Thanks everyone who responded.
I found the following articles / thread relevant and helpful:
http://www.xoutpost.com/bmw-sav-foru...ry-bypass.html
https://wiki.bentleypublishers.com/d...W+5+Series+E60
Brake pad sensor Question - BMW 3-Series (E90 E92) Forum - E90Post.com

I checked the brake pad thickness myself and got it checked at a local brake shop. Confirmed that I have 9-10mm of brake pads left.

Then I went to the dealer and asked SA - why does CBS show 3600 miles left, when I have 9mm of brake pads left. He thought my sensor is not set right. He called a technician to review and assess. Technician was confident that it’s not the pads or sensor, it is a computer calibration issue. He said that he can hook-up the computer and reset the sensor with existing pad condition of 9mm . I didn’t catch his full reasoning but I thought he mumbled that they might have forgotten to reset when they put new pads and sensor
at 48K.

First I didn’t believe him, as many people have said that resetting the CBS with half worn sensor will lead to “-----“ on brake miles. However he seemed very confident. SA agreed to do it for free, So I let them go at it.
He took the car in shop and did a special computer reset. Not the standard brake light reset. My car comes out of 18,000 miles remaining on Rear brakes. I am still intrigued what did he do but as long as it works I am happy.

Thanks again for help!