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, 2013

OR

¨ 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 D Preferred Stock	New York Stock Exchange 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 website, 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, 2013, 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 $3,859,000,000. At January 31, 2014, 77,302,625 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, 2013 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: failure to complete the proposed merger with Essex Property Trust, Inc., defaults or non-renewal of leases, increased interest rates and operating costs, failure to obtain necessary outside financing, difficulties in identifying communities to acquire and in effecting acquisitions, failure to successfully integrate acquired communities 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.

2

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 ownership, development, acquisition and management of multifamily apartment communities. Our operating and investment activities are primarily focused on the major metropolitan markets within the state of California, and in the metropolitan area of Seattle, Washington. At December 31, 2013, our multifamily portfolio had real estate assets with a net book value of approximately $3.5 billion, which included: 73 wholly or majority owned stabilized multifamily communities, aggregating 20,724 homes primarily located in California and Washington; one multifamily community owned in a joint venture and comprised of 252 homes; one land asset held for sale; and six development communities in various stages of construction and development. We have been a publicly traded company since our founding in 1970 and have paid 173 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 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 and the Seattle metropolitan area. 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, job growth 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.

3

Events During 2013

On December 19, 2013, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Essex Property Trust, Inc., a Maryland corporation (“Essex”), and Bronco Acquisition Sub, Inc., a Delaware corporation and wholly owned subsidiary of Essex (“Merger Sub”). On February 5, 2014, Merger Sub changed its name to BEX Portfolio, Inc. The Merger Agreement provides for the merger of the Company with and into Merger Sub (the “Merger”), with Merger Sub surviving as a wholly owned subsidiary of Essex. If the Merger process proceeds without delay, we currently expect the transaction to close by the second quarter of 2014.

On September 30, 2013, we acquired one wholly owned community located in Hollywood, California with 270 homes for an aggregate investment of $120,515,000.

During 2013, we sold three wholly owned communities in Southern California: Summerwind Townhomes, with 200 homes; Mission Grove Park with 432 homes; and Villa Santana, with 240 homes. The net proceeds from the three sales were $162,357,000 resulting in a net gain of $57,324,000.

During 2013, six joint venture interests were sold to our joint venture partner. The sale consisted of four joint venture communities located in Denver, Colorado and two joint venture communities located in Phoenix, Arizona totaling 2,180 homes. We had a 15% equity ownership in all six joint venture interests sold. The net proceeds from the sale totaled $47,408,000 and we recorded a net gain of approximately $15,025,000. We also sold one joint venture community located in Phoenix, Arizona with 432 homes. We had a 15% interest in the joint venture and the net proceeds from the sale totaled $6,000,000 and we recorded a net gain of $3,608,000.

During 2013, we completed construction of one development community, Aviara, with 166 homes in Mercer Island, Washington. The aggregate investment in the community totaled $42,900,000.

As of December 31, 2013, we had four sites under construction. The aggregate investment in the sites is expected to total $724,200,000. We have an estimated cost of $181,000,000 to complete the existing construction in process which consists of four communities totaling 1,382 homes. The communities are expected to be delivered during 2014. In addition, we own two land projects under development and expect to begin construction in 2014.

On May 10, 2013, we prepaid a single property mortgage on Mission Grove Park for $29,884,000 ninety days prior to its scheduled maturity, with no prepayment penalty.

During the fourth quarter of 2013, we reached a settlement in connection with litigation regarding our Avenue 64 apartment community located in Emeryville, California. Pursuant to the terms of the settlement, in November 2013 we received $19,750,000 from the general contractor. This amount was recorded as Other Income during the fourth quarter of 2013.

Events During 2012

During 2012, we sold three communities located in the San Diego market: Countryside Village, with 96 homes; Terra Nova Villas, with 233 homes; and Canyon Villa, with 183 homes. The approximate net proceeds from the three sales were $88,236,000 resulting in a net gain of $62,136,000. Additionally, during 2012, three joint venture assets were sold: Calavera Point, a 276 home community located in Westminister, Colorado; Pinnacle at the Creek, a 216 home community located in Centennial, Colorado; and Pinnacle at Galleria, a 236 home community, located in Roseville, California. We had a 15% equity ownership in the sold communities in Colorado and a 35% equity ownership in the community sold in California. The sale of the three joint venture communities resulted in net proceeds of approximately $26,919,000 and a net gain on sale of approximately $6,025,000.

During 2012, we completed construction of one development community, Lawrence Station, with 336 homes in Sunnyvale, California. The aggregate investment in the community totaled $104,400,000 as of December 31, 2012.

During 2012, we acquired a parcel of land for future development in Redwood City, California for a purchase price of $11,400,000. We also acquired a parcel of land for future development in Pleasanton, California for a purchase price of $11,100,000.

During 2012, we recorded a $15,000,000 non cash impairment charge on land held for development, as a result of our decision to sell the site and no longer proceed with development. As a result, we concluded that indicators of impairment existed and a reduction in the carrying value to estimated fair value was warranted for the site. This charge was the result of an analysis of the site’s estimated fair value (based on market assumptions and comparable sales data) compared to its current capitalized carrying value.

4

As of December 31, 2012, we had four sites under construction. The aggregate investment in the sites is expected to total $541,500,000. We have an estimated cost of $239,200,000 to complete the existing construction in process which consists of four development communities totaling 1,188 homes. The communities are expected to be delivered during 2013 and 2014.

On January 5, 2012, we entered into a $750,000,000 revolving credit facility (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 revolving credit facility. Based on our current debt ratings, revolving credit facility 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, we prepaid the single property mortgage on Alessio for $65,866,000 prior to its scheduled maturity with no prepayment penalty.

During 2012, we exercised our right to redeem for cash all of the $35,000,000 outstanding convertible 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”).

During 2012, all remaining 160,882 Operating Company units were converted to 160,882 shares of BRE common stock.

On August 13, 2012 we completed an offering of $300,000,000 10.5 year senior unsecured notes. The notes will mature on January 15, 2023 and bear interest at a fixed coupon rate of 3.375%. Net proceeds from the offering, after all discounts, commissions, and issuance costs totaled approximately $295,400,000 and were used for general corporate purposes.

During 2012, 815,045 shares were issued under the EDAs, with an average share price of $49.09 for total gross proceeds of approximately $40,000,000 and total commissions paid to the sales agents of approximately $800,000. As of December 31, 2012, the remaining capacity under the EDAs totals $123,600,000. We intend to use any net proceeds from the sale of shares under the EDAs for general corporate purposes, which may include reducing borrowings under the our revolving credit facility, the repayment of other indebtedness, the redemption or other repurchase of outstanding debt or equity securities, funding for development activities and financing for acquisitions.

On December 21, 2012, a redeemable noncontrolling interest partner exercised its redemption rights to its membership interest in the Meridian Apartments LLC. The Meridian Apartments LLC solely owns the community Pinnacle City Center. The redemption resulted in a decrease in redeemable noncontrolling interests of $3,356,000 and a corresponding reduction in notes receivable of $2,424,000.

Events During 2011

During 2011, we acquired three communities totaling 652 homes: Lafayette Highlands, with 150 homes, located in Lafayette, California; The Landing at Jack London Square, with 282 homes, located in Oakland, California; and The Vistas of West Hills, with 220 homes, located in Valencia, California. The aggregate investment in these three communities was $170,127,000. In addition to these 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, 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 net proceeds from the sales of the two communities were $63,486,000, resulting in a net gain of approximately $14,489,000. 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. We had a 15% equity ownership in the communities and as a result received net proceeds of $9,349,000 and recognized a net gain on the sale of $4,270,000.

5

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 gain 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 remained 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 revolving credit facility.

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 agreements totaled $163,600,000. Proceeds were used for general corporate purposes, which included reducing borrowings under our revolving credit facility, 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.

Competition

All of our communities are located in urban and suburban areas that include other multifamily communities. There are many other multifamily communities 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 and on the rents charged at our communities or at any newly developed or acquired communities. We may be competing with others that have greater resources than us. In addition, other forms of residential communities, 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 major metropolitan markets of Southern and Northern California and Seattle, Washington. As circumstances warrant, certain communities 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 communities 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.

6

Employees

As of December 31, 2013, we had 617 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 as soon as reasonably practicable after our filings 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 (“Communities”) 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 18, 2014:

Name	Age at February 18, 2014	Position(s)
Constance B. Moore	58	President, Chief Executive Officer and Director
Stephen C. Dominiak	50	Executive Vice President, Chief Investment Officer
Kerry Fanwick	58	Executive Vice President, General Counsel
Deborah J. Jones	63	Executive Vice President, Associate Relations and Development
Scott A. Reinert	55	Executive Vice President, Operations
John A. Schissel	47	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.

7

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 Company Apartment Communities. 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 24, 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 communities 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 affiliate), a Washington D.C. based commercial office REIT, from 2004 to 2009. Prior to joining Carr Properties, Mr. Schissel worked at Wachovia Securities (and predecessor institutions), from 1991 to 2004, serving as Senior Vice President, and later as Director in the firm’s Real Estate Corporate Finance Group. Mr. Schissel holds a Bachelor’s degree in Business Administration in 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.

8

Risk Factors Relating to the Merger

The exchange ratio and the cash consideration will not be adjusted in the event of any change in the stock prices of either Essex or BRE.

Upon the consummation of the Merger, each outstanding share of our common stock will be converted automatically into the right to receive 0.2971 shares of Essex common stock, with cash paid in lieu of any fractional shares, plus $12.33 in cash, without interest, each subject to certain adjustments provided for in the Merger Agreement. To the extent that certain asset sales are completed in accordance with the terms set forth in the Merger Agreement and a special distribution is authorized and declared to be paid to our shareholders of record as of the close of business on the business day immediately prior to the effective time of the Merger as a result of such asset sales, the cash consideration will be reduced by the per share amount of such special distribution. The exchange ratio of 0.2971 and cash consideration will not be adjusted for changes in the market prices of either shares of Essex common stock or shares of our common stock. Changes in the market price of shares of Essex common stock prior to the Merger will affect the market value of the Merger consideration that our shareholder will receive on the closing date of the Merger. Stock price changes may result from a variety of factors (many of which are beyond the control of Essex and BRE), including the following factors:

· market reaction to the announcement of the Merger;

· changes in the respective businesses, operations, assets, liabilities and prospects of Essex and BRE;

· changes in market assessments of the business, operations, financial position and prospects of either company or the combined company following consummation of the Merger;

· market assessments of the likelihood that the Merger will be completed;

· interest rates, general market and economic conditions and other factors generally affecting the market prices of Essex common stock and BRE common stock;

· federal, state and local legislation, governmental regulation and legal developments in the businesses in which Essex and BRE operate; and

· other factors beyond the control of Essex and BRE, including those described or referred to elsewhere in this “Risk Factors” section.

The market price of shares of Essex common stock at the closing of the Merger may vary from its price on the date the Merger Agreement was executed, on the date of this Annual Report on Form 10-K and on the date of the special meetings of Essex and BRE. As a result, the market value of the Merger consideration represented by the exchange ratio will also vary.

Because the Merger will be completed after the date of the BRE special meeting, at the time of the special meeting, BRE shareholder will not know the exact market value of the shares of Essex common stock that they will receive upon completion of the Merger. You should consider the following two risks:

· If the market price of shares of Essex common stock increases between the date the Merger Agreement was signed or the date of the Essex and BRE special meetings and the closing of the Merger, BRE shareholders will receive shares of Essex common stock that have a market value upon completion of the Merger that is greater than the market value of such shares calculated pursuant to the exchange ratio on the date the Merger Agreement was signed or on the date of the special meetings, respectively.

· If the market price of shares of Essex common stock declines between the date the Merger Agreement was signed or the date of the Essex and BRE special meetings and the closing of the Merger, BRE shareholders will receive shares of Essex common stock that have a market value upon completion of the Merger that is less than the market value of such shares calculated pursuant to the exchange ratio on the date the Merger Agreement was signed or on the date of the special meetings, respectively.

Therefore, while the number of shares of Essex common stock to be issued per share of BRE common stock is fixed, BRE shareholders cannot be sure of the market value of the Merger consideration they will receive upon completion of the Merger.

Essex and BRE shareholders will be diluted by the Merger.

The Merger will dilute the ownership position of Essex shareholders and result in BRE shareholders having an ownership stake in the combined company that is smaller than their current stake in BRE. Upon completion of the Merger, we estimate that continuing Essex shareholders will own approximately 62% of the issued and outstanding shares of combined company common stock, and former BRE shareholders will own approximately 38% of the issued and outstanding common stock of the combined company. Consequently, our shareholders, as a general matter, will have less influence over the management and policies of the combined company after the effective time of the Merger than they currently exercise over the management and policies of BRE.

9

Failure to complete the Merger could negatively impact the stock prices and the future business and financial results of BRE.

If the Merger is not completed, the ongoing business of BRE could be adversely affected and BRE will be subject to a variety of risks associated with the failure to complete the Merger, including the following:

· BRE being required, under certain circumstances, to pay to Essex a termination fee of $170 million or up to $10 million in expense reimbursement;

· BRE having to pay certain costs relating to the proposed Merger, such as legal, accounting, financial advisor, filing, printing and mailing fees; and

· diversion of BRE management focus and resources from operational matters and other strategic opportunities while working to implement the Merger.

If the Merger is not completed, these risks could materially affect the business, financial results and stock prices of BRE.

The pendency of the Merger could adversely affect the business and operations of BRE.

Prior to the effective time of the Merger, some residents or vendors of BRE may delay or defer decisions, which could negatively affect the revenues, earnings, cash flows and expenses of BRE, regardless of whether the Merger is completed. Similarly, current and prospective employees of BRE may experience uncertainty about their future roles with the combined company following the Merger, which may materially adversely affect the ability of BRE to attract and retain key personnel during the pendency of the Merger. In addition, due to operating restrictions in the Merger Agreement, BRE may be unable, during the pendency of the Merger, to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions, even if such actions would prove beneficial.

The Merger Agreement contains provisions that could discourage a potential competing acquirer of BRE or could result in a competing acquisition proposal being at a lower price than it might otherwise be.

The Merger Agreement contains provisions that, subject to limited exceptions necessary to comply with the duties of the BRE Board of Directors, restrict the ability of BRE to solicit, initiate or knowingly facilitate any third-party proposals to acquire beneficial ownership of at least 20% of the assets of, equity interest in, or businesses of, BRE or any subsidiary of BRE. Prior to receiving BRE shareholder approval of the Merger, BRE may negotiate with a third party after receiving an unsolicited written proposal if the BRE Board of Directors determines in good faith that the unsolicited proposal could reasonably be likely to result in a transaction that is more favorable than the Merger, and the BRE Board of Directors determines that failure to negotiate would be inconsistent with its duties. Once a third party proposal is received, BRE must notify Essex within 24 hours following receipt of the proposal and keep Essex informed of the status and terms of the proposal and associated negotiations. In response to such a proposal, BRE may, under certain circumstances, withdraw or modify its recommendation to BRE shareholders with respect to the Merger, and enter into an agreement to consummate a competing transaction with a third-party, if the BRE Board of Directors determines in good faith that the competing proposal is more favorable to BRE shareholders and pays the $170 million termination fee to Essex.

These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of BRE from considering or proposing such an acquisition, even if the potential competing acquirer was prepared to pay consideration with a higher per share value than the value proposed to be received or realized in the Merger, or might result in a potential competing acquirer proposing to pay a lower per share value than it might otherwise have proposed to pay because of the added expense of the termination fee and expense reimbursement that may become payable in certain circumstances under the Merger Agreement.

10

There can be no assurance that Essex will be able to secure the financing necessary to pay the cash portion of the Merger consideration on acceptable terms, in a timely manner, or at all.

In connection with the Merger, Essex has obtained commitments for up to $1.0 billion in a senior unsecured bridge loan facility to finance the cash portion of the Merger consideration. In addition, Essex is exploring additional alternatives to fund the cash portion of the Merger consideration including through existing unsecured credit facilities, asset sales, joint ventures or other financing arrangements. However, Essex has not entered into a definitive agreement for the debt financing, nor has it secured alternative financing. There can be no assurance that Essex will be able to secure financing to pay the cash portion of the Merger consideration on acceptable terms, in a timely manner, or at all. If Essex is unable to secure such financing, Essex will nonetheless be required to close the Merger under the terms of the Merger Agreement. In addition, the bridge loan facility expires on April 18, 2014 (with a right to extend up to an additional 30 days in certain circumstances) whereas the Merger Agreement may not be terminable until June 17, 2014.

Some of the directors and executive officers of BRE have interests in the Merger that are different from, or in addition to, those of the other BRE shareholders.

Some of the directors and executive officers of BRE have arrangements that provide them with interests in the Merger that are different from, or in addition to, those of BRE shareholders, generally. These interests include, among other things, a sizeable severance payment if terminated upon, or following, consummation of the Merger. These interests, among other things, may influence or may have influenced the directors and executive officers of BRE to support or approve the Merger.

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 communities 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 communities are located affects occupancy, market rental rates and expenses. These factors consequently can have an impact on revenues from the communities 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 communities.

Other factors may further adversely affect revenues from and values of our communities. These factors include the general economic climate, local conditions in the areas in which communities are located such as an oversupply of apartment homes or a reduction in the demand for apartment homes, the attractiveness of the communities 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 homes, 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 communities 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 communities and real estate values.

11

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 communities for development and acquisition, complete acquisitions and developments on favorable terms, successfully integrate acquired and newly developed communities, 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 communities 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 communities. We intend to actively pursue development and construction of multifamily apartment communities. We cannot assure you that we will complete development of the communities 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;

• expenses of operating a completed community, including labor, may be higher than anticipated; and

• faulty construction.

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 communities 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 communities. However, we cannot assure you that we will have the financial resources to make suitable acquisitions or that communities satisfying our investment policies will be available for acquisition. Acquisitions of communities entail risks that investments will fail to perform in accordance with expectations. Estimates of the costs of improvements to bring an acquired property up to standards established for the market position intended for that property 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.

12

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 assets a REIT may sell without adverse tax consequences. To effect our current operating strategy, we have in the past raised, and will seek to continue to raise additional funds, both through outside financing and through the orderly disposition of assets 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 communities, 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 communities disposed of, or that we will be able to acquire communities meeting our investment criteria. If we are unable to reinvest proceeds from the disposition of communities or if communities acquired with any such proceeds produce a lower rate of return than the communities 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-deferred 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 communities to qualify for tax-deferred treatment under Section 1031 of the Internal Revenue Code, certain technical requirements must be met. Given the competition for communities meeting our investment criteria, it may be difficult for us to identify suitable communities 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 communities which were disposed of.

Substantial competition among multifamily communities and real estate companies may adversely affect our rental revenues and development and acquisition opportunities.

All of the communities currently owned by us are located in defined urban and suburban locations. There are numerous other multifamily communities and real estate companies, many of which have greater financial and other resources than we have, within the market area of each of our communities which compete with us for residents and development and acquisition opportunities. The number of competitive multifamily communities 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, San Diego, and Seattle 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 communities 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 communities.

We carry comprehensive liability, fire, mold, extended coverage and rental loss insurance with respect to our communities with certain policy specifications, limits and deductibles. While as of December 31, 2013, we carried flood and fire insurance for our communities with an aggregate annual limit of $150,000,000, and earthquake insurance with an aggregate annual limit of $100,000,000, subject to substantial 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 communities. 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.

13

Adverse changes in laws may affect our liability relating to our communities 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 communities 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 communities periodically to determine the level of compliance and, if necessary, take appropriate action to bring such communities into compliance.

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 communities 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 communities, 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 communities may not be available or may be available only on disadvantageous terms or that the cash flow from new communities 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.

14

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 communities, 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 communities 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 revolving credit facility) as well as from other sources such as sales of communities 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, 2013, we had outstanding borrowings of approximately $1.8 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.

From time to time we may seek 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.

15

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 communities 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 communities, we may be considered an owner or operator of such communities 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 communities 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 communities; 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 communities previously sold by our predecessors or by us.

There have been a number of lawsuits against owners and managers of multifamily communities 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 communities 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. Taxable shareholders 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. shareholder may be required to pay tax with respect to such dividends in excess of the cash received. If a U.S. shareholder 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. shareholders, 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 shareholders 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.

16

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 revolving credit facility 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 and restrictions 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. In our charter, these include 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. In our bylaws, these include provisions establishing procedures and requirements to be met in order for our shareholders to request or call a special meeting of shareholders (including that the request be made by holders of at least a majority of the votes entitled to be cast), provisions requiring advance notice of shareholder nominees for director and of other shareholder proposals, restrictions on our shareholders’ ability 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 fill vacancies created thereby, and restrictions on the transfer of shares of our capital stock with respect to the preservation of our REIT status. Such provisions and restrictions 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.

17

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.

To maintain our REIT status, we may be forced to borrow funds during unfavorable market conditions.

To qualify as a REIT, we generally must distribute to our shareholders at least 90% of our net taxable income each year, excluding capital gains, and we will be subject to regular corporate income taxes to the extent that we distribute less than 100% of our net taxable income each year. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we paid in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. We intend to distribute sufficient dividends to meet the REIT distribution requirements and minimize our income and excise tax obligations. Accordingly, we intend to make an election on our 2013 tax return to carryback a portion of the dividends we pay in 2014 to satisfy the REIT distribution requirement obligations with respect to 2013. To the extent the distributions we make are not sufficient to satisfy the REIT distribution requirement for 2013 and to avoid the payment of income taxes, we or our successor in the Merger intend to make additional distributions to our shareholders in order to maintain our REIT status for 2013 and to avoid the payment of income taxes. We or our successor may need to borrow funds to meet the REIT distribution requirements even if the then prevailing market conditions are not favorable for these borrowings. These borrowing needs could result from differences in timing between the actual receipt of cash and inclusion of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments.

18

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 2. COMMUNITIES

General

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

Multifamily Community Data

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

Multifamily Communities	2013			2012			2011			2010			2009
Percentage of total portfolio at cost, as of December 31, 2013		99	%		99	%		99	%		99	%		99	%
Percentage of total revenues, for the year ended December 31, 2013		99	%		99	%		99	%		99	%		99	%

No single multifamily community accounted for more than 10% of total revenues in any of the five years ended December 31, 2013.

This table summarizes information about our 2013 operating multifamily communities (excluding properties sold in 2013) and includes communities acquired and development communities fully delivered during 2013 and 2012 in various phases of lease up:

Market	Number of Communities		Homes		Percentage of Revenue1			Percentage of NOI1			Occupancy2			Average Rent3
San Francisco Bay Area		16		4,533		27	%		29	%		94.6	%	$	2,141
Los Angeles		14		3,337		17	%		16	%		94.7	%		1,792
Seattle		14		3,622		15	%		14	%		93.7	%		1,466
Orange County		11		3,549		17	%		17	%		94.7	%		1,653
San Diego		11		3,640		17	%		17	%		94.8	%		1,663
Inland Empire		4		741		3	%		3	%		95.3	%		1,569
Phoenix		2		902		3	%		2	%		94.3	%		995
Sacramento		1		400		1	%		1	%		95.6	%		1,222
Total Weighted Average		73		20,724		100	%		100	%		94.5	%	$	1,711

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

	December 31,
	2013			2012			2011			2010			2009
Total number of homes		20,724			21,160			21,336			21,318			21,245
Physical occupancy4		95.0	%		94.0	%		95.0	%		95.0	%		95.0	%
Average revenue per home3	$	1,711		$	1,622		$	1,548		$	1,417		$	1,475
Total number of communities		73			74			76			75			73

¹ Represents the aggregate revenue and net operating income (NOI) from communities in each market divided by the total revenue and net operating income of multifamily communities for the year ended December 31, 2013. Excludes revenue and NOI from communities sold in 2013 and income from unconsolidated joint ventures.

19

² Represents average physical occupancy for all communities for the twelve months ended December 31, 2013. The total is a weighted average by homes for all communities shown.

³ Represents average revenue per home including rental and ancillary income earned on occupied homes for the twelve months ended December 31, 2013. The total is a weighted average by homes for all communities shown.

⁴ Physical occupancy is calculated by dividing the total occupied homes by the total homes in the portfolio at the end of the year. Apartment homes are generally leased to residents for rental terms not exceeding one year.

The following table summarizes our “Same-store” operating results. “Same-store” communities are defined as communities that have been completed, stabilized and owned by us for two comparable calendar year periods. We define “stabilized” as communities that have reached a physical occupancy of at least 93%. Physical occupancy is calculated by dividing the total occupied homes by the total homes in stabilized communities in the portfolio.

	December 31,
	2013			2012			2011			2010			2009
Number of same-store homes		19,952			19,462			18,461			18,914			19,572
Same-store homes % of total homes		96	%		92	%		87	%		89	%		92	%
Same-store revenue change		4.8	%		5.5	%		3.4	%		(2.0	)%		(3.9	)%
Same-store expense change		1.9	%		3.6	%		1.5	%		(1.7	)%		(1.9	)%
Same-store NOI change		6.1	%		6.4	%		4.3	%		(3.7	)%		(6.4	)%

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,
	2013			2012			2011
Net income available to common shareholders	$	179,131		$	133,499		$	66,461
Interest, including discontinued operations		66,551			68,467			74,964
Depreciation, including discontinued operations		108,154			101,618			103,940
Redeemable noncontrolling interest in income		190			413			1,168
Net gain on sales of discontinued operations		(57,324	)		(62,136	)		(14,489	)
Net gain on sale of unconsolidated entities		(18,633	)		(6,025	)		(4,270	)
General and Administrative expense		23,037			22,848			21,768
Dividends on preferred stock		3,645			3,645			7,655
Non cash impairment charge		-			15,000			-
Merger costs		3,401			-			-
Acquisition costs		585			-			402
Legal settlement proceeds		(19,750	)		-			-
Redemption related to preferred stock issuance cost, net		-			-			3,771
Net operating income	$	288,987		$	277,329		$	261,370

20

We consider community level and portfolio-wide NOI to be an appropriate supplemental measure to net income available to common shareholders 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 available to common shareholders 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 Communities

The following table provides data on our six multifamily communities that were under various stages of development and construction at December 31, 2013. Completion of the development communities is subject to a number of risks and uncertainties, including construction delays and cost overruns. We cannot assure that these communities 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 homes shown in the table below. In addition to the communities below, we have made predevelopment investments and deposits on potential projects totaling approximately $17,800,000. 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 Homes		Costs Incurred to Date - December 31, 2013		Estimated Total Cost		Estimated Cost to Complete		Estimated Completion Date(1)
Construction in Progress
Solstice(2)	Sunnyvale, CA		280	$	111.0	$	121.9	$	10.9	1Q/2014
Wilshire La Brea(3)	Los Angeles, CA		478		249.5		277.3		27.8	4Q/2014
Radius	Redwood City, CA		264		55.6		97.8		42.2	4Q/2014
MB360	San Francisco, CA		360		127.1		227.2		100.1	4Q/2014
Total Construction in Progress			1,382	$	543.2	$	724.2	$	181.0

Property name	Location	Proposed Number of Homes		Costs Incurred to Date - December 31, 2013		Estimated Total Cost(4)
Land Under Development(5)
Pleasanton I	Pleasanton, CA		251	$	23.6		TBR
Pleasanton II	Pleasanton, CA		255		17.2		TBR
Total Land Owned			506	$	40.8	$	171.0

21

¹ “Completion” is defined as our estimate of when an entire project will have a final certificate of occupancy issued and be ready for occupancy.

² Reflects all recorded costs as of December 31, 2013, recorded on our balance sheet as “direct investments in real estate-construction in progress.” Included in this amount is $54.2 million of costs for completed and delivered homes as of December 31, 2013, which is reflected on the consolidated balance sheets as “Direct investments in real estate – Investment in rental communities”.

³ Reflects all recorded costs as of December 31, 2013, recorded on our balance sheet as “direct investments in real  estate – construction in progress”. Included in this amount is $46.1 million of costs for completed and delivered homes as of December 31, 2013, which is reflected on the consolidated balance sheets as “Direct investments in real estate – Investment in rental communities”.

⁴ Reflects the aggregate cost estimates including land. Specific community cost estimates To Be Reported (TBR) once entitlement approvals are received and we are prepared to begin construction.

⁵ Represents projects in various stages of pre-construction development. Projects are transferred to construction in progress when contracts are finalized and construction activity has commenced.

Insurance, Property Taxes and Income Tax Basis

We carry comprehensive liability, fire, pollution, extended coverage and rental loss insurance on our communities with certain policy specifications, limits and deductibles. In addition, at December 31, 2013, we carried flood and fire coverage with an annual aggregate limit of $150,000,000 (after policy deductibles). Also, we carried earthquake insurance with an aggregate annual limit of $100,000,000 (after policy deductibles). Management believes the communities are adequately covered by such insurance.

Property taxes on portfolio communities 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 communities was $3,918,341,000 as of December 31, 2013. On the same date our assets had an underlying federal income tax basis of approximately $3,676,253,000 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 $28.00 as of December 31, 2013. The lease term ends on February 1, 2016. We also maintain leased regional offices in: Seattle, Washington; Irvine and San Diego, California; and Phoenix, Arizona.

Item 3. LEGAL PROCEEDINGS

Since the announcement of the Merger Agreement on December 19, 2013, three putative class action and shareholder derivative actions have been filed on behalf of alleged shareholders of the Company and/or the Company itself in the Circuit Court for Baltimore City, Maryland, under the following captions: Sutton v. BRE Properties, Inc., et al., No. 24-C-13-008425, filed December 23, 2013; Applegate v. BRE Properties, Inc., et al., No. 24-C-14-00002, filed December 30, 2013; and Lee v. BRE Properties, Inc., et al., No. 24-C-14-00046, filed January 3, 2014.

All of these complaints name as defendants the Company, the Company’s Board of Directors, Essex, and Merger Sub, and allege that the Company’s Board of Directors breached its fiduciary duties to the Company’s shareholders and/or to the Company itself, and that the Merger involves an unfair price, an inadequate sales process, and unreasonable deal protection devices that purportedly preclude competing offers. The complaints further allege that Essex, Merger Sub, and, in some cases, we aided and abetted those alleged breaches of duty. The complaints seek injunctive relief, including enjoining or rescinding the Merger, and an award of other unspecified attorneys’ and other fees and costs, in addition to other relief. On February 7, 2014, Plaintiffs filed identical, amended complaints in the three pending actions. The amended complaints add allegations that disclosures regarding the proposed merger in the joint proxy statement/prospectus filed with the SEC on January 29, 2014 are inadequate.

22

We are 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 our insurance policies. As a result, the risk of a material loss impacting our financial position has been assessed as remote. As of December 31, 2013, there were no pending legal proceeds to which we are a party or of which any of our communities is the subject, the adverse determination of which we anticipate would have a material adverse effect upon our 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, 2014, there were approximately 2,486 record holders of BRE’s common stock and the last reported sales price on the NYSE was $59.10. 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, 2014, there were approximately 16,610 beneficial holders of BRE’s common stock.

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

	2013						2012
	Stock Price				Dividends		Stock Price				Dividends
	High		Low		Paid		High		Low		Paid
First Quarter	$	51.87	$	46.74	$	0.395	$	52.43	$	48.30	$	0.385
Second Quarter	$	54.14	$	45.76	$	0.395	$	53.57	$	47.66	$	0.385
Third Quarter	$	55.76	$	47.07	$	0.395	$	53.31	$	46.68	$	0.385
Fourth Quarter	$	61.50	$	49.27	$	0.395	$	51.45	$	46.08	$	0.385

Since 1970, when BRE was founded, we have made regular and uninterrupted quarterly dividends to shareholders. The payment of dividends 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.

23

Equity Compensation Plan Information

The following table sets forth information as of December 31, 2013 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 and available for future issuance under equity compensation plans excluding securities reflected in column (a)
	(a)		(b)		(c)
Plan Category
Equity Compensation plans approved by security holders		362,429	$	44.95		1,410,755
Equity Compensation plans not approved by security holders		-		-		-
Total		362,429	$	44.95		1,410,755

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 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, 2008 and that all dividends were reinvested ⁽¹⁾.

24

BRE Properties, Inc.

	Period Ending
Index	12/31/08		12/31/09		12/31/10		12/31/11		12/31/12		12/31/13
BRE Properties, Inc.	$	100.00	$	127.42	$	173.99	$	208.38	$	216.47	$	240.40
NAREIT All Equity REIT Index	$	100.00	$	127.99	$	163.76	$	177.32	$	212.26	$	218.32
S&P 500	$	100.00	$	126.46	$	145.51	$	148.59	$	172.37	$	228.19

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

⁽²⁾ Indicates appreciation of $100 invested on December 31, 2008 in BRE Common Stock, S&P 500, and NAREIT All Equity REIT Index, assuming reinvestment of dividends discussed above.

25

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

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, 2013 through March 31, 2013		80,822	$	51.50		-		-
April 1, 2013 through June 30, 2013		-		-		-		-
July 1, 2013 through September 30, 2013		-		-		-		-
October 1, 2013 through October 31, 2013		-		-		-		-
November 1, 2013 through November 30, 2013		-		-		-		-
December 1, 2013 through December 31, 2013		19,741		54.71		-		-
Total		100,563	$	52.13		-		-

¹ Includes an aggregate of 96,289 shares withheld to pay taxes and 4,274 shares withheld for option costs.

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.

	2013			2012			2011			2010			2009
	(Amounts in thousands, except per share data)
Operating Results
Rental and ancillary revenues	$	404,028		$	375,557		$	348,803		$	312,784		$	296,608
Revenues from discontinued operations		11,851			21,880			28,817			41,647			52,239
Income from unconsolidated entities and other income		21,239			5,174			5,424			5,112			5,788
Total revenues	$	437,118		$	402,611		$	383,044		$	359,543		$	354,635
Net income available to common shareholders	$	179,131		$	133,499		$	66,461		$	41,576		$	50,642
Plus:
Net gain on sales of discontinued operations		(57,324	)		(62,136	)		(14,489	)		(40,111	)		(21,574	)
Net gain on sales of unconsolidated entities		(18,633	)		(6,025	)		(4,270	)		-			-
Depreciation from continuing operations		105,371			96,736			97,139			84,647			76,033
Depreciation from discontinued operations		2,783			4,882			6,801			9,737			12,386
Depreciation related to unconsolidated entities		493			1,903			2,052			1,991			1,841
Redeemable noncontrolling interest in income		—			—			748			1,026			1,461
Funds from operations (FFO)1	$	211,821		$	168,859		$	154,442		$	98,866		$	120,789
Core funds from operations (Core FFO)2	$	196,057		$	183,859		$	158,615		$	127,671		$	132,819
Net cash flows generated by operating activities	$	232,951		$	201,887		$	172,177		$	140,719		$	130,683
Net cash flows used in investing activities	$	(187,776	)	$	(135,245	)	$	(267,345	)	$	(197,261	)	$	(80,537	)
Net cash flows (used in) generated by financing activities	$	(98,984	)	$	(14,001	)	$	98,411		$	57,243		$	(52,214	)
Dividends paid to common and preferred shareholders and distributions to noncontrolling interests	$	125,855		$	122,723		$	118,305		$	106,770		$	114,379
Weighted average shares outstanding—basic		77,111			76,567			71,220			61,420			52,760
Dilutive effect of stock based awards on EPS		229			353			450			430			240
Weighted average shares outstanding—diluted (EPS)		77,340			76,920			71,670			61,850			53,000
Plus—Operating Company units3		—			20			510			685			780
Weighted average shares outstanding—diluted (FFO)		77,340			76,940			72,180			62,535			53,780
Operating Company units outstanding at end of period		—			—			161			615			771
Net income per share—basic	$	2.32		$	1.74		$	0.93		$	0.67		$	0.95
Net income per share—assuming dilution	$	2.32		$	1.74		$	0.93		$	0.67		$	0.95
Dividends paid to common shareholders	$	1.58		$	1.54		$	1.50		$	1.50		$	1.88
Balance sheet information and other data
Real estate portfolio, net of depreciation	$	3,547,438		$	3,382,407		$	3,288,577		$	3,097,528		$	2,915,565
Total assets	$	3,608,846		$	3,498,982		$	3,352,621		$	3,156,247		$	2,980,008
Total debt	$	1,759,428		$	1,731,960		$	1,662,671		$	1,792,918		$	1,867,075
Redeemable noncontrolling interests	$	4,751		$	4,751		$	16,228		$	34,866		$	33,605
Shareholders’ equity	$	1,752,184		$	1,686,482		$	1,610,449		$	1,276,393		$	1,022,919

26

¹FFO 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 accounting principles generally accepted in the United States) 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 and adjustments for unconsolidated partnerships and joint ventures. 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 communities that result from use or market conditions nor the level of capital expenditures to maintain the operating performance of our communities, 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.

²We believe that Core Funds from Operations (“Core FFO”) is a meaningful supplemental measure of our operating performance for the same reasons as FFO and including adjustments for non-routine items allows for more comparable periods. Core FFO begins with FFO as defined by the NAREIT White Paper and adjusts for the following:

- The impact of any expenses relating to non-operating asset impairment and valuation allowances;

27

- Property acquisition costs and pursuit cost write-offs (other expenses);

- Gains and losses from early debt extinguishment, including prepayment penalties and preferred share redemptions;

- Executive level severance costs;

- Gains and losses on the sales of non-operating assets, and

- Other non-comparable items

³Under earnings per share guidance, common share equivalents deemed to be anti-dilutive are excluded from the diluted per share calculations.

Note: See Item 7 for a reconciliation of net income to FFO and Core FFO.

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, development, acquisition, and management of multifamily apartment communities. Our operating and investment activities are primarily focused on the major metropolitan markets within the state of California, and in the metropolitan area of Seattle, Washington. At December 31, 2013 our portfolio had real estate assets with a net book value of approximately $3.5 billion that include 73 wholly or majority owned stabilized multifamily communities, aggregating 20,724 homes primarily located in California and Washington; one multifamily community owned in a joint venture and comprised of 252 homes; one land asset held for sale; and six development communities in various stages of construction and development. We earn revenue and generate operating cash flow primarily by collecting monthly rent from our community residents.

Our 2013 results, when compared to 2012 and 2011 annual results reflect the impact of improving fundamentals for the multifamily industry. We experienced same-store revenue growth in 2013 of 4.8% as compared to 5.5% growth in 2012 and 3.4% growth in 2011. Operating fundamentals, driven by low levels of new supply and an increase in propensity to rent, began to improve in 2011 and continued to strengthen throughout 2012 and 2013. Although unemployment levels following the severe recession that started in late 2007 remain elevated at 8.3% in California and 6.6% in Washington, we did experience job growth in our core markets in 2013 with the San Francisco Bay Area and Seattle markets benefiting the most from increased employment levels.

We continue to make progress on building out our development pipeline with properties that are in some of the country’s premier locations. As of December 31, 2013, our active development pipeline had a total estimated cost of $724,200,000 of which approximately $181,000,000 remains to be funded. Our active pipeline consists of Solstice, Wilshire La Brea, Radius and MB 360 projects.

We expect that strategic draws on our unsecured revolving credit facility and asset sales will be the primary funding source for our remaining current construction funding commitments. During 2013, we disposed of three communities with 872 homes (located in Southern California) for combined net proceeds of $162,357,000. The dispositions produced net gains on sales totaling $57,324,000. In addition, during 2013 we sold our joint venture interests in seven communities that generated $53,408,000 in net proceeds and net gains totaling $18,633,000. We believe that a combination of a targeted development program focused on our core markets along with the disposition of slower revenue growth communities will over the time result in a higher quality portfolio with a stronger revenue growth profile.

We also remain committed to maintaining a strong financial position and balance sheet flexibility. Our leverage measured as debt as a percentage of gross assets was 39% as of December 31, 2013.

We believe our communities are well-positioned to take advantage of the favorable demographic factors that are expected to produce continued revenue growth for apartment owners in the coming years. These factors include: (1) increases in overall population levels among the age demographic 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 the majority of our core markets.

28

To better understand our overall results, our 73 wholly or majority owned apartment communities can be characterized as follows:

• 19,952 homes in 70 communities were owned, completed and stabilized for all of 2012 and 2011 (“same-store”) communities;

• 502 homes in two development communities were experiencing lease up and stabilization during 2012 and 2013 and as a result did not have comparable year-over-year operating results (“non same-store”); and

• 270 homes in one community was acquired during 2013, and as a result did not have comparable annual year-over-year operating results (“non same-store”).

In addition to year-over-year economic operating performance, our results of operations for the three years ended December 31, 2013 were affected by income derived from communities acquired and completions of apartment communities, offset by the cost of capital associated with financing these transactions.

Proposed Merger Transaction with Essex Property Trust, Inc.

On December 19, 2013, we entered into the Merger Agreement with Essex and Merger Sub. The Board of Directors of the Company has unanimously (i) determined and declared that the Merger, the Merger Agreement and the other transactions contemplated by the Merger Agreement are advisable and in the best interests of the Company and its shareholders and (ii) approved the Merger Agreement.

Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each outstanding share of common stock, par value $0.01 per share, of the Company (the “Company Common Stock”), will be converted into the right to receive (i) 0.2971 shares of common stock, par value $0.0001 per share, of Essex (“Essex Common Stock”) and (ii) $12.33 in cash, without interest, each subject to certain adjustments provided for in the Merger Agreement and subject to any applicable withholding tax (collectively, the “Merger Consideration”).

Under the Merger Agreement, at the Effective Time each BRE stock option that is outstanding and unexercised immediately prior to the Effective Time, whether or not then vested or exercisable, will be assumed by Essex and converted into a stock option to acquire the number of whole shares of Essex Common Stock equal to the product of (i) the number of shares of Company Common Stock subject to the BRE stock option and (ii) the sum of 0.2971 and the quotient obtained by dividing (x) the per share cash consideration portion of the Merger Consideration by (y) the volume weighted average of Essex Common Stock over a ten-day trading period starting with the opening of trading on the first trading day to the closing of the second to last trading day prior to the closing date of the transactions contemplated by the Merger Agreement (such sum, the “Stock Award Exchange Ratio”). The exercise price per share of Essex Common Stock subject to each such assumed option will be equal to the quotient obtained by dividing (a) the exercise price per share of Company Common Stock of such BRE stock option by (b) the Stock Award Exchange Ratio. Except as described above, each such assumed stock option will continue to have, and will be subject to, the same terms and conditions as applied to the BRE stock option immediately prior to the Effective Time (but taking into account any changes provided for in the applicable Company Equity Plan (as defined in the Merger Agreement), in any award agreement, or in such BRE stock option by reason of the Merger or the Merger Agreement).

Additionally, at the Effective Time, each outstanding and unvested share of BRE restricted stock (including any associated right to the issuance of additional shares of Company Common Stock upon the achievement of BRE performance goals) will be assumed by Essex and will be converted into an award of Essex restricted stock for that number of shares of Essex Common Stock equal to product of (i) the number of shares of Company Common Stock underlying the BRE restricted stock award, and (ii) the Stock Award Exchange Ratio. To the extent any such BRE restricted stock is subject to performance vesting and, following the Effective Time, the performance metrics applicable to such BRE restricted stock otherwise cease to be measurable on substantially similar terms as immediately prior to the Effective Time, then the Essex restricted stock will vest based on target performance at the time and, subject to any applicable payment conditions, prescribed by the terms in effect for such BRE restricted stock immediately prior to the Effective Time. Except as described above, each such assumed award of restricted stock will continue to have, and will be subject to, the same terms and conditions as applied to the BRE restricted stock immediately prior to the Effective Time (but taking into account any changes provided for in the applicable Company Equity Plan or in any award agreement by reason of the Merger or the Merger Agreement).

29

The Company and Essex have made certain customary representations and warranties to each other in the Merger Agreement. The Company has agreed, among other things, not to solicit, initiate, knowingly encourage or facilitate any inquiry, discussion, offer or request from third parties regarding other proposals to acquire the Company and not to engage in any discussions or negotiations regarding any such proposal, or furnish to any third party non-public information regarding the Company. The Company has also agreed to certain other restrictions on its ability to respond to any such proposals. The Merger Agreement also includes certain termination rights for both the Company and Essex and provides that, in connection with the termination of the Merger Agreement, under specified circumstances, (i) the Company may be required to pay to Essex a termination fee of $170.0 million and/or reimburse Essex’s transaction expenses in an amount equal to $10,000,000 and (ii) Essex may be required to reimburse the Company’s transaction expenses in an amount equal to $10,000,000.

The completion of the Merger is subject to various conditions, including, among other things, the approval by the Company’s shareholders of the Merger and the other transactions contemplated by the Merger Agreement, the approval by Essex’s shareholders of the issuance of Essex Common Stock in connection with the Merger and certain consents having been obtained. Essex and the Company filed preliminary joint proxy materials (Form S-4) with the Securities and Exchange Commission on January 29, 2014. Complete information on the Merger, including the Merger background, reasons for the Merger, who may vote, how to vote and the time and place of the Company shareholder meeting are included in the definitive proxy statement filed on February 14, 2014. As of December 31, 2013, the Company has incurred $3,400,000 for legal, consulting and other expenses related to the Merger. If the Merger process proceeds without delay, we currently expect the transaction to close by the second quarter of 2014.

RESULTS OF OPERATIONS

Comparison of the Years ended December 31, 2013, 2012 and 2011

Revenues

Total revenues include revenues from discontinued operations in an effort to provide information regarding the amount of total revenues the portfolio generated each year. The increase in rental income in 2013 was primarily derived from a 4.8% increase in same-store property revenue. A summary of revenues is as follows:

Composite of Change in year over year revenues

			% of Total					% of Total					% of Total
	2013 Total		Revenues			2012 Total		Revenues			2011 Total		Revenues
Rental income	$	388,300,000		88.8	%	$	361,116,000		92.0	%	$	336,014,000		90.0	%
Ancillary income		15,728,000		3.6	%		14,441,000		4.0	%		12,789,000		4.0	%
Total revenue from continuing operations		404,028,000					375,557,000					348,803,000
Revenues from discontinued operations		11,851,000		2.7	%		21,880,000		2.0	%		28,817,000		4.0	%
Total rental and ancillary income		415,879,000					397,437,000					377,620,000
Income from unconsolidated entities		625,000		0.2	%		2,644,000		1.0	%		2,888,000		1.0	%
Other income		20,614,000		4.7	%		2,530,000		1.0	%		2,536,000		1.0	%
Total revenues	$	437,118,000		100.0	%	$	402,611,000		100.0	%	$	383,044,000		100.0	%

30

	2013 Change		2012 Change
Same-store communities	$	17,973,000	$	18,834,000
Non same-store communities		10,498,000		8,245,000
Total change in rental and ancillary revenues from continuing operations	$	28,471,000	$	27,079,000

Rental and Ancillary Income

Same-store revenues increased by $17,973,000 or 4.8% and by $18,834,000 or 5.5% for the years ended for the years ended December 31, 2013 and 2012, respectively. The 2013 same-store increase was primarily due to a 5.3% increase in average revenue earned per occupied home. Revenue per home is comprised of rental and ancillary income earned on occupied homes during the period and net of concessions of $1 per month per occupied home during 2013 and concessions of $3 per month per home during 2012. Physical occupancy levels averaged 95%, 94%, and 95% during the years ended 2013, 2012, and 2011, respectively. The $10,498,000 increase in revenue from non same-store communities represents the increase in the year-over-year size of the portfolio from recently completed development communities and communities acquired in 2013.

As described above, the increase in non same-store rental and ancillary revenues relates to acquired and developed communities. The following table summarizes our multifamily development, acquisition and disposition activities:

	Year Ended December 31,
	2013		2012		2011
Total cost of development communities completed	$	42,900,000	$	104,400,000	$	—
# of homes completed		166		336		—
Total cost of communities acquired	$	120,515,000	$	—	$	170,127,000
# of homes acquired		270		—		652
Approximate net sales proceeds of dispositions	$	162,357,000	$	88,236,000	$	63,486,000
# of homes sold		872		512		634

	Year Ended December 31,
	2013			2012			2011
Number of wholly or majority owned operating communities		73			74			76
Physical occupancy rates for operating communities(1)		95.0	%		94.0	%		95.0	%

⁽¹⁾Physical occupancy is calculated by dividing the total occupied homes by the total homes in stabilized communities in the portfolio.

Other income

Other income is detailed below and is comprised of the following:

	For the years ended December 31,
	2013			2012		2011
Legal and insurance settlements	$	19,750,000	(1)	$	133,000	$	40,000
JV management fees (2)		384,000			1,637,000		1,843,000
Interest income		219,000			377,000		369,000
Disposition fees		128,000			243,000		144,000
Other		133,000			140,000		140,000
Total other income	$	20,614,000		$	2,530,000	$	2,536,000

31

⁽¹⁾ Related to $19,750,000 legal settlement for construction defects.

⁽²⁾ Decrease in management fees due to decrease in the number of joint venture interests from 11 interests at December 31, 2011 to 8 interests at December 31, 2012 to 1 interest at December 31, 2013.

Expenses

Real estate expenses

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

	Year Ended December 31,
	2013			2012			2011
Real estate expenses	$	124,304,000		$	118,143,000		$	112,497,000
Real estate expenses as a percent of rental and ancillary income from continuing operations		30.8	%		31.5	%		32.3	%
Same-store expense % change		1.9	%		3.6	%		1.5	%

Real estate expenses for multifamily rental communities (which include repairs and maintenance, utilities, on-site staff payroll, property taxes, insurance, advertising and other direct operating expenses) increased $6,161,000, or 5.2% and $5,646,000 or 5.0%, for the years ended December 31, 2013 and 2012, respectively. Also, same-store expenses increased $2,252,000, $3,920,000, and $1,520,000 in 2013, 2012 and 2011, respectively.

Property taxes comprised 30% of real estate expenses during the years ended December 31, 2013, 2012 and 2011, respectively. Across the same-store portfolio, property taxes increased $2,236,000 or 6.4% in 2013 from 2012. In our Seattle market on a same-store basis, property taxes increased $876,000 or 17% for the year e ended December 31, 2013.

Real estate expenses shown in the table above exclude real estate expense from discontinued operations which totaled $4,077,000, $7,139,000 and $9,177,000 for 2013, 2012 and 2011, respectively.

Provision for depreciation

The provision for depreciation totaled $105,371,000, $96,736,000 and $97,139,000 for the years ending 2013, 2012 and 2011, respectively. The provision for depreciation increased $8,635,000, or 8.9%, for the year ended December 31, 2013 compared to 2012, and decreased $403,000, or 0.4%, for the year ended December 31, 2012 compared to 2011. The increases in 2013 resulted from higher depreciable bases on newly delivered developments and acquisitions.

Interest expense

	Year ended December 31,
	2013			2012			2011
Interest on unsecured senior notes	$	46,048,000		$	42,103,000		$	38,518,000
Interest on convertible debt		-			274,000			1,870,000
Interest on mortgage loans payable		40,513,000			40,953,000			43,898,000
Interest on line of credit		3,777,000			5,101,000			3,396,000
Total interest incurred	$	90,338,000		$	88,431,000		$	87,682,000
Capitalized interest(1)		(24,471,000	)		(21,633,000	)		(14,431,000	)
Total interest expense	$	65,867,000		$	66,798,000		$	73,251,000

32

(1) The increase in capitalized interest is related to the increase in our average investment in land and construction in progress. Our monthly average investment balance in land and construction in progress was $468,363,000, $406,619,000 and $280,698,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

Year-end debt balances were as follows:

	Year ended December 31,
	2013			2012			2011
Unsecured senior notes	$	950,000,000		$	990,018,000		$	690,018,000
Convertible unsecured senior notes(1)		—			—			34,939,000
Mortgage loans payable		711,428,000			741,942,000			808,714,000
Unsecured line of credit		98,000,000			—			129,000,000
Total debt	$	1,759,428,000			1,731,960,000			1,662,671,000
Weighted average interest rate for all debt at end of period		5.1	%		5.4	%		5.3	%

⁽¹⁾ During 2012, we exercised the right to redeem for cash all of the remaining 4.125% convertible unsecured notes outstanding, 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:

	For the years ended  December 31,
	2013			2012			2011
General and administrative expenses	$	23,037,000		$	22,848,000		$	21,768,000
Annual change as a percentage		0.8	%		5.0	%		5.8	%
As a percentage of rental and ancillary revenues (including revenues from discontinued operations)		5.5	%		5.7	%		5.8	%

General and administrative expenses increased 0.8% in 2013, increased 5.0% in 2012 and increased 5.8% in 2011. The increase during 2013 was primarily due to legal costs.

Other expenses

Other expenses are comprised of the following:

	For the years ended  December 31,
	2013		2012		2011
Merger costs(1)	$	3,401,000	$	-	$	-
Acquisition fees		585,000		-		402,000
Non cash impairment charge(2)		-		15,000,000		-
Total other expenses	$	3,986,000	$	15,000,000	$	402,000

33

⁽¹⁾ Represents merger related legal and professional fees incurred as of December 31, 2013.

⁽²⁾ Represents a $15,000,000 non cash impairment charge to write down a land site to its estimated fair value less cost of disposal, as a result of changes in the future plans to develop the project.

Redeemable noncontrolling interest in income

Redeemable noncontrolling interest in income represent the earnings attributable to the noncontrolling members of our consolidated subsidiaries and totaled $190,000, $413,000 and $1,168,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

Discontinued operations

Accounting guidance requires the results of operations for communities 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 communities held for sale is reported as discontinued operations.

During 2013 we sold three communities in Southern California: Summerwind Townhomes, with 200 homes; Mission Grove Park with 432 homes; and Villa Santana, with 240 homes. The net proceeds from the three sales were $162,357,000 resulting in a net gain of $57,324,000.

During 2012, we sold three communities located in San Diego, California: Countryside Village, with 96 homes in El Cajon submarket; Terra Nova Villas, with 233 homes in Chula Vista; and Canyon Villa, with 183 homes in Chula Vista. The approximate net proceeds from the three sales were $88,236,000 resulting in a combined net gain of $62,136,000. The sale of these assets reduced our exposure in the San Diego multi-family market to 18% of total net operating income from 21% at year-end 2011.

During 2011, we sold two communities in the eastern half of the Inland Empire totaling 634 homes: Galleria at Towngate, with 268 homes located in Moreno Valley, California; and Windrush Village, a 366 unit property located in Colton, California. The net proceeds from sales of the two communities were $63,486,000, resulting in a combined net gain of $14,489,000. The sale of these assets reduced our concentration of net operating income from the Inland Empire.

The net gain on sale and the combined results of operations for these eight communities for each year presented are included in discontinued operations on the consolidated statements of income. These amounts totaled $61,631,000, $70,326,000 and $25,615,000 for the years ended December 31, 2013, 2012 and 2011, respectively. There were no operating communities held for sale as of December 31, 2013.

As of December 31, 2013, there was land with a net carrying value of $23,481,000 classified as held for sale on the consolidated balance sheet. As of December 31, 2012, there was land with a net carrying value of $23,065,000 classified as held for sale on the consolidated balance sheet.

Income from unconsolidated entities

Income from unconsolidated entities totaled $625,000, $2,644,000 and $2,888,000 for the years ended December 31, 2013, 2012 and 2011, respectively. The totals for each year include our share of net income from the joint ventures we own.

During 2013, six joint venture interests were sold to our joint venture partner. The sale consisted of four joint venture communities located in Denver, Colorado and two joint venture communities located in Phoenix, Arizona totaling 2,180 homes. We had a 15% equity ownership in all six joint venture interests sold. The net proceeds from the sale was $47,408,000 and net gain of $15,025,000. We also sold to an unrelated third party one joint venture community located in Phoenix, Arizona with 432 homes. We had a 15% interest in the joint venture and the net proceed from the sale was $6,000,000 with a net gain of $3,608,000.

34

Dividends attributable to preferred stock

Dividends totaled $3,645,000, $3,645,000 and $7,655,000 for the years ended December 31, 2013, 2012, and 2011, respectively. Dividends for the year ended December 31, 2013 and 2012 are attributable to the dividends on our 6.75% Series D Cumulative Redeemable Preferred Stocks. Dividends for the year ended December 31, 2011 are attributable to 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, 2013 was $179,131,000 or $2.32 per diluted share, for the year ended December 31, 2012 was $133,499,000 or $1.74 per diluted share, and $66,461,000, or $0.93 per diluted share for the year ended December 31, 2011.

Non-GAAP financial measure reconciliations and definitions

The following is our reconciliation of net income to funds from operations (FFO) and core funds from operations (Core FFO) for each of the five years ended December 31, 2013:

	2013			2012			2011			2010			2009
	(Amounts in thousands, except per share data)
Net income available to common shareholders	$	179,131		$	133,499		$	66,461		$	41,576		$	50,642
Depreciation from continuing operations		105,371			96,736			97,139			84,647			76,033
Depreciation from discontinued operations		2,783			4,882			6,801			9,737			12,386
Depreciation from unconsolidated entities		493			1,903			2,052			1,991			1,841
Net gain on sales of discontinued operations		(57,324	)		(62,136	)		(14,489	)		(40,111	)		(21,574	)
Net gain on sale of unconsolidated entities		(18,633	)		(6,025	)		(4,270	)		-			-
Less: Redeemable noncontrolling interest in income		—			—			748			1,026			1,461
Funds from operations(1)	$	211,821		$	168,859		$	154,442		$	98,866		$	120,789
Non core items in the periods presented
Legal settlement proceeds		(19,750	)		-			-			-			-
Merger costs		3,401			-			-			-			-
Acquisition costs		585			-			402			3,998			-
Non cash asset impairment charge		-			15,000			-			-			-
Redemption related preferred stock issuance costs, net		-			-			3,771			-			-
Severance charge		-			-			-			1,300			600
Net  loss/(gain) from extinguishment of debt		-			-			-			23,507			(1,470	)
Abandonment costs		-			-			-						12,900
Core Funds from operations(2)	$	196,057		$	183,859		$	158,615		$	127,671		$	132,819

¹FFO 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 accounting principles generally accepted in the United States) 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 and adjustments for unconsolidated partnerships and joint ventures. We calculate FFO in accordance with the NAREIT definition.

35

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 communities that result from use or market conditions nor the level of capital expenditures to maintain the operating performance of our communities, 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.

²We believe that Core Funds from Operations (“Core FFO”) is a meaningful supplemental measure of our operating performance for the same reasons as FFO and including adjustments for non-routine items allows for more comparable periods. Core FFO begins with FFO as defined by the NAREIT White Paper and adjusts for the following: 

- The impact of any expenses relating to non-operating asset impairment and valuation allowances; 

- Property acquisition costs and pursuit cost write-offs (other expenses); 

- Gains and losses from early debt extinguishment, including prepayment penalties and preferred share redemptions; 

- Executive level severance costs; 

- Gains and losses on the sales of non-operating assets, and 

- Other non-comparable items.

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 credit facility, 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 credit facility, 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 noncontrolling members by approximately $106,900,000, $79,200,000 and $54,000,000 for the years ended December 31, 2013, 2012 and 2011, 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 revolving credit facility provides adequate liquidity to address temporary cash shortfalls.

On February 15, 2013, our 7.130% senior notes came due and the aggregate principal balance of $40,018,000 was paid in full.

On May 10, 2013, we prepaid a mortgage on Mission Grove Park for $29,884,000 ninety days prior to its scheduled maturity, with no prepayment penalty.

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

36

On August 13, 2012, we completed an offering of $300,000,000, 10.5 year senior unsecured notes. The notes will mature on January 15, 2023 and bear interest at a fixed coupon rate of 3.375%. Net proceeds from the offering, after all discounts, commissions, and issuance costs totaled approximately $295,400,000 and were used for general corporate purposes.

On February 24, 2010, we entered into Equity Distribution Agreements (EDAs) with each of Deutsche Bank Securities Inc., J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, UBS Securities LLC, and Wells Fargo Securities, LLC (collectively, the “sales agents”) under which we may issue and sell from time to time through or to its sales agents shares of its common stock having an aggregate offering price of up to $250,000,000.

No shares were issued under the EDAs during the twelve months ended December 31, 2013. As of December 31, 2013 the remaining capacity under the EDAs totals $123,600,000. During the first quarter of 2012, 815,045 shares were issued under the EDAs, with an average share price of $49.09 for total gross proceeds of approximately $40,000,000 and total commissions paid to the sales agents of approximately $800,000. During 2011, 1,291,537 shares were issued under the EDAs, with an average share price of $47.55 for total gross proceeds of approximately $61,414,000.

During 2013, 2012, and 2011 we invested $283,026,000, $250,400,000 and $161,280,000, respectively in development, rehab and capital expenditures.

	Years ended December 31,
(amounts in thousands)	2013		2012		2011
New development (including land)	$	212,937	$	196,021	$	124,249
Rehab expenditures		42,415		34,420		15,869
Capital expenditures		27,674		19,959		21,162
Total capital expenditures	$	283,026	$	250,400	$	161,280

Capitalized soft costs totaling $35,211,000, $31,511,000 and $24,058,000, for the years ending 2013, 2012, and 2011, were included in total capital expenditures in the table above. A detail of capitalized soft costs are shown below:

	Years ended December 31,
(amounts in thousands)	2013		2012		2011
Payroll expense	$	10,740	$	9,878	$	9,627
Interest expense		24,471		21,633		14,431
Total soft cost capital expenditures	$	35,211	$	31,511	$	24,058

Tender Offers and Repurchase Activity

During February 2012, we exercised our right to redeem for cash all of the $35,000,000 outstanding convertible 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.

Fixed Rate Unsecured Notes and Unsecured line of credit

On January 4, 2012, we entered into a $750,000,000 unsecured revolving credit facility (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 revolving credit facility. Based on our current debt ratings, the unsecured revolving credit facility 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. Borrowings under our unsecured revolving credit facility totaled $98,000,000 at December 31, 2013, compared to zero balance at December 31, 2012. Borrowings under the unsecured line of credit were used to fund acquisition and development activities as well as for general corporate uses. Balances on the unsecured line of credit were typically reduced with available cash balances.

37

On February 15, 2013, our 7.130% senior notes came due and the aggregate principal balance of $40,018,000 was paid in full.

On August 13, 2012, we completed an offering of $300,000,000, 10.5 year senior unsecured notes. The notes will mature on January 15, 2023 and bear interest at a fixed coupon rate of 3.375%. Net proceeds from the offering, after all discounts, commissions, and issuance costs totaled approximately $295,400,000 and were used for general corporate purposes.

The total principal amount in unsecured senior notes outstanding at December 31, 2013, consisted of the following:

Maturity	Unsecured Senior		Interest
(amounts in thousands)	Note Balance		Rate (1)
March 2014	$	50,000	$	4.700	%
March 2017		300,000		5.500	%
March 2021		300,000		5.200	%
March 2023		300,000		3.375	%
Total/ Weighted Average Interest Rate	$	950,000	$	4.692	%

⁽¹⁾ Represents the weighted average coupon interest rate in the year in which they become due.

Secured Debt

On December 31, 2013, we had mortgage loans and a secured credit facility with a total principal amount outstanding of $711,428,000, at an effective interest rate of 5.6%, and remaining terms ranging from 1 year to 7 years.

As of December 31, 2013, we had total outstanding debt balances of $1,759,428,000 and total outstanding shareholders’ equity and redeemable noncontrolling interests of $1,756,935,000, representing a debt to total book capitalization ratio of approximately 50%.

On May 10, 2013, we prepaid a mortgage on Mission Grove Park for $29,884,000 ninety days prior to its scheduled maturity, with no prepayment penalty.

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

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, 2013.

We anticipate that we will continue to require outside sources of financing to meet all our long-term liquidity needs beyond 2013, including scheduled debt repayments, construction funding and property acquisitions. At December 31, 2013, we had an estimated cost of $181,000,000 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 are as follows (in thousands):

38

			Less than						More than
Contractual Obligations	Total		1 year		1-3 years		3-5 years		5 years
Mortgage notes payable	$	91,428	$	390	$	915	$	30,648	$	59,475
Secured notes		620,000		3,700		16,126		313,046		287,128
Unsecured senior notes		950,000		50,000		-		300,000		600,000
Unsecured line of credit		98,000		-		98,000		-		-
Interest on indebtedness (1)		1,634		1,305		329		-		-
Long-term debt obligation	$	1,761,062	$	55,395	$	115,370	$	643,694	$	946,603
Lease obligations		14,906		1,829		2,653		1,438		8,986
Total	$	1,775,968	$	72,287	$	65,416	$	319,962	$	1,290,989

⁽¹⁾ Interest on indebtedness for variable debt was calculated using interest rates as of December 31, 2013.

We continue to consider other sources of possible funding, including 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 a joint venture co-investment in a community that is unconsolidated and accounted for under the equity method of accounting. Management does not believe the investment has a materially different impact upon our liquidity, cash flows, capital resources, credit or market risk than our property management and ownership activities. The joint venture is discussed in Note 4 of our Consolidated Financial Statements.

As of December 31, 2013 we have 73 wholly or majority owned operating communities with a gross book value of approximately $3,918,341,000. Seventeen of the 73 operating communities with gross book values of approximately $936,580,000 are encumbered with secured financing totaling $711,428,000. The remaining 56 operating communities are unencumbered with an approximate gross book value of $2,981,761,000.

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 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 Communities

Rental communities 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 estimated fair market value based upon market comparables if acquired in a merger or in an operating community acquisition.

39

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 communities in the development and leasing phase is to expense all operating expenses associated with completed apartment homes, 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, including interest and property taxes, until homes 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 $10,023,000, $10,738,000 and $12,178,000, for the years ending 2013, 2012, and 2011, 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 expenditures 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 homes become ready for occupancy. Depreciation begins as homes are placed in service. Land acquired for development is capitalized and reported as Land under development until the development plan for the land is formalized. Once the development plan is 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 community assets. The determination as to whether expenditures should be capitalized or expensed, and the period over which depreciation is recognized, requires management’s judgment.

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 are 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 estimate fair value is warranted. Impairment is first triggered when the carrying amount of an asset may not be recoverable. To determine impairment, the test consists of comparing the undiscounted net cash flows expected to be produced by the asset to the carrying value of the asset. If the total future net cash flows thus determined are less than the carrying amount of the real estate, impairment exists. If impairment exists and the carrying amount of the real estate exceeds its fair value, an impairment loss is recognized equal to the amount of the excess carrying amount. Based on periodic tests of recoverability of long-lived assets, for the years ended December 31, 2013, 2012 and 2011, we did not record any impairment losses for wholly-owned operating real estate assets.

We also assess land held for development for impairment if our intent changes with respect to the development of the land. During the year ended December 31 2012, we recorded a $15,000,000 non cash asset impairment charge on land held for development located in Anaheim, CA, as a result of our decision to sell the site and no longer proceed with development. Our change in intent to pursue disposition of the land rather than holding for development triggered the determination that an impairment of the basis for the land existed. As a result of this decision, we concluded that indicators of impairment existed and a reduction in the carrying value to estimated fair value was warranted for the land. This charge was the result of an analysis of the land’s estimated fair value (based on market assumptions and comparable sales data) compared to its current capitalized carrying value. There was no land held for development for which an adjustment for impairment in value was made in 2013 or 2011.

In the normal course of business, we will receive offers for sale of our communities, 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 the 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 ceases once an asset is classified as held for sale. As of December 31, 2013, there was $23,481,000 of reported real estate held for sale, net, relating to our Anaheim, California land site we are in the process of selling.

40

Stock-Based Compensation

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, as expense 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 us beginning January 1, 2010. Additional disclosures for VIEs are required, including a description about a reporting entity’s involvement with VIEs, how a reporting entity’s involvement with a VIE affects the reporting entity’s financial statements, and significant judgments and assumptions made by the reporting entity to determine whether it must consolidate the VIE.

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 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, 2013, we have no land purchase options outstanding requiring evaluation as VIEs and potential consolidation. We have concluded that there is no impact on the financial statements as a result of the adoption of the guidance.

41

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 asset held in a LLC and concluded that we do not have control over the LLC we manage. Consequently, we have applied the equity method of accounting to our investment in a joint venture.

We consolidate entities not deemed to be VIEs that we have the ability to control. The accompanying consolidated financial statements include our accounts and other controlled subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Impact of Inflation

Approximately 99% of our total revenues for 2013 were derived from apartment communities. 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.

Dividends paid for the years ended December 31, are summarized below:

	2013		2012		2011
Quarterly Dividends	$	0.395	$	0.385	$	0.375
Annual Dividends	$	1.580	$	1.540	$	1.500
Dividends paid to Common Shareholders	$	122,210,000	$	118,665,000	$	109,482,000
Dividends paid to Preferred Shareholders	$	3,645,000	$	3,645,000	$	7,655,000

Distributions accrued and paid to noncontrolling interests were $190,000, $413,000 and $1,168,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

We intend to make an election on our 2013 tax return to carryback a portion of the dividends we pay in 2014 to satisfy our REIT distribution requirement for 2013. Accordingly, we have not accrued any taxes or related interest for financial reporting purposes with respect to 2013.

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 revolving credit facility. 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.

42

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 $1,809,707,000 at December 31, 2013, as compared with a carrying value of $1,661,428,000.

We had $98,000,000 and zero in variable rate debt outstanding at December 31, 2013 and 2012, respectively. A hypothetical 10% adverse change in interest rates would have had an annualized unfavorable impact of approximately $133,000 and zero 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, 2013 and 2012, 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.

43

As of December 31, 2013, 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 our disclosure controls and procedures are effective to ensure that information required to be disclosed by us on the reports we file or submit 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. 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, 2013, 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, 2013.

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.

44

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, 2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission “(1992 framework)” (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, 2013, 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, 2013 and 2012, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2013 of BRE Properties, Inc. and our report dated February 18, 2014 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

San Francisco, CA

February 18, 2014

45

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 2013 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, 2013. 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 California State Automobile Association Inter-Insurance Bureau. 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 58 years old.

46

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 64 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 57 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 57 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 58 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 60 years old.
Jeffrey T. Pero	Mr. Pero has been our director since 2009. Mr. Pero currently serves on the Board of Directors of Redwood Trust, Inc. He is a former partner of Latham & Watkins LLP (LW), an international law firm, and has been engaged in the practice of law since 1971. As a 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 67 years old.

47

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 President and Chief Financial Officer of Storage USA, Inc., from 1994 to 1997. Mr. Robinson currently serves on the boards of directors of First Potomac Realty Trust and Tanger Factory Outlet Centers, Inc., 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 NAREIT. Mr. Robinson is 66 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 Trustee Emeriti 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 Communities, Inc. in 2003. Mr. Singleton served as Chief Financial Officer and Director of Spieker Communities, 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 69 years old.

Thomas P. Sullivan Mr. Sullivan has been our director since 2009. He controls Westwood Interests, a privately-held, San Francisco-based firm active in real estate investments and developments in the Bay Area, including several office development projects in the Silicon Valley. Prior to forming Westwood, he was a founding partner of Wilson Meany Sullivan, a San Francisco development firm focused on urban infill locations on the West Coast. Mr. Sullivan has 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.), as well as several urban infill residential development projects. Prior to WMS, Mr. Sullivan served as President of Wilson/Equity Office, a joint venture between Equity Office Properties Trust and William Wilson and Associates; and as Senior Vice President at William Wilson & Associates. Mr. Sullivan was selected by the Nominating & Governance Committee due to his experience with real estate and development and his advisory roles in Bay Area organizations. Mr. Sullivan is 56 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 2014 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, 2013.

48

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 2014 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, 2013.

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 2014 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, 2013.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated by reference from our Proxy Statement, relating to our 2014 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, 2013.

49

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Financial Statements

1. Financial Statements:

Report of Independent Registered Public Accounting Firm	53
Consolidated Balance Sheets at December 31, 2013 and 2012	54
Consolidated Statements of Income for the years ended December 31, 2013, 2012, and 2011	55
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012, and 2011	56
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2013, 2012, and 2011	58
Notes to Consolidated Financial Statements	59

2. Financial Statement Schedule:

Schedule III—Real Estate and Accumulated Depreciation	86
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and, therefore, have been omitted.

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

(b) Exhibits

See Index to Exhibits.

(c) Financial Statement Schedules

See Index to Financial Statements and Financial Statement Schedule.

50

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 18, 2014

BRE PROPERTIES, INC.
By:	/s/ CONSTANCE B. MOORE
	Constance B. Moore
	President and Chief Executive Officer

51

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 18, 2014
/s/ JOHN A. SCHISSEL John A. Schissel	Executive Vice President, Chief Financial Officer (Principal Financial Officer)	February 18, 2014
/s/ PETER C. OLSON Peter C. Olson	Chief Accounting Officer (Principal Accounting Officer)	February 18, 2014
/s/ PAULA F. DOWNEY Paula Downey	Director	February 18, 2014
/s/ IRVING F. LYONS, III Irving F. Lyons, III	Director	February 18, 2014
/s/ CHRISTOPHER J. MCGURK Christopher J. McGurk	Director	February 18, 2014
/s/ MATTHEW T. MEDEIROS Matthew T. Medeiros	Director	February 18, 2014
/s/ JEANNE R. MYERSON Jeanne R. Myerson	Director	February 18, 2014
/s/ JEFFREY T. PERO Jeffrey T. Pero	Director	February 18, 2014
/s/ THOMAS E. ROBINSON Thomas E. Robinson	Director	February 18, 2014
/s/ DENNIS E. SINGLETON Dennis E. Singleton	Director	February 18, 2014
/s/ THOMAS P. SULLIVAN Thomas P. Sullivan	Director	February 18, 2014

52

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, 2013 and 2012, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2013. 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, 2013 and 2012, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2013, 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, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission “(1992 framework)” and our report dated February 18, 2014 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

San Francisco, CA

February 18, 2014

53

BRE PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands, except per share data)

	December 31,
	2013			2012
Assets
Real estate portfolio:
Direct investments in real estate:
Investments in rental communities	$	3,918,341		$	3,722,838
Construction in progress		442,931			302,263
Less: accumulated depreciation		(884,472	)		(811,187	)
		3,476,800			3,213,914
Equity investment in real estate joint ventures		6,363			40,753
Real estate held for sale, net		23,481			23,065
Land under development		40,794			104,675
Total real estate portfolio		3,547,438			3,382,407
Cash		8,432			62,241
Other assets		52,976			54,334
Total assets	$	3,608,846		$	3,498,982
Liabilities and Shareholders’ Equity
Liabilities:
Unsecured senior notes	$	950,000		$	990,018
Unsecured revolving credit facility		98,000			-
Mortgage loans payable		711,428			741,942
Accounts payable and accrued expenses		92,483			75,789
Total liabilities		1,851,911			1,807,749
Redeemable noncontrolling interest		4,751			4,751
Shareholders’ equity:
Preferred stock, $0.01 par value; 20,000,000 shares authorized; 2,159,715 shares with $25 liquidation preference issued and outstanding at December 31, 2013 and 2012.		22			22
Common stock, $0.01 par value, 100,000,000 shares authorized; 77,210,095 and 76,925,351 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively.		772			769
Additional paid-in capital		1,888,028			1,879,250
Cumulative dividends in excess of accumulated net income		(136,638	)		(193,559	)
Total shareholders’ equity		1,752,184			1,686,482
Total liabilities and shareholders’ equity	$	3,608,846		$	3,498,982

See Accompanying Notes to Consolidated Financial Statements

54

BRE PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)

	Years ended December 31,
	2013		2012		2011
Revenues
Rental income	$	388,300	$	361,116	$	336,014
Ancillary income		15,728		14,441		12,789
Total revenues		404,028		375,557		348,803
Expenses
Real estate		124,304		118,143		112,497
Provision for depreciation		105,371		96,736		97,139
Interest		65,867		66,798		73,251
General and administrative		23,037		22,848		21,768
Other expenses		3,986		15,000		402
Total expenses		322,565		319,525		305,057
Other income		20,614		2,530		2,536
Income before noncontrolling interests, income from investments in unconsolidated entities and discontinued operations		102,077		58,562		46,282
Income from unconsolidated entities		625		2,644		2,888
Net gain on sales of unconsolidated entities		18,633		6,025		4,270
Income from continuing operations		121,335		67,231		53,440
Net gain on sales of discontinued operations		57,324		62,136		14,489
Income from discontinued operations, net		4,307		8,190		11,126
Income from discontinued operations		61,631		70,326		25,615
Net income	$	182,966	$	137,557	$	79,055
Redeemable noncontrolling interest in income		190		413		1,168
Net income attributable to controlling interests	$	182,776	$	137,144	$	77,887
Redemption related preferred stock issuance costs, net		-		-		3,771
Dividends attributable to preferred stock		3,645		3,645		7,655
Net income available to common shareholders	$	179,131	$	133,499	$	66,461
Per common share data - Basic
Income from continuing operations (net of preferred dividends and redeemable noncontrolling interest in income)	$	1.52	$	0.82	$	0.57
Income from discontinued operations		0.80		0.92		0.36
Net income available to common shareholders	$	2.32	$	1.74	$	0.93
Weighted average common shares outstanding – basic		77,111		76,567		71,220
Per common share data - Diluted
Income from continuing operations (net of preferred dividends and redeemable noncontrolling interest in income)	$	1.52	$	0.82	$	0.57
Income from discontinued operations		0.80		0.92		0.36
Net income available to common shareholders	$	2.32	$	1.74	$	0.93
Weighted average common shares outstanding – diluted		77,340		76,920		71,670

See Accompanying Notes to Consolidated Financial Statements

55

BRE PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

	Years ended December 31,
	2013			2012			2011
Cash flows from operating activities:
Net income	$	182,966		$	137,557		$	79,055
Adjustments to reconcile net income to net cash flows provided by operating activities:
Net gain on sales of discontinued operations		(57,324	)		(62,136	)		(14,489	)
Net gain on sales of unconsolidated entities		(18,633	)		(6,025	)		(4,270	)
Non cash interest on convertible debt		—			36			322
Income from unconsolidated entities		(625	)		(2,644	)		(2,888	)
Distributions of earnings from unconsolidated entities		722			4,253			4,263
Non cash asset impairment charge		—			15,000			—
Provision for depreciation		105,371			96,736			97,139
Provision for depreciation from discontinued operations		2,783			4,882			6,801
Amortization of deferred financing costs		3,155			2,960			2,223
Non cash stock based compensation expense		7,474			5,754			4,697
Change in other assets		(2,534	)		(5,349	)		(5,147	)
Change in accounts payable and accrued expenses		9,596			10,863			4,471
Net cash flows provided by operating activities		232,951			201,887			172,177
Cash flows from investing activities:
Acquisition of operating real estate communities		(120,515	)		—			(170,127	)
Additions to land under development and predevelopment cost		(9,486	)		(37,989	)		(27,666	)
Additions to construction in progress		(203,451	)		(146,632	)		(50,083	)
Rehabilitation expenditures and other		(42,415	)		(34,420	)		(15,869	)
Capital expenditures		(27,674	)		(19,959	)		(21,162	)
Contributions to real estate joint venture		—			—			(8,743	)
Proceeds from sale of unconsolidated entities, net of closing costs		53,408			26,919			9,349
Purchase of land		—			(11,400	)		(46,500	)
Additions to furniture fixture and equipment		—			—			(30	)
Proceeds from sale of operating community, net of closing costs		162,357			88,236			63,486
Net cash flows used in investing activities		(187,776	)		(135,245	)		(267,345	)
Cash flows from financing activities:
Principal payments on mortgage loans		(30,513	)		(66,772	)		(2,128	)
Repayment of unsecured notes		(40,018	)		(35,000	)		(48,545	)
Proceeds from issuance of unsecured notes, net		—			295,406			—
Lines of credit:
Advances		315,000			193,000			454,000
Repayments		(217,000	)		(322,000	)		(534,000	)
Cash dividends paid to common shareholders		(122,210	)		(118,665	)		(109,482	)
Cash dividends paid to preferred shareholders		(3,645	)		(3,645	)		(7,655	)
Distributions to redeemable noncontrolling interests		—			—			(978	)
Redemption of preferred stock		—			—			(120,496	)
Redeemable noncontrolling interests redemption activity		—			—			(21,876	)
Redeemable other noncontrolling interests redemption activity		—			(1,083	)		—
Distributions to other redeemable noncontrolling interests		(190	)		(413	)		(420	)
Shares retired for tax withholding		(4,965	)		(2,982	)		(2,625	)
Proceeds from exercises of stock options and other, net		3,855			8,249			7,647
Proceeds from dividend reinvestment plan		702			999			1,020
Proceeds from issuance of common shares, net		—			38,905			483,949
Net cash flows (used in)/provided by financing activities		(98,984	)		(14,001	)		98,411
(Decrease)/Increase in cash		(53,809	)		52,641			3,243
Cash balance at beginning of period		62,241			9,600			6,357
Cash balance at end of period	$	8,432		$	62,241		$	9,600

See Accompanying Notes to Consolidated Financial Statements

56

BRE PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

	Years ended December 31,
	2013			2012			2011
Supplemental information
Cash paid for interest, net of amounts capitalized	$	66,225		$	65,355		$	75,576
Transfers of direct investments in real estate-construction in progress to investments in rental properties	$	141,703		$	104,428		$	—
Transfer of net investment in rental communities to held for sale	$	139,178		$	—		$	50,830
Transfer of land under development to real estate held for sale, net	$	—		$	23,000		$	—
Transfer of land under development to direct investments in real estate-construction in progress	$	71,576		$	—		$	157,410
Transfer of other assets to construction in progress and land under development	$	—		$	3,981		$	—
Change in accrued improvements to direct investments in real estate	$	219		$	1,066		$	1,055
Change in accrued development costs for construction in progress and land under development	$	(6,432	)	$	(20	)	$	(8,486	)
Change in redemption value of redeemable noncontrolling interests	$	—		$	(3,789	)	$	(3,238	)
Change in redemption related preferred stock issuance costs	$	—		$	—		$	3,771
Conversion of redeemable noncontrolling interest units	$	—		$	(4,332	)	$	—

See Accompanying Notes to Consolidated Financial Statements

57

BRE PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

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

	Years ended December 31,
Common Stock Shares	2013			2012			2011
Balance at beginning of year		76,925,351			75,556,167			64,675,815
Stock options exercised, net of shares tendered		139,349			265,708			249,474
Conversion of Operating Company units to common shares		—			160,882			—
Vested restricted shares, net of shares tendered		131,416			107,328			117,449
Shares issued pursuant to dividend reinvestment plan		13,979			20,221			21,892
Common stock issuance		—			815,045			10,491,537
Balance at end of period		77,210,095			76,925,351			75,556,167
Preferred stock shares
Balance at beginning of year		2,159,715			2,159,715			7,000,000
Repurchased shares		—			—			(4,840,285	)
Balance at end of period		2,159,715			2,159,715			2,159,715
Common stock
Balance at beginning of year	$	769		$	756		$	647
Stock options exercised, net of shares tendered		2			3			3
Conversion of Operating Company units to common shares		—			1			—
Vested restricted shares, net of shares tendered		1			1			1
Shares issued pursuant to dividend reinvestment plan		—			—			—
Common stock issuance		—			8			105
Balance at end of period	$	772		$	769		$	756
Preferred stock
Balance at beginning of year	$	22		$	22		$	70
Repurchased shares		—			—			(48	)
Balance at end of period	$	22		$	22		$	22
Additional paid-in capital
Balance at beginning of year	$	1,879,250		$	1,818,064		$	1,441,048
Stock options exercised, net of shares tendered and other, net		3,855			8,246			7,645
Stock based compensation		9,186			7,907			7,047
Shares retired for tax withholding		(4,965	)		(2,982	)		(2,625	)
Conversion of Operating Company units to common shares		—			4,332			—
Change in redemption value on redeemable noncontrolling interests		—			3,789			(3,238	)
Dividend reinvestment plan		702			998			1,020
Preferred stock redemption, net of discount on repurchase		—			—			(116,677	)
Common stock issuance, net		—			38,896			483,844
Balance at end of period	$	1,888,028		$	1,879,250		$	1,818,064
Cumulative dividends in excess of accumulated net income
Balance at beginning of year	$	(193,559	)	$	(208,393	)	$	(165,372	)
Net income		182,966			137,557			79,055
Cash dividends declared and paid to common shareholders: $1.58 per common share for the year ended December 31, 2013, $1.54 per common share for the year ended December 31, 2012, and $1.50 per common share for the year ended December 31, 2011.		(122,210	)		(118,665	)		(109,482	)
Cash dividends declared and paid to preferred shareholders (see Note 10)		(3,645	)		(3,645	)		(7,655	)
Preferred stock redemption, original issuance costs		—			—			(3,771	)
Redeemable and other noncontrolling interest in income		(190	)		(413	)		(1,168	)
Balance at end of period	$	(136,638	)	$	(193,559	)	$	(208,393	)
Total shareholders’ equity	$	1,752,184		$	1,686,482		$	1,610,449
Redeemable noncontrolling interests
Balance at beginning of year	$	4,751		$	16,228		$	34,866
Redeemable and other non controlling interest in income		190			413			1,168
Distributions paid and accrued to redeemable noncontrolling interest		(190	)		(413	)		(1,168	)
Conversion/ redemption activity		—			(7,688	)		(21,876	)
Change in redemption value of redeemable noncontrolling interests		—			(3,789	)		3,238
Balance at end of period	$	4,751		$	4,751		$	16,228

See Accompanying Notes to Consolidated Financial Statements

58

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, 2013, BRE owned directly or through wholly or majority owned subsidiaries, 73 multifamily communities (aggregating 20,724 homes), classified as direct investments in real estate-investments in rental communities on the accompanying consolidated balance sheets. Of these communities, 57 were located in California, 14 in Washington, and two in Arizona. In addition, at December 31, 2013, there were six communities under various stages of construction and development, including four directly owned communities with 1,382 homes classified as direct investments in real estate-construction in progress and two land parcels which are classified as land under development. BRE also holds a 35% interest in one real estate Limited Liability Company (LLC) that owns one multifamily community with a total of 252 homes at December 31, 2013.

The Operating Company

In November 1997, BRE acquired 16 completed communities and eight development communities 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. Substantially all of the communities acquired in the Transaction are owned by the Operating Company, which was formed by BRE for the purpose of acquiring the communities in the Transaction. As of December 31, 2012, no OC Units remained outstanding and the Operating Company was 100% owned by BRE.

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; 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.

The consolidation analysis for VIEs requires 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. Accounting guidance requires an ongoing reconsideration of the primary beneficiary.

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 has reviewed the consolidation guidance and concluded that the joint ventures LLCs are not VIEs. The Company has also 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, 2013, the Company had no land purchase options outstanding from third party entities.

Under applicable accounting guidance, the managing member of a limited liability company, or LLC, is presumed to control the joint venture LLC 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 unilateral control over the LLC managed by the Company. Consequently, the Company has applied the equity method of accounting to its investment in its joint venture.

59

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 and other controlled subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements, in accordance with accounting principles generally accepted in the United States of America, 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 communities, 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 Communities

Rental communities are recorded at cost, less accumulated depreciation, less an adjustment, if any, for impairment. All communities are held for leasing activities. A land value is assigned based on the purchase price if land is acquired separately, or based on estimated market rates 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, determining 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 communities 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 communities 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 communities in the development and leasing phase is to expense all operating expenses associated with completed apartment homes, 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 homes 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 and benefits, office rent, and associated costs for those individuals directly responsible for development activities are also capitalized and allocated to the projects to which they relate. Capitalized indirect development costs totaled approximately $10,023,000, $10,738,000 and $12,178,000 for the years ended December 31, 2013, 2012 and 2011, 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 expenditures 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 homes become ready for occupancy. Depreciation begins once homes 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.

60

In accordance with “FASB” (Financial Accounting Standards Board) guidance on accounting for the impairment or disposal of long-lived assets, the Company’s investments in real estate are periodically evaluated for indicators of impairment. The evaluation of impairment and the determination of estimated fair value are 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 estimate fair value is warranted. Impairment is first triggered when the carrying amount of an asset may not be recoverable. To determine impairment, the test consists of comparing the undiscounted net cash flows expected to be produced by the asset to the carrying value of the asset. If the total future net cash flows thus determined are less than the carrying amount of the real estate, impairment exists. If impairment exists and the carrying amount of the real estate exceeds its fair value, an impairment loss is recognized equal to the amount of the excess carrying amount. Based on periodic tests of recoverability of long-lived assets, for the years ended December 31, 2013, 2012 and 2011, the Company did not record any impairment losses for wholly-owned operating real estate assets.

The Company also assesses land held for development for impairment if the intent changes with respect to the development of the land. During the year ended December 31, 2012, the Company recorded a $15,000,000 non cash asset impairment charge on land held for development located in Anaheim, CA, as a result of changes in the future plans to develop the project. The change in intent to pursue disposition of the land rather than holding for development triggered the determination that an impairment of the basis for the land existed. As a result of this decision, the Company concluded that indicators of impairment existed and a reduction in the carrying value to estimated fair value, less disposal costs was warranted for the land. This charge was the result of an analysis of the land’s estimated fair value (based on market assumptions and comparable sales data) compared to its current capitalized carrying value. There was no land held for development for which an adjustment for impairment in value was made in 2013.

FASB 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 the Company’s 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 ceases once an asset is classified as held for sale.

Assets Held for Sale and Discontinued Operations

In the normal course of business, BRE will receive offers for sale of its communities, 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 or loss 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.

As of December 31, 2013, $23,481,000 of land located in Anaheim, CA was held for sale. There were no operating communities held for sale on December 31, 2013.

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.

61

Redeemable Noncontrolling Interests

On December 21, 2012, a redeemable noncontrolling interest partner exercised its redemption rights to its membership interest in the Meridian Apartments LLC investment. The Meridian Apartments LLC investment solely owns the community Pinnacle City Center. The redemption resulted in a decrease in redeemable noncontrolling interests of $3,356,000. As of December 31, 2013, and 2012, there was $4,751,000 of redeemable noncontrolling interest stated at redemption value.

Rental Revenue

Rental revenue 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. The allowance for bad debt expense approximated less than 1% of total rental revenue for the three years ended December 31, 2013. The allowance for bad debt is netted into rental revenue and the resulting rental revenue, net of the bad debt allowance is presented as Rental income on the Consolidated statements of income. There were no contingent rental payments or percentage rents in the three years ended December 31, 2013, 2012 and 2011. Rent concessions are amortized over the lives of the related leases.

Other Income

Other income for the three years ended December 31, 2013 is comprised of the items in the table below. Joint venture management fees decreased due to a decrease in joint ventures owned from eleven joint ventures at December 31, 2011, eight joint ventures at December 31, 2012 and one joint venture owned at December 31, 2013. See further discussion related to joint ventures at Note 4. During 2013, the Company received legal settlement proceeds for construction defects totaling $19,750,000. See further discussion related to the legal settlement proceeds at Note 17.

	For the years ended December 31,
	2013		2012		2011
Legal and insurance settlements	$	19,750,000	$	133,000	$	40,000
JV management fees		384,000		1,637,000		1,843,000
Interest income		219,000		377,000		369,000
Disposition fees		128,000		243,000		144,000
Other		133,000		140,000		140,000
Total other income	$	20,614,000	$	2,530,000	$	2,536,000

Real estate expense

Real estate expenses for multifamily rental communities include repairs and maintenance, utilities, on-site staff payroll, property taxes, insurance, advertising and other direct operating expenses. Advertising expense totaled $3,500,000, $3,300,000 and $3,200,000 for the three years ended December 31, 2013, respectively.

Other Expenses

Other expenses for the three years ended December 31, 2013 are comprised of the following in the table below. The Company incurred $3,401,000 of merger related legal and professional fees during the year ended December 31, 2013. See further discussion related to the merger at Note 18. During 2012, the Company recorded a non cash impairment charge to write down a land site to its estimated fair value less cost of disposal, as a result of changes in the future plans to develop the project.

62

	For the years ended  December 31,
	2013		2012		2011
Merger costs	$	3,401,000	$	-	$	-
Acquisition fees		585,000		-		402,000
Non cash impairment charge		-		15,000,000		-
Total other expenses	$	3,986,000	$	15,000,000	$	402,000

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 $11,501,000 and $14,654,000 as of December 31, 2013, and 2012, respectively. Amortization of deferred costs totaled $3,155,000, $2,960,000 and $2,223,000 for the years ended December 31, 2013, 2012 and 2011, 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 must make distributions to shareholders aggregating annually at least 90% of its net taxable income, excluding net capital gain. To the extent that the Company does not distribute all of its net capital gain, 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 communities 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.

BRE intends to make an election on its 2013 tax return to carryback a portion of the dividends it pays in 2014 to satisfy the REIT distribution requirement with respect to 2013. Accordingly, BRE has not accrued any taxes or related interest for financial reporting purposes with respect to 2013. To the extent the distributions BRE makes are not sufficient to satisfy the REIT distribution requirement for 2013 and to avoid the payment of income taxes, BRE or its successor in the Merger intends to make additional distributions to its shareholders in order to maintain BRE’s REIT status for 2013 and to avoid the payment of income taxes. 

Fair Value of Assets

Under FASB guidance, 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.

63

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 classified as 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.

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 and are therefore classified as Level 1. The Company’s deferred compensation plan investments are recorded in Other assets and totaled and $4,958,000 and $4,111,000 at December 31, 2013 and at December 31, 2012.

There were no transfers of assets measured at fair value between Level 1 and Level 2 of the fair value hierarchy for the twelve months ended December 31, 2013.

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 the Company’s 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 ceases once an asset is classified as held for sale.

During 2012, a $15,000,000 non cash impairment charge was recorded in Other expenses in conjunction with the decision to sell land in Anaheim, California that the Company previously intended to develop. The Company’s real estate asset impairment charge (level 3) was the result of an analysis of the land’s fair value (based on market assumptions and comparable sales data) compared to its current capitalized carrying value. As of December 31, 2013, the capitalized carrying value of the land approximates fair value, net of the $15,000,000 impairment charge. The land was classified as Real estate held for sale, net in the consolidated balance sheets at December 31, 2013 and December 31, 2012 and is presented at fair value.

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 (level 2). The fair value of the Company’s mortgage loans payable and unsecured senior notes was approximately $790,615,000 (compared to a net carrying value of $711,428,000) and $1,019,092,000 (compared to a net carrying value of $950,000,000) at December 31, 2013.

Stock-based Compensation

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, 2013, 2012 and 2011 includes all awards outstanding that vested during the period.

64

Stock-based compensation cost is measured at the grant date fair value and is recognized, net of estimated forfeitures, as expense 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 service 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, 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 its 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 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 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 its 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 communities, which comprised 99% of BRE’s consolidated assets at December 31, 2013 and December 31, 2012 and approximately 99% of its total consolidated revenues for the three years in the period ended December 31, 2013, represents an operating segment. The Company aggregates its operating segments into five reportable segments based upon geographical region for same-store communities, with non same-store communities aggregated into one reportable segment.

“Same-store” communities are defined as communities that have been completed, stabilized and owned by the Company for two comparable calendar year periods. The Company defines “stabilized” as communities that have reached a physical occupancy of at least 93%. Physical occupancy is calculated by dividing the total occupied homes by the total homes in stabilized communities in the portfolio.

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, 2013, 2012 or 2011.

65

Recently Adopted Accounting Pronouncements

In February 2013, the FASB issued an accounting standards update requiring enhanced disclosures about items reclassified out of accumulated other comprehensive income (AOCI) and changes in AOCI balances that should be applied prospectively for public entities with interim and annual periods beginning after December 15, 2012. For items reclassified to net income in their entirety, the Accounting Standards Update (ASU) requires information about the effect of significant reclassification items on line items of net income by component of other comprehensive income (OCI). For other AOCI reclassification items not required to be reclassified directly to net income in their entirety, companies must cross-reference to the note where additional details about the effects of the reclassification are disclosed. The update also requires disclosure of more information about changes in AOCI balances, requiring companies to present current-period reclassifications out of AOCI and other amounts of current-period OCI separately for each component of OCI on the face of the financial statements or in the notes. The adoption of this guidance had no impact on the Company’s financial statements during the twelve months ended December 31, 2013.

3. Real Estate Portfolio

On September 30, 2013, the Company acquired one wholly owned community located in Hollywood, California with 270 homes for an aggregate investment of $120,515,000. As part of the community acquisition, the Company allocated to in-place leases approximately $3,234,000 of the purchase price. This amount is amortized over the average remaining lease terms.

During 2013 the Company sold three communities in Southern California: Summerwind Townhomes, with 200 homes; Mission Grove Park with 432 homes; and Villa Santana, with 240 homes. The net proceeds from the three sales were $162,357,000 resulting in a net gain of $57,324,000.

During 2013, the Company completed the construction of one development community, Aviara, with 166 homes in Mercer Island, Washington. The aggregate investment in the community totaled $42,900,000.

During 2012, BRE acquired a parcel of land for future development in Redwood City, California for a purchase price of $11,400,000. BRE also acquired a parcel of land for future development in Pleasanton, California for a purchase price of $11,100,000.

During 2012, BRE sold three communities in San Diego, California: Countryside Village, with 96 homes, located in El Cajon submarket; Terra Nova Villas, with 233 homes, located in Chula Vista; and Canyon Villa, with 183 homes, located in Chula Vista. The net proceeds from the three sales were $88,236,000 resulting in a net gain of $62,136,000.

During 2012, BRE completed construction of one development community, Lawrence Station, with 336 homes in Sunnyvale, California. The aggregate investment in the community totaled $104,400,000.

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

	As of December 31
	2013			2012
Land	$	668,431,000		$	661,076,000
Buildings and improvements		3,249,910,000			3,061,762,000
Subtotal		3,918,341,000			3,722,838,000
Accumulated depreciation		(884,472,000	)		(811,187,000	)
Total	$	3,033,869,000		$	2,911,651,000

BRE’s net carrying value of its assets exceeded the federal income tax basis by approximately $238,000,000 (unaudited) at December 31, 2013, 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:

66

	As of December 31
	2013			2012
Opening balance	$	302,263,000		$	246,347,000
Costs incurred to projects under construction		210,795,000			160,344,000
Transfers of construction in progress to direct investments in real estate - investment in rental communities		(141,703,000	)		(104,428,000	)
Transfers from land under development to direct investments in real estate- construction in progress		71,576,000			-
Ending balance	$	442,931,000		$	302,263,000

At December 31, 2013, BRE had an estimated cost of $181,000,000 (unaudited) to complete existing construction in progress, with funding estimated through the fourth quarter of 2014.

4. Equity Investments in Real Estate Joint Ventures

During 2013, six joint venture interests were sold to BRE’s joint venture partner. The sale consisted of four joint venture communities located in Denver, Colorado and two joint venture communities located in Phoenix, Arizona totaling 2,180 homes. BRE had a 15% equity ownership in all six joint venture interests sold. The net proceeds from the sales were $47,408,000 and a net gain of $15,025,000. BRE also sold one joint venture community located in Phoenix, Arizona with 432 homes to an unrelated third party. BRE had a 15% interest in the joint venture and the sale of the community resulted in net proceeds of $6,000,000 and a net gain on sale of $3,608,000.

During 2012, three joint venture assets were sold: Calavera Point, a 276 home community located in Westminister, Colorado; Pinnacle at the Creek, a 216 home community located in Centennial, Colorado; and Pinnacle at Galleria, a 236 home community, located in Roseville, California. BRE had a 15% equity ownership in the sold communities in Colorado and a 35% equity ownership in the community sold in California. The sale of the three joint venture communities resulted in net proceeds of $26,919,000 and a net gain on sale of $6,025,000.

As of December 31, 2013, BRE had a 35% interest in one joint venture, which is managed by the Company.

BRE Investment in Joint Ventures

	December 31,				December 31,
	Communities		2013		Communities		2012
35% Equity interest		1	$	6,363,000		1	$	6,496,000
15% Equity interest		-		-		7		34,257,000
Total JV investment		1	$	6,363,000		8	$	40,753,000

The Company has an ownership interest of 35% in one single multifamily community that was developed by BRE and completed in 2001. BRE’s investment in this joint venture totaled $6,363,000 and $6,496,000 as of December 31, 2013 and 2012, respectively, and is included within “Equity investment in real estate joint ventures” on BRE’s consolidated balance sheets

The Company’s income from unconsolidated entities totaled $625,000, $2,644,000 and $2,888,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

67

5. Other Assets

The components of Other assets are as follows in the table below. Trade receivables totaled $2,800,000 and corresponding bad debt reserve totaled $1,800,000 resulting in a net trade receivable of $1,000,000 at December 31, 2013. Trade receivables totaled $2,900,000 and corresponding bad debt reserve totaled $1,900,000 resulting in a net trade receivable of $1,000,000 at December 31, 2012.

BRE had notes receivable from third party non-controlling interest members of limited liability company subsidiaries of the Company totaling $4,751,000 at December 31, 2013 and 2012, respectively. See Note 15 for more detail.

	As of December 31,
	2013		2012
Predevelopment and escrow deposits	$	18,263,000	$	16,249,000
Deferred financing costs		11,501,000		14,654,000
Accounts and mortgages receivable, net		6,228,000		6,535,000
Prepaid insurance		5,057,000		4,896,000
Deferred compensation plan		4,958,000		4,111,000
Other		6,969,000		7,889,000
Total other assets	$	52,976,000	$	54,334,000

6. Secured Debt

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

								Interest
		As of December 31,						Rate
Fixed Rate Loan	Maturity	2013			2012			(Coupon)
Mission Grove	August 2013	$	-		$	30,113,000			5.3	%
Fountains at River Oaks	September 2019		31,953,000			32,354,000			5.7	%
Secured Facility(1)	May 2019		310,000,000			310,000,000			5.6	%
Montanosa	April 2020		59,475,000			59,475,000			5.2	%
Secured Facility(1)	September 2020		310,000,000			310,000,000			5.7	%
Total fixed rate secured mortgage loans		$	711,428,000		$	741,942,000			5.6	%
Number of communities securing mortgage loans			17			18
Net book value of investments in real estate collateralizing secured debt		$	730,313,000		$	701,638,000
Remaining terms of mortgage loans payable			1-7 years			1-8 years
Weighted average interest rate on fixed rate mortgages			5.6	%		5.6	%

⁽¹⁾ One pool with 15 communities is encumbered by the Secured Facility.

68

On May 10, 2013, the Company prepaid a single property mortgage on Mission Grove Park for $29,884,000 ninety days prior to its scheduled maturity, with no prepayment penalty.

On February 1, 2012, the Company prepaid the single property mortgage on Alessio, a 624 home community in Los Angeles, California, for $65,866,000 ninety days prior to its scheduled maturity with no prepayment penalty.

For the years ending December 31, 2013, 2012 and 2011, respectively, unencumbered real estate net operating income represented 73.9%, 72.5% and 68.6% of its total real estate net income.

7. Unsecured Senior Notes and Unsecured Line of Credit

The following table pertains to BRE’s unsecured senior notes and unsecured line of credit. Weighted average interest rate includes amortization of all loan fees as related to unsecured notes and the revolving credit facility (facility fees calculated on the capacity of the unsecured revolving credit facility).

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

		As of December 31,
	Maturity	2013			2012
2013 7.125% Senior Note	February 2013	$	-		$	40,018,000
2014 4.700% Senior Note	March 2014		50,000,000			50,000,000
2017 5.500% Senior Note	March 2017		300,000,000			300,000,000
2021 5.200% Senior Note	March 2021		300,000,000			300,000,000
2023 3.375% Senior Note	January 2023		300,000,000			300,000,000
Fixed rate unsecured notes		$	950,000,000		$	990,018,000
Unsecured revolving credit facility			98,000,000			—
Total unsecured debt		$	1,048,000,000		$	990,018,000
Weighted average interest rate on fixed rate unsecured notes			4.81	%		4.91	%
Weighted average interest rate on unsecured revolving credit facility			1.83	%		1.90	%

Fixed Rate Unsecured Notes

On February 15, 2013, the Company’s 7.130% senior notes came due and the aggregate principal balance of $40,018,000 was paid in full.

On August 13, 2012, the Company completed an offering of $300,000,000, 10.5 year senior unsecured notes. The notes will mature on January 15, 2023 and bear interest at a fixed coupon rate of 3.375%. Net proceeds from the offering, after all discounts, commissions, and issuance costs totaled approximately $295,400,000 and were used for general corporate purposes including reducing the Company’s revolving credit facility balance.

During February 2012, the Company exercised its right to redeem for cash all of the convertible senior unsecured notes outstanding, 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”).

Unsecured Line of Credit

On January 5, 2012, the Company entered into a new $750,000,000 unsecured revolving credit facility (the “Credit Agreement”). The Credit Agreement has an initial term of 39 months, terminates on April 3, 2015 and replaces its previous $750,000,000 revolving credit facility. Based on its current debt ratings, the unsecured revolving credit facility 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. Borrowings under its unsecured revolving credit facility totaled $98,000,000 at December 31, 2013 and $0 at December 31, 2012. Borrowings under the unsecured revolving credit facility are used to fund acquisition and development activities as well as for general corporate purposes. Balances on the unsecured revolving credit facility are typically reduced with available cash balances.

69

The unsecured revolving credit facility and unsecured senior note agreements contain various covenants that include, among other factors, tangible net worth and requirements to maintain certain financial ratios. BRE was in compliance with all such financial covenants throughout the years ended December 31, 2013 and 2012.

Scheduled principal payments required on the unsecured revolving credit facility, unsecured notes and mortgage loans payable for the next five years and thereafter are as follows (amounts in thousands). Weighted average rate represents the weighted average coupon interest rates of the debt securities in the year in which they become due:

					Mortgage loans payable
Year of maturity	Unsecured senior notes		Unsecured revolving credit facility		Amortization		Balloon		Total mortgage loans payable		Total debt		Weighted Avg Rate
2014	$	50,000	$	-	$	4,090	$	-	$	4,090	$	54,090		4.77	%
2015		-		98,000		8,329		-		8,329		106,329		1.70	%
2016		-		-		8,712		-		8,712		8,712		5.64	%
2017		300,000		-		8,986		-		8,986		308,986		5.50	%
2018		-		-		10,218		-		10,218		10,218		5.63	%
2019		-		-		6,515		317,975		324,490		324,490		5.59	%
2020		-		-		2,957		343,646		346,603		346,603		5.61	%
2021		300,000		-		-		-		-		300,000		5.20	%
2022		-		-		-		-		-		-		0.00	%
2023		300,000		-		-		-		-		300,000		3.38	%
	$	950,000	$	98,000	$	49,807	$	661,621	$	711,428	$	1,759,428		4.86	%

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

	Year ended December 31,
	2013			2012			2011
Total interest incurred (excluding discontinued operations)	$	90,338,000		$	88,431,000		$	87,682,000
Capitalized interest		(24,471,000	)		(21,633,000	)		(14,431,000	)
Total interest expense	$	65,867,000		$	66,798,000		$	73,251,000
Total cash paid for interest	$	90,696,000		$	86,988,000		$	90,007,000
Total cash paid for interest, net of capitalized interest	$	66,225,000		$	65,355,000		$	75,576,000

8. Accounts Payable and Accrued Expenses

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

70

	As of December 31,
	2013		2012
Accrued interest payable	$	18,031,000	$	18,389,000
Accrued development costs and real estate improvements		20,433,000		15,357,000
Retention payable		17,910,000		11,045,000
Accrued employee and non employee director wages and benefits		11,926,000		8,672,000
Security deposits		9,441,000		9,337,000
Other		14,742,000		12,989,000
Total Accounts Payable and Accrued Expenses	$	92,483,000	$	75,789,000

9. Discontinued Operations

The results of operations for communities sold during the period or designated as held for sale at the end of the period are required to be classified as discontinued operations because they were deemed a component of an entity. The community - 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, interest expense and the net gain or loss on disposal.

During 2013, the Company sold three communities in Southern California: Summerwind Townhomes, with 200 homes; Mission Grove Park with 432 homes; and Villa Santana, with 240 homes. The net proceeds from the three sales totaled $162,357,000.

During 2012, BRE sold three communities in San Diego, California: Countryside Village, with 96 homes, located in El Cajon submarket; Terra Nova Villas, with 233 homes, located in Chula Vista; and Canyon Villa, with 183 homes, located in Chula Vista. The net proceeds from the three sales were $88,236,000.

During 2011, the Company sold two communities totaling 634 homes: Galleria at Towngate, with 268 homes located in Moreno Valley, California; and Windrush Village, a 366 home property located in Colton, California; The net proceeds from sale of the two communities were $63,486,000.

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

	Years Ended December 31
	2013			2012			2011
Rental income	$	11,851,000		$	21,880,000		$	28,817,000
Real estate expenses		(4,077,000	)		(7,139,000	)		(9,177,000	)
Provision for depreciation		(2,783,000	)		(4,882,000	)		(6,801,000	)
Interest expense		(684,000	)		(1,669,000	)		(1,713,000	)
Discontinued operations, net		4,307,000			8,190,000			11,126,000
Net gain on sales of discontinued operations		57,324,000			62,136,000			14,489,000
Income from discontinued operations, net	$	61,631,000		$	70,326,000		$	25,615,000

71

10. Preferred Stock and Equity

Preferred Stock

The following table presents the Company’s issued and outstanding Preferred Shares as of December 31, 2013 and 2012:

	Optional redemption date	Annual dividend rate per share		Outstanding at December 31, 2013		Outstanding at December 31, 2012
Preferred Stock, nonvoting, $0.01 par value; 20,000,000 shares authorized: 6.75% Series D cumulative redeemable, liquidation preference $25.00 per share, 2,159,715 and 2,159,715 shares outstanding at December 31, 2013 and 2012	December 2009	$	1.6875	$	53,992,875	$	53,992,875

On or after the optional 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. 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 February 24, 2010, the Company entered into Equity Distribution Agreements (EDAs) with each of Deutsche Bank Securities Inc., J.P.Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, UBS Securities LLC, and Wells Fargo Securities, LLC (collectively, the “sales agents”) under which the Company may issue and sell from time to time through or to its sales agents shares of its common stock having an aggregate offering price of up to $250,000,000.

During 2012, 815,045 shares were issued under the EDAs, with an average share price of $49.09 for total gross proceeds of approximately $40,000,000 and total commission paid to the sales agents of approximately $800,000. During 2011, 1,291,537 shares were issued under the EDAs, with an average share price of $47.55 for total gross proceeds of approximately $61,414,000 and total commission paid to the sales agents of approximately $1,228,280. As of December 31, 2013, the remaining capacity under the EDAs totals $123,600,000. The Company intends to use any net proceeds from the sale of its shares under the EDAs for general corporate purposes, which may include reducing borrowings under its unsecured revolving credit facility, the repayment of other indebtedness, the redemption or other repurchase of outstanding debt or equity securities, funding for development activities and financing for acquisitions.

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 number of shares authorized under the DRIP is 1,500,000. From inception through December 31, 2013, 443,654 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 six 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 its common stock reserved for issuance from time to time in connection with the Amended and Restated 1999 BRE Stock Incentive Plan.

72

Restricted Stock and Options Awards

Stock based compensation awards under BRE’s employee and non-employee director plans vest over periods ranging from one to six years. At December 31, 2013, compensation cost related to non-vested awards not yet recognized totaled approximately $14,700,000 and the weighted average period over which it is expected to be recognized is 3.0 years. During the twelve months ended December 31, 2013, 217,869 restricted shares and zero stock options were awarded. Total stock-based compensation in general and administrative expenses totaled $7,474,000, $5,754,000, and $4,697,000 during the years ending 2013, 2012, and 2011, respectively. Stock-based compensation cost capitalized are recorded in Construction in progress on the Consolidated balance sheets and totaled $1,714,000, $2,155,000 and $2,352,000 for the years ended December 31, 2013, 2012 and 2011, respectively. The fair value of restricted shares awarded and options awarded totaled $12,088,000, $9,057,000, and $7,300,000 in 2013, 2012, and 2011, respectively.

Employee Plan

The intrinsic value of stock options exercised and restricted shares vested totaled $12,963,000, $9,147,000, and $7,400,000 during 2013, 2012 and 2011, respectively. The aggregate intrinsic value of options currently exercisable at December 31, 2013, 2012, and 2011 was $1,742,000, $2,973,000, and $4,111,000, respectively.

Summary of stock options outstanding as follows:

	Year ended December 31,
	2013					2012					2011
				Weighted					Weighted					Weighted
	Shares			average		Shares			average		Shares			average
	under			exercise		under			exercise		under			exercise
	option			price		option			price		option			price
Beginning Balance		342,178		$	39.12		347,428		$	34.35		307,906		$	31.86
Granted		—		$	—		78,446		$	51.52		66,996		$	44.12
Exercised		(115,124	)	$	32.28		(83,696	)	$	30.64		(26,584	)	$	30.29
Cancelled		—			—		—			—		(890	)	$	28.98
Ending Balance		227,054		$	42.70		342,178		$	39.12		347,428		$	34.35
Exercisable		114,319		$	39.47		172,681		$	33.61		219,224		$	31.73
Weighted average estimated fair value of options granted		—			—		78,446		$	14.43		66,996		$	12.17

At December 31, 2013, the exercise price of shares under option ranged from $33.06 to $51.52, with a weighted average exercise price of $42.70. Expiration dates range from 2020 through 2022 and the weighted average remaining contractual life of these options is 7.1 years. Exercise prices on stock options exercised during 2013 ranged from $29.79 to $32.45.

No options were granted during 2013.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,
	2013		2012
Risk-free interest rate		-		1.74	%
Dividend yield		-		3.14	%
Volatility		-		36.09	%
Weighted average option life		-		8.5 years

73

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, 2013 are as follows:

				Weighted		Weighted average
Options		Options		average		contractual terms
outstanding		vested		exercise price		(in years)
	81,612		61,209	$	33.06		6.08
	66,996		33,498	$	44.12		7.08
	78,446		19,612	$	51.52		8.07
	227,054		114,319	$	42.70		7.06

As of December 31, 2013, the remaining unvested restricted share awards outstanding have a weighted average contractual life of 3.1 years. A summary of the remaining restricted stock awards under the employee plan that remain outstanding at the year ended as follows:

				Weighted
				Average					Weighted					Weighted
				Grant Date					Average					Average
	2013			Fair Value		2012			Price		2011			Price
Beginning Balance		432,181		$	39.49		458,035		$	35.06		507,992		$	34.92
Shares awarded		199,949		$	55.97		128,295		$	54.79		133,509		$	47.92
Shares vested		(182,125	)	$	51.84		(144,478	)	$	51.09		(152,402	)	$	45.50
Shares forfeited		(5,936	)	$	47.59		(9,671	)	$	38.38		(31,064	)	$	36.86
Ending Balance		444,069		$	47.95		432,181		$	39.49		458,035		$	35.06

The fair value for 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,
	2013			2012			2011
Grant date share price	$	51.24		$	51.52		$	44.12
Risk free rate		0.63	%		1.10	%		1.48	%
Volatilities		14%-53%			43%-65%			50%-63%

74

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. Awards with market conditions have the potential to payout 0-200% of the target number of shares awarded. The simulation model can produce a fair value of an award that is greater than the share price on the grant date.

The following is a summary of the Company’s restricted shares granted under the employee plan for the years ended December 31, 2013, 2012 and 2011, respectively:

			Weighted				Weighted				Weighted
			Average				Average				Average
			Grant Date				Grant Date				Grant Date
Restricted Stock - Awards	2013		Fair Value		2012		Fair Value		2011		Fair Value
Executives:
Service Based Shares Awarded		24,159	$	51.24		46,205	$	51.52		46,531	$	44.12
Performance Based Awards		60,400	$	51.24		25,413	$	61.93		21,229	$	56.70
Awards with Market Conditions		72,482	$	63.84		20,792	$	57.08		17,369	$	54.25
Employee:
Service Based Shares Awarded		37,919	$	51.24		31,555	$	51.52		43,422	$	44.12
Awards with Market Conditions		4,989	$	57.95		4,330	$	60.58		4,958	$	57.12
Total -Restricted Stock Awards		199,949	$	55.97		128,295	$	54.79		133,509	$	47.92

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 2013, 2012, and 2011, 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, 2013, the exercise prices of shares under option ranged between $34.45 and $63.22 with expiration dates from 2014 to 2017. The weighted average remaining contractual life of these options is approximately 2.09 years. Exercise prices on stock options exercised during 2013 ranged from $29.85 to $32.41. The intrinsic value of options exercised and restricted shares vested totaled $1,496,000, $4,013,000 and $5,091,000 for the years ended December 31, 2013, 2012 and 2011, respectively. The aggregate intrinsic value of options currently exercisable at December 31, 2013, 2012 and 2011 was $811,000, $837,000 and $4,523,000, respectively.

75

Changes in options outstanding were as follows:

	Year ended December 31,
	2013					2012					2011
				Weighted					Weighted					Weighted
	Shares			average		Shares			average		Shares			average
	under			exercise		under			exercise		under			exercise
	option			price		option			price		option			price
Beginning Balance		164,953		$	45.76		346,965		$	38.86		569,855		$	36.11
Granted		—			—		—			—		—			—
Exercised		(29,578	)	$	32.21		(182,012	)	$	32.61		(222,890	)	$	31.83
Cancelled		—			—		—			—		—			—
Ending Balance		135,375		$	48.72		164,953		$	45.76		346,965		$	38.86
Exercisable		135,375		$	48.72		164,953		$	45.76		346,965		$	38.86

A summary of the remaining options outstanding under the non-employee director plan as of December 31, 2013 are as follows:

						Weighted		Weighted average
Options		Options		Range -		average		contractual terms
outstanding		vested		Exercise Price		exercise price		(in years)
	53,177		53,177	$	34.00-39.99	$	36.75		0.98
	50,359		50,359	$	51.00-57.99	$	52.20		2.42
	31,839		31,839	$	63.22	$	63.22		3.42
	135,375		135,375	$	34.45-63.22	$	48.72		2.09

As of December 31, 2013, the remaining unvested restricted shares 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 for the years ended as follows:

				Weighted
				Average					Weighted					Weighted
				Grant Date					Average					Average
	2013			Fair Value		2012			Price		2011			Price
Beginning Balance		18,195		$	49.23		17,557		$	51.02		22,649		$	39.55
Shares awarded		17,920		$	49.99		18,195		$	49.23		17,557		$	51.02
Shares vested		(18,195	)	$	49.23		(17,557	)	$	51.02		(22,649	)	$	39.55
Shares forfeited		-		$	-		-			-		-			-
Ending Balance		17,920		$	49.99		18,195		$	49.23		17,557		$	51.02

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, 2013 and 2012 and approximately 99% of its total consolidated revenues for the three years ended December 31, 2013, 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.

76

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. The Company evaluates performance and allocates resources primarily based on the NOI of an individual multifamily community. The Company defines 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 two comparable calendar year 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, 2013, 2012, and 2011, and reconciles NOI to income from continuing operations per the consolidated statement of operations:

	For the years ended December 31,
(amounts in thousands)	2013			2012			2011
Revenues (1):
Southern California (2)	$	214,996		$	208,455		$	199,958
San Francisco Bay Area		102,320			94,566			82,208
Seattle		57,591			54,163			49,873
Non core markets (3)		15,798			15,549			15,081
Same-store revenues		390,705			372,733			347,120
Non same-store communities(4)		13,323			2,824			1,683
Total community revenues	$	404,028		$	375,557		$	348,803
Net operating income:
Southern California (2)	$	149,485		$	143,139		$	136,474
San Francisco Bay Area		75,231			67,903			58,050
Seattle		37,800			35,869			32,161
Non core markets (3)		9,927			9,812			9,621
Same-store net operating income		272,443			256,723			236,306
Non same-store communities(4)		7,281			691			-
Total community net operating income from continuing operations	$	279,724		$	257,414		$	236,306
Other income, net of legal settlement proceeds		864			2,530			2,536
Income from unconsolidated entities		625			2,644			2,888
Net operating income from discontinued operations		7,774			14,741			19,640
Net operating income	$	288,987		$	277,329		$	261,370
Interest, including discontinued operations		(66,551	)		(68,467	)		(74,964	)
Depreciation, including discontinued operations		(108,154	)		(101,618	)		(103,940	)
Net gain on sales of discontinued operations		57,324			62,136			14,489
Net gain on sales of unconsolidated entities		18,633			6,025			4,270
General and Administrative expense		(23,037	)		(22,848	)		(21,768	)
Non cash impairment charge		-			(15,000	)		-
Merger costs		(3,401	)		-			-
Legal settlement proceeds		19,750			-			-
Acquisition costs		(585	)		-			(402	)
Dividends attributable to preferred stock		(3,645	)		(3,645	)		(7,655	)
Redemption related preferred stock issuance cost		-			-			(3,771	)
Redeemable and other noncontrolling interests in income		(190	)		(413	)		(1,168	)
Net income available to common shareholders	$	179,131		$	133,499		$	66,461

77

The following table details the assets of the Company’s reportable segments for the years ended December 31, 2013 and 2012:

	As of December 31, 2013							As of December 31, 2012 (5)
(amounts in thousands)	Communities		Homes		Total Asset Cost			Total Asset Cost
Assets
Southern California(2)		39		10,997	$	2,035,741		$	2,034,627
San Francisco Bay Area		15		4,197		835,823			612,465
Seattle		13		3,456		533,059			522,444
Non core markets(3)		3		1,302		132,416			130,893
Total Same-store communities		70		19,952		3,537,039			3,300,429
Non Same-store communities(4)		3		772		381,302			422,409
Total investment in rental communities		73		20,724	$	3,918,341		$	3,722,838
Accumulated depreciation						(884,472	)		(811,187	)
Construction in progress						442,931			302,263
Equity investment in real estate joint ventures						6,363			40,753
Real estate held for sale, net						23,481			23,065
Land under development						40,794			104,675
Cash						8,432			62,241
Other assets						52,976			54,334
Total  assets					$	3,608,846		$	3,498,982

⁽¹⁾ All revenues are from external customers and no single tenant or related group of tenants contributed 10% or more of the Company’s total revenue during the years ended December 31, 2013 and 2012.

⁽²⁾ Consists of 11 communities in San Diego, 5 in Inland Empire, 13 in Los Angeles, and 12 in Orange County.

⁽³⁾ Consists of one same-store community in Sacramento, California and two same-store communities in Phoenix, Arizona.

⁽⁴⁾ 2013 Non same-store communities’ totals includes one community fully delivered in 2012, one community fully delivered in the second quarter of 2013, one community acquired during the third quarter of 2013 and commercial communities that will be later developed as multi-family.

⁽⁵⁾ Data represents balances for same-store pools established in the year ended December 31, 2012.

78

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 December 31,
	2013			2012			2011
Numerator:
Income from continued operations	$	121,335		$	67,231		$	53,440
Income from discontinued operations		61,631			70,326			25,615
Preferred stock dividend		(3,645	)		(3,645	)		(7,655	)
Redemption related preferred stock issuance cost		-			-			(3,771	)
Redeemable noncontrolling interest in income		(190	)		(413	)		(1,168	)
Net income available to common shareholders		179,131			133,499			66,461
Participating securities		(399	)		(384	)		-
Net income available to common shareholders net of participating securities	$	178,732		$	133,115		$	66,461
Denominator:
Denominator for basic earnings per share -weighted average shares		77,111			76,567			71,220
Dilutive effect of stock based awards		229			353			450
Denominator for diluted earnings per share adjusted for weighted average shares and assumed conversion		77,340			76,920			71,670
Basic earnings per share from continuing operations	$	1.52		$	0.82		$	0.57
Basic earnings per share from discontinuing operations		0.80			0.92			0.36
Basic earnings per share	$	2.32		$	1.74		$	0.93
Diluted earnings per share from continuing operations	$	1.52		$	0.82		$	0.57
Diluted earnings per share from discontinuing operations		0.80			0.92			0.36
Diluted earnings per share	$	2.32		$	1.74		$	0.93

Under FASB guidance, the effects of anti-dilutive units and shares under options have been excluded from the diluted earnings per share calculation. Weighted average units totaled zero, 18,000, and 509,000 for the years ended December 31, 2013, 2012 and 2011, respectively. The anti-dilutive shares under option total 32,326, 160,644 and 82,198 for the years ended December 31, 2013, 2012 and 2011, 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 2013, 2012 and 2011, BRE contributed up to 3% of the employee’s contributions up to $7,650, $7,500 and $7,350 for the years ended December 31, 2013, 2012, and 2011, respectively, per employee. The aggregate amounts contributed and recognized as expense by BRE were $565,000, $528,000 and $443,000 for the years ended December 31, 2013, 2012 and 2011, 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 $4,751,000 at December 31, 2013 and 2012, respectively. The amounts are recorded in Other assets on the consolidated balance sheets. These notes mature in 2018 and have a weighted average interest rate of 4%. Interest income from the notes totaled $190,000, $319,000 and $366,000 for the years ended December 31, 2013, 2012 and 2011, respectively. The Company has recourse to take over the ownership in the underlying assets from the third party non-controlling 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.

79

16. Commitments

During the years ended December 31, 2013, 2012 and 2011, total operating office lease payments incurred including real estate taxes, insurance, repairs and utilities, aggregated $1,349,000, $1,476,000, and $1,499,000, respectively.

The minimum future basic aggregate rental commitment under the Company’s operating leases (including both office and ground leases) is as follows:

2014	$	1,829,000
2015		1,786,000
2016		867,000
2017		747,000
2018		691,000
Thereafter		8,986,000
Total	$	14,906,000

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 Aviara community on Mercer Island 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, 2013 are as follows:

	Lease Terms
Lease Location	Start Date	Termination date	BRE Options
Irvine, CA (office lease)	12/1/2005	3/31/2015	N/A
San Francisco, CA (office lease)	8/1/2005	2/1/2016	Two 5 year extensions
Phoenix, AZ (office lease)	3/12/2012	7/1/2017
Seattle, WA (office lease)	6/1/2012	11/1/2017
Mercer Island, WA (ground lease)	10/7/2010	10/7/2070	Two 15 year extensions, and a 9 year extension

17. Legal Settlements

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, 2013, there were no pending legal proceeds to which the Company is a party or of which any of its communities 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.

80

Avenue 64 Legal Settlement Proceeds

On January 1, 2008, the Company fully delivered all 224 units of the development community Avenue 64 located in Emeryville, California. During 2011, the Company determined there was damage caused by construction defects that required extensive replacement work. On December 27, 2011, BRE filed suit in the Alameda County Superior Court against the general contractor of the development to protect against statutes of limitations. In 2012, the Company conducted testing to determine the extent of the damage. Based upon the testing, the Company discovered that due to water intrusion issues as a result of faulty workmanship, each building at the community had been compromised. As a result, during 2013, the size and scope of the lawsuit was expanded.

In 2013, the Company reached a settlement in connection with the Avenue 64 apartment community. Pursuant to the terms of the settlement, the Company received an aggregate of $19,750,000 from the general contractor. All settlement funds were received by the Company in the fourth quarter of 2013 and the amount was recorded as Other income for the fourth quarter of 2013.

Legal and consulting charges recognized during 2013, 2012 and 2011 totaled $320,000, $187,000 and $54,000, respectively, and are reported as General and administrative on the Consolidated Statement of Income. The charges reported include legal and consulting fees incurred during destructive testing to determine the extent of the damage and required reconstruction.

Under the provisions of ASC 360, BRE has performed an impairment analysis on Avenue 64 using undiscounted cash flows, which reflect the anticipated decreased net operating income during reconstruction. No impairment charge was deemed necessary based on this analysis. The net book value of the components of the buildings that are damaged and being replaced approximate $13,900,000 and are being depreciated over an 18-month expected reconstruction period. Additional depreciation recognized during 2013 and 2012 totaled approximately $1,475,000 and $1,105,000, respectively. During reconstruction, costs that extend the useful life of the asset, increase its value or enhance safety of the community will be capitalized. All other costs, including legal and consulting, will be expensed as incurred.

Litigation Relating to the Merger Transactions with Essex

Since the announcement of the Merger Agreement on December 19, 2013, three putative class action and shareholder derivative actions have been filed on behalf of alleged shareholders of the Company and/or the Company itself in the Circuit Court for Baltimore City, Maryland, under the following captions: Sutton v. BRE Properties, Inc., et al., No. 24-C-13-008425, filed December 23, 2013; Applegate v. BRE Properties, Inc., et al., No. 24-C-14-00002, filed December 30, 2013; and Lee v. BRE Properties, Inc., et al., No. 24-C-14-00046, filed January 3, 2014.

All of these complaints name as defendants the Company, the Company’s Board of Directors, Essex (as defined in Note 18), and Merger Sub (as defined in Note 18), and allege that the Company’s Board of Directors breached its fiduciary duties to the Company’s shareholders and/or to the Company itself, and that the Merger involves an unfair price, an inadequate sales process, and unreasonable deal protection devices that purportedly preclude competing offers. The complaints further allege that Essex, Merger Sub, and, in some cases, the Company aided and abetted those alleged breaches of duty. The complaints seek injunctive relief, including enjoining or rescinding the Merger, and an award of other unspecified attorneys’ and other fees and costs, in addition to other relief. On February 7, 2014, Plaintiffs filed identical, amended complaints in the three pending actions. The amended complaints add allegations that disclosures regarding the proposed merger in the joint proxy statement/prospectus filed with the SEC on January 29, 2014 are inadequate.

18. Proposed Merger with Essex Property Trust, Inc.

On December 19, 2013, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Essex Property Trust, Inc., a Maryland corporation (“Essex”), and Bronco Acquisition Sub, Inc., a Delaware corporation and wholly owned subsidiary of Essex (“Merger Sub”). On February 5, 2014, Merger Sub changed its name to BEX Portfolio, Inc. The Merger Agreement provides for the merger of the Company with and into Merger Sub (the “Merger”), with Merger Sub surviving as a wholly owned subsidiary of Essex. The Board of Directors of the Company has unanimously approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement.

81

Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each outstanding share of common stock, par value $0.01 per share, of the Company (the “Company Common Stock”), will be converted into the right to receive (i) 0.2971 shares of common stock, par value $0.0001 per share, of Essex (“Essex Common Stock”) and (ii) $12.33 in cash, without interest, each subject to certain adjustments provided for in the Merger Agreement and subject to any applicable withholding tax (collectively, the “Merger Consideration”).

Under the Merger Agreement, at the Effective Time each BRE stock option that is outstanding and unexercised immediately prior to the Effective Time, whether or not then vested or exercisable, will be assumed by Essex and converted into a stock option to acquire the number of whole shares of Essex Common Stock equal to the product of (i) the number of shares of Company Common Stock subject to the BRE stock option and (ii) the sum of 0.2971 and the quotient obtained by dividing (x) the per share cash consideration portion of the Merger Consideration by (y) the volume weighted average of Essex Common Stock over a ten-day trading period starting with the opening of trading on the first trading day to the closing of the second to last trading day prior to the closing date of the transactions contemplated by the Merger Agreement (such sum, the “Stock Award Exchange Ratio”). The exercise price per share of Essex Common Stock subject to each such assumed option will be equal to the quotient obtained by dividing (a) the exercise price per share of Company Common Stock of such BRE stock option by (b) the Stock Award Exchange Ratio. Except as described above, each such assumed stock option will continue to have, and will be subject to, the same terms and conditions as applied to the BRE stock option immediately prior to the Effective Time (but taking into account any changes provided for in the applicable Company Equity Plan (as defined in the Merger Agreement), in any award agreement, or in such BRE stock option by reason of the Merger or the Merger Agreement).

Additionally, at the Effective Time, each outstanding and unvested share of BRE restricted stock (including any associated right to the issuance of additional shares of Company Common Stock upon the achievement of BRE performance goals) will be assumed by Essex and will be converted into an award of Essex restricted stock for that number of shares of Essex Common Stock equal to product of (i) the number of shares of Company Common Stock underlying the BRE restricted stock award, and (ii) the Stock Award Exchange Ratio. To the extent any such BRE restricted stock is subject to performance vesting and, following the Effective Time, the performance metrics applicable to such BRE restricted stock otherwise cease to be measurable on substantially similar terms as immediately prior to the Effective Time, then the Essex restricted stock will vest based on target performance at the time and, subject to any applicable payment conditions, prescribed by the terms in effect for such BRE restricted stock immediately prior to the Effective Time. Except as described above, each such assumed award of restricted stock will continue to have, and will be subject to, the same terms and conditions as applied to the BRE restricted stock immediately prior to the Effective Time (but taking into account any changes provided for in the applicable Company Equity Plan or in any award agreement by reason of the Merger or the Merger Agreement).

The Company and Essex have made certain customary representations and warranties to each other in the Merger Agreement. The Company has agreed, among other things, not to solicit, initiate, knowingly encourage or facilitate any inquiry, discussion, offer or request from third parties regarding other proposals to acquire the Company and not to engage in any discussions or negotiations regarding any such proposal, or furnish to any third party non-public information regarding the Company. The Company has also agreed to certain other restrictions on its ability to respond to any such proposals. The Merger Agreement also includes certain termination rights for both the Company and Essex and provides that, in connection with the termination of the Merger Agreement, under specified circumstances, (i) the Company may be required to pay to Essex a termination fee of $170,000,000 and/or reimburse Essex’s transaction expenses in an amount equal to $10,000,000 and (ii) Essex may be required to reimburse the Company’s transaction expenses in an amount equal to $10,000,000.

The completion of the Merger is subject to various conditions, including, among other things, the approval by the Company’s shareholders of the Merger and the other transactions contemplated by the Merger Agreement, the approval by Essex’s shareholders of the issuance of Essex Common Stock in connection with the Merger and certain consents having been obtained. Essex and the Company filed preliminary joint proxy materials (Form S-4) with the Securities and Exchange Commission on January 29, 2014. Complete information on the Merger, including the Merger background, reasons for the Merger, who may vote, how to vote and the time and place of the Company shareholder meeting are included in the definitive proxy statement filed on February 14, 2014. As of December 31, 2013, the Company has incurred $3,401,000 for legal, consulting and other expenses related to the Merger. If the Merger process proceeds without delay, the Company currently expects the transaction to close by the second quarter of 2014.

82

The Company has agreed to certain restrictions on it and its subsidiaries until the earlier of the effective time of the Merger and the valid termination of the Merger Agreement. In general, except with Essex’s prior written approval or as otherwise expressly required or permitted by the Merger Agreement or required by law, the Company has agreed that it will, and will cause each of its subsidiaries to, conduct its business in all material respects in the ordinary course and in a manner consistent with past practice, and use its commercially reasonable efforts to (i) maintain its material assets and properties in their current condition (normal wear and tear excepted), (ii) preserve intact in all material respects its current business organization, goodwill, ongoing businesses and significant relationships with third parties, (iii) keep available the services of its present officers provided it does not require additional compensation, (iv) maintain all of the Company’s insurance policies, and (v) maintain the status of Company as a REIT. Without limiting the foregoing, the Company has also agreed that it will not, and it will not cause or permit any of its subsidiaries to (subject to certain exceptions), among other things:

· amend or propose to amend its organizational documents;

· split, combine, subdivide or reclassify any shares of stock of the Company or any of its subsidiaries;

· declare, set aside or pay any dividends on or make any other distributions with respect to shares of capital stock or other equity securities or ownership interests in the Company or any of its subsidiaries;

· redeem, purchase or otherwise acquire any shares of the Company’s capital stock or other equity interests of the Company or any of its subsidiaries;

· acquire real property, personal property, business organizations or any division or material amount of assets thereof;

· sell, pledge, assign, transfer, dispose of or encumber any property or assets;

· incur, create, assume, refinance, replace or prepay any indebtedness for borrowed money or issue or amend the terms of any debt securities of the Company or any of its subsidiaries, or assume, guarantee or endorse, or otherwise become responsible (whether directly, contingently or otherwise) for the indebtedness of any other person;

· make any loans, advances or capital contributions to, or investments in, any other person or entity (including to any of its officers, trustees, affiliates, agents or consultants), make any change in its existing borrowing or lending arrangements for or on behalf of such persons or entities, or enter into any “keep well” or similar agreement to maintain the financial condition of another entity;

· enter into, renew, modify, amend or terminate, or waive, release, compromise or assign any rights or claims under, any material contract;

· enter into, modify or terminate any ground lease or office lease;

· make any material tax election, enter into any material closing agreement with a tax authority, file any amended tax return or change any method of accounting for tax purposes or annual tax accounting period;

· take any action that could, or fail to take any action, the failure of which could, reasonably be expected to cause the Company to fail to qualify as a REIT;

· incur any capital expenditures or any obligations or liabilities in excess of $500,000 individually, or $1,000,000 in the aggregate;

· increase the salary or bonus opportunity of any officers or directors, grant any officer or director any increase in severance or termination pay, or hire any officer with a title of vice president or higher;

· enter into any agreement or arrangement that materially restricts the Company, or, after the closing of the Merger, Essex or its subsidiaries or any successor thereto from engaging or competing in any line of business in which the Company is currently engaged or in any geographic area material to the business or operations of Essex;

· change any of the accounting methods used by the Company or its subsidiaries, except for such changes required by GAAP or applicable law;

· settle or compromise any material claim or legal proceeding where the amount paid in settlement or compromise exceeds $500,000 individually or $1,000,000 in the aggregate;

· adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization;

83

· form any new joint ventures or funds;

· undertake any development projects;

· amend or modify the compensation terms or other obligations of the Company contained in the engagement letter with the Company’s financial advisor;

· modify or amend a specific lease option agreement to which a subsidiary of the Company is a party; or

· enter into any written agreement, contract, commitment or arrangement to do any of the foregoing, or authorize in writing any of the foregoing.

However, nothing in the Merger Agreement prohibits the Company from taking any action that, in the reasonable judgment of the Company, upon advice of counsel, is reasonably necessary for the Company to maintain its qualification as a REIT under the Code for any period or portion thereof ending on or prior to the effective time of the Merger or to qualify or preserve certain tax status of the Company’s subsidiaries, including making dividend or other distribution payments to shareholders of the Company.

19. Subsequent Events

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

On January 21, 2014, the Company announced a Notice of Redemption to all holders of record of BRE outstanding 6.75% Series D Cumulative Redeemable Preferred Stock at a redemption price of $25.23438 per share. The redemption price is equal to the original issuance price of $25.00 per share, plus accrued and unpaid dividends to the redemption date. The redemption date will be February 20, 2014. In accordance with accounting guidance the initial issuance costs totaling $1,900,000 associated with this series of perpetual preferred stock will be recognized as a reduction of earnings in arriving at net income available to common shareholders. BRE will record this charge in the first quarter of 2014.

Subsequent to the year ended December 31, 2013, three operating communities, one located in Sacramento, California and two located in San Diego, California, with a combined gross carrying value of $90,800,000 and totaling 908 homes, met the criteria for held for sale. Two of the operating communities totaling 700 homes were sold as of February 18, 2014 for net proceeds of approximately $111,000,000 and a net gain of approximately $82,000,000. The sale of the remaining operating community held for sale is expected to close in the first quarter of 2014.

20. Supplemental Financial Data (Unaudited)

Quarterly financial information follows:

	2013
	Quarter ended			Quarter ended			Quarter ended			Quarter ended
	March 30			June 30			September 30			December 31
	(amounts in thousands, except per share data)
Revenues*	$	97,192		$	99,302		$	101,970		$	105,564
Income from continuing operations		33,895			25,784			22,035			39,621
Discontinued operations		1,090			18,781			1,047			40,713
Redeemable noncontrolling interests in income		(47	)		(47	)		(48	)		(48	)
Preferred stock dividends		(911	)		(911	)		(911	)		(912	)
Net income available to common shareholders	$	34,027		$	43,607		$	22,123		$	79,374
Basic earnings per share from continuing operations	$	0.43		$	0.32		$	0.28		$	0.50
Basic earnings per share from discontinued operations	$	0.01		$	0.24		$	0.01		$	0.53
Basic earnings per share	$	0.44		$	0.56		$	0.29		$	1.03
Diluted earnings per share from continuing operations	$	0.43		$	0.32		$	0.28		$	0.50
Diluted per share from discontinued operations	$	0.01		$	0.24		$	0.01		$	0.52
Diluted earnings per share	$	0.44		$	0.56		$	0.29		$	1.02

84

	2012
	Quarter  ended			Quarter  ended			Quarter  ended			Quarter  ended
	March 30			June 30			September 30			December 31
	(amounts in thousands, except per share data)
Revenues*	$	91,246		$	92,758		$	94,927		$	96,626
Income from continuing operations		16,983			19,403			11,913			18,933
Discontinued operations		2,141			10,309			1,993			55,882
Redeemable noncontrolling interests in income		(105	)		(105	)		(105	)		(99	)
Preferred stock dividends		(911	)		(911	)		(911	)		(911	)
Net income available to common shareholders	$	18,108		$	28,696		$	12,890		$	73,805
Basic earnings per share from continuing operations	$	0.21		$	0.24		$	0.14		$	0.23
Basic earnings per share from discontinued operations		0.03			0.13			0.03			0.73
Basic earnings per share	$	0.24		$	0.37		$	0.17		$	0.96
Diluted earnings per share from continuing operations	$	0.21		$	0.24		$	0.14		$	0.23
Diluted per share from discontinued operations	$	0.03		$	0.13		$	0.03		$	0.73
Diluted earnings per share	$	0.24		$	0.37		$	0.17		$	0.96

^* Revenue totals do not include revenues from discontinued operations, other income and partnership income.

For the years ended December 31, 2013, 2012 and 2011, 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, 2013		30	%		34	%		37	%		—
December 31, 2012		39	%		45	%		16	%		—
December 31, 2011		61	%		7	%		14	%		18	%

	Ordinary income			Long term capital gain			Unrecaptured section 1250 gain			Return of capital
Cumulative Redeemable Preferred Stock (all series)
December 31, 2013		30	%		34	%		37	%		—
December 31, 2012		39	%		45	%		16	%		—
December 31, 2011		75	%		8	%		17	%		—

85

BRE PROPERTIES, INC.

SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2013

(Dollar amounts in thousands)

						Intitial Cost to Company								Gross Amount Carried at December 31, 2013
Community Name	Location	Units		Dates Acquired /Constructed		Land		Building & Improvements		Total		Costs Capitalized Subsequent to Acquisition		Land		Building & Improvements		Total		Accumulated Depreciation			Net Book Value		Encumbrances
Sharon Green**	Menlo Park,CA		296		1971/1970	$	1,250	$	5,770	$	7,020	$	15,124	$	1,250	$	20,894	$	22,144	$	(16,382	)	$	5,762	$	-
Verandas	Union City,CA		282		1993/1989		3,233		12,932		16,165		6,716		3,233		19,648		22,881		(11,413	)		11,468		-
Foster's Landing	Foster City,CA		490		1996/1987		11,742		47,846		59,588		19,435		11,742		67,281		79,023		(31,309	)		47,714		-
Crow Canyon	San Ramon,CA		400		1996/1992		8,724		34,895		43,619		11,969		8,724		46,864		55,588		(24,535	)		31,053		-
Lakeshore Landing	San Mateo,CA		308		1997/1988		8,547		34,228		42,775		10,364		8,547		44,592		53,139		(21,171	)		31,968		-
Mission Peaks	Fremont ,CA		453		1997/1995		11,747		47,082		58,829		36,148		11,747		83,230		94,977		(40,659	)		54,318		-
Deer Valley	San Rafael,CA		171		1997/1996		6,042		24,169		30,211		4,515		6,042		28,684		34,726		(13,139	)		21,587		-
City Centre	Hayward,CA		192		2000/2000		4,903		22,999		27,902		2,107		4,903		25,106		30,009		(8,903	)		21,106		-
Mission Peaks II	Fremont ,CA		336		2000/1989		12,639		50,690		63,329		9,564		12,639		60,254		72,893		(23,621	)		49,272		-
Avenue 64	Emeryville, CA		224		2007/2007		10,364		58,100		68,464		4,338		10,364		62,438		72,802		(11,988	)		60,814		-
Lawrence Station	Sunnyvale, CA		336		2012/2012		14,876		89,528		104,404		508		14,876		90,036		104,912		(2,812	)		102,100		-
Villa Granada**	Santa Clara, CA		270		2010/2010		13,052		74,600		87,652		2,162		13,052		76,762		89,814		(6,633	)		83,181		-
Museum Park	San Jose, CA		117		2010/2002		6,609		22,991		29,600		1,982		6,609		24,973		31,582		(3,134	)		28,448		-
Fountains at River Oaks***	San Jose, CA		226		2010/1990		12,394		37,906		50,300		6,318		12,394		44,224		56,618		(5,363	)		51,255		31,953
The Landing at Jack London Square	Oakland, CA		282		2011/2001		12,975		51,900		64,875		4,380		12,975		56,280		69,255		(4,752	)		64,503		-
Layfayette Highlands	Lafayette, CA		150		2011/2007/1970		9,130		38,592		47,722		2,650		9,130		41,242		50,372		(3,250	)		47,122		-
San Francisco Bay Area						$	148,227	$	654,228	$	802,455	$	138,280	$	148,227	$	792,508	$	940,735	$	(229,064	)	$	711,671	$	31,953
Montanosa***	San Diego,CA		472		1992/1990/1989	$	6,005	$	24,065	$	30,070	$	11,049	$	6,005	$	35,114	$	41,119	$	(20,645	)	$	20,474	$	59,475
Esplanade	San Diego,CA		616		1993/1985		6,350		25,421		31,771		8,650		6,350		34,071		40,421		(18,866	)		21,555		-
Lakeview Village	Spring Valley,CA		300		1996/1985		3,977		15,910		19,887		6,304		3,977		22,214		26,191		(11,131	)		15,060		-
Cambridge Park	San Diego,CA		320		1998/1998		7,628		30,521		38,149		12,136		7,627		42,658		50,285		(18,318	)		31,967		-
Carmel Landing	San Diego,CA		356		1999/1989		6,928		27,686		34,614		8,945		6,928		36,631		43,559		(16,562	)		26,997		-
Carmel Creek**	San Diego,CA		348		2000/2000		4,744		45,430		50,174		11,288		4,744		56,718		61,462		(19,554	)		41,908		-
Pinnacle at Otay Ranch I & II**	Chula Vista,CA		364		2001/2001		8,928		43,388		52,316		8,095		8,928		51,483		60,411		(17,751	)		42,660		-
Mission Trails	San Diego,CA		208		2002/1987		5,315		21,310		26,625		3,632		5,315		24,942		30,257		(8,495	)		21,762		-
Bernardo Crest	San Diego,CA		216		2002/1988		6,016		24,115		30,131		4,840		6,016		28,955		34,971		(10,526	)		24,445		-
Carmel Summit	San Diego,CA		246		2006/1989		16,025		36,611		52,636		8,904		16,025		45,515		61,540		(14,258	)		47,282		-
Allure at Scripps Ranch	San Diego,CA		194		2010/2002		11,885		34,315		46,200		2,449		11,885		36,764		48,649		(4,742	)		43,907		-
San Diego						$	83,801	$	328,772	$	412,573	$	86,292	$	83,800	$	415,065	$	498,865	$	(160,848	)	$	338,017	$	59,475
Village Green	La Habra,CA		272		1972/1971	$	372	$	2,763	$	3,135	$	4,090	$	372	$	6,853	$	7,225	$	(5,696	)	$	1,529	$	-
The Havens	Fountain Valley,CA		440		1996/1969		4,617		18,691		23,308		26,231		4,617		44,922		49,539		(16,285	)		33,254		-
Parkside Court	Santa Ana,CA		210		1997/1987		2,013		8,632		10,645		3,143		2,013		11,775		13,788		(5,676	)		8,112		-
Villa Siena	Costa Mesa,CA		272		1999/1974		4,853		19,739		24,592		11,990		4,853		31,729		36,582		(12,562	)		24,020		-
Cortesia	Rancho Santa Margarita,CA		308		2000/1999		7,740		30,982		38,722		5,620		7,740		36,602		44,342		(13,553	)		30,789		-
The Palms at Laguna Niguel**	Laguna Niguel, CA		460		2001/1988		12,572		50,308		62,880		5,886		12,572		56,194		68,766		(19,405	)		49,361		-
Pinnacle at MacArthur Place**	South Coast Metro, CA		253		2002/2002		8,155		54,257		62,412		8,602		8,155		62,859		71,014		(18,457	)		52,557		-
Pinnacle at Fullerton**	Fullerton,CA		192		2004/2002		7,087		36,869		43,956		1,927		7,087		38,796		45,883		(9,862	)		36,021		-
Pinnacle at Talega**	San Clemente,CA		362		2004/2003		17,125		48,171		65,296		5,973		17,126		54,143		71,269		(15,984	)		55,285		-
Renaissance at Uptown Orange	Orange, CA		460		2007/2007		16,603		99,175		115,778		1,894		16,603		101,069		117,672		(16,212	)		101,460		-
Park Viridian*	Anaheim, CA		320		2009/2009		9,629		79,042		88,671		1,717		9,629		80,759		90,388		(9,493	)		80,895		-
Orange County						$	90,766	$	448,629	$	539,395	$	77,073	$	90,767	$	525,701	$	616,468	$	(143,185	)	$	473,283	$	-
The Summit	Chino Hills,CA		125		1996/1989	$	1,838	$	7,354	$	9,192	$	4,190	$	1,839	$	11,543	$	13,382	$	(6,169	)	$	7,213	$	-
Emerald Pointe*,**	Diamond Bar, CA		160		2002/1989		5,052		20,248		25,300		3,254		5,052		23,502		28,554		(8,068	)		20,486		-
Enclave at Town Square	Chino, CA		124		2003/1987		2,473		10,069		12,542		2,897		2,473		12,966		15,439		(5,038	)		10,401		-
The Heights I & II	Chino Hills,CA		332		2005/2004		9,132		58,844		67,976		2,943		9,132		61,787		70,919		(14,008	)		56,911		-
Inland Empire						$	18,495	$	96,515	$	115,010	$	13,284	$	18,496	$	109,798	$	128,294	$	(33,283	)	$	95,011	$	-
Candlewood North	Northridge,CA		189		1996/1995/1964	$	2,110	$	8,477	$	10,587	$	2,909	$	2,110	$	11,386	$	13,496	$	(5,755	)	$	7,741	$	-
Pinnacle at Westridge**	Valencia,CA		234		2004/2002		11,253		31,465		42,718		4,631		11,253		36,096		47,349		(8,558	)		38,791		-
Canyon Creek	Northridge,CA		200		2003/1986		6,152		24,650		30,802		4,219		6,152		28,869		35,021		(9,403	)		25,618		-
Regency Palm Court	Los Angeles,CA		116		2004/1987		2,049		8,277		10,326		1,823		2,049		10,100		12,149		(3,409	)		8,740		-
Windsor Court	Los Angeles,CA		95		2004/1987		1,638		6,631		8,269		1,676		1,638		8,307		9,945		(2,879	)		7,066		-
Tiffany Court	Los Angeles,CA		101		2004/1987		3,033		12,211		15,244		3,112		3,033		15,323		18,356		(5,435	)		12,921		-
Alessio	Los Angeles,CA		624		2004/2001		40,560		96,565		137,125		10,774		40,560		107,339		147,899		(28,885	)		119,014		-
Catalina Gardens	Los Angeles,CA		128		2005/1987		6,400		20,309		26,709		1,829		6,400		22,138		28,538		(5,234	)		23,304		-
Bridgeport Coast**	Santa Clarita, CA		188		2006/2006		11,500		28,741		40,241		1,152		11,500		29,893		41,393		(5,863	)		35,530		-
The Stuart at Sierra Madre Villa	Pasadena, CA		188		2007/2007		7,926		55,733		63,659		1,613		7,926		57,346		65,272		(8,739	)		56,533		-
5600 Wilshire	Los Angeles,CA		284		2008/2008		32,825		100,993		133,818		1,624		32,825		102,617		135,442		(13,070	)		122,372		-
Aqua at Marina Del Rey	Marina Del Rey, CA		500		2010/2001		37,445		128,555		166,000		13,577		37,445		142,132		179,577		(14,643	)		164,934		-
The Jefferson at Hollywood	Hollywood, CA		270		2013		32,442		88,058		120,500		139		32,442		88,197		120,639		(1,171	)		119,468		-
The Vistas of West Hills**	Valencia, CA		220		2011/2009		11,295		45,182		56,477		1,251		11,244		46,433		57,677		(4,223	)		53,454		-
Los Angeles						$	206,628	$	655,847	$	862,475	$	50,329	$	206,577	$	706,176	$	912,753	$	(117,267	)	$	795,486	$	-
Selby Ranch	Sacramento,CA		400		1986/1971-1974	$	2,660	$	18,340	$	21,000	$	13,321	$	2,660	$	31,661	$	34,321	$	(20,878	)	$	13,443	$	-
Sacramento						$	2,660	$	18,340	$	21,000	$	13,321	$	2,660	$	31,661	$	34,321	$	(20,878	)	$	13,443	$	-
Pinnacle at South Mountain I  & II	Phoenix,AZ		552		1997/1996	$	11,062	$	44,257	$	55,319	$	5,380	$	11,062	$	49,637	$	60,699	$	(21,407	)	$	39,292		$
Pinnacle Towne Center	Phoenix,AZ		350		1998/1998		6,688		27,631		34,319		3,077		6,688		30,708		37,396		(12,812	)		24,584		-
Phoenix						$	17,750	$	71,888	$	89,638	$	8,457	$	17,750	$	80,345	$	98,095	$	(34,219	)	$	63,876	$	-
Parkwood at Mill Creek	Mill Creek,WA		240		1989/1989		3,947		15,811		19,758		8,448		3,947		24,259		28,206		(12,533	)		15,673
Aviara(1)	Mercer Island, WA		166		2013/2013		-		42,907		42,907		3		-		42,910		42,910		(705	)		42,205
Shadowbrook	Redmond,WA		416		1987-98/1986		4,776		17,415		22,191		7,591		4,776		25,006		29,782		(16,564	)		13,218
Citywalk	Seattle ,WA		102		1988/1988		1,123		4,276		5,399		1,606		1,123		5,882		7,005		(3,727	)		3,278
Bothell Ridge	Bothell,WA		214		1996/1988		2,031		8,223		10,254		3,319		2,031		11,542		13,573		(5,775	)		7,798
Ballinger Commons	Shoreline,WA		485		1996/1989		5,824		23,519		29,343		6,764		5,824		30,283		36,107		(15,186	)		20,921
Park Highland	Bellevue ,WA		250		1998/1993		5,602		22,483		28,085		4,191		5,602		26,674		32,276		(11,870	)		20,406
BellCentre**	Bellevue ,WA		248		2000/2000		11,163		32,821		43,984		6,846		11,163		39,667		50,830		(12,439	)		38,391
Pinnacle Sonata	Bothell,WA		268		2002/2000		8,576		39,067		47,643		1,862		8,576		40,929		49,505		(13,047	)		36,458
Pinnacle at Lake Washington**	Renton, WA		180		2001/2001		4,878		26,184		31,062		2,780		4,878		28,964		33,842		(9,228	)		24,614
The Audrey at Belltown**	Seattle,WA		137		2001/1992		4,279		17,259		21,538		4,234		4,279		21,493		25,772		(7,973	)		17,799
The Trails of Redmond	Redmond,WA		423		2004/1985		17,413		45,013		62,426		11,230		17,413		56,243		73,656		(19,921	)		53,735
Taylor 28	Seattle, WA		197		2009/2009		8,100		52,101		60,201		762		8,100		52,863		60,963		(6,194	)		54,769
Belcarra**	Bellevue ,WA		296		2010/2010		12,485		74,778		87,263		4,279		12,485		79,057		91,542		(7,976	)		83,566
Seattle						$	90,197	$	421,857	$	512,054	$	63,915	$	90,197	$	485,772	$	575,969	$	(143,138	)	$	432,831	$	-
Non-Multi Family
Gateway at Emeryville	Emeryville,CA					$	10,171	$	2,328	$	12,499	$	38	$	10,200	$	2,337	$	12,537	$	(2,329	)	$	10208	$	-
Solstice(2)	Sunnyvale, CA															$	54,194	$	54,194	$	(164	)	$	54,030		$
Wilshire La Brea(2)	Los Angeles, CA																46,110		46,110		(97	)		46,013
Lease up communities - partially delivered																$	100,304	$	100,304	$	(261	)	$	100,043	$	-
TOTAL -73 Communities			20,724			$	668,695	$	2,698,404	$	3,367,099	$	450,989	$	668,674	$	3,249,667	$	3,918,341	$	(884,472	)	$	3,033,869	$	91,428

* Communities held by a consolidated subsidiary of the Company

** Communities secure the Company's $620,000,000 FNMA line of credit.

*** Communities secure a single mortgage.

⁽¹⁾ The land is leased pursuant to a ground lease expiring in 2030 with extensions up to 79 years.

⁽²⁾ These development communities began delivering homes during 2013 and as of December 31, 2013 not all homes were delivered. The allocation of land to the communities is not determined until all homes have been delivered.

86

BRE PROPERTIES, INC.

SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2013

(Amounts in thousands)

The activity in investments in rental communities and related depreciation for the three-year period ended December 31, 2013 is as follows:

Investments in rental communities:

	Years ended December 31,
	2013			2012			2011
Balance at beginning of year	$	3,722,838		$	3,607,045		$	3,464,466
Transfers from construction in progress		141,703			104,428			1,324
Capital and rehabilitation expenditures		70,089			54,379			37,032
Acquisitions		120,515			—			170,127
Communities sold		(137,023	)		(44,080	)		(62,690	)
Change in accrued improvements to direct investment in real estate costs		219			1,066			(3,214	)
Balance at end of year	$	3,918,341		$	3,722,838		$	3,607,045

Accumulated depreciation on rental communities:

	Years ended December 31,
	2013			2012			2011
Balance at beginning of year	$	811,187		$	729,151		$	640,456
Provision for depreciation, including discontinued operations		108,153			101,618			103,940
Communities sold		(34,868	)		(19,582	)		(15,245	)
Balance at end of year	$	884,472		$	811,187		$	729,151

87

INDEX TO EXHIBITS

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated as of December 19, 2013, among the Registrant, Essex Property Trust, Inc., and Bronco Acquisition Sub, Inc. (previously filed on December 20, 2013, as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K and incorporated herein by reference)
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 Communities, 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	Third Amended and Restated By-Laws of the Registrant (previously filed on December 19, 2012 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 Communities, 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 Communities, 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)
4.6	$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)
4.8	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)

88

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)
4.11	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 Communities, 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)
4.14	3.375% Senior Note due 2023 (previously filed on August 7, 2012 as Exhibit 4.6 to the Registrant’s Current Report on Form 8-K 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 Communities 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)
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

89

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 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*	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)
10.21*	First Amendment, made on January 27, 2011 and effective as of January 1, 2011, to Employment Agreement of John 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)
10.22*	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)
10.23*	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)
10.24*	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)

90

10.25*	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)
10.26	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)
10.27	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)
10.28	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)
10.29	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)
10.30	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)
10.31*	Retirement Plan for Employees of BRE Communities, 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)
10.32*	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)
10.33*	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)
10.34*	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)
10.35*	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)
10.36*	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)
10.37*	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)
10.38*	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)

91

10.39*	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)
10.40*	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)
10.41*	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)
10.42*	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)
10.43*	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)
10.44*	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)
10.45	Credit Agreement, dated as of January 5, 2012 (previously filed on January 5, 2012 as Exhibt 4.1 to the Registrant’s Current Report on Form 8-K and incorporated by reference herein)
10.46*	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)
10.47	Equity Distribution Agreement, dated as of February 24, 2010, between BRE Communities, 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)
10.48	Equity Distribution Agreement, dated as of February 24, 2010, between BRE Communities, 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)
10.49	Equity Distribution Agreement, dated as of February 24, 2010, between BRE Communities, 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)
10.50	Equity Distribution Agreement, dated as of February 24, 2010, between BRE Communities, 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)
10.51	Equity Distribution Agreement, dated as of February 24, 2010, between BRE Communities, 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)
10.52	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)
10.53*	Direct Stock Purchase and Dividend Reinvestment Plan (previously filed on November 8, 2013 pursuant to Rule 424(b)(5) under the Securities Act of 1933, as amended, as Prospectus Supplement to the Registrant’s Prospectus dated October 31, 2013 (File No. 333-192031) and incorporated by reference herein)

92

10.54*	Form of Restricted Stock Award Agreement under 1999 BRE Stock Incentive Plan (previously filed on April 3, 2013 as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K/A and incorporated by reference herein)
10.55*	Form of Restricted Stock Award Agreement under 1999 BRE Stock Incentive Plan (previously filed July 2, 2013 as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K 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)
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
99.1	Form of Voting Agreement, dated December 19, 2013, among the Registrant and certain shareholders of Essex Property Trust, Inc. (previously filed on December 20, 2013 as Exhibit 99.2  to the Registrants Current Report on Form 8-K and incorporated herein by reference).
101	The following materials from the BRE Properties, Inc. Yearly Report on Form 10-K for the year ended December 31, 2013 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.

93