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In simple terms, net present value is calculated based on Net Operating Income (NOI) divided by a factor known as the Capitalization Rate (“Cap Rate”). The Cap Rate reflects an expected rate of return to an investor on a property. Capitalization Rates are highly specific to different types of commercial product and markets; a lower Cap Rate will produce a higher project valuation, and vice versa. Factors and Assumptions: Attachment 1 summarizes the calculation; an explanation of the specific factors applied is as follows – these track to the sections of the calculation. Project Description • Gross Building Area (GBA) reflects the additional square footage associated with the FAR increase, based on the project proposal. • Rentable Building Area (RBA) applies a factor to deduct non-rentable square footage, accounting for circulation (e.g. corridors and lobbies, stairwells and elevators, utility space and so on) from the GBA. The RBA is estimated based on the project plans, at about 75 percent of the GBA. Project Valuation In this section of the calculation, the Project is valued based on estimated rental revenue, adjusted to reflect operating costs and other factors, to derive an estimated Net Operating Income (NOI). A Capitalization Rate is then applied to the NOI, to determine the net present value of the project. • Gross Rent Potential applies an average annual rental rate of $25 per square foot for the RBA. (The calculation states this as a dollar amount per GBA, adjusted to the same ratio of GBA to RBA, 75 percent). The $25/square foot value was derived by averaging typical rental rates per square foot, from a survey of Public Storage facilities (in Pleasanton and in several nearby cities), as well as other storage facilities in Pleasanton e.g. U-Haul, CubeSmart. • Vacancy Allowance: Since there is typically turnover in storage facilities, a 5 percent vacancy rate was assumed and used to adjust the gross rent potential downward. This rate is consistent with industry data for the broader west coast region (typical vacancy rates of 8 percent), reduced slightly to reflect the fact that Pleasanton is a high-value market, and that this will be a brand new facility, adding to its desirability. • Operating Expenses are deducted from the estimated revenue, reflecting costs such as utilities, maintenance, staffing, etc. Operating expenses were assumed to be 30 percent of adjusted gross revenue, a value based on industry-specific data from commercial brokerage firms, in turn based on market surveys for the region. • Capitalization Rate: As noted, the Capitalization Rate, divided by the Net Operating Income, yields the Net Present Value of the property. Although a relatively broad range of Cap Rates was identified in the sources consulted, a rate of 4.5% was recommended by EPS based on actual transaction data; this is at the lower end of the range (i.e. yielding a higher project value). • Building Value Estimate: The analysis derives the net present value of the project on a per- square-foot basis. This income capitalization value ($277 per sf) was “back checked” against the valuation of actual comparable sales, and was within the range of those values. The value of the additional square footage is equivalent to over $46 Million. DocuSign Envelope ID: E4D0AD6B-3F79-48DA-8B5E-017EB2A6132F