Fitch Affirms BRE Properties' IDR at 'BBB'; Outlook Stable

NEW YORK--(Business Wire)--
Fitch Ratings has affirmed the Issuer Default Rating (IDR) and
outstanding debt ratings on BRE Properties, Inc. (NYSE:BRE):

--IDR 'BBB';

--Unsecured revolving credit facility 'BBB';

--Senior unsecured notes 'BBB';

--Convertible senior notes 'BBB';

--Preferred stock 'BBB-'.

The Rating Outlook is Stable.

The ratings are supported by BRE's high quality portfolio of
multifamily assets in supply-constrained locations, solid debt service
coverage ratios, a large unencumbered asset pool, well-laddered debt
maturities, and adequate risk-adjusted capitalization. Credit concerns
include the company's exposure to a relatively small number of housing
markets and a significant increase in leverage in recent quarters.

Importantly, BRE's debt coverage ratios have remained steady in
recent years. For the last twelve months ended March 31, 2008, Fitch
calculated BRE's total interest coverage (as defined by recurring
EBITDA over interest expense plus capitalized interest) to be 2.1
times (x) and fixed charge coverage (as defined by recurring EBITDA
less capital expenditures over total interest expense plus preferred
dividends) to be 1.7x. These coverage ratios are appropriate for the
rating category.

Fitch notes that 70 of BRE's 80 wholly owned assets were
unencumbered as of March 31, 2008, representing approximately $2.4
billion of undepreciated book value, or approximately 80% of the
portfolio. This reduces subordination from secured debt and provides
flexibility to finance or sell assets as needed.

Additionally, BRE's debt maturities are well-laddered, with less
than $300 million that comes due annually over the next several years.

BRE continues to invest in new development in its markets. Fitch
notes that the company has four projects currently under construction
and four additional projects in various stages of pre-development,
with a total remaining cost to completion of approximately $350
million. BRE has indicated an intention to sell assets from its
portfolio to fund a significant portion of this projected cost. While
transaction activity has slowed dramatically in other asset classes,
demand for multifamily assets has remained solid due to continued
availability of financing from both Fannie Mae and Freddie Mac. Any
significant pullback in lending by these entities could make it more
challenging to sell multifamily assets in the future.

Fitch's primary rating concerns relate to the geographic
concentration of the portfolio and the company's increase in leverage
over the past 2 years. Approximately 93% of BRE's first quarter-2008
(1Q'08) same store net operating income (NOI) was derived from
properties located in five regions in California and one in the state
of Washington. These sizable regional exposures carry the risk that a
regional economic downturn, such as the substantial decline in the
technology sector that the Bay Area experienced earlier this decade,
or other trigger event could have a disproportionate effect on BRE's
operating results.

That said, BRE's primary markets are large and most have fairly
diverse economies. Additionally, these markets can be characterized as
fairly high barrier-to-entry markets with long entitlement processes
that help to dampen new supply. While home prices have declined in
many locations over the past year, the declines in home prices in many
coastal locations have been more muted, due to continued demand for
properties in these locations. The combination of high home prices and
tighter restrictions from lenders are helping to buoy demand for
apartments.

Fitch is also concerned about the general increase in the
company's leverage metrics. Total debt to undepreciated book capital
was 58.5% and total debt plus preferred stock to undepreciated book
capital was 63.7% at March 31, 2008. These ratios are up from 53% and
61%, respectively, at Dec. 31, 2006. Similarly, total debt to total
market capitalization was approximately 44% and total debt plus
preferred stock to total market capitalization was approximately 48%
at March 31, 2008, up from 32% and 36%, respectively at Dec. 31, 2006.

Fitch calculated BRE's risk-adjusted capital ratio to be 1.13x at
March 31, 2008, down from 1.40x at Dec. 31, 2006 and 1.53x at Dec. 31,
2005. While Fitch believes that BRE remains adequately capitalized for
its existing ratings, the company's capital position has clearly
weakened.

As such, BRE has indicated plans to reduce leverage meaningfully
over the next 12-to-18 months, which would cause the company's
risk-adjusted capitalization to improve noticeably.

BRE Properties is a $3 billion (total book assets) equity real
estate investment trust (REIT) based in San Francisco that is focused
on the development, acquisition, and management of multifamily
apartment communities in six targeted metropolitan regions of the
Western U.S. As of March 31, 2008, BRE's portfolio consisted of 80
wholly owned, stabilized multifamily communities totaling 22,680 units
in California, Arizona, and Washington; minority interests in thirteen
stabilized multifamily communities totaling 4,080 units, three wholly
owned properties that were in lease-up totaling 872 units, and seven
communities in various stages of construction and development that are
expected to yield 2,253 units. During the 1Q'08, 21% of same store NOI
was generated in San Diego, 16% in the San Francisco Bay Area, 15% in
Los Angeles, 15% in Seattle, 14% in Orange County, 4% in Sacramento,
and 3% in Phoenix.

Fitch's rating definitions and the terms of use of such ratings
are available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality,
conflicts of interest, affiliate firewall, compliance and other
relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings, New York
Janice Svec, 212-908-0304
Kimberly Chan, 212-908-0346
or
Media Relations:
Sandro Scenga, 212-908-0278

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