Determination of Best Secondary Use

The primary use of facilities located on the Site is the transmission and distribution of electricity in the City of Rosemead (the City). Because both Sites are crossed by overhead transmission lines, their potential secondary uses are limited. SCE states that its objective has been to select secondary uses for its property that provide the highest revenue consistent with its utility safety and reliability obligations, and that it has determined that the Park Edison project offers the highest potential revenue.

To evaluate the rental value for Site 1, SCE solicited development proposals from the real estate market. The developers incorporated into their proposals the highest lease rates they were willing to pay for the particular use to be developed. After reviewing all submitted proposals, SCE determined that Park Edison's proposal provided the highest potential revenue. To verify the Park Edison proposal, SCE determined a rental value for Site 1 by appraising the land value of comparable industrial facilities and applying a market capitalization percentage to the land values. The annual base rent SCE will receive from Park Edison for Site 1 falls within the acceptable market range established by the analysis of comparable facilities and is in line with revenues SCE will receive from similar transactions that we have approved in the past.

Unlike Site 1, which could be marketed as a stand-alone development, the location and size of Site 2 make it unattractive for separate land development. Upon being awarded the right to develop Site 1, Park Edison requested the right to discuss the development potential of Site 2 with the City. The City agreed with Park Edison's proposal to develop Site 2 as a self-storage facility but stipulated that development of Site 2 was contingent upon Park Edison's development of Site 1.

To evaluate the rental value for Site 2, SCE reviewed the rent paid by comparable self-storage facilities in and around the City. Utilizing the results of this rental survey and research accumulated during prior self-storage lease negotiations, SCE determined a rental value for Site 2. The annual base rent SCE will receive from Park Edison falls within the range determined by analysis of comparable self-storage facilities and is in line with revenues SCE will receive from similar transactions that we have approved in the past.