SAN FRANCISCO (February 1, 2001) – BRE Properties, Inc., (NYSE:BRE) today reported operating results for the quarter and year ended December 31, 2000. For the year, funds from operations (FFO), the generally accepted measure of operating performance for real estate investment trusts, achieved a record level of $123.4 million, or $2.56 per diluted share, a 10.3% per share increase, from $110.6 million, or $2.32 per diluted share, for the same period in 1999. Revenues for 2000 increased 8.2% to $253.4 million, from $234.3 million a year ago. Net income available to common shareholders for 2000, totaled $36.7 million, or $0.81 per diluted share, as compared with $69 million, or $1.55 per diluted share, for the same period in 1999. Net income for 2000 included a loss on the sale of real estate of $35.7 million, and a loss recognition associated with the company’s Internet business segment of $8.8 million.

For fourth quarter 2000, FFO totaled $31.6 million, or $0.65 per diluted share, a 6.6% per share increase from $29.1 million, or $0.61 per diluted share, for the same period in 1999. Revenues for the quarter totaled $61.8 million, as compared with $60.7 million for the quarter ended December 31, 1999. Net income available to common shareholders for fourth quarter 2000 totaled $12.9 million, or $0.28 per diluted share, as compared with $18.7 million, or $0.42 per diluted share, for the same period in 1999. Net income for fourth quarter 2000 included a loss on the sale of real estate of $3.0 million and a loss recognition associated with the company’s Internet business segment of $5.7 million.

"Our operating results reflect the continuing strength of our Western U.S. markets," said Frank McDowell, BRE’s president and CEO. "The housing fundamentals in our Western markets continue to drive exceptional same-store revenue and operating results. We enter 2001 with high expectations. The company’s portfolio is concentrated in some of the strongest housing markets in the U.S., and is well positioned to support strong future operating results. Our internally generated growth, combined with our acquisition and development activities, are generating significant FFO growth and value."

Same-store property results were supported by higher average monthly rents and lower annualized turnover rates. On a year-over-year basis, average monthly rents increased to $1,019, from $893 in the same-store portfolio. For the fourth quarter and the year, operating margins improved to 72%, as compared with 70% in the same periods in 1999.

"During 2000, the California markets performed at the highest levels in the company’s history," said John Nunn, BRE’s executive vice president, asset management. "Our California communities generated same-store NOI growth ranging, by metro, from 8% to 16%. These markets represent more than 60% of BRE’s current NOI, by design. Our in-house economic and demographic research influenced our decision to overweight the portfolio in California markets, generating superior results and returns."

BRE defines same-store properties as stabilized apartment communities owned by the company for at least five full quarters. Of the 20,195 apartment units owned by BRE, same-store units totaled 18,047 for the quarter, and 17,775 for the entire year.

During the fourth quarter the company acquired three apartment communities. In California, the company acquired Sun Pointe Village, a 336-unit community in the San Francisco Bay area city of Fremont, for approximately $64 million; and, Pinnacle at Cortesia, a 308-unit community located in Rancho Santa Margherita in Orange County, for approximately $38 million. In Colorado, the company acquired Pinnacle Mountain Gate, a 496-unit community located in the Denver suburb of Littleton, for approximately $42 million.

The company completed two directly owned development communities during the fourth quarter: Pinnacle at Carmel Creek, located in San Diego, California; and, Pinnacle at Overlook 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. It is anticipated that the first full quarter of stabilized operating results for these properties will occur during third quarter 2001.

In the fourth quarter, the company completed a joint venture development community, Pinnacle Sonata, a 268-unit complex located in the Seattle suburb of Bothell, Washington. The apartment community was developed with a total cost of approximately $49 million; under the terms of the joint venture agreement, BRE retained an investment of $18 million.

BRE commenced construction of three directly owned development communities in fourth quarter 2000: Pinnacle at the Bluffs, located in Renton, Washington; Pinnacle at Otay Ranch II, located in the San Diego suburb of Chula Vista, California, and Pinnacle at Denver Tech Center, located in Greenwood Village, Colorado. Upon completion, these properties will add 804 apartment units to the BRE portfolio, with a projected investment of $97.4 million.

"Our strong operating results continue to demonstrate the success of our research-driven investment strategy, and validate our decision to focus new investment activity in Western U.S. markets," said Lee Carlson, BRE’s chief operating officer. "In selecting investment opportunities, we seek to identify markets that combine strong demographic and economic trends. Our acquisition and development activity, combined with redeployment efforts during the year, are good examples of this approach, extending our investment concentrations in six highly desirable markets."

"During the fourth quarter, we enhanced BRE’s management depth with the appointment of Brad Griggs as executive vice president, chief investment officer," said Carlson. "Brad’s appointment centralizes the leadership and management of the company’s acquisition and development activities in our corporate headquarters. Under his direction, we believe our development team will continue to expand its efforts to identify attractive acquisition and development opportunities, and produce outstanding results."

The company announced during third quarter 2000, the pending sale of 22 apartment communities located in Tucson, Albuquerque, Las Vegas and Phoenix. The gross sales amount for the transaction was identified at $280 million. In connection with the transaction, the company announced it would record a one-time loss on the sale, for GAAP accounting purposes, of approximately $35 million.

On September 14, 2000, the company announced the first closing associated with this portfolio sale, which included 19 apartment communities in Tucson, Albuquerque, Las Vegas and Phoenix. The gross sales amount for the first closing totaled $261 million. The company used net proceeds from the sale to repay borrowings under its line of credit, and redeployed capital to supply-constrained Western markets. In connection with this closing, the company recognized a loss on the sale of approximately $35 million, of which $32.7 million was recognized during third quarter 2000, and $2.3 million was recognized during fourth quarter 2000.

During the fourth quarter, BRE announced that it amended and restated its revolving credit facility, extending the maturity date to December 2003 from August 2001, and expanding the borrowing capacity to $450 million from $400 million, with an option to upsize the credit facility to $500 million. Borrowings under the credit facility will bear interest at 70 basis points over LIBOR. The new credit facility was closed on December 19, 2000, and funded on January 18, 2001.

Subsequent to the end of the fourth quarter, the company issued $250 million of senior unsecured notes, with a maturity of 10 years, at a coupon of 7.45%. The proceeds derived from the offering were used to repay amounts outstanding under the company’s revolving credit facility. At January 31, 2001, outstanding borrowings under the company’s line of credit totaled $116 million.

At December 31, 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 34.3%. BRE’s outstanding debt of $825.3 million carried a weighted average interest rate of 7.4%. For the year, BRE’s coverage ratio of EBITDA to interest expense was 3.7 times. 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.

"We begin 2001 with an excellent credit profile," said Ed Lange, BRE’s chief financial officer. "We have benefited from outstanding execution on the renewal of our line of credit and sale of 10-year notes. Leverage remains at a modest level, and our interest coverage is high. Our balance sheet retains financial flexibility, and possesses more than sufficient liquidity to meet our current commitments. The company is well positioned for new investment and growth opportunities."

For the year ended December 31, 2000, cash dividend payments to common shareholders totaled $76.9 million, or $1.70 per share, as compared with dividend payments of $73.7 million, or $1.56 per share, for the same period 1999. Correspondingly, the FFO payout ratio for 2000 was 66%, as compared with 67% for 1999.

In addition to the cash dividends, BRE common shareholders of record as of August 7, 2000 received one share of VelocityHSI, Inc. (OTCBB:VHSI) for every five shares of BRE owned, on August 15, 2000. This special noncash, nonrecurring distribution resulted in taxable income to common shareholders of $0.24 per BRE common share.

On December 15, 2000, BRE confirmed the company’s previously disclosed capital commitments to VelocityHSI, Inc., a provider of high-speed Internet service to the apartment industry. The confirmation of the capital commitment followed the announcement on December 15, 2000 by VelocityHSI of a modified business plan in light of adverse changes in the capital markets for Internet and telecommunication-related businesses and its inability to obtain anticipated financing.

VelocityHSI was formed as a division of BRE in April 2000 and spun off as a separately traded public company in August 2000. BRE retained an ownership interest of approximately 9.9% in VelocityHSI, which was carried at $1.3 million on the date of the spin-off.

The company’s investment in VelocityHSI is accounted for under the equity method of accounting. As a result, until VelocityHSI has secured an outside source of funding, the company will record 100% of VelocityHSI’s losses under its Internet business segment, on a 90-day lag basis. The losses will be applied against the company’s investment in and receivables from VelocityHSI until such amounts are reduced to zero.

As of December 31, 2000, the company had advanced approximately $6.5 million pursuant to an agreement to provide VelocityHSI with up to $10 million in funding for general corporate expenses and the costs of installing equipment at properties not owned by BRE. In addition, the company had advanced approximately $1.1 million to finance the installation of equipment in 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.

At December 31, 2000, the company’s investment in and receivables from VelocityHSI were recorded at $3.2 million, net the application of losses.

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 72 apartment communities totaling 20,195 units in California, Arizona, Washington, Oregon, Utah and Colorado. BRE currently has 12 other apartment communities in various stages of development and construction, totaling 2,839 units, and joint venture interests in 21 additional apartment communities, totaling 4,816 units. Additional information about BRE can be found on the web at www.breproperties.com.

(1)  Expenses relate to VelocityHSI, our non-real estate segment that was spun off August 15, 2000, and are added back to operations for the determination of real estate FFO. Subsequent to the spin-off our investment in VelocityHSI is recorded on the equity method of accounting. The recognition of our portion of income or losses is on a 90-day lag basis. The effect of including this segment in FFO would be ($0.12) for the quarter and ($0.18) for the year.

(2) Calculated using the FFO definition from NAREIT’s October 1999 White Paper.