SAN FRANCISCO (October 12, 2000)— BRE Properties, Inc., (NYSE:BRE) today reported funds from operations (FFO) of $31.6 million, or $0.65 per share, for the quarter ended September 30, 2000, compared with consensus estimates of $0.64. Per share FFO increased 10.2% over FFO of $28.1 million, or $0.59 per share, in the same quarter a year ago. Per share numbers are based on the weighted average number of common shares and equivalents outstanding, and include the impact of any potentially dilutive securities.

The company’s total revenues increased by $4.8 million, to $64.6 million, in the third quarter 2000, an increase of 8% from the third quarter 1999. Earnings before interest, income taxes, depreciation and amortization (EBITDA) totaled $10.1 million in the third quarter, reflecting a one-time loss of $32.7 million on a previously announced portfolio transaction. Excluding the loss, third quarter EBITDA would have totaled $42.8 million, a $3.0 million increase over EBITDA in the same quarter last year.

EBITDA in the current quarter reflects $1.3 million in operating expenses for VelocityHSI, Inc.—BRE’s technology initiative providing broadband Internet infrastructure, portable ISP service and a customized community portal site to the apartment industry. On August 15, 2000, BRE spun off a majority interest in VelocityHSI to BRE shareholders, resulting in a separately traded public company (OTCBB:VHSI).

"This quarter’s financial results reflect two significant events that we believe will have long-term benefits for our shareholders," said Frank McDowell, BRE’s president and CEO. "In addition to the value created with the spin-off of VelocityHSI, we have concentrated the investment focus of our portfolio in the strongest performing apartment markets."

In mid-July, BRE announced a plan to sell 22 apartment communities in four Southwestern markets—Albuquerque, Tucson, Las Vegas and Phoenix—to a joint venture for $280 million to:

"To achieve these benefits, we told the market in July to expect a one-time loss of approximately $35 million on the transaction," said McDowell. "On September 14, BRE announced the first closing of the transaction, which included 19 apartment communities for total proceeds of approximately $261 million. The recorded loss on the first portion of the transaction is $32.7 million. We expect to close on the three remaining apartment properties by the middle of the fourth quarter. Proceeds from the second closing are expected to total approximately $19 million, with a corresponding loss of about $2.3 million.

"The transaction yielded immediate portfolio performance benefits:

"BRE’s third quarter same-store net operating income (NOI) growth rate of 9% reflects strong rent growth, occupancy gains, declining levels of turnover and flat operating expenses," said John Nunn, executive vice president, asset management. "Average rents across the portfolio increased by 6% in the quarter, while occupancy climbed to 98% from 96% in the prior year. Typically, we experience the highest level of annual turnover in the third quarter of each year. This quarter, our turnover declined to 63% from 75% in the same quarter a year ago; on a year-to-date basis, turnover has declined to 66% from 70% last year. While timing of particular line items caused some expense fluctuation in individual markets, same-store operating expenses across the portfolio as a whole were flat in the quarter.

"All four of BRE’s major California metros produced double-digit same-store NOI growth rates in the third quarter," said Nunn, "ranging from 17% in the San Francisco Bay area to 10% in Sacramento. In the Pacific Northwest, Portland and Seattle produced same-store NOI growth of 7% and 6%, respectively, on strong leasing results. Occupancies at our Portland and Seattle properties stood at 99% and 98% at the end of the third quarter.

"Outside our California metros, we saw relatively flat same-store performance in Phoenix and Tucson, consistent with our expectation for the summer months in these markets," said Nunn. "We expect better same-store comparisons for Salt Lake City beginning in 2001, given recent occupancy gains and the nonrecurring impact of an increased property tax assessed valuation reflected in the current year. We continue to be encouraged by the performance of our Denver properties. Our apartment communities in this market are 100% occupied, with no concessions, and have posted another quarter of 4% rent growth, supporting our plans to increase investment in this market."

BRE defines same-store properties as stabilized apartment communities owned by the company for at least five full quarters. In the third quarter of 2000, same-store units totaled 17,774 of the 18,594 directly owned by BRE.

"We have immediate acquisition opportunities in high-performance markets to employ sales proceeds from our recently announced portfolio transaction," said Lee Carlson, BRE’s chief operating officer. On October 11, BRE acquired Sun Pointe Village—a 336 unit apartment community in the San Francisco Bay area city of Fremont—for approximately $63.7 million. Adjacent to BRE’s 453-unit Red Hawk Ranch, this community exemplifies the BRE property profile: well-amenitized apartment communities located near business, transportation and employment centers that are essential to our customers. Built in 1989, the 14 three-story buildings feature one- and two-bedroom apartment homes averaging 877 square feet, and are equipped with interior and exterior amenities for lifestyle renters. Sun Pointe Village’s convenient location offers easy access to public transportation and recreation, the I-880/I-680 corridor and the growing number of East Bay and Silicon Valley businesses. The planned installation of VelocityHSI high-speed Internet access will provide a total telecommute solution for the community’s high-tech professionals.

BRE expects to use proceeds from the transaction to fund a commitment to acquire Pinnacle Mountain Gate—a newly developed 496-unit apartment community southwest of downtown Denver, in Littleton, Colorado—for approximately $43 million. The transaction is expected to close by mid-fourth quarter. Pinnacle Mountain Gate is close to light rail, major transit links and the Highlands Ranch Corporate Center, home to Lucent, United Airlines, ICG Communications, Merrill Lynch and Charles Schwab, among others. The new 1.5-million-square-feet Park Meadows Mall is 15 minutes away. The community’s one-, two- and three-bedroom apartment homes average 952 square feet, and will feature VelocityHSI’s high-speed Internet access among its lifestyle amenities.

Also during the quarter, BRE increased its development pipeline by 444 units in two apartment communities in Southern California. Currently, BRE’s development pipeline includes 3,567 apartment units—approximately 3,100 of which are located in economically vibrant submarkets of California, Washington and Colorado.

"During the third quarter, BRE enhanced its financial profile and balance sheet," commented Ed Lange, BRE’s chief financial officer. "The proceeds derived from asset sales were used to reduce variable rate debt and position the company to further its investment activities in California markets. BRE continues to exhibit an excellent financial profile, with a modest level of leverage and strong operating ratios."

At September 30, 2000, BRE’s combination of debt and equity resulted in a total market capitalization of approximately $2.2 billion, with a debt-to-total market capitalization ratio of 29.7%. BRE’s outstanding debt of $666.5 million carries a weighted average interest rate of 7.38%. BRE’s coverage ratio of EBITDA to interest expense is 3.6. The weighted average maturity for the company’s debt is nine years, excluding amounts drawn on the company’s line of credit, and seven years when amounts currently drawn are included.

During the quarter, BRE retired a $100 million revolving credit facility scheduled to mature December 1, 2000, and reduced borrowing on its $400 million line of credit to $208.5 million. At September 30, 2000, variable rate debt comprised 36% of BRE’s total debt with a weighted average interest rate of 7.04%. In additional financing activity, BRE secured a $35 million Fannie Mae loan on its Montanosa apartment community in San Diego with a 10-year term at an interest rate of 7.37%.

Also in the third quarter, consistent with BRE’s strategy to recycle capital from slower growth assets, BRE sold its third-party management company, Alliance Property Management to an investor group led by Alliance’s senior management. In connection with the sale, BRE has received $1.5 million in cash and expects to receive $1.5 million in service fees over the next five years.

In anticipation of Regulation FD, BRE will expand its disclosure policies to include providing updated earnings guidance to the market, not less than quarterly. At October 11, 2000, 10 research analysts had contributed quarterly earnings estimates on BRE to First Call^TM, a widely referenced source of consensus earnings. Current analyst estimates of BRE’s per share FFO for the fourth quarter 2000 range from $0.64 to $0.65 cents for a consensus average of $0.64 per share. For 2001, analysts have contributed earnings estimates to First Call for BRE ranging from $2.78 to $2.85 per share for a consensus average of $2.81. Given the company’s current expectations and judgment, we are comfortable with the ranges given for both 4Q00 and 2001 at this time.

The company will discuss its performance and prospects in more detail during its quarterly earnings conference call on Friday, October 13, 2000 at 8:30 a.m. PDT (11:30 am EDT). The call is open to the public and will be broadcast live on the Internet at www.breproperties.com/analysts and www.vcall.com. For additional information, including playback details, please visit our website at www.breproperties.com/analysts or contact Jason Morgan by phone at 415.445-6550 or e-mail at jmorgan@breproperties.com.

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 directly owns and operates 68 apartment communities, totaling 18,930 units in California, Arizona, Washington, Oregon, Utah and Colorado. BRE currently has 15 other apartment communities in various stages of development and construction, totaling 3,567 units, and joint venture interests in 20 additional apartment communities, totaling 4,548 units.

Direct investments in real estate:

Investments in rental properties

$1,463,680

$1,691,762

Construction in progress

47,985

46,575

Less: accumulated depreciation

(116,791)

(109,623)

1,394,874

1,628,714

Equity interests in and advances to real estate joint ventures:

Investments in rental properties

9,697

-

Construction in progress

50,315

15,083

60,012

15,083

Land under development

54,613

26,538

Cash

882

13,812

Other assets

53,055

25,306

Mortgage loans

$214,987

$211,403

Unsecured senior notes

243,000

253,000

Unsecured line of credit

208,500

315,000

Accounts payable and accrued expenses

24,010

17,212

690,497

796,615

Minority interest

70,608

87,640

Preferred stock, $.01 par value; 10,000,000 shares authorized: 8 1/2% Series A cumulative redeemable, liquidation preference, $25 per share. Shares issued and outstanding: 2,150,000 shares at September 30, 2000 and December 31, 1999.

53,750

53,750

Common stock; $.01 par value, 100,000,000 shares authorized. Shares issued and outstanding: 45,681,540 shares at September 30, 2000; 44,679,341 shares at December 31, 1999.

457

447

Additional paid-in capital

748,124

771,001

Total shareholders' equity

802,331

825,198

Rental income

Other income

Real estate expenses

Depreciation

Interest expense

General and administrative

Internet business segment (1)

Provision for nonrecurring charge (2)

Gains (losses) on sales of real estate investments

Income before minority interest in consolidated subsidiary

Minority interest