EFTA01454617

RRP72 - Southern Financial Retrofit Finance Structures The ESA-based strategy being pursued by the Partnership will compete primarily with two existing models for retrofit projects: (i) building owners who do the retrofits on their own ("Do it Yourself' or "DIY"); and (ii) energy service companies or "ESCOs" which finance retrofit projects through third party debt' Explanation Financing Source Guarantee of Savings Retrofit Finance Structures Do it yourself (DIY) The building owner manages all aspects of their own energy efficiency project Equity or third party debt No Upfront Cost to Owner Full cost of retrofit Difficulty of Execution for Building High Owner Ability for Tenanted Building Owner Possibly2 to Capture Energy Savings Energy Service Company (ESCO) A third party is contracted to design, build and source financing for all aspects of an energy efficiency project Third party debt Yes, but difficult to enforce. Owners must oversee Measurement & Verification ("M&V") to ensure they are being paid for savings shortfalls over full term of project. Full cost of retrofit, but typically 100% financed from annual savings via third party debt Low Possibly2 Energy Service Agreement (ESA) A third party funds the cost of energy efficiency equipment and then operates the equipment to provide "energy services" to the building Equity/Debt via third party All risk borne by third party None Low Possibly2 Another alternative is Property Assessed Clean Energy or "PACE,' which is an emerging structure in the marketplace for financing retrofit and dean energy projects. The Partnership may compete with PACE financing for project opportursties and, in certain cases. may use PACE financing as part of an overall Partnership project. See Appendix F. Note 8 for additional important information regarding PACE financing alternatives. Tit depends on specific lease terms and definitions In a typical triple Nat lease the tenard realizes the energy savings instead of the building owner New "green lease' and other lease provisions can address this split incentive Deutsche Asset RREEF Retrofit Partners. L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only t Wealth Manage,- June 2014 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) CONFIDENTIAL SDNY_GM_00259033 DB-SDNY-0 112849 EFTA01454617