  | -------------------------- |  | ---------------------- | ------ | ---------------------------------------- | - | ---------------------- |  | -------------------------------------------------- | ------ | ----------------------- | -- | ----- | - | ----------------------- |  | - | ------------ |  | - | ------- |  | - | ------- | - |  | - | ------
|                                 |  |                |  |                            |  | Initial Cost toCompany |        | CostsCapitalizedSubsequentto Acquisition |   | DepreciableLivesYears |  | Gross Amount at Which Carried at December 31, 2004
|Name                             |  | Location       |  | Dates Acquired/Constructed |  | Land                   |        | Buildings &Improvements                  |   |                        |  | Land                                               |        | Buildings &Improvements |    | Total |   | AccumulatedDepreciation |  |   | Encumbrances
|APARTMENTS                       |  |                |  |                            |  |                        |        |                                          |   |                        |  |                                                    |        |                         |    |       |   |                         |  |   |              |  |   |         |  |   |         |   |  |   |       
|Hazel Ranch                      |  | Fair Oaks, CA  |  | 1996/1985                  |  | $                      | 2,471  |                                          | $ | 9,885                  |  | $                                                  | 1,916  |                         | 40 |       | $ | 2,471                   |  | $ | 11,801       |  | $ | 14,272  |  | $ | (2,751  | ) |  |   |       
|Rocklin Gold                     |  | Rocklin, CA    |  | 1996/1990                  |  |                        | 1,558  |                                          |   | 6,232                  |  |                                                    | 829    |                         | 40 |       |   | 1,558                   |  |   | 7,061        |  |   | 8,619   |  |   | (1,607  | ) |  |   |       
|Shaliko                          |  | Rocklin, CA    |  | 1996/1990                  |  |                        | 2,050  |                                          |   | 8,198                  |  |                                                    | 1,248  |                         | 40 |       |   | 2,050                   |  |   | 9,446        |  |   | 11,496  |  |   | (2,246  | ) |  |   |       
|Quail Chase                      |  | Folsom, CA     |  | 1996/1990                  |  |                        | 1,303  |                                          |   | 5,211                  |  |                                                    | 904    |                         | 40 |       |   | 1,303                   |  |   | 6,115        |  |   | 7,418   |  |   | (1,438  | ) |  |   |       
|Canterbury Downs                 |  | Roseville, CA  |  | 1996/1993                  |  |                        | 2,297  |                                          |   | 9,190                  |  |                                                    | 544    |                         | 40 |       |   | 2,297                   |  |   | 9,734        |  |   | 12,031  |  |   | (2,182  | ) |  |   |       
|Selby Ranch                      |  | Sacramento, CA |  | 1986/1971-74               |  |                        | 2,660  |                                          |   | 18,340                 |  |                                                    | 8,556  |                         | 40 |       |   | 2,660                   |  |   | 26,896       |  |   | 29,556  |  |   | (10,268 | ) |  |   | 10,210
|Overlook at Blue Ravine I*       |  | Folsom, CA     |  | 1997/1991                  |  |                        | 6,050  |                                          |   | 24,203                 |  |                                                    | 2,946  |                         | 40 |       |   | 6,050                   |  |   | 27,149       |  |   | 33,199  |  |   | (5,149  | ) |  |   |       
|Arbor Pointe                     |  | Sacramento, CA |  | 1997/1988                  |  |                        | 1,814  |                                          |   | 7,256                  |  |                                                    | 2,846  |                         | 40 |       |   | 1,814                   |  |   | 10,102       |  |   | 11,916  |  |   | (2,635  | ) |  |   |       
|Overlook at Blue Ravine II       |  | Folsom, CA     |  | 2000/2000                  |  |                        | 1,014  |                                          |   | 9,575                  |  |                                                    |       |                         | 40 |       |   | 1,014                   |  |   | 9,575        |  |   | 10,589  |  |   | (956    | ) |  |   |       
|Pinnacle at Blue Ravine          |  | Folsom, CA     |  | 2002/2000                  |  |                        | 3,073  |                                          |   | 32,689                 |  |                                                    | 93     |                         | 40 |       |   | 3,073                   |  |   | 32,782       |  |   | 35,855  |  |   | (2,120  | ) |  |   | **    
|                                 |  |                |  |                            |  |                        |        |                                          |   |                        |  |                                                    |        |                         |    |       |   |                         |  |   |              |  |   |         |  |   |         |   |  |   |       
|Sacramento                       |  |                |  |                            |  | $                      | 24,290 |                                          | $ | 130,779                |  | $                                                  | 19,882 |                         |    |       | $ | 24,290                  |  | $ | 150,661      |  | $ | 174,951 |  | $ | (31,352 | ) |  | $ | 10,210
|                                 |  |                |  |                            |  |                        |        |                                          |   |                        |  |                                                    |        |                         |    |       |   |                         |  |   |              |  |   |         |  |   |         |   |  |   |       
|Arcadia Cove                     |  | Phoenix, AZ    |  | 1996/1996                  |  | $                      | 4,909  |                                          | $ | 19,902                 |  | $                                                  | 900    |                         | 40 |       | $ | 4,909                   |  | $ | 20,802       |  | $ | 25,711  |  | $ | (4,538  | ) |  |   |       
|Pinnacle at S. Mountain I & II * |  | Phoenix, AZ    |  | 1998/1996                  |  |                        | 11,062 |                                          |   | 44,257                 |  |                                                    | 1,137  |                         | 40 |       |   | 11,062                  |  |   | 45,394       |  |   | 56,456  |  |   | (8,342  | ) |  | $ | 23,013
|Pinnacle at Union Hills *        |  | Phoenix, AZ    |  | 1998/1996                  |  |                        | 4,626  |                                          |   | 18,507                 |  |                                                    | 575    |                         | 40 |       |   | 4,626                   |  |   | 19,082       |  |   | 23,708  |  |   | (3,483  | ) |  |   |       
|Pinnacle Towne Center *          |  | Phoenix, AZ    |  | 1999/1999                  |  |                        | 6,688  |                                          |   | 27,631                 |  |                                                    | 818    |                         | 40 |       |   | 6,688                   |  |   | 28,449       |  |   | 35,137  |  |   | (4,491  | ) |  |   | 17,992
|Pinnacle Terrace *               |  | Chandler, AZ   |  | 1999/1999                  |  |                        | 4,561  |                                          |   | 18,793                 |  |                                                    | 395    |                         | 40 |       |   | 4,561                   |  |   | 19,188       |  |   | 23,749  |  |   | (2,940  | ) |  |   |       
|                                 |  |                |  |                            |  |                        |        |                                          |   |                        |  |                                                    |        |                         |    |       |   |                         |  |   |              |  |   |         |  |   |         |   |  |   |       
|Phoenix                          |  |                |  |                            |  | $                      | 31,846 |                                          | $ | 129,090                |  | $                                                  | 3,825  |                         |    |       | $ | 31,846                  |  | $ | 132,915      |  | $ | 164,761 |  | $ | (23,794 | ) |  | $ | 41,005
|                                 |  |                |  |                            |  |                        |        |                                          |   |                        |  |                                                    |        |                         |    |       |   |                         |  |   |              |  |   |         |  |   |         |   |  |   |       
|Parkwood                         |  | Mill Creek, WA |  | 1989/1989                  |  | $                      | 3,947  |                                          | $ | 15,811                 |  | $                                                  | 748    |                         | 40 |       | $ | 3,947                   |  | $ | 16,559       |  | $ | 20,506  |  | $ | (6,312  | ) |  |   |       
|Shadowbrook                      |  | Redmond, WA    |  | 1987-98/1986               |  |                        | 4,776  |                                          |   | 17,415                 |  |                                                    | 2,228  |                         | 40 |       |   | 4,776                   |  |   | 19,643       |  |   | 24,419  |  |   | (7,340  | ) |  |   |       
|Citywalk                         |  | Seattle, WA    |  | 1988/1988                  |  |                        | 1,123  |                                          |   | 4,276                  |  |                                                    | 342    |                         | 40 |       |   | 1,123                   |  |   | 4,618        |  |   | 5,741   |  |   | (1,939  | ) |  |   |       
|Thrashers Mill                  |  | Bothell, WA    |  | 1996/1988                  |  |                        | 2,031  |                                          |   | 8,223                  |  |                                                    | 1,164  |                         | 40 |       |   | 2,031                   |  |   | 9,387        |  |   | 11,418  |  |   | (2,114  | ) |  |   |       



73



---

BRE PROPERTIES, INC.



SCHEDULE IIIREAL ESTATE AND ACCUMULATED DEPRECIATION



December 31, 2004

(Dollar amounts in thousands)





|                                     |  |                       |  |                            |  |                        |         |                                          |   |                        |  |                                                    |         |                         |    |       |   |                         |  |   |              |  |   |           |  |   |          |   |  |   |        
|------------------------------------ |  | --------------------- |  | -------------------------- |  | ---------------------- | ------- | ---------------------------------------- | - | ---------------------- |  | -------------------------------------------------- | ------- | ----------------------- | -- | ----- | - | ----------------------- |  | - | ------------ |  | - | --------- |  | - | -------- | - |  | - | -------
|                                     |  |                       |  |                            |  | Initial Cost toCompany |         | CostsCapitalizedSubsequentto Acquisition |   | DepreciableLivesYears |  | Gross Amount at Which Carried at December 31, 2004
|Name                                 |  | Location              |  | Dates Acquired/Constructed |  | Land                   |         | Buildings &Improvements                  |   |                        |  | Land                                               |         | Buildings &Improvements |    | Total |   | AccumulatedDepreciation |  |   | Encumbrances
|APARTMENTS                           |  |                       |  |                            |  |                        |         |                                          |   |                        |  |                                                    |         |                         |    |       |   |                         |  |   |              |  |   |           |  |   |          |   |  |   |        
|Ballinger Commons                    |  | Seattle, WA           |  | 1996/1989                  |  |                        | 5,824   |                                          |   | 23,519                 |  |                                                    | 2,346   |                         | 40 |       |   | 5,824                   |  |   | 25,865       |  |   | 31,689    |  |   | (5,814   | ) |  |   |        
|The Park at Dashpoint                |  | Federal Way, WA       |  | 1998/1989                  |  |                        | 3,074   |                                          |   | 12,411                 |  |                                                    | 1,100   |                         | 40 |       |   | 3,074                   |  |   | 13,511       |  |   | 16,585    |  |   | (2,782   | ) |  |   |        
|Montebello                           |  | Kirkland, WA          |  | 1998/1998                  |  |                        | 6,680   |                                          |   | 27,274                 |  |                                                    | 402     |                         | 40 |       |   | 6,680                   |  |   | 27,676       |  |   | 34,356    |  |   | (4,855   | ) |  |   |        
|Park Highland                        |  | Bellevue, WA          |  | 1998/1993                  |  |                        | 5,602   |                                          |   | 22,483                 |  |                                                    | 715     |                         | 40 |       |   | 5,602                   |  |   | 23,198       |  |   | 28,800    |  |   | (3,894   | ) |  |   |        
|Brentwood Townhomes                  |  | Kent, WA              |  | 1998/1991                  |  |                        | 1,387   |                                          |   | 5,574                  |  |                                                    | 284     |                         | 40 |       |   | 1,387                   |  |   | 5,858        |  |   | 7,245     |  |   | (1,005   | ) |  |   |        
|Pinnacle BellCentre                  |  | Bellevue, WA          |  | 2000/2000                  |  |                        | 11,163  |                                          |   | 32,821                 |  |                                                    | 194     |                         | 40 |       |   | 11,163                  |  |   | 33,015       |  |   | 44,178    |  |   | (3,189   | ) |  |   |        
|Pinnacle Sonata                      |  | Bothell, WA           |  | 2002/2000                  |  |                        | 8,576   |                                          |   | 38,958                 |  |                                                    | 42      |                         | 40 |       |   | 8,576                   |  |   | 39,000       |  |   | 47,576    |  |   | (2,760   | ) |  |   | **     
|Pinnacle on Lake Washington          |  | Renton, WA            |  | 2002/2002                  |  |                        | 4,878   |                                          |   | 26,184                 |  |                                                    | 745     |                         | 40 |       |   | 4,878                   |  |   | 26,929       |  |   | 31,807    |  |   | (1,962   | ) |  |   |        
|Pinnacle Bell Town                   |  | Seattle, WA           |  | 2001/1992                  |  |                        | 4,279   |                                          |   | 17,259                 |  |                                                    | 768     |                         | 40 |       |   | 4,279                   |  |   | 18,027       |  |   | 22,306    |  |   | (1,671   | ) |  |   |        
|Evergreen Park                       |  | Redmond, WA           |  | 2004/1985                  |  |                        | 17,413  |                                          |   | 45,013                 |  |                                                    |        |                         | 40 |       |   | 17,413                  |  |   | 45,013       |  |   | 62,426    |  |   | (307     | ) |  |   |        
|                                     |  |                       |  |                            |  |                        |         |                                          |   |                        |  |                                                    |         |                         |    |       |   |                         |  |   |              |  |   |           |  |   |          |   |  |   |        
|Seattle                              |  |                       |  |                            |  | $                      | 80,753  |                                          | $ | 297,221                |  | $                                                  | 11,078  |                         |    |       | $ | 80,753                  |  | $ | 308,299      |  | $ | 389,052   |  | $ | (45,944  | ) |  |   |       
|                                     |  |                       |  |                            |  |                        |         |                                          |   |                        |  |                                                    |         |                         |    |       |   |                         |  |   |              |  |   |           |  |   |          |   |  |   |        
|The Landing at Bear Creek            |  | Lakewood, CO          |  | 1999/1996                  |  | $                      | 3,666   |                                          | $ | 14,777                 |  | $                                                  | 698     |                         | 40 |       | $ | 3,666                   |  | $ | 15,475       |  | $ | 19,141    |  | $ | (2,896   | ) |  |   |        
|Pinnacle Hunters Glen *              |  | Thornton, CO          |  | 1998/1998                  |  |                        | 4,485   |                                          |   | 17,908                 |  |                                                    | 1,253   |                         | 40 |       |   | 4,485                   |  |   | 19,161       |  |   | 23,646    |  |   | (2,970   | ) |  |   |        
|Pinnacle at Mountain Gate            |  | Littleton, CO         |  | 2000/1999                  |  |                        | 8,371   |                                          |   | 33,687                 |  |                                                    | 614     |                         | 40 |       |   | 8,371                   |  |   | 34,301       |  |   | 42,672    |  |   | (3,581   | ) |  |   |        
|Pinnacle at the Creek                |  | Centennial, CO        |  | 2002/2002                  |  |                        | 1,694   |                                          |   | 20,487                 |  |                                                    | 1,250   |                         | 40 |       |   | 1,694                   |  |   | 21,737       |  |   | 23,431    |  |   | (1,125   | ) |  |   | **     
|Pinnacle Denver Technological Center |  | Greenwood Village, CO |  | 2002/2002                  |  |                        | 5,823   |                                          |   | 47,350                 |  |                                                    | 1,017   |                         | 40 |       |   | 5,823                   |  |   | 48,367       |  |   | 54,190    |  |   | (2,285   | ) |  |   |        
|                                     |  |                       |  |                            |  |                        |         |                                          |   |                        |  |                                                    |         |                         |    |       |   |                         |  |   |              |  |   |           |  |   |          |   |  |   |        
|Denver                               |  |                       |  |                            |  | $                      | 24,039  |                                          | $ | 134,209                |  | $                                                  | 4,832   |                         |    |       | $ | 24,039                  |  | $ | 139,041      |  | $ | 163,080   |  | $ | (12,857  | ) |  |   |       
|                                     |  |                       |  |                            |  |                        |         |                                          |   |                        |  |                                                    |         |                         |    |       |   |                         |  |   |              |  |   |           |  |   |          |   |  |   |        
|Total                                |  |                       |  |                            |  | $                      | 475,461 |                                          | $ | 1,923,160              |  | $                                                  | 139,550 |                         |    |       | $ | 475,461                 |  | $ | 2,062,710    |  | $ | 2,538,171 |  | $ | (280,498 | ) |  | $ | 203,365
|                                     |  |                       |  |                            |  |                        |         |                                          |   |                        |  |                                                    |         |                         |    |       |   |                         |  |   |              |  |   |           |  |   |          |   |  |   |        

---

|* |  | Property held by a consolidated subsidiary of the Company
|- |  | ---------------------------------------------------------

|** |  | Properties secure the Companys secured line of credit.
|-- |  | -------------------------------------------------------



74



---

BRE PROPERTIES, INC.



SCHEDULE IIIREAL ESTATE AND ACCUMULATED DEPRECIATION



December 31, 2004

(Amounts in thousands)



The activity in investments in rental properties and related depreciation for the three-year period ended December 31, 2004 is as follows:



Investments in rental properties:



|                                                                               |  |                          |           |   |      |   |           |      |  |   |           |  
|------------------------------------------------------------------------------ |  | ------------------------ | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                                                               |  | Years ended December 31, |          
|                                                                               |  | 2004                     |           |   | 2003 |   |           | 2002 | 
|Balance at beginning of year                                                   |  | $                        | 2,209,650 |   |      | $ | 2,073,029 |      |  | $ | 1,719,479 |  
|Multifamily communities purchased                                              |  |                          | 268,218   |   |      |   | 116,183   |      |  |   | 156,543   |  
|Transfers from construction in progress and other miscellaneous capitalization |  |                          | 107,711   |   |      |   | 57,601    |      |  |   | 94,909    |  
|Acquisition of third party minority interests in real estate joint ventures    |  |                          | 3,068     |   |      |   |          |      |  |   | 139,382   |  
|Investments sold                                                               |  |                          | (86,179   | ) |      |   | (57,756   | )    |  |   | (51,934   | )
|Capital expenditures                                                           |  |                          | 17,971    |   |      |   | 10,390    |      |  |   | 8,276     |  
|Rehabilitation expenditures                                                    |  |                          | 18,088    |   |      |   | 10,670    |      |  |   | 6,501     |  
|Less capital expenditures on properties held for sale                          |  |                          | (356      | ) |      |   | (467      | )    |  |   | (127      | )
|                                                                               |  |                          |           |   |      |   |           |      |  |   |           |  
|Balance at end of year                                                         |  | $                        | 2,538,171 |   |      | $ | 2,209,650 |      |  | $ | 2,073,029 |  
|                                                                               |  |                          |           |   |      |   |           |      |  |   |           |  



Accumulated depreciation on rental
properties:



|                                                   |  |                          |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                   |  | Years ended December 31, |        
|                                                   |  | 2004                     |         |   | 2003 |   |         | 2002 | 
|Balance at beginning of year                       |  | $                        | 229,983 |   |      | $ | 190,044 |      |  | $ | 152,179 |  
|Provision for depreciation                         |  |                          | 61,296  |   |      |   | 49,644  |      |  |   | 41,500  |  
|Other depreciation on non-rental properties        |  |                          | (2,403  | ) |      |   | (2,413  | )    |  |   | (2,434  | )
|Depreciation from discontinued operations          |  |                          | 2,916   |   |      |   | 3,708   |      |  |   | 6,035   |  
|Less: depreciation expense on assets held for sale |  |                          | (1,375  | ) |      |   | (1,579  | )    |  |   | (1,554  | )
|Less: accumulated depreciation on properties sold  |  |                          | (9,919  | ) |      |   | (9,421  | )    |  |   | (5,682  | )
|                                                   |  |                          |         |   |      |   |         |      |  |   |         |  
|Balance at end of year                             |  | $                        | 280,498 |   |      | $ | 229,983 |      |  | $ | 190,044 |  
|                                                   |  |                          |         |   |      |   |         |      |  |   |         |  



Certain balances have
been reclassified to real estate held for sale, net.



75



---

INDEX TO EXHIBITS



|              |  |                                                                                                                                                                                                                                                                                                                                              
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  |                                                                                                                                                                                                                                                                                                                                              
|              | 
|3.0           |  | Amended and Restated Articles of Incorporation (previously filed on March 15, 1996 as Exhibit 3.1 to the Registrants Current Report
on Form 8-K)                                                                                                                                                                                            
|              | 
|3.1           |  | Articles of Amendment (previously filed on April 28, 1997 as Exhibit 4.2 to the Registrants Registration Statement on Form S-3 (No.
333-24915), as amended, and incorporated by reference herein)                                                                                                                                           
|              | 
|3.2           |  | Articles Supplementary of the Registrant, classifying and designating the terms of the 8.08% Series B Cumulative Redeemable Preferred Stock
(previously filed on June 17, 2002 as Exhibit 1.5 of the Registrants Form 8-A)                                                                                                                  
|              | 
|3.3           |  | Articles Supplementary of the Registrant, reclassifying all 2,300,000 shares of 8.50% Series A Cumulative Redeemable Preferred Stock as
Preferred Stock and classifying and designating the terms of the 6.75% Series C Cumulative Redeemable Preferred Stock (previously filed on March 1, 2004 as Exhibit 3.4 of the Registrants Form 8-A)
|              | 
|3.4           |  | Articles Supplementary of the Registrant, classifying and designating the terms of the 6.75% Series D Cumulative Redeemable Preferred Stock
(previously filed on December 8, 2004 as Exhibit 1.5 of the Registrants Form 8-A)                                                                                                               
|              | 
|3.5           |  | Certificate of Correction of the Registrant (previously filed on January 29, 1999 as Exhibit 1.3 to the Registrants Form 8-A and
incorporated by reference herein)                                                                                                                                                                          
|              | 
|3.6           |  | Amended and Restated By-Laws of the Registrant (previously filed on February 17, 2004 as Exhibit 3.5 to the Registrants Annual Report
on Form 10-K and incorporated by reference herein)                                                                                                                                                    
|              | 
|4.0           |  | Indenture dated as of June 23, 1997 between the Registrant and Chase Trust Company of California (previously filed on June 23, 1997 as
Exhibit 4.1 to the Registrants Current Report on Form 8-K and incorporated by reference herein)                                                                                                      
|              | 
|4.1           |  | First Supplemental Indenture dated as of April 23, 1998 between the Registrant and Chase Manhattan Bank and Trust Company, National
Association, as successor trustee (previously filed on May 14, 1998 as Exhibit 4.1 to the Registrants Quarterly Report on Form 10-Q and incorporated by reference herein)                               
|              | 
|4.2           |  | Form of Note due 2007 (previously filed on June 23, 1997 as Exhibit 4.2 to the Registrants Current Report on Form 8-K and
incorporated by reference herein)                                                                                                                                                                                 
|              | 
|4.3           |  | Form of Note due 2013 (previously filed on February 24, 1998 as Exhibit 4.2 to the Registrants Current Report on Form 8-K and
incorporated by reference herein)                                                                                                                                                                             
|              | 
|4.4           |  | Form of Note due 2011 (previously filed on January 12, 2001 as Exhibit 4.1 to the Registrants Current Report on Form 8-K and
incorporated by reference herein)                                                                                                                                                                              
|              | 
|4.5           |  | Form of Note due 2007 (previously filed on March 13, 2002 as Exhibit 4.2 to the Registrants Current Report on Form
8-K)                                                                                                                                                                                                                     
|              | 
|4.6           |  | Form of Note due 2009 (previously filed on August 26, 2002 as Exhibit 4.2 to the Registrants Current Report on Form
8-K)                                                                                                                                                                                                                    
|              | 
|4.7           |  | Form of Note due 2009 (previously filed on March 16, 2004 as Exhibit 4.1 to the Registrants Current Report on Form
8-K)                                                                                                                                                                                                                     
|              | 
|4.8           |  | Form of Note due 2014 (previously filed on March 16, 2004 as Exhibit 4.2 to the Registrants Current Report on Form
8-K)                                                                                                                                                                                                                     
|              | 
|4.9           |  | Specimen Common Stock Certificate (previously filed on February 17, 2004 as Exhibit 4.7 to the Registrants Annual Report on Form
10-K)                                                                                                                                                                                                      
|              | 
|4.10          |  | Specimen 8.08% Series B Cumulative Redeemable Preferred Stock Certificate (previously filed on June 17, 2002 as Exhibit 1.6 to the
Registrants Form 8-A)                                                                                                                                                                                    



---

|              |  |                                                                                                                                                                                                                                                                                           
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  |                                                                                                                                                                                                                                                                                           
|              | 
|5.0           |  | Specimen 6.75% Series C Cumulative Redeemable Preferred Stock Certificate (previously filed on March 1, 2004 as Exhibit 3.5 to the
Registrants Form 8-A)                                                                                                                                 
|              | 
|5.1           |  | Specimen 6.75% Series D Cumulative Redeemable Preferred Stock Certificate (previously filed on December 8, 2004 as Exhibit 1.6 to the
Registrants Form 8-A)                                                                                                                              
|              | 
|10.0*         |  | Amended and Restated 1992 Employee Stock Plan (previously filed on November 14, 1997 as Exhibit 10.45 to the Registrants Quarterly
Report on Form 10-Q and incorporated by reference herein)                                                                                             
|              | 
|10.1*         |  | First Amendment to BRE Properties, Inc. Amended and Restated 1992 Employee Stock Plan (previously filed on November 8, 2002 as Exhibit 10.4
of the Registrants Quarterly Report on Form 10-Q)                                                                                            
|              | 
|10.2*         |  | 1992 Payroll Investment Plan (previously filed on October 19, 1992 in the Exhibits to the Registrants Annual Report on Form 10-K and
incorporated by reference herein)                                                                                                                   
|              | 
|10.3          |  | Second Amended and Restated Non-Employee Director Stock Option and Restricted Stock Plan (previously filed on April 8, 2003 as Proxy Item
number 2 to the Registrants Proxy Statement and incorporated by reference herein)                                                              
|              | 
|10.4*         |  | 1999 BRE Stock Incentive Plan (previously filed on August 16, 1999 as Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q
and incorporated by reference herein)                                                                                                                
|              | 
|10.5*         |  | First amendment to the 1999 BRE Stock Incentive Plan (previously filed on March 12, 2001 as Exhibit 10.51 to the Registrants Annual
Report on Form 10-K and incorporated by reference herein)                                                                                            
|              | 
|10.6*         |  | Second amendment to the 1999 BRE Stock Incentive Plan (previously filed on March 12, 2001 as Exhibit 10.52 to the Registrants Annual
Report on Form 10-K and incorporated by reference herein)                                                                                           
|              | 
|10.7*         |  | Third Amendment to 1999 BRE Stock Incentive Plan (previously filed on November 8, 2002 as Exhibit 10.3 of the Registrants Quarterly
Report on Form 10-Q)                                                                                                                                 
|              | 
|10.8          |  | Dividend Reinvestment Plan (previously filed on August 9, 1996 in the Registrants Registration Statement on Form S-3 (File No.
333-09945) and incorporated by reference herein)                                                                                                          
|              | 
|10.9*         |  | BRE Properties Inc. Deferred Compensation Plan effective January 1, 2000 (previously filed on March 14, 2000 as Exhibit 10.43 to the
Registrants Annual Report on Form 10-K, as amended by the Annual Report on Form 10-K/A filed on August 4, 2000 and incorporated by reference herein)
|              | 
|10.10*        |  | Employment Agreement with Edward F. Lange, Jr. dated June 23, 2000 (previously filed on February 17, 2004 as Exhibit 10.13 to the
Registrants Annual Report on Form 10-K)                                                                                                                
|              | 
|10.11*        |  | Employment Agreement with Bradley P. Griggs dated December 8, 2001 (previously filed on March 12, 2001 as Exhibit 10.57 to the
Registrants Annual Report on Form 10-K)                                                                                                                   
|              | 
|10.12*        |  | Employment Agreement with Frank C. McDowell dated January 24, 2001 (previously filed on March 12, 2001 as Exhibit 10.58 to the
Registrants Annual Report on Form 10-K)                                                                                                                   
|              | 
|10.13*        |  | Employment Agreement with Deirdre A. Kuring dated October 25, 2002 (previously filed on February 27, 2002 as Exhibit 10.53 to the
Registrants Annual Report on Form 10-K)                                                                                                                
|              | 
|10.14*        |  | Employment agreement with Constance B. Moore dated July 11, 2002 (previously filed on November 8, 2002 as Exhibit 10.1 of the
Registrants Quarterly Report on Form 10-Q)                                                                                                                 
|              | 
|10.15*        |  | Form of Indemnification Agreement (previously filed on February 27, 2002 as Exhibit 10.53 to the Registrants Annual Report on Form
10-K)                                                                                                                                                 
|              | 
|10.16*        |  | First Amendment to the Employment Agreement with Frank C. McDowell dated January 23, 2003 (previously filed on May 15, 2003 as Exhibit 10.3
to the Registrants quarterly Report on Form 10-Q)                                                                                            



---

|              |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|------------- | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|              |  
|10.17         | * |  | First Amendment to the Employment Agreement with Constance B. Moore dated January 23, 2003 (previously filed on May 15, 2003 as Exhibit
10.4 to the Registrants quarterly Report on Form 10-Q)                                                                                                                                                                                                                    
|              |  
|10.18         | * |  | First Amendment to the Employment Agreement with Edward F. Lange, Jr. dated January 23, 2003 (previously filed on May 15, 2003 as Exhibit
10.5 to the Registrants quarterly Report on Form 10-Q)                                                                                                                                                                                                                  
|              |  
|10.19         | * |  | First Amendment to the Employment Agreement with Bradley P. Griggs dated January 23, 2003 (previously filed on May 15, 2003 as Exhibit 10.6
to the Registrants quarterly Report on Form 10-Q)                                                                                                                                                                                                                     
|              |  
|10.20         | * |  | First Amendment to the Employment Agreement with Deirdre A. Kuring dated January 23, 2003 (previously filed on May 15, 2003 as Exhibit 10.7
to the Registrants quarterly Report on Form 10-Q)                                                                                                                                                                                                                     
|              |  
|10.21         | * |  | Executive Transition Employment Agreement with Frank C. McDowell and the Registrant as of January 1, 2004. (previously filed on February
17, 2004 as Exhibit 10.25 to the Registrants Annual Report on Form 10-K and incorporated by reference herein)                                                                                                                                                            
|              |  
|10.22         | * |  | First Amendment to the Executive Transition Employment Agreement with Frank C. McDowell and the Registrant as of January 1,
2005.                                                                                                                                                                                                                                                                                  
|              |  
|10.23         |   |  | Treasury Lock Swap Transaction (previously filed on November 14, 1996 as Exhibit 10.16 to the Registrants Quarterly Report on Form
10-Q and incorporated by reference herein)                                                                                                                                                                                                                                     
|              |  
|10.24         |   |  | Treasury rate guarantee hedge with Morgan Stanley, dated November 21, 1997 (previously filed on March 26, 1998 as Exhibit 10.36 to the
Registrants Annual Report on Form 10-K and incorporated by reference herein)                                                                                                                                                                                               
|              |  
|10.25         |   |  | Loan Agreement between The Prudential Insurance Registrant of America, as Lender and Real Estate Investment Trust of California, as
Borrower, dated as of January 31, 1994 (previously filed on February 19, 1997 as Exhibit 10.30 to the Registrants Form 10-K, as amended by the Report on the Registrants Annual Report on Form 10-K/A filed on April 25, 1997 and
incorporated by reference herein)          
|              |  
|10.26         |   |  | Loan Agreement between The Prudential Insurance Company of America, as Lender and Real Estate Investment Trust of California, as Borrower,
dated as of July 7, 1995 (previously filed on February 19, 1997 as Exhibit 10.34 to the Registrants Annual Report on Form 10-K, as amended by the Report on the Registrants Annual Report on Form 10-K/A filed on April 25, 1997 and
incorporated by reference herein)
|              |  
|10.27         |   |  | First Amendment to Loan Agreement by and between The Prudential Insurance Company of America and the Registrant dated April 30, 1996
(previously filed on February 19, 1997 as Exhibit 10.35 to the Registrants Annual Report on Form 10-K, as amended by the Annual Report on the Registrants Form 10-K/A filed on April 25, 1997 and incorporated by reference
herein)                                         
|              |  
|10.28         |   |  | Second Amendment to Loan Agreement by and between The Prudential Insurance Company of America and the Registrant, dated November 20, 1996
(previously filed on February 19, 1997 as Exhibit 10.36 to the Registrants Annual Report on Form 10-K, as amended by the Annual Report on the Registrants Form 10-K/A filed on April 25, 1997 and incorporated by reference
herein)                                    
|              |  
|10.29         |   |  | Third Amendment to Loan Agreement by and between The Prudential Insurance Company of America and the Registrant, dated February 25, 1997
(previously filed on August 12, 1997 as Exhibit 10.38 to the Registrants Quarterly Report on Form 10-Q and incorporated by reference herein)                                                                                                                             
|              |  
|10.30         |   |  | Fourth Amendment to Loan Agreement by and between The Prudential Insurance Company of America and the Registrant, dated June 30, 1997
(previously filed on August 12, 1997 as Exhibit 10.40 to the Registrants Quarterly Report on Form 10-Q and incorporated by reference herein)                                                                                                                                



---

|              |  |                                                                                                                                                                                                                                                                                                                                                                   
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  |                                                                                                                                                                                                                                                                                                                                                                   
|              | 
|10.31         |  | Fifth Amendment to Loan Agreement by and between The Prudential Insurance Company of America and the Registrant, dated May 20, 2003
(previously filed on February 24, 2004 as Exhibit 10.2 to the Registrants Current Report on Form 8-K and incorporated by reference herein)                                                                                   
|              | 
|10.32         |  | Sixth Amendment to Loan Agreement by and between The Prudential Insurance Company of America and the Registrant, dated May 20, 2003
(previously filed on February 24, 2004 as Exhibit 101 to the Registrants Current Report on Form 8-K and incorporated by reference herein)                                                                                    
|              | 
|10.33         |  | Third Amended and Restated Unsecured Line of Credit Loan Agreement dated April 4, 2003 (previously filed on May 15, 2003 as exhibit 10.1 to
the Registrants Quarterly Report on Form 10-Q and incorporated by reference herein)                                                                                                                                  
|              | 
|10.34         |  | Master Credit Facility Agreement by and between BRE-FMCF, LLC and Prudential Multifamily Mortgage, Inc., dated May 2, 2003 (previously
filed on May 15, 2003 as Exhibit 10.8 to the Registrants Annual Report on Form 10-Q and incorporated by reference herein)                                                                                                 
|              | 
|10.35         |  | First Amendment to Master Credit Facility Agreement by and between BRE-FMCF, LLC and Prudential Multifamily Mortgage, Inc., dated March 25,
2004 (previously filed on March 31, 2004 as Exhibit 10.1 to the Registrants Current Report on Form 8-5 and incorporated by reference herein)                                                                         
|              | 
|10.36         |  | Amended and Restated Limited Liability Company Agreement of BRE Property Investors LLC, dated as November 18, 1997 (previously filed on
December 18, 1997 as Exhibit 10.1 to the Registrants Current Report on Form 8-K and incorporated by reference herein)                                                                                                    
|              | 
|10.37         |  | Contribution Agreement dated as of September 29, 1997 between the Registrant, BRE Property Investors LLC and the TCR Signatories
(previously filed on November 14, 1997 as Exhibit 10.44 to the Registrants Quarterly Report on Form 10-Q and incorporated by reference herein)                                                                                  
|              | 
|10.38         |  | The Registration Rights Agreement among the Registrant, BRE Property Investors LLC and the other signatories thereto dated November 18,
1997 (previously filed on December 3, 1997 as Exhibit 4.6 to the Registrants Registration Statement on Form S-3 (No. 333-41433), as amended, and incorporated by reference herein)                                       
|              | 
|10.39         |  | The Registration Rights Agreement between the Registrant and Legg Mason Unit Investment Trust Series 7, Legg Mason REIT Trust, December
1998 Series, dated as of December 23, 1997, (previously filed on January 27, 1998 as Exhibit 4.6 of the Registrants Registration Statement on Form S-3 (No. 333-44997), as amended, and incorporated by reference herein)
|              | 
|10.40         |  | Purchase and Sale Agreement by and between the Registrant and G&I III Residential One LLC dated July 10, 2000 (previously filed on
September 8, 2000 as Exhibit 2.1 to the Registrants Current Report on Form 8-K and incorporated by reference herein)                                                                                                          
|              | 
|10.41         |  | Amendment No. 1 to the Purchase and Sale Agreement by and between the Registrant and G&I III Residential One LLC dated September 6,
2000 (previously filed on September 28, 2000 as Exhibit 2.1 to the Registrants Current Report on Form 8-K and incorporated by reference herein)                                                                              
|              | 
|10.42         |  | Amendment No. 2 to the Purchase and Sale Agreement by and between the Registrant and G&I III Residential One LLC dated October 24, 2000
(previously filed on November 14, 2000 as Exhibit 10.3 to the Registrants Quarterly Report on Form 10-Q and incorporated by reference herein)                                                                            
|              | 
|10.43         |  | Amendment No. 3 to the Purchase and Sale Agreement by and between the Registrant and G&I III Residential One LLC dated January 31, 2001
(previously filed on March 12, 2001 as Exhibit 10.50 to the Registrants Annual Report on Form 10-K and incorporated by reference herein)                                                                                 
|              | 
|10.44         |  | Office Lease between OTR, an Ohio general partnership and the Registrant dated September 26, 1997 (previously filed on March 26, 1998 as
Exhibit 10.37 to the Registrants Annual Report on Form 10-K and incorporated by reference herein)                                                                                                                       
|              | 
|10.45         |  | Office Lease between Knickerbocker Properties, Inc. a Delaware Corporation and the Registrant dated December 21, 2004                                                                                                                                                                                                                                             



---

|              |   |  |                                                                                                                                                                                                                                                                                  
|------------- | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |   |  |                                                                                                                                                                                                                                                                                  
|              |  
|10.46         |   |  | Promissory Note payable by BRE Properties, Inc. to the order of Prudential Multifamily Mortgage, Inc. dated September 28, 2000 (previously
filed on March 12, 2001 as Exhibit 10.55 to the Registrants Annual Report on Form 10-K and incorporated by reference herein)         
|              |  
|10.47         | * |  | Retirement Plan for Employees of BRE Properties, Inc. (previously filed on March 12, 2003 as Exhibit 10.45 to the Registrants Annual
Report on Form 10-K, as amended by the Annual Report on the Registrants Form 10-K/A on June 12, 2003 and incorporated by reference herein)
|              |  
|10.48         | * |  | Form of option agreement for the 1999 BRE Stock Incentive Plan                                                                                                                                                                                                                   
|              |  
|10.49         |   |  | Form of option agreement for the Second Amdended and Restated Non-Employee Directors Stock Option and Restricted Stock
Plan                                                                                                                                                      
|              |  
|10.50         | * |  | Form of performance share award for the 1999 BRE Stock Incentive Plan                                                                                                                                                                                                            
|              |  
|10.51         |   |  | Form of restricted stock award agreement for the Second Amdended and Restated Non-Employee Directors Stock Option and Restricted Stock
Plan                                                                                                                                      
|              |  
|12            |   |  | Statements re: computation of ratios                                                                                                                                                                                                                                             
|              |  
|21            |   |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                   
|              |  
|23            |   |  | Consent of Ernst & Young LLP                                                                                                                                                                                                                                                     
|              |  
|31.1          |   |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                              
|              |  
|31.2          |   |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                              
|              |  
|32.1          |   |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                              
|              |  
|32.2          |   |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                              

---

|* |  | Management contract, or compensatory plan or agreement.
|- |  | -------------------------------------------------------