Portfolio Performance and Same-Store Results

"BRE’s second quarter same-store NOI growth rate of 7% was the result of strong rent growth and occupancy gains," said John Nunn, executive vice president, asset management. "Average rents increased 4% across the portfolio, while occupancies climbed to 97% from 96% in the prior year. Operating expenses increased 5% in the quarter, reflecting timing differences in payroll and maintenance line items and—in certain markets—increased assessed values for property taxes, between the periods under comparison. Operating expenses tend to fluctuate across quarters but are relatively predictable over the full year. For example, operating expenses have increased 2.5% for the year to date, a level more reflective of our portfolio’s overall operating characteristics.

"Our core portfolio is producing strong same-store revenue growth in both second quarter and sequential quarter comparisons," said Nunn. "California markets are the source of approximately 55% of BRE’s net operating income and produced same-store revenue growth rates in the second quarter of 2000 that ranged from 6% in Sacramento, to 12% in the San Francisco Bay area. Last quarter, the same revenue growth rates ranged from 3% to 9%. In the Pacific Northwest, Portland is demonstrating a continuation of the positive numbers it began posting last quarter. Portland’s 8% same-store revenue growth rate is a function of occupancy gains of approximately 300 basis points and reduced use of rental concessions. Same-store revenue growth in Seattle has averaged 2%-3% in the last three quarters. However, firming occupancies and declining use of concessions point to near-term rate growth improvements—in both our Seattle and Phoenix markets. Our plans to increase investment in the Denver market should benefit from current same-store trends. Denver continues to lead our portfolio in occupancy at 99%-100% and show promising revenue growth of 4% in the most recent quarter."

Development and Acquisition Activity 

During the quarter, BRE acquired Pinnacle City Centre—a 192-unit apartment community in the San Francisco Bay area city of Hayward—for $27.4 million. Adjacent to a Bay Area Rapid Transit (BART) station and a major local thoroughfare, City Centre exemplifies the BRE property profile—communities located near business, transportation and employment centers that are essential to its Customers. The 11 three-story buildings feature one-, two- and three-bedroom apartment homes, averaging 910 s.f., and equipped with amenities designed for lifestyle renters. BRE expects to achieve an approximate 9.25% return on this investment.

BRE intends to reduce borrowings under the combined credit facilities with proceeds from a planned asset sale and joint venture, totaling $280 million. Details of the transaction were announced in a press release on July 12, 2000, which outlined several strategic benefits:

· Exiting three property markets (Albuquerque, Tucson and Las Vegas);

· Increasing the company’s investment in supply-constrained Western U.S. markets;

· Reducing the company’s exposure to variable rate debt; and

· Focusing BRE development activities on Western markets with strong growth fundamentals.

BRE Properties, Inc., is a real estate investment trust focused on the development, acquisition and management of apartment communities located near business, transportation and employment centers that are essential to its Customers. BRE owns and operates 86 apartment communities totaling 22,882 units in California, Arizona, Washington, Oregon, Nevada, New Mexico, Utah and Colorado. The company currently has eight other apartment communities in various stages of development and construction totaling 3,123 units. Additional information about BRE can be found on the company’s web site—www.breproperties.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Except for the historical information contained herein, this news release contains forward-looking statements regarding Company and property performance, and is based on the Company’s current expectations and judgment. Actual results could vary materially depending on risks and uncertainties inherent to general and local real estate conditions, competitive factors specific to markets in which BRE operates, legislative or other regulatory decisions, future interest rate levels or capital markets conditions. The Company assumes no liability to update this information. For more details, please refer to the Company’s SEC filings, including its most recent Annual Report on Form 10-K and quarterly reports on Form 10-Q.

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