Edgar Filing: BRE PROPERTIES INC /MD/

Form 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

(Mark One)

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

For the fiscal year ended December 31, 2011

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

Commission File No. 1-14306

BRE PROPERTIES, INC.

(Exact name of registrant as specified in its charter)


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

525 Market Street, 4th Floor San Francisco, California		94105-2712
(Address of Principal Executive Offices)		(Zip Code)

(415) 445-6530

(Registrant’s telephone number, including area code)

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

Title of each class

Name of each exchange on which registered

Common Stock, $.01 par value

6.75% Series C Preferred Stock

6.75% Series D Preferred Stock

New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. x Yes ¨ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes x No

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. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer x		Accelerated filer ¨		Non-accelerated filer ¨		Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

At June 30, 2011, 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 $3,726,000,000. At January 31, 2012, 75,736,542 shares of Common Stock were outstanding.

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, 2011 are incorporated by reference in Part III of this report.

FORWARD-LOOKING STATEMENTS

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

BRE PROPERTIES, INC.

PART I

Item 1. BUSINESS

References in this Annual Report on Form 10-K to “BRE,” “Company,” “we” or “us” refer to BRE Properties, Inc., a Maryland corporation.

Corporate Profile

We are a self-administered equity real estate investment trust, or REIT, focused on the development, acquisition and management of multifamily apartment communities primarily located in the major metropolitan markets within the State of California, and the Seattle, Washington region. We also own and operate communities in the Phoenix, Arizona and in the Denver, Colorado metropolitan markets. At December 31, 2011, our multifamily portfolio had real estate assets with a net book value of approximately $3.3 billion, which included: 76 wholly or majority owned stabilized multifamily communities, aggregating 21,336 units in California, Washington and Arizona; eleven stabilized multifamily communities owned through joint ventures comprised of 3,592 apartment units; and seven apartment communities in various stages of construction and development. We have been a publicly traded company since our founding in 1970 and have paid 165 consecutive quarterly dividends to our shareholders since inception.

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

•

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

•

Create a valuable customer experience that focuses on services from our residents’ point of view and generates increased profitability from resident retention and referrals;

•

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

•

Communicate a clear, results-oriented strategic direction based on the long-term plan developed by Management and reviewed and approved by the Board of Directors, which is the driver behind all key decisions;

•

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

We believe we can best achieve our objectives by developing, acquiring and internally managing high-quality apartment communities in high-demand, supply-constrained locations in the most attractive places to live in the Western United States, specifically coastal California. Our communities are generally near the business, transportation, employment and recreation centers essential to customers who value the convenience, service and flexibility of rental living. Recognizing that customers have many housing choices, we focus on developing and acquiring apartment homes with customer-defined amenities and providing professional management services delivered by well-trained associates. We have concentrated our investment and business focus in California and

the Seattle, Washington region, because of certain market characteristics that we find attractive, including the propensity to rent, and the scarcity of undeveloped land. From time to time, we dispose of assets that do not meet our long-term investment criteria, recycling the capital derived from property sales into apartment communities in supply-constrained locations that offer higher long-term return opportunities.

Events During 2011

During 2011, we acquired three communities totaling 652 units: Lafayette Highlands, with 150 units, located in Lafayette, California; The Landing at Jack London Square, with 282 units, located in Oakland, California; and The Vistas of West Hills, with 220 units, located in Valencia, California. The aggregate investment in these three communities was $170,127,000. In addition to the communities, we acquired two parcels of land for future development in San Francisco, California’s Mission Bay district for a purchase price of $41,400,000; and we purchased a 4.4 acre site contiguous to our existing Park Viridian operating community and its existing second phase land site in Anaheim, California for a purchase price of $5,100,000.

As of December 31, 2011 we had seven sites under development or construction. The aggregate investment in the sites is expected to total $977,600,000. We have an estimated cost of $307,300,000 to complete existing construction in progress, which is estimated to be completed during 2013 and 2014.

During 2011, we sold two communities totaling 634 units: Galleria at Towngate, with 268 units located in Moreno Valley, California; and Windrush Village, a 366 unit property located in Colton, California. The approximate gross proceeds from the sales of the two communities were $65,175,000, resulting in a net gain of approximately $14,489,000. The two properties sold were located in the eastern half of the Inland Empire, reducing our exposure in this market to 5.3% of total net operating income from 7.4% in 2010. Additionally, during 2011, two joint venture assets were sold; The Landing at Bear Creek, a 224 unit joint venture community, located in Lakewood, Colorado; and The Pinnacle at Hunters Glen, a 264 unit joint venture community located in Thornton, Colorado. The Company had a 15% equity ownership in the communities and as a result received gross proceeds of $9,300,000 and recognized a net gain on the sale of $4,270,000.

On August 15, 2011, we repurchased 840,285 shares of our 6.75% Series D Cumulative Redeemable Preferred Stock at a price of $24.33 per share on the open market, a $0.67 discount to par resulting in a non cash return from preferred shareholders of $563,000. In addition, the initial issuance costs associated with these shares totaling $718,000 were charged to retained earnings during the third quarter of 2011. The net effect of the activity was a $155,000 charge to retained earnings for the three months ending September 30, 2011. As of December 31, 2011, 2,159,715 shares of 6.75% Series D Cumulative Redeemable Preferred Stock remain outstanding.

On June 13, 2011, we redeemed all 4,000,000 shares of our 6.75% Series C Cumulative Redeemable Preferred Stock at a redemption price of $25.35 per share. The redemption price was equal to the original issuance price of $25.00 per share, plus accrued and unpaid dividends to the redemption date. The initial issuance cost totaling approximately $3,616,000 associated with this series of perpetual preferred stock was charged to retained earnings during the second quarter of 2011.

On May 11, 2011, we completed an equity offering of 9,200,000 shares of common stock, including shares issued to cover over-allotments, at $48.00 (prior to a $1.92 per share underwriters discount) per share. Total gross proceeds from this offering were approximately $441,508,000. We used the net proceeds from the offering for general corporate purposes which included redeeming our 6.75% Series C Cumulative Redeemable Preferred Stock and a portion of our 6.75% Series D Cumulative Redeemable Preferred Stock, and to repay borrowings under our unsecured line of credit.

On February 24, 2010, we entered into Equity Distribution Agreements (EDAs) under which we may issue and sell from time to time through or to our sales agents shares of our common stock having aggregate offering proceeds of up to $250,000,000. During 2011, 1,291,537 shares were issued under the EDAs, with an average gross share price of $47.55 for total gross proceeds of approximately $61,414,000. As of December 31, 2011, the remaining capacity under the equity distribution agreement totals $163,600,000. Proceeds were used

for general corporate purposes, which included reducing borrowings under our unsecured line of credit, the repayment of other indebtedness, the redemption or other repurchase of outstanding securities and funding for development activities.

During January 2011, we paid off the remaining aggregate principal amount of $48,545,000 of our 7.450% senior notes as they matured.

Events During 2010

During 2010, we acquired four communities totaling 1,037 units: Allure at Scripps Ranch, with 194 units, located in San Diego, California; Museum Park, with 117 units, located in San Jose, California; Fountains at River Oaks, with 226 units, located in San Jose, California; and Aqua at Marina Del Rey, with 500 units, located in Marina Del Rey, California. In connection with the acquisition of Fountains at River Oaks, we assumed an existing $32,500,000 secured mortgage loan, with a fixed interest rate of 5.74% that is scheduled to mature in 2019. The aggregate investment in these four communities was $292,100,000. In addition to the communities, we purchased one land parcel for future development of 280 units, in Sunnyvale, California, for $19,000,000.

During 2010, we completed construction of two development communities: Belcarra, with 296 units in Bellevue, Washington, and Villa Granada, with 270 units in Santa Clara, California. The aggregate investment in the two communities totaled $178,025,000.

At December 31, 2010 we owned one site under construction. The aggregate investment in the site is expected to total $110,600,000.

At December 31, 2010, we owned five parcels of land that were in the process of entitlement and predevelopment.

During 2010, we sold four communities totaling 1,530 units: Montebello, with 248 units located in Seattle, Washington; Boulder Creek, a 264 unit property located in Riverside, California; Pinnacle Riverwalk, a 714 unit property located in Riverside, California; and Parkside Village, a 304 unit property located in Riverside, California. The approximate gross proceeds from sales of the four communities were $167,327,000, resulting in a net gain of approximately $40,111,000. Three of the four properties sold were located in the Inland Empire, reducing our exposure in this market to 7.4% of total net operating income from 11.2% in 2009.

Effective February 24, 2010, we terminated the equity distribution agreement we entered into on May 14, 2009 under which we could issue and sell from time to time through or to our sales agent shares of our common stock having an aggregate offering proceeds of up to $125,000,000. On February 24, 2010, we entered into new equity distribution agreements (EDAs) under which we may issue and sell from time to time through or to our sales agents shares of our common stock having an aggregate offering proceeds of up to $250,000,000. During 2010, 581,055 shares were issued under the EDAs for gross proceeds of approximately $25,000,000 with an average gross share price of $43.02. Proceeds were used for general corporate purposes, which included reducing borrowings under our unsecured line of credit, the repayment of other indebtedness, the redemption or other repurchase of outstanding securities and funding for development activities.

On April 7, 2010, we completed an equity offering of 8,050,000 common shares, including shares issued to cover over-allotments, at $34.25 per share. Total gross proceeds from this offering were approximately $275,713,000 before deducting the underwriting discount and other offering expenses we paid. We used the net proceeds from the offering for general corporate purposes, which included reducing borrowings under our unsecured line of credit.

On April 30, 2010 we refinanced a single property mortgage loan totaling $59,500,000 at a fixed rate of 5.20%. The mortgage has a 10 year interest only term. The original mortgage note had a principal amount outstanding of $31,100,000 and was scheduled to mature on October 1, 2010, at a fixed rate of 7.38%.

On September 22, 2010, we closed an offering of $300,000,000 of 10.5 year senior unsecured notes with a coupon rate of 5.20%. The notes will mature on March 15, 2021. Net proceeds from the offering, after all discounts, commissions and issuance costs, totaled approximately $297,477,000. We used the net proceeds of the 2021 Notes Offering to repay borrowings under our $750 million unsecured line of credit and used a portion of the proceeds to fund a portion of the purchase price and accrued and unpaid interest on any 4.125% convertible senior notes due 2026 validly tendered and accepted for payment pursuant to the Offer to Purchase dated September 15, 2010.

As a result of the resignation of our former Chief Operating Officer, we recognized a one-time expense during the second quarter of 2010 totaling approximately $1,300,000.

During June 2010, we repurchased $15,000,000 of our 4.125% convertible senior unsecured notes at par. We recognized a net loss on early debt extinguishment of $558,000 in connection with the repurchase. On October 13, 2010, we closed a fixed price cash tender offer for any and all of our 4.125% convertible senior unsecured notes due in 2026. As a result, $321,334,000 in aggregate principal of our 4.125% convertible senior unsecured notes due in 2026 were validly tendered, and we accepted, purchased and subsequently cancelled the notes for an aggregate purchase price of 104% of par, or approximately $334,187,360. We recognized a net loss of $22,949,000 in connection with the tender offer. After the tender offers an aggregate principal amount of $35,000,000 of the notes remained outstanding at December 31, 2011 and 2010.

Events During 2009

During 2009, we sold two communities totaling 752 units: Overlook at Blue Ravine, with 512 units located in Folsom, California; and Arbor Pointe, a 240 unit property located in Sacramento, California. The two properties were sold for an aggregate sales price of approximately $67,000,000, resulting in a net gain on sales of approximately $21,574,000. In addition to the two communities, we sold an excess parcel of land in Santa Clara, California, classified as held for sale at December 31, 2008, for gross sales proceeds totaling $17,100,000, approximately equal to the carrying value.

During 2009, we completed construction of three development communities: Taylor 28, with 197 units located in Seattle, Washington, 5600 Wilshire, with 284 units located in Los Angeles, California and Park Viridian with 320 units located in Anaheim, California. The aggregate investment in the three communities totaled $282,934,000.

As of December 31, 2009, we owned two sites that were under construction. The aggregate investment in these two sites is expected to total approximately $176,100,000. We had an estimated cost of $16,400,000 to complete existing construction in progress, which was completed during 2010.

As of December 31, 2009, we owned four parcels of land that were in the process of entitlement and predevelopment.

On July 30, 2009, our Board of Directors approved a reduction in quarterly common dividends to $0.3750 from $0.5625 per share for the third quarter of 2009. The quarterly common dividend payment of $0.3750 was equivalent to $1.5000 per common share on an annualized basis.

On May 14, 2009, we entered into equity distribution agreements (EDAs) under which we may offer and sell shares of our common stock having an aggregate offering proceeds of up to $125,000,000 over time through our sales agent. During 2009, 3,801,185 shares were issued for gross proceeds of approximately $104,600,000 with an average gross share price of $27.52. Proceeds were used for general corporate purposes, which include reducing borrowings under our unsecured line of credit, the repayment of other indebtedness, the redemption or other repurchase of outstanding securities, and funding for development activities.

On April 7, 2009, we closed a $620,000,000 secured credit facility with Deutsche Bank Berkshire Mortgage, Inc. The facility consists of two $310,000,000 tranches. The first tranche has a fixed rate term of 10 years and has a maturity date of May 1, 2019. The second tranche has a maturity date of September 1, 2020, with a fixed rate term for the first 10 years and a variable rate for the remaining one-year period. Together, the effective composite annual cost of debt is 5.6% inclusive of rate hedging transactions. Fifteen multifamily properties totaling 4,651 units with a net carrying value of $607,500,000 secured the credit facility at the time of closing. Proceeds from this facility were used to refinance near-term debt maturities, debt tenders and debt repurchases noted below.

On April 15, 2009, we closed a fixed price cash tender offer for any and all of our outstanding 5.750% senior notes due 2009 and any and all of our outstanding 4.875% senior notes due 2010. As a result, $61,407,000 and $119,421,000 in aggregate principal amount of the 5.750% senior notes due 2009 and 4.875% senior notes due 2010, respectively, were validly tendered and we accepted, purchased and subsequently cancelled the notes. After giving effect to the purchase of the tendered notes, an aggregate principal amount of $30,579,000 of the 4.875% senior notes due in 2010, were paid in full during 2010. The remaining principal balance of the 5.750% senior notes due in 2009 was paid in full during September 2009, as the notes came due.

On April 1, 2009, we closed a fixed price cash tender offer for any and all of our outstanding 7.450% senior notes due 2011 and any and all of our outstanding 7.125% senior notes due 2013. As a result, $201,455,000 and $89,982,000 in aggregate principal amount of the 7.450% senior notes due 2011 and 7.125% senior notes due 2013, respectively, were validly tendered and we accepted, purchased and subsequently cancelled the notes. After giving effect to the purchase of the tendered notes, an aggregate principal amount of $48,545,000 7.450% senior notes due 2011 were paid in full in 2011, and $40,018,000 7.125% senior notes due in 2013, respectively, remain outstanding at December 31, 2011.

During the course of 2009, we repurchased $78,266,000 of our 4.125% convertible senior unsecured notes for an aggregate price of 92.98% of par, or approximately $72,776,000.

During the course of 2009, we recognized a net gain on the early extinguishment of debt totaling $1,470,000 in connection with the repurchase and tender activity.

During the fourth quarter of 2009, we incurred a charge of approximately $12,900,000 for previously capitalized costs primarily related to development rights for three land sites under option agreements that will not proceed to development. Additionally, in the fourth quarter of 2009, we incurred cash severance charges totaling approximately $600,000.

Competition

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

Structure, Tax Status and Investment Policy

We were incorporated in the state of Maryland in 1970. We are organized and operate in a manner intended to enable us to qualify as a real estate investment trust, or REIT, under Sections 856-860 of the Internal Revenue Code of 1986, as amended. As a REIT, we generally will not be subject to federal income tax to the extent we distribute 100% of our taxable income to our shareholders. REITs are subject to a number of complex organizational and operational requirements. If we fail to qualify as a REIT, our taxable income may be subject to income tax at regular corporate rates. See “Risk Factors—Tax Risks.”

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

Employees

As of December 31, 2011, we had 690 employees. No employee is covered by collective bargaining agreements.

Company Website

To view our current and periodic reports free of charge, please go to our website at www.breproperties.com. We make these postings after our filings have been submitted with the SEC. Our website contains copies of our Corporate Governance Guidelines, our Code of Business Conduct and Ethics and the charters of each of our Audit, Compensation, and Nominating and Governance Committees. This information is also available in print to any shareholder who requests it by contacting us at BRE Properties, Inc., 525 Market St., 4^th Floor, San Francisco, California, 94105, attention: Investor Relations. Information contained on our website is not and should not be deemed a part of this report or a part of any other report or filing with the SEC.

Investment Portfolio

See Part I, Item 2 (“Properties”) and Part II, Item 7 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) of this report for a description of our individual investments and certain developments during the year with respect to these investments. See Part IV, Item 15(a) 2, Schedule III (financial statement schedule), for additional information about our portfolio, including locations, costs and encumbrances.

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

Executive Officers

The following persons were executive officers of BRE as of February 17, 2012:


Name	Age at February 17, 2012		Position(s)
Constance B. Moore		56	President, Chief Executive Officer and Director
Stephen C. Dominiak		48	Executive Vice President, Chief Investment Officer
Kerry Fanwick		56	Executive Vice President, General Counsel
Deborah J. Jones		61	Executive Vice President, Associate Relations and Development
Scott A. Reinert		53	Executive Vice President, Operations
John A. Schissel		45	Executive Vice President, Chief Financial Officer

Ms. Moore has served as President and Chief Executive Officer since January 2005. Prior to serving as the Company’s Chief Executive Officer, she served as our Chief Operating Officer from July of 2002 through December 2004. Ms. Moore held several executive positions with Security Capital Group & Affiliates, an international real estate operating and investment management company, from 1993 to July 2002, including Co-Chairman and Chief Operating Officer of Archstone-Smith Trust, a Colorado-based multifamily REIT. Ms. Moore holds a Master of Business Administration Degree from the University of California, Berkeley and a Bachelor’s Degree in Business Administration from San Jose State University.

Mr. Dominiak has served as Executive Vice President, Chief Investment Officer since August 2008. Prior to joining BRE, Mr. Dominiak was the Division President and Managing Partner for JPI’s western division from 2004 to August 2008, a Division Vice President for BRE’s Southern California region from 2003 to 2004, and a Group Vice President for Archstone-Smith Trust in Southern California from 1995 to 2003. Mr. Dominiak holds a Master of Business Administration Degree from the University of California, Irvine, and both a Master’s Degree in city and regional planning and a Bachelor’s Degree in architecture from the University of Texas, Arlington.

Mr. Fanwick has served as Executive Vice President, General Counsel since July 2008. Prior to serving as the Company’s Executive Vice President, General Counsel, he served as Senior Vice President, General Counsel from February 2007 through July 2008. Mr. Fanwick was a co-founding partner of Miller & Fanwick, LLP, a law firm specializing in business and financial strategies, where he served as partner from May 1998 to December 2006. Previously, he served as general counsel for First Nationwide Bank from 1990 to 1998; an attorney at the law firm of Wilson, Sonsini, Goodrich & Rosati from 1981 to 1985; and in-house counsel and a member of senior management for various financial services and real estate companies. Mr. Fanwick received his Juris Doctor Degree from Stanford Law School .

Ms. Jones has served as Executive Vice President, Associate Relations and Development since October, 2010. Ms Jones joined BRE in 2005 as Vice President, associate relations and development, and was promoted to Senior Vice President in 2007. She began her career in the apartment industry in 1984 as director, human resources for Trammell Crow Residential-West (TCR-W), which was acquired by BRE in 1997, and continued in that role as Vice President for BRE after the acquisition. From 2000 to 2005, she served as Vice President, human resources for The Irvine Apartment Management Company. Ms. Jones is a professionally certified executive coach and holds a Bachelor’s Degree in business administration from Hertford College in Hertford, England.

Mr. Reinert has served as Executive Vice President, Operations since January, 2011. Prior to joining BRE, he was employed by the Irvine Company in Newport Beach, California from 1994 to 2009. Most recently, he served as Senior Vice President, property management, for the Irvine Company Apartment Communities. His first position was Vice President, asset management, Irvine Apartment Communities, then a public REIT. In 1998, he was promoted to president, Irvine Apartment Management Company. After leaving the Irvine Company, Mr. Reinert founded Axiom Multifamily Realty Advisors, Inc., to invest in and manage properties in the Southwest. He began his career in property management at GFS Northstar (now Pinnacle) in Atlanta, where he rose to Chief Operating Officer, East, in four years. Mr. Reinert holds a Bachelor’s Degree in real estate and risk management from Florida State University

Mr. Schissel has served as Executive Vice President, Chief Financial Officer since October, 2009. Prior to joining BRE, he served as Executive Vice President, Chief Financial Officer and Board Member of Carr Properties (and predecessor Columbia Equity Trust Inc.), a Washington D.C. based commercial office REIT, from 2004 to 2009. Prior to joining Carr Properties, Mr. Schissel worked at Wachovia Securities from 1991 to 2004, serving as Senior Vice President, and later as Director in the firm’s Real Estate Investment Banking Group. Mr. Schissel holds a Bachelor’s Degree in Business Administration and Finance from Georgetown University.

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

Item 1A. RISK FACTORS

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

Risks Due to Investment in Real Estate

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

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

Other factors may further adversely affect revenues from and values of our properties. These factors include the general economic climate, local conditions in the areas in which properties are located such as an oversupply of apartment units or a reduction in the demand for apartment units, the attractiveness of the properties to residents, competition from other multifamily communities and our ability to provide adequate facilities maintenance, services and amenities. Our revenues would also be adversely affected if residents were unable to pay rent or we were unable to rent apartments on favorable terms. If we were unable to promptly relet or renew the leases for a significant number of apartment units, or if the rental rates upon renewal or reletting were significantly lower than expected rates, then our funds from operations and our ability to make expected distributions to our shareholders and pay amounts due on our debt could 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.

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

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

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

As a general matter, property development and construction projects typically have a higher, and sometimes substantially higher, level of risk than the acquisition of existing properties. We intend to actively pursue

development and construction of multifamily apartment communities. We cannot assure you 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;

•

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

•

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

Development and construction activities are also subject to risks relating to the inability to obtain, or delays in obtaining, all necessary zoning, land-use, building, occupancy, and other required governmental permits and authorizations.

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

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

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

Real estate investments are relatively illiquid and, therefore, tend to limit our ability to adjust our portfolio in response to changes in economic or other conditions. Additionally, the Internal Revenue Code places certain limits on the number of properties a REIT may sell without adverse tax consequences. To affect our current operating strategy, we have in the past raised, and will seek to continue to raise additional funds, both through outside financing and through the orderly disposition of assets that no longer meet our investment criteria. However, we cannot assure you that we will be able to dispose of these assets, particularly during periods of decline in the real estate market, and the inability to make these dispositions may prevent us from executing our operating strategy and could have a material adverse effect on us and our ability to make distributions to our shareholders and pay amounts due on our debt. Depending upon interest rates, current development and acquisition opportunities and other factors, generally we will reinvest the proceeds from any property dispositions in additional multifamily properties, although such funds may be employed in other uses. We cannot assure you 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. If we are unable to reinvest proceeds from the disposition of properties or if properties acquired with any such proceeds produce a lower rate of return than the properties disposed of, our results of operations and our ability to make distributions to our shareholders and pay amounts due on our debt could be adversely affected. In addition, a delay in reinvestment of any such proceeds could also have a material adverse effect on us and our ability to make distributions to our shareholders and pay amounts due on our debt.

We may seek to structure future dispositions as tax-free exchanges, where appropriate, utilizing the non-recognition provisions of Section 1031 of the Internal Revenue Code to defer income taxation on the disposition of the exchanged property. For an exchange of these properties to qualify for tax-free or tax deferred treatment under Section 1031 of the Internal Revenue Code, certain technical requirements must be met. Given the competition for properties meeting our investment criteria, it may be difficult for us to identify suitable properties within the applicable time frames in order to meet the requirements of Section 1031. Even if we can structure a suitable tax-deferred exchange, as noted above, we cannot assure you 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 defined urban and suburban locations. There are numerous other multifamily properties and real estate companies, many of which have greater financial and other resources than we have, within the market area of each of our properties which compete with us for residents and development and acquisition opportunities. The number of competitive multifamily properties and real estate companies in these areas could have a material effect on (1) our ability to rent the apartments and the rents charged, and (2) development and acquisition opportunities. The activities of these competitors could cause us to pay a higher price for a new property than we otherwise would have paid or may prevent us from purchasing a desired property at all, which could have a material adverse effect on us and our ability to make distributions to our shareholders and pay amounts due on our debt.

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

Our portfolio is primarily located in the San Francisco Bay Area, Los Angeles, Orange County, Inland Empire, San Diego, and Seattle area markets. 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 particular our performance is disproportionately influenced by job growth and unemployment. To the extent the aforementioned general economic conditions, job growth and unemployment in any of these markets deteriorate or any of these areas experiences natural disasters, the value of the portfolio, our results of operations and our ability to make distributions to our shareholders and pay amounts due on our debt could be materially adversely affected.

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

We carry comprehensive liability, fire, mold, extended coverage and rental loss insurance with respect to our properties with certain policy specifications, limits and deductibles. While as of December 31, 2011, we carried flood and earthquake insurance for our properties with an aggregate annual limit of $100,000,000, subject to customary deductibles, we cannot assure you that this coverage will be available on acceptable terms or at an acceptable cost, or at all, in the future, or if obtained, that the limits of those policies will cover the full cost of repair or replacement of covered properties. In addition, there may be certain extraordinary losses (such as those resulting from civil unrest or terrorist acts) that are not generally insured (or fully insured against) or

underinsured losses (such as those resulting from claims in connection with the occurrence of mold, asbestos, and lead) because they are either uninsurable or not economically insurable. Should an uninsured or underinsured loss occur to a property, we could be required to use our own funds for restoration or lose all or part of our investment in, and anticipated revenues from, the property and would continue to be obligated on any mortgage indebtedness on the property. Any such loss could have a material effect on us and our ability to make distributions to our shareholders and pay amounts due on our debt. In addition, a failure of any of our insurers to comply with their obligations to us could have a material adverse effect on us and our ability to make distributions to our shareholders and pay amounts due on our debt.

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

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

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

A number of federal, state and local laws (including the Americans with Disabilities Act) and regulations exist that may require modifications to existing buildings or restrict certain renovations by requiring improved access to such buildings by disabled persons and may require other structural features which add to the cost of buildings under construction. Legislation or regulations adopted in the future may impose further burdens or restrictions on us with respect to improved access by disabled persons. The costs of compliance with these laws and regulations may be substantial, and limits or restrictions on construction or completion of certain renovations may limit implementation of our investment strategy in certain instances or reduce overall returns on our investments, which could have a material adverse effect on us and our ability to make distributions to our shareholders and 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.

The operations of BRE Property Investors LLC are limited.

Five 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, 2011, held approximately a 99% equity interest in it. Third parties as non-managing members hold the remaining equity interests in the operating company.

Under the terms of the limited liability company agreement governing the operations of the operating company, the Operating Company is required to maintain certain debt service coverage, debt-to-asset and other financial ratios intended to protect the members’ rights to receive distributions. The requirement to maintain financial ratios and the restrictions on the actions of the operating company and us as managing member could have a material adverse effect on us and our ability to make distributions to our shareholders and pay amounts due on our debt.

Further, under the terms of the operating company’s limited liability company agreement, the operating company must obtain the consent of a majority in interest of the non-managing members in order to 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 dissolve the operating company, even when such a disposition or dissolution of the operating company would be in our best interest, could have a material adverse effect on us and our ability to make distributions to our shareholders and pay amounts due on our debt.

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

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

•

the amount necessary to permit the full priority distribution, or

•

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

We may not voluntarily withdraw from the operating company or transfer all or any portion of our interest in the operating company without the consent of all of the non-managing members, except in certain limited circumstances, such as a sale of all or substantially all of our assets, or any merger, consolidation or other combination by us with or into another person, or any reclassification, recapitalization or change of our outstanding equity interests. Such restrictions on our withdrawal as the managing member of the operating company, and on our ability to transfer our interest in the operating company, could have a material adverse effect on us and our ability to make distributions to our shareholders and pay amounts due on our debt.

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

We have not obtained updated surveys for all of the properties we have acquired or developed. Because updated surveys were not always obtained, the title insurance policies obtained by us may contain exceptions for matters that an updated survey might have disclosed. Such matters might include such things as boundary encroachments, unrecorded easements or similar matters, which would have been reflected on a survey. Moreover, because no updated surveys were prepared for some properties, we cannot assure you that the title insurance policies in fact cover the entirety of the real property, buildings, fixtures, and improvements which we believe they cover. Incomplete coverage in the event of a claim could have a material adverse effect on our ability to make distributions to our shareholders and 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, and other forms of secured or unsecured financing or through the issuance of additional debt or equity by us. We expect periodically to review our financing options regarding the appropriate mix of debt and equity financing. Equity, rather than debt, financing of future developments or acquisitions could have a dilutive effect on the interests of our existing shareholders. Similarly, there are certain risks involved with financing future developments and acquisitions with debt, including those described below. In addition, if new developments are financed through construction loans, there is a risk that, upon completion of construction,

permanent financing for such properties may not be available or may be available only on disadvantageous terms or that the cash flow from new properties will be insufficient to cover debt service. If a newly developed or acquired property is unsuccessful, our losses may exceed our investment in the property. Any of the foregoing could have a negative impact on operations and our ability to make distributions to our shareholders and pay amounts due on our debt.

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

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

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

We have incurred and expect in the future to incur indebtedness and interest rate hedges that bear interest at variable rates. Accordingly, increases in interest rates would increase our interest costs, which could have a material adverse effect on us and our ability to make distributions to our shareholders and pay amounts due on our debt or cause us to be in default under certain debt instruments. In addition, an increase in market interest rates may lead holders of our common shares to demand a higher yield on their shares from distributions by us, which could adversely affect the market price for our common stock.

We may incur additional debt in the future.

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

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

At December 31, 2011, we had outstanding borrowings of approximately $1.7 billion. Our indebtedness contains financial covenants as to minimum net worth, interest coverage ratios, maximum secured debt, and total debt to capital, among others. In the event that an event of default occurs, our lenders may declare borrowings under the respective loan agreements to be due and payable immediately, which could have a material adverse effect on us and our ability to make distributions to our shareholders and pay amounts due on our debt.

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

We may to manage our exposure to interest rate volatility by using interest rate hedging arrangements, such as interest rate cap agreements and interest rate swap agreements. These agreements involve risks, such as the

risk that the counterparties may fail to honor their obligations under these arrangements, that these arrangements may not be effective in reducing our exposure to interest rate changes and that a court could rule that such an agreement is not legally enforceable. Hedging may reduce overall returns on our investments. Failure to hedge effectively against interest rate changes could have a material adverse effect on us and our ability to make distributions to our shareholders and 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, hazardous or toxic substances may adversely effect the owner’s or operator’s ability to sell or rent the affected property or to borrow using the property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of hazardous or toxic substances at a disposal or treatment facility, whether or not the facility is owned or operated by the person. Certain environmental laws impose liability for release of asbestos-containing materials into the air, and third parties may also seek recovery from owners or operators of real properties for personal injury associated with asbestos-containing materials and other hazardous or toxic substances. Federal and state laws also regulate the operation and subsequent removal of certain underground storage tanks. In connection with the current or former ownership (direct or indirect), operation, management, development 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. We cannot assure you, however, that the Phase I environmental studies or other environmental studies undertaken with respect to any of our current or future properties will reveal:

•

all or the full extent of potential environmental liabilities;

•

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

•

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

•

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

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

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

Risks Associated with Payment of Taxable Stock Dividends

We may in the future choose to pay dividends in our own stock, in which case you may be required to pay tax in excess of the cash you receive.

We may distribute taxable dividends that are partially payable in cash and partially payable in our stock. Under recent IRS guidance, up to 90% of any such taxable dividend with respect to calendar years 2008 through 2011, and in some cases declared as late as December 31, 2012, could be payable in our stock if certain conditions are met. Taxable stockholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits for United States federal income tax purposes. As a result, a U.S. stockholder may be required to pay tax with respect to such dividends in excess of the cash received. If a U.S. stockholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. In addition, if a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on dividends, such sales may put downward pressure on the trading price of our stock.

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

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

The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements or misrepresentations. While management continues to review the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we can not assure you that our disclosure controls and procedures or internal control over financial reporting will be effective in accomplishing all control objectives all of the time. Deficiencies, particularly material weaknesses, in internal control over financial reporting which may occur in the future could result in misstatements of our results of operations, restatements of our financial statements, a decline in our stock price, or otherwise materially adversely affect our business, reputation, results of operation, financial condition or liquidity.

Ranking of Securities and Subordination of Claims

A portion of our operations is conducted through our subsidiaries, including the operating company. Our cash flow and the consequent ability to make distributions and other payments on our equity securities and to service our debt will be partially dependent upon the earnings of our subsidiaries and the distribution of those earnings to us, or upon loans or other payments of funds made by our subsidiaries to us. In addition, debt or other arrangements of our subsidiaries may impose restrictions that affect, among other things, our subsidiaries’ ability to pay dividends or make other distributions or loans to us.

Likewise, a portion of our consolidated assets is owned by our subsidiaries, effectively subordinating certain of our unsecured indebtedness to all existing and future liabilities, including indebtedness, trade payables, lease obligations and guarantees of our subsidiaries. The operating company has guaranteed amounts due under our unsecured line of credit with a syndicate of banks. The operating company and other of our subsidiaries may also, from time to time, guarantee other of our indebtedness. Therefore, our rights and the rights of our creditors, including the holders of other unsecured indebtedness, to participate in the assets of any subsidiary upon the latter’s liquidation or reorganization will be subject to the prior claims of such subsidiary’s creditors, except to the extent that we may ourselves be a creditor with recognized claims against the subsidiary, in which case our claims would still be effectively subordinate to any security interests in or mortgages or other liens on the assets of such subsidiary and would be subordinate to any indebtedness of such subsidiary senior to that held by us.

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

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

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

Tax Risks

Risks related to our REIT status.

We believe we have operated and intend to continue operating in a manner that will allow us to qualify as a REIT for federal income tax purposes under the Internal Revenue Code. However, we cannot assure you that we have in fact operated, or will be able to continue to operate, in a manner so as to qualify, or remain qualified, as a REIT. 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, we must satisfy a number of requirements, including requirements regarding the composition of our assets and a requirement that at least 95% of our gross income in any year must be derived from qualifying sources, such as “rents from real property.” Also, we must make distributions to shareholders aggregating annually at least 90% of our net taxable income, excluding net capital gains. In addition, legislation, new regulations, administrative interpretations or court decisions may materially adversely affect our investors, our ability to qualify as a REIT for federal income tax purposes or the desirability of an investment in a REIT relative to other investments.

Even if we qualify as a REIT for federal income tax purposes, we may be subject to some federal, state and local taxes on our income or property and, in certain cases, a 100% penalty tax, in the event we sell property as a dealer.

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

Item 1B.

UNRESOLVED STAFF COMMENTS

None.

Item 2.

PROPERTIES

General

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

Multifamily Property Data

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


Multifamily Properties	2011			2010			2009			2008			2007
Percentage of total portfolio at cost, as of December 31		99	%		99	%		99	%		99	%		99	%
Percentage of total revenues, for the year ended December 31		99	%		99	%		99	%		99	%		99	%

No single multifamily property accounted for more than 10% of total revenues in any of the five years ended December 31, 2011.

This table summarizes information about our 2011 operating multifamily properties and includes properties acquired during 2011 and 2010 in various phases of lease up:


Market	Number of Communities		Units		Percentage of Revenue¹			Percentage of NOI¹			Occupancy²			Market Rent³
San Francisco Bay Area		15		4,197		22	%		23	%		96	%	$	1,811
San Diego		14		4,152		20	%		21	%		96	%		1,545
Orange County		12		3,789		18	%		18	%		95	%		1,511
Los Angeles		14		3,267		17	%		17	%		95	%		1,764
Seattle Area		13		3,456		14	%		13	%		96	%		1,304
Inland Empire		5		1,173		5	%		5	%		96	%		1,439
Phoenix		2		902		3	%		2	%		96	%		951
Sacramento		1		400		1	%		1	%		94	%		1,179

Total/Weighted Average		76		21,336		100	%		100	%		95	%	$	1,548

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


	December 31,
	2011			2010			2009			2008			2007
Total number of units		21,336			21,318			21,245			21,196			21,808
Portfolio occupancy²		95	%		95	%		95	%		94	%		94	%
Market rent per unit³	$	1,548		$	1,417		$	1,475		$	1,528		$	1,424
Total number of properties		76			75			73			72			77

Represents the aggregate revenue and net operating income (NOI) from properties in each market divided by the total revenue and net operating income of multifamily properties for the year ended December 31, 2011. Excludes revenue and NOI from properties sold in 2011 and income from unconsolidated joint ventures.

Represents average physical occupancy for all properties for the twelve months ended December 31, 2011. The total is a weighted average by units for all communities shown. Portfolio occupancy is calculated by dividing the total occupied units by the total units in the portfolio at the end of the year. Apartment units are generally leased to residents for rental terms not exceeding one year.

³	Represents average prevailing gross market rent per unit for the twelve months ended December 31, 2011. The total is a weighted average by units for all communities shown.

The following table summarizes our “same-store” operating results. “Same-store” properties are defined as properties that have been completed, stabilized and owned by us for at least two twelve month periods.


	December 31,
	2011			2010			2009			2008			2007
Number of same-store units		18,641			18,914			19,572			19,053			19,233
Same-store units % of total units		87	%		89	%		92	%		90	%		89	%
Same-store revenue change		3.4	%		(2.0	%)		(3.9	%)		3.4	%		5.0	%
Same-store expense change		1.5	%		1.7	%		1.9	%		4.0	%		1.5	%
Same-store NOI change		4.3	%		(3.7	%)		(6.4	%)		3.2	%		6.5	%

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

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


	Years ended December 31
(amounts in thousands)	2011			2010			2009
Net income available to common shareholders	$	66,461		$	41,576		$	50,642
Interest expense, including discontinued operations		74,964			84,894			82,734
Provision for depreciation, including discontinued operations		103,940			94,384			88,419
Redeemable noncontrolling interests in income		1,168			1,446			1,885
Net gain on sales of discontinued operations		(14,489	)		(40,111	)		(21,574	)
General and administrative expense		21,768			20,570			17,390
Dividends attributable to preferred stock		7,655			11,813			11,813
Redemption related to preferred stock issuance cost		3,771			—			—
Other expenses		402			5,298			13,522
Net loss/(gain) on extinguishment of debt		—			23,507			(1,470	)
Net gain on sales of unconsolidated entities		(4,270	)		—			—

Net operating income	$	261,370		$	243,377		$	243,361

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

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

Development Properties

The following table provides data on our seven multifamily properties that were under various stages of development and construction at December 31, 2011. Completion of the development properties is subject to a number of risks and uncertainties, including construction delays and cost overruns. We cannot assure that these properties will be completed, or that they will be completed by the estimated dates, or for the estimated amounts, or will contain the number of proposed units shown in the table below. In addition to the properties below, we have made predevelopment investments and deposits on four potential projects totaling approximately $17,679,000. The deposits and predevelopment costs are reported in Other Assets on the Consolidated Balance Sheet.


(Dollar amounts in millions) Property Name	Location		Proposed Number of Units		Costs Incurred to Date— December 31, 2011⁽¹⁾		Estimated Total Cost		Estimated Cost to Complete		Estimated Completion Date⁽²⁾
Construction in Progress
Lawrence Station		Sunnyvale, CA		336	$	63.5	$	110.0	$	46.5		1Q/2013
Aviara³		Mercer Island, WA		166		12.6		44.5		31.9		2Q/2013
Wilshire La Brea⁴		Los Angeles, CA		478		130.6		277.3		146.7		4Q/2014
Solstice		Sunnyvale, CA		280		39.7		121.9		82.2		1Q/2014

Total Construction in Progress				1,260	$	246.4	$	553.7	$	307.3

Property Name	Location		Proposed Number of Units		Costs Incurred to Date— December 31, 2011		Estimated Total Cost⁽⁵⁾
Land Owned⁶
Pleasanton		Pleasanton, CA		254	$	18.5		TBR
Park Viridian II, III⁷		Anaheim, CA		400		35.6		TBR
Mission Bay⁸		San Francisco, CA		360		46.9		TBR

Total Land Owned				1,014	$	101.0		423.9

¹	Reflects all recorded costs as of December 31, 2011, recorded on our balance sheet as “direct investments in real estate-construction in progress.”

²	“Completion” is defined as our estimate of when an entire project will have a final certificate of occupancy issued and be ready for occupancy.

³	During the fourth quarter of 2010, the company entered into a ground lease for the Mercer Island site. The ground lease has an initial term of 60 years, two 15-year extensions followed by a 9-year extension. The annualized GAAP straight line lease expense is approximately $664,000.

⁴	Project’s estimated cost reflects the construction of 478 units and 40,000 square feet of retail. The estimated unit count and costs reflect the current underlying entitlements associated with the site.

⁵	Reflects the aggregate cost estimates; specific property cost estimates to be reported (TBR) once entitlement approvals are received and the Company is prepared to begin construction.

⁶

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

⁷	During the first quarter of 2011, the Company purchased for $5.1 million, a 4.4 acre site contiguous to its existing Park Viridian community and phase 2 land site in Anaheim, California. The combined undeveloped phases now total 400 units (185 units were added).

⁸	Represents two parcels of land in San Francisco, California’s Mission Bay district, acquired in the second quarter 2011, that are entitled for residential use and can be developed in phases.

Insurance, Property Taxes and Income Tax Basis

We carry comprehensive liability, fire, pollution, extended coverage and rental loss insurance on our properties with certain policy specifications, limits and deductibles. In addition, at December 31, 2011, we carried flood and earthquake coverage with an annual aggregate limit of $100,000,000 (after policy deductibles ranging from 2%-5% of damages). Management believes the properties are adequately covered by such insurance.

Property taxes on portfolio properties are assessed on asset values based on the valuation method and tax rate used by the respective jurisdictions. The gross carrying value of our direct investments in operating rental properties was $3,607,045,000 as of December 31, 2011. On the same date our assets had an underlying federal income tax basis of approximately $3,500,144,000, reflecting, among other factors, the carryover of basis on tax-deferred exchanges.

Headquarters

We lease our corporate headquarters at 525 Market Street, 4th Floor, San Francisco, California, 94105-2712, from Knickerbocker Properties, Inc., a Delaware corporation. The lease covers 28,339 rentable square feet at annual per square foot rents, which were $24.00 as of December 31, 2011. The lease term ends on February 1, 2016. We also maintain leased regional offices in: Seattle, Washington; Irvine and San Diego, California; Phoenix, Arizona; and Denver, Colorado. In addition, we own a regional office in Emeryville, California.

Item 3.

LEGAL PROCEEDINGS

The Company is involved in various legal actions arising in the ordinary course of business. Losses associated with legal claims arising in the ordinary course of business are expected to be covered under the Company’s insurance policies. As a result, the risk of a material loss impacting the Company’s financial position has been assessed as remote. As of December 31, 2011, there were no pending legal proceedings to which the Company is a party or of which any of its properties is the subject, the adverse determination of which the Company anticipates would have a material adverse effect upon its consolidated financial condition and results of operations.

Item 4.

(REMOVED AND RESERVED)

PART II

Item 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the New York Stock Exchange under the symbol ‘‘BRE’’. As of January 31, 2012, there were approximately 3,016 record holders of BRE’s common stock and the last reported sales price on the NYSE was $51.82. The number of holders does not include shares held of record by a broker or clearing agency, but does include each such broker or clearing agency as one record holder. As of January 31, 2012, there were approximately 20,602 beneficial holders of BRE’s common stock.

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


	Years ended December 31,
	2011						2010
	Stock Price				Dividends Paid		Stock Price				Dividends Paid
	High		Low		Dividends Paid		High		Low		Dividends Paid
First Quarter	$	47.69	$	42.01	$	0.3750	$	37.66	$	30.37	$	0.3750
Second Quarter	$	51.15	$	46.31	$	0.3750	$	43.50	$	34.92	$	0.3750
Third Quarter	$	54.31	$	41.39	$	0.3750	$	43.47	$	35.09	$	0.3750
Fourth Quarter	$	50.86	$	39.65	$	0.3750	$	46.38	$	41.01	$	0.3750

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

Operating company units in BRE Property Investors LLC converted into shares of BRE common stock or redeemed for cash totaled 454,273 and 155,634 for the years ended December 31, 2011 and 2010, respectively. As of December 31, 2011, 160,882 operating company units remain outstanding. Subsequent to December 31, 2011, 158,975 operating company units were exchanged for shares of BRE common stock. As a result, 1,907 operating company units remain outstanding.

Equity Compensation Plan Information

The following table sets forth information as of December 31, 2011 for all of our equity compensation plans, including our Amended and Restated 1992 Employee Stock Plan, our 1999 Stock Incentive Plan and our Fifth Amended and Restated Non-Employee Director Stock Option and Restricted Stock Plan:


	Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights		Weighted Average Exercise Price of Outstanding Options, Warrants and Rights ($)		Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans Excluding Securities Reflected in Column (a)
Plan Category		(a)		(b)		(c)
Equity compensation plans approved by security holders		694,393	$	36.62		1,529,528
Equity compensation plans not approved by security holders		—		—		—
Total		694,393	$	36.62		1,529,528

COMPARATIVE STOCK PERFORMANCE

The line graph below compares the cumulative total shareholder return on BRE Common Stock for the last five years with the cumulative total return on the S&P 500 Index and the NAREIT All Equity REIT Index REIT Index over the same period. This comparison assumes that the value of the investment in the Common Stock and in each index was $100 on December 31, 2006 and that all dividends were reinvested (1).

BRE Properties, Inc.

LOGO


	Period Ending
*Index*	12/31/06		12/31/07		12/31/08		12/31/09		12/31/10		12/31/11
BRE Properties, Inc.		100.00		64.87		47.38		60.38		82.45		98.74
NAREIT All Equity REIT Index		100.00		84.31		52.50		67.20		85.98		93.10
S&P 500		100.00		105.49		66.46		84.05		96.71		98.76

⁽¹⁾	Common Stock performance data is provided by SNL Securities and is calculated using the ex-dividend date.

⁽²⁾	Indicates appreciation of hypothetical $100 invested on December 31, 2006 in BRE Common Stock, the S&P 500, and the NAREIT All Equity REIT Index, assuming reinvestment of dividends discussed above.

Recent Sales of Unregistered Securities; Use of Proceeds from Unregistered Securities

During the year ended December 31, 2011, an aggregate 454,273 limited partnership units in BRE Property Investors LLC were redeemed for cash. The redemption value was calculated by multiplying the number of units redeemed times the 10 day average closing price of BRE’s common stock prior to the redemption notice date.

Issuer Purchases of Equity Securities


	(a) Total Number of Shares (or Units) Purchased¹			(b) Average Price Paid per Share (or Unit)²		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Traded Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
January 1, 2011 though March 31, 2011		(40,452	)	$	44.00		—		—
April 1, 2011 though June 30, 2011		(4,013,559	)	$	25.43		—		—
July 1, 2011 though September 30, 2011		(840,285	)	$	24.60		—		—
October 1, 2011 though October 31, 2011		(3,591	)	$	48.05		—		—
November 1, 2011 though November 30, 2011		—			—		—		—
December 1, 2011 though December 31, 2011		—			—		—		—
Total		(4,897,887	)	$	25.46		—		—

Includes an aggregate of 57,602 shares withheld to pay taxes; 4,000,000 shares of our 6.75% Series C Cumulative Redeemable Preferred Stock that we redeemed for $25.00 plus accrued dividends of $0.34688 on June 14, 2011; and 840,285 shares of our 6.75% Series D Cumulative Redeemable Preferred Stock that we repurchased for $24.33 plus accrued dividends of $0.27 on August 15, 2011.

²	Average price paid per share owned and forfeited by shareholder.

Item 6.

SELECTED FINANCIAL DATA

The selected financial data below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes. The results are affected by numerous acquisitions and dispositions as discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Therefore, the consolidated financial statements and notes thereto included elsewhere in this report are not directly comparable to prior years.


	2011			2010			2009			2008			2007
	(Amounts in thousands, except per share data)
Operating Results
Rental and ancillary revenues	$	371,381		$	334,965		$	319,143		$	318,506		$	295,695
Revenues from discontinued operations		6,239			19,466			29,703			50,592			58,946
Income from unconsolidated entities and other income		5,424			5,112			5,788			10,445			7,920
Total revenues	$	383,044		$	359,543		$	354,634		$	379,543		$	362,561
Net income available to common shareholders	$	66,461		$	41,576		$	50,642		$	122,760		$	103,607
Plus:
Net (gain) on sales of discontinued operations		(14,489	)		(40,111	)		(21,574	)		(65,984	)		(55,957	)
Net (gain) on sales of unconsolidated entities		(4,270	)		—			—			—			—
Depreciation from continuing operations		102,574			90,038			81,251			73,196			68,258
Depreciation from discontinued operations		1,366			4,346			7,168			8,263			11,691
Depreciation related to unconsolidated entities		2,052			1,991			1,841			1,715			1,285
Redeemable noncontrolling interest in income convertible into common shares		748			1,026			1,461			1,868			1,857
Funds from operations (FFO)¹	$	154,442		$	98,866		$	120,789		$	141,818		$	130,741
Other expenses²	$	402		$	5,298		$	13,522		$	5,719		$	—
Redemption related preferred stock issuance cost, net³	$	3,771			—			—			—		$	2,768
Net cash flows generated by operating activities	$	172,177		$	140,719		$	130,683		$	167,010		$	157,896
Net cash flows used in investing activities	$	(267,345	)	$	(197,261	)	$	(80,537	)	$	(47,820	)	$	(216,391	)
Net cash flows generated by (used in) financing activities	$	98,411		$	57,243		$	(52,214	)	$	(118,418	)	$	55,365
Dividends paid to common and preferred shareholder and distributions to noncontrolling interests	$	118,305		$	106,770		$	114,379		$	130,129		$	128,092
Weighted average shares outstanding—basic		71,220			61,420			52,760			51,050			50,735
Dilutive effect of stock based awards on EPS		450			430			240			650			1,045
Weighted average shares outstanding—diluted (EPS)		71,670			61,850			53,000			51,700			51,780
Plus—Operating Company Units⁴		510			685			780			830			870
Weighted average shares outstanding—diluted (FFO)		72,180			62,535			53,780			52,530			52,650
Operating Company Units outstanding at end of period		161			615			771			780			845
Net income per share—basic	$	0.93		$	0.67		$	0.95		$	2.38		$	2.03
Net income per share—assuming dilution	$	0.93		$	0.67		$	0.95		$	2.36		$	2.00
Dividends paid to common shareholders	$	1.50		$	1.50		$	1.88		$	2.25		$	2.15
Balance sheet information and other data
Real estate portfolio, net of depreciation	$	3,288,577		$	3,097,528		$	2,915,565		$	2,911,295		$	2,884,206
Total assets	$	3,352,621		$	3,156,247		$	2,980,008		$	2,992,744		$	2,954,166
Total debt	$	1,662,671		$	1,792,918		$	1,867,075		$	1,902,401		$	1,887,862
Redeemable noncontrolling interests	$	16,228		$	34,866		$	33,605		$	29,972		$	42,357
Shareholders’ equity	$	1,610,449		$	1,276,393		$	1,022,919		$	969,204		$	943,542

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

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

Other expenses for 2011 totaled $402,000 and were related to acquisition costs. Other expenses for 2010 totaled $5,298,000 and included $3,998,000 related to acquisition costs and a one-time $1,300,000 charge associated with the resignation of our Chief Operating Officer. Other expenses for 2009 totaled $13,522,000, which represent a $12,922,000 abandonment charge related to three sites under option agreements or letters of intent and a $600,000 severance charge. Other expenses for 2008 totaled $5,719,000, which represented a $5,119,000 abandonment charge related to three sites under option agreements or letters of intent and a $600,000 severance charge.

Represents preferred stock issuance costs related to the redemption of our 6.75% Series C Cumulative Redeemable Preferred Stock during the quarter ended June 30, 2011; the purchase of 840,285 shares of 6.75% Series D Cumulative Redeemable Preferred Stock during the quarter ended September 30, 2011; and the redemption of 8.08% Series B Cumulative Redeemable Preferred Stock during the quarter ended September 30, 2007.

⁴	Under earnings per share guidance, common share equivalents deemed to be anti-dilutive are excluded from the diluted per share calculations.

Item 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Summary

We are a self-administered equity real estate investment trust, or REIT, focused on the ownership, operation, development, and acquisition of apartment communities. Our operating and investment activities are primarily focused on the major metropolitan markets within the state of California, and in the Seattle, Washington region. We also own and operate apartment communities in the Phoenix, Arizona and in the Denver, Colorado metropolitan markets. At December 31, 2011, our portfolio had real estate assets with a net book value of approximately $3.3 billion that included 76 wholly or majority owned completed apartment communities, aggregating 21,336 units; eleven multifamily communities owned in joint ventures, comprised of 3,592 apartment units; and seven apartment communities in various stages of construction and development. We earn revenue and generate operating cash flow primarily by collecting monthly rent from our apartment residents.

Our 2011 results, when compared to 2010 and 2009 annual results reflect the impact of improving fundamentals for the multifamily industry. We experienced same store revenue growth in 2011 of 3.4% after experiencing consecutive years of declines of 2.0% in 2010 and 3.9% in 2009. Operating fundamentals, driven by low levels of new supply and an increase in the propensity to rent, began to improve in 2010 and continued to strengthen throughout 2011. Although unemployment levels following the severe recession that started in late 2007 remain elevated at 11% in California and 8.5% in Washington, we experienced job growth in our core markets in 2011. Over 150,000 jobs were added in 2011 and over 100,000 of these jobs came in the second half of 2011.

On the investment side, the landscape remains competitive within our markets despite the broader economic volatility. We continue our approach of opportunistically sourcing acquisitions that make sense from a location and long-term return perspective.

We were active early cycle acquirers during the past 24 months closing on over $462 million of on balance sheet communities and increasing our operating real estate portfolio by 14.5% since December 31, 2009. We continue to look for well located existing assets that will complement our existing portfolio but, given the competition in the acquisition environment in which we operate we expect to be more active investing in development properties which can provide a higher return in many cases than that of acquisitions at this time in the cycle.

During 2011, we acquired three operating communities consisting of 652 units and each located within California for an aggregate purchase price of $170,127,000. We also disposed of two communities (in the Inland Empire region of California) for combined gross proceeds of $65,175,000. The dispositions produced net gains on the sales totaling $14,489,000. The acquisition and disposition activity in 2011 reflects our strategy of concentrating our investments in coastal metropolitan areas which we believe possess stronger long-term growth prospects and reducing our exposure in the eastern portion of the Inland Empire which we believe does not present the same long-term growth prospects as our coastal markets.

We also continued to strengthen our financial position and balance sheet flexibility during 2011. Through a combination of common equity issuance and property dispositions, we raised over $547,000,000 in capital. The proceeds from these activities were used to fund investment activity, refinance near-term debt maturities and reduce our overall level of leverage.

As the economic environment improves, we believe our communities are well-positioned to take advantage of the favorable demographic factors that are expected to produce strong levels of revenue growth for apartment owners in the coming years. These factors include: (1) increases in overall population levels among the age cohort with the greatest tendency to rent (age 20 to 34 years old); (2) a greater propensity to rent among all age groups as a result of the psychology and financial impact on homeownership rates coming out of this past recession; and (3) low levels of new supply of apartment communities from development activities in our core markets.

To better understand our overall results, our 76 wholly or majority owned apartment communities can be characterized as follows:

•

18,641 units in 66 communities were owned, completed and stabilized for all of 2011 and 2010 (“same-store”) communities;

•

566 units in two development communities were experiencing lease up and stabilization during 2011 and 2010 and as a result did not have comparable year-over-year operating results (“non same-store”); and

•

1,689 units in seven communities were acquired during 2011 and 2010 and as a result did not have comparable year-over-year operating results (“non same-store”); and

•

440 units were moved from same-store operating communities into rehabilitation/redevelopment community category during 2011.

In addition to year-over-year economic operating performance, our results of operations for the three years ended December 31, 2011 were affected by income derived from property acquisitions and development completions of apartment communities, offset by the cost of capital associated with financing these transactions. Our book capitalization grew to $3.4 billion at December 31, 2011 from $3.0 billion at December 31, 2009, reflecting capital raised through offerings of debt and equity.

RESULTS OF OPERATIONS

Comparison of the Years ended December 31, 2011, 2010 and 2009

Revenues

Total revenues were $383,044,000 in 2011, $359,543,000 in 2010 and $354,634,000 in 2009, including revenues from discontinued operations. The increase in rental income in 2011 was derived from both properties developed and acquired and a 3.4% increase in same store property revenue. A summary of revenues for the years ended December 31, 2011, 2010 and 2009 follows:


	2011 Total		% of Total Revenues			2010 Total		% of Total Revenues			2009 Total		% of Total Revenues
Rental income	$	357,505,000		93	%	$	322,510,000		90	%	$	307,186,000		87	%
Ancillary income⁽¹⁾		13,876,000		3	%		12,455,000		3	%		11,957,000		3	%
Revenues from discontinued operations		6,239,000		2	%		19,466,000		5	%		29,703,000		8	%

Total Rental and Ancillary income		377,620,000					354,431,000					348,846,000

Income from unconsolidated entities		2,888,000		1	%		2,178,000		1	%		2,329,000		1	%
Other income		2,536,000		1	%		2,934,000		1	%		3,459,000		1	%

Total revenue	$	383,044,000		100	%	$	359,543,000		100	%	$	354,634,000		100	%

⁽¹⁾	Ancillary income is defined as any non-rental income earned per occupied unit during the period.

Composite of Change in Year over Year Revenues


	2011 Change		2010 Change⁽¹⁾
Same-store Communities	$	10,578,000	$	(6,407,000	)
Non same-store Communities		25,838,000		22,200,000

Total change in Rental and Ancillary revenues from continuing operations	$	36,416,000	$	15,793,000

⁽¹⁾	Represents 2010 same-store pool and prior period results and do not tie internally to restated 2010 amounts, whereas, 2011 results reflect current same-store results.

Rental and Ancillary Income

The $25,838,000 increase in revenue from non-same-store properties represents the increase in the size of the portfolio from recently completed development properties and properties acquired in 2010 and 2011. Same store revenues increased by $10,578,000 or 3.4% and decreased by $6,407,000 or 2.0% for the years ended December 31, 2011 and 2010, respectively. The 2011 same store increase was primarily due to a 3.8% increase in average monthly revenue earned per unit in the same-store portfolio in 2011 to $1,508 per unit from $1,453 per unit in 2010. Average monthly revenue is comprised of rental and ancillary income earned on occupied units during the period and net of concessions of $9 per month per occupied unit during the period.

As described above, the increase in rental and ancillary revenues primarily relates to acquired and developed communities. The following table summarizes our multifamily property development completed, acquired and dispositions:


	Year Ended December 31,
	2011		2010		2009
Total cost of development properties completed		—	$	119,698,000	$	282,934,000

# of units completed		—		566		801

Total cost of properties acquired	$	170,127,000	$	292,100,000		—

# of units acquired		652		1,037		—

Approximate gross sales proceeds of dispositions	$	65,175,000	$	167,327,000	$	67,000,000

# of units sold		634		1,530		752


	December 31,
	2011			2010			2009
Number of wholly or majority owned operating properties		76			75			73
Average portfolio physical occupancy rates for operating properties		95	%		95	%		95	%

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

Other income

Other income for the years ended December 31, 2011, 2010 and 2009, is comprised of the following:


	2011		2010		2009
Joint venture management fees	$	1,843,000	$	1,715,000	$	1,700,000
Interest income		369,000		555,000		650,000
Legal and insurance settlements		40,000		530,000		640,000
Disposition fee		144,000		—		—
Other		140,000		134,000		469,000

Total	$	2,536,000	$	2,934,000	$	3,459,000

Expenses

Real estate expenses

A summary of our real estate expenses, excluding discontinued operations is as follows:


	Year ended December 31,
	2011		2010		2009
Real estate expenses	$	119,212,000	$	108,634,000	$	99,951,000
Real estate expenses as a percent of rental and ancillary income from continuing operations		32%		32%		31%
“Same-store” expense % change⁽¹⁾		1.5%		1.7%		1.9%

⁽¹⁾	Prior year changes represent previously reported amounts and are not updated for the 2011 same-store pool.

Real estate expenses for multifamily rental properties (which include repairs and maintenance, utilities, on-site staff payroll, property taxes, insurance, advertising and other direct operating expenses) increased $10,578,000, or 9.7%, for the year ended December 31, 2011, as compared to the prior year. The primary driver of overall expense increase was non same-store properties that were acquired or recently delivered. Same-store expenses increased $1,520,000, or 1.5%, $1,621,000, or 1.7%, and $1,831,000, or 1.9% in 2011, 2010 and 2009, respectively, as a result.

During the year ended December 31, 2011, we were successful in appealing property tax values on numerous properties, primarily in California and the Seattle, Washington area, which lead to lower expenses during the year. Property taxes comprised 28%, 29% and 31% of real estate expenses in the current same store pool during the year ended December 31, 2011, 2010 and 2009, respectively. Across the same store portfolio, property taxes decreased $559,000 or 1.9% in 2011 from 2010.

Real estate expenses shown in the table above exclude real estate expense from discontinued operations which totaled $2,462,000, $7,532,000 and $11,321,000 for 2011, 2010 and 2009, respectively.

Provision for depreciation

The provision for depreciation totaled $102,574,000, $90,038,000 and $81,251,000 for the years ending 2011, 2010 and 2009, respectively. The provision for depreciation increased $12,536,000, or 14%, for the year ended December 31, 2011 compared to 2010, and increased $8,787,000, or 10.8%, for the year ended December 31, 2010 compared to 2009. The increases in 2011 and 2010 resulted from higher depreciable bases on acquisitions and development properties completed.

Interest expense

Common equity issuance has reduced debt as a percentage of gross assets to 41% at December 31, 2011, compared to 47% at December 31, 2010 and 52%, at December 31, 2009. As a result, lower leverage levels have reduced the absolute levels of interest expense incurred over the past three years. Conversely, we have higher levels of capitalized interest as the average construction in progress and land under development balances outstanding totaled $275,214,000, $221,800,000 and $307,559,000 for the years ended December 31, 2011, 2010 and 2009, respectively. Weighted average cost of debt was 5.3%, 5.2% and 5.2% for the years ended December 31, 2011, 2010 and 2009, respectively. A summary of interest expense is as follows:


	Year ended December 31,
	2011			2010			2009
Interest on unsecured senior notes	$	38,518,000		$	31,440,000		$	40,681,000
Interest on convertible debt		1,870,000			17,661,000			24,986,000
Interest on mortgage loans payable		45,611,000			44,294,000			28,163,000
Interest on unsecured line of credit		3,396,000			3,476,000			5,234,000

Total interest incurred	$	89,395,000		$	96,871,000		$	99,064,000
Capitalized interest		(14,431,000	)		(11,977,000	)		(16,330,000	)

Total interest expense	$	74,964,000		$	84,894,000		$	82,734,000

Year-end debt balances were as follows:


	December 31,
	2011		2010		2009
Unsecured senior notes	$	690,018,000	$	738,563,000	$	469,142,000
Convertible unsecured senior notes⁽¹⁾		34,939,000		34,513,000		357,776,000
Mortgage loans payable		808,714,000		810,842,000		752,157,000
Unsecured line of credit		129,000,000		209,000,000		288,000,000

Total debt	$	1,662,671,000	$	1,792,918,000	$	1,867,075,000

Weighted average interest rate for all debt at end of period		5.3%		5.2%		5.2%

⁽¹⁾

The remaining $35,000,000 principal amount of the 4.125% convertible unsecured notes are callable by the Company on or after February 21, 2012. Subsequent to the end of the year, the Company announced it is exercising its right to redeem for cash all of the outstanding notes, at a redemption price equal to 100% of the principal amount of the notes outstanding, plus accrued and unpaid interest up to, but excluding, February 21, 2012 (the “Redemption Date”).

General and administrative expenses

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


	2011		2010		2009
General and administrative expenses	$	21,768,000	$	20,570,000	$	17,390,000
Annual change as a percentage		5.8%		18.3%		(15.5)%
As a percentage of rental and ancillary revenues (including revenues from discontinued operations)		5.9%		5.8%		5.0%

General and administrative expenses increased 5.8% in 2011 primarily related to increased compensation costs. The 18% increase in general and administrative expenses in 2010 was primarily related to increased levels of stock-based compensation expense during the year. Total stock-based compensation in general and administrative expenses totaled $4,697,000, $4,785,000, and $2,596,000 during the years ending 2011, 2010, and 2009, respectively. Stock-based compensation expense during 2009 reflected the impact of decreased expectations for vesting levels of certain performance based awards due to the recessionary environment.

Office rents totaling $1,499,000, $1,433,000 and $1,405,000 for the years ended December 31, 2011, 2010 and 2009, respectively, are included in general and administrative expense.

Other expenses

Other expenses for the years ended December 31, 2011, 2010 and 2009, are comprised of the following:


	2011			2010			2009
Acquisition costs	$	402,000	⁽¹⁾	$	3,998,000	⁽¹⁾		—
Severance charge		—			1,300,000	⁽²⁾	$	600,000
Abandonment charge		—			—			12,922,000	⁽³⁾

Total	$	402,000		$	5,298,000		$	13,522,000

⁽¹⁾	Represents costs related to acquisitions during 2011 and 2010. Effective January 1, 2009, we adopted an accounting standard requiring costs associated with the acquisition of operating properties be expensed as incurred. No operating communities were acquired during 2009.

⁽²⁾	Represents one-time charge associated with the resignation of our Chief Operating Officer.

⁽³⁾	Represents an abandonment charge related to three land sites under option agreements that we chose not to purchase.

Redeemable noncontrolling interest in income

Redeemable noncontrolling interest in income represent the earnings attributable to the noncontrolling members of our consolidated subsidiaries and totaled $1,168,000, $1,446,000, and $1,885,000 for the years ended December 31, 2011, 2010 and 2009, respectively. Redeemable noncontrolling interests in income decreased in 2011 primarily due to redemptions of operating company units for cash. Conversions and redemptions of operating company units to common shares or cash totaled 454,273; 155,635; and 10,674 units for the years ended December 31, 2011, 2010 and 2009, respectively. As of December 31, 2011, 160,882 operating company units remain outstanding. Subsequent to the end of the year, 158,975 operating company units were converted for shares of BRE common stock. As a result, 1,907 operating company units remain outstanding.

Discontinued operations

Accounting guidance requires the results of operations for properties sold during the period or designated as held for sale at the end of the period to be classified as discontinued operations. The property-specific components of net earnings that are classified as discontinued operations include all property-related revenues and operating expenses, depreciation expense recognized prior to the classification as held for sale, and property-specific interest expense to the extent there is secured debt on the property. In addition, the net gain or loss on the eventual disposal of properties held for sale is reported as discontinued operations.

During 2011, we sold two communities in the eastern half of the Inland Empire totaling 634 units: Galleria at Towngate, with 268 units located in Moreno Valley, California; and Windrush Village, a 366 unit property located in Colton, California. The gross proceeds from the sales of the two communities were $65,175,000, resulting in a net gain of $14,489,000. The sale of these assets reduced our concentration of net operating income from the Inland Empire to 5.3% in 2011 from 7.4% in 2010.

During 2010, we sold four communities totaling 1,530 units: Montebello, with 248 units located in Seattle, Washington; Boulder Creek, a 264 unit property located in Riverside, California; Pinnacle Riverwalk, a 714 unit property located in Riverside, California; and Parkside Village, a 304 unit property located in Riverside, California. The four communities were sold for gross sales proceeds of $167,327,000 resulting in a net gain on sales of $40,111,000.

During 2009, we sold two communities totaling 752 units: Overlook at Blue Ravine, with 512 units located in Folsom, California; and Arbor Pointe, a 240 unit community located in Sacramento, California. The two communities were sold for gross sales proceeds of $67,000,000, resulting in a net gain on sales of $21,574,000. In addition to the two communities, we sold an excess parcel of land in Santa Clara, California, classified as held for sale at December 31, 2008, for gross sales proceeds totaling $17,100,000, approximately equal to the carrying value.

The net gain on sale and the combined results of operations for these eight properties for each year presented are included in discontinued operations on the consolidated statements of income. These amounts totaled $16,900,000, $47,699,000, and $32,787,000 for the years ended December 31, 2011, 2010 and 2009, respectively. There were no operating properties held for sale as of December 31, 2011.

Income from unconsolidated entities

Income from unconsolidated entities totaled $2,888,000, $2,178,000 and $2,329,000 for the years ended December 31, 2011, 2010 and 2009, respectively. The totals for each year include our share of net income from the joint ventures we own.

During 2011, two joint venture assets were sold; The Landing at Bear Creek, a 224 unit joint venture community, located in Lakewood, Colorado; and The Pinnacle at Hunters Glen, a 264 unit joint venture community located in Thornton, Colorado. The Company had a 15% equity ownership in the communities and as a result received gross proceeds of $9,300,000 and recognized a net gain on the sale of $4,270,000.

Net (loss)/gain from extinguishment of debt

There was no gain or loss on extinguishment of debt during the year ended December 31, 2011. Net (loss)/gain on extinguishment of debt totaled ($23,507,000) and $1,470,000 for the years ended December 31, 2010 and 2009, respectively. The activity was driven by tender offers in 2010 and 2009, along with open market repurchases in each of those years. In 2009, the repurchases were done at less than par resulting in gains.

On October 13, 2010, we closed a fixed price cash tender offer for any and all of our 4.125% convertible senior unsecured notes due 2026. As a result, $321,334,000 in aggregate principal amount of our 4.125% convertible senior unsecured notes due 2026 were validly tendered, and we accepted, purchased and subsequently cancelled the notes for an aggregate purchase price of 104% of par, or approximately $334,187,360. After the tender offer an aggregate principal amount of $35,000,000 of the notes remain outstanding. We recognized a net loss on early debt extinguishment of $22,949,000 in connection with the tender offer.

On April 15, 2009, we closed a fixed price cash tender offer for any and all of our outstanding 5.750% senior notes due 2009 and any and all of our outstanding 4.875% senior notes due 2010. As a result, $61,407,000 and $119,421,000 in aggregate principal amount of the 5.750% senior notes due 2009 and 4.875% senior notes due 2010, respectively, were validly tendered and we accepted, purchased and subsequently cancelled the notes. After giving effect to the purchase of the tendered notes, an aggregate principal amount of $30,579,000 of the 4.875% senior notes due in 2010, were paid in full during the 2010. The remaining principal balance of the 5.750% senior notes due in 2009 were paid in full during September 2009, as the notes came due.

On April 1, 2009, we closed a fixed price cash tender offer for any and all of our outstanding 7.450% senior notes due 2011 and any and all of our outstanding 7.125% senior notes due 2013. As a result, $201,455,000 and $89,982,000 in aggregate principal amount of the 7.450% senior notes due 2011 and 7.125% senior notes due 2013, respectively, were validly tendered and we accepted, purchased and subsequently cancelled the notes. After giving effect to the purchase of the tendered notes, an aggregate principal amount of $48,545,000 and $40,018,000 of the 7.450% senior notes due 2011 and 7.125% senior notes due 2013, respectively, remain outstanding.

During 2009, we repurchased $78,266,000 of our 4.125% convertible senior unsecured notes for an aggregate price of 92.99% of par, or approximately $72,776,000. We recognized a net gain on early extinguishment of debt of $2,870,000 in connection with this repurchase.

Dividends attributable to preferred stock

On August 15, 2011, we repurchased 840,285 shares of 6.75% Series D Cumulative Redeemable Preferred Stock at a price of $24.33 per share on the open market, a $0.67 discount to par resulting in a non cash return from preferred shareholders of $563,000. In addition, the initial issuance costs associated with these shares totaling $718,000 were charged to retained earnings during the third quarter of 2011. The net effect of the activity was a $155,000 charge to retained earnings during the third quarter of 2011. As of December 31, 2011, 2,159,715 shares of 6.75% Series D Cumulative Redeemable Preferred Stock remain outstanding.

On June 13, 2011, we redeemed all 4,000,000 shares of 6.75% Series C Cumulative Redeemable Preferred Stock at a redemption price of $25.34688 per share. The redemption price was equal to the original issuance

price of $25.00 per share, plus accrued and unpaid dividends to the redemption date. The initial issuance costs totaling approximately $3,616,000 associated with this series of perpetual preferred stock were charged to retained earnings during the second quarter of 2011.

As stated above, our Series C Cumulative Redeemable Preferred Stock was outstanding for part of the year and a portion of our Series D Cumulative Redeemable Preferred Stock was outstanding for the entire year. Dividends for the Series C Cumulative Redeemable Preferred Stock for 2011 reflect the dividends earned from January 1, 2011 to the June 13, 2011, redemption date. Dividends for the 6.75% Series D Cumulative Redeemable Preferred Stock for 2011 reflect the dividends earned from January 1, 2011 to December 31, 2011. Included in the total are dividends earned from January 1, 2011 to August 10, 2011 for the 840,285 repurchased shares of 6.75% Series D Cumulative Redeemable Preferred Stock. Dividends totaled $7,655,000 for the year ended December 31, 2011, and $11,813,000 for the years ended December 31, 2010, and 2009 are attributable to preferred stock represent the dividends on our 6.75% Series C and 6.75% Series D Cumulative Redeemable Preferred Stock. Our Series D Cumulative Redeemable Preferred Stock has a $25.00 per share liquidation preference and became callable at our election in December of 2009.

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, 2011 was $66,461,000, or $0.93 per diluted share, as compared with $41,576,000, or $0.67 per diluted share, for the year ended December 31, 2010, and $50,642,000, or $0.95 per diluted share, for the year ended December 31, 2009.

Liquidity and Capital Resources

Depending upon the availability and cost of external capital, we anticipate making additional investments in multifamily apartment communities. These investments are expected to be funded through a variety of sources. These sources may include internally generated cash, temporary borrowings under our revolving unsecured line of credit, proceeds from asset sales, public and private offerings of debt and equity securities, and in some cases the assumption of secured borrowings. To the extent that these additional investments are initially financed with temporary borrowings under our revolving unsecured line of credit, we anticipate that permanent financing will be provided through a combination of public and private offerings of debt and equity securities, proceeds from asset sales and secured debt. We believe our liquidity and various sources of available capital are sufficient to fund operations, meet debt service and dividend requirements, and finance future investments. Annual cash flows from operating activities exceeded annual distributions to common shareholders, preferred shareholders and minority members by approximately $54,000,000, $34,000,000 and $16,000,000 for the years ended December 31, 2011, 2010 and 2009, respectively. Due to the timing associated with operating cash flows, there may be certain periods where cash flows generated by operating activities are less than distributions. We believe our unsecured line of credit provides adequate liquidity to address temporary cash shortfalls.

On May 11, 2011, we completed an equity offering of 9,200,000 common shares, including shares issued to cover over-allotments, at $48.00 (prior to a $1.92 per under writers discount) per share. Total gross proceeds from this offering were approximately $441,508,000. We used the proceeds, net of the discount, of approximately $423,936,000 from the offering for general corporate purposes and to repay borrowings under its unsecured line of credit.

On February 24, 2010, we entered into Equity Distribution Agreements (EDAs) under which we may issue and sell from time to time through or to our sales agents shares of our common stock having an aggregate offering price of up to $250,000,000. During 2011, 1,291,537 shares were issued under the EDAs, with an average gross share price of $47.55 for total gross proceeds of approximately $61,414,000. As of December 31, 2011, the remaining capacity under the EDAs totals $163,600,000. Proceeds were used for general corporate purposes, which included reducing borrowings under our unsecured line of credit, the repayment of other indebtedness, the redemption or other repurchase of outstanding securities and funding for development

activities. During 2010, 581,055 shares were issued under the EDAs for gross proceeds of approximately $25,000,000 with an average gross share price of $43.02. Proceeds were used for general corporate purposes, which included reducing borrowings under our unsecured line of credit, the repayment of other indebtedness, the redemption or other repurchase of outstanding securities and funding for development activities.

During January 2011, we paid off the remaining aggregate principal amount of $48,545,000 of our 7.450% senior notes as they matured.

On April 7, 2010, we completed an equity offering of 8,050,000 common shares, including shares issued to cover over-allotments, at $34.25 per share. Total gross proceeds from this offering were approximately $275,713,000 before deducting the underwriting discount and other offering expenses paid by the Company. The Company used the net proceeds of approximately $263,498,000 from the offering for general corporate purposes, which included reducing borrowings under its unsecured line of credit.

Effective February 24, 2010, we terminated the EDAs the Company entered into on May 14, 2009 under which we could issue and sell from time to time through or to our sales agent shares of our common stock having an aggregate offering price of up to $125,000,000. During 2009, 3,801,185 shares were issued under the EDAs for gross proceeds of approximately $104,600,000 with an average gross share price of $27.52. Proceeds were used for general corporate purposes, which included reducing borrowings under our unsecured line of credit, the repayment of other indebtedness, the redemption or other repurchase of outstanding securities and funding for development activities. During 2010, there were no shares issued under the EDAs entered into on May 14, 2009.

During 2011, 2010 and 2009 we invested $161,280,000, $101,239,000 and $155,451,000 respectively in capital expenditures. Development, rehabilitation/redevelopment and capital expenditures are expected to be between $241,000,000 and $318,000,000 for the year ending December 31, 2012.


	Year ended December 31,
(amounts in thousands)	2012 Range		2011		2010		2009
New development (including land)	$	190,000-$240,000	$	124,249	$	71,630	$	127,902
Rehab expenditures		30,000-55,000		15,869		5,944		7,097
Capital expenditures		21,000-23,000		21,162		23,665		20,452

Total capital expenditures	$	241,000-$318,000	$	161,280	$	101,239	$	155,451

Tender Offers and Repurchase Activity

On October 13, 2010, we closed a fixed price cash tender offer for any and all of our 4.125% convertible senior unsecured notes due in 2026. The convertible notes are putable to the company in February 2012, August 2013, August 2016 and August 2021. The decision to tender for and retire the majority of outstanding bonds was based on our desire to take advantage of the favorable interest rate environment for long-term debt in 2010 while also avoiding the potential put of these notes in 2012, the same year that our unsecured line of credit was scheduled to expire. As a result of this tender offer, $321,334,000 in aggregate principal amount of our 4.125% convertible senior unsecured notes due in 2026 were validly tendered, and we accepted, purchased and subsequently cancelled the notes for an aggregate purchase price of 104% of par, or approximately $334,187,360. After the tender offer an aggregate principal amount of $35,000,000 of the notes remained outstanding. We recognized a net loss on early debt extinguishment of $22,949,000 in connection with the tender offer.

During June 2010, we repurchased $15,000,000 of our 4.125% convertible senior unsecured notes at par. The Company recognized a net loss on early debt extinguishment of $558,000 in connection with the repurchase.

2010 Debt Tender/Repurchase Summary

(Amounts in thousands)


Security	Cash Principal Outstanding			Bonds Retired		Cash Paid		Principal Amount Remaining			% of Par			Extinguishment loss			Write off of Unamortized Discounts / Fees			Net (Loss)
4.125% Senior Notes	$	371,334	⁽¹⁾	$	15,000	$	15,000	$	356,334			100.00	%		—		($	558	)	($	558	)

Open Market Repurchase	$	371,334		$	15,000	$	15,000	$	356,334			100.00	%		—		($	558	)	($	558	)
4.125% Senior Notes	$	356,334	⁽²⁾	$	321,334	$	334,187	$	35,000			104.00	%	($	12,853	)	($	10,096	)	($	22,949	)

Debt Tender Total	$	356,334		$	321,334	$	334,187	$	35,000			104.00	%	($	12,853	)	($	10,096	)	($	22,949	)

Total Tender/Repurchase	$	371,334		$	336,334	$	349,187	$	35,000	⁽³⁾		103.82	%	($	12,853	)	($	10,654	)	($	23,507	)

⁽¹⁾	Balance as of December 31, 2009.

⁽²⁾	Balance prior to October, 2010 tender offer.

⁽³⁾	Balance as of December 31, 2010.

On April 15, 2009, we closed a fixed price cash tender offer for any and all of our outstanding 5.750% senior notes due 2009 and any and all of our outstanding 4.875% senior notes due 2010. As a result, $61,407,000 and $119,421,000 in aggregate principal amount of the 5.750% senior notes due 2009 and 4.875% senior notes due 2010, respectively, were validly tendered and we accepted, purchased and subsequently cancelled the notes. After giving effect to the purchase of the tendered notes, an aggregate principal amount of $30,579,000 of the 4.875% senior notes due in 2010, respectively, were paid in full during 2010. The remaining principal balance of the 5.750% senior notes due in 2009 were paid in full during September 2009, as the note came due.

On April 1, 2009, we closed a fixed price cash tender offer for any and all of our outstanding 7.450% senior notes due 2011 and any and all of our outstanding 7.125% senior notes due in 2013. As a result, $201,455,000 and $89,982,000 in aggregate principal amount of the 7.450% senior notes due 2011 and 7.125% senior notes due in 2013, respectively, were validly tendered and we accepted, purchased and subsequently cancelled the notes. After giving effect to the purchase of the tendered notes, an aggregate principal amount of $48,545,000 7.450% senior notes due 2011 were paid in full in 2011, and $40,018,000 7.125% senior notes due in 2013, respectively, remain outstanding.

During 2009, we repurchased $78,266,000 of our 4.125% convertible senior unsecured notes for an aggregate price of 92.98% of par, or approximately $72,776,000.

Net gain on extinguishment of debt totaled $1,470,000 for the year ended December 31, 2009.

Fixed rate Unsecured Senior notes and Unsecured line of credit

On September 22, 2010, we closed an offering of $300,000,000 of 10.5 year senior unsecured notes. The notes will mature on March 15, 2021 with a coupon rate of 5.20%. Net proceeds from the offering, after all discounts, commissions and issuance costs, totaled approximately $297,477,000. Proceeds from these offerings have been used for general corporate purposes, including the repayment of debt, redemption of equity securities, funding for development activities and financing for acquisitions. Pending these uses, we initially used the proceeds from these offerings to reduce borrowings under our unsecured line of credit.

Through December 31, 2011 we maintained an unsecured line of credit with a total commitment of $750,000,000. Based on our then current debt ratings, the line of credit accrued interest at London Interbank Offered Rate (LIBOR) plus 47.5 basis points. In addition, we paid a 0.15% annual facility fee on the total commitment of the facility. Borrowings under our unsecured line of credit totaled $129,000,000 at December 31, 2011, compared to $209,000,000 at December 31, 2010. Borrowings under the unsecured line of credit were used

to fund acquisition and development activities as well as for general corporate purposes. Balances on the unsecured line of credit were typically reduced with available cash balances. The unsecured line of credit was terminated subsequent to December 31, 2011.

Subsequent to the year ended December 31, 2011, we entered into a $750,000,000 unsecured line of credit (the “Credit Agreement”). The Credit Agreement has an initial term of 39 months, terminates on April 3, 2015 and replaces our previous $750,000,000 unsecured line of credit. Based on our current debt ratings, the line of credit accrues interest at LIBOR plus 120 basis points. In addition, we pay a 0.20% annual facility fee on the total commitment amounts of the facility.

The total principal amount in unsecured senior notes outstanding at December 31, 2011, consist of the following:


Maturity	Unsecured Senior Note Balance		Interest Rate (Coupon)
February 2012⁽¹⁾	$	34,939,000		6.01	%
February 2013		40,018,000		7.13	%
March 2014		50,000,000		4.70	%
March 2017		300,000,000		5.50	%
March 2021		300,000,000		5.20	%

Total/Weighted Average Interest Rate	$	724,957,000		5.44	%

⁽¹⁾

The principal amount of our 4.125% convertible senior unsecured notes is $35,000,000. The notes are callable by us on or after February 21, 2012. The interest rate and note balance have been adjusted in accordance with guidance on convertible debt instruments. Subsequent to the year ended December 31, 2011, the Company gave notice that it will be calling the remaining outstanding 2012 4.125% convertible senior unsecured notes on February 21, 2012.

Secured Debt

On December 31, 2011, we had mortgage loans and a secured credit facility with a total principal amount outstanding of $808,714,000, at an effective interest rate of 5.60%, and remaining terms ranging from 1 year to 9 years.

Subsequent to the year ended December 31, 2011, the Company prepaid the single property mortgage on our Alessio operating community for $66,168,027 including principal and accrued interest prior to its scheduled maturity, with no prepayment penalty.

On August 12, 2010, we purchased an operating community totaling 226 units located in San Jose, California, for an aggregate purchase price of $50,300,000. In connection with the acquisition, we assumed an existing $32,500,000 secured mortgage loan, with a fixed interest rate of 5.74% that is scheduled to mature on September 1, 2019.

On April 30, 2010, we refinanced a single property mortgage loan totaling $59,500,000 at a fixed rate of 5.20%. The mortgage has a 10 year interest only term and is scheduled to mature on April 30, 2020. The original mortgage note had a principal amount outstanding of $31,100,000 and was scheduled to mature on October 1, 2010, at a fixed rate of 7.38%.

On April 7, 2009, we closed a $620,000,000 secured credit facility. The facility consists of two $310,000,000 tranches. The first tranche has a fixed rate term of 10 years and has a maturity date of May 1, 2019. The second tranche has a maturity date of September 1, 2020, with a fixed rate term for the first 10 years and a variable rate for the remaining one-year period. Together, the effective composite annual cost of debt is 5.6% inclusive of rate hedging transactions. Fifteen multifamily properties totaling 4,651 units with a net carrying value of $607,500,000 secured the credit facility at the time of closing.

As of December 31, 2011, we had total outstanding debt balances of $1,662,671,000 and total outstanding shareholders’ equity and redeemable noncontrolling interests of $1,626,927,000, representing a debt to total book capitalization ratio of approximately 51%.

We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases or privately negotiated transactions. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Our indebtedness contains financial covenants as to minimum net worth, interest coverage ratios, maximum secured debt and total debt to capital, among others. We were in compliance with all such financial covenants throughout the year ended December 31, 2011.

We anticipate that we will continue to require outside sources of financing to meet all our long-term liquidity needs beyond 2011, including scheduled debt repayments, construction funding and property acquisitions. At December 31, 2011, we had an estimated cost of $307,300,000 to complete existing construction in progress, with funding estimated to be incurred through the fourth quarter of 2014.

Scheduled contractual obligations required for the next five years and thereafter as of December 31, 2011 are as follows:


Contractual Obligations	Total		Less than 1 year⁽¹⁾		1-3 years		3-5 years		More than 5 years
	(amounts in thousands)
Long-term debt obligations	$	1,662,732	$	230,742	$	124,368	$	17,003	$	1,290,619
Lease obligations		17,082		1,823		3,622		2,511		9,126

Total	$	1,679,814	$	232,565	$	127,990	$	19,514	$	1,299,745

⁽¹⁾	4.125% 2012 convertible senior unsecured notes are presented gross. The balance sheet carrying value at December 31, 2011 reflects a debt discount of $61 thousand.

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

We have joint venture co-investments in properties that are unconsolidated and accounted for under the equity method of accounting. Management does not believe these investments have a materially different impact upon our liquidity, cash flows, capital resources, credit or market risk than our property management and ownership activities. These joint ventures are discussed in Note 4 of the Company’s Consolidated Financial Statements.

As of December 31, 2011 we have 76 wholly or majority owned operating properties with a gross book value of approximately $3,607,045,000. Nineteen of the 76 operating properties with gross book values of approximately $1,066,705,000 are encumbered with secured financing totaling $808,714,000. The remaining 57 operating properties are unencumbered with an approximate gross book value of $2,540,341,000. Majority owned subsidiary entities that own seven of the 57 unencumbered operating properties, with an approximate gross book value of $231,977,000 are subject to guarantees of our unsecured line of credit at December 31, 2011.

On January 5, 2012, we entered into a new $750,000,000 unsecured line of credit (the “Credit Agreement”) and terminated the previous unsecured line of credit. Majority owned subsidiaries no longer guarantee our unsecured line of credit as amended and restated.

Under applicable accounting guidance, the managing member of a limited liability company, or LLC, is presumed to control the LLC unless the non-managing member(s) have certain rights that preclude the managing member from exercising unilateral control. We have reviewed our control as the managing member of our joint venture assets held in LLCs and concluded that we do not have control over any of those LLCs we manage. Consequently, we have applied the equity method of accounting to our investments in joint ventures. We consolidate entities not deemed to be variable interest entities that we have the ability to control. The accompanying consolidated financial statements include our accounts and our ownership in other controlled subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Critical Accounting Policies

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

Investments in Rental Properties

Rental properties are recorded at cost, less accumulated depreciation, less an adjustment, if any, for impairment. Costs associated with the purchase of operating communities are allocated between land, building, personal property and intangibles when applicable, based on their estimated fair value in accordance with Financial Accounting Standards Board (FASB) business combination guidance. Land value is assigned based on the purchase price if land is acquired separately, or its estimated fair market value based upon market comparables if acquired in a merger or in an operating community acquisition.

Where possible, we stage construction to allow leasing and occupancy during the construction period, which we believe minimizes the duration of the lease-up period following completion of construction. Our accounting policy related to properties in the development and leasing phase is to expense all operating expenses associated with completed apartment units, including costs associated with the lease up of the development. Projects under development are carried at cost, including direct and indirect costs incurred to ready the assets for their intended use and which are specifically identifiable, including interest and property taxes until units are placed in service. Interest is capitalized on the construction in progress at a rate equal to our weighted average cost of debt. We have a development group which manages the design, development and construction of apartment communities. Project costs related to the development and construction of apartment communities (including interest and related loan fees, property taxes, and other direct costs including municipal fees, permits, architecture, engineering and other professional fees) are capitalized as a cost of the project. Indirect development costs, including salaries, share based payment and bonuses, benefits, office rent, and associated costs for those individuals directly responsible for development activities are also capitalized and allocated to the projects based on development and construction personnel time allocations. Capitalized indirect development costs totaled approximately $12,178,000, $8,433,000 and $10,173,000 for the twelve month periods ended December 31, 2011, 2010 and 2009, respectively. Indirect costs not related to development and construction activity are expensed as incurred. Expenditures for ordinary maintenance and repairs are expensed to operations as incurred and significant renovations and improvements that increase the value of the property or extend its useful life are capitalized.

Direct investment development projects are considered placed in service as certificates of occupancy are issued and the units become ready for occupancy. Depreciation begins as units are placed in service. Land acquired for development is capitalized and reported as “Land under development” until the development plan for the land is finalized. Once the development plan is finalized and construction contracts are signed, the costs are transferred to the balance sheet line item “Construction in progress.”

In accordance with FASB guidance on accounting for the impairment or disposal of long-lived assets, our investments in real estate are periodically evaluated for indicators of impairment. The evaluation of impairment

and the determination of estimated fair value is based on several factors, and future events could occur which would cause management to conclude that indicators of impairment exist and a reduction in carrying value to estimated fair value is warranted. There were no assets for which an adjustment for impairment in value was made in 2011, 2010 or 2009.

In the normal course of business, we will receive offers for sale of our properties, either solicited or unsolicited. For those offers that are accepted, the prospective buyer will usually require a due diligence period before consummation of the transaction. It is not unusual for matters to arise that result in the withdrawal or rejection of the offer during this process. We classify real estate as “held for sale” when all criteria under the FASB guidance has been met.

The guidance also requires that the results of operations of any communities that have been sold, or otherwise qualify as held for sale, be presented as discontinued operations in our consolidated financial statements in all periods presented. The community specific real estate classified as held for sale is stated at the lower of its carrying amount or estimated fair value less disposal costs. Depreciation is not recorded on assets once classified as held for sale.

Share-Based Payments

FASB guidance requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their grant date fair values.

Stock-based compensation cost is measured at the grant date fair value and is recognized, net of estimated forfeitures, and expensed ratably over the requisite service period, which is generally the vesting period. The cost related to stock-based compensation included in the determination of consolidated net income includes all awards outstanding that vested during these periods.

Under the 1992 Stock Option Plan and the 1999 BRE Stock Incentive Plan, as amended, and the Fifth Amended and Restated Non-Employee Director Stock Option and Restricted Stock Plan, we award service based restricted stock, performance based restricted stock without market conditions, performance based restricted stock with market conditions, and stock options.

We measure the value of the service based restricted stock and performance based restricted stock without market conditions at fair value on the grant date, based on the number of units granted and the market value of our common stock on that date. Guidance requires compensation expense to be recognized with respect to the restricted stock if it is probable that the service or performance condition will be achieved. As a result, we amortize the fair value, net of estimated forfeitures, as stock-based compensation expense on a straight-line basis over the vesting period for service based restricted stock. For service based restricted stock awards, we evaluate our forfeiture rate at the end of each reporting period based on the probability of the service condition being met. For performance based restricted stock awards without market conditions, we amortize the fair value, net of estimated forfeitures, as stock based compensation expense using the accelerated method with each vesting tranche valued as a separate award. The fair value of performance based restricted stock awards with market conditions is determined using a Monte Carlo simulation to estimate the grant date value. We amortize the fair value of these awards with market conditions, net of estimated forfeitures, as stock-based compensation on a straight-line basis over the vesting period regardless of whether the market conditions are satisfied in accordance with share-based payment guidance.

We estimated the fair value of our options using a Black-Scholes valuation model using various assumptions to determine their grant date fair value. We amortize the fair value, net of estimated forfeitures, as stock-based compensation expense on a straight-line basis over the vesting period.

Consolidation

Arrangements that are not controlled through voting or similar rights are reviewed under the applicable accounting guidance for variable interest entities or “VIEs.” A Company is required to consolidate the assets, liabilities and operations of a VIE if it is determined to be the primary beneficiary of the VIE.

In June 2009, the Financial Accounting Standards Board changed the consolidation analysis for VIEs to require a qualitative analysis to determine the primary beneficiary of the VIE. The determination of the primary beneficiary of a VIE is based on whether the entity has the power to direct matters which most significantly impact the activities of the VIE and has the obligation to absorb losses, or the right to receive benefits, of the VIE which could potentially be significant to the VIE. The guidance requires an ongoing reconsideration of the primary beneficiary and also amends the events triggering a reassessment. The new guidance was effective for the Company beginning January 1, 2010.

Under the guidance, an entity is a VIE and subject to consolidation, if by design a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by any parties, including equity holders or b) as a group the holders of the equity investment at risk lack any one of the following three characteristics: (i) the power, through voting rights or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity. We reviewed the consolidation guidance and concluded that our joint venture LLCs are not VIEs. We further reviewed the management fees paid to us by our joint ventures and determined that they do not create variable interests in the entities. As of December 31, 2011, we have two land purchase options outstanding from unrelated third party entities. The Company determined that although the selling entities are generally VIE’s, BRE does not have the power to direct the activities that most significantly affect the entity’s economic performance, and therefore, consolidation is not appropriate.

At December 31, 2011, all cash deposits for land purchase option agreements were non-refundable.

We consolidate entities not deemed to be VIEs that we have the ability to control. The accompanying consolidated financial statements include our accounts, the Operating Company and other controlled subsidiaries. At December 31, 2011, we owned 99% of the Operating Company. All significant intercompany balances and transactions have been eliminated in consolidation.

Impact of Inflation

Approximately 99% of our total revenues for 2011 were derived from apartment properties. Due to the short-term nature of most apartment unit leases (typically one year or less), we may seek to adjust rents to mitigate the impact of inflation upon renewal of existing leases or commencement of new leases, although we cannot assure that we will be able to adjust rents in response to inflation. In addition, market rates may also fluctuate due to short-term leases and other permitted and non-permitted lease terminations.

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

A cash dividend has been paid to common shareholders each quarter since our inception in 1970. The payment of distributions by BRE is at the discretion of the Board of Directors and depends on numerous factors, including our cash flow, financial condition and capital requirements, REIT provisions of the Internal Revenue

Code and other factors. The quarterly common dividend payment of $0.3750 is equivalent to $1.50 per common share on an annualized basis. Cash dividends per common share were $1.50 in 2011, $1.50 in 2010, and $1.88 in 2009. Total cash dividends paid to common shareholders for the three years ended December 31, 2011, 2010 and 2009 were $109,482,000, $93,741,000, and $100,681,000, respectively. Dividends paid to preferred shareholders were $7,655,000 in 2011, and $11,813,000 in 2010 and 2009.

Distributions accrued and paid to noncontrolling interests were $1,168,000, $1,446,000 and $1,885,000 for the years ended December 31, 2011, 2010 and 2009, respectively.

Item 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Our exposure to market risk for changes in interest rates relates primarily to our unsecured line of credit. We primarily enter into fixed and variable rate debt obligations to support general corporate purposes, including acquisitions and development, capital expenditures and working capital needs. We continuously evaluate our level of variable rate debt with respect to total debt and other factors, including our assessment of the current and future economic environment.

We seek to limit the risk of interest rate exposure by following established risk management policies and procedures including the use of derivatives to hedge interest rate risk on debt instruments. We do not engage in hedging activities for speculative purposes.

We have a policy of only entering into contracts with major financial institutions based upon their credit ratings and other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, we have not sustained a material loss from those instruments nor do we anticipate any material adverse effect on our net income or financial position in the future from the use of derivatives currently in place.

The fair values of our financial instruments (including such items in the financial statement captions as cash, other assets, accounts payable and accrued expenses, and lines of credit) approximate their carrying or contract values based on their nature, terms and interest rates that approximate current market rates. The fair value of mortgage loans payable and unsecured senior notes is estimated using discounted cash flow analyses with an interest rate similar to that of current market borrowing arrangements. The estimated fair value of our mortgage loans and unsecured senior notes is approximately $1,612,849,000 at December 31, 2011, as compared with a carrying value of $1,533,671,000 at that date.

We had $129,000,000 and $209,000,000 in variable rate debt outstanding at December 31, 2011 and 2010, respectively. A hypothetical 10% adverse change in our current base interest rates would have had an annualized unfavorable impact of approximately $240,000 and $400,000 on our earnings and cash flows based on these period-end debt levels and our average variable interest rates for the twelve months ended December 31, 2011 and 2010, respectively. We cannot predict the effect of adverse changes in interest rates on our variable rate debt and, therefore, our exposure to market risk, nor can we assure that fixed rate, long-term debt will be available to us at advantageous pricing. Consequently, future results may differ materially from the estimated adverse changes discussed above.

Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A.

CONTROLS AND PROCEDURES

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

As of December 31, 2011, the end of the quarter and fiscal year covered by this report, management conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company on the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. We continue to review and document our disclosure controls and procedures, including our internal control over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

Management’s Annual Report on Internal Control over Financial Reporting

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

(1)

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

(2)

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of our company are being made only in accordance with authorizations of management and our Board of Directors; and

(3)

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

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

Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2011, using the framework set forth in the report entitled “Internal Control—Integrated Framework” published by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework management concluded that our internal control over financial reporting was effective as of December 31, 2011.

Ernst & Young LLP, the registered accounting firm that audited the financial statements included in this annual report, has issued an attestation report on our internal control over financial reporting.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the fourth quarter of the period covered by this Annual Report on Form 10-K that has materially affected, or is reasonable likely to materially affect, our internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of:

BRE Properties, Inc

We have audited BRE Properties, Inc.’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). BRE Properties, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

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

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

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

In our opinion, BRE Properties, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of BRE Properties, Inc. as of December 31, 2011 and 2010, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2011 of BRE Properties, Inc. and our report dated February 17, 2012 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

San Francisco, CA

February 17, 2012

Item 9B.

OTHER INFORMATION

Pursuant to Section 303A.12(a) of the New York Stock Exchange’s Corporate Governance Standards, the Chief Executive Officer has certified to the NYSE that she is not aware of any violation by the Company of NYSE corporate governance listing standards. This certification was submitted to the NYSE and was not qualified in any respect. Additionally, certifications by our Chief Executive Officer and Chief Financial Officer required under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are filed and furnished, respectively, with the Securities and Exchange Commission as exhibits to this report.

PART III

Item 10.

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a)

Identification of Directors. The information required by this Item is incorporated herein by reference to our Proxy Statement relating to our 2012 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, 2011. A summary of the directors and their principal business for the last five years follows:


Paula F. Downey		Ms. Downey has been our Director since March 2008. Currently, Ms. Downey is President and CEO of the AAA Northern California Nevada and Utah Insurance Exchange. She served as President of AAA Northern California, Nevada and Utah (CSAA) from 2005 to 2010. She was Chief Operations Officer from 2003 through 2005 and Senior Vice President and Chief Financial Officer from 2000 to 2003, and was named CEO in July of 2010. Ms. Downey serves as an officer of California State Automobile Association, California State Automobile Association Inter-Insurance Bureau, and as a director of their subsidiaries including Pacific Lighthouse Reinsurance Ltd., Western United Insurance Company, CSAA Life and Financial Services, Inc., ACA Insurance Company, ACA Member Services Company, and Ceres Reinsurance, Inc. Ms. Downey is 56 years old.

Irving F. Lyons, III		Mr. Lyons has been our Director since 2006. Mr. Lyons currently serves on the Board of Directors of Equinix, Inc. and ProLogis. He served as Vice Chairman of ProLogis, a global provider of distribution facilities and services, from 2001 through May 2006. He was Chief Investment Officer from March 1997 to December 2004, and held several other executive positions since joining ProLogis in 1993. Prior to joining ProLogis, he was a Managing Partner of King & Lyons, a San Francisco Bay Area industrial real estate development and management company, since its inception in 1979. Mr. Lyons is 62 years old.

Christopher J. McGurk		Mr. McGurk has been our Director since 2006. Currently, Mr. McGurk is Chairman and Chief Executive Officer of Cinedigm Digital Cinema Corporation, a NASDAQ-listed provider of digital services, advertising, software and content distribution to theaters. From 2006 to 2010, Mr. McGurk served as CEO of Overture Films, a motion picture studio. Prior to his post at Overture Films, Mr. McGurk served as Vice Chairman and COO of Metro-Goldwyn-Mayer, Inc. (MGM), a motion picture, television, home video, and theatrical production and distribution company, from 1999 to 2005. From 1996 to 1999, Mr. McGurk served in executive capacities with Universal Pictures, a division of Universal Studios Inc., most recently as President and COO. Mr. McGurk is 55 years old.

Matthew T. Medeiros		Mr. Medeiros has been our Director since 2005. Mr. Medeiros has served as President, Chief Executive Officer and Director of SonicWALL, a global Internet security company, since March 2003. From 1998 to December 2002, he served as Chief Executive Officer of Philips Components, a division of Royal Philips Electronics, a consumer electronics company. Mr. Medeiros served as Chairman of the Board, LG.Philips LCD, a liquid crystal display joint venture, from 2001 to 2002. Mr. Medeiros is 55 years old.



Constance B. Moore		Ms. Moore has been our Director since 2002. Ms. Moore has served as President and Chief Executive Officer of the Company since January 1, 2005, and was President and Chief Operating Officer in 2004. Ms. Moore was Executive Vice President and Chief Operating Officer of BRE from July 2002 through December 2003. She held several executive positions with Security Capital Group & Affiliates, an international real estate operating and investment management company, from 1993 to 2002, including Co-Chairman and Chief Operating Officer of Archstone-Smith Trust. Ms. Moore is 56 years old.

Jeanne R. Myerson		Ms. Myerson has been our Director since 2002. Ms. Myerson has served as President and Chief Executive Officer of The Swig Company, a private real estate investment firm, since 1997. She served as President and Chief Executive Officer of The Bailard, Biehl & Kaiser REIT from 1993 to 1997. Ms. Myerson is 58 years old.

Jeffrey T. Pero		Mr. Pero has been our Director since 2009. He is a former partner of Latham & Watkins (LW), an international law firm, and has been engaged in the practice of law since 1971. As partner, his focus was public and private debt and equity financings; mergers and acquisitions; corporate governance; and compliance with U.S. securities laws. He has lectured extensively on these topics in the United States and England. Mr. Pero also served as primary outside counsel to several publicly traded companies, including BRE. He served as the managing partner of the LW London office from 1990 to 1994. Mr. Pero is 65 years old.

Thomas E. Robinson		Mr. Robinson has been our Director since 2007. Currently, Mr. Robinson is senior advisor to the real estate investment banking group at Stifel, Nicolaus & Company, Inc., St. Louis, MO and its prior affiliate Legg Mason, where he was previously a managing director. Prior to that position he served as the president and chief financial officer of Storage USA, Inc., from 1994-1997. Mr. Robinson currently serves on the Tanger Factory Outlet Centers, Inc. board of directors, is a former trustee/director of Centerpoint Properties Trust and Legg Mason Real Estate Investors, Inc., and a past member of the board of governors of the National Association of Real Estate Investment Trusts (NAREIT). Mr. Robinson is 64 years old.

Dennis E. Singleton		Mr. Singleton has been our Director since 2009. Mr. Singleton currently serves on the Board of Directors of Digital Realty Trust, Inc; as vice chairman of the board of trustees of Lehigh University; and is a board member and past president of the Glaucoma Research Foundation. Mr. Singleton was a founding partner of Spieker Properties, Inc., a Northern California-based commercial real estate investment trust (REIT), which was acquired by Equity Office Properties, Inc. in 2003. Mr. Singleton served as Chief Financial Officer and Director of Spieker Properties, Inc. from 1993 to 1995, Chief Investment Officer and Director from 1995 to 1997, and Vice Chairman and Director from 1998 to 2001. Mr. Singleton is 66 years old.



Thomas P. Sullivan		Mr. Sullivan has been our Director since 2009. He is a founding partner of Wilson Meany Sullivan (WMS), a San Francisco-based, privately owned real estate investment and development firm focused on urban infill locations in the western United States. At WMS, Mr. Sullivan’s focus is company management, identification of investment opportunities, major transactions, and debt and equity financing. Mr. Sullivan played a major role in the development of large-scale, technologically innovative projects in San Francisco, most notably Foundry Square, the Ferry Building and 250 Embarcadero (headquarters of Gap Inc.). Prior to WMS, Mr. Sullivan served as president of Wilson/Equity Office, a joint venture with Equity Office Properties Trust; and as senior vice president at William Wilson & Associates. Both companies were predecessors of WMS, which was formed by development partners of each entity in 2003. Mr. Sullivan is 54 years old.

(b)

Identification of Executive Officers. See “Executive Officers of the Registrant” in Part I of this report.

Item 11.

EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference from our Proxy Statement, relating to our 2011 Annual Meeting of Shareholders, under the headings “Executive Compensation and Other Information” and “Election of Directors—Governance, Board and Committee Meetings; Compensation of Directors,” to be filed with the Securities and Exchange Commission within 120 days of December 31, 2011.

Item 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT

The information required by this Item is incorporated herein by reference from our Proxy Statement, relating to our 2011 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, 2011.

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 2011 Annual Meeting of Shareholders, under the headings “Certain Relationships and Related Transactions,” to be filed with the Securities and Exchange Commission within 120 days of December 31, 2011.

Item 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated by reference from our Proxy Statement, relating to our 2012 Annual Meeting of Shareholders, under the headings “Report of the Audit Committee” and “Fees of Ernst & Young LLP,” to be filed with the Securities and Exchange Commission within 120 days of December 31, 2011.

PART IV

Item 15.

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

(a) Financial Statements

Financial Statements:


Report of Independent Registered Public Accounting Firm			53

Consolidated Balance Sheets at December 31, 2011 and 2010			54

Consolidated Statements of Income for the years ended December 31, 2011, 2010, and 2009			55

Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010, and 2009			56

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2011, 2010, and 2009			58

Notes to Consolidated Financial Statements			59

Financial Statement Schedule:


Schedule III—Real Estate and Accumulated Depreciation			87

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.

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

(b) Exhibits

See Index to Exhibits.

See Index to Financial Statements and Financial Statement Schedule.

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 February 17, 2012


BRE PROPERTIES, INC.

By:		/s/ CONSTANCE B. MOORE
		Constance B. Moore President and Chief Executive Officer

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


Name	Title	Date

/s/ CONSTANCE B. MOORE Constance B. Moore	President, Chief Executive Officer and Director (Principal Executive Officer)	February 17, 2012

/s/ JOHN A. SCHISSEL John A. Schissel	Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)	February 17, 2012

/s/ PAULA F. DOWNEY Paula Downey	Director	February 17, 2012

/s/ IRVING F. LYONS, III Irving F. Lyons, III	Director	February 17, 2012

/s/ CHRISTOPHER J. MCGURK Christopher J. McGurk	Director	February 17, 2012

/s/ MATTHEW T. MEDEIROS Matthew T. Medeiros	Director	February 17, 2012

/s/ JEANNE R. MYERSON Jeanne R. Myerson	Director	February 17, 2012

/s/ JEFFREY T. PERO Jeffrey T. Pero	Director	February 17, 2012

/s/ THOMAS E. ROBINSON Thomas E. Robinson	Director	February 17, 2012

/s/ DENNIS E. SINGLETON Dennis E. Singleton	Director	February 17, 2012

/s/ THOMAS P. SULLIVAN Thomas P. Sullivan	Director	February 17, 2012

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of

BRE Properties, Inc.

We have audited the accompanying consolidated balance sheets of BRE Properties, Inc. as of December 31, 2011 and 2010, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2011. Our audits also included the financial statement schedule listed in the Index at item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of BRE Properties, Inc. at December 31, 2011 and 2010, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles. 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.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), BRE Properties, Inc.’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2012 expressed an unqualified opinion thereon .

/s/ Ernst & Young LLP

San Francisco, California

February 17, 2012

BRE PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands, except per share data)


	December 31,
	2011			2010
A S S E T S
Real estate portfolio
Direct investments in real estate:
Investments in rental properties	$	3,607,045		$	3,464,466
Construction in progress		246,347			29,095
Less: Accumulated depreciation		(729,151	)		(640,456	)

		3,124,241			2,853,105

Equity interests in and advances to real estate joint ventures:
Investments in rental properties		63,313			61,132
Land under development		101,023			183,291

Total real estate portfolio		3,288,577			3,097,528
Cash		9,600			6,357
Other assets		54,444			52,362

Total assets	$	3,352,621		$	3,156,247

L I A B I L I T I E S A N D S H A R E H O L D E R S’ E Q U I T Y
Unsecured senior notes	$	724,957		$	773,076
Unsecured line of credit		129,000			209,000
Mortgage loans payable		808,714			810,842
Accounts payable and accrued expenses		63,273			52,070

Total liabilities		1,725,944			1,844,988

Redeemable noncontrolling interests		16,228			34,866

Shareholders’ equity:
Preferred stock, $0.01 par value; 20,000,000 shares authorized at both December 31 2011 and 2010; 2,159,715 and 7,000,000 shares with $25 liquidation preference, issued and outstanding at December 31, 2011 and December 31, 2010		22			70
Common stock, $0.01 par value; 100,000,000 shares authorized at both December 31, 2011 and 2010; 75,556,167 and 64,675,815 shares issued and outstanding at December 31, 2011 and December 31, 2010, respectively		756			647
Additional paid-in capital		1,818,064			1,441,048
Accumulated net income less than cumulative dividends		(208,393	)		(165,372	)

Total shareholders’ equity		1,610,449			1,276,393

Total liabilities and shareholders’ equity	$	3,352,621		$	3,156,247

See Accompanying Notes to Consolidated Financial Statements

BRE PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)


	Years ended December 31,
	2011		2010			2009
Revenue
Rental income	$	357,505	$	322,510		$	307,186
Ancillary income		13,876		12,455			11,957

Total rental revenue		371,381		334,965			319,143

Expenses
Real estate		119,212		108,634			99,951
Provision for depreciation		102,574		90,038			81,251
Interest		74,964		84,894			82,734
General and administrative		21,768		20,570			17,390
Other expenses		402		5,298			13,522

Total expenses		318,920		309,434			294,848

Other income		2,536		2,934			3,459
Net (loss)/gain on extinguishment of debt		—		(23,507	)		1,470
Income before noncontrolling interests, partnership income and discontinued operations		54,997		4,958			29,224
Income from unconsolidated entities		2,888		2,178			2,329
Gain on sale of unconsolidated entities		4,270		—			—

Income from continuing operations		62,155		7,136			31,553
Net gain on sales of discontinued operations		14,489		40,111			21,574
Discontinued operations, net		2,411		7,588			11,213

Income from discontinued operations		16,900		47,699			32,787
Net income	$	79,055	$	54,835		$	64,340
Redeemable noncontrolling interest in income		1,168		1,446			1,885
Net income attributable to controlling interests		77,887		53,389			62,455
Redemption related preferred stock issuance costs, net		3,771		—			—
Dividends attributable to preferred stock		7,655		11,813			11,813

Net income available to common shareholders	$	66,461	$	41,576		$	50,642

Per common share data—Basic
Income/(loss) from continuing operations (net of preferred dividends, redemption related preferred stock issuance costs and redeemable noncontrolling interest in income)	$	0.69	$	(0.10	)	$	0.33
Income from discontinued operations	$	0.24	$	0.77		$	0.62

Net income available to common shareholders	$	0.93	$	0.67		$	0.95

Weighted average common shares outstanding—basic		71,220		61,420			52,760

Per common share data—Diluted
Income/(loss) from continuing operations (net of preferred dividends, redemption related preferred stock issuance costs and redeemable noncontrolling interest in income)	$	0.69	$	(0.10	)	$	0.33
Income from discontinued operations	$	0.24	$	0.77		$	0.62

Net income available to common shareholders	$	0.93	$	0.67		$	0.95

Weighted average common shares outstanding—diluted		71,670		61,850			53,000

See Accompanying Notes to Consolidated Financial Statements

BRE PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)


	Years ended December 31,
	2011			2010			2009
Cash flows from operating activities
Net income	$	79,055		$	54,835		$	64,340
Adjustments to reconcile net income to net cash flows generated by operating activities:
Net gain on sales of discontinued operations		(14,489	)		(40,111	)		(21,574	)
Net gain on sales of unconsolidated entities		(4,270	)		—			—
Net gain on sales of land		—			—			(121	)
Net loss/(gain) on extinguishment of debt		—			23,507			(1,470	)
Noncash abandonment of development pursuits		—			—			10,703
Noncash interest on convertible debt		322			4,778			6,404
Income from unconsolidated entities		(2,888	)		(2,178	)		(2,329	)
Distributions of earnings from unconsolidated entities		4,263			3,564			2,857
Provision for depreciation		102,574			90,038			81,251
Provision for depreciation from discontinued operations		1,366			4,346			7,168
Stock based compensation expense		4,697			4,785			2,596
Change in other assets		(2,924	)		1,585			1,594
Change in accounts payable and accrued expenses		4,471			(4,430	)		(20,736	)

Net cash flows generated by operating activities		172,177			140,719			130,683

Cash flows from investing activities
Purchase of operating real estate		(170,127	)		(259,600	)		—
Additions to land under development and predevelopment costs		(27,666	)		(25,117	)		(18,223	)
Additions to construction in progress		(50,083	)		(27,513	)		(96,879	)
Rehabilitation expenditures and other		(15,869	)		(5,944	)		(7,097	)
Capital expenditures		(21,162	)		(23,051	)		(20,240	)
Capital contribution to equity investment in real estate joint venture		(8,743	)		—			—
Purchase of land		(46,500	)		(19,000	)		(12,800	)
Deposits on property under contract to be purchased		—			—			(250	)
Proceeds from sale of consolidated joint venture entities		9,349			—			—
Improvements to real estate joint ventures		(0	)		(614	)		(212	)
Proceeds from sale of land		—			—			10,100
Additions to furniture fixture and equipment		(30	)		(127	)		(605	)
Proceeds from sales of rental property, net of closing costs		63,486			163,705			65,669

Net cash flows used in investing activities		(267,345	)		(197,261	)		(80,537	)

Cash flows from financing activities
Principal payments on mortgage loans and unsecured senior notes		(2,128	)		(2,165	)		(19,339	)
Proceeds from new mortgage loans, net		—			28,350			617,144
Proceeds from issuance of unsecured senior notes, net		—			297,477			—
Premium to par paid on convertible notes repurchase		—			(12,853	)		—
Repurchase/repayment of convertible notes, repayment of unsecured notes		(48,545	)		(366,913	)		(683,639	)
Lines of credit:
Advances		454,000			590,000			923,000
Repayments		(534,000	)		(669,000	)		(880,000	)
Proceeds from exercises of stock options and other, net		7,647			17,931			2,213
Shares retired for tax withholding		(2,625	)		(4,780	)		(472	)
Redemption of preferred stock		(120,496	)		—			—
Proceeds from dividend reinvestment plan		1,020			822			1,367
Proceeds from issuance of common stock, net		483,949			287,903			101,891
Cash dividends paid to common shareholders		(109,482	)		(93,741	)		(100,681	)
Cash dividends paid to preferred shareholders		(7,655	)		(11,813	)		(11,813	)
Redeemable nontcontrolling interests redemption activity		(21,876	)		(2,759	)		—
Distributions to redeemable nontcontrolling interests		(978	)		(796	)		(1,461	)
Distributions to other redeemable noncontrolling interests		(420	)		(420	)		(424	)

Net cash flows provided by (used in) financing activities		98,411			57,243			(52,214	)

Change in cash		3,243			701			(2,068	)

Balance at beginning of year	$	6,357		$	5,656		$	7,724

Balance at end of year	$	9,600		$	6,357		$	5,656

See Accompanying Notes to Consolidated Financial Statement

BRE PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)


	Years ended December 31,
	2011			2010			2009
Supplemental disclosure of non cash investing and financing activities
Transfers of direct investments in real estate-construction in progress to investments in rental properties	$	—		$	119,698		$	283,434

Transfer of land under development to direct investments in real estate—construction in progress	$	157,410		$	21,234		$	—

Change in accrued development costs for construction in progress and land under development	$	(8,486	)	$	2,667		$	7,015

Conversion of redeemable interest units	$	—		$	2,049		$	—

Transfer of investment in rental properties to held for sale	$	50,830		$	125,714		$	43,038

Change in accrued improvements to direct investments in real estate cost	$	1,055		$	1,242		$	(80	)

Change in redemption related preferred stock issuance costs	$	3,771		$	—		$	—

Change in redemption value of redeemable noncontrolling interests	$	(3,238	)	$	(6,069	)	$	(3,920	)

Mortgage note assumed in acquisition of real estate property	$	—		$	32,500		$	—

See Accompanying Notes to Consolidated Financial Statements

BRE PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

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


	Years ended December 31,
	2011			2010			2009
Common stock shares
Balance at beginning of year		64,675,815			55,136,359			51,149,745
Stock options exercised, net of shares tendered		249,474			592,823			9,500
Conversion of operating company units to common shares		—			76,097			—
Vested restricted shares net of shares tendered		117,449			218,572			120,561
Shares issued pursuant to dividend reinvestment plan		21,892			20,909			55,368
Common stock issuance		10,491,537			8,631,055			3,801,185

Balance at end of year		75,556,167			64,675,815			55,136,359

Preferred stock shares
Balance at beginning of year		7,000,000			7,000,000			7,000,000
Repurchased shares		(4,840,285	)		—			—

Balance at end of year		2,159,715			7,000,000			7,000,000

Common stock (at par)
Balance at beginning of year	$	647		$	551		$	511
Stock options exercised		3			6			—
Conversion of operating company units to common shares		—			1			—
Vested restricted shares		1			2			1
Shares issued pursuant to dividend reinvestment plan		—			1			1
Common stock issuance		105			86			38

Balance at end of year	$	756		$	647		$	551

Preferred stock
Balance at beginning of year	$	70		$	70		$	70
Repurchased shares		(48	)		—			—

Balance at end of year	$	22		$	70		$	70

Additional paid-in capital
Balance at beginning of year	$	1,441,048		$	1,135,505		$	1,031,791
Stock option exercises		7,898			18,381			213
Stock-based compensation		7,047			7,780			4,005
Shares retired for tax withholding		(2,625	)		(4,779	)		(472	)
Conversion of operating company units to common shares		—			2,049			—
Change in redemption value on redeemable noncontrolling interests		(3,238	)		(6,069	)		(3,920	)
Convertible debt repurchase		—			—			(1,624	)
Dividend reinvestment plan		1,020			822			1,367
Preferred stock redemption cost, net of discount on repurchase		(116,677	)		—			—
Common stock issuance, net		483,844			287,816			101,853
Other		(253	)		(457	)		2,292

Balance at end of year	$	1,818,064		$	1,441,048		$	1,135,505

Accumulated net income less than cumulative dividends
Balance at beginning of year	$	(165,372	)	$	(113,207	)	$	(63,168	)
Net income for year		79,055			54,835			64,340
Cash dividends declared and paid to common shareholders: $1.50 per common share for the year ended December 31, 2011 and 2010 and $1.88 per common share for the year ended December 31, 2009		(109,482	)		(93,741	)		(100,681	)
Cash dividends declared and paid to preferred shareholders (see Note 10)		(7,655	)		(11,813	)		(11,813	)
Preferred stock redemption net of discount on repurchase		(3,771	)		—			—
Redeemable noncontrolling interest in income		(1,168	)		(1,446	)		(1,885	)

Balance at end of year	$	(208,393	)	$	(165,372	)	$	(113,207	)

Total shareholders’ equity	$	1,610,449		$	1,276,393		$	1,022,919

Redeemable noncontrolling interests
Balance at beginning of year	$	34,866		$	33,605		$	29,972
Redeemable noncontrolling interest in income		1,168			1,446			1,885
Distributions paid and accrued to redeemable noncontrolling interest		(1,168	)		(1,446	)		(1,885	)
Conversion/ redemption activity		(21,876	)		(4,808	)		(287	)
Change in redemption value of redeemable noncontrolling interests		3,238			6,069			3,920

Balance at end of year	$	16,228		$	34,866		$	33,605

See Accompanying Notes to Consolidated Financial Statements

BRE PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Company

BRE Properties, Inc., a Maryland corporation (“BRE” or the “Company”), was formed in 1970. BRE is a self-administered real estate investment trust (“REIT”) focused on the development, acquisition and management of multifamily apartment communities primarily located in the major metropolitan markets within the state of California, and in the Seattle, Washington region. At December 31, 2011, BRE owned directly or through wholly or majority owned subsidiaries, 76 multifamily communities (aggregating 21,336 units), classified as direct investments in real estate-investments in rental properties on the accompanying consolidated balance sheets. Of these properties, 61 were located in California, 13 in Washington, and two in Arizona. In addition, at December 31, 2011, there were seven properties under various stages of construction and development, including four directly owned property with 1,260 units classified as direct investments in real estate-construction in progress and three land parcels which are classified as land under development. BRE also holds a 35% interest in two real estate limited liability Company’s (LLC’s) that own two multifamily properties with a total of 488 units and a 15% interest in nine LLC’s that own nine multifamily properties with a total of 3,104 units at December 31, 2011.

The Operating Company

In November 1997, BRE acquired 16 completed properties and eight development properties from certain entities of Trammell Crow Residential-West (the “Transaction”) pursuant to a definitive agreement (the “Contribution Agreement”). BRE paid a total of approximately $160,000,000 in cash and issued $100,000,000 in common stock based on a stock price of $26.93 per share, as provided for in the Contribution Agreement. In addition, certain entities received Operating Company Units (“OC Units”) valued at $76,000,000 in BRE Property Investors LLC (the “Operating Company”), a Delaware limited liability company and a majority owned subsidiary of BRE. The Operating Company assumed approximately $120,000,000 in debt in connection with this purchase. BRE continues to be the sole managing member and majority owner of the Operating Company at December 31, 2011. Substantially all of the properties acquired in the Transaction are owned by the Operating Company, which was formed by BRE for the purpose of acquiring the properties in the Transaction.

The OC Units held by non-managing members are included in redeemable noncontrolling interests in the Company’s consolidated financial statements. Starting in November 1999, non-managing members of the Operating Company can exchange their units for cash in an amount equal to the market value of BRE common stock at the time of the exchange or, at the option of the Company, common stock of BRE on a 1:1 basis. During the year ended December 31, 2011, an aggregate 454,273 OC units in the Operating Company were redeemed for cash (using a 10 day trailing average to calculate redemption value). As of December 31, 2011, 3,068,981 Operating Company Units have been exchanged for common stock or cash. There are 160,882 OC units outstanding as of December 31, 2011. The non-managing members are entitled to priority distributions regardless of the cash flows of the Operating Company. The Operating Company is also required to maintain certain financial ratios to protect the non-managing members’ distributions. Further, the Company had restrictions from selling certain assets of the Operating Company in a taxable sale for a ten year period from the date of the Transaction. The ten year period lapsed November 18, 2007. The Operating Company will continue until the earlier of conversion or redemption of all non-managing member OC Units, or September 25, 2012. As of December 31, 2011, the Operating Company also guaranteed the repayment of the Company’s $750,000,000 unsecured line of credit. Subsequent to the year ended December 31, 2011, the Company entered into a new $750,000,000 unsecured line of credit (the “Credit Agreement”) and terminated the previous unsecured line of credit. As a result, the Operating Company no longer guarantees our unsecured line of credit. Subsequent to the year ended December 31, 2011, 158,975 outstanding OC units were converted for shares of BRE common stock. As a result, 1,907 OC units remain outstanding.

2. Summary of Significant Accounting Policies

Consolidation

Arrangements that are not controlled through voting or similar rights are reviewed under the accounting guidance for variable interest entities “VIEs”. A Company is required to consolidate the assets, liabilities and operations of a VIE if it is determined to be the primary beneficiary of the VIE.

In June 2009, the Financial Accounting Standards Board changed the consolidation analysis for VIEs to require a qualitative analysis to determine the primary beneficiary of the VIE. The determination of the primary beneficiary of a VIE is based on whether the entity has the power to direct matters which most significantly impact the activities of the VIE and has the obligation to absorb losses, or the right to receive benefits, of the VIE which could potentially be significant to the VIE. The guidance requires an ongoing reconsideration of the primary beneficiary and also amends the events triggering a reassessment. The guidance was effective for the Company beginning January 1, 2010.

Under the guidance, an entity is a VIE and subject to consolidation, if by design a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by any parties, including equity holders or b) as a group the holders of the equity investment at risk lack any one of the following three characteristics: (i) the power, through voting rights or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity. The Company reviewed the consolidation guidance and concluded that its joint venture LLCs are not VIEs. The Company further reviewed the management fees paid to it by its joint ventures and determined that they do not create variable interests in the entities. As of December 31, 2011, the Company had two land purchase options outstanding. The Company determined that although the selling entities are generally VIE’s, BRE does not have the power to direct the activities that most significantly affect the entities economic performance, and therefore, consolidation is not appropriate.

Under applicable accounting guidance, the managing member of a limited liability company, or LLC, is presumed to control the joint venture LLCs and must prove non-managing member(s) have certain rights that preclude the managing member from exercising unilateral control. The Company has reviewed its control as the managing partner of the Company’s joint venture assets and concluded that it does not have control over any of the LLCs managed by the Company. As a result, the Company has applied the equity method of accounting to its investments in joint ventures.

BRE consolidates entities not deemed to be VIEs that it has the ability to control. The accompanying consolidated financial statements include the accounts of the Company, the Operating Company and other controlled subsidiaries. At December 31, 2011, BRE owned 99% of the Operating Company. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements, in accordance with U.S. generally accepted accounting principles, requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to acquiring, developing and assessing the carrying values of its real estate properties, its investments in and advances to joint ventures, its accrued liabilities, its performance-based equity compensation awards, and its qualification as a REIT. The Company bases its estimates on historical experience, current market conditions, and various other assumptions that are believed to be reasonable under the circumstances. Actual results may vary from those estimates and those estimates could vary under different assumptions or conditions.

Investments in Rental Properties

Rental properties are recorded at cost, less accumulated depreciation, less an adjustment, if any, for impairment. All properties are held for leasing activities. A land value is assigned based on the purchase price if land is acquired separately, or based on its estimated fair value if acquired in a merger or in an operating community acquisition. In connection with the acquisition of an operating community, the Company performs a valuation to determine the fair value of each asset and liability acquired in such transaction at the date of acquisition. The purchase price accounting related to tangible assets, such as land, buildings and improvements, and furniture, fixtures and equipment, are reflected in investments in rental properties and depreciated over their estimated useful lives. Any purchase price accounting related to intangible assets, such as in-place leases, is included in investments in rental properties and amortized over the average remaining lease term of the acquired leases. The fair value of acquired in-place leases is determined based on the estimated cost to replace such leases, including foregone rents during an assumed re-lease period, as well as the impact on projected cash flow of acquired leases with leased rents above or below current market rents.

Where possible, the Company stages its construction to allow leasing and occupancy during the construction period, which BRE believes minimizes the duration of the lease-up period following completion of construction. The Company’s accounting policy related to properties in the development and leasing phase is to expense all operating expenses associated with completed apartment units, including costs associated with the lease up of the development. Projects under development are carried at cost, including direct and indirect costs incurred to ready the assets for their intended use and which are specifically identifiable, including interest and property taxes until units are placed in service. Interest is capitalized on the construction in progress at a rate equal to the Company’s weighted average cost of debt. The Company has a development group which manages the design, development and construction of apartment communities. Project costs related to the development and construction of apartment communities (including interest and related loan fees, property taxes, and other direct costs including municipal fees, permits, architecture, engineering and other professional fees) are capitalized as a cost of the project. Indirect development costs, including salaries, share based payments and bonuses, benefits, office rent, and associated costs for those individuals directly responsible for development activities are also capitalized and allocated to the projects based on development and construction personnel time allocations. Capitalized indirect development costs totaled approximately $12,178,000, $8,433,000 and $10,173,000 for the twelve month periods ended December 31, 2011, 2010 and 2009, respectively. Indirect costs not related to development and construction activity are expensed as incurred. Expenditures for ordinary maintenance and repairs are expensed to operations as incurred and significant renovations and improvements that increase the value of the property or extend its useful life are capitalized.

Direct investment development projects are considered placed in service as certificates of occupancy are issued and the units become ready for occupancy. Depreciation begins once units are placed in service. Land acquired for development is capitalized and reported as Land under development until the development plan for the land is finalized. Once the development plan is finalized and construction contracts are signed, the costs are transferred to the balance sheet line item Construction in progress.

Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, which generally range from 35 to 40 years for buildings and three to ten years for other property.

The Company evaluates its long-lived assets for impairment under FASB guidance and requires that the results of operations of any communities that have been sold, or otherwise qualify as “held for sale,” be presented as discontinued operations in all periods presented.

The Company periodically evaluates its long-lived assets, including its investments in rental properties, for impairment indicators. Such assets are stated at cost, less accumulated depreciation and amortization, unless the carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of a property may not be recoverable, the Company assesses its recoverability by comparing the carrying amount of the property to its estimated undiscounted future cash flows. If the carrying amount exceeds the aggregate undiscounted future cash flows, the Company recognizes an impairment loss to the extent the carrying amount

exceeds the estimated fair value of the property. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions, the expected holding period of each asset and legal and environmental concerns. Future events could occur which would cause the Company to conclude that impairment indicators exist and an impairment loss is warranted. There were no assets for which an adjustment for impairment in value was made in 2011, 2010 or 2009.

Assets Held for Sale and Discontinued Operations

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

Specific components of net income that are presented as discontinued operations include the held for sale communities’ operating results, depreciation and interest expense to the extent there is a secured loan on the property. In addition, the net gain or loss on the eventual disposal of communities held for sale will be presented as income from discontinued operations when recognized. Real estate assets held for sale are measured at the lower of the carrying amount or the fair value less the cost to sell. Subsequent to classification of a community as held for sale, no further depreciation is recorded on the assets. Communities are presented as held for sale on the accompanying consolidated balance sheets only in the period that they qualify for such treatment. The Company accounts for sales of real estate assets and the related gain recognition in accordance with the accounting guidance applicable to sales of real estate, which establishes standards for recognition of profit on all real estate sales transactions. The Company recognizes the sale, and associated gain or loss from the disposition, provided that the earnings process is complete and the Company is not obligated to perform significant activities after the sale.

Equity Interests in Real Estate Joint Ventures

The Company’s investments in non-controlled real estate joint ventures and joint ventures which are VIEs in which the Company is not the primary beneficiary are accounted for under the equity method of accounting on the accompanying consolidated financial statements. Investments in real estate joint ventures that are managed by the Company are included in Equity interests in and advances to real estate joint ventures.

Redeemable Noncontrolling Interests

Redeemable noncontrolling interests include our redeemable OC Units and are recorded at the greater of their carrying value or their current redemption value. Increases or decreases in the redemption value of the redeemable OC Units are recorded against additional paid-in capital with decreases limited to their carrying value. The redeemable noncontrolling interest amount related to the OC Unit is reclassified to Common stock and Additional paid-in capital at conversion.

Rental Revenue

Rental income is recorded when due from residents and recognized monthly as it is earned and realizable, under lease terms which 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, 2011, 2010 and 2009. Rent concessions are amortized over the lives of the related leases.

Other Income

Other income for the years ended December 31, 2011, 2010 and 2009, is comprised of the following:


	Years Ended December 31,
	2011		2010		2009
Joint venture management fees	$	1,843,000	$	1,715,000	$	1,700,000
Interest income		369,000		555,000		650,000
Legal and insurance settlements		40,000		530,000		640,000
Disposition fee		144,000		—		—
Other		140,000		134,000		469,000

Total	$	2,536,000	$	2,934,000	$	3,459,000

Other Expenses

Other expenses for the years ended December 31, 2011, 2010 and 2009, is comprised of the following:


	Years Ended December 31,
	2011			2010			2009
Acquisition costs	$	402,000	⁽¹⁾	$	3,998,000	⁽¹⁾		—
Severance charge		—			1,300,000	⁽²⁾	$	600,000
Abandonment charge		—			—			12,900,000	⁽³⁾
Other		—			—			22,000

Total	$	402,000		$	5,298,000		$	13,522,000

⁽¹⁾	Represents costs related to operating community acquisitions during 2011 and 2010. Effective January 1, 2009, the Company adopted an accounting standard requiring costs associated with the acquisition of operating properties to be expensed as incurred. There was no acquisition activity during 2009.

⁽²⁾	Represents one-time charge associated with the resignation of the Company’s Chief Operating Officer.

⁽³⁾	Represents an abandonment charge related to three land sites under option agreements that the Company chose not to purchase.

Cash

Cash and cash equivalents include all cash and liquid investments with an original maturity of three months or less from the date acquired. The Company maintains its cash at financial institutions. The combined account balances at one or more institutions periodically exceed the Federal Depository Insurance Corporation (“FDIC”) insurance coverage, and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. The Company believes that the risk is not significant, as the Company places its cash deposits and temporary cash investments with financial institutions believed by management to be creditworthy and of high quality.

Derivative Instruments

The Company utilizes derivative financial instruments to manage interest rate risk and generally designates these financial instruments as cash flow hedges in accordance with derivative and hedging guidance.

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 $8,431,000 and $10,347,000 as of December 31, 2011, and 2010, respectively. Amortization of deferred costs totaled $2,223,000, $2,907,000 and $3,570,000 for the years ended December 31, 2011, 2010 and 2009, respectively.

Income Taxes

BRE has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). As a result, BRE will not be subject to federal taxation at the corporate level to the extent it distributes, annually, at least 90% of its REIT taxable income, as defined by the Code, to its shareholders and satisfies certain other requirements. To the extent that we do not distribute all of our net capital gain, or distribute at least 90%, but less than 100%, of our “REIT taxable income,” as adjusted, the Company will be required to pay tax on the undistributed amount at regular corporate tax rates.

In addition, the states in which BRE owns and operates real estate properties have provisions equivalent to the federal REIT provisions. Management believes that all conditions to qualify as a REIT have been met for all periods presented. Accordingly, no provision has been made for federal or state income taxes at the REIT level in the accompanying consolidated financial statements.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the “exit price”) in an orderly transaction between market participants at the measurement date.

Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity. Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, defined by the FASB and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. The types of assets and liabilities carried at Level 1 fair value generally are G-7 government and agency securities, equities listed in active markets, investments in publicly traded mutual funds with quoted market prices and listed derivatives.

Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. Fair valued assets that are generally included in this category are stock warrants for which there are market-based implied volatilities, unregistered common stock and thinly traded common stock.

Level 3—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Generally, assets carried at fair value and included in this category include stock warrants for which market-based implied volatilities are not available.

Our redeemable noncontrolling interests are required to be marked to redemption value. The maximum redemption amount of the noncontrolling interests is contingent on the fair value of the Company’s common stock at the redemption date, and therefore the amount reported is calculated based on the fair value of the Company’s common stock as of the balance sheet date. Since the valuation is based on observable inputs such as quoted prices for similar instruments in active markets, redeemable noncontrolling interests are classified as Level 2.

The estimated fair values of investment securities classified as deferred compensation plan investments are based on quoted market prices utilizing public information for the same transactions. Our deferred compensation plan investments are recorded in Other assets with the corresponding liabilities and totaled $3,668,000 and $3,196,000 at December 31, 2011 and 2010, respectively.

Financial Instruments Not Carried at Fair Value

The fair values of BRE’s financial instruments, including such items in the consolidated financial statement captions as other assets, cash, mortgages payable, and lines of credit, approximate their carrying or contract values based on their nature, terms and interest rates that approximate current market rates. The fair value of mortgage loans payable and unsecured senior notes is estimated using discounted cash flow analyses with an interest rate similar to that of current market borrowing arrangements. The fair value of the Company’s mortgage loans payable and unsecured senior notes was approximately $1,612,849,000 (compared to a net carrying value of $1,533,671,000) and $1,536,493,000 (compared to a net carrying value of $1,583,918,000) at December 31, 2011 and 2010, respectively.

Share-based payments

FASB guidance requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their grant date fair values.

Effective January 1, 2006, the Company adopted the modified prospective method for share-based payments. This method requires the recognition of compensation cost for all share-based payments that are unvested as of January 1, 2006. The cost related to stock-based compensation included in the determination of consolidated net income for the twelve months ended December 31, 2011, 2010 and 2009 includes all awards outstanding that are vesting during the period. From January 1, 2003 through December 31, 2005, the Company applied fair value recognition provisions. The Company adopted the prospective method as provided for in FASB guidance and applied them prospectively to all awards granted, modified or settled after January 1, 2003.

Under the 1992 Stock Option Plan and the 1999 BRE Stock Incentive Plan, as amended, and the Fifth Amended and Restated Non-Employee Director Stock Option and Restricted Stock Plan, the Company awards service based restricted stock, performance based restricted stock without market conditions, performance based restricted stock with market conditions, and stock options.

The Company measures the value of the service based restricted stock and performance based restricted stock without market conditions at fair value on the grant date, based on the number of units granted and the market value of our common stock on that date. Guidance requires compensation expense to be recognized with respect to the restricted stock if it is probable that the service or performance condition will be achieved. As a result, the Company amortizes the fair value, net of estimated forfeitures, as stock-based compensation expense on a straight-line basis over the vesting period for service based restricted stock. For service based restricted stock awards, the Company evaluates its forfeiture rate at the end of each reporting period based on the probability of the service condition being met. For performance based restricted stock awards without market conditions, the Company amortizes the fair value, net of estimated forfeitures, as stock-based compensation expense using the accelerated method with each vesting tranche valued as a seperate award. The fair value of performance based restricted stock awards with market conditions is determined using a Monte Carlo simulation to estimate the grant date fair value. The Company amortizes the fair value of these awards with market conditions, net of estimated forfeitures, as stock-based compensation on a straight-line basis over the vesting period regardless of whether the market conditions are satisfied in accordance with share-based payment guidance.

The Company estimated the fair value of our options using a Black-Scholes valuation model using various assumptions to determine their grant date fair value. The Company amortizes the fair value, net of estimated forfeitures, as stock-based compensation expense on a straight-line basis over the vesting period.

Reclassifications

Certain reclassifications and adjustments have been made to the prior years’ consolidated financial statements to conform to the presentation of the current year’s consolidated financial statements due to discontinued operations.

Reportable Segments

FASB guidance requires certain descriptive information to be provided about an enterprise’s reportable segments. BRE has determined that each of its operating properties, which comprised 99% of BRE’s consolidated assets at December 31, 2011 and 2010 and approximately 99% of its total consolidated revenues for the three years ended December 31, 2011, represents an operating segment. The Company aggregates its operatory segments into reportable segments defined as the three geographical regions in which its apartment communities are located: Southern California, San Francisco Bay Area, and the Seattle area.

Concentration Risk

All multifamily communities owned by the Company are located in the western United States, primarily in California, and Seattle, Washington. All revenues are from external customers and there are no revenues from transactions with other segments. There are no residents that contributed 10% or more of BRE’s total revenues in the years ended December 31, 2011, 2010 or 2009.

Recently Adopted Accounting Pronouncements

Effective January 1, 2009, FASB guidance on property acquisitions requires the acquiring entity in a business combination to recognize the fair value of assets acquired and liabilities assumed in the transaction and recognize contingent consideration arrangements and pre-acquisition loss and gain contingencies at their acquisition-date fair value. The acquirer is required to expense, as incurred, acquisition related transaction costs. BRE expenses costs associated with the pursuit of potential acquisitions to General and Administrative expenses. Once an acquisition is probable the costs are categorized and expensed in Other expenses.

In January 2010, the FASB issued an amendment to improving disclosures about fair value This amendment provides for more robust disclosures about (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements, and (4) the transfers between Levels 1, 2, and 3. The new guidance is effective for the Company for interim and annual reporting beginning after December 15, 2009, with one new disclosure effective after December 15, 2010. The adoption of this guidance did not impact the Company’s financial position or results of operations.

3. Real Estate Portfolio

During 2011, BRE acquired three communities totaling 652 units: Lafayette Highlands, with 150 units, located in Lafayette, California; The Landing at Jack London Square, with 282 units, located in Oakland, California; and The Vistas of West Hills, with 220 units, located in Valencia, California. The aggregate investment in these three communities was $170,127,000. In addition to the communities, we acquired two parcels of land for future development in San Francisco, California’s Mission Bay district for a purchase price of $41,400,000; and we purchased a 4.4 acre site contiguous to our existing Park Viridian operating community and its existing second phase land site in Anaheim, California for a purchase price of $5,100,000.

During 2011, BRE sold two communities totaling 634 units: Galleria at Towngate, with 268 units located in Moreno Valley, California; and Windrush Village, a 366 unit property located in Colton, California; The gross proceeds from sales of the two communities were $65,175,000, resulting in a net gain of $14,489,000.

During 2010, BRE acquired four communities totaling 1,037 units: Allure at Scripps Ranch, with 194 units, located in San Diego, California; Museum Park, with 117 units, located in San Jose, California; Fountains at River Oaks, with 226 units, located in San Jose, California; and Aqua at Marina Del Rey, with 500 units, located in Marina Del Rey, California. The aggregate investment in these four communities was $292,100,000. In addition to the communities, BRE purchased one land parcel for future development of 280 units, in Sunnyvale, California for $19,000,000.

During 2010, BRE sold four communities totaling 1,530 units: Montebello, with 248 units located in Seattle, Washington; Boulder Creek, a 264 unit property located in Riverside, California; Pinnacle Riverwalk, a 714 unit property located in Riverside, California; and Parkside Village, a 304 unit property located in Riverside, California. The gross sales proceeds from sales of the four communities were $167,327,000, resulting in a net gain of $40,111,000.

During 2010, BRE completed construction of two development communities: Belcarra, with 296 units in Bellevue, Washington, and Villa Granada, with 270 units in Santa Clara, California. The aggregate investment in the two communities totals $178,205,000.

During 2009, BRE sold two communities totaling 752 units: Overlook at Blue Ravine, with 512 units located in Folsom, California; and Arbor Pointe, a 240 unit property located in Sacramento, California. The two properties were sold for an aggregate sales price of $67,000,000, resulting in a net gain on sales of $21,574,000. In addition to the two communities, BRE sold an excess parcel of land in Santa Clara, California, classified as held for sale at December 31, 2008, for gross sales proceeds totaling $17,100,000, approximately equal to the carrying value. During 2009 BRE completed construction of three development communities: Taylor 28, with 197 units in Seattle, Washington, 5600 Wilshire, with 284 units in Los Angeles, California and Park Viridian with 320 units in Anaheim, California. The aggregate investment in the three communities totaled $282,934,000.

The components of direct investments in real estate—investments in rental properties are as follows:


	As of December 31
	2011			2010
Land	$	653,190,000		$	627,471,000
Buildings and improvements		2,953,855,000			2,836,995,000

Subtotal		3,607,045,000			3,464,466,000
Accumulated depreciation		(729,151,000	)		(640,456,000	)

Total	$	2,877,894,000		$	2,824,010,000

BRE’s net carrying value of its assets exceeded the tax basis by approximately $107,000,000 (unaudited) at December 31, 2011, reflecting, among other factors, the carryover of basis on tax-deferred exchanges.

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


	As of December 31
	2011		2010
Opening balance	$	29,095,000	$	101,354,000
Costs incurred to projects under construction		59,842,000		26,205,000
Transfers of construction in progress to direct investments in real estate—investments in rental properties		—		(119,698,000	)
Transfers from land under development to direct investments in real estate—construction in progress		157,410,000		21,234,000

Ending balance	$	246,347,000	$	29,095,000

At December 31, 2011, BRE had an estimated cost of $307,300,000 (unaudited) to complete existing construction in progress, with funding estimated through the fourth quarter of 2014.

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

As of December 31, 2011, BRE had eleven joint venture arrangements in which its ownership interest in two of the joint ventures is 35% and its ownership interest in nine of the joint ventures is 15%; these joint ventures are managed by the Company (the “joint ventures”). The Company accounts for its investments in these joint ventures under the equity method of accounting. BRE’s equity interest investment in its eleven joint ventures totaled $63,313,000 for the year ended December 31, 2011. BRE’s equity interest investment in its thirteen joint ventures totaled $61,132,000 for the year ended December 31, 2010.

Each of the joint ventures in which the Company has an ownership interest of 35% contains a single multifamily community that was developed by BRE and completed in 2001. BRE’s investment in these joint ventures totals $20,366,000 and $11,765,000 as of December 31, 2011 and 2010, respectively, and is shown as “Equity interests in and advances to real estate joint ventures-investments in rental properties” on BRE’s consolidated balance sheets. These joint ventures carried secured, non-recourse loans totaling $17,376,000 as of December 31, 2010, of which 50% was BRE’s portion. During 2011, the loans were paid off at maturity through capital contributions from BRE and the joint venture partner. As a result, BRE’s equity investment in the ventures increased by $8,743,000.

BRE Investment in Joint Ventures


	December 31,				December 31,
	Properties		2011		Properties		2010
35% Equity interest		2	$	20,366,000		2	$	11,765,000
15% Equity interest⁽¹⁾		9		42,947,000		11		49,367,000

Total JV investment		11	$	63,313,000		13	$	61,132,000

BRE share of JV Debt⁽²⁾			$	0			$	8,688,000

⁽¹⁾	The Company sold two of its properties in which it had 15% equity interest during 2011.

⁽²⁾	JV debt related to the two properties in which the Company has a 35% equity interest was paid at maturity during 2011.

Each of the joint ventures in which the Company has an ownership interest of 15%, contain a single multifamily community. Six of the nine joint venture communities were previously owned by the Company and were contributed into the joint ventures upon their respective formation. The remaining joint venture communities were acquired by the Company and its joint venture partner through arms length transactions with non affiliated third parties. BRE’s investment in these nine joint ventures totaled $42,947,000 as of December 31, 2011, and its investment in the eleven joint ventures totaled $49,367,000 as of December 31, 2010, respectively, and is included within “Equity interests in and advances in real estate joint ventures-investments in rental properties” on BRE’s consolidated balance sheets.

The eleven joint venture communities had a total cost of approximately $441,165,000 as of December 31, 2011. The Company’s maximum exposure to loss on joint ventures is the total investment. All eleven of the joint ventures are un-leveraged as of December 31, 2011.

The Company’s income from unconsolidated entities totaled $2,888,000, $2,178,000 and $2,329,000 for the years ended December 31, 2011, 2010 and 2009, respectively.

BRE’s underlying equity interest within these joint ventures totaled $65,614,000 and $65,005,000, for the years ended December 31, 2011 and 2010, respectively. The carrying value difference of $2,301,000 and $3,873,000 for 2011 and 2010 is being accreted over 40 years.

5. Other Assets

The components of Other assets are as follows:


	As of December 31
	2011		2010
Predevelopment and escrow deposits	$	17,679,000	$	13,654,000
Accounts and mortgages receivable, net⁽¹⁾		8,911,000		8,843,000
Deferred financing costs		8,431,000		10,347,000
Prepaid insurance		4,706,000		4,418,000
Furniture and equipment, net		3,906,000		5,327,000
Deferred compensation plan		3,668,000		3,196,000
Other		7,143,000		6,577,000

Total Other Assets	$	54,444,000	$	52,362,000

⁽¹⁾	BRE had notes receivable from third party non-controlling interest members of limited liability company subsidiaries of the Company totaling $7,242,000 and $7,304,000 at December 31, 2011 and 2010, respectively. See footnote 15 for more detail.

6. Secured Debt

The following data pertains to BRE’s secured debt:


	As of December 31,
	2011		2010
Fixed rate secured mortgage loans	$	808,714,000	$	810,842,000

Number of properties securing mortgage loans		19		19
Net book value of investments in real estate collateralizing secured debt	$	835,839,000	$	853,632,000
Remaining terms of mortgage loans payable		1-9 years		2-10 years
Weighted average interest rate on fixed rate mortgages		5.6%		5.6%

For the years ending December 31, 2011, 2010 and 2009, respectively, unencumbered real estate net operating income represented, 68.6%, 68.7% and 68.6% of our total real estate net income.

On August 12, 2010, the Company purchased an operating community with 226 units located in San Jose, California, for an aggregate purchase price of $50,300,000. In connection with the acquisition, the company assumed an existing $32,500,000 secured mortgage loan, with a fixed interest rate of 5.74% and is scheduled to mature on September 1, 2019.

On April 30, 2010 the Company refinanced a single property mortgage loan totaling $59,500,000 at a fixed rate of 5.20%. The mortgage has a 10 year interest only term that matures on April 20, 2020. The original mortgage note had a principal amount outstanding of $31,100,000 and was scheduled to mature on October 1, 2010, at a fixed rate of 7.38%.

The following is a summary of BRE’s secured debt:


		As of December 31,				Interest Rate (Coupon)
Fixed Rate Loan	Maturity	2011		2010		Interest Rate (Coupon)
Alessio⁽¹⁾	May 2012	$	65,866,000	$	67,255,000		5.50	%
Mission Grove	August 2013		30,893,000		31,632,000		5.33	%
Fountains at River Oaks	September 2019		32,480,000		32,480,000		5.74	%
Secured Facility	May 2019		310,000,000		310,000,000		5.57	%
Montanosa	April 2020		59,475,000		59,475,000		5.20	%
Secured Facility	September 2020		310,000,000		310,000,000		5.69	%

		$	808,714,000	$	810,842,000		5.58	%

⁽¹⁾	On February 1, 2012, the Company prepaid the single property mortgage on Alessio for $66,168,027 including principal and accrued interest prior to its maturity with no prepayment penalty.

7. Unsecured Senior Notes and Unsecured Line of Credit

The following table pertains to BRE’s unsecured senior notes and unsecured line of credit:


	As of December 31,
	2011			2010
Fixed rate unsecured notes	$	690,018,000		$	738,563,000
Convertible senior unsecured notes⁽¹⁾		34,939,000			34,513,000
Unsecured line of credit		129,000,000			209,000,000

Total unsecured debt	$	853,957,000		$	982,076,000

Weighted average interest rate on fixed rate unsecured notes		5.51	%		5.65	%
Weighted average interest rate on convertible notes		6.01	%		6.01	%
Weighted average interest rate on unsecured line of credit		1.85	%		1.91	%

⁽¹⁾

Represents $35 million principal as of December 31, 2011 and 2010, respectively, with a 4.125% coupon adjusted to reflect convertible debt accounting guidance. Subsequent to the end of the year, the Company announced it is exercising its right to redeem for cash all of the outstanding notes, at a redemption price equal to 100% of the principal amount of the notes outstanding, plus accrued and unpaid interest up to, but excluding, February 21, 2012 (the “Redemption Date”).

Fixed Rate Unsecured Notes

During January 2011, the Company paid off the remaining aggregate principal amount of $48,545,000 of its 7.450% senior notes as they matured.

On September 15, 2010, the Company closed an offering of $300,000,000 of 10.5 year senior unsecured notes with a coupon rate of 5.20%. The notes will mature on March 15, 2021. Net proceeds from the offering, after all discounts, commissions and issuance costs, totaled approximately $297,477,000.

The following is a summary of BRE’s unsecured senior notes:


	Maturity	As of December 31,				Interest Rate (Coupon)
	Maturity	2011		2010		Interest Rate (Coupon)
2011 7.450% Senior Note	January 2011	$	0	$	48,545,000		7.45	%
2013 7.125% Senior Note	February 2013		40,018,000		40,018,000		7.13	%
2014 4.700% Senior Note	March 2014		50,000,000		50,000,000		4.70	%
2017 5.500% Senior Note	March 2017		300,000,000		300,000,000		5.50	%
2021 5.200% Senior Note	March 2021		300,000,000		300,000,000		5.20	%

		$	690,018,000	$	738,563,000

Convertible Senior Unsecured Notes

On August 15, 2006, the Company completed a private offering of $460,000,000 aggregate principal amount of convertible senior unsecured notes that mature on August 15, 2026. The notes bear interest at a fixed coupon rate of 4.125%. The notes may be converted into shares of BRE common stock (“Common Shares”), at the option of the holder, under specific circumstances, or on or after July 15, 2026, at an initial conversion rate of 14.0432 shares per $1,000 principal amount of notes. This is equivalent to an initial conversion price of $71.21 per share, which represents a 27.50% premium over the $55.85 closing price of the Company’s stock at the time the transaction was priced. The number of shares of common stock that may be issuable upon conversion of the notes is based on a conversion price of approximately $55.85 per share, which is based on a maximum conversion rate of 17.9051 shares per $1,000 principal amount of notes. On or after February 21, 2012, the Company may redeem the notes at a redemption price equal to the principal amount of the notes plus any accrued but unpaid interest thereon, and in certain circumstances, any additional conversion value.

The following is a summary of BRE’s convertible senior unsecured notes:


	Convertible Senior Unsecured Notes as of December 31,
	2011			2010
Carrying amount of equity component	$	37,153,000		$	37,153,000
Principal amount of debt	$	35,000,000		$	35,000,000
Unamortized debt discount		(61,000	)		(487,000	)

Net carrying amount of convertible debt	$	34,939,000		$	34,513,000
Remaining expected term of convertible debt		0.14 years			1.14 years
Potential amount of shares to be delivered upon conversion		492,000			492,000

Total net interest related to the 4.125% convertible senior unsecured notes is as follows:


	Years Ended December 31,
	2011			2010			2009
Fixed coupon rate on notes		4.125%			4.125%			4.125%
Effective interest rate on notes		6.005%			6.005%			6.005%
Contractual interest expense based on coupon of 4.125%	$	1,444,000		$	12,659,000		$	17,374,000
Noncash interest expense on effective coupon of 6.01%		426,000			5,001,000			7,612,000
Capitalized interest on effective coupon of 6.01%		(104,000	)		(750,000	)		(1,209,000	)

Total net interest recognized on convertible debt	$	1,766,000		$	16,910,000		$	23,777,000

Tender Offers and Repurchase Activity

During June 2010, the Company repurchased $15,000,000 of its 4.125% convertible senior unsecured notes at par. The Company recognized a net loss on early debt extinguishment of $558,000 in connection with the repurchase.

On October 13, 2010, the Company closed a fixed price cash tender offer for any and all of our 4.125% convertible senior unsecured notes. As a result, $321,334,000 in aggregate principal amount of our 4.125% convertible senior unsecured notes were validly tendered, and we accepted, purchased and subsequently cancelled the notes for an aggregate purchase price of 104% of par, or approximately $334,187,360. The Company recognized a net loss on early debt extinguishment of $22,949,000 in connection with the valid tender. After the tender offer an aggregate principal amount of $35,000,000 of the notes remain outstanding at December 31, 2011 and 2010.

2010 Debt Tender/Repurchase Summary

(Amounts in thousands)


Security	Cash Principal Outstanding			Bonds Retired		Cash Paid		Principal Amount Remaining			% of Par			Extinguishment loss			Write off of Unamortized Discounts / Fees			Net (Loss)
4.125% Senior Notes	$	371,334	⁽¹⁾	$	15,000	$	15,000	$	356,334			100.00	%		—		($	558	)	($	558	)

Open Market Repurchase	$	371,334		$	15,000	$	15,000	$	356,334			100.00	%		—		($	558	)	($	558	)
4.125% Senior Notes	$	356,334	⁽²⁾	$	321,334	$	334,187	$	35,000			104.00	%	($	12,853	)	($	10,096	)	($	22,949	)

Debt Tender Total	$	356,334		$	321,334	$	334,187	$	35,000			104.00	%	($	12,853	)	($	10,096	)	($	22,949	)

Total Tender/Repurchase	$	371,334		$	336,334	$	349,187	$	35,000	⁽³⁾		103.82	%	($	12,853	)	($	10,654	)	($	23,507	)

⁽¹⁾	Balance as of December 31, 2009

⁽²⁾	Balance prior to October 2010 tender offer.

⁽³⁾	Balance as of December 31, 2011 and 2010.

During 2010, the Company recognized a combined loss of $23,507,000 in connection with debt repurchase and tender activity.

On April 15, 2009, the Company closed a fixed price cash tender offer for any and all of our outstanding 5.750% senior notes due in 2009 and any and all of our outstanding 4.875% senior notes due in 2010. As a result, $61,407,000 and $119,421,000 in aggregate principal amount of the 5.750% senior notes due in 2009 and 4.875% senior notes due in 2010, respectively, were validly tendered and we accepted, purchased and subsequently cancelled the notes. After giving effect to the purchase of the tendered notes, an aggregate principal amount of $30,579,000 of the 4.875% senior notes due in 2010, respectively, were paid in full during 2010. The remaining principal balance of the 5.750% senior notes due in 2009 were paid in full during September 2009, as the note came due.

On April 1, 2009, the Company closed a fixed price cash tender offer for any and all of our outstanding 7.450% senior notes due 2011 and any and all of our outstanding 7.125% senior notes due in 2013. As a result, $201,455,000 and $89,982,000 in aggregate principal amount of the 7.450% senior notes due in 2011 and 7.125% senior notes due in 2013, respectively, were validly tendered and we accepted, purchased and subsequently cancelled the notes. After giving effect to the purchase of the tendered notes, an aggregate principal amount of $48,545,000 7.450% senior notes due in 2011 were paid in full in 2011, and $40,018,000 7.125% senior notes due in 2013, respectively, remain outstanding at December 31, 2011.

During 2009, the Company repurchased $78,266,000 of its 4.125% convertible senior unsecured notes for an aggregate price of 92.99% of par, or approximately $72,776,000, resulting in a net gain on extinguishment of debt of $2,870,000.

During 2009, the Company recognized a net gain of $1,470,000 in connection with the repurchase and tender activity.

Unsecured Line of Credit

Through December 31, 2011 the Company maintained an unsecured line of credit with a total commitment of $750,000,000. Based on its then current debt ratings, the line of credit accrued interest at LIBOR plus 47.5 basis points. In addition, the Company paid a 0.15% annual facility fee on the total commitment of the facility. Borrowings under our unsecured line of credit totaled $129,000,000 at December 31, 2011, compared to $209,000,000 at December 31, 2010. Borrowings under the unsecured line of credit were used to fund acquisition and development activities as well as for general corporate purposes. Balances on the unsecured line of credit were typically reduced with available cash balances. The unsecured line of credit was terminated subsequent to December 31, 2011.

The unsecured line of credit and unsecured senior note agreements contained various covenants that include, among other factors, tangible net worth and requirements to maintain certain financial ratios. BRE was in compliance with all such financial covenants throughout the years ended December 31, 2011 and 2010.

On January 5, 2012, the Company entered into a new $750,000,000 unsecured line of credit (the “Credit Agreement”). The Credit Agreement has an initial term of 39 months, terminates on April 3, 2015 and replaces the previous $750,000,000 unsecured line of credit. Based on our current debt ratings, the line of credit accrues interest at LIBOR plus 120 basis points. In addition, the Company pays a 0.20% annual facility fee on the total commitment of the facility. The new unsecured line of credit contains various covenants that include among other factors, tangible net worth and requirements to maintain certain financial ratios. As of the filing date, BRE is in compliance with all such financial covenants as it entered the new agreement.

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


2012⁽¹⁾	$	230,742,000
2013		70,529,000
2014		53,839,000
2015		7,962,000
2016		9,041,000
Thereafter		1,290,619,000

Total	$	1,662,732,000

⁽¹⁾

This total includes the unsecured line of credit balance of $129,000,000, which was terminated in 2012, along with the principal amount of the 4.125% convertible senior unsecured notes. The carrying value of the 4.125% convertible senior unsecured notes at December 31, 2011 reflects a debt discount of $61,000.

The following is a summary of interest expense on mortgage loans, lines of credit and unsecured senior notes, including amortization of related issuance costs:


	Year ended December 31,
	2011			2010			2009
Total interest incurred	$	89,395,000		$	96,871,000		$	99,064,000
Capitalized interest		(14,431,000	)		(11,977,000	)		(16,330,000	)

Total interest expense	$	74,964,000		$	84,894,000		$	82,734,000
Total cash paid for interest⁽¹⁾	$	90,007,000		$	91,547,000		$	102,250,000

⁽¹⁾	Total cash paid for interest net of capitalized interest was $75,576,000, $79,570,000 and $85,920,000, for the periods ending December 31, 2011, 2010 and 2009, respectively.

8. Accounts Payable and Accrued Expenses

The components of accounts payable and accrued expenses are as follows:


	As of December 31,
	2011		2010
Accrued interest payable	$	15,361,000	$	16,503,000
Accrued development costs and real estate improvements		11,562,000		4,922,000
Security deposits		9,283,000		8,843,000
Accrued employee and non employee director wages and benefits		8,975,000		7,587,000
Prepaid rent		5,023,000		3,732,000
Deferred compensation plan		3,668,000		3,196,000
Retention payable		2,506,000		810,000
Other		6,895,000		6,477,000

Total Accounts Payable and Accrued Expenses	$	63,273,000	$	52,070,000

9. Discontinued Operations

The results of operations for properties sold during the period or designated as held for sale at the end of the period are required to be classified as discontinued operations if deemed a component of an entity. The property-specific components of net earnings that are classified as discontinued operations include operating results, depreciation expense recognized prior to the classification as held for sale, and the net gain or loss on disposal.

During 2011, the Company sold two communities totaling 634 units: Galleria at Towngate, with 268 units located in Moreno Valley, California; and Windrush Village, a 366 unit property located in Colton, California; The approximate gross proceeds from sale of the two communities were $65,175,000, resulting in a net gain of $14,489,000.

During 2010, the Company sold four communities totaling 1,530 units: Montebello, with 248 units located in Seattle, Washington; Boulder Creek, a 264 unit property located in Riverside, California; Pinnacle Riverwalk, a 714 unit property located in Riverside, California; and Parkside Village, a 304 unit property located in Riverside, California. The four properties were sold for a gross sales price of $167,327,000, resulting in a net gain on sale of $40,111,000.

During 2009, the Company sold two communities totaling 752 units: Overlook at Blue Ravine, with 512 units located in Folsom, California; and Arbor Pointe, a 240 unit property located in Sacramento, California. The two properties were sold for a gross sales price of $67,000,000, resulting in a net gain on sales of $21,574,000. In addition to the two communities, we sold an excess parcel of land in Santa Clara, California, classified as held for sale at December 31, 2008, for gross sales proceeds totaling $17,100,000, approximately equal to the carrying value.

The net gain on sale and the combined results of operations for these eight operating properties of $16,900,000, $47,699,000 and $32,787,000 for the twelve months ended December 31, 2011, 2010 and 2009, respectively, are included in discontinued operations on the consolidated statements of income for each twelve month ended period presented.

The following is a breakdown of the net gain on sales and the combined results of operations for the properties included in discontinued operations:


	Years Ended December 31
	2011			2010			2009
Rental income	$	6,239,000		$	19,466,000		$	29,703,000
Real estate expenses		(2,462,000	)		(7,532,000	)		(11,322,000	)
Provision for depreciation		(1,366,000	)		(4,346,000	)		(7,168,000	)
Net gain on sales of discontinued operations		14,489,000			40,111,000			21,574,000

Total discontinued operations	$	16,900,000		$	47,699,000		$	32,787,000

10. Preferred Stock and Equity

Preferred Stock

On August 15, 2011, the Company repurchased 840,285 shares of its 6.75% Series D Cumulative Redeemable Preferred Stock at a price of $24.33 per share on the open market, a $0.67 discount to par resulting in a non cash return from preferred shareholders of $563,000. In addition, the initial issuance costs associated with these shares totaling $718,000 were charged to retained earnings during the third quarter of 2011. The net effect of the activity was a $155,000 charge to retained earnings for the three months ending September 30, 2011. As of December 31, 2011, 2,159,715 shares of 6.75% Series D Cumulative Redeemable Preferred Stock remain outstanding.

On June 13, 2011, the Company redeemed all 4,000,000 shares of its 6.75% Series C Cumulative Redeemable Preferred Stock at a redemption price of $25.34688 per share. The redemption price was equal to the original issuance price of $25.00 per share, plus accrued and unpaid dividends to the redemption date. The initial issuance costs totaling approximately $3,616,000 associated with this series of perpetual preferred stock were charged to retained earnings during the second quarter of 2011.

The following table presents the Company’s issued and outstanding Preferred Shares as of December 31, 2011 and 2010:


	Optional Redemption Date⁽¹⁾		Annual Dividend Rate per Share⁽²⁾		Outstanding at December 31, 2011		Outstanding at December 31, 2010
Preferred Stock, nonvoting, $0.01 par value; 20,000,000 shares authorized:
6.75% Series C cumulative redeemable, liquidation preference $25.00 per share, 0 and 4,000,000 shares outstanding at December 31, 2011 and 2010		March 2009	$	1.6875	$	0	$	100,000,000
6.75% Series D cumulative redeemable, liquidation preference $25.00 per share, 2,159,715 and 3,000,000 shares outstanding at December 31, 2011 and 2010		December 2009	$	1.6875		53,992,875		75,000,000

					$	53,992,875	$	175,000,000

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

⁽²⁾

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

Equity Distribution and Issuance

On May 11, 2011, the Company completed an equity offering of 9,200,000 common shares, including shares issued to cover over-allotments, at $48.00 (prior to a $1.92 per share discount) per share. Total gross proceeds from this offering were approximately $441,508,000. The Company used the net proceeds from the offering for general corporate purposes and to repay borrowings under its unsecured line of credit.

On February 24, 2010, the Company entered into Equity Distribution Agreements (EDAs) under which it may issue and sell from time to time through or to its sales agents shares of its common stock having aggregate offering proceeds of up to $250,000,000. During 2011, 1,291,537 shares were issued under the EDAs, with an average gross share price of $47.55 for total gross proceeds of approximately $61,414,000. As of December 31, 2011, the remaining capacity under the EDAs totals $163,600,000. Proceeds were used for general corporate purposes, which included reducing borrowings under the Company’s unsecured line of credit, the repayment of other indebtedness, the redemption or other repurchase of outstanding securities and funding for development activities. During 2010, 581,055 shares were issued under the EDAs for gross proceeds of approximately $25,000,000 with an average gross share price of $43.02.

On April 7, 2010, the Company completed an equity offering of 8,050,000 common shares, including shares issued to cover over-allotments, at $34.25 per share. Total gross proceeds from this offering were approximately $275,713,000 before deducting the underwriting discount and other offering expenses we paid. The Company used the net proceeds from the offering for general corporate purposes, which included reducing borrowings under its unsecured line of credit.

11. Stock Compensation Plans

Direct Stock Purchase and Dividend Reinvestment Plan

In 1996, the Company instituted a direct stock purchase and dividend reinvestment plan (the “DRIP”) in which shareholders may purchase either newly issued or previously issued shares. There is no discount on shares purchased through the DRIP. The total amount of shares authorized under the DRIP is 1,500,000; from inception through December 31, 2011, 409,454 new shares have been issued under the DRIP.

Employee Stock Option and Restricted Stock Plan

The 1992 Stock Option Plan and the 1999 BRE Stock Incentive Plan, as amended (the “Plans”) provide for the issuance of incentive stock options, non-qualified stock options, share appreciation rights, restricted shares and other grants. The original maximum number of shares that may be issued under the Plans was 6,850,000. The grant price may not be less than the fair market value of a share on the date that the award is granted and the awards generally vest over three to four years. Shareholders initially adopted the 1999 BRE Stock Incentive Plan in 1999 and approved the plan as amended in 2007. The 1999 BRE Stock Incentive Plan, as amended, allowed for grants of up to 4,500,000 shares. On May 18, 2010 at the 2010 Annual Meeting of Shareholders of BRE Properties, Inc. the shareholders of the Company approved an amendment to the Amended and Restated 1999 BRE Stock Incentive Plan to increase the maximum number of shares reserved for issuance from 4,500,000 shares to 5,250,000 shares. On November 5, 2010 the Company registered an additional 750,000 shares of our common stock reserved for issuance from time to time in connection with the Amended and Restated 1999 BRE Stock Incentive Plan.

Restricted Stock and Options Awards

Share based payment awards under BRE’s employee and non-employee director plans vest over periods ranging from one to four years. The Company recognizes expense for awards with graded vesting on a straight line basis. At December 31, 2011, compensation cost related to non-vested awards not yet recognized totaled approximately $10,600,000 and the weighted average period over which it is expected to be recognized is 2.2 years. During the twelve months ended December 31, 2011, 151,066 restricted shares and 66,996 stock options were awarded. Total stock-based compensation in general and administrative expenses totaled $4,697,000, $4,785,000 and $2,596,000 during the years ending 2011, 2010, and 2009, respectively. Stock-based compensation during 2009 reflected the impact of decreased expectations for vesting levels of certain performance based awards due to the recessionary environment. Stock-based compensation cost capitalized totaled $2,352,000, $3,000,000, and $1,461,000 for the years ended December 31, 2011, 2010 and 2009, respectively. The fair value of restricted shares and options awarded totaled $7,300,000, $7,900,000 and $9,400,000 in 2011, 2010, and 2009, respectively.

Employee Plan

The intrinsic value of options exercised and restricted shares vested totaled $7,400,000, $8,406,000, and $5,068,000 during 2011, 2010 and 2009, respectively. The aggregate intrinsic value of options currently exercisable at December 31, 2011, 2010, and 2009 was $4,111,000, $2,732,000, and $1,828,000, respectively.

Changes in options outstanding were as follows:


	Years Ended December 31,
	2011					2010					2009
	Shares under option			Weighted average exercise price		Shares under option			Weighted average exercise price		Shares under option			Weighted average exercise price
Beginning Balance		307,906		$	31.86		620,911		$	30.92		692,311		$	30.80
Granted		66,996		$	44.12		106,220		$	33.06		—			—
Exercised		(26,584	)	$	30.29		(394,611	)	$	30.62		(9,500	)	$	22.40
Cancelled		(890	)	$	28.98		(24,614	)	$	33.06		(61,900	)	$	30.96

Ending Balance		347,428		$	34.35		307,906		$	31.86		620,911		$	30.92
Exercisable		219,224		$	31.73		226,294		$	31.43		620,911		$	30.92
Weighted average estimated fair value per share of options granted		66,996		$	12.17		106,220		$	8.32		—		$	—

At December 31, 2011, the exercise price of shares under option ranged from $29.16 to $44.12, with a weighted average exercise price of $34.35. Expiration dates range from 2012 through 2021; the weighted average remaining contractual life of these options is 4.6 years. Exercise prices on stock options exercised during 2011 ranged from $29.16 to $32.45.

The fair value for the Company’s share options was estimated at the time the share options were granted using the Black-Scholes option pricing model with the following assumptions:


	Year Ended December 31, 2011			Year Ended December 31, 2010
Risk-free interest rate		2.93	%		3.27	%
Dividend yield		3.46	%		4.72	%
Volatility		34	%		37	%
Weighted average option life		8.5 years			8.5 years

The Black-Scholes option pricing model was developed for use in estimating the fair 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.

A summary of the remaining options outstanding under the plans as of December 31, 2011 are as follows:


Options Outstanding	Options vested	Range— Exercise Price	Weighted Average Price⁽¹⁾	Weighted average contractual terms (in years)
64,840	64,840	$20.00 - $29.99	$29.81	0.86
215,592	154,384	$30.00 - $39.99	$32.68	4.34
66,996	—	$40.00 - $49.99	$44.12	9.08

347,428	219,224	$29.16 - $44.12	$34.35	4.60

⁽¹⁾	Represents weighted average share price of options outstanding.

As of December 31, 2011, the remaining unvested restricted share awards outstanding have a weighted average contractual life of 2.20 years. A summary of the remaining restricted stock awards under the employee plan that remain outstanding as of December 31, are as follows:


	2011			Weighted Average Price		2010			Weighted Average Price		2009			Weighted Average Price
Beginning Balance		507,992		$	34.92		792,707		$	36.15		725,246		$	42.64

Shares Awarded		133,509		$	47.92		201,432		$	34.63		336,450		$	27.86
Shares Vested		(152,402	)	$	45.50		(304,378	)	$	37.36		(120,044	)	$	45.52
Shares forfeited		(31,064	)	$	36.86		(181,769	)	$	35.88		(148,945	)	$	41.46

Ending Balance		458,035		$	35.06		507,992		$	34.92		792,707		$	36.15

The fair value of the Company’s performance based restricted stock awards with market conditions was determined at the time the shares were granted using a Monte Carlo simulation with the following range of assumptions:


	Year Ended December 31
	2011	2010	2009
Grant date share price	$44.12	$33.06	$26.40
Risk free rate	1.48%	1.95%	1.35%
Volatilities	50%-63%	48%-62%	41%-50%

The Monte Carlo simulation was developed for use in estimating the fair market value of performance based restricted awards with market based conditions. In addition, the model requires the input of highly subjective assumptions, including the expected stock price volatilities which have been determined using historical volatilities of the company, the MSCI US REIT index and a set of peer companies. 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 restricted performance shares with market conditions.

The following is a summary of the Company’s restricted shares granted under the employee plan for the years ended December 31, 2011, 2010 and 2009, respectively:


Restricted Stock - Awards	2011		Grant Date Fair Value		2010		Grant Date Fair Value		2009		Grant Date Fair Value
Executives:
Service Based Shares Awarded		46,531	$	44.12		68,785	$	32.94		121,707	$	26.40
Performance Based Awards		21,229	$	56.70		28,979	$	33.06		78,261	$	26.40
Awards with Market Conditions		17,369	$	54.25		28,975	$	44.63		45,117	$	37.25
Employee:
Service Based Shares Awarded		43,422	$	44.12		74,693	$	33.06		91,365	$	26.40
Performance and Market Based Awards		4,958	$	57.12		—		—		—		—

Total -Restricted Stock Awards		133,509				201,432				336,450

Non-Employee Director Stock Option and Restricted Stock Plan

The Fifth Amended and Restated Non-Employee Director Stock Option and Restricted Stock Plan provides for: (1) annual grants of restricted stock with a market price-based value of $91,000 per year per non-employee director; (2) discretionary annual grants for service as Chairman of the Board or Lead Director of restricted stock with an aggregate value of up to $35,000 per year; and (3) annual grants for service as a Board committee chairman of restricted stock with an aggregate value of $10,500 per year per committee chairman. Under the

plan, share-based compensation for 2011, 2010, and 2009, and all future service periods are to be paid in the form of restricted share grants and no new options are to be issued. The maximum number of shares that may be issued under the plan is 2,650,000. As with the Plans, the grant price may not be less than the fair market value of a share on the date the award is granted.

At December 31, 2011, the exercise prices of shares under option ranged between $28.42 and $63.22, with expiration dates from 2012 to 2017. The weighted average remaining contractual life of these options is approximately 2.3 years. Exercise prices on stock options exercised during 2011 ranged from $28.25 to $38.54. The intrinsic value of options exercised and restricted shares vested totaled $5,091,000, $3,039,000 and $464,000, for the years ended December 31, 2011, 2010 and 2009, respectively. The aggregate intrinsic value of options currently exercisable at December 31, 2011, 2010 and 2009 was $4,523,000, $5,299,000 and $1,805,000.

Changes in options outstanding were as follows:


	Years ended December 31,
	2011					2010					2009
	Shares under option			Weighted average exercise price		Shares under option			Weighted average exercise price		Shares under option			Weighted average exercise price
Beginning Balance		569,855		$	36.11		768,067		$	34.41		844,920			33.95
Granted		—			—		—			—		—			—
Exercised		(222,890	)	$	31.83		(198,212	)	$	29.52		—			—
Cancelled		—			—		—			—		(76,853	)	$	29.28

Ending Balance		346,965		$	38.86		569,855		$	36.11		768,067		$	34.41

Exercisable		346,965		$	38.86		569,855		$	36.11		768,067		$	34.41

A summary of the remaining options outstanding under the non-employee director plan as of December 31, 2011 are as follows:


Options Outstanding	Options vested	Range— Exercise Price	Weighted Average Price	Weighted average contractual terms (in years)
41,918	41,918	$20.00 - $29.99	$28.87	0.65
222,849	222,849	$30.00 - $39.99	$34.25	1.73
50,359	50,359	$50.00 - $59.99	$52.19	4.42
31,839	31,839	$60.00 - $69.99	$63.22	5.42

346,965	346,965	$28.42 - $63.22	$38.86	2.33

As of December 31, 2011, the remaining unvested restricted share awards outstanding have a weighted average contractual life of 0.42 years. A summary of the remaining restricted stock awards under the non-employee director plan that remain outstanding as of December 31, are as follows:


	2011			Weighted Average price		2010			Weighted Average price		2009			Weighted Average price
Beginning Balance		22,649		$	39.55		32,611		$	25.38		18,916		$	44.30

Shares Awarded		17,557		$	51.02		25,401		$	38.85		32,611		$	25.38
Shares Vested		(22,649	)	$	39.55		(35,363	)	$	25.98		(18,699	)	$	44.26
Shares forfeited		—			—		—			—		(217	)	$	48.43

Ending Balance		17,557		$	51.02		22,649		$	39.55		32,611		$	25.38

12. Segment Reporting

FASB guidance requires certain descriptive information to be provided about an enterprise’s reportable segments. BRE has determined that each of its operating properties, which comprised 99% of BRE’s consolidated assets at December 31, 2011 and 2010 and approximately 99% of its total consolidated revenues for the three years ended December 31, 2011, represents an operating segment. The Company aggregates its operating segments into reportable segments defined as the geographical regions in which its apartment communities are located: Southern California, San Francisco Bay Area and the Seattle area.

Segment Reporting guidance requires that segment disclosures present the measure(s) used by the chief operating decision makers to decide how to allocate resources and for purposes of assessing such segments’ performance. The Company’s chief operating decision maker is comprised of several members of its executive management team who use net operating income (“NOI”) as a primary financial measure to assess the performance of the business.

The Company’s operating and investment activities are primarily focused on the ownership, development and operation of multifamily communities in the major metropolitan markets within the state of California, and in the metropolitan area of Seattle, Washington. We evaluate performance and allocate resources primarily based on the NOI of an individual multifamily community. We define NOI as the excess of all revenue generated by the community (primarily rental revenue) less direct real estate expenses. Accordingly, NOI does not take into account community-specific costs such as depreciation, capitalized expenditures and interest expense.

The Company monitors the operating results of each property on a “Same-store” and “non same-store” basis. “Same-store” properties are defined as properties that have been completed, stabilized and owned by the Company for at least two twelve month periods. A comparison of operating results for same-store communities is meaningful as these communities have stabilized occupancy and operating expenses, there is no plan to conduct substantial redevelopment activities and the community is not held for disposition within the current year.

Operating results are aggregated into five reportable segments based upon geographical region for same-store communities, with non same-store communities aggregated into one reportable segment. The following table details rental income and NOI for the Company’s reportable segments for the years ended December 31, 2011, 2010, and 2009, and reconciles NOI to income from continuing operations per the consolidated statement of operations (dollars in thousands):

The Company’s segmented revenue is as follows:


	For the Years Ended December 31,
	2011			2010			2009
Revenues:
Southern California⁽¹⁾	$	196,726		$	192,474		$	190,753
San Francisco Bay Area		64,843			61,366			62,391
Seattle		45,121			42,948			43,458
Non-core markets⁽²⁾		15,080			14,406			14,338
Non Same-store properties⁽³⁾		49,611			23,771			8,203

Total property revenues⁽⁴⁾	$	371,381		$	334,965		$	319,143

Net Operating Income:
Southern California⁽¹⁾	$	135,571		$	132,110		$	132,154
San Francisco Bay Area		46,867			43,871			45,175
Seattle		28,884			27,211			28,592
Non-core markets⁽²⁾		9,622			8,695			8,694
Non Same-store properties⁽³⁾		31,225			14,444			4,576

Total property net operating income	$	252,169		$	226,331		$	219,191

Other income		2,536			2,934			3,459
Income from unconsolidated entities		2,888			2,178			2,329
Income from discontinued operations, net		3,777			11,934			18,382

Net operating income	$	261,370		$	243,377		$	243,361

Provision for depreciation, including discontinued operations	$	(103,940	)	$	(94,384	)	$	(88,419	)
Interest expense, including discontinued operations		(74,964	)		(84,894	)		(82,734	)
General and administrative		(21,768	)		(20,570	)		(17,390	)
(Loss)/Gain on retirement of debt		—			(23,507	)		1,470
Other expenses		(402	)		(5,298	)		(13,522	)
Net gain on sale of from discontinued operations		14,489			40,111			21,574
Gain from sale of unconsolidated entity		4,270			—			—
Dividends attributable to preferred stock		(7,655	)		(11,813	)		(11,813	)
Redemption related to preferred stock issuance costs		(3,771	)		—			—
Redeemable non-controlling interests in income		(1,168	)		(1,446	)		(1,885	)

Net income available to common shareholders	$	66,461		$	41,576		$	50,642

The following table details the assets of the Company’s reportable segments for the years ended December 31, 2011 and 2010 (dollars in thousands):


	As of December 31,
	2011			2010
Assets
Southern California⁽¹⁾	$	1,838,003		$	1,825,712
San Francisco Bay Area		518,384			514,493
Seattle Area		423,908			419,182
Non-core markets⁽²⁾		129,526			128,164
Non Same-store properties⁽³⁾		697,224			514,570

Total investments in rental properties	$	3,607,045		$	3,402,121

Value assets sold in 2011 (present in 2010)	$	0		$	62,345
Accumulated depreciation		(729,151	)		(640,456	)
Construction in progress	$	246,347		$	29,095
Equity investment in real estate joint ventures		63,313			61,132
Land under development		101,023			183,291
Cash		9,600			6,357
Other assets		54,444			52,362

Total gross assets	$	3,352,621		$	3,156,247

⁽¹⁾	Consists of properties in San Diego, Inland Empire, Los Angeles and Orange County.

⁽²⁾	Consists of one property in Sacramento, California (400 Units) and two properties in Phoenix, Arizona (902 units).

⁽³⁾	2011 Non Same-store properties include; three properties acquired in 2011, four properties acquired in 2010, two properties delivered in 2010 and under lease-up, and one property under rehabilitation/redevelopment.

⁽⁴⁾	All revenues are from external customers and no single tenant or related group of tenants contributed 10% or more of the Company’s total revenues during the three years ended December 31, 2011, 2010, or 2009.

13. Earnings per Share

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


	For the years ended,
	2011			2010			2009
Numerator:
Net income available to common shareholders	$	66,461,000		$	41,576,000		$	50,642,000
Less adjustment for earnings and gains from discontinued operations		(16,900,000	)		(47,699,000	)		(32,787,000	)

Numerator for earnings per share from continuing operations	$	49,561,000		($	6,123,000	)	$	17,855,000

Denominator
Denominator for basic earnings per share—weighted average shares		71,220,000			61,420,000			52,760,000
Effect of dilutive securities:
Stock based awards		450,000			430,000			240,000

Denominator for diluted earnings per share adjusted for weighted average shares and assumed conversion		71,670,000			61,850,000			53,000,000

Basic earnings per share from continuing operations	$	0.69		$	(0.10	)	$	0.33
Basic earnings per share from discontinued operations		0.24			0.77			0.62

Basic earnings per share	$	0.93		$	0.67		$	0.95

Diluted earnings per share from continuing operations	$	0.69		$	(0.10	)	$	0.33
Diluted earnings per share from discontinued operations		0.24			0.77			0.62

Diluted earnings per share	$	0.93		$	0.67		$	0.95

Under FASB guidance the effect of anti-dilutive Operating Company units and shares under option have been excluded from the diluted earnings per share calculation. Weighted average Operating Company units totaled 509,000, 683,000, and 780,000 for the years ended December 31, 2011, 2010 and 2009, respectively. The anti-dilutive shares under option total 82,198, 82,198 and 242,831 for the years ended December 31, 2011, 2010 and 2009, respectively.

14. Retirement Plan

BRE has a 401K defined contribution retirement plan covering all employees with more than six months of continuous full-time employment. In addition to employee elective deferrals, in 2011, 2010 and 2009, BRE contributed up to 3% of the employee’s contributions up to $7,350 per employee in 2011, 2010 and 2009. The aggregate amounts contributed and recognized as expense by BRE were $443,000, $415,000 and $518,000 for the years ended December 31, 2011, 2010 and 2009, respectively.

15. Related Party Transactions

BRE has notes receivable from third party non-controlling interest members of limited liability company subsidiaries of the Company totaling $7,242,000 and $7,304,000 at December 31, 2011 and 2010, respectively. The amounts are recorded in Other assets on the consolidated balance sheets. These notes mature in 2013 and have a weighted average interest rate of approximately 5%. Interest income from the notes totaled $366,000, $370,000 and 374,000 for the years ended December 31, 2011, 2010 and 2009, respectively. The Company has recourse to take over the ownership in the underlying assets from the third party minority interest member in the event of default, which is sufficient to recover amounts owed to the Company in the event of default. No allowance has been recorded.

16. Commitments

During the years ended December 31, 2011, 2010 and 2009, total operating lease payments incurred for office space, including real estate taxes, insurance, repairs and utilities, aggregated $1,499,000, $1,433,000, and $1,405,000 respectively.

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


2012	$	1,823,000
2013		1,734,000
2014		1,888,000
2015		1,712,000
2016		799,000
Thereafter		9,126,000

Total	$	17,082,000

Over the term of each operating lease, rent is based on fixed contractual increases to the base rent and expense is recognized on a straight line basis. The ground lease for the Mercer Island Development site has an annual straight line rent expense of approximately $664,000. The straight line expense has been calculated based on fixed contractual amounts in years one through five and CPI-U index inflation ratios beginning in year six.

The Company’s leases as of December 31, 2011 are as follows:


	Lease Terms
Lease Location	Start Date		Termination Date		BRE Options
Phoenix, AZ		12/1/2006		1/31/12	N/A
Seattle, WA		6/1/2007		9/1/2012	5 year extension
Denver, CO		2/1/2008		1/31/2013	3-5 year extension
Irvine, CA		12/1/2005		3/31/2015	N/A
San Francisco, CA		8/1/2005		2/1/2016	Two 5 year extensions
Mercer Island, WA		10/7/2010		10/7/2070	Two 15 year extensions, and a 9 year extension

17. Contingencies

The Company is involved in various legal actions arising in the ordinary course of business. Losses associated with legal claims arising in the ordinary course of business are expected to be covered under the Company’s insurance policies. As of December 31, 2011, there were no pending legal proceedings to which the Company is a party or of which any of its properties is the subject, the adverse determination of which the Company anticipates would have a material adverse effect upon its consolidated financial condition and results of operations. As of the filing date, the risk of a material loss impacting the Company’s financial position has been assessed as remote.

18. Subsequent Events

The Company has evaluated and disclosed subsequent events through the date of issuance of the financial statements.

On January 5, 2012, the Company entered into a $750,000,000 unsecured line of credit (the “Credit Agreement”). The Credit Agreement has an initial term of 39 months, terminates on April 3, 2015 and replaces the previous $750,000,000 unsecured line of credit. Based on our current debt ratings, the line of credit accrues interest at LIBOR plus 120 basis points. In addition, we pay a 0.20% annual facility fee on the total commitment of the facility.

On February 1, 2012, the Company prepaid the single property mortgage on Alessio for $65,866,000 prior to its scheduled maturity, with no prepayment penalty.

On February 6, 2012, the Company’s Board of Directors approved an increase in the 2012 dividend to $0.385 per quarter or $1.54 annually.

Subsequent to the end of the year, 158,975 operating company units were converted for shares of BRE common stock. There are 1,907 remaining operating company units outstanding as of February 17, 2012.

Subsequent to the end of the year, the Company announced it is exercising its right to redeem for cash all of the outstanding 2012 convertible 4.125% senior unsecured notes, at a redemption price equal to 100% of the principal amount of the notes outstanding, plus accrued and unpaid interest up to, but excluding, February 21, 2012 (the “Redemption Date”).

19. Supplemental Financial Data (Unaudited)

Quarterly financial information follows:


	2011
	Quarter ended March 31			Quarter ended June 30			Quarter ended September 30			Quarter ended December 31
	(amounts in thousands, except per share data)
Revenues⁽¹⁾	$	88,808		$	91,691		$	94,895			$95,989
Income from continuing operations		12,274			12,171			18,051			19,659
Discontinued operations		659			605			645			14,991
Redeemable noncontrolling interests in income		(335	)		(335	)		(332	)		(165	)
Preferred stock dividends		(2,953	)		(2,653	)		(1,138	)		(911	)
Redemption related preferred stock issuance costs		—			(3,616	)		(155	)		—

Net income available to common shareholders	$	9,645		$	6,172		$	17,071		$	33,574

Basic earnings per share from continuing operations	$	0.14		$	0.08		$	0.22		$	0.25
Basic earnings per share from discontinued operations		0.01			0.01			0.01			0.20

Basic earnings per share	$	0.15		$	0.09		$	0.23		$	0.45

Diluted earnings per share from continuing operations	$	0.14		$	0.08		$	0.22		$	0.24
Diluted per share from discontinued operations		0.01			0.01			0.01			0.20

Diluted earnings per share	$	0.15		$	0.09		$	0.23		$	0.44


	2010
	Quarter ended March 31			Quarter ended June 30			Quarter ended September 30			Quarter ended December 31
	(amounts in thousands, except per share data)
Revenues⁽¹⁾	$	79,926		$	82,200		$	85,427			$87,413
Income/ (loss) from continuing operations		6,602			6,161			7,267			(12,894	)
Discontinued operations		2,249			13,462			15,656			16,331
Redeemable noncontrolling interests in income		(373	)		(373	)		(365	)		(335	)
Preferred stock dividends		(2,953	)		(2,953	)		(2,953	)		(2,953	)

Net income available to common shareholders	$	5,525		$	16,297		$	19,605		$	149

Basic earnings (loss) per share from continuing operations	$	0.06		$	0.04		$	0.06		$	(0.25	)
Basic earnings (loss) per share from discontinued operations		0.04			0.22			0.24			0.25

Basic earnings per share	$	0.10		$	0.26		$	0.30		$	0.00

Diluted earnings (loss) per share from continuing operations	$	0.06		$	0.04		$	0.06		$	(0.25	)
Diluted earnings (loss) per share from discontinued operations		0.04			0.22			0.24			0.25

Diluted earnings per share	$	0.10		$	0.26		$	0.30		$	0.00

⁽¹⁾	Revenue totals do not include revenues from discontinued operations, other income and partnership income.

For the years ended December 31, 2011, 2010 and 2009, the federal income tax components of the Company’s dividends on the common and preferred stock were as follows (unaudited).


	Ordinary Income			Long Term Capital Gain			Unrecaptured Section 1250 Gain			Return of Capital
Common Stock
December 31, 2011		61	%		7	%		14	%		18	%
December 31, 2010		49	%		23	%		28	%		—	%
December 31, 2009		86	%		—	%		14	%		—	%

	Ordinary Income			Long Term Capital Gain			Unrecaptured Section 1250 Gain			Return of Capital
Cumulative Redeemable Preferred Stock (all series)
December 31, 2011		75	%		8	%		17	%		—	%
December 31, 2010		49	%		23	%		28	%		—	%
December 31, 2009		86	%		—	%		14	%		—	%

BRE PROPERTIES, INC.

SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2011

(Dollar amounts in thousands)


Property Name	Location	Dates Acquired / Constructed		Intitial Cost to Company				Costs Capitalized Subsequent to Acquisition		Depreciable Lives-Years		Gross Amount Carried at December 31, 2011
Property Name	Location	Dates Acquired / Constructed		Land		Building & Improvements		Costs Capitalized Subsequent to Acquisition		Depreciable Lives-Years		Land		Building & Improvements		Total		Accumulated Depreciation			Encumbrances
Sharon Green	Menlo Park, CA		1971/1970	$	1,250	$	5,770	$	12,955		40	$	1,250	$	18,725	$	19,975	$	(14,970	)		*	*
Verandas	Union City, CA		1993/1989		3,233		12,932		5,698		40		3,233		18,630		21,863		(9,678	)
Foster’s Landing	Foster City, CA		1996/1987		11,742		47,846		13,527		40		11,742		61,373		73,115		(26,434	)
Crow Canyon	San Ramon, CA		1996/1992		8,724		34,895		10,464		40		8,724		45,359		54,083		(20,630	)
Lakeshore Landing	San Mateo, CA		1997/1988		8,547		34,228		8,174		40		8,547		42,402		50,949		(17,902	)
Mission Peaks	Fremont, CA		1997/1995		11,747		47,082		35,066		40		11,747		82,148		93,895		(35,273	)
Deer Valley*	San Rafael, CA		1997/1996		6,042		24,169		3,729		40		6,042		27,898		33,940		(11,346	)
Pinnacle City Centre*	Hayward, CA		2000/2000		4,903		22,999		1,235		40		4,903		24,234		29,137		(7,309	)
Mission Peaks II	Fremont, CA		2000/1989		12,639		50,690		8,759		40		12,639		59,449		72,088		(19,039	)
Avenue 64	Emeryville, CA		2007/2007		10,364		58,100		876		40		10,364		58,976		69,340		(6,142	)		*	*
Villa Granada	Santa Clara, CA		2010/2010		13,052		74,600		1,867		40		13,052		76,467		89,519		(2,756	)
Museum Park	San Jose, CA		2010/2002		6,609		22,991		1,485		40		6,609		24,476		31,085		(1,490	)
Fountains at River Oaks	San Jose, CA		2010/1990		12,394		37,906		2,955		40		12,394		40,861		53,255		(2,072	)		32,480
The Landing at Jack London Square	Oakland		2011/2001		12,732		52,143		472		40		12,732		52,615		65,347		(1,413	)
Layfayette Highlands	Lafayette		2011/2007/1970		9,130		38,592		1,126		40		9,130		39,718		48,848		(690	)

*San Francisco Bay Area*				$	133,108	$	564,943	$	108,388			$	133,108	$	673,331	$	806,439		(177,144	)		32,480

Montanosa	San Diego, CA		1992/1990/19989	$	6,005	$	24,065	$	9,733		40	$	6,005	$	33,798	$	39,803	$	(18,334	)	$	59,475
Esplanade	San Diego, CA		1993/1985		6,350		25,421		7,176		40		6,350		32,597		38,947		(16,367	)
Terra Nova Villas	Chula Vista, CA		1994/1985		2,925		11,699		4,123		40		2,925		15,822		18,747		(7,917	)
Canyon Villa	Chula Vista, CA		1996/1981		3,064		12,258		3,456		40		3,064		15,714		18,778		(7,091	)
Lakeview Village	Spring Valley, CA		1996/1985		3,977		15,910		5,028		40		3,977		20,938		24,915		(9,301	)
Countryside Village	El Cajon, CA		1996/1989		1,002		4,007		1,450		40		1,002		5,457		6,459		(2,528	)
Cambridge Park	San Diego, CA		1998/1998		7,628		30,521		7,106		40		7,628		37,627		45,255		(15,294	)
Carmel Landing	San Diego, CA		1999/1989		6,928		27,686		8,025		40		6,928		35,711		42,639		(13,205	)
Carmel Creek	San Diego, CA		2000/2000		4,744		45,430		7,204		40		4,744		52,634		57,378		(15,925	)		*	*
Pinnacle at Otay Ranch I & II	Chula Vista, CA		2001/2001		8,928		43,388		6,293		40		8,928		49,681		58,609		(14,066	)		*	*
Mission Trails	San Diego, CA		2002/1987		5,315		21,310		2,883		40		5,315		24,193		29,508		(6,869	)
Bernardo Crest	San Diego, CA		2002/1988		6,016		24,115		4,235		40		6,016		28,350		34,366		(8,561	)
Carmel Summit	San Diego, CA		2006/1989		16,025		36,611		7,932		40		16,025		44,543		60,568		(9,801	)
Allure at Scripps Ranch	San Diego, CA		2010/2002		11,885		34,315		875		40		11,885		35,190		47,075		(2,608	)

*San Diego*				$	90,792	$	356,736	$	75,519			$	90,792	$	432,255	$	523,047	$	(147,867	)	$	59,475


Property Name	Location	Dates Acquired / Constructed		Intitial Cost to Company				Costs Capitalized Subsequent to Acquisition		Depreciable Lives-Years		Gross Amount Carried at December 31, 2011
Property Name	Location	Dates Acquired / Constructed		Land		Building & Improvements		Costs Capitalized Subsequent to Acquisition		Depreciable Lives-Years		Land		Building & Improvements		Total		Accumulated Depreciation			Encumbrances
Village Green	La Habra, CA		1972/1971	$	372	$	2,763	$	3,453		40	$	372	$	6,216	$	6,588	$	(5,033	)
Sycamore Valley	Fountain Valley, CA		1996/1969		4,617		18,691		8,566		40		4,617		27,257		31,874		(11,375	)
Villa Santana	Santa Ana, CA		1997/1986		3,016		12,180		2,962		40		3,016		15,142		18,158		(6,421	)
Parkside Court	Santa Ana, CA		1997/1987		2,013		8,632		2,480		40		2,013		11,112		13,125		(4,775	)
Villa Siena	Costa Mesa, CA		1999/1974		4,853		19,739		11,331		40		4,853		31,070		35,923		(10,354	)
Cortesia	Rancho Santa Margarita, CA		2000/1999		7,740		30,982		4,627		40		7,740		35,609		43,349		(10,985	)
The Palms at Laguna Niguel	Rancho Niguel, CA		2001/1988		12,572		50,308		4,900		40		12,572		55,208		67,780		(16,025	)		*	*
Pinnacle at MacArthur Place	South Coast Metro, CA		2002/2002		8,155		54,257		4,710		40		8,155		58,967		67,122		(14,435	)		*	*
Pinnacle at Fullerton	Fullerton, CA		2004/2002		7,087		36,869		1,231		40		7,087		38,100		45,187		(7,568	)		*	*
Pinnacle at Talega	San Clemente, CA		2004/2003		17,125		48,171		4,222		40		17,125		52,393		69,518		(12,281	)		*	*
Renaissance at Uptown Orange	Orange, CA		2007/2007		16,603		99,175		1,043		40		16,603		100,218		116,821		(10,811	)
Park Viridian	Anaheim, CA		2009/2009		9,629		79,042		912		40		9,629		79,954		89,583		(5,251	)

*Orange County*				$	93,782	$	460,809	$	50,437			$	93,782	$	511,246	$	605,028	$	(115,314	)		—

The Summit	Chino Hills, CA		1996/1989	$	1,838	$	7,354	$	3,603		40	$	1,838	$	10,957	$	12,795	$	(4,985	)
Emerald Pointe	Diamond Bar, CA		2002/1989		5,052		20,248		2,714		40		5,052		22,962		28,014		(6,661	)
Enclave at Town Square	Chino Hills, CA		2003/1987		2,473		10,069		2,603		40		2,473		12,672		15,145		(4,256	)
Mission Grove Park	Riverside, CA		2005/2001		15,120		61,873		2,654		40		15,120		64,527		79,647		(12,141	)		30,893
The Heights I & II	Chino Hills, CA		2005/2004		9,132		58,844		1,998		40		9,132		60,842		69,974		(10,359	)

*Inland Empire*				$	33,615	$	158,388	$	13,572			$	33,615	$	171,960	$	205,575	$	(38,402	)	$	30,893

Candlewood North	Northridge, CA		1996/1995/1964	$	2,110	$	8,477	$	2,396		40	$	2,110	$	10,873	$	12,983	$	(4,848	)
Pinnacle at Westridge	Valencia, CA		2004/2002		11,253		31,465		1,134		40		11,253		32,599		43,852		(6,277	)		*	*
Canyon Creek	Northridge, CA		2003/1986		6,152		24,650		3,623		40		6,152		28,273		34,425		(7,637	)
Summerwind Townhomes	Harbor City, CA		2004/1987		6,950		27,879		4,583		40		6,950		32,462		39,412		(8,983	)
Regency Palm Court	Los Angeles, CA		2004/1987		2,049		8,277		1,529		40		2,049		9,806		11,855		(2,719	)
Windsor Court	Los Angeles, CA		2004/1987		1,638		6,631		1,361		40		1,638		7,992		9,630		(2,310	)
Tiffany Court	Los Angeles, CA		2004/1987		3,033		12,211		2,661		40		3,033		14,872		17,905		(4,293	)
Alessio	Los Angeles, CA		2004/2001		40,560		96,565		8,411		40		40,560		104,976		145,536		(21,670	)		65,866
Catalina Gardens	Los Angeles, CA		2005/1987		6,400		20,309		1,211		40		6,400		21,520		27,920		(3,817	)
Bridgeport Coast	Santa Clarita, CA		2006/2006		11,500		28,741		615		40		11,500		29,356		40,856		(4,170	)		*	*
The Stuart at Sierra Madre	Pasadena		2007/2007		7,926		55,733		693		40		7,926		56,426		64,352		(5,680	)
5600 Wilshire	Los Angeles, CA		2008/2008		32,825		100,993		759		40		32,825		101,752		134,577		(7,708	)
Aqua at Marina Del Rey	Marina Del Rey, CA		2010/2001		37,445		128,555		3,905		40		37,445		132,460		169,905		(6,039	)
The Vistas of West Hills	Valencia		2011/2009		11,244		45,233		333		40		11,244		45,566		56,810		(1,664	)

*Los Angeles*				$	181,085	$	595,719	$	33,214			$	181,085	$	628,933	$	810,018	$	(87,815	)	$	65,866


Property Name	Location	Dates Acquired / Constructed		Intitial Cost to Company				Costs Capitalized Subsequent to Acquisition		Depreciable Live-Years		Gross Amount Carried at December 31, 2011
Property Name	Location	Dates Acquired / Constructed		Land		Building & Improvements		Costs Capitalized Subsequent to Acquisition		Depreciable Live-Years		Land		Building & Improvements		Total		Accumulated Depreciation			Encumbrances
Selby Ranch	Sacramento, CA		1986/1971-1974	$	2,660	$	18,340	$	12,302		40	$	2,660	$	30,642	$	33,302	$	(18,602	)		*	*

*Sacramento*				$	2,660	$	18,340	$	12,302		40	$	2,660	$	30,642	$	33,302	$	(18,602	)	$	—

Pinnacle at South Mountain I & II*	Phoenix, AZ		1997/1996	$	11,062	$	44,257	$	4,107		40	$	11,062	$	48,364	$	59,426	$	(18,080	)		*	*
Pinnacle Towne Center*	Phoenix, AZ		1998/1998		6,688		27,631		2,478		40		6,688		30,109		36,797		(10,827	)		*	*

*Phoenix*				$	17,750	$	71,888	$	6,585		40	$	17,750	$	78,473	$	96,223	$	(28,907	)	$	—

Parkwood at Mill Creek	Mill Creek, WA		1989/1989	$	3,947	$	15,811	$	2,866		40	$	3,947	$	18,677	$	22,624	$	(10,496	)
Shadowbrook	Redmond, WA		1987-98/1986		4,776		17,415		6,081		40		4,776		23,496		28,272		(14,426	)
Citywalk	Seattle, WA		1988/1988		1,123		4,276		1,171		40		1,123		5,447		6,570		(3,220	)
Thrasher’s Mill	Bothell, WA		1996/1988		2,031		8,223		2,549		40		2,031		10,772		12,803		(4,823	)
Ballinger Commons	Seattle, WA		1996/1989		5,824		23,519		5,788		40		5,824		29,307		35,131		(12,894	)
Park Highland	Bellevue, WA		1998/1993		5,602		22,483		3,601		40		5,602		26,084		31,686		(9,846	)
Pinnacle BellCentre	Bellevue, WA		2000/2000		11,163		32,821		2,002		40		11,163		34,823		45,986		(9,886	)		*	*
Pinnacle Sonata	Bothell, WA		2002/2000		8,576		39,067		1,188		40		8,576		40,255		48,831		(10,624	)
Pinnacle on Lake Washington	Renton, WA		2001/2001		4,878		26,184		2,292		40		4,878		28,476		33,354		(7,394	)		*	*
The Audrey at Belltown	Seattle, WA		2001/1992		4,279		17,259		3,848		40		4,279		21,107		25,386		(6,164	)
The Trails of Redmond	Redmond, WA		2004/1985		17,413		45,013		10,024		40		17,413		55,037		72,450		(15,560	)
Taylor 28	Seattle, WA		2009/2009		8,100		52,101		615		40		8,100		52,716		60,816		(3,497	)
Belcarra	Bellevue, WA		2010/2010		12,485		74,778		3,711		40		12,485		78,489		90,974		(3,942	)

*Seattle*				$	90,197	$	378,950	$	45,736			$	90,197	$	424,686	$	514,883	$	(112,772	)	$	—

Non-Multi

Gateway at Emeryville	Emeryville, CA			$	10,201	$	2,328	$	1		2	$	10,201	$	2,329	$	12,530	$	(2,328	)	$	—

TOTAL -76 Communities				$	653,190	$	2,608,101	$	345,754			$	653,190	$	2,953,855	$	3,607,045	$	(729,151	)	$	188,714

*	Property held by a consolidated subsidiary of the Company

**	Properties secure the Company’s $620,000,000 FNMA line of credit.

BRE PROPERTIES, INC.

SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2011

(Amounts in thousands)

The activity in investments in rental properties and related depreciation for the three-year period ended December 31, 2011 is as follows:

Investments in rental properties:


	Years ended December 31,
	2011			2010			2009
Balance at beginning of year	$	3,464,466		$	3,180,633		$	2,927,481
Transfers from construction in progress		—			119,698			283,434
Capital and Rehabilitation expenditures		37,031			30,307			27,337
Acquisitions		170,127			292,100			—
Investments sold		(62,690	)		(159,514	)		(59,663	)
Change in accrued improvements to direct investment in real estate costs and other capitalization		(1,889	)		1,242			2,044

Balance at end of year	$	3,607,045		$	3,464,466		$	3,180,633

Accumulated depreciation on rental properties:


	Years ended December 31,
	2011			2010			2009
Balance at beginning of year	$	640,456		$	583,953		$	514,388
Provision for depreciation, including discontinued operations		103,940			94,384			88,419
Dispositions		(15,245	)		(37,881	)		(18,854	)

Balance at end of year	$	729,151		$	640,456		$	583,953

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

INDEX TO EXHIBITS


Exhibit No.		Description
3.0		Amended and Restated Articles of Incorporation (previously filed on March 15, 1996 as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein)

3.1		Articles of Amendment of BRE Properties, Inc., incorporated by reference to Annex A to the Definitive Proxy Statement filed by the Registrant with the Commission on April 5, 2005 (previously filed on November 4, 2009 as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein)

3.2		Articles Supplementary of the Registrant, reclassifying all 2,300,000 shares of 8.50% Series A Cumulative Redeemable Preferred Stock as Preferred Stock and classifying and designating the terms of the 6.75% Series C Cumulative Redeemable Preferred Stock (previously filed on March 1, 2004 as Exhibit 3.4 of the Registrant’s Form 8-A and incorporated by reference herein)

3.3		Articles Supplementary of the Registrant, classifying and designating the terms of the 6.75% Series D Cumulative Redeemable Preferred Stock (previously filed on December 8, 2004 as Exhibit 1.5 of the Registrant’s Form 8-A and incorporated by reference herein)

3.4		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)

3.5		Second Amended and Restated By-Laws of the Registrant (previously filed on May 23, 2007 as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein)

4.0		Indenture dated as of June 23, 1997 between the Registrant and Chase Trust Company of California (previously filed on June 23, 1997 as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein)

4.1		First Supplemental Indenture dated as of April 23, 1998 between the Registrant and Chase Manhattan Bank and Trust Company, National Association, as successor trustee (previously filed on May 14, 1998 as Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 and incorporated by reference herein)

4.2		Second Supplemental Indenture, dated as of August 15, 2006, between BRE Properties, Inc. and J.P. Morgan Trust Company, National Association, as trustee, including the form of 4.125% Convertible Senior Notes due 2026 (previously filed on August 21, 2006 as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein)

4.3		Third Supplemental Indenture, dated as of November 3, 2006, between BRE Properties, Inc. and The Bank of New York Trust Company, National Association (successor to J.P. Morgan Trust Company, National Association) (previously filed on November 8, 2006 as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein)

4.4		Form of Note due 2013 (previously filed on February 24, 1998 as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein)

4.5		Form of Note due 2011 (previously filed on January 12, 2001 as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein)

4.6		$310,000,000 Fixed Facility Note (Standard Maturity), dated as of April 7, 2009 (previously filed on April 7, 2009 as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein).

4.7		Equity Distribution Agreement, dated as of May 14, 2009, between the Registrant and Goldman Sachs & Co. (previously filed on May 14, 2009 as Exhibit 1.1 to the Registrants Current Report on the Form 8-K and incorporated by reference herein)


Exhibit No.		Description

4.8		Form of Note due 2014 (previously filed on March 16, 2004 as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein)

4.9		Specimen Common Stock Certificate (previously filed on February 17, 2004 as Exhibit 4.7 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003 and incorporated by reference herein)

4.10		Specimen 6.75% Series C Cumulative Redeemable Preferred Stock Certificate (previously filed on March 1, 2004 as Exhibit 3.5 to the Registrant’s Form 8-A and incorporated by reference herein)

4.11		Specimen 6.75% Series D Cumulative Redeemable Preferred Stock Certificate (previously filed on December 8, 2004 as Exhibit 1.6 to the Registrant’s Form 8-A and incorporated by reference herein)

4.12		Master Credit Facility Agreement by and among BRE-FMCA, LLC and BRE-FMAZ, LLC, as borrowers, BRE Properties, Inc., as guarantor, and Deutsche Bank Berkshire Mortgage, Inc., as lender, entered into as of April 7, 2009 (previously filed on April 7, 2009 as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein)

4.13		5.200% Senior Note due 2021 (previously filed on November 5, 2010 as Exhibit 4.1 to the registrant’s Quarterly Report on Form 10-Q and incorporated by reference herein)

10.0*		Amended and Restated 1992 Employee Stock Plan (previously filed on November 14, 1997 as Exhibit 10.45 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 and incorporated by reference herein)

10.1		$310,000,000 Fixed Facility Note (Fixed + 1 Maturity), dated as of August 3, 2009 (previously filed on August 5, 2009 as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein)

10.2*		Fifth Amended and Restated Non-Employee Director Stock Option and Restricted Stock Plan (previously filed on November 5, 2007 as Exhibit 10.2 to the Registrant’s Quarterly Report on From 10-Q for the quarter ended September 30, 2007 and incorporated by reference herein)

10.3*		Amended and Restated 1999 BRE Stock Incentive Plan (previously filed on March 17, 2008 as Annex D to the Registrant’s Proxy Statement on Schedule 14A and incorporated by reference herein)

10.4*		BRE Properties Inc. Deferred Compensation Plan effective January 1, 2000 (previously filed on March 24, 2000 as Exhibit 10.44 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999, as amended by the Annual Report on Form 10-K/A filed on August 4, 2000 and incorporated by reference herein)

10.5*		Amended and Restated Employment Agreement with Constance B. Moore dated November 20, 2006 (previously filed November 21, 2006 as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein)

10.6*		First Amendment to the Amended and Restated Employment Agreement with Constance B. Moore dated December 31, 2008 (previously filed on February 18, 2009 as Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 and incorporated by reference herein)

10.7*		Second Amendment, made on January 27, 2011 and effective as of January 1, 2011, to Amended and Restated Employment Agreement of Constance B. Moore effective as of January 1, 2005, as amended (previously filed on February 1, 2011 as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein).

10.8*		Employment Agreement with Stephen C. Dominiak dated August 12, 2008 (previously filed on August 13, 2008 as Exhibit 99.2 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein)


Exhibit No.		Description

10.9*		First Amendment to the Employment Agreement with Stephen C. Dominiak dated December 31, 2008 (previously filed on February 18, 2009 as Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 and incorporated by reference herein

10.10*		Second Amendment, made on January 27, 2011 and effective as of January 1, 2011, to Employment Agreement of Stephen C. Dominiak effective as of September 2, 2008, as amended (previously filed on February 1, 2011 as Exhibit 10.4 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein).

10.11*		Employment Agreement with Kerry Fanwick dated January 2, 2007 (previously filed on November 6. 2008 as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q and incorporated by reference herein)

10.12*		First Amendment to the Employment Agreement with Kerry Fanwick dated December 31, 2008. (previously filed on February 18, 2009 as Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 and incorporated by reference herein)

10.13*		Second Amendment, made on January 27, 2011 and effective as of January 1, 2011, to Employment Agreement of Kerry Fanwick effective as of February 1, 2007, as amended (previously filed on February 1, 2011 as Exhibit 10.5 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein).

10.14*		Employment Agreement, dated as of August 7, 2009, between the registrant and John A. Schissel (previously filed on August 13, 2009 as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein)

10.15*		First Amendment, made on January 27, 2011 and effective as of January 1, 2011, to Employment Agreement of John A. Schissel effective as of October 5, 2009, as amended (previously filed on February 1, 2011 as Exhibit 10.6 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein).

10.16*		Employment Agreement, dated as of January 11, 2011, between the Registrant and Scott A. Reinert (previously filed on January 14, 2011 as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein).

10.17*		First Amendment, made on January 27, 2011 and effective as of January 1, 2011, to Employment Agreement of Scott A. Reinert effective as of January 24, 2011, as amended (previously filed on February 1, 2011 as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein).

10.18*		Amended and Restated Employment Agreement, dated as of February 7, 2011, between the Registrant and Deborah J. Jones (previously filed on February 8, 2011 as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein).

10.19*		Form of Indemnification Agreement (previously filed on February 27, 2002 as Exhibit 10.53 to the Registrant’s Annual Report on Form 10-K and incorporated by reference herein)

10.20		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 for the year ended December 31, 1997 and incorporated by reference herein)

10.21		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)

10.22		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 for the quarter ended September 30, 1997 and incorporated by reference herein)


Exhibit No.		Description

10.22		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)

10.23		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)

10.24*		Retirement Plan for Employees of BRE Properties, Inc. (previously filed on March 12, 2003 as Exhibit 10.45 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002, as amended by the Annual Report on the Registrant’s Form 10-K/A on June 12, 2003 and incorporated by reference herein)

10.25*		Form of option agreement for the 1999 BRE Stock Incentive Plan (previously filed on March 16, 2005 as Exhibit 10.48 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004 and incorporated by reference herein)

10.26*		Form of option agreement for the Second Amended and Restated Non-Employee Directors Stock Option and Restricted Stock Plan (previously filed on March 16, 2005 as Exhibit 10.49 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004 and incorporated by reference herein)

10.27*		Form of performance share award for the 1999 BRE Stock Incentive Plan (previously filed on March 16, 2005 as Exhibit 10.50 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004 and incorporated by reference herein)

10.28*		Form of 2005 performance share award for the 1999 BRE Stock Incentive Plan (previously filed on March 1, 2007 as Exhibit 10.45 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2006 and incorporated by reference herein)

10.29*		Form of share award for the 1999 BRE Stock Incentive Plan (previously filed on October 29, 2008 as Exhibit 99.1 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein)

10.30*		Form of restricted stock award agreement for the Fifth Amended and Restated Non-Employee Directors Stock Option and Restricted Stock Plan (previously filed on March 16, 2005 as Exhibit 10.51 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004 and incorporated by reference herein)

10.31*		Form of restricted stock Performance Stock Award Agreement to evidence grants of performance shares made on January 27, 2010 pursuant to our 1999 BRE Stock Incentive Plan (previously filed on February 2, 2010 as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein)

10.32*		Form of performance stock award agreement for the 1999 BRE Stock Incentive Plan (previously filed on February 2, 2010 as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein)

10.33*		Form of Executive Officer Performance Stock Award Agreement under 1999 BRE Stock Incentive Plan, as amended (previously filed on February 1, 2011 as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein).

10.34*		Form of Executive Officer Performance Restricted Stock Award Agreement under 1999 BRE Stock Incentive Plan, as amended (previously filed on December 20, 2011 as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein).


Exhibit No.		Description

10.35*		Form of restricted stock award agreement for the Fifth Amended and Restated Non-Employee Directors Stock Option and Restricted Stock Plan (previously filed on February 12, 2010 as Exhibit 10.30 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009 and incorporated by reference herein)

10.36*		Form of restricted stock award agreement for the 1999 BRE Stock Incentive Plan (previously filed on February 12, 2010 as Exhibit 10.31 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009 and incorporated by reference herein)

10.37*		Form of Performance Stock Award Agreement under 1999 BRE Stock Incentive Plan, as amended (previously filed on February 2, 2010 as Exhibit 10.1 to the registrant’s Current Report on Form 8-K and incorporated by reference herein)

10.38		Amended and Restated Credit Agreement by and among BRE Properties, Inc., as borrower, the lenders party thereto and each of Wachovia Capital Markets, LLC and RBS Securities Corporation, as joint lead arrangers and joint book managers, Wachovia Bank, National Association, as administrative agent, The Royal Bank of Scotland, plc, as syndication agent, and Bank of America, N.A., JPMorgan Chase Bank, N.A. and Deutsche Bank Securities, Inc., as co-documentation agents, entered into as of September 18, 2007 (previously filed on September 20, 2007 as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein).

10.39*		Form of 1999 BRE Stock Incentive Plan Certificate of Stock Option Agreement (previously filed on February 2, 201 as Exhibit 10.2 to the registrant’s Current Report on Form 8-K and incorporated by reference herein)

10.40		Equity Distribution Agreement, dated as of February 24, 2010, between BRE Properties, Inc. and Deutsche Bank Securities Inc. (previously filed on February 25, 2010 as Exhibit 1.1 to the registrant’s Current Report on Form 8-K and incorporated by reference herein)

10.41		Equity Distribution Agreement, dated as of February 24, 2010, between BRE Properties, Inc. and J.P. Morgan Securities Inc. (previously filed on February 25, 2010 as Exhibit 1.2 to the registrant’s Current Report on Form 8-K and incorporated by reference herein)

10.42		Equity Distribution Agreement, dated as of February 24, 2010, between BRE Properties, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (previously filed on February 25, 2010 as Exhibit 1.3 to the registrant’s Current Report on Form 8-K and incorporated by reference herein)

10.43		Equity Distribution Agreement, dated as of February 24, 2010, between BRE Properties, Inc. and UBS Securities LLC (previously filed on February 25, 2010 as Exhibit 1.4 to the registrant’s Current Report on Form 8-K and incorporated by reference herein)

10.44		Equity Distribution Agreement, dated as of February 24, 2010, between BRE Properties, Inc. and Wells Fargo Securities, LLC (previously filed on February 25, 2010 as Exhibit 1.5 to the registrant’s Current Report on Form 8-K and incorporated by reference herein)

10.45		Amendment No. 1 to Contribution Agreement, dated November 18, 1997 (previously filed on November 24, 1997 as Exhibit 2.2 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein)

10.46*		Direct Stock Purchase and Dividend Reinvestment Plan (previously filed on November 28, 2008 pursuant to Rule 424(b)(5) under the Securities Act of 1933, as amended, as Prospectus Supplement to the Registrant’s Prospectus dated November 8, 2007 (File No. 333-147238) and incorporated by reference herein)

12		Statements re: computation of ratios

14		Code of Ethics (previously filed on March 7, 2006 as Exhibit 14 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated by reference herein)


Exhibit No.		Description

21		Subsidiaries of the Registrant

23		Consent of Ernst & Young LLP

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101		The following materials from the BRE Properties, Inc. Yearly Report on Form 10-K for the year ended December 31, 2011 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows and (iv) notes to consolidated financial statements

*	Management contract, or compensatory plan or agreement.