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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

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

                                   Form 10-K
(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, 2000

                                      OR

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

                        Commission File Number: 0-5305

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

                             BRE PROPERTIES, INC.
            (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                <C>
            Maryland                                 94-1722214
  (State or other jurisdiction                    (I.R.S. Employer
of incorporation or organization)              Identification Number)
</TABLE>

                       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:

<TABLE>
<S>                              <C>
      Title of each class          Name of each exchange on which registered
      -------------------          -----------------------------------------
 Common Stock, $.01 par value               New York Stock Exchange
8 1/2% Series A Preferred Stock             New York Stock Exchange
 Common Stock Purchase Rights               New York Stock Exchange
</TABLE>

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

  Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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]

  At February 28, 2001, 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 $1,328,000,000. At that date 46,326,861 shares
were outstanding.

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<PAGE>

                      DOCUMENTS INCORPORATED BY REFERENCE

  Portions of the Proxy Statement for the Annual Meeting of Shareholders of
BRE Properties, Inc. to be filed within 120 days of December 31, 2000 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 there is no assurance 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 in 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, 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. Do not rely solely on
forward-looking statements, which only reflect management's analysis. We
assume no obligation to update forward-looking statements.

                                       2
<PAGE>

                             BRE PROPERTIES, INC.
                                    PART I

Item 1. BUSINESS

Corporate Profile

  We are a self-administered real estate investment trust or "REIT" focused on
the development, acquisition and management of multifamily apartment
communities in 10 targeted metropolitan markets of the Western United States.
At December 31, 2000, our multifamily portfolio had real estate assets with a
book value of approximately $1.7 billion, which included: 72 wholly or
majority-owned completed multifamily communities, aggregating 20,195 units in
California, Arizona, Washington, Utah, Oregon and Colorado; 21 communities in
which we have a minority interest, comprised of 4,816 apartment units; and
twelve apartment communities in various stages of construction and development
totaling 2,839 units. We have been a publicly-traded company since our
founding in 1970 and have paid 121 consecutive quarterly dividends to our
shareholders since inception.

  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:

  .  Accelerate growth from the operation of existing assets by achieving and
     maintaining high occupancy levels, dynamic pricing, and operating margin
     expansion through operating efficiencies and cost controls;

  .  Deploy new and recycled capital to supply-constrained markets of the
     West through a selective development and acquisition program that is
     supported by a research-driven investment model;

  .  Create a valuable customer experience that focuses on services that
     generate increased profitability from resident retention and referrals;
     and

  .  Seek to maintain balance sheet strength and financial flexibility to
     provide continued access to attractively priced capital for intelligent
     growth opportunities.

  We believe we can best achieve our objectives by developing, acquiring and
internally managing high-quality apartment communities in high-demand, supply-
constrained locations 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, BRE focuses 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, including propensity to rent, population growth and
employment growth.

Events During 2000

  During 2000, we completed the development and lease-up of two directly owned
communities totaling 460 units located in San Diego and Sacramento,
California. We also purchased two multifamily communities located in the San
Francisco Bay Area, one located in Southern California, and one located in the
Denver suburb of Littleton, Colorado, totaling 1,332 units, and eight land
sites for development of an estimated additional 1,666 units.

  As of December 31, 2000, we had committed to a total of six development
joint ventures. Two of the joint venture communities were delivered from
construction in progress in 2000. The delivered communities are located in
Sacramento, California and Bothell, Washington, and BRE's net investment in
these joint ventures totals approximately $27,500,000. The remaining four
joint venture arrangements involve the construction of communities with 967
proposed units and an estimated total cost of $122,100,000, with BRE's
contribution

                                       3
<PAGE>

expected to total approximately $25,000,000 to $30,000,000. We are a minority
partner in each of the six joint ventures and will receive additional
operational cash flow or sales proceeds upon certain return thresholds from
the properties.

  In September 2000, BRE and BRE Property Investors LLC, a majority owned and
consolidated subsidiary, sold 19 communities (totaling 4,288 apartment units)
pursuant to an agreement with G&I III Residential One LLC, an unrelated third
party, for an aggregate sale price of $261,000,000. To facilitate the sale, we
then invested approximately $11,288,000 of the net proceeds in a joint venture
related to the buyer in which BRE has a 15% equity interest and DRA Growth and
Income Fund III, LLC has an 85% interest. The communities are located in
Albuquerque, Las Vegas, Phoenix, and Tucson. BRE recorded a loss on sale of
approximately $34,957,000.

  In August 2000, we completed the spin-off of VelocityHSI, Inc. VelocityHSI
was incorporated as a wholly owned subsidiary in April 2000 and was previously
a segment within BRE. VelocityHSI provides high-speed Internet access to the
multifamily apartment industry. On August 15, 2000, we distributed
approximately 87% of our investment in VelocityHSI to BRE shareholders and
retained the balance. Each BRE common shareholder of record as of August 7,
2000 received one share of VelocityHSI for every five common shares of BRE
owned. After cash distributions in lieu of fractional shares, 9,066,383 shares
of VelocityHSI common stock were distributed to BRE shareholders. We initially
retained 1,363,678 shares, and additional shares were sold or given to
VelocityHSI and BRE employees and limited partners of BRE Property Investors,
LLC, in related transactions. In addition, BRE option holders received options
to purchase VelocityHSI common shares on the same one for five ratio.
Subsequent to the spin-off, our ownership in VelocityHSI has been reduced to
approximately 9.9% and is recorded under the equity method of accounting,
which requires BRE to recognize the losses of VelocityHSI against our interest
in VelocityHSI. We have also advanced funds to VelocityHSI under two separate
agreements, for a total of $7.6 million as of December 31, 2000. After the
application of our equity in VelocityHSI's losses, our investment in and
receivable from VelocityHSI was recorded at $3.2 million as of December 31,
2000.

  In December 2000, we renewed our line of credit through December 2003,
increasing funds available to $450 million, with an option to upsize to $500
million, and maintaining an interest rate of 70 basis points over LIBOR.

Events During 1999

  During 1999, BRE completed the development and lease-up of six communities
that were under development at December 31, 1998. We also purchased two other
multifamily communities located in Los Angeles and San Diego, California
totaling 628 units and four land sites for development of an estimated
additional 1,132 units.

  As of December 31, 1999, BRE had committed to three joint ventures. These
joint ventures involved the construction of three communities with 780
proposed units and an estimated total cost of $72,000,000, with BRE's expected
contribution representing approximately $17,000,000. BRE is a minority partner
in the joint ventures and will receive additional operational cash flow or
sales proceeds upon certain return thresholds from the properties.

  In the first quarter of 1999, BRE issued a total of 2,150,000 shares of
preferred stock for net proceeds of approximately $52,000,000.

Events During 1998

  During 1998, BRE completed the construction of eight communities that were
under construction as of December 31, 1997. Seven of these were ready for
occupancy as of December 31, 1998. We also purchased seven other multifamily
communities located in Denver, Seattle, Portland, Los Angeles and San Diego,
totaling 1,597 units, and five land sites for development of an estimated
additional 1,215 units. Three multifamily communities and four commercial and
retail properties were sold and the proceeds reinvested in multifamily
communities.

                                       4
<PAGE>

  In February 1998, BRE issued $130 million in unsecured notes due 2013, at an
effective yield of 7.3%, taking advantage of what it considered a favorable
interest rate. In October 1998, our $300 million lines of credit were replaced
with one $400 million line of credit and the maturity was extended by more
than one year. Also, BRE issued a total of 2,119,515 shares of common stock
for net proceeds of $56 million, further enhancing our financial flexibility.

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 BRE for tenants and
development and acquisition opportunities. Such competition could have a
material effect on our ability to lease apartment homes at our 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 BRE. In
addition, other forms of residential properties, including single-family
housing, provide housing alternatives to potential residents of upscale
apartment communities.

Structure, Tax Status and Investment Policy

  We are a real estate investment trust under Sections 856-860 of the Internal
Revenue Code of 1986, as amended. As a result, we generally will not be
subject to Federal income tax if we distribute 95% of our taxable income to
our shareholders. REITs are subject to a number of complex organizational and
operational requirements. If BRE fails to qualify as a REIT, its 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 which management believes
better align with our growth objectives. Among other items, this policy is
intended to enable 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.

  Prior to 2001, a REIT could not own more than 10% of the outstanding voting
securities of any one issuer. Recently, legislation was enacted that includes
a provision limiting a REIT's ability to own more than 10% by vote or value of
the securities (both debt and equity) of any one issuer. The legislation
allows a REIT to own any percentage of the voting stock and value of a taxable
REIT subsidiary, provided the REIT's taxable investment in all of its REIT
subsidiaries does not represent more than 20% of the REIT's total assets and
at least 75% of the REIT's total assets are real estate assets or other
qualifying assets. Because BRE owns more than 10% of the value of the
outstanding securities (taking into account both debt and equity securities)
of BRE Alliance Services, Inc. and VelocityHSI, Inc., both of these entities
are expected to make the required election to be taxable REIT subsidiaries
prior to March 15, 2001. Additionally, the legislation includes a provision
that prevents a taxable REIT subsidiary from deducting interest on debt funded
directly or indirectly by a REIT if certain tests regarding the taxable REIT
subsidiary's debt to equity ratio and interest expense are satisfied. The
legislation also includes a provision that reduces the REIT distribution
requirement from 95% to 90% of a REIT's taxable income. These provisions are
generally effective for taxable years ending after December 31, 2000.

Employees

  As of December 31, 2000, we had approximately 700 employees. None of the
employees is covered by collective bargaining agreements.

                                       5
<PAGE>

Investment Portfolio

  See Items 2 and 7 of this report for a description of our individual
investments and certain developments during the year with respect to these
investments. See Item 14(d), Schedule III (financial statement schedule), for
additional information about our portfolio, including location, costs and
encumbrances.

  Additionally, see Item 8 of this report for our consolidated financial
statements.

Executive Officers of the Registrant

  The following persons were executive officers of BRE as of February 28,
2001:

<TABLE>
<CAPTION>
                            Age at
                         February 28,
Name                         2001                               Position(s)
----                     ------------                           -----------
<S>                      <C>          <C>
Frank C. McDowell.......      52      President, Chief Executive Officer and Director
LeRoy E. Carlson........      55      Executive Vice President, Chief Operating Officer and Director
Edward F. Lange, Jr.....      41      Executive Vice President, Chief Financial Officer and Secretary
Bradley P. Griggs.......      43      Executive Vice President, Chief Investment Officer
John H. Nunn............      42      Executive Vice President, Asset Management
Lauren L. Barr..........      39      Senior Vice President, Strategic Planning & Communications
Stephen E. Lefkovits....      34      Senior Vice President, Technology Initiatives
</TABLE>

  Mr. McDowell was appointed to his current position in June 1995. Mr. Carlson
and Mr. Nunn joined BRE in March 1996. Messrs. Lange, Griggs and Lefkovits
joined the company in 2000 and Ms. Barr was appointed to her current position
in July 1999. Set forth below is information regarding the business experience
of each of the executive officers:

  From 1992 to 1995, Mr. McDowell was Chief Executive Officer and Chairman of
Cardinal Realty Services, Inc., a Columbus, Ohio-based apartment management
company and owner of multifamily housing. From 1988 to 1992, Mr. McDowell was
Senior Vice President, Head of Real Estate of First Interstate Bank of Texas.
Mr. McDowell holds a Bachelor of Business Administration Degree and a Master
of Business Administration Degree, both from the University of Texas, Austin.

  Mr. Carlson served as Vice President and Chief Financial Officer of Real
Estate Investment Trust of California or "RCT" from 1980 to 1996. Prior to
joining RCT, Mr. Carlson was the Chief Financial Officer of the William
Walters Company, a large asset management company based in Los Angeles,
California. He is a licensed Certified Public Accountant in the State of
California. Mr. Carlson holds a Bachelor's Degree from the University of
Southern California.

  Mr. Lange served as Vice President and Chief Financial Officer at Health
Care REIT, Inc. from 1996 to 2000. Prior to joining Health Care REIT, Mr.
Lange was Senior Vice President of Finance of The Careplex Group Inc., and
affiliated companies from 1992 to 1996. Mr. Lange holds a Master's Degree in
Business Administration from the University of Connecticut and a Bachelor's
Degree in urban planning from the University of Massachusetts.

  Mr. Griggs most recently served as a Senior Vice President of Development
for Homestead Village, Inc., a subsidiary of Security Capital Group, Inc. from
1995 to 2000. Prior to joining Homestead, Mr. Griggs served as a senior real
estate executive for The Fieldstone Company, Inc. and Ryland Homes, Inc. from
1987 to 1995. 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.

  Mr. Nunn served as Vice President of Asset Management of RCT from 1990 to
1996. Prior to joining RCT, Mr. Nunn was Vice President of Asset Management
and a property manager for the William Walters Company

                                       6
<PAGE>

from 1986 to 1990. Mr. Nunn holds a Bachelor's Degree from California State
University, Long Beach and is a Certified Property Manager.

  Ms. Barr served as a Vice President of the asset management group for the
Company since 1990 and was promoted in 1999 to Senior Vice President,
Strategic Planning & Communications. Ms. Barr holds a Bachelor's Degree in
Economics from the University of San Francisco and is a Certified Property
Manager. Ms. Barr is currently on a six-month leave of absence.

  Mr. Lefkovits served as National Multi Housing Council (NMHC) Vice President
of Housing and Finance from 1997 to 2000. He has a Bachelor's Degree in
Economics from Yale University and a Masters Degree in public administration
from Princeton University.

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

                                       7
<PAGE>

                                 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. References to "we" or "us" refer to BRE and "you" refers
to BRE's shareholders.

Risks Due to Investment in Real Estate

 Decreased Yields from an Investment in Real Property Due to Factors Which May
 Cause a Decrease in Revenues or Values or an Increase in Operating Expenses

  Real property investments are subject to varying degrees of risk. The yields
available from equity 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, debt service and capital
expenditures, our results of operations and ability to make distributions to
you and to pay amounts due on our debt 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 the revenues from the properties and their
underlying values. The financial results of major local employers may also
have an impact on the revenues 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 such renewal or reletting were significantly lower than expected rates,
then our funds from operations would, and our ability to make expected
distributions to you 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 were 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.

 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. There can
be no assurance that we will complete 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;

                                       8
<PAGE>

  .  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
 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, no assurance can be given that we will have the financial resources
to make suitable acquisitions or that 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.
Such risks may include construction costs exceeding original estimates,
possibly making a project uneconomical. Other risks may include financing not
being available on favorable terms or at all and construction and lease-up may
not be completed on schedule. Estimates of the costs of improvements to bring
an acquired property up to standards established for the market position
intended for that property might prove inaccurate. In addition, there are
general real estate investment risks associated with any new real estate
investment. 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 you 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 which 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 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 whom may have greater resources, experience or
expertise than us. 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, no assurance can be given that the proceeds realized from
the disposition of assets which no longer meet our investment criteria can be
reinvested to produce 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. To the extent that we are unable to reinvest
proceeds from the assets which no longer meet our investment criteria, or if
properties acquired with such proceeds produce a lower rate of return than the
properties disposed of, such results may have a material adverse effect on us.
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 such 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

                                       9
<PAGE>

foregoing time frames in order to meet the requirements of Section 1031. 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 the properties which will compete with us for
tenants and development and acquisition opportunities. The number of
competitive multifamily properties and real estate companies in such areas
could have a material effect on (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 you and to pay amounts due on our debt.

 Potential Effect on Operations Due to Geographic Concentration of Properties
 and Economic Conditions; Dependence on Western United States Regions

  Our portfolio is located in the San Francisco Bay Area, Los Angeles/Orange
County, San Diego, Sacramento, Seattle, Portland, Salt Lake City, the Denver
area, Phoenix and Tucson. 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 experienced economic recessions and depressed conditions in the local
real estate markets. To the extent general economic or social conditions in
any of these areas deteriorate or any of these areas experiences natural
disasters, the value of the portfolio, our results of operations and our
ability to make distributions to you and to pay amounts due on our debt could
be materially adversely affected.

 Inability to Implement Growth Strategy; Potential Failure to Identify,
 Acquire or Integrate New Acquisitions

  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. There can be no assurance 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 affect on us and our ability to make distributions to
you and to pay amounts due on our debt.

  A substantial portion of our growth over the last several years has been
attributable to acquisitions. We intend to continue to acquire stabilized
multifamily apartment communities to the extent we identify communities that
meet our investment criteria. Acquisitions of multifamily apartment
communities 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 may prove inaccurate. In addition, there are general investment risks
associated with any new real estate investment.

 Uninsured and Underinsured Losses; Limited Insurance Coverage

  We carry comprehensive liability, fire, extended coverage and rental loss
insurance with respect to our properties with certain policy specifications,
limits and deductibles. While we currently carry flood and earthquake
insurance for our properties with an aggregate annual limit of $250 million,
subject to substantial

                                      10
<PAGE>

deductibles, no assurance can be given that such coverage will be available on
acceptable terms or at an acceptable cost, or at all, in the future, or if
obtained, that the limits of those policies will cover the full cost of repair
or replacement of covered properties. In addition, there may be certain
extraordinary losses (such as those resulting from civil unrest) that are not
generally insured (or fully insured against) because they are either
uninsurable or not economically insurable. Should an uninsured or underinsured
loss occur to a property, 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 you and 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 did not obtain updated surveys when we acquired properties from Trammell
Crow Residential-West because we believe that prior owners of the Trammell
Crow Residential-West properties in the past obtained surveys of these
properties. Because updated surveys of the Trammell Crow Residential-West
properties acquired were not obtained, the title insurance policies obtained
by us for those properties 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 these properties, there can be no assurance 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.

 Adverse Changes in Laws May Affect Our Potential Liability Relating to the
 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 you 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 you 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.

 Potential Effect on Costs and Investment Strategy From Compliance With Laws
 Benefiting Disabled Persons

  A number of federal, state and local laws (including the Americans with
Disabilities Act) and regulations exist that may require modifications to
existing buildings or restrict certain renovations by requiring improved
access to such buildings by disabled persons 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 you 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. Such
conclusions are based upon currently available information and data, and no
assurance can be given that further review and analysis of our properties, or
future legal interpretations or legislative changes, will not significantly
increase the costs of compliance.

                                      11
<PAGE>

 Restrictions on the Operations of the Operating Company

  Sixteen 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,
2000, held approximately a 78% equity interest in it. The remaining equity
interests in the operating company are held by third parties as nonmanaging
members.

  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 financial
ratios intended to protect the members' rights to receive distributions. In
addition, with respect to certain tax-exempt financing for certain completed
properties, the operating company is restricted from repaying its debt or
taking certain other specified action which 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 nonmanaging members (or
of the nonmanaging 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 nonmanaging 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.

  Any such requirement to maintain financial ratios and any such restrictions
on the actions of the operating company and its managing member could have a
material adverse affect on us and our ability to make distributions to you 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 give notice to a majority in
interest of the nonmanaging members in order to, (i) dispose of any of the
properties held by the operating company 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
ten years from November 18, 1997, or (ii) 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 significant 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 you 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: 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 (i) the amount necessary to permit the full priority distribution or (ii)
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.

  In addition, we may not be removed as the managing member of the operating
company by the nonmanaging members, with or without cause, other than with our
consent. We may not voluntarily withdraw

                                      12
<PAGE>

from the operating company or transfer all or any portion of our interest in
the operating company without the consent of all of the nonmanaging members,
except in certain limited 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 you and to pay amounts due on our debt.

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, 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 you and to pay
amounts due on our debt.

 Potential Inability to Renew, Repay or Refinance Our Debt Financing

  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 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 you 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.

 Increase in Cost of Indebtedness Due to Rising Interest Rates

  We have incurred and expect in the future to incur indebtedness which bears
interest at a variable rate. 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 you or cause us to be in default
under certain debt instruments (including our debt). In addition, an increase
in market interest rates may lead holders of our common shares to demand a
higher yield on their shares from distributions by us, which could adversely
affect the market price for BRE common stock.

 Potential Incurrence of Additional Debt and Related Debt Service

  We currently fund the acquisition and development of multifamily communities
partially through borrowings (including our line 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. Our organizational
documents do not contain any limitation on the amount of indebtedness that we
may incur. Accordingly, subject to limitations

                                      13
<PAGE>

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 you and
to pay amounts due on our debt and in an increased risk of default on our
obligations.

 Restrictive Terms of Certain Indebtedness May Cause Acceleration of Debt
 Payments

  At December 31, 2000, we had outstanding borrowings of approximately $825
million. Our indebtedness contains financial covenants as to minimum net
worth, interest coverage ratios, maximum secured debt, total debt to capital,
and maintaining our investment grade rating, among others. In the event that
we fail to maintain an investment grade rating for our long-term unsecured
debt or if 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 you and to pay amounts due on our debt.

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, such substances may adversely affect the
owner's or operator's ability to sell or rent the affected property or to
borrow using such property as collateral. Persons who arrange for the disposal
or treatment of hazardous or toxic substances may also be liable for the costs
of removal or remediation of such substances at a disposal or treatment
facility, whether or not such facility is owned or operated by such person.
Certain environmental laws impose liability for release of asbestos-containing
materials into the air, and third parties may also seek recovery from owners
or operators of real properties for personal injury associated with asbestos-
containing materials and other hazardous or toxic substances. The operation
and subsequent removal of certain underground storage tanks are also regulated
by federal and state laws. In connection with the current or former ownership
(direct or indirect), operation, management, development and/or control of
real properties, 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.

  Our current policy is to obtain a Phase I environmental study on each
property we seek to acquire and to proceed accordingly. No assurance can be
given, however, that the Phase I environmental studies or other environmental
studies undertaken with respect to any of 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 you and to pay amounts due on our debt. We
currently carry no insurance for environmental liabilities.

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

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 service our
debt, will be partially dependent upon the earnings of such subsidiaries and
the distribution of those earnings to us, or upon loans or other payments of
funds made by such subsidiaries to us. In addition, debt or

                                      14
<PAGE>

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 are owned by our
subsidiaries, effectively subordinating certain unsecured indebtedness of BRE
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 $450 million 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 million 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 Which 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
articles of incorporation provide, among other things, that if the Board of
Directors determines, in good faith, that direct or indirect ownership of BRE
common stock has or may become concentrated to an extent that would prevent us
from qualifying as a REIT, the Board of Directors may prevent the transfer of
BRE common stock or call for redemption (by lot or other means affecting one
or more shareholders selected in the sole discretion of the Board of
Directors) of a number of shares of BRE common stock sufficient in the opinion
of the Board of Directors to maintain or bring the direct or indirect
ownership of BRE common 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 the Board of
Directors.

  In addition, certain other provisions contained in our articles of
incorporation 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. For example, such provisions may deter tender offers for BRE common
stock which offers may be attractive to the shareholders, or deter purchases
of large blocks of BRE common stock, thereby limiting the opportunity for
shareholders to receive a premium for their shares of BRE common stock over
then-prevailing market prices.

Tax Risks

 Tax Liabilities as a Consequence of Failure to Qualify as a REIT

  Although management believes that we are organized and are operating so as
to qualify as a REIT under the Internal Revenue Code, no assurance can be
given 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 in 2000, 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 95% 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

                                      15
<PAGE>

certain relief provisions apply, and, even if those relief provisions apply, a
tax would be imposed with respect to excess net income, any of which could
have a material adverse effect on us and our ability to make distributions to
you and to pay amounts due on our debt. Additionally, to the extent the
operating company or certain other subsidiaries are determined to be taxable
as a corporation, we would not qualify as a REIT, which could have a material
adverse effect on us and our ability to make distributions to you and to pay
amounts due on our debt. Finally, no assurance can be given that new
legislation, new regulations, administrative interpretations or court
decisions will not change the tax laws with respect to qualification as a REIT
or the federal income tax consequences of such qualification.

  If 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 and
our ability to make distributions to you 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 is lost. This treatment would
reduce funds available for investment or distributions to you 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 you. To the extent that
distributions to you 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.

Item 2. PROPERTIES

General

  In addition to the information in this Item 2, certain information on our
portfolio is contained in Schedule III (financial statement schedule) under
Item 14(d).

Multifamily Property Data

  Our multifamily properties represent 100% of our real estate portfolio and
97% of our total revenue.

<TABLE>
<CAPTION>
               Multifamily Properties                  2000 1999 1998 1997 1996
               ----------------------                  ---- ---- ---- ---- ----
<S>                                                    <C>  <C>  <C>  <C>  <C>
Percentage of total portfolio at cost, as of December
 31..................................................  100% 100% 100% 99%  87%
Percentage of total revenues, for the year ended
 December 31.........................................   97%  97%  97% 89%  77%
</TABLE>

  From 1996 through 1999, multifamily revenues as a percentage of total
revenues did not increase in proportion to the increase in the relative size
of the multifamily portfolio at December 31 of the year indicated due to the
timing of purchases of multifamily properties and the sales of commercial
properties. No single multifamily property accounted for more than 10% of
revenues in 2000.

  The following table discloses certain year-end operating data about our
multifamily units.

<TABLE>
<CAPTION>
                                                December 31,
                                   -------------------------------------------
                                    2000     1999     1998     1997     1996
                                   -------  -------  -------  -------  -------
<S>                                <C>      <C>      <C>      <C>      <C>
Total available units.............  20,195   22,690   21,858   18,569   12,212
Occupancy percent(1)..............      96%      95%      94%      95%      96%
Average monthly rent per unit.....  $1,019     $893     $877     $817     $755
Total number of properties........      72       86       85       74       54
</TABLE>

                                      16
<PAGE>

  This table summarizes data about our operating multifamily properties:

<TABLE>
<CAPTION>
                             Percentage         Number of               Average
           Market            of NOI(2)  Units  Communities Occupancy(3) Rent(4)
           ------            ---------- ------ ----------- ------------ -------
<S>                          <C>        <C>    <C>         <C>          <C>
San Francisco Bay Area......     29%     3,488      10          96%     $1,645
San Diego...................     16%     2,923      12          97%     $1,110
Los Angeles/Orange County...     12%     2,976      11          96%     $  915
Phoenix.....................     12%     2,694       7          95%     $  844
Seattle.....................     11%     2,316       9          97%     $  935
Sacramento..................      8%     1,896       9          97%     $  933
Salt Lake City..............      6%     1,517       5          96%     $  764
Denver......................      3%       984       3          95%     $  889
Portland....................      2%       780       3          96%     $  696
Tucson......................      1%       621       3          94%     $  520
                                ---     ------     ---         ---      ------
  Total/Weighted Average....    100%    20,195      72          96%     $1,019
                                ===     ======     ===         ===      ======
</TABLE>
--------
(1) Portfolio occupancy is calculated by dividing the total occupied units by
    the total units in the portfolio. Apartment units are generally leased to
    residents for rental terms which do not exceed one year.

(2) Represents the aggregate net operating income of all properties in each
    market divided by the total net operating income of multifamily properties
    for the year ended December 31, 2000, and includes the results of two
    completed properties acquired during 2000 from the date of acquisition.
    Accordingly, these results do not reflect a full year of operations for
    properties acquired or completed in 2000 and six communities under lease-
    up.

(3) Represents physical occupancy at December 31, 2000. The total is a
    weighted average by units for all communities.

(4) Represents total gross potential rent divided by total units as of
    December 31, 2000. The total is a weighted average by units for all
    communities shown.

Properties Completed during 2000

  In 2000, we completed the development of Pinnacle at Carmel Creek in San
Diego, California, adding 348 units, and Pinnacle at Overlook II in Folsom,
California, adding 112 units, both of which are directly owned by BRE. We also
completed Pinnacle at Blue Ravine in Folsom, California, adding 260 units, and
Pinnacle Sonata in Bothell, Washington, adding 268 units. These two properties
are held by joint ventures of which we own less than 50%. These assets are
recorded as equity interests in investments in rental properties on the
consolidated balance sheet.

                                      17
<PAGE>

Development Properties

  The following table provides data on our 12 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. No assurance can be given
that these properties will be completed or, that they will be completed by the
estimated dates, or for the estimated amount, or will contain the number of
proposed units shown in the table below.

<TABLE>
<CAPTION>
                                                                    Costs
                                                                   Incurred
                                                        Proposed  to Date--   Estimated Estimated Estimated
                                                         Number  December 31,  Cost to    Total   Completion
Property Name                           Location        of Units     2000     Complete    Cost     Date(5)
-------------                           --------        -------- ------------ --------- --------- ----------
                                                                    (Dollar amounts in millions)
<S>                               <C>                   <C>      <C>          <C>       <C>       <C>
Direct Investment
Pinnacle Bellecentre.....         Bellevue, WA             248      $ 40.3     $  0.3    $ 40.6    1Q/2001
Pinnacle at the Bluffs...         Renton, WA               180        12.5       14.2      26.7    4Q/2001
Pinnacle at Otay Ranch
 II......................         Chula Vista, CA          204         9.8       17.0      26.8    2Q/2002
Pinnacle at Denver Tech Center..  Greenwood Village, CO    420        11.3       32.6      43.9    4Q/2002
                                                         -----      ------     ------    ------
                                                         1,052      $ 73.9(6)  $ 64.1    $138.0
                                                         -----      ------     ------    ------
Equity interests in joint
 ventures(7)
Pinnacle at Queen Creek..         Chandler, AZ             252      $ 18.7     $  --     $ 18.7    1Q/2001
Pinnacle at MacArthur
 Place...................         Santa Ana, CA            253        31.3       24.7      56.0    4Q/2001
Pinnacle at Stone Creek..         Paradise Valley, AZ      226        19.4        3.7      23.1    3Q/2001
Pinnacle at Galleria.....         Roseville, CA            236        10.4       13.9      24.3    4Q/2001
                                                         -----      ------     ------    ------
                                                           967      $ 79.8(8)  $ 42.3    $122.1
                                                         -----      ------     ------    ------
Land under development(9)
Pinnacle at the Creek....         Aurora, CO               216      $  2.9     $ 16.6    $ 19.5    1Q/2002
Pinnacle at Otay Ranch
 I.......................         Chula Vista, CA          160         5.3       16.3      21.6    1Q/2002
Pinnacle at Fullerton....         Fullerton, CA            192         7.9       29.1      37.0    4Q/2002
Pinnacle at Talega.......         San Clemente, CA         252        14.0       28.2      42.2    4Q/2002
                                                         -----      ------     ------    ------
                                                           820      $ 30.1     $ 90.2    $120.3
                                                         -----      ------     ------    ------
                                  Total                  2,839      $183.8     $196.6    $380.4
                                                         =====      ======     ======    ======
</TABLE>
--------
(5) Represents the date when BRE estimates a certificate of occupancy will be
    received for the entire community.

(6) Reflects all recorded and allocated costs incurred as of December 31,
    2000, consisting of $57.9 million recorded on our balance sheet as "direct
    investments--construction in progress" and $16.0 million of costs for
    completed buildings located on the listed properties, reflected on our
    balance sheet as "direct investments--investments in rental properties."

(7) With respect to our aggregated joint ventures, we currently expect to
    maintain 35% to 40% leverage and contribute approximately 30% to 35% of
    the remaining equity. BRE anticipates that its equity will approximate
    $25,000,000 to $30,000,000 upon completion.

(8) Consists of $34.4 million recorded on our balance sheet as "equity
    interest in advances to real estate joint ventures--construction in
    progress," which is net of $45.4 million in construction loan balances.

(9) 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 moved to construction in progress.

                                      18
<PAGE>

Insurance, Property Taxes and Income Tax Basis

  We carry comprehensive liability, fire, extended coverage and rental loss
insurance on our properties with certain policy specifications, limits and
deductibles. In addition, we currently carry flood and earthquake coverage
with an annual aggregate limit of $250,000,000 (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; such
rates ranged from approximately 1% to 2% of assessed values for 2000. The
gross carrying value of our direct investments in rental properties was
$1,646,486,000 as of December 31, 2000; at that date our assets had an
underlying federal income tax basis approximately $228,000,000 lower, which
reflects, 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 15,142 rentable square feet at annual per square foot rents which
began at $37.00 in 1999 and rise to $44.00 in the eighth year of the lease.
The lease term ends on January 31, 2006. The Company also maintains regional
offices in: Seattle, Washington; Sacramento, Irvine, and San Diego,
California; Phoenix, Arizona; Denver, Colorado; and Salt Lake City, Utah.

Item 3. LEGAL PROCEEDINGS

  BRE is defending various claims and legal actions that arise from its 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.

                                      19
<PAGE>

                                    PART II

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

  Our common stock is traded on the New York Stock Exchange under the symbol
"BRE." As of February 28, 2001, there were approximately 6,170 recordholders
of BRE's common stock and the last reported sales price on the NYSE was
$29.05. 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 28, 2001, there were approximately
32,000 beneficial holders of BRE's common stock.

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

<TABLE>
<CAPTION>
                                            Years ended December 31,
                                 -----------------------------------------------
                                          2000                    1999
                                 ----------------------- -----------------------
                                  Stock Price             Stock Price
                                 ------------- Dividends ------------- Dividends
                                  High   Low     Paid     High   Low     Paid
                                 ------ ------ --------- ------ ------ ---------
   <S>                           <C>    <C>    <C>       <C>    <C>    <C>
   First Quarter................ $26.83 $21.27  $0.425   $24.75 $21.51  $0.390
   Second Quarter............... $29.83 $24.69  $0.425   $25.79 $21.64  $0.390
   Third Quarter................ $33.00 $28.11  $0.425   $25.61 $22.49  $0.390
   Fourth Quarter............... $33.63 $29.75  $0.425   $23.84 $20.05  $0.390
</TABLE>

  On August 15, 2000, BRE also made a special non-cash, non-recurring dividend
of one share of VelocityHSI, Inc. (OTCBB: VHSI) common stock for every five
shares of BRE common stock owned as of August 7, 2000. The dividend had a
value at the time of distribution of $0.24 per BRE common share.

  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 the cash flow, financial condition, capital requirements,
REIT provisions of the Internal Revenue Code and other factors.

                                      20
<PAGE>

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 the transactions with G&I III Residential One LLC (DRA
Advisors) in 2000, Trammell Crow Residential-West in 1997, the merger with
Real Estate Investment Trust of California in 1996, and numerous acquisitions
and dispositions as discussed in "Management's Discussion and Analysis of
Financial Condition and Results of Operations." As such, the consolidated
financial statements and notes thereto included elsewhere in this report are
not directly comparable to prior years.

<TABLE>
<CAPTION>
                             2000        1999        1998        1997       1996
                          ----------  ----------  ----------  ----------  ---------
                              (Amounts in thousands, except per share data)
<S>                       <C>         <C>         <C>         <C>         <C>
Operating Results
Revenues................  $  253,477  $  234,253  $  203,245  $  137,761  $ 101,651
                          ==========  ==========  ==========  ==========  =========
Net income available to
 common shareholders....  $   36,734  $   69,034  $   60,644  $   76,197  $  89,839
Plus:
 Net loss (gain) on
  sales of investments..      35,693         (54)      1,859     (27,824)   (52,825)
 Depreciation...........      37,425      35,524      27,763      17,938     13,283
 Provision for
  nonrecurring charge...         --        1,250       2,400         --         --
 Equity in losses of
  Internet business.....       8,765         --          --          --         --
 Joint venture
  adjustment............         197         --          --          --         --
 Minority interest in
  income convertible
  into common shares....       4,614       4,847       4,126         972        --
                          ----------  ----------  ----------  ----------  ---------
Funds from
 operations(10).........  $  123,428  $  110,601  $   96,792  $   67,283  $  50,297
                          ==========  ==========  ==========  ==========  =========
Net cash flows generated
 by operating
 activities.............  $  123,183  $  113,024  $   97,081  $   67,564  $  47,887
Net cash flows used in
 investing activities...  $ (105,321) $ (104,288) $ (290,297) $ (235,293) $(132,082)
Net cash flows from
 financing activities...  $  (31,412) $    3,019  $  191,057  $  171,761  $  68,322
Dividends to common and
 preferred shareholders
 and distributions to
 minority members.......  $   85,344  $   79,313  $   66,327  $   52,035  $  39,849
Weighted average number
 of shares outstanding..      45,181      44,540      42,940      35,750     30,520
Weighted average number
 of operating company
 units..................       2,739       3,100       2,840         290        --
Weighted average number
 of shares outstanding--
 assuming dilution......      48,270      47,760      46,110      36,610     30,790
Shares outstanding at
 end of period..........      45,895      44,680      44,220      41,740     32,880
Operating company units
 outstanding at end of
 period.................       2,287       3,050       2,990       2,820        --
Per share data
Income excluding gain
 (loss) on sales of
 investments............  $     1.60  $     1.55  $     1.45  $     1.35  $    1.21
Net gain (loss) on sales
 of investments.........       (0.79)        --        (0.04)       0.78       1.73
                          ----------  ----------  ----------  ----------  ---------
Net income..............  $     0.81  $     1.55  $     1.41  $     2.13  $    2.94
                          ==========  ==========  ==========  ==========  =========
Per share data--assuming
 dilution
Income excluding gain
 (loss) on sales of
 investments............  $     1.60  $     1.55  $     1.45  $     1.35  $    1.20
Net gain (loss) on sales
 of investments.........       (0.79)        --        (0.04)       0.76       1.72
                          ----------  ----------  ----------  ----------  ---------
Net income--assuming
 dilution...............  $     0.81  $     1.55  $     1.41  $     2.11  $    2.92
                          ==========  ==========  ==========  ==========  =========
Dividends paid to common
 shareholders...........  $     1.70  $     1.56  $     1.44  $     1.38  $    1.33
Balance sheet
 information and other
 data
Real estate portfolio,
 before depreciation....  $1,796,507  $1,779,958  $1,677,619  $1,346,923  $ 816,389
Total assets............  $1,718,129  $1,707,162  $1,628,526  $1,339,937  $ 782,479
Long-term debt..........  $  825,253  $  779,403  $  752,146  $  541,367  $ 311,985
Minority interest.......  $   69,712  $   87,640  $   87,432  $   76,066  $     --
Shareholders' equity....  $  801,116  $  822,907  $  762,614  $  705,534  $ 462,879
</TABLE>
-------
(10) Management considers Funds from Operations to be an appropriate
     supplemental measure of the performance of an equity REIT because it is
     predicated on cash flow analyses that facilitate an understanding of the
     operating performance of BRE's properties without giving effect to
     noncash items such as depreciation. FFO is defined by the National
     Association of Real Estate Investment Trusts as net income or loss
     (computed in accordance with generally accepted accounting principles)
     excluding gains or losses from debt restructuring and sales of property,
     plus depreciation and amortization of real estate assets. FFO does not
     represent cash generated from operating activities in accordance with
     generally accepted accounting principles and, therefore, should not be
     considered a substitute for net income as a measure of results of
     operations or for cash flows from operations as a measure of liquidity.
     Additionally, the application and calculation of FFO by other REITs may
     vary materially from our calculations, and therefore our FFO and the FFO
     of other REITs may not be directly comparable. On October 27, 1999,
     NAREIT revised its definition for periods after January 1, 2000.
     Consequently, FFO calculations for periods ending subsequent to January
     1, 2000 may not be comparable to calculations for periods ended prior to
     that date.

                                      21
<PAGE>

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

Overview

  BRE Properties, Inc., is a self-administered equity real estate investment
trust or "REIT" focused on the development, acquisition and management of
multifamily apartment communities in 10 metropolitan markets of the Western
United States. At December 31, 2000, our portfolio had real estate assets with
a book value of approximately $1.7 billion that included 72 wholly or
majority-owned apartment communities, aggregating 20,195 units; 21 multifamily
communities owned in partnerships, comprised of 4,816 apartment units; and
12 apartment communities in various stages of construction and development
totaling 2,839 units.

  In 2000, BRE acquired four apartment communities. In Northern California, we
acquired Pinnacle City Centre, an 192-unit community located in Hayward, for
approximately $28 million and Sun Pointe Village, a 336-unit community in
Fremont, for approximately $64 million. In Southern California, we acquired
Pinnacle at Cortesia, a 308-unit community located in Rancho Santa Margarita,
for approximately $38 million. In Colorado, we acquired Pinnacle Mountain
Gate, a 496-unit community located in the Denver suburb of Littleton, for
approximately $42 million.

  Also in 2000, we acquired and started development on eight land sites with a
proposed 1,666 units. Advances to fund our land purchases, development and
construction activities during 2000 totaled $186.5 million.

  BRE also completed two directly owned development communities: Pinnacle at
Carmel Creek, located in San Diego, California; and Overlook at Blue Ravine
II, located in the Sacramento suburb of Folsom, California. These communities
added 460 apartment units to the BRE portfolio, for a total investment of
$60.5 million. We also completed two joint venture development communities,
Pinnacle at Blue Ravine, a 260-unit community located in Folsom, California,
and Pinnacle Sonata, a 268-unit community located in the Seattle suburb of
Bothell, Washington. These communities were developed with total costs of
approximately $30.0 and $49.0 million, respectively. Under the terms of the
joint venture agreements, BRE retained investments of approximately $9.3 and
$18.2 million, respectively.

Liquidity and Capital Resources

  At December 31, 2000, BRE's net real estate investments totaled
approximately $1,672,000,000, which included 72 operating multifamily
apartment communities and 12 apartment communities under development.
Depending upon the availability and cost of external capital, BRE anticipates
making additional investments in multifamily apartment communities. New
investments are funded from temporary borrowings under our revolving line of
credit, internally generated cash and the proceeds derived from asset sales.
Permanent financing for future investments, which replaces funds drawn under
the revolving line of credit, is expected to be provided through a combination
of public and private offerings of debt and equity securities, and the
assumption of secured debt. BRE believes its liquidity and various sources of
available capital are sufficient to fund operations, meet debt service and
dividend requirements, and finance future investments.

  During 2000, BRE sold 19 communities in a portfolio sale for net proceeds of
approximately $256,000,000 and received proceeds from a secured mortgage loan
of $35,000,000.

  In December 2000, we amended and restated our unsecured line of credit,
which was scheduled to mature in August 2001. The new unsecured credit
facility matures in December 2003 and expands the credit capacity to
$450,000,000, with an option to upsize the facility to $500,000,0000. The new
credit facility funded on January 12, 2001. Borrowings under the line of
credit bear interest at LIBOR plus 0.70% plus a fee of 0.20% payable on the
unused portion of the credit facility.

                                      22
<PAGE>

  Borrowings under our line of credit totaled $368,000,000 at December 31,
2000, compared to $315,000,000 at December 31, 1999. Drawings on the line of
credit are available to fund our investment activities and general corporate
purposes. BRE typically reduces its outstanding balance on the line of credit
with available cash balances.

  BRE had a total of $243,000,000 in unsecured indebtedness other than the
line of credit at December 31, 2000, consisting of the following: (i)
$63,000,000 of unsecured senior notes with an interest rate of 7.44% per annum
on $45,000,000 and 7.88% per annum on $18,000,000, to be repaid through
scheduled principal payments annually from 2000 to 2005; (ii) $50,000,000
principal amount of unsecured senior notes due 2007, with an effective
interest rate of approximately 7.8%; and (iii) $130,000,000 principal amount
of unsecured notes due 2013, with an effective interest rate of 7.3%. In
addition, at December 31, 2000, BRE had mortgage indebtedness totaling
$214,253,000 at interest rates ranging from 5.7% to 8.4%, with remaining terms
of from less than one to 28 years.

  Our indebtedness contains financial covenants as to minimum net worth,
interest coverage ratios, maximum secured debt and total debt to capital,
among others. BRE was in compliance with all such financial covenants during
the year ended December 31, 2000.

  As of December 31, 2000, BRE had total outstanding debt balances of
$825,000,000 and total outstanding shareholders' equity and minority interest
of $871,000,000, representing a debt to total book capitalization ratio of
approximately 49%.

  BRE anticipates that it will continue to require outside sources of
financing to meet its long-term liquidity needs beyond 2000, such as scheduled
debt repayments, construction funding and property acquisitions. At December
31, 2000, BRE had an estimated cost of $196,600,000 to complete existing
direct investment and joint venture construction in progress and land under
development, with funding estimated from 2001 through 2002. A portion of the
land under development may be contributed to joint ventures, which may
significantly lower BRE's required funding. Scheduled debt repayments through
December 31, 2001 total approximately $12,900,000.

  As of December 31, 2000, BRE has an effective shelf registration on file
with the Securities and Exchange Commission under which we may issue up to
$640,000,000 of securities including debt, convertible debt, common and
preferred stock. Depending upon market conditions, we may issue securities
under such shelf registration to invest in additional multifamily communities
and to repay borrowings under our line of credit. On January 12, 2001, we
issued $250,000,000 of 10-year senior unsecured notes under this shelf, at a
7.45% coupon. The net proceeds from the sale of notes were used to repay a
portion of the borrowings under our existing credit facility. As of February
28, 2001, outstanding borrowings under our credit facility totaled
$115,000,000.

  BRE continues to consider other sources of possible funding, including
further joint ventures and additional secured construction debt. BRE owns
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 has encumbered assets with significant equity that
could be further encumbered should other sources of capital not be available.

RESULTS OF OPERATIONS
Comparison of the Years Ended December 31, 2000, 1999 and 1998

General

  The results of operations for the three years ended December 31, 2000 were
significantly affected by acquisitions and completions of apartment
communities and the repositioning of BRE's portfolio through the sale of all
of our commercial and retail properties and our underperforming apartment
communities. The 2000 results include the completion of two development
properties and a full year of stabilized operations for one property completed
in 1999 and two properties acquired in 1999, partially offset by the sale of
19 apartment communities

                                      23
<PAGE>

at the end of the third quarter of 2000. We retained a 15% interest in these
19 communities by entering into a joint venture with the buyer. The 1999
results include completion and lease-up of eight properties acquired as
development projects in 1997 and seven communities acquired in 1998 with a
first full year of stabilized operations in 1999.

  At December 31, 2000, BRE's portfolio of apartment communities consisted of
the following: (i) 17,775 units in 64 communities that were completed and
stabilized for all of 2000 and 1999 ("same-store" communities); (ii) 628 units
in two communities that were acquired or stabilized in 1999 and held for all
of 2000; and (iii) 1,792 units in four communities that were acquired and two
communities developed in 2000.

Revenues

  Total revenues were $253,477,000 in 2000, $234,253,000 in 1999 and
$203,245,000 in 1998. Revenues increased in 2000 primarily from increases in
average monthly rents and the completion and lease-up of apartment communities
and acquisitions of stabilized properties in 1999, which were held for all of
2000. The increase was partially offset by the sale of 19 apartment
communities at the end of the third quarter 2000. Revenues increased in 1999
primarily from the completion and lease-up of apartment communities and
acquisitions of stabilized properties in 1998, which were held for all of
1999. A summary of revenues for the years ended December 31, 2000, 1999 and
1998 follows:

<TABLE>
<CAPTION>
                                      % of Total              % of Total              % of Total
                          2000 Total   Revenues   1999 Total   Revenues   1998 Total   Revenues
                         ------------ ---------- ------------ ---------- ------------ ----------
<S>                      <C>          <C>        <C>          <C>        <C>          <C>
Rental income........... $235,723,000     93%    $218,057,000     93%    $190,806,000     94%
Other income............   17,754,000      7       16,196,000      7       12,439,000      6%
                         ------------    ---     ------------    ---     ------------    ---
  Total revenue......... $253,477,000    100%    $234,253,000    100%    $203,245,000    100%
                         ============    ===     ============    ===     ============    ===
</TABLE>

<TABLE>
<CAPTION>
                                                                  % Change
                                                               from Prior Year
                                                              -------------------
                                                              2000   1999   1998
                                                              -----  -----  -----
<S>                                                           <C>    <C>    <C>
Multifamily rental...........................................    8%    14%    48%
Other income.................................................   10%    30%    37%
Total revenue................................................    8%    15%    48%
</TABLE>

  On a same-store basis, rental revenues increased 7% due to average rent per
unit increasing approximately 8% and slightly higher occupancy in 2000. On a
same-store basis in 1999, rental revenues increased 4% due to average rent per
unit increasing approximately 3%. Occupancy for each of the three years ended
December 31, 2000 follows:

<TABLE>
<CAPTION>
                                                                  2000  1999  1998
                                                                  ----  ----  ----
<S>                                                               <C>   <C>   <C>
Portfolio occupancy rates as of December 31......................  96%   95%   94%
Number of properties.............................................  72    86    85
</TABLE>

  Portfolio occupancy is calculated by dividing the total occupied units by
the total units in stabilized communities in the portfolio at the end of the
period.

                                      24
<PAGE>

  The following table summarizes the multifamily acquisitions, development
properties completed, and dispositions for the years ended December 31, 2000,
1999 and 1998 (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):

<TABLE>
<CAPTION>
                                2000              1999               1998
                         ------------------ ----------------- ------------------
                           #        $         #        $        #        $
                         ----- ------------ ----- ----------- ----- ------------
<S>                      <C>   <C>          <C>   <C>         <C>   <C>
Multifamily
  Property
   acquisitions.........    4  $171,700,000    2  $57,900,000    7  $162,700,000
  Development properties
   completed............    2    60,500,000    1   29,965,000    7   183,088,000
  Property
   dispositions.........   19   261,000,000    1    7,000,000    3    19,200,000
</TABLE>

 Other income

  Other income (which consists primarily of recurring nonrental income derived
from apartment communities and includes, among other items, income from joint
ventures, partnerships, interest, third-party property management and
development fees) was $17,754,000, $16,196,000 and $12,439,000 for the years
ended December 31, 2000, 1999 and 1998, respectively. The increase in 2000
over 1999 was primarily due to other income from joint venture and partnership
investments and other income from same-store communities. The increase in 1999
over 1998 was due to other income from same-store communities, communities
acquired in 1998 and held for all of 1999, and development fees from joint
ventures to the extent of third-party interests.

Expenses

 Real estate expenses

  Real estate expenses for multifamily rental properties (which include
maintenance and repairs, utilities, on-site staff payroll, property taxes,
insurance, advertising and other direct operating expenses) increased by
$1,855,000 (3%) in the year ended December 31, 2000, as compared to the prior
year. The increase was only 3% despite the acquisitions and delivered
communities due to cost containment efforts and the disposition of
19 properties in the third quarter of 2000. Real estate expenses increased by
$5,093,000 (9%) in the year ended December 31, 1999 as compared to 1998. The
1999 increase was due largely to the completion and lease-up of six
communities previously under development as real estate expenses at same-store
communities remained relatively unchanged. Multifamily real estate expenses as
a percentage of multifamily rental income decreased from 34.0% in 1998 to
32.4% in 1999 and to 30.7% in 2000. Although not measurable with precision,
management believes that this continued decrease results in part from
economies of scale derived from increased concentration of assets in BRE's
markets.

 Provision for depreciation

  The provision for depreciation increased by $1,901,000 for the year ended
December 31, 2000 as compared to 1999, and increased $7,761,000 for the year
ended December 31, 1999 as compared to 1998. The increases in 2000 and 1999
resulted from additional depreciation on property acquisitions and
depreciation on development properties completed. Further, during 1999 and
1998, dispositions of commercial and retail properties generally resulted in a
higher depreciable base (and related depreciation expense) as the original
cost basis plus the realized gain was reinvested.

                                      25
<PAGE>

 Interest expense

  Interest expense for the years ended December 31, 2000, 1999 and 1998
follows:

<TABLE>
<CAPTION>
                                          2000         1999          1998
                                      ------------  -----------  ------------
   <S>                                <C>           <C>          <C>
   Interest on line of credit........ $ 25,370,000  $15,016,000  $ 12,550,000
   Interest on unsecured senior
    notes............................   20,885,000   19,018,000    17,672,000
   Interest on mortgage loans
    payable..........................   15,207,000   17,146,000    17,982,000
   Capitalized interest..............  (16,434,000)  (9,485,000)  (12,606,000)
                                      ------------  -----------  ------------
     Total interest expense.......... $ 45,028,000  $41,695,000  $ 35,598,000
                                      ============  ===========  ============
</TABLE>

  Year-end debt balances at December 31, 2000, 1999 and 1998 follow:

<TABLE>
<CAPTION>
                                     December 31,  December 31,  December 31,
                                         2000          1999          1998
                                     ------------  ------------  ------------
   <S>                               <C>           <C>           <C>
   Unsecured line of credit......... $368,000,000  $315,000,000  $264,000,000
   Unsecured senior notes...........  243,000,000   253,000,000   253,000,000
   Mortgage loans payable...........  214,253,000   211,403,000   235,146,000
                                     ------------  ------------  ------------
     Total debt..................... $825,253,000  $779,403,000  $752,146,000
                                     ============  ============  ============
   Weighted average interest rate
    for all debt at end of period...          7.4%          7.1%          7.0%
                                     ============  ============  ============
</TABLE>

  Interest expense increased $3,333,000 to $45,028,000 in 2000 due to higher
average balances under our line of credit as a means of short-term financing
for our development and acquisitions, combined with higher variable interest
rates in the early quarters of 2000. Capitalized interest was $16,434,000 in
2000, up from $9,485,000 in 1999 due to the higher volume of construction and
development activity ongoing throughout 2000. In 1999, several projects were
completed, resulting in less capitalized interest taken during the year.
Interest expense increased $6,097,000 to $41,695,000 in 1999 over 1998 due to
eight properties previously under development and lease-up. The cost of
development increased borrowings under the line of credit and related interest
expense, and lowered capitalization of interest upon completion. These
increases were offset in part by the pay-down of the line of credit from the
proceeds of the January 1999 issuance of $53,750,000 in Series A Preferred
Stock.

 General and administrative expenses

  General and administrative expenses for the three years ended December 31,
2000 were as follows:

<TABLE>
<CAPTION>
                                               2000        1999        1998
                                            ----------  ----------  ----------
   <S>                                      <C>         <C>         <C>
   General and administrative expenses..... $7,807,000  $6,706,000  $6,133,000
   As a percentage of total revenues.......        3.1%        2.9%        3.0%
</TABLE>

  General and administrative expenses as a percentage of total revenues
increased by 0.2% in 2000 as compared to 1999 due to rising payroll costs. In
1999 as compared to 1998, general and administrative expenses decreased by
0.1% due to continued efficiencies in administrating a larger portfolio and a
restructuring of corporate personnel in the first quarter of 1999.

  Office rent totaling $821,000, $792,000 and $568,000 for each of the three
years ended December 31, 2000 is included in general and administrative
expenses.

 Equity in losses of Internet business

  Equity in losses of Internet business totaled $8,765,000 during 2000 and
represents the net losses of VelocityHSI, Inc., our non real-estate segment
which was spun off on August 15, 2000. We recorded a loss from VelocityHSI,
Inc., totaling $3,075,000 prior to the spin-off. Subsequent to the spin-off,
we have recorded

                                      26
<PAGE>

$5,690,000 in additional losses as our investment in VelocityHSI is recorded
under the equity method of accounting, with losses being recorded on a 90-day
lag basis. We are required to record 100% of VelocityHSI's losses up to our
level of investment in and advances to VelocityHSI, until it secures an
independent source of financing.

 Provision for nonrecurring charge

  In the first quarter of 1999, BRE recorded a restructuring charge of
$1,250,000 related to reductions in corporate personnel. In the third quarter
of 1998, BRE recorded a provision for litigation loss of $2,400,000 in
connection with a jury award and related legal expenses. Both of these charges
were concluded in 1999 with no further charge to expense. There were no such
charges in 2000.

 Net gain (loss) on sales of investments in rental properties

  On September 13, 2000, BRE and BRE Property Investors LLC sold 19
communities (totaling 4,288 apartment units) pursuant to an agreement with G&I
III Residential One LLC, an unrelated third party, for an aggregate sale price
of $261,000,000. BRE then invested approximately $11,288,000 of the net
proceeds in a joint venture related to the buyer, in which BRE has a 15%
equity interest. BRE recorded a loss on sale of approximately $35,000,000. The
communities are located in Albuquerque, New Mexico, Las Vegas, Nevada, and
Phoenix and Tucson, Arizona. Additionally, BRE sold its last commercial
property and a land parcel for a combined net loss of approximately $700,000.

  The net gain on sales of investments in rental properties in 1999 was
$54,000, primarily from the sale of the Los Senderos community. In 1998, the
net loss on sales of investments in rental properties was $1,859,000,
primarily from the sale of the Park Glenn apartment community and three
commercial and retail properties: Hawthorne Del Amo, Valencia Medical Center
and Vista Village Shopping Center, for a total gross sale price of
approximately $17,300,000. Certain of these sales were structured as tax-
deferred exchanges, with the proceeds applied toward new investments in
apartment communities. As of December 31, 2000, the Company had gains on sales
totaling approximately $228,000,000 that have been deferred for federal and
state income tax purposes since the Company's organization in 1970.

 Minority interest in income

  Minority interest in income was $5,132,000 for the year ended December 31,
2000 due to the earnings attributable to the minority members of the Company's
consolidated subsidiaries, down from $5,447,000 for the year ended December
31, 1999. The decrease was due to a lower distribution paid to BRE Property
Investors LLC operating company unit holders as members of the limited
liability company exchanged their operating company units for shares of BRE
common stock in 2000. The increase from 1998 to 1999 of $1,223,000 was
primarily due to the issuance of additional interests in income pursuant to
the attainment of development goals in the transaction with Trammell Crow
Residential-West and a full year of operations from another consolidated
subsidiary formed in 1999.

 Dividends attributable to preferred stock

  Dividend payments associated with BRE's outstanding preferred stock for the
year ended December 31, 2000, totaled $4,569,000 as compared with $4,182,000
for the year ended December 31, 1999 as the preferred stock was issued in the
first quarter of 1999. There were no such dividend payments in 1998.

 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, 2000 was $36,734,000, or
$0.81 per share, as compared with $69,034,000, or $1.55 per share, for the
year ended December 31, 1999 and $60,644,000, or $1.41 per share, for the year
ended December 31, 1998.

                                      27
<PAGE>

Impact of Inflation

  More than 97% of BRE's total revenues for 2000 were derived from apartment
properties. Due to the short-term nature of most apartment 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 there can be no assurance that BRE will be able to adjust rents in
response to inflation. In addition, occupancy rates may also fluctuate due to
short-term leases that permit apartment residents to leave at the end of each
lease term at minimal cost to the resident.

Dividends and Distributions to Minority Members

  A cash dividend has been paid to common shareholders each quarter since
BRE's inception in 1970. Cash dividends per common share were $1.70 in 2000,
$1.56 in 1999 and $1.44 in 1998. Total cash dividends paid to common
shareholders for the three years ended December 31, 2000, 1999 and 1998 were
$76,607,000, $69,544,000 and $62,138,000, respectively. Distributions to
minority members were $4,167,000 in 2000, $5,587,000 in 1999 and $4,189,000 in
1998. In 2000 and 1999, respectively, $4,569,000 and $4,182,000 in dividends
were paid to preferred shareholders.

  On August 15, 2000, BRE also made a special noncash, nonrecurring dividend
of one share of VelocityHSI, Inc., (OTCBB: VHSI) common stock for every five
shares of BRE common stock owned as of August 7, 2000. The dividend had a
value at the time of distribution of $0.24 per BRE common share.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

  BRE's exposure to market risk for changes in interest rates relates
primarily to our unsecured line of credit. We generally enter into fixed and
variable rate debt obligations to support general corporate purposes,
including acquisitions, capital expenditures and working capital needs. BRE
continuously evaluates its level of variable rate debt with respect to total
debt and other factors, including its assessment of the current and future
economic environment. BRE did not have any derivative financial instruments at
December 31, 2000, but had in previous years. In 1998 and 1999, we closed out
treasury rate lock agreements in conjunction with the issuance of $50 million
unsecured senior notes due 2007, issued in June 1998, and $130 million
unsecured senior notes due 2013, issued in February 1999. The purpose of these
treasury rate lock agreements was to hedge the impact of future fluctuations
in variable interest rates on these debt issuances.

  The fair values of BRE's financial instruments (including such items in the
financial statement captions as cash, other assets, and unsecured line 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 BRE's mortgage loans payable
and unsecured senior notes approximates their carrying value at December 31,
2000.

  BRE had $400,530,000 and $347,530,000 in variable rate debt outstanding at
December 31, 2000 and 1999, respectively. A hypothetical 10% adverse change in
interest rates would have had an annualized unfavorable impact of
approximately $3,000,000 and $2,200,000, respectively, on our earnings and
cash flows based on these year-end debt levels. BRE cannot predict the effect
of adverse changes in interest rates on its variable rate debt and, therefore,
its exposure to market risk, nor can there be any assurance that fixed rate,
long-term debt will be available to BRE at advantageous pricing. Consequently,
future results may differ materially from the estimated adverse changes
discussed above.

                                      28
<PAGE>

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

  See Item 14. Such Financial Statements and Schedules are incorporated herein
by reference.

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

  None.

                                       29
<PAGE>

                                   PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

  (a) Executive Officers. See "Executive Officers of the Registrant" in Part I
of this report.

  (b) Directors. The information required by this Item is incorporated herein
by reference to our Proxy Statement, relating to our 2000 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, 2000. A summary of the
directors and their principal business for the last five years follows:

  John McMahan       Chairman of the Board of BRE. Has served as a director of
                     BRE since 1993. Managing Principal, The McMahan Group,
                     real estate strategic management consultants, since 1996.
                     Executive Director, The Center for Real Estate Enterprise
                     Management, since 2000. President, John McMahan
                     Associates, Inc., a management consulting firm, and
                     McMahan Real Estate Securities, Inc., a real estate
                     investment firm, 1994 to 1996. President and Chief
                     Executive Officer, Mellon/McMahan Real Estate Advisors,
                     Inc., a real estate advisory firm, 1990 to 1994.

  William E. Borsari Has served as a director of BRE or its predecessor since
                     1992. Self-employed, private investor. Former Chairman or
                     President, The Walters Management Company, a real estate
                     asset management company, for more than five years.

  LeRoy E. Carlson   Appointed a director and Chief Operating Officer of BRE
                     in 2000. Executive Vice President and Chief Financial
                     Officer of BRE from 1996-2000, and Chief Financial
                     Officer of Real Estate Investment Trust of California,
                     from 1980 to 1996.

  Robert A. Fiddaman Has served as a director of BRE since 1998. Self-
                     employed, private investor. Former board chairman of SSR
                     Realty Advisors, a real estate investment and management
                     firm, from 1996 to 1998. President and Chief Executive
                     Officer of Metric Realty from 1993 to 1996.

  L. Michael Foley   Has served as a director of BRE since 1994. Principal, L.
                     Michael Foley and Associates, real estate and corporate
                     consulting, since 1996. Director and Executive Committee
                     Member, Western Property Trust, 1999-2000. Senior Vice
                     President and Chief Financial Officer, Coldwell Banker
                     Corporation, 1995-1996. Chairman and Chief Executive
                     Officer, Sears Savings Bank, 1989-93. Senior Executive
                     Vice President, Coldwell Banker Real Estate Group, Inc.,
                     1986-93. Executive Vice President, Homart Development
                     Co., 1983-1993.

  Roger P. Kuppinger Has served as a director of BRE or its predecessor since
                     1995. President, The Kuppinger Company, a private
                     financial advisor to public and private companies, since
                     February 1994. Director, Realty Income Corporation.
                     Senior Vice President and Managing Director, Sutro & Co.,
                     Inc., an investment banking company, from 1969 to
                     February 1994.

  Edward E. Mace     Has served as a director of BRE since 1998. Vice Chairman
                     of Fairmont Hotels & Resorts--U.S./Mexico division since
                     2000. President and Chief Executive Officer of Fairmont
                     Hotels 1996-2000. Midwest regional director for
                     management consulting for the Real Estate Industry Group
                     of KPMG Peat Marwick from 1994 to 1996. President and
                     managing partner for Lincoln Property Company of Europe
                     from 1990 to 1994.

                                      30
<PAGE>

  Frank C. McDowell  Has served as a director of BRE and President and Chief
                     Executive Officer of BRE since June 1995. Chief Executive
                     Officer and Chairman of Cardinal Realty Services, Inc.,
                     1992-95.

  Gregory M. Simon   Has served as a director of BRE or its predecessor since
                     1991. Self employed as a private investor, since 1991.
                     Senior Vice President, H.F. Ahmanson & Co. and Home
                     Savings of America, from 1983 to 1991. Officer and
                     Director, Golden Orange Broadcasting, a privately held
                     corporation.

  Arthur G. von Thaden
                     Has served as a director of BRE since 1981. President and
                     Chief Executive Officer of BRE from 1987 to June 1995.
                     Chief Executive Officer, BankAmerica Realty Services,
                     Inc., a real estate investment advisory firm, from 1970
                     to 1987.

Item 11. EXECUTIVE COMPENSATION

  The information required by this Item is incorporated herein by reference to
our Proxy Statement, relating to our 2000 Annual Meeting of Shareholders,
under the headings "Executive Compensation and Other Information" and "Board
and Committee Meetings; Compensation of Directors," to be filed with the
Securities and Exchange Commission within 120 days of December 31, 2000.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT

  The information required by this Item is incorporated herein by reference to
our Proxy Statement, relating to our 2000 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, 2000.

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 2000 Annual Meeting of Shareholders,
under the headings "Stock Loans" to be filed with the Securities and Exchange
Commission within 120 days of December 31, 2000.

                                      31
<PAGE>

                                    PART IV

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

  (a) Financial Statements

    1. Financial Statements:

            Report of Independent Auditors

            Consolidated Balance Sheets at December 31, 2000 and 1999

            Consolidated Statements of Income for the years ended December 31,
            2000, 1999 and 1998

            Consolidated Statements of Cash Flows for the years ended December
            31, 2000, 1999 and 1998

            Consolidated Statements of Shareholders' Equity for the years
             ended December 31, 2000, 1999 and 1998

            Notes to Consolidated Financial Statements

    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) Reports on Form 8-K:

       None

  (c) Exhibits

       See Index to Exhibits.

  (d) Financial Statement Schedules

       See Index to Financial Statements and Financial Statement Schedule.

                                      32
<PAGE>

                                  SIGNATURES

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

Dated March 12, 2001                      Bre Properties, Inc.

                                                 /s/ Frank C. McDowell
                                          By: _________________________________
                                                     Frank C. McDowell
                                               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:

<TABLE>
<CAPTION>
             Signature                           Title                  Date
             ---------                           -----                  ----

<S>                                  <C>                           <C>
     /s/ Frank C. McDowell           President and Director        March 12, 2001
____________________________________  (Principal Executive
         Frank C. McDowell            Officer)

      /s/ LeRoy E. Carlson           Executive Vice President      March 12, 2001
____________________________________  and Director
          LeRoy E. Carlson

    /s/ Edward F. Lange, Jr.         Executive Vice President      March 12, 2001
____________________________________  (Principal Financial and
        Edward F. Lange, Jr.          Accounting Officer

        /s/ John McMahan             Chairman and Director         March 12, 2001
____________________________________
            John McMahan

     /s/ William E. Borsari          Director                      March 12, 2001
____________________________________
         William E. Borsari

     /s/ Robert A. Fiddaman          Director                      March 12, 2001
____________________________________
         Robert A. Fiddaman
      /s/ L. Michael Foley           Director                      March 12, 2001
____________________________________
          L. Michael Foley

     /s/ Roger P. Kuppinger          Director                      March 12, 2001
____________________________________
         Roger P. Kuppinger

       /s/ Edward E. Mace            Director                      March 12, 2001
____________________________________
           Edward E. Mace
      /s/ Gregory M. Simon           Director                      March 12, 2001
____________________________________
          Gregory M. Simon

    /s/ Arthur G. von Thaden         Director                      March 12, 2001
____________________________________
        Arthur G. von Thaden

</TABLE>

                                      33
<PAGE>

                        REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Directors of
BRE Properties, Inc.

  We have audited the accompanying consolidated balance sheets of BRE
Properties, Inc., and subsidiaries (the Company) as of December 31, 2000 and
1999, and the related consolidated statements of income, cash flows and
shareholders' equity for each of the three years in the period ended December
31, 2000. Our audits also included the financial statement schedule listed in
the Index at Item 14(a). These financial statements and the related schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and the related financial
schedule based on our audits.

  We conducted our audits in accordance with auditing standards generally
accepted in the 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of BRE Properties, Inc., and subsidiaries at December 31, 2000 and 1999, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

                                          /s/ Ernst & Young LLP

San Francisco, California
January 30, 2001

                                      34
<PAGE>

                              BRE PROPERTIES, INC.

                          CONSOLIDATED BALANCE SHEETS
              (Dollar amounts in thousands, except per share data)

<TABLE>
<CAPTION>
                                                            December 31,
                                                        ----------------------
                                                           2000        1999
                                                        ----------  ----------
                        ASSETS
                        ------

<S>                                                     <C>         <C>
Real estate portfolio
Direct investments in real estate:
  Investments in rental properties..................... $1,646,486  $1,691,762
  Construction in progress.............................     57,961      46,575
  Less: Accumulated depreciation.......................   (124,618)   (109,623)
                                                        ----------  ----------
                                                         1,579,829   1,628,714
                                                        ----------  ----------
Equity interests in and advances to real estate joint
 ventures:
  Investments in rental properties.....................     27,477         --
  Construction in progress.............................     34,439      15,083
                                                        ----------  ----------
                                                            61,916      15,083
                                                        ----------  ----------
Land under development.................................     30,144      26,538
                                                        ----------  ----------
    Total real estate portfolio........................  1,671,889   1,670,335
Cash...................................................        262      13,812
Other assets...........................................     45,978      23,015
                                                        ----------  ----------
    Total assets....................................... $1,718,129  $1,707,162
                                                        ==========  ==========

<CAPTION>
         LIABILITIES AND SHAREHOLDERS' EQUITY
         ------------------------------------

<S>                                                     <C>         <C>
Mortgage loans payable................................. $  214,253  $  211,403
Unsecured senior notes.................................    243,000     253,000
Unsecured line of credit...............................    368,000     315,000
Accounts payable and accrued expenses..................     22,048      17,212
                                                        ----------  ----------
    Total liabilities..................................    847,301     796,615
                                                        ----------  ----------
Minority interest......................................     69,712      87,640
                                                        ----------  ----------
Shareholders' equity:
  Preferred stock, $.01 par value; 10,000,000 shares
   authorized, liquidation preference $25 per share.
   Shares issued and outstanding: 2,150,000 8 1/2%
   Series A cumulative redeemable shares at December
   31, 2000 and 1999...................................     53,750      53,750
  Common stock, $.01 par value; 100,000,000 shares
   authorized. Shares issued and outstanding:
   45,895,281 at December 31, 2000; 44,679,341 at
   December 31, 1999...................................        459         447
  Additional paid-in capital...........................    699,264     671,760
  Accumulated net income in excess of cumulative
   dividends...........................................     50,476      99,241
  Stock purchase loans to executives...................     (2,833)     (2,291)
                                                        ----------  ----------
    Total shareholders' equity.........................    801,116     822,907
                                                        ----------  ----------
    Total liabilities and shareholders' equity......... $1,718,129  $1,707,162
                                                        ==========  ==========
</TABLE>

                 See Notes to Consolidated Financial Statements

                                       35
<PAGE>

                              BRE PROPERTIES, INC.

                       CONSOLIDATED STATEMENTS OF INCOME
              (Dollar amounts in thousands, except per share data)

<TABLE>
<CAPTION>
                                                    Years ended December 31,
                                                   ---------------------------
                                                     2000      1999     1998
                                                   --------  -------- --------
<S>                                                <C>       <C>      <C>
Revenue
  Rental income..................................  $235,723  $218,057 $190,806
  Other income...................................    17,754    16,196   12,439
                                                   --------  -------- --------
    Total revenue................................   253,477   234,253  203,245
                                                   --------  -------- --------
Expenses
  Real estate....................................    72,324    70,469   64,624
  Provision for depreciation.....................    37,425    35,524   27,763
  Interest.......................................    45,028    41,695   35,598
  General and administrative.....................     7,807     6,706    6,133
  Equity in losses of Internet business..........     8,765       --       --
  Provision for nonrecurring charge..............       --      1,250    2,400
                                                   --------  -------- --------
    Total expenses...............................   171,349   155,644  136,518
                                                   --------  -------- --------
Income before (loss) gain on sales of investments
 in rental properties and minority interest......    82,128    78,609   66,727
Net (loss) gain on sales of investments in rental
 properties......................................   (35,693)       54   (1,859)
                                                   --------  -------- --------
Income before minority interest..................    46,435    78,663   64,868
Minority interest in income......................     5,132     5,447    4,224
                                                   --------  -------- --------
Net income.......................................    41,303    73,216   60,644
Dividends attributable to preferred stock........     4,569     4,182      --
                                                   --------  -------- --------
Net income available to common shareholders......  $ 36,734  $ 69,034 $ 60,644
                                                   ========  ======== ========
Earnings per common share--basic and assuming
 dilution:
  Income excluding net (loss) gain on sales of
   investments in rental properties and minority
   interest......................................  $   1.60  $   1.55 $   1.45
  Net (loss) gain on sales of investments in
   rental properties.............................     (0.79)      --     (0.04)
                                                   --------  -------- --------
  Net income per common share--basic and assuming
   dilution......................................  $   0.81  $   1.55 $   1.41
                                                   ========  ======== ========
</TABLE>

                 See Notes to Consolidated Financial Statements

                                       36
<PAGE>

                              BRE PROPERTIES, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                 Years ended December 31,
                                               -------------------------------
                                                 2000       1999       1998
                                               ---------  ---------  ---------
<S>                                            <C>        <C>        <C>
Cash flows from operating activities
Net income...................................  $  41,303  $  73,216  $  60,644
Adjustments to reconcile net income to net
 cash flows generated by operating
 activities:
  Net loss (gain) on sales of investments in
   rental properties.........................     35,693        (54)     1,859
  Provision for depreciation.................     37,425     35,524     27,763
  Minority interest in income................      5,132      5,447      4,224
  Loss on Internet business after spin-off...      5,690        --         --
  Provision for nonrecurring charge..........        --         --       2,400
  (Increase) decrease in other assets........     (6,896)       392         63
  Increase (decrease) in accounts payable and
   accrued expenses..........................      4,836     (1,501)       128
                                               ---------  ---------  ---------
Net cash flows generated by operating
 activities..................................    123,183    113,024     97,081
                                               ---------  ---------  ---------
Cash flows from investing activities
Additions to direct investment construction
 in progress.................................    (55,284)   (35,514)  (179,568)
Advances to unconsolidated joint ventures for
 construction in progress....................    (74,729)   (49,243)       --
Reimbursements of construction in progress
 from unconsolidated joint ventures..........     48,092     56,615        --
Additions to land for development............    (56,523)   (11,210)       --
Multifamily communities purchased............   (171,741)   (59,206)  (149,638)
Decrease in funds held in escrow.............        --         --      15,833
Capital expenditures.........................     (4,647)    (4,715)    (3,694)
Rehabilitation expenditures and other........    (21,774)   (12,604)    (6,665)
Mortgage loans receivable repayments.........        --         --       2,535
Investment in joint venture..................    (11,288)       --         --
Capitalized costs related to Internet
 business segment............................    (10,229)       --         --
Advances to Internet business................     (7,623)       --         --
Proceeds from sales of property, net.........    260,425     11,589     30,900
                                               ---------  ---------  ---------
Net cash flows used in investing activities..   (105,321)  (104,288)  (290,297)
                                               ---------  ---------  ---------
Cash flows from financing activities
Principal payments on mortgage loans and
 unsecured senior notes......................    (42,150)   (23,743)    (5,833)
Proceeds from new mortgage loan..............     35,000        --         --
Issuance of unsecured senior notes, net......        --         --     126,213
Lines of credit:
  Advances...................................    480,500    231,000    386,000
  Repayments.................................   (427,500)  (180,000)  (308,000)
Proceeds from preferred equity offering,
 net.........................................        --      51,637        --
Proceeds from common equity offerings, net...        --         --      56,013
Proceeds from exercises of stock options,
 net.........................................      8,082      3,438      2,991
Distributions to minority members............     (4,168)    (5,587)    (4,189)
Cash dividends paid..........................    (81,176)   (73,726)   (62,138)
                                               ---------  ---------  ---------
Net cash flows (used in) generated by
 financing activities........................    (31,412)     3,019    191,057
                                               ---------  ---------  ---------
(Decrease) increase in cash..................    (13,550)    11,755     (2,159)
Balance at beginning of period...............     13,812      2,057      4,216
                                               ---------  ---------  ---------
Balance at end of period.....................  $     262  $  13,812  $   2,057
                                               =========  =========  =========
</TABLE>

                 See Notes to Consolidated Financial Statements

                                       37
<PAGE>

                              BRE PROPERTIES, INC.

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
              (Dollar amounts in thousands, except per share data)

<TABLE>
<CAPTION>
                                               Years ended December 31,
                                          -------------------------------------
                                             2000         1999         1998
                                          -----------  -----------  -----------
<S>                                       <C>          <C>          <C>
Common stock shares
Balance at beginning of year............   44,679,341   44,221,560   41,738,704
Stock options exercised.................      514,432      269,852      350,415
Conversion of operating company units to
 common shares..........................      701,508      185,000          --
Shares issued pursuant to dividend
 reinvestment plan......................          --           --        12,926
Issuance of shares pursuant to equity
 offerings..............................          --           --     2,119,515
Other...................................          --         2,929          --
                                          -----------  -----------  -----------
  Balance at end of year................   45,895,281   44,679,341   44,221,560
                                          ===========  ===========  ===========
Preferred stock shares
Balance at beginning of year............    2,150,000          --           --
Issuance of 8 1/2% Series A cumulative
 redeemable.............................          --     2,150,000          --
                                          -----------  -----------  -----------
  Balance at end of year................    2,150,000    2,150,000          --
                                          ===========  ===========  ===========
Common stock
Balance at beginning of year............  $       447  $       443  $       417
Stock options exercised.................            5            2            5
Conversion of operating company units to
 common shares..........................            7            2          --
Issuance of shares pursuant to equity
 offerings..............................          --           --            21
                                          -----------  -----------  -----------
  Balance at end of year................  $       459  $       447  $       443
                                          -----------  -----------  -----------
Preferred stock
Balance at beginning of year............  $    53,750          --           --
Issuance of 8 1/2% Series A cumulative
 redeemable.............................          --   $    53,750          --
                                          -----------  -----------  -----------
  Balance at end of year................  $    53,750  $    53,750          --
                                          -----------  -----------  -----------
Additional paid-in capital
Balance at beginning of year............  $   671,760  $   664,811  $   605,833
Stock options exercised.................        8,612        1,899        2,637
Conversion of operating company units to
 common shares..........................       18,892        4,980          --
Issuance of shares pursuant to dividend
 reinvestment plan......................          --           --           349
Issuance of shares pursuant to equity
 offerings..............................          --           --        55,992
Other...................................          --            70          --
                                          -----------  -----------  -----------
  Balance at end of year................  $   699,264  $   671,760  $   664,811
                                          -----------  -----------  -----------
Accumulated net income in excess of
 cumulative dividends
Balance at beginning of year............  $    99,241  $    99,751  $   101,245
Net income for year.....................       41,303       73,216       60,644
Cash dividends paid: $1.70, $1.56, and
 $1.44 per common share for the years
 ended December 31, 2000, 1999 and 1998,
 respectively; $2.13 and $1.96 per
 preferred share in 2000 and 1999,
 respectively...........................      (81,176)     (73,726)     (62,138)
Distribution of VelocityHSI, Inc. in
 spin-off...............................       (8,892)         --           --
                                          -----------  -----------  -----------
  Balance at end of year................  $    50,476  $    99,241  $    99,751
                                          -----------  -----------  -----------
Stock purchase loans to executives
Balance at beginning of year............  $    (2,291) $    (2,391) $    (1,961)
Additional loans granted................       (1,030)        (806)        (819)
Maturities and reserves on loans........          488          906          389
                                          -----------  -----------  -----------
  Balance at end of year................  $    (2,833) $    (2,291) $    (2,391)
                                          -----------  -----------  -----------
Total shareholders' equity..............  $   801,116  $   822,907  $   762,614
                                          ===========  ===========  ===========
</TABLE>

                 See Notes to Consolidated Financial Statements

                                       38
<PAGE>

                             BRE PROPERTIES, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Company

  BRE Properties, Inc. ("BRE" or the "Company") is a self-administered real
estate investment trust focused on the development, acquisition and management
of multifamily apartment communities in the Western United States. At December
31, 2000, BRE's portfolio, owned directly or through subsidiaries, consisted
of 72 multifamily communities (aggregating 20,195 units) classified as Direct
investments in real estate-investments in rental properties on the
accompanying consolidated balance sheet. Of these properties, 42 were located
in California, 10 in Arizona, nine in Washington, five in Utah, three in
Oregon and three in Colorado. In addition, at December 31, 2000, there were 12
properties under various stages of construction and development aggregating an
estimated 2,839 units, including four directly owned properties with 1,052
units in construction in progress, four properties with 967 units held under
binding joint venture arrangements in which BRE will be a minority owner when
construction is completed, and four properties estimated to have 820 units
that are classified as land under development. During 2000, BRE completed the
construction of two properties with 528 units held under joint venture
agreements in which we are a minority interest holder and managing member. One
property is located in California and the other is in Washington. BRE also
holds a minority joint venture interest in 19 additional apartment communities
totaling 4,288 units.

 Transaction with Trammell Crow Residential-West

  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 million in cash and issued
$100 million 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 million in BRE
Property Investors LLC (the "Operating Company"), a Delaware limited liability
company and majority-owned subsidiary of BRE. The Operating Company also
assumed approximately $120 million in debt. BRE is the sole managing member of
the Operating Company and owned an approximate 78% interest therein at
December 31, 2000. Substantially all of the properties acquired in the
Transaction were held through the Operating Company, which was formed by BRE
for the purpose of acquiring the properties in the Transaction.

  The OC Units held by nonmanaging members are included in minority interest
in the Company's consolidated financial statements. Starting in November 1998,
nonmanaging members of the Operating Company can exchange their units for
common stock of BRE on a 1:1 basis or, at the option of the Company, cash in
an amount equal to the market value of such common stock at the time of the
exchange. As of December 31, 2000, 886,508 OC Units have been exchanged for
common stock. The nonmanaging members are entitled to priority distributions
regardless of the cash flow of the Operating Company. The Operating Company is
also required to maintain certain financial ratios to protect the nonmanaging
member's 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 10 years from the date of the Transaction. The Operating Company
has also guaranteed the repayment of the Company's $450 million line of
credit.

2. Accounting Policies

 Consolidation

  The accompanying consolidated financial statements include the accounts of
the Company, the Operating Company and other subsidiaries that hold title to
individual properties. All significant intercompany balances and transactions
have been eliminated in consolidation. Due to the Company's ability to control
the Operating Company and other subsidiaries, such entities have been
consolidated with the Company for financial reporting purposes. At December
31, 2000, BRE owned 78% of the Operating Company, which in turn owned 99% of
the individual title holding companies.

                                      39
<PAGE>

 Equity method of accounting

  The Company's investments in noncontrolled real estate joint ventures are
recorded under the equity method of accounting on the accompanying
consolidated balance sheets. Investments in real estate joint ventures that
are managed by the Company or are being developed by the Company are included
in Equity interests in and advances to real estate joint ventures. BRE
receives certain fees for the development and construction of the real estate
property held by these joint ventures and has recognized other income to the
extent of the third-party interest. Investments in real estate joint ventures
managed by third parties are included in Other assets. The Company's minority
investment in the common stock of VelocityHSI, Inc., is also recorded under
the equity method of accounting and included in Other assets, with income or
losses being recorded on a 90-day lag basis.

 Rental property

  Rental property is recorded at cost, less accumulated depreciation, less an
adjustment, if any, for impairment. Rental properties are evaluated for
impairment when conditions indicate that the sum of future expected
undiscounted cash flows from a rental property during the expected holding
period may be less than its carrying value. Projects under development are
carried at cost, including land, construction costs, capitalized interest and
property taxes until units are placed in service, at which time depreciation
begins. Projects under development are evaluated for impairment when
conditions indicate that the sum of future expected undiscounted cash flows
from rental operations during the expected holding period may be less than the
estimated total cost at the end of development. Upon determination that such
impairment has occurred, the related assets are reduced to estimated fair
value. There were no assets for which an adjustment for impairment in value
was made in 2000 or 1999.

  Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets, which range from 35 to 45 years for buildings and three
to 10 years for other property. Direct investment development projects are
considered placed in service as certificates of occupancy are issued and the
units become ready for occupancy. 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
items Construction in progress.

 Real estate held for sale

  Real estate classified as held for sale is stated at the lower of its
carrying amount or estimated fair value less disposal costs. Depreciation is
not recorded on assets classified as held for sale.

  In the 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.
As a result, real estate is not classified as "held for sale" until it is
likely, in the opinion of management, that a property will be disposed of in
the near term, even if sales negotiations for such property are currently
under way. As of December 31, 2000, there is one land parcel classified as
"held for sale" and included in other assets on our consolidated balance
sheet. There were no properties considered "held for sale" as of December 31,
1999.

 Rental revenue and expense, and capitalized costs

  Rental income is recorded when due from tenants 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, 2000.

  For multifamily properties, costs of replacements, such as appliances,
carpets and drapes, are expensed. For all properties, improvements and
betterments that increase the value of the property or extend its useful life
are capitalized.

                                      40
<PAGE>

 Cash and short-term investments

  Financial instruments that potentially subject BRE to concentrations of
credit risk include cash, short-term investments and funds held in escrow. BRE
places its cash deposits and temporary cash investments with creditworthy,
high-quality financial institutions. Cash and cash-equivalent balances are
held with various financial institutions and may at times exceed the
applicable Federal Deposit Insurance Corporation limit of $100,000.

 Deferred costs

  Included in Other assets are costs incurred in obtaining debt financing that
are deferred and amortized over the terms of the respective debt agreements 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 $7,057,000 and $7,730,000 as of December 31, 2000 and 1999, respectively.

 Income taxes

  BRE has elected to be taxed as a Real Estate Investment Trust ("REIT") under
the Internal Revenue Code of 1986, as amended ("the Code"). As a result, BRE
will not be subject to federal taxation at the corporate level to the extent
it distributes, annually, at least 95% of its REIT taxable income, as defined
by the Code, to its shareholders and satisfies certain other requirements. In
addition, the states in which BRE owns and operates real estate properties
have provisions equivalent to the federal REIT provisions. Accordingly, no
provision has been made for federal or state income taxes in the accompanying
consolidated financial statements.

 Net gain (loss) on sales of investments in rental properties

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

 Fair value of financial instruments

  The fair values of BRE's financial instruments (including such items in the
financial statement captions as cash, other assets, and unsecured line 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 approximates their carrying value at
December 31, 2000.

 Reclassifications

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

 Use of estimates

  The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
and disclosure of contingent assets and liabilities, at the dates of the
consolidated financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

                                      41
<PAGE>

 Descriptive information about reportable segments

  BRE adopted Financial Accounting Standards Board Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information"
("Statement 131"), in the fourth quarter of 1999. Statement 131 requires
certain descriptive information to be provided about an enterprise's
reportable segments. BRE has determined that it has one operating and
reportable segment, multifamily communities, which comprised 98% of BRE's
assets at December 31, 2000 and 1999 and approximately 97% of its total
revenues for the three years ended December 31, 2000. All multifamily
communities owned by the Company are located in the Western United States, in
three general markets that it defines as Coastal, Desert and Mountain states.
The Company considered VelocityHSI to be a separate segment prior to the spin-
off of this company in the third quarter 2000. As VelocityHSI is now a
separate, publicly traded company in which BRE owns a minority interest,
segment disclosure is no longer meaningful as of December 31, 2000.

  BRE's business focus is the ownership and operation of multifamily
communities; it evaluates performance and allocates resources primarily based
on the net operating income ("NOI") of an individual multifamily community.
NOI is defined by the Company (and generally by the real estate industry) as
the excess of all revenue generated by the community (primarily rental
revenue) less direct operating expenses (primarily, but not limited to,
payroll, property taxes, insurance and maintenance expense). Accordingly, NOI
excludes depreciation, capitalized expenditures and interest expense. NOI from
multifamily communities totaled $157 million, $158 million and $134 million
for the years ended December 31, 2000, 1999, and 1998, respectively. All other
segment measurements are presently disclosed in the accompanying consolidated
balance sheets and Notes to Consolidated Financial Statements.

  All revenues are from external customers and there are no revenues from
transactions with other segments. There are no tenants that contributed 10% or
more of BRE's total revenues in 2000, 1999 or 1998. Interest income is not
separately reported, as it is immaterial. Interest expense on debt is not
allocated to individual properties, even if such debt is secured. Further,
minority interest in consolidated subsidiaries is not allocated to the related
properties. There is no provision for income tax as the Company is organized
as a REIT under the Code.

 Recently Issued Accounting Pronouncements

  In December 1999, the SEC issued Staff and Accounting Bulletin No. 101 ("SAB
101"), "Revenue Recognition in Financial Statements." SAB 101 provides
specific guidance, among other things, as to the recognition of revenue
related to contingent rental payments. BRE's accounting policies comply with
SAB 101 in all material respects.

  In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded on
the balance sheet as either an asset or liability measured at its fair value.
The statement requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. Certain provisions of SFAS 133 were amended by SFAS 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities--an amendment of
Statement 133." SFAS 133 was required to be adopted by the Company on January
1, 2001 and had no impact as the Company does not currently use derivatives.

                                      42
<PAGE>

3. Real Estate Portfolio

  Direct investments in real estate--investments in rental properties:

<TABLE>
<CAPTION>
                                                        December 31,
                                                ------------------------------
                                                     2000            1999
                                                --------------  --------------
   <S>                                          <C>             <C>
   Land........................................ $  310,271,000  $  327,928,000
   Improvements................................  1,336,215,000   1,363,834,000
                                                --------------  --------------
     Subtotal..................................  1,646,486,000   1,691,762,000
   Accumulated depreciation....................   (124,618,000)   (109,623,000)
                                                --------------  --------------
     Total..................................... $1,521,868,000  $1,582,139,000
                                                ==============  ==============
</TABLE>

  A roll-forward of direct investment construction in progress follows:

<TABLE>
<CAPTION>
                                                          December 31,
                                                    --------------------------
                                                        2000          1999
                                                    ------------  ------------
   <S>                                              <C>           <C>
   Opening balance................................  $ 46,575,000  $ 43,830,000
   Additions to projects under construction at
    beginning of year.............................    54,315,000     9,426,000
   Costs of projects started during the year......       969,000    24,444,000
   Transfers of construction in progress to direct
    investments in rental properties--
    multifamily...................................   (76,619,000)   (3,301,000)
   Contributions to joint ventures................           --    (22,455,000)
   Communities sold...............................           --     (5,369,000)
   Transfers from land under development to direct
    construction in progress--multifamily.........    32,721,000           --
                                                    ------------  ------------
   Ending balance.................................  $ 57,961,000  $ 46,575,000
                                                    ============  ============
</TABLE>

  BRE's carrying value of its assets exceeded the tax basis by approximately
$228,000,000 (unaudited) at December 31, 2000.

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

  As of December 31, 2000, BRE had interests in six communities, each under a
joint venture arrangement. Such arrangements are accounted for under the
equity method. These six joint venture arrangements include: (i) two
communities which were completed and delivered in 2000, and (ii) four
communities held under binding joint venture arrangements in which BRE will be
the minority managing member when construction is completed. Completed
communities in joint ventures are shown as Equity interests in and advances to
real estate joint ventures--investments in rental properties on BRE's
consolidated balance sheets. These two communities had a total cost of
$78,777,000, funded by BRE and members' equity. BRE's investment in these
joint ventures totals $27,477,000 as of December 31, 2000. There is no
outstanding debt in these joint ventures as of December 31, 2000, as the other
members' cash contributions upon completion were used to repay outstanding
balances on the related construction loans.

  Communities under construction pursuant to joint venture arrangements are
shown as Equity interests in and advances to real estate joint ventures-
construction in progress on BRE's consolidated balance sheets. Under the terms
of these binding joint venture arrangements, BRE is obligated to fund all
costs during the construction phase and is responsible for completion of
construction. As of December 31, 2000, cumulative costs incurred to date on
these communities totaled approximately $79,870,000, which had been funded
through a combination of construction loans and advances to the joint ventures
funded primarily by drawings on BRE's unsecured line of credit. These joint
ventures have secured loans with total commitments of $82,520,000, with
$45,431,000 outstanding at December 31, 2000. The loans are guaranteed by BRE,
mature in 2002 to 2011, and have interest

                                      43
<PAGE>

rates between 7.0%-8.0%, with interest only due until maturity. The secured
loan balances will be replaced with joint venture members' equity
contributions upon completion of the communities. These equity commitments are
subject to binding agreements. Upon completion, BRE anticipates that these
four joint ventures will have total costs of $122,100,000 and combined
leverage of approximately 35% to 40%, with the balance being funded by
members' equity and BRE's portion of that equity approximating $25,000,000 to
$30,000,000 (unaudited).

  A roll-forward of equity interests in real estate joint ventures--
construction in progress follows:

<TABLE>
<CAPTION>
                                                          December 31,
                                                    --------------------------
                                                        2000          1999
                                                    ------------  ------------
   <S>                                              <C>           <C>
   Opening balance................................  $ 15,083,000  $        --
   Transfers to construction in progress from land
    under development.............................    20,196,000           --
   Transfers from direct investments to joint
    ventures......................................           --     22,455,000
   Advances by BRE to joint ventures..............    74,729,000    49,243,000
   Reimbursements to BRE from joint ventures upon
    receipt of secured loans......................   (48,092,000)  (56,615,000)
   Transfers to and equity in income of joint
    venture investments in rental properties......   (27,477,000)          --
                                                    ------------  ------------
   Ending balance.................................  $ 34,439,000  $ 15,083,000
                                                    ============  ============
</TABLE>

5. Other Assets

  The components of other assets follow:
<TABLE>
<CAPTION>
                                                            December 31,
                                                       -----------------------
                                                          2000        1999
                                                       ----------- -----------
   <S>                                                 <C>         <C>
   Investment in G&I III Residential One, LLC......... $11,454,000 $       --
   Accounts and mortgages receivable..................   6,970,000   3,545,000
   Prepaid expenses and loan fees.....................   9,364,000  11,986,000
   Land held for sale.................................   6,639,000         --
   Investment in and receivable from VelocityHSI,
    Inc. .............................................   3,270,000         --
   Furniture and equipment, net.......................   2,536,000   2,596,000
   Other..............................................   5,745,000   4,888,000
                                                       ----------- -----------
   Total Other Assets................................. $45,978,000 $23,015,000
                                                       =========== ===========
</TABLE>

  During 2000, BRE completed the sale of 19 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 to
facilitate the sale of 85% of these assets. The interest in the joint venture
is recorded under the equity method of accounting and is included in Other
assets on the accompanying consolidated balance sheet as it was a nonstrategic
investment and the assets are no longer managed by the Company. BRE's share of
income from the joint venture is included in Other income on the accompanying
consolidated income statement.

6. Mortgage Loans Payable

  The following data pertain to loans payable at December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                           December 31,
                                                     -------------------------
                                                         2000         1999
                                                     ------------ ------------
   <S>                                               <C>          <C>
   Mortgage loans payable........................... $214,253,000 $211,403,000
   Cost of investments in real estate securing
    mortgage loans payable.......................... $358,109,000 $400,247,000
   Annual principal and interest payments........... $ 17,600,000 $ 19,500,000
   Remaining terms of mortgage loans payable........   1-28 years   1-29 years
   Interest rates on fixed rate mortgages...........    6.5%-8.4%    6.5%-9.3%
</TABLE>

                                      44
<PAGE>

  Included in the $214,253,000 mortgage loans payable is $32,530,000 of tax-
exempt debt with a variable interest rate, which was 3.7% at December 31,
2000. The effective interest rate on this debt is 5.7%, which includes
amortization of related fees and costs. Interest on all other mortgage loans
is fixed. Future scheduled principal payments are included in Note 7.

7. Unsecured Senior Notes and Line of Credit

  As of December 31, 2000 and 1999, there was $243,000,000 and $253,000,000,
respectively, in unsecured senior notes outstanding with an average fixed
interest rate of 7.5%. Included in this effective interest rate is
amortization of costs related to the issuance of $50 million unsecured notes
due 2007 and $130 million unsecured notes due 2013. These unsecured notes are
to be repaid through scheduled principal payments from 2001 through 2005, 2007
and 2013.

  As of December 31, 2000, BRE had an amended unsecured line of credit for up
to $450,000,000, with an option to upsize to $500,000,000, expiring in
December 2003. Borrowings totaled $368,000,000 at December 31, 2000.
Borrowings under the prior line of credit for up to $400 million totaled
$315,000,000 at December 31, 1999. The interest rate on the current and prior
line of credit is based on LIBOR plus 70 basis points and the average interest
rate was approximately 7.4% and 6.1% for the years ended December 31, 2000 and
1999, respectively.

  The 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
such financial covenants throughout the year ended December 31, 2000.

  Scheduled principal payments required on the unsecured line of credit,
unsecured senior notes payable and mortgage loans payable for the next five
years and thereafter are as follows. Included in the 2003 amount is
$368,000,000 for the unsecured line of credit.

<TABLE>
     <S>                                                            <C>
     2001.......................................................... $ 12,857,000
     2002..........................................................   30,099,000
     2003..........................................................  397,228,000
     2004..........................................................   22,348,000
     2005..........................................................   60,248,000
     Thereafter....................................................  302,473,000
                                                                    ------------
       Total....................................................... $825,253,000
                                                                    ============
</TABLE>

  Interest expense on mortgage loans and unsecured senior notes, including
amortization of related costs, aggregated $36,092,000, $36,164,000 and
$35,654,000 for the years ended December 31, 2000, 1999 and 1998,
respectively. Capitalized interest was $16,434,000, $9,485,000 and $12,606,000
for the years ended December 31, 2000, 1999 and 1998, respectively. Excluding
capitalized interest, interest expense exceeded cash paid for interest by
approximately $986,000, $1,500,000 and $1,300,000 in 2000, 1999 and 1998,
respectively.

8. Spinoff and Distribution of VelocityHSI, Inc.

  In August 2000, BRE completed the spin-off of VelocityHSI, Inc.,
("VelocityHSI"). VelocityHSI was incorporated as a wholly owned subsidiary in
April 2000 and was previously a segment within BRE. VelocityHSI provides high-
speed Internet access to the multifamily apartment industry. On August 15,
2000, BRE distributed shares representing approximately 87%, or $8,892,000 of
BRE's $10.2 million investment in VelocityHSI on that date, to BRE
shareholders and retained the balance. Each BRE shareholder of record as of
August 7, 2000 received one share of VelocityHSI for every five common shares
of BRE owned. After cash distributions in lieu of fractional shares, 9,066,383
shares of VelocityHSI common stock were distributed to BRE shareholders. BRE
initially retained 1,363,678 shares, and additional shares were sold and given
to VelocityHSI and BRE employees

                                      45
<PAGE>

and limited partners of BRE Property Investors, LLC in related transactions.
BRE option holders received options to purchase VelocityHSI common shares on
the same one for five ratio (See Note 9). Subsequent to the spin-off, BRE's
ownership in VelocityHSI has been reduced to approximately 9.9% and is
recorded under the equity method of accounting due to BRE board
representation. BRE has also advanced funds to VelocityHSI under two separate
agreements, for a total of $7.6 million as of December 31, 2000. Until
VelocityHSI has secured an outside source of funding, BRE will record 100% of
its losses, which are applied against the Company's investment in and
receivables from VelocityHSI until such amounts are reduced to zero. Losses
are recorded on a 90-day lag basis in order to allow VelocityHSI to complete
its financial reporting. The investment in and receivable from VelocityHSI was
$3.2 million as of December 31, 2000.

9. Stock Option Plans

  BRE has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), and related
Interpretations in accounting for its employee and non-employee director stock
options. As discussed below, the alternative fair value accounting provided
for under Financial Accounting Standards Board Statement No. 123, "Accounting
and Disclosure of Stock-Based Compensation" ("Statement 123"), requires the
use of option valuation models that were not developed for use in valuing
employee and non-employee director stock options. Under APB 25, because the
exercise price equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized.

 Employee Plan

  The 1984 and 1992 Stock Option Plans and the 1999 BRE Stock Incentive Plan
(the "Plans") provide for the issuance of Incentive Stock Options, Non-
Qualified Stock Options, restricted shares and other grants. The maximum
number of shares that may be issued under the Plans is 4,350,000. The option
price may not be less than the fair market value of a share on the date that
the option is granted and the options generally vest over three to five years,
except for options granted pursuant to a reload, which vest 100% after 18
months from the date of the grant. Shareholders adopted the 1999 BRE Stock
Incentive Plan in 1999. The 1999 BRE Stock Incentive Plan incorporated the
Broad Based Plan created in 1999, and allows for grants of up to
2,000,000 shares. During 2000, 1999 and 1998, certain key employees were
allowed to exercise options with a reload provision and 233,146, 18,567 and
186,374 reload grants were made, respectively, in those years. Changes in
options outstanding during the years ended December 31, 2000, 1999 and 1998
were as follows:

<TABLE>
<CAPTION>
                                          Years ended December 31,
                          -----------------------------------------------------------
                                 2000                1999                1998
                          ------------------- ------------------- -------------------
                                     Weighted            Weighted            Weighted
                           Shares    average   Shares    average   Shares    average
                            under    exercise   under    exercise   under    exercise
                           option     price    option     price    option     price
                          ---------  -------- ---------  -------- ---------  --------
<S>                       <C>        <C>      <C>        <C>      <C>        <C>
Balance at beginning of
 period.................  1,840,769   $24.96  1,445,179   $24.29    864,200   $20.96
Granted.................  1,085,093   $23.41    825,410   $24.64    852,424   $26.72
Exercised...............   (622,307)  $25.18   (218,510)  $19.34   (208,095)  $19.04
Cancelled...............   (318,945)  $24.47   (211,310)  $25.76    (63,350)  $24.29
                          ---------           ---------           ---------
  Balance at end of
   period...............  1,984,610   $24.76  1,840,769   $24.96  1,445,179   $24.29
                          =========           =========           =========
Exercisable.............    275,633   $22.97    441,096   $24.33    266,005   $18.79
Shares available for
 granting future
 options................    852,442           1,385,764               2,601
Weighted average
 estimated fair value of
 options granted during
 the year...............              $ 3.79              $ 3.26              $ 3.14
</TABLE>

                                      46
<PAGE>

  At December 31, 2000, the exercise price of shares under option ranged from
$13.99 to $32.75, with a weighted average exercise price of $24.76. The
exercise price of all options granted in the years ended December 31, 2000,
1999 and 1998 was equal to the market price on the date of grant. Expiration
dates range from 2001 through 2010; the weighted average remaining contractual
life of these options is eight years. Stock options were exercised during 2000
on options originally granted with exercise prices from $12.97 to $29.69. At
December 31, 2000, there were 13,241 restricted shares outstanding. There were
320 and 18,375 restricted shares granted in 2000 and 1999, respectively,
vesting over three to five years. There were no restricted shares granted in
1998.

  In addition to the options granted under the Plans, an option for 100,000
shares at an exercise price of $15.32 per share was held by the President and
Chief Executive Officer. During 1998, 33,334, and in 1999, 33,333, such
options were exercised for $15.32 per share. During 2000, 33,333 options were
exercised for $15.13 per share. This option was registered with the Securities
and Exchange Commission on a Form S-8 and was not part of the Plans. This
option had a fair value of $2.28 per share in 1995, the year of the grant. In
conjunction with the 1996 merger with Real Estate Investment Trust of
California ("RCT"), options on 381,900 BRE shares equivalent to options
previously granted under the RCT plan were issued to officers with exercise
prices ranging from $11.41 to $14.70. During 1999, 81,919 of these options
were exercised at $14.70 and none of these options remain outstanding at
December 31, 2000.

  In addition, an outside consultant holds options on 8,000 shares at a strike
price of $26.68, which is not a part of the Plans. The options were issued in
March 1998 to the outside consultant in connection with advisory services
rendered to BRE in 1998. The options were granted upon the completion of
performance, which included participation in meetings. As the options were
fully vested and exercisable on the grant date, the fair value of the options
was expensed on the grant date.

 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. The total amount of shares authorized
under the DRIP is 1,500,000; from inception through December 31, 2000, 122,001
new shares have been issued.

                                      47
<PAGE>

 Non-Employee Director Stock Option Plan

  The Amended and Restated Non-Employee Director Stock Option Plan provides
for the issuance of 25,000 Non-Qualified Stock Options per year to each non-
employee member of the Board of Directors and an additional 25,000 options to
the Chairman of the Board of Directors. In addition, up to 8,000 options may
be granted to each non-employee director for committee membership and/or
chairmanship, and up to 5,000 options may be granted based on operational
performance. This plan has a reload provision that granted an additional
204,596, 140,681 and 100,305 options in 2000, 1999 and 1998, respectively. 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, 2000, 1999 and 1998 were as follows:

<TABLE>
<CAPTION>
                                         Years ended December 31,
                          ----------------------------------------------------------
                                 2000                1999               1998
                          ------------------- ------------------- ------------------
                                     Weighted            Weighted           Weighted
                           Shares    average   Shares    average   Shares   average
                            under    exercise   under    exercise  under    exercise
                           option     price    option     price    option    price
                          ---------  -------- ---------  -------- --------  --------
<S>                       <C>        <C>      <C>        <C>      <C>       <C>
Balance at beginning of
 period.................  1,070,534   $24.81    796,204   $24.38   600,000   $21.92
Granted.................    479,596   $29.66    433,545   $24.30   381,305   $25.25
Exercised...............   (258,371)  $23.60   (158,548)  $21.25  (174,349)  $17.61
Cancelled...............        --    $  --        (667)  $26.25   (10,752)  $27.80
                          ---------           ---------           --------
  Balance at end of
   period...............  1,291,759   $26.69  1,070,534   $24.81   796,204   $24.38
                          =========           =========           ========
Exercisable.............    900,725   $25.39    704,413   $24.89   527,723   $24.10
Shares available for
 granting future
 options................    785,475             310,475            602,672
Weighted average
 estimated fair value of
 options granted during
 the year...............              $ 4.37              $ 3.28             $ 2.84
</TABLE>

  At December 31, 2000, the exercise prices of shares under option ranged
between $15.14 and $32.14, with expiration dates from 2004 to 2010. The
exercise price of all options granted in the years ended December 31, 2000,
1999 and 1998 was equal to the market price on the date of grant. The options
vest ratably over one year, except for options granted pursuant to a reload,
which vest 100% after 18 months from the date of the grant, and options
granted by operational performance, which vest immediately. The weighted
average remaining contractual life of these options is eight years.

  Pro forma information regarding net income and earnings per share required
by Statement 123 was determined as if BRE had accounted for the employee and
non-employee director stock options granted in the years ended December 31,
2000, 1999, 1998 and 1997 under the fair value method of that Statement. The
impact on the years ended December 31, 2000, 1999 and 1998 of options granted
prior to 1996 was excluded from this presentation. The fair value for these
options was estimated as of the date of grant using a Black-Scholes option
pricing model, with the following weighted average assumptions for the years
ended December 31, 2000, 1999 and 1998:

<TABLE>
<CAPTION>
                                                       Years ended December
                                                                31,
                                                      -------------------------
                                                       2000     1999     1998
                                                      -------  -------  -------
   <S>                                                <C>      <C>      <C>
   Risk-free interest rate...........................    6.10%    5.70%    5.50%
   Dividend yield....................................    5.85%    6.70%    5.70%
   Volatility........................................     .22      .24      .18
   Weighted average option life...................... 7 years  7 years  7 years
</TABLE>

                                      48
<PAGE>

  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.

  For purposes of pro forma disclosures, the estimated fair value of the
options is amortized over the options' vesting periods. BRE's pro forma
information, as if the Company had adopted Statement 123 as discussed above,
follows:

<TABLE>
<CAPTION>
                                                Years ended December 31,
                                           -----------------------------------
                                              2000        1999        1998
                                           ----------- ----------- -----------
   <S>                                     <C>         <C>         <C>
   Pro forma net income................... $33,915,000 $66,291,000 $58,474,000
   Pro forma earnings per share........... $      0.75 $      1.49 $      1.36
   Pro forma earnings per share assuming
    dilution.............................. $      0.75 $      1.49 $      1.36
</TABLE>

  The effect of the pro forma application of Statement 123 is not necessarily
representative of the effect on net income for future years.

  In connection with the spin-off and distribution of VelocityHSI common stock
on August 15, 2000, BRE option holders received options to purchase shares of
VelocityHSI on the same one for five ratio as the stock distribution, as an
antidilution mechanism. The VelocityHSI options granted to BRE option holders
reflect the same terms as the BRE options, including the vesting provisions
and exercise periods of the BRE options. The Company established the exercise
price of each VelocityHSI option using the ratio of the holder's BRE option
exercise price to the underlying BRE market value per share immediately before
the distribution. The Company then applied this ratio to the VelocityHSI value
per share at the time of the distribution to establish the exercise price of
the VelocityHSI option. The exercise price of the existing BRE option after
the distribution was calculated by applying the same ratio to the BRE market
value per share immediately after the distribution. The Company computed the
market value of BRE common stock immediately before the distribution based on
the market capitalization of BRE on August 4, 2000, the date which was three
days prior to the distribution record date.

  The formula used for determining the BRE and VelocityHSI option exercise
prices was designed to assure that the aggregate intrinsic value of both the
BRE option and the related VelocityHSI option for each option holder following
the distribution was not greater than the intrinsic value of the BRE option
prior to the distribution under the guidelines included in Financial
Accounting Standards Board Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation," an interpretation of APB 25. The
relevant guidelines, when applied in a spin-off transaction, provide that
modifications to exercise prices of existing options and the granting of new
awards for each option holder do not result in financial accounting
consequences to the grantors. The issuance of options to purchase shares of
VelocityHSI common stock to BRE option holders and the modification of the
price of BRE options in the manner described did not result in a new
measurement date for BRE's accounting purposes.

                                      49
<PAGE>

10. Earnings per Share

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

<TABLE>
<CAPTION>
                                               2000        1999         1998
                                            ----------- -----------  -----------
<S>                                         <C>         <C>          <C>
Numerator
  Net income available to common
   shareholders...........................  $36,734,000 $69,034,000  $60,644,000
  Less adjustment for (gain) loss on sales
   of investments in rental properties
   available to common shareholders.......   35,693,000     (54,000)   1,859,000
                                            ----------- -----------  -----------
Numerator for basic earnings per share
 income from continuing operations
 available to common shareholders.........   72,427,000  68,980,000   62,503,000
Effect of dilutive securities
  Minority interest in income convertible
   into common shares.....................    4,614,000   4,847,000    4,126,000
                                            ----------- -----------  -----------
Numerator for diluted earnings per share..  $77,041,000 $73,827,000  $66,629,000
                                            =========== ===========  ===========
Denominator
  Denominator for basic earnings per
   share--weighted average shares.........   45,181,000  44,540,000   42,940,000
  Effect of dilutive securities
    Stock options.........................      350,000     120,000      330,000
    Weighted average convertible operating
     company units........................    2,739,000   3,100,000    2,840,000
                                            ----------- -----------  -----------
  Dilutive potential common shares........    3,089,000   3,220,000    3,170,000
                                            ----------- -----------  -----------
  Denominator for diluted earnings per
   share adjusted for weighted average
   shares and assumed conversion..........   48,270,000  47,760,000   46,110,000
                                            =========== ===========  ===========
  Basic earnings per share excluding gain
   (loss) on sale.........................  $      1.60 $      1.55  $      1.45
                                            =========== ===========  ===========
  Diluted earnings per share excluding
   gain (loss) on sale....................  $      1.60 $      1.55  $      1.45
                                            =========== ===========  ===========
</TABLE>

11. Retirement Plan

  BRE has a defined contribution retirement plan covering all employees with
more than six months of continuous full-time employment. In addition to
employee elective deferrals, in 2000, 1999 and 1998, BRE contributed up to 3%
of the employee's compensation up to $4,800 per employee in 2000 and 1999 and
$4,500 in 1998. The aggregate amounts contributed and recognized as expense by
BRE were $365,000, $359,000 and $197,000 for the years ended December 31,
2000, 1999 and 1998, respectively.

12. Related Party Transactions

  Certain executives of BRE have purchased stock, the consideration for which
was interest-bearing recourse loans. The loans given prior to 2000 may be
forgiven in whole or in part upon the achievement of certain performance goals
for BRE related to growth in assets, funds from operations and stock price. A
portion of the loans expected to be forgiven are expensed currently as
compensation. At December 31, 2000, the carrying amount of the loans was
$2,833,000. The amounts of such loans expected to be forgiven and treated as
compensation expense were $300,000, $166,000 and $390,000 for the years ended
December 31, 2000, 1999 and 1998, respectively. Loans issued in 2000 and
thereafter no longer have forgiveness provisions.

13. Commitments

  As of December 31, 2000, the Company had commitments to sell three remaining
communities pursuant to the agreement with G&I III Residential One, LLC.
Although there can be no assurance, BRE anticipates that the remaining three
communities (totaling 621 units and located in Tucson) will be sold and
contributed to a joint

                                      50
<PAGE>

venture in the first quarter of 2001. The remaining three communities
represent approximately $19,000,000 of the total $280,000,000 sales price.
This second closing is subject to customary closing conditions and loan
assumptions. Because of uncertainties inherent in real estate transactions,
these properties are included in direct investments in real estate and
depreciated, rather than reclassified to "held for sale."

  In addition, BRE has agreed to provide VelocityHSI with up to $10,000,000 in
funds through September 30, 2001, to be used for general corporate purposes.
BRE has also agreed to provide VelocityHSI with funds through September 30,
2001 to finance the installation of equipment at properties owned by BRE.
Installation of equipment at the Company's apartment communities has been
suspended pending VelocityHSI's development of a new operating and capital
plan. VelocityHSI must repay advances on or before September 30, 2001,
together with interest on periodic unpaid balances at a rate of 9% per year.
Balances under these two agreements totaling $6,500,000 and $1,100,000,
respectively, have been written down to $3,200,000 at December 31, 2000 and
are included in other assets.

14. Litigation

  BRE defends against various claims and legal actions in its normal course of
business. BRE cannot predict the ultimate outcome of these matters. In the
opinion of management, there are no current actions that would have a material
adverse effect on BRE's consolidated results of operations or financial
position.

  In the third quarter of 1998, the Company recorded a provision for
litigation loss of $2,400,000 in connection with a jury award and related
legal expenses. This judgment was settled in 1999 with no additional charge to
expense.

15. Supplemental Financial Data (Unaudited)

  Quarterly financial information follows:

<TABLE>
<CAPTION>
                                      Year ended December 31, 2000
                         -------------------------------------------------------
                         Quarter ended Quarter ended Quarter ended Quarter ended
                           March 31       June 30    September 30   December 31
                         ------------- ------------- ------------- -------------
                              (amounts in thousands, except per share data)
<S>                      <C>           <C>           <C>           <C>
Revenues................    $61,603       $65,437      $ 64,613       $61,825
Income before gain
 (loss) on sales........    $21,689       $20,569      $ 21,741       $18,128
Net income available to
 common shareholders....    $19,195       $17,997      $(13,332)      $12,875
Net income per share--
 basic
  Income before gain
   (loss) on sales......    $  0.42       $  0.40      $   0.43       $  0.35
  Net income............    $  0.42       $  0.40      $  (0.29)      $  0.28
Net income per share--
 assuming dilution
  Income before gain
   (loss) on sales......    $  0.42       $  0.40      $   0.42       $  0.35
  Net income............    $  0.42       $  0.40      $  (0.29)      $  0.28

<CAPTION>
                                      Year ended December 31, 1999
                         -------------------------------------------------------
                         Quarter ended Quarter ended Quarter ended Quarter ended
                           March 31       June 30    September 30   December 31
                         ------------- ------------- ------------- -------------
<S>                      <C>           <C>           <C>           <C>
Revenues................    $55,420       $58,339      $ 59,829       $60,665
Income before gain
 (loss) on sales........    $17,511       $19,462      $ 20,434       $21,202
Net income available to
 common shareholders....    $15,340       $17,038      $ 17,939       $18,717
Net income per share--
 basic
  Income before gain
   (loss) on sales......    $  0.40       $  0.44      $   0.46       $  0.47
  Net income............    $  0.35       $  0.38      $   0.40       $  0.42
Net income per share--
 assuming dilution
  Income before gain
   (loss) on sales......    $  0.45       $  0.41      $   0.43       $  0.37
  Net income............    $  0.35       $  0.38      $   0.40       $  0.42
</TABLE>

                                      51
<PAGE>

  For the years ended December 31, 2000, 1999 and 1998, the federal income tax
components of the Company's dividends on the common stock were as follows. In
2000 and 1999, the dividends on the preferred stock were 100% allocable to
ordinary income (unaudited).

<TABLE>
<CAPTION>
                                                         Unrecaptured
                        Ordinary 28% Capital 20% Capital Section 1250 Return of
                         Income     Gain        Gain         Gain      Capital
                        -------- ----------- ----------- ------------ ---------
   <S>                  <C>      <C>         <C>         <C>          <C>
   December 31, 2000...    82%        --           6%         12%         --%
   December 31, 1999...    95%        --           1%          4%         --%
   December 31, 1998...    83%        --           4%          2%         11%
</TABLE>

16. Subsequent Event

  On January 12, 2001, the Company issued $250,000,000 in unsecured senior
notes. The notes mature in 2011, with a coupon of 7.45% to yield 7.50%. Net
proceeds received from the offering were used to repay borrowings under the
Company's unsecured line of credit.

                                      52
<PAGE>

                             BRE PROPERTIES, INC.

            SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION

                               December 31, 2000
                         (Dollar amounts in thousands)

<TABLE>
<CAPTION>
                                                       Initial Cost        Costs
                                                        to Company      Capitalized
                                         Dates     -------------------- Subsequent  Depreciable
                                       Acquired/           Buildings &      to        Lives--
Name              Location            Constructed   Land   Improvements Acquisition    Years
----              --------            ------------ ------- ------------ ----------- -----------
APARTMENTS
<S>               <C>                 <C>          <C>     <C>          <C>         <C>
Sharon Green      Menlo Park, CA       1971/1970   $ 1,250   $  5,770     $ 4,247        45
Verandas          Union City, CA       1993/1989     3,233     12,932         810        40
Foster's Landing  Foster City, CA      1996/1987    11,742     47,846       4,476        40
Promontory Point  San Ramon, CA        1996/1992     8,724     34,895         358        40
Blue Rock
Village I & II*   Vallejo, CA          1997/1987     6,836     27,352       1,264        40
Lakeshore
Landing           San Mateo, CA        1997/1988     8,548     34,228       2,049        40
Red Hawk Ranch    Fremont, CA          1997/1995    11,747     47,082         367        40
Deer Valley*      San Rafael, CA       1997/1996     6,042     24,169         209        40
Pinnacle City
Centre*           Hayward, CA          2000/2000     4,903     22,999         --         40
Sun Pointe
Village           Fremont, CA          2000/1989    12,639     50,690         --         40
                                                   -------   --------     -------
San Francisco
Bay Area                                            75,664    307,963      13,780
                                                   =======   ========     =======
Montanosa         San Diego, CA       1992/1989-90   6,005     24,065       1,219        40
Cimmaron          San Diego, CA        1993/1985     1,899      7,517         494        40
Hacienda          San Diego, CA        1993/1985     1,979      8,027         416        40
Westpark          San Diego, CA        1993/1985       990      3,949         243        40
Terra Nova
Villas            Chula Vista, CA      1994/1985     2,925     11,699         391        40
Winchester        San Diego, CA        1994/1987     1,482      5,928         130        40
Canyon Villas     Chula Vista, CA      1996/1981     3,064     12,258         687        40
Lakeview Village  Spring Valley, CA    1996/1985     3,977     15,910         635        40
Countryside
Village           El Cajon, CA         1996/1989     1,002      4,007         126        40
Cambridge Park*   San Diego, CA        1998/1998     7,627     30,521          59        40
Reflections
Apartments        San Diego, CA        1999/1989     6,928     27,686         553        40
Pinnacle at
Carmel Creek      San Diego, CA        2000/2000     4,736     45,430         --         40
                                                   -------   --------     -------
San Diego                                           42,614    196,997       4,953
                                                   =======   ========     =======
Windrush Village  Colton, CA           1996/1985     3,747     14,989         440        40
The Summit        Chino Hills, CA      1996/1989     1,839      7,354         251        40
Candlewood North  Northridge, CA      1996/1964-95   2,110      8,477         214        40
Village Green     La Habra, CA         1972/1971       372      2,763         522        45
Sycamore Valley   Fountain Valley, CA  1996/1969     4,617     18,691       1,515        40
Parkside Village  Riverside, CA        1997/1987     3,417     13,674         216        40
Parkside Court    Santa Ana, CA        1997/1987     2,013      8,632         309        40
Parkside
Terrace*          Santa Ana, CA        1997/1986     3,016     12,180         357        40
<CAPTION>
                    Gross Amount at Which Carried at December 31, 2000
                  -------------------------------------------------------
                          Buildings &           Accumulated
Name               Land   Improvements  Total   Depreciation Encumbrances
----              ------- ------------ -------- ------------ ------------
APARTMENTS
<S>               <C>     <C>          <C>      <C>          <C>
Sharon Green      $ 1,250   $ 10,017   $ 11,267   $ (4,243)    $17,398
Verandas            3,233     13,742     16,975     (2,651)     11,305
Foster's Landing   11,742     52,322     64,064     (5,315)        --
Promontory Point    8,724     35,253     43,977     (3,561)        --
Blue Rock
Village I & II*     6,836     28,616     35,452     (2,312)     23,290
Lakeshore
Landing             8,548     36,277     44,825     (3,053)        --
Red Hawk Ranch     11,747     47,449     59,196     (4,393)        --
Deer Valley*        6,042     24,378     30,420     (1,917)        --
Pinnacle City
Centre*             4,903     22,999     27,902       (376)        --
Sun Pointe
Village            12,639     50,690     63,329         (1)        --
                  ------- ------------ -------- ------------ ------------
San Francisco
Bay Area           75,664    321,743    397,407    (27,822)     51,993
                  ======= ============ ======== ============ ============
Montanosa           6,005     25,284     31,289     (5,001)     34,927
Cimmaron            1,899      8,011      9,910     (1,437)     11,848
Hacienda            1,979      8,443     10,422     (1,497)         **
Westpark              990      4,192      5,182       (733)         **
Terra Nova
Villas              2,925     12,090     15,015     (2,031)      9,240
Winchester          1,482      6,058      7,540     (1,013)        --
Canyon Villas       3,064     12,945     16,009     (1,573)        --
Lakeview Village    3,977     16,545     20,522     (2,036)        --
Countryside
Village             1,002      4,133      5,135       (559)        --
Cambridge Park*     7,627     30,580     38,207     (1,667)        --
Reflections
Apartments          6,928     28,239     35,167       (693)        --
Pinnacle at
Carmel Creek        4,736     45,430     50,166       (532)        --
                  ------- ------------ -------- ------------ ------------
San Diego          42,614    201,950    244,564    (18,772)     56,015
                  ======= ============ ======== ============ ============
Windrush Village    3,747     15,429     19,176     (1,837)        --
The Summit          1,839      7,605      9,444       (938)        --
Candlewood North    2,110      8,691     10,801     (1,033)        --
Village Green         372      3,285      3,657     (2,059)        --
Sycamore Valley     4,617     20,206     24,823     (2,199)        --
Parkside Village    3,417     13,890     17,307     (1,106)      8,506
Parkside Court      2,013      8,941     10,954       (751)      7,815
Parkside
Terrace*            3,016     12,537     15,553     (1,014)      9,308
</TABLE>

                                       53
<PAGE>

                             BRE PROPERTIES, INC.

            SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION

                               December 31, 2000
                         (Dollar amounts in thousands)

<TABLE>
<CAPTION>
                                                              Initial Cost        Costs
                                                               to Company      Capitalized
                                                          -------------------- Subsequent  Depreciable
                                          Dates Acquired/         Buildings &      to        Lives--
Name                   Location             Constructed    Land   Improvements Acquisition    Years
----                   --------           --------------- ------- ------------ ----------- -----------
APARTMENTS
<S>                    <C>                <C>             <C>     <C>          <C>         <C>
The Arbors at
Warner Center          Woodland Hills, CA    1978/1994    $ 4,718   $ 19,375      $ 358         40
Pinnacle at
Adams Place            Costa Mesa, CA        1999/1974      4,853     19,739      5,682         40
Pinnacle at            Rancho Santa
Cortesia               Margarita, CA         2000/1999      7,740     30,982        --          40
                                                          -------   --------      -----
Los
Angeles/Orange County                                      38,442    156,856      9,864
                                                          =======   ========      =====
Hazel Ranch            Fair Oaks, CA         1996/1985      2,471      9,885        376         40
Rocklin Gold           Rocklin, CA           1996/1990      1,558      6,232        188         40
Shaliko                Rocklin, CA           1996/1990      2,049      8,198        568         40
Quail Chase            Folsom, CA            1996/1990      1,303      5,211        211         40
Canterbury Downs       Roseville, CA         1996/1993      2,297      9,190        231         40
Selby Ranch            Sacramento, CA      1986/1971-74     2,660     18,340      3,826         40
Overlook at Blue
Ravine I*              Folsom, CA            1997/1991      6,050     24,203        599         40
Arbor Point            Sacramento, CA        1997/1998      1,814      7,256      1,818         40
Overlook at Blue
Ravine II              Folsom, CA            2000/2000      1,014      9,575        --          40
                                                          -------   --------      -----
Sacramento                                                 21,216     98,090      7,817
                                                          =======   ========      =====
Scottsdale Cove        Scottsdale, AZ     1991-94/1992-94   3,243     14,468        577         40
Arcadia Cove           Phoenix, AZ           1996/1996      4,909     19,902        307         40
Newport Landing        Glendale, AZ       1995-96/1987-96   4,467     18,171        642         40
Pinnacle at
South
Mountain I & II*       Phoenix, AZ           1997/1996     11,062     44,257        282         40
Pinnacle at
Union Hills*           Phoenix, AZ           1997/1996      4,626     18,507        114         40
Pinnacle Towne
Center*                Phoenix, AZ           1998/1998      6,688     27,631       (75)         40
Pinnacle
Terrace*               Chandler, AZ          1998/1998      4,561     18,793         68         40
                                                          -------   --------      -----
Phoenix                                                    39,556    161,729      1,915
                                                          =======   ========      =====
Hacienda Del Rio       Tucson, AZ            1994/1983      1,859      7,437        314         40
Colonia Del Rio        Tucson, AZ            1994/1985      1,774      7,094        143         40
Fountain Plaza         Tucson, AZ            1994/1975        907      3,628        244         40
                                                          -------   --------      -----
Tucson                                                      4,540     18,159        701
                                                          =======   ========      =====
Parkwood               Mill Creek, WA        1989/1989    $ 3,947   $ 15,811      $ 300         40
Shadowbrook            Redmond, WA         1987-98/1986     4,776     17,415        697         40
<CAPTION>
                         Gross Amount at Which Carried at December 31, 2000
                       -------------------------------------------------------
                               Buildings &           Accumulated
Name                    Land   Improvements  Total   Depreciation Encumbrances
----                   ------- ------------ -------- ------------ ------------
APARTMENTS
<S>                    <C>     <C>          <C>      <C>          <C>
The Arbors at
Warner Center          $ 4,718   $ 19,733   $ 24,451   $ (1,394)        --
Pinnacle at
Adams Place              4,853     25,421     30,274       (624)        --
Pinnacle at
Cortesia                 7,740     30,982     38,722        --          --
                       ------- ------------ -------- ------------ ------------
Los
Angeles/Orange County   38,442    166,720    205,162    (12,955)    $25,629
                       ======= ============ ======== ============ ============
Hazel Ranch              2,471     10,261     12,732     (1,253)        --
Rocklin Gold             1,558      6,420      7,978       (771)        --
Shaliko                  2,049      8,766     10,815     (1,023)        --
Quail Chase              1,303      5,422      6,725       (666)        --
Canterbury Downs         2,297      9,421     11,718     (1,118)        --
Selby Ranch              2,660     22,166     24,826     (6,949)     11,465
Overlook at Blue
Ravine I*                6,050     24,802     30,852     (2,019)        --
Arbor Point              1,814      9,074     10,888       (727)        --
Overlook at Blue
Ravine II                1,014      9,575     10,589        (14)        --
                       ------- ------------ -------- ------------ ------------
Sacramento              21,216    105,907    127,123    (14,540)     11,465
                       ======= ============ ======== ============ ============
Scottsdale Cove          3,243     15,045     18,288     (2,898)        --
Arcadia Cove             4,909     20,209     25,118     (2,207)        --
Newport Landing          4,467     18,813     23,280     (2,180)        --
Pinnacle at
South
Mountain I & II*        11,062     44,539     55,601     (3,515)     25,054
Pinnacle at
Union Hills*             4,626     18,621     23,247     (1,468)        --
Pinnacle Towne
Center*                  6,688     27,556     34,244     (1,398)     18,796
Pinnacle
Terrace*                 4,561     18,861     23,422       (948)        --
                       ------- ------------ -------- ------------ ------------
Phoenix                 39,556    163,644    203,200    (14,614)     43,850
                       ======= ============ ======== ============ ============
Hacienda Del Rio         1,859      7,751      9,610     (1,198)      5,283
Colonia Del Rio          1,774      7,237      9,011     (1,129)        --
Fountain Plaza             907      3,872      4,779       (604)      2,999
                       ------- ------------ -------- ------------ ------------
Tucson                   4,540     18,860     23,400     (2,931)      8,282
                       ======= ============ ======== ============ ============
Parkwood               $ 3,947   $ 16,111   $ 20,058   $ (4,484)        --
Shadowbrook              4,776     18,112     22,888     (4,882)    $ 3,260
</TABLE>

                                       54
<PAGE>

                             BRE PROPERTIES, INC.

            SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION

                               December 31, 2000
                         (Dollar amounts in thousands)

<TABLE>
<CAPTION>
                                                     Initial Cost         Costs
                                                      to Company       Capitalized
                                        Dates    --------------------- Subsequent  Depreciable
                                      Acquired/           Buildings &      to        Lives--
Name              Location           Constructed   Land   Improvements Acquisition    Years
----              --------           ----------- -------- ------------ ----------- -----------
APARTMENTS
<S>               <C>                <C>         <C>      <C>          <C>         <C>
Citywalk          Seattle, WA         1988/1988     1,123       4,276        154        40
Thrasher's Mill   Bothell, WA         1996/1988     2,031       8,223        357        40
Ballinger
Commons           Seattle, WA         1996/1989     5,824      23,519        705        40
Park at Dash
Point             Federal Way, WA     1997/1989     3,074      12,411        387        40
Montebello        Kirkland, WA        1998/1998     6,680      27,274        140        40
Park Highland     Bellevue, WA        1998/1993     5,602      22,483        112        40
Brentwood
Townhomes         Kent, WA            1998/1991     1,387       5,574        312        40
Pinnacle
Bellecentre       Bellevue, WA        2000/2000     4,464      11,557        --         40
                                                 --------  ----------    -------
Seattle                                            38,908     148,543      3,164
                                                 ========  ==========    =======
Brookdale Glen    Portland, OR        1993/1985     2,797      11,188        980        40
Berkshire Court   Wilsonville, OR     1996/1996     3,284      13,200      1,338        40
Carriage House    Vancouver, WA       1999/1993     1,827       7,579         70        40
                                                 --------  ----------    -------
Portland                                            7,908      31,967      2,388
                                                 ========  ==========    =======
Pinnacle at Fort
Union*            Salt Lake City, UT  1997/1997     3,008      12,034        109        40
Pinnacle
Reserve*          Draper, UT          1997/1997     8,698      34,781      1,028        40
Pinnacle
Lakeside*         Salt Lake City, UT  1997/1985     3,217      12,876      1,187        40
Pinnacle Canyon
View*             Orem, UT            1998/1998     5,049      20,927       (139)       40
Pinnacle
Mountain View*    Clearfield, UT      1998/1998     5,030      20,684        439        40
                                                 --------  ----------    -------
Salt Lake City                                     25,002     101,302      2,624
                                                 ========  ==========    =======
Landing at Bear
Creek             Lakewood, CO        1998/1996     3,666      14,777        210        40
Pinnacle at
Hunters Glen*     Thornton, CO        1998/1998     4,387      17,908        995        40
Pinnacle
Mountain Gate     Littleton, CO       2000/1999     8,368      33,513        --         40
                                                 --------  ----------    -------
Denver                                             16,421      66,198      1,205
                                                 ========  ==========    =======
Total                                            $310,271  $1,287,804    $48,411
                                                 ========  ==========    =======
<CAPTION>
                      Gross Amount at Which Carried at December 31, 2000
                  ----------------------------------------------------------
                           Buildings &             Accumulated
Name                Land   Improvements   Total    Depreciation Encumbrances
----              -------- ------------ ---------- ------------ ------------
APARTMENTS
<S>               <C>      <C>          <C>        <C>          <C>
Citywalk             1,123       4,430       5,553     (1,394)         --
Thrasher's Mill      2,031       8,580      10,611     (1,000)         --
Ballinger
Commons              5,824      24,224      30,048     (2,826)         --
Park at Dash
Point                3,074      12,798      15,872     (1,163)         --
Montebello           6,680      27,414      34,094     (1,936)         --
Park Highland        5,602      22,595      28,197     (1,426)         --
Brentwood
Townhomes            1,387       5,886       7,273       (363)         --
Pinnacle
Bellecentre          4,464      11,557      16,021        (45)         --
                  -------- ------------ ---------- ------------ ------------
Seattle             38,908     151,707     190,615    (19,519)       3,260
                  ======== ============ ========== ============ ============
Brookdale Glen       2,797      12,168      14,965     (2,372)         --
Berkshire Court      3,284      14,538      17,822     (1,473)         --
Carriage House       1,827       7,649       9,476       (520)       4,908
                  -------- ------------ ---------- ------------ ------------
Portland             7,908      34,355      42,263     (4,365)       4,908
                  ======== ============ ========== ============ ============
Pinnacle at Fort
Union*               3,008      12,143      15,151       (960)         --
Pinnacle
Reserve*             8,698      35,809      44,507     (2,799)         --
Pinnacle
Lakeside*            3,217      14,063      17,280     (1,256)       8,851
Pinnacle Canyon
View*                5,049      20,788      25,837       (932)         --
Pinnacle
Mountain View*       5,030      21,123      26,153     (1,090)         --
                  -------- ------------ ---------- ------------ ------------
Salt Lake City      25,002     103,926     128,928     (7,037)       8,851
                  ======== ============ ========== ============ ============
Landing at Bear
Creek                3,666      14,987      18,653     (1,136)         --
Pinnacle at
Hunters Glen*        4,387      18,903      23,290       (857)         --
Pinnacle
Mountain Gate        8,368      33,513      41,881        (70)         --
                  -------- ------------ ---------- ------------ ------------
Denver              16,421      67,403      83,824     (2,063)         --
                  ======== ============ ========== ============ ============
Total             $310,271  $1,336,215  $1,646,486  $(124,618)    $214,253
                  ======== ============ ========== ============ ============
</TABLE>
-----
 * Property held by a consolidated subsidiary of the Company.
** These properties are also collateral for the loan shown on the Cimmaron
   property.

                                       55
<PAGE>

                              BRE PROPERTIES, INC.

             SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION

                               December 31, 2000
                             (Amounts in thousands)

  The activity in investments in rental properties and related depreciation for
the three-year period ended December 31, 2000 is as follows:

Investments in rental properties:
<TABLE>
<CAPTION>
                                                 Years ended December 31,
                                             ----------------------------------
                                                2000        1999        1998
                                             ----------  ----------  ----------
<S>                                          <C>         <C>         <C>
Balance at beginning of year...............  $1,691,762  $1,618,461  $1,259,941
Investments purchased......................     171,741      59,206     165,162
Transfers from construction in progress and
 other miscellaneous
 capitalization............................      76,619       3,301     215,866
Investments sold...........................    (309,561)     (6,525)    (32,867)
Capital expenditures.......................       4,647       4,715       3,694
Rehabilitation expenditures................      11,278      12,604       6,665
                                             ----------  ----------  ----------
Balance at end of year.....................  $1,646,486  $1,691,762  $1,618,461
                                             ==========  ==========  ==========

Accumulated Depreciation:
<CAPTION>
                                                 Years ended December 31,
                                             ----------------------------------
                                                2000        1999        1998
                                             ----------  ----------  ----------
<S>                                          <C>         <C>         <C>
Balance at beginning of year...............  $  109,623  $   75,838  $   49,721
Depreciation expense.......................      37,425      35,524      27,763
Other depreciation.........................      (2,510)     (1,301)       (492)
Accumulated depreciation on investments
 sold......................................     (19,920)       (438)     (1,154)
                                             ----------  ----------  ----------
Balance at end of year.....................  $  124,618  $  109,623  $   75,838
                                             ==========  ==========  ==========
</TABLE>

                                       56
<PAGE>

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
 Exhibit
 Number                            Identity of Exhibit
 -------                           -------------------
 <C>     <S>
  3.0    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)

  3.1    Articles Supplementary of the Registrant, classifying and designating
          the Series A Preferred Stock (previously filed on January 29, 1999 as
          Exhibit 4.1 to the Registrant's Current Report on Form 8-K and
          incorporated by reference herein)

  3.2    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)

  3.3    Amended and Restated By-Laws of the Registrant (previously filed on
          August 14, 1998 as Exhibit 3(ii) to the Registrant's Quarterly Report
          on Form 10-Q 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 of the Registrant's Current Report on Form 8-K and
          incorporated by reference herein)

  4.4    Rights Agreement between the Registrant and Bank of America, N.T. &
          S.A., dated August 14, 1988 (previously filed on August 14, 1988 as
          Exhibit 4.1 to the Registrant's Current Report on Form 8-K and
          incorporated by reference herein)

  4.5    Supplement to Rights Agreement between the Registrant and Chemical
          Trust Company of California dated July 30, 1992 (previously filed on
          April 10, 1997 as Exhibit 4.4 to the Registrant's Registration
          Statement on Form S-3 (No. 333-24915), as amended, and incorporated
          by reference herein)

  4.6    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)

 10.1    1984 Stock Option Plan, as amended to date (previously filed on
          October 19, 1992 in the Exhibits to the Registrant's Annual Report on
          Form 10-K and incorporated by reference herein)

 10.2    1992 Employee Stock Option Plan, as amended and restated to date
          (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    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)

 10.4    Employment agreement with Frank C. McDowell dated June 5, 1995
          (previously filed on October 23, 1995 as Exhibit 10.8 to the
          Registrant's Form 10-K and incorporated by reference herein)

 10.5    BRE Properties, Inc. Retirement Plan as amended (previously filed on
          October 24, 1988 in the Exhibits to the Registrant's Annual Report on
          Form 10-K and incorporated by reference herein)
</TABLE>

                                       57
<PAGE>

<TABLE>
<CAPTION>
 Exhibit
 Number                            Identity of Exhibit
 -------                           -------------------
 <C>     <S>
 10.6    BRE Properties, Inc. Supplemental ERISA Retirement Plan (previously
          filed on October 23, 1995 as Exhibit 10.12 to the Registrant's Annual
          Report on Form 10-K and incorporated by reference herein)

 10.7    Sublease with Wells Fargo Bank on 10,142 square feet at Suite 2500,
          One Montgomery Street, San Francisco, California (previously filed on
          October 24, 1988 in the Exhibits to the Registrant's Annual Report on
          Form 10-K and incorporated by reference herein)

 10.8    Form of deferred compensation agreement with Eugene P. Carver
          (previously filed on October 13, 1994 as Exhibit 10.10 to the
          Registrant's Annual Report Form 10-K and incorporated by reference
          herein)

 10.9    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)

 10.10   Employment agreement with Jay W. Pauly (previously filed on December
          22, 1995 in the Registrant's Form S-4 (File No. 333-65365) and
          incorporated by reference herein)

 10.11   Employment agreement with LeRoy E. Carlson dated March 15, 1996
          (previously filed on December 22, 1995 in the Registrant's Form S-4
          (File No. 333-65365) and incorporated by reference herein)

 10.12   Employment agreement with John H. Nunn (previously filed on December
          22, 1995 in the Registrant's Form S-4 (File No. 33-65365) and
          incorporated by reference herein)

 10.13   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)

 10.14   1991 Stock Option Plan for Real Estate Investment Trust of California
          (previously filed on February 19, 1997 as Exhibit 10.22 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)

 10.15   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)

 10.16   First Amendment to Loan Agreement by and between The Prudential
          Insurance Company of America and Real Estate Investment Trust of
          California, dated July 7, 1995 (previously filed on February 19, 1997
          as Exhibit 10.31 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)

 10.17   Second 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 10.32 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)

 10.18   Third 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 Exhibits 10.33 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)

 10.19   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)
</TABLE>

                                       58
<PAGE>

<TABLE>
<CAPTION>
 Exhibit
 Number                            Identity of Exhibit
 -------                           -------------------
 <C>     <S>
 10.20   First Amendment to Loan Agreement by and between The Prudential
          Insurance Company of America and the Registrant, dated July 7, 1995
          (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)

 10.21   Second 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 10.36 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)

 10.22   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)

 10.23   Fourth 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 10.37 to the
          Registrant's Quarterly Report on Form 10-Q and incorporated by
          reference herein)

 10.24   Fifth 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 10.39 to the
          Registrant's Quarterly Report on Form 10-Q and incorporated by
          reference herein)

 10.25   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)

 10.26   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)

 10.27   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)

 10.28   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)

 10.29   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)

 10.30   Unsecured Line of Credit Loan Agreement, dated as of November 17,
          1997, by and between the Registrant, and Bank of America National
          Trust and Savings Association (previously filed on December 18, 1997
          as Exhibit 10.3 to the Registrant's Current Report on Form 8-K and
          incorporated by reference herein)

 10.31   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)

 10.32   Amended and Restated Credit Agreement with Sanwa Bank, dated December
          31, 1997 (previously filed on March 26, 1998 as Exhibit 10.35 to the
          Registrant's Annual Report on Form 10-K and incorporated by reference
          herein)
</TABLE>

                                       59
<PAGE>

<TABLE>
<CAPTION>
 Exhibit
 Number                            Identity of Exhibit
 -------                           -------------------
 <C>     <S>
 10.33   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)

 10.34   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)

 10.35   Loan Modification Agreement by and among the Registrant, various
          financial institutions, and Bank of America NT&SA dated January 18,
          1998 (previously filed on March 26, 1998 as Exhibit 10.38 to the
          Registrant's Annual Report on Form 10-K and incorporated by reference
          herein)

 10.36   Employment agreement with Bruce C. Ward dated November 18, 1997
          (previously filed on March 26, 1998 as Exhibit 10.39 to the
          Registrant's Annual Report on Form 10-K and incorporated by reference
          herein)

 10.37   Amended and Restated Non-Employee Director Stock Option Plan as
          amended March 2, 1998 (previously filed on May 14, 1998 as Exhibit
          10.1 to the Registrant's Quarterly Report on Form 10-Q and
          incorporated by reference herein)

 10.38   First Amendment to Credit Agreement with Sanwa Bank dated June 3, 1998
          (previously filed on August 14, 1998 as Exhibit 10.1 to the
          Registrant's Quarterly Report on Form 10-Q and incorporated by
          reference herein)

 10.39   Form of Indemnification Agreement (previously filed on August 14, 1998
          as Exhibit 10.2 to the Registrant's Form 10-Q and incorporated by
          reference herein)

 10.40   Amended and Restated Line of Credit with Bank of America dated October
          21, 1998 (previously filed on November 13, 1998 as Exhibit 10.1 to
          the Registrant's Quarterly Report on Form 10-Q and incorporated by
          reference herein)

 10.41   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)

 10.42   Amended and Restated Non-Employee Director Stock Option Plan
          (previously filed on August 16, 1999 as Exhibit 10.2 to the
          Registrant's Quarterly Report on Form 10-Q and incorporated by
          reference herein)

 10.43   First Amendment Agreement dated as of February 4, 2000 to Bank of
          America Amended and Restated Unsecured Line of Credit Agreement
          (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)

 10.44   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)

 10.45   Unsecured Line of Credit Loan Agreement by and among the Registrant,
          Bank of America and various institutions party thereto dated June 1,
          2000 (previously filed on August 14, 2000 as Exhibit 10.1 to the
          Registrant's Quarterly Report on Form 10-Q and incorporated by
          reference herein)

 10.46   Employment Agreement with Edward F. Lange, Jr. dated June 23, 2000
          (previously filed on August 14, 2000 as Exhibit 10.1 to the
          Registrant's Quarterly Report on Form 10-Q and incorporated by
          reference herein)

 10.47   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)
</TABLE>

                                       60
<PAGE>

<TABLE>
<CAPTION>
 Exhibit
 Number                            Identity of Exhibit
 -------                           -------------------
 <C>     <S>
 10.48   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)

 10.49   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)

 10.50   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

 10.51   First amendment to the 1999 BRE Stock Incentive Plan

 10.52   Second amendment to the 1999 BRE Stock Incentive Plan

 10.53   Second Amended and Restated Unsecured Line of Credit Loan Agreement by
          and among the Registrant, Bank of America, N.A., and certain banks as
          parties thereto, dated December 19, 2000

 10.54   Side Letter Agreement by and among the Registrant, Bank of America,
          N.A. and certain banks as parties thereto, dated January 11, 2001

 10.55   Promissory Note payable by BRE Properties, Inc. to the order of
          Prudential Multifamily Mortgage, Inc. dated September 28, 2000

 10.56   Employment agreement with Stephen E. Lefkovits

 10.57   Employment agreement with Bradley P. Griggs

 10.58   Employment agreement with Frank C. McDowell

 10.59   Amended and Restated Non-Employee Director Stock Option Plan dated
          January 27, 2000

 10.60   First Amendment to the Amended and Restated Non-Employee Director
          Stock Option Plan dated June 29, 2000

 10.61   First Amendment to the 1992 Amended and Restated Stock Plan dated June
          29, 2000

 12      Statements re: computation of ratios

 21      Subsidiaries of the Registrant

 23.1    Consent of Ernst & Young LLP
</TABLE>

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