EFTA01469396.pdf

RRP72 - Southern Financial Deutsche Asset & Wealth Management Confidential — Not for Public Distribution Available to U.S. Person Clients of the U.S./Americas Key Client Partners Desk RREEF Retrofit Partners, L.P. North American Energy Efficiency Retrofit Projects June 2014 EFTA01469396 RRP72 - Southern Financial Executive Summary Funding the cost of building retrofit projects and capturing the resulting "energy savings" returns without owning host buildings Overview of Retrofits and Market Opportunity I Core Project Elements: Retrofit projects generally involve four common elements: new equipment; new controls; integrated design; and active energy management. I Potentially Large Market: Certain recent studies suggest that the U.S. marketplace opportunity for energy efficiency projects is potentially very large (possibly $270 billion to $520 billion).1 I Traditional Challenges: Although retrofit projects often result in significant energy savings for property owners, they are labor and capital intensive endeavors that require the retention, coordination and oversight of various third party service providers. H Opportunity: RREEF Retrofit Partners, L.P. (the "Partnership") believes it can take advantage of this significant potential market opportunity and address traditional challenges by providing capital and retrofit know-how to property owners and, in the process, generate current income returns for its Limited Partners. Strategy and Project Execution I Core Strategy: The Partnership's core strategy will be to structure retrofit projects through energy service agreements or "ESAs." I ESA Structure: Under an ESA, the Partnership will pay for an energy efficiency retrofit (equipment plus labor) and will receive, typically over a 10-year term, the energy savings resulting from the project (the difference between a property's historical utility bills and its post-retrofit bills), subject to certain adjustments.2 I Project Delivery: The Partnership expects to source projects through third party origination partners (as well as proprietary sources) and intends to use experienced, high quality 3rd party service providers for project design, construction and management. Partnership Objectives and Expected Benefits I Project Size and Geographic Focus: The Partnership will target projects located in the US and Canada in $2 to $5 million range (but may pursue smaller or larger projects). The Partnership expects to fund approximately 60-120 projects, assuming total Partnership capital commitments of $250 million plus 30% leverage. I Target Properties: The Partnership expects to undertake projects in commercial, large multi-family residential, big box retail, hospitality and 'MUSH" (municipal, university, school and hospital) buildings and other properties. EFTA01469397 H Jobs/Carbon Benefits: Although the Partnership's primary objective will be to generate attractive risk-adjusted returns, project activities are expected to result in both job creation and carbon emissions reduction. Experienced Team Operating Within the DB Platform I Team: Core team of five, led by Jeff Baer. I DB Senior Advisers: Pierre Cherki and Todd Henderson, senior executives within Deutsche Asset & Wealth Management, will act as senior advisers to the Team. I DB Platform: The Team is part of Deutsche Asset & Wealth Management's integrated global real estate platform and will leverage the breadth of research, transaction execution and asset management capabilities of the DB Platform. IIPrior Retrofit Experience: Members of the Team have completed over 800 non-ESA energy efficiency retrofit projects in last four years within Deutsche Bankoccupied real estate and have received numerous energy efficiency awards around the globe in recognition of the retrofit work.4,5 1 DBCCA Research (an affiliate of Deutsche Bank), 2012; "Unlocking energy efficiency in the U.S. economy", McKinsey & Co., July 2009. See Footnote 1 on page 18 for full disclosure. 2 There can be no assurance that the Partnership will achieve any particular rate of return or any return at all. 3 DB Corporate Real Estate Services data. See page 30 for additional details on projects. 4 See page 31 for details on awards. Deutsche Asset & Wealth Management RREEF Retrofit Partners, L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only EFTA01469398 June 2014 EFTA01469399 RRP72 - Southern Financial Partnership Objectives and Potential Benefits 1 Current Return Focus The primary objective of the Partnership is to generate attractive risk- adjusted returns to Limited Partners from periodic current income payments expected to be made in connection with projectsl In addition, the Partnership believes that its strategy has two ancillary features that may be attractive to certain Limited Partners: 2 Job Creation Projects are expected to result in new construction and engineering jobs. 135,000 incremental job days of work estimated from Partnership's activities. 2,3 3 Carbon Reduction Projects are also expected to result in reduced carbon emissions (the Team estimates that each Target Project will reduce C02 emissions by 3,000 to 3,600 tons per annum)2,3 1 There can be no assurance that the Partnership will achieve any particular rate of return or any return at all. 2 Estimates based on $325 million in project activity (funded commitments plus leverage) and projects having attributes of the type being targeted by the Partnership. There can be no assurance regarding the number or types of jobs (or job days/years), or the amount of carbon reduction, which will result from a particular project or the projects as a whole. The actual number of work days and carbon reduction resulting from Partnership project activities may be higher or lower than these estimates and will depend, among other things, on the actual amount of capital deployed and the nature of projects completed. 3 In evaluating and structuring each project, the Partnership will focus exclusively on the return aspects of the project and not the project's ability to create jobs or reduce carbon (although the Team believes that job creation and carbon reduction are likely to result from projects). For example, if a particular project could be structured in two alternative ways, one that generated a higher return and resulted in less job creation and/or less carbon reduction, and another that generated a lower return but resulted in more job creation and/or more carbon reduction, the Partnership would pursue the former and not the latter structure. Deutsche Asset & Wealth Management RREEF Retrofit Partners, L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only June 2014 EFTA01469400 RRP72 - Southern Financial Contents 01 Firm Overview 02 Executing Retrofit Projects through a Core ESA Strategy 03 The Market Opportunity 04 Project Management Process 05 Overview of Team and Experience 06 Summary of Key Terms and Structure 07 Appendices A. Biographies B. Case Studies C. Responsible Contractor Program D. Sample Jobs Creation and CO2 Reduction Report E. Potential Building Ratings Benefits F. New Building CO2 Comparison G. Additional Notes and Important Information EFTA01469401 RRP72 - Southern Financial 01 Firm Overview EFTA01469402 RRP72 - Southern Financial Alternative Investments Business Part of Deutsche Bank's Asset & Wealth Management (AWM) division Overview — At more than €98.8/US$136 billion of AUM and over 700 professionals and staff, Deutsche Asset & Wealth Management is one of the world's largest managers of Alternative Investmentsl. — We are one of the few asset managers with significant coverage in each sub- asset class of alternatives and our vertically integrated business model provides packaged one stop shop services for our clients. We utilize our extensive experience across sectors, geographies and asset life cycles to maximize client value with intelligent acquisition, management and disposal strategies Alternatives AUM Summary Commodities Private Equity & Private Markets 13% 13% Infrastructure 16% €98.8/$136bn Active Real Estate 35% 21% Retirement & Hybrid Solutions Alternatives and Real Assets Pierre Cherki Note: Figures subject to change without prior notice. Number may not sum to 100% due to rounding. Certain alternative assets are reported elsewhere in Deutsche Asset & Wealth Management and the above includes dbSelect notional Assets that are not currently reported as AUM. Real Estate Infrastructure Liquid Real Assets Sustainable Investments Private Equity & Private Markets Infrastructure 1 Source: Towers Watson. Global Alternatives Survey 2013, dated July 2013. Note: Not all DeAWM products and services are offered in all jurisdictions and availability is subject to local regulatory restrictions and requirements. Numbers may not sum due to rounding. Source: Deutsche Asset & Wealth Management. As of December 31, 2013. EFTA01469403 Deutsche Asset & Wealth Management RREEF Retrofit Partners, L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only June 2014 Alternatives and Fund Solutions Stephane Farouze Hedge Funds Fund Derivatives & Financing Retirement Products Passive Alternatives Deposits/Loans Deutsche Bank Sustainable Investments Hedge Funds Private & Business Clients Corporate Banking & Securities Asset & Wealth Management Michele Faissola Global Transaction Banking Non-Core Operations Regional Management EFTA01469404 RRP72 - Southern Financial DB's Real Estate Business Long tenured manager of real estate assets across the private and public investment spectrum and around the globe A full service real estate manager with US$48.3/€35.0 billion in assets under management More than 475 institutional clients and approximately 450 employees in 22 cities around the world Global footprint and AUM by strategy (billions) Private real estate - Americas — Creating value through active management since 1975. — Long tenured senior professionals averaging 14 years with the firm and 28 years of industry experience. — US$16.9 billion in total AUM. — Nearly 300 institutional clients, including public, corporate, union and foundations/endowments. — Approximately 200 professionals and staff in 9 offices. 19% 35% 5% Total: US$48.3/€35.0 IIRE Direct: Asia Pacific IIRE Securities 41% IIRE Direct: Americas IIRE Direct: Europe US$16.9/€12.3 US$19.5/€14.2 US$2.6/€1.9 US$9.3/€6.7 — Dedicated teams closed more than $40 billion (1,300+ properties) in purchase and sales transactions over the last 10 years. — Regional asset management organization with nearly 30 asset managers Source: Deutsche Asset & Wealth Management. Numbers may not sum due to rounding. As of March 31, 2014. Deutsche Asset & Wealth Management RREEF Retrofit Partners, L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only June 2014 EFTA01469405 RRP72 - Southern Financial DB's Real Estate Business Long tenured manager of real estate assets across the private and public investment spectrum and around the globe A full service real estate manager with €34.2/US$47.0 billion in assets under management More than 475 institutional clients and approximately 450 employees in 24 cities around the world Global footprint Private real estate - Americas — Creating value through active management since 1975. — Long tenured senior professionals averaging 14 years with the firm and 27 years of industry experience. — US$16.2 billion in total AUM. — Nearly 300 institutional clients, including public, corporate, union and foundations/endowments. — Approximately 200 professionals and staff in 9 offices. 19% 34% 5% Total: US$47.0/€34.2 42% RE Direct: Americas RE Direct: Europe RE Direct: Asia Pacific IIRE Securities US$16.2/€11.8 US$19.6/€14.2 US$2.4/€1.8 US$8.8/€6.4 — Dedicated teams closed more than $40 billion (1,300+ properties) in purchase and sales transactions over the last 10 years. — Regional asset management organization with nearly 30 asset managers Source: Deutsche Asset & Wealth Management. Numbers may not sum due to rounding. As of December 31, 2013. Deutsche Asset & Wealth Management RREEF Retrofit Partners, L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only June 2014 EFTA01469406 RRP72 - Southern Financial Benefits Provided by the DB Platform Extensive real estate & asset management capabilities of the DB Platform provide the Partnership with the focus, depth and scale needed to execute its strategy. Platform Capability 1 Disciplined Investment Process 2 Sophisticated View on Markets and Competitive Trends 3 Expertise in Counterparty and Real Estate Credit Underwriting 4 Extensive Real Estate Acquisition and Disposition Experience 5 Deep Leasing Knowledge 6 Asset Management Experience Deutsche Asset & Wealth Management Benefit Provided to Partnership • DB Platform's rigorous investment and risk management processes have been developed and refined over multiple real estate cycles. • Team will use and adapt the rigorous investment process in connection with the Team's evaluation of potential project opportunities. • DB Platform maintains House Forecasts, Qualitative Inputs and a Quantitative Allocation Model to address risk and opportunity across markets and sectors. • Team believes that having access to this type of proprietary analysis will enhance the Team's overall project screening and evaluation efforts. • DB Platform has extensive experience performing comprehensive risk-reward analysis on prospective projects, with a focus on relative values among target assets. EFTA01469407 • Team expects to leverage this expertise to ensure that counterparty and real estate credit risks are appropriately assessed and used in project structuring and analysis • Since 2003, U.S. transactions group has acquired >350 assets ($25 billion+) and disposed >500 assets ($22 billion+) across multiple property types. • Team believes that this extensive experience may provide valuable insights to the Partnership in structuring certain retrofit projects. • Asset Management team is responsible for overseeing the leasing the 100.7m sq. ft. US portfolio representing >5,800 tenants. To maintain stabilized occupancy, the Asset Management team works closely with tenants and leasing brokers in all major markets in the US. • Team will draw upon the DB Platform's multi-decade tenant leasing experience, allowing the Team to more effectively structure projects and to target attractive market categories. • Asset management relationships contribute significantly to the broader real estate network and information advantage available to all of the firm's teams. • Team expects to access this experience and these relationships as part of its efforts to source and manage high-quality retrofit projects. RREEF Retrofit Partners, L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only June 2014 EFTA01469408 RRP72 - Southern Financial 02 Executing Retrofit Projects through a Core ESA Strategy EFTA01469409 RRP72 - Southern Financial Energy Efficiency Retrofit Project Funding Through an ESA, the Partnership will fund the cost of retrofit projects and capture the "energy savings" returns of an energy efficiency retrofit without owning the host buildingl Contract The Partnership and a building owner enter into a contract where the building owner agrees to pay its historical utility bills to the Partnership for the term of the contract, in exchange for energy services relating to the equipment installed. Project Capital The Partnership funds the cost of money-saving, energy efficient equipment installed in the owner's building. Typically, the owner of the building owns the equipment installed During the term of the contract, the Partnership provides "energy services" to the building. Returns The Partnership earns the difference between the historical utility bills and the new, lowered utility bills adjusted for any gain sharing arrangements and certain other adjustments. Over the life of the project, these payments are expected to generate attractive, risk-adjusted current returns with no reliance on capital appreciation.2 1 In the context of a particular project or transaction, the Partnership may modify or simplify the typical ESA structure and terms described above or may elect to structure such project or transaction through a non-ESA or modified ESA structure. By way of example, in the context of a smaller project, the Partnership may elect to bill a building owner directly (i.e., rather than receiving payment from the differential between the building's historic payments and post-retrofit payments). The Partnership may also (i) undertake renewable energy and cogeneration projects in buildings and other properties in which the vehicle has an existing project and (ii) engage in other energy efficiency projects or transactions, either through an ESA (or modified ESA) structure or otherwise. 2 There can be no assurance that the Partnership will achieve a particular rate of return or any return at all. Deutsche Asset & Wealth Management RREEF Retrofit Partners, L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only June 2014 EFTA01469410 RRP72 - Southern Financial Payment Details The hypothetical contract illustration below summarizes how the ESA model is expected to work financially for both the building owner and the Partnershipl Shared Savings Post-Retrofit Savings Pre$ Retrofit Actual Energy Costs 1 Before the ESA, the building owner pays energy service costs at an existing, baseline level ( the "Historical Baseline Costs"). ESA Payment Post-Retrofit Actual Energy Costs 2 During the term of the ESA, the building owner pays the Partnership the equivalent of the Historical Baseline Costs (or slightly lower rates as negotiated), which reflects what energy service costs would have been without retrofit. The costs incurred in retrofitting the building are expected to be recovered from the difference between the Historical Baseline Costs and new energy service cost post-retrofit. 3 After the term of the ESA, the building owner keeps the equipment and benefits from full energy service cost reduction. 1 For illustrative purposes only. There can be no assurance that any implementation of the ESA model will achieve any particular level of energy service cost savings or any savings at all. In the context of a particular project or transaction, the Partnership may modify or simplify the typical ESA structure and may elect to structure such project or transaction through a non-ESA or modified ESA structure. By way of example, in the context of a smaller project, the Partnership may elect to bill a building owner directly (i.e., rather than receiving payment from the differential between the building's historic payments and post-retrofit payments). Deutsche Asset EFTA01469411 & Wealth Management RREEF Retrofit Partners, L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only June 2014 EFTA01469412 RRP72 - Southern Financial Typical Elements of a Retrofit Project Retrofit projects involve replacing or upgrading an existing building's energy equipment and systems with new, more energy efficient, equipment and systems. A typical retrofit includes four principal components: Description New Equipment Repair, replace and/or upgrade key energy consuming equipment that drives lower energy consumption for the same output Examples H Heating, ventilation, and air-conditioning (HVAC) upgrades II High efficiency boilers and furnaces il High efficiency lighting IIl recovery devices New Controls A system applied to equipment that reduces energy usage by ensuring equipment is only running when needed I Lighting sensors I Variable speed drives on motors and pumps I New building automation and HVAC controls Integrated Design An engineering approach that addresses the combined impact of multiple replacements/upgrades of both equipment and control systems I Combining upgraded energy efficient equipment, air sealing, moisture management, controlled ventilation, insulation, and solar control Active Energy Management Installation of software that continue to monitor and manage the performance of the upgraded systems and inform the relevant people when faults are identified II Detect/predict building faults II Identify further savings opportunities IIReport on energy usage outside of contractual limits Deutsche Asset & Wealth Management EFTA01469413 RREEF Retrofit Partners, L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only June 2014 EFTA01469414 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 debtl Retrofit Finance Structures Traditional Do it yourself (DIY) Explanation The building owner manages all aspects of their own energy efficiency project Financing Source Guarantee of Savings Equity or third party debt No 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. Upfront Cost to Owner Difficulty of Execution for Building Owner Ability for Tenanted Building Owner to Capture Energy Savings Full cost of retrofit High Possibly2 Full cost of retrofit, but typically 100% financed from annual savings via third party debt Low Possibly2 Emerging 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 EFTA01469415 Equity/Debt via third party All risk borne by third party None Low Possibly2 1 Another alternative is Property Assessed Clean Energy or "PACE," which is an emerging structure in the marketplace for financing retrofit and clean energy projects. The Partnership may compete with PACE financing for project opportunities 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. 2 This depends on specific lease terms and definitions. In a typical triple net lease, the tenant realizes the energy savings instead of the building owner. New "green lease" and other lease provisions can address this split incentive. Deutsche Asset & Wealth Management RREEF Retrofit Partners, L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only June 2014 EFTA01469416 RRP72 - Southern Financial Competition — ESCO Challenges The Team believes that the ESCO industry has not achieved broad market acceptance and significant business in the commercial office market for the following reasons: Scaling Challenge 1 Require upfront payment Description • ESCO typically requires upfront payment at commissioning of project in advance of savings being realized 2 Often strong equipment preference 3 May not address full suite of energy savings options • Most large ESCOs have acquired OEMs and focus on positioning their own equipment into projects. "Independent" ESCOs often have strong equipment preferences • Commercial office owners have not widely accepted the ESCO business model given concerns that recommended projects may not address the full or optimal suite of energy conservation measures for their buildings 4 Focus on external financing • The ESCO model is heavily centered on the use of external capital and firm's are organized away from use of their own balance sheet capital to fund projects 5 Potential high margins and limited price transparency • ESCOs have traditionally operated with significant markups embedded into deals with limited transparency • ESCO fees are typically "justified" as based on measurement and verification savings guarantees that can be difficult for the building owner to understand and enforce Deutsche Asset & Wealth Management RREEF Retrofit Partners, L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only June 2014 EFTA01469417 RRP72 - Southern Financial Competition — the ESA Advantage The Team believes that the Partnership's core ESA strategy, although newer and not generally as well-known in the marketplace as the traditional DIY and ESCO financing models, offers property owners the following significant competitive advantages to completing retrofit projects compared to DIYs and ESCOs1 Traditional Finance Model Barriers to Acceptance Potential ESA Solutions2 1 Unclear benefits Due to the complex engineering requirements for deep retrofits, building owner does not understand or have confidence in achieving the savings The ESA model shifts the risk of project savings performance fully to the Partnership while creating "gain-sharing" guaranteed income streams that will be divided between the building owner and its tenants depending upon their specific lease terms and ESA contract structure. The "gain-sharing" value can take the form of a "lease payment" for mechanical room usage, an upfront "access fee" for the right to "mine out the energy efficiency" and/or a percentage reduction in energy costs paid out. 2 Long and complex process Building owner loses interest due to a complicated 9-12 month evaluation and sales cycle. While sales cycle can still be lengthy for new adopters, it is possible to eliminate complexity by transferring all engineering and project completion risk away from owner to third party 3 Capital constrained Owner either does not have money to perform themselves or chooses to allocate capital to other priorities. Require no upfront use of capital from building owner -orNo cash or debt origination requirement to building owner3 1 See also Note 1 on page 10 of this presentation. 2 ESAs are relatively new to the retrofit marketplace and are complicated arrangements from accounting, tax and other perspectives. As such, there can be no assurance that, notwithstanding the potential solutions described above, the ESA will obtain the level of marketplace acceptance over time needed to generate the volume of project EFTA01469418 opportunities the Partnership is targeting. In particular, the ESA structure to be used has not been tested in the context of commercial buildings with split incentive leases and therefore it is unclear whether it will be accepted as an attractive transaction structure by building owners in this sector. 3 New accounting regulation requires the debt to be shown as an on balance sheet liability. Deutsche Asset & Wealth Management RREEF Retrofit Partners, L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only June 2014 EFTA01469419 RRP72 - Southern Financial ESA Structure A typical ESA structure would operate as follows:1 Utility Services A Property Owner Historical utility payment minus gain share Project Control Account "Lockbox" B Reduced utility payment Utility Company Rent + energy use payments ( A Tenants - B ) Project costs and returns Energy services agreement Capital and energy efficiency upgrades Partnership/Energy Efficiency Manager For illustrative purposes only. 1 In the context of a particular project or transaction, the Partnership may modify or simplify the typical ESA structure and terms described above or may elect to structure such project or transaction through a non - ESA or modified ESA structure. By way of example, in the context of a smaller project, the Partnership may elect to bill a building owner directly (i.e., rather than receiving payment from the differential between the building's historic payments and post-retrofit payments). The Partnership may also (i) undertake renewable energy and cogeneration projects in buildings and other properties in which the Partnership has an existing project and (ii) engage in other energy efficiency projects or transactions, either through an ESA (or modified ESA) structure or otherwise. Deutsche Asset & Wealth Management Money flow Services Agreements Capital RREEF Retrofit Partners, L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only June 2014 EFTA01469420 RRP72 - Southern Financial 03 The Market Opportunity EFTA01469421 RRP72 - Southern Financial The Energy Efficiency Retrofit Market Studies indicate that in the U.S. alone, between $270bn and $520bn of capital may be needed over the next six years to make buildings more energy efficientl Potential Investment Requirements: Approximately $520bn of potential project activity through 20201 Industrial: $113bn Residential: $229bn Commercial: $125bn Combined Heat and Power (CHP): $56bn (across all sectors/not broken out below) Potential Energy Savings: Approximately 9,100 trillion BTUs of related savings through 20201 40% of BTU savings Industrial 24% 33% 3,650 Trillion BTUs Energy-intensive industry processes 43% Energy support systems 41% 3,160 Trillion BTUs 10% 19% Existing lowincome homes Existing non-low income homes 25% Government buildings Existing private buildings 1 Source: DBCCA Research (an affiliate of Deutsche Bank), 2012; "Unlocking energy efficiency in the U.S. economy", McKinsey & Co., July 2009. A significant portion of these opportunities will not fit the Partnership's strategy, may be taken up by competitors or may otherwise be unavailable to the Partnership. The Partnership will fund new retrofit projects over a four-to-five year "commitment period," which is shorter than the six-year period covered by these studies (which means that certain opportunities may arise after the date on which EFTA01469422 the Partnership may be permitted to pursue them). Deutsche Asset & Wealth Management RREEF Retrofit Partners, L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only June 2014 19% Non energyintensive industry processes 35% of BTU savings Residential Lighting and major appliances 11% Electrical devices and small appliances New homes 34% 2,290 Trillion BTUs 16% 12% 13% Office and noncommercial equipment New private buildings 25% of BTU savings Commercial Community infrastructure EFTA01469423 RRP72 - Southern Financial The Pool of Target Buildings The Team believes there are a significant number of buildings in commercial office, educational and other building types that could offer attractive potential retrofit projects of the type being targeted by the Partnership Commercial Office Building Target Marketl,2 Commercial Office (25%) Community infrastructure 12% 34% 2,290 Trillion BTUs 16% 25% Government buildings Existing private buildings >500k sq. ft. 34,000 buildings 8,000 buildings Commercial Office Building "Sweet Spot": 20,000 buildings are greater than 200k sq. ft. and are located in zones with significant temperature variability While all commercial office buildings above 100k sq. ft. are potentially attractive retrofit candidates, there are 20,000 buildings that are particularly attractive being more than 200k sq. ft. and located in geographic areas with significant temperature variability 1"Unlocking energy efficiency in the U.S. economy", McKinsey & Co., July 2009 ; 2 http://nces.ed.gov/fastfacts/display.asp?id=372; 3http://- www.bls.gov/oco/cg/cgs036.htm; 4http://www.aha.org/research/rc/stat-studies/fast-facts.shtml 5 CoStar data, 2012. Data includes buildings located in certain specified markets, with a construction date of 1960-2000, and greater than 200,000 sq. ft. Many of these opportunities may be unavailable to the Partnership for a variety of reasons, including competition for opportunities, suitability of the project and other reasons. The Partnership's ability to source attractive retrofit project opportunities in commercial buildings is likely to be impacted by (I) whether a building has a favorable lease structure within its tenant base (i.e., the leases permit the building owner to retain project gains) and (II) if it does not, whether the Partnership can structure the ESA for such building to address any "split incentive" issues EFTA01469424 associated with the building leases. Deutsche Asset & Wealth Management RREEF Retrofit Partners, L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only June 2014 Other target buildings Hotels/Motels3 Hospitals4 Large multi-family5 Total other target buildings >64,000 >5,700 >12,000 >81,000 13% Office and noncommercial equipment New private buildings 200k sq. ft. to 500k sq. ft. 100k sq. ft. to 200k sq. ft 74,000 buildings Additional Targets Education buildings2 Universities Public schools Private schools Total education buildings 5,000 98,800 33,300 136,500 EFTA01469425 RRP72 - Southern Financial Retrofits have the Potential to Create Jobs The Team expects that retrofit projects will result in the employment of skilled construction labor National Job Creation Estimates) I Several research studies estimate a large potential national employment impact if retrofits are pursued at scale in the United States: Political Economy Research Institute: Employment Estimates for Energy Efficiency Retrofits • 48.6 million job years I DBCCA/Rockefeller Foundation: United States Building Energy Efficiency Retrofits — Market Sizing and Financing Models • 3.3 million job years Center for American Progress: A Star Turn for Energy Efficiency Jobs • 625,000 job years McKinsey: Unlocking Energy Efficiency in the U.S. Economy • 600,000 to 900,000 job years Potential Single Project Impact2 I A target retrofit project ranges from $3-5m of cost I Based on studies of retrofit employment impact, the table below estimates the potential total direct job days for a $3m project Study Center on Wisconsin Strategy4 DB/Living Cities5 DBCCA/ Rockefeller Foundation6 USGBC/Booz Allen7 Total direct job days 9,534 6,810 4,767 681 Potential Job Creation Types3 EFTA01469426 I A retrofit project has the potential to create a wide variety of jobs depending on the project elements. H For example, a retrofit project that upgrades a building's HVAC, lighting and associated controls would generally be expected to create jobs in the following categories: Pipe Fitters and Plumbers Electrical Workers Engineers Sheet Metal Workers Carpenters Painters Heat and Frost Insulators Asbestos Workers Plasterers Cement Masons Roofers and Water proofers 1 These estimates are based on the job-creating potential of retrofit projects across a very large number of projects completed over a number of years on a national scale. Given the wide range of estimated job creation set forth in the table above, it is very difficult to predict what the overall level of job creation would be for retrofit projects generally (i.e. projects undertaken by the Partnership, as well as all other retrofit projects completed in the marketplace). In addition, the number of jobs generated by the Partnership's projects would represent a very small portion of this overall national number. Although the Team believes that the Partnership's strategy, if successfully implemented, could contribute to overall marketplace momentum for retrofit projects generally, and therefore the potential for job creation beyond the jobs created by the Partnership's projects, there can be no assurance that this will be the case. 2 This information is provided for illustrative purposes only. Although the Team believes that retrofit projects will result in some level of job creation, there can be no assurance of the number of jobs (or job day/years) that will be created in connection with any particular project or projects generally. In evaluating and structuring each project, the Partnership will focus exclusively on the return EFTA01469427 aspects of the project and not the project's ability to generate jobs. For example, if a particular project could be structured in two alternative ways, one that generated a higher return and resulted in less carbon reduction, and another that generated a lower return but resulted in more job creation, the Partnership would pursue the former and not the latter structure. See also footnotes 2 and 3 in Appendix F. 3 There can be no assurance that a particular project (or projects generally) will generate a particular category of jobs. 4 Center on Wisconsin Strategy, Seizing The Opportunity (For Climate, Jobs, And Equity) In Building Energy Efficiency, November 2007. 5 DB Living Cities, The Benefits of Energy Efficiency in Multi-Family Affordable Housing, January 2012. 6 DBCCA Research and Rockefeller Foundation, United States Building Energy Efficiency Retrofits — Market Sizing and Financing Models, March 2012. 7 U.S. Green Building Council (USGBC) and Booz Allen Hamilton, Green Jobs Study, November 2009. Deutsche Asset & Wealth Management RREEF Retrofit Partners, L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only June 2014 EFTA01469428 RRP72 - Southern Financial Retrofits have the Potential to Reduce Carbon Retrofits are expected to result in some level of reduction in greenhouse gas emissions related to retrofitted buildings Expected project level savings • Annual savings expected to range from 3,100 — 4,200 tons of CO2 saved per year depending on energy intensity of building and asset class typel Expected Partnership lifecycle savings • Over the full operational life of the Partnership , cumulative savings of approximately 3.3 million tons of CO2 are expected to be saved2 The expected lifetime emissions savings of the Partnership are equivalent to the following impacts, assuming cumulative savings over the term of the Partnership of approximately 3.3 million tons of CO2: Expected Lifetime Partnership savings are equal to:3 Trees Planted Home Electricity Use Barrels of Oil Cars I Planting 85 million new trees and letting them grow for ten years IIEliminating 490,000 homes' electricity use for one year I Preventing the burning of 7.7 million barrels of oil IITaking 693,000 cars off the road for one year Which is equivalent to: I Almost three times the number of trees as there are Christmas trees used annually in the United States4 I Taking all of the houses in the cities of Boston and Atlanta off the electric grid for one year5 H Total US oil production per day6 H Removing more than the total number of all of the taxi cabs in the United States for one year7 1 DOE CBECS 2003, Team analysis; Annual savings calculated on a per-project basis assuming a project size of between $2 and $5 million and a project profile generally consistent with the type of project being targeted by the Partnership; 2 DOE CBECS 2003, Team analysis; Based on the Partnership having completed $325 million of projects (funded capital plus leverage) of the type referred in Note 1 and managing such projects over the term of 10-year ESAs; 3 US EPA greenhouse gas calculator: http://www.epa.gov/cleanenergy/energy-resources/- refs.html; 4 EFTA01469429 http://www.flchristmastrees.com/treefacts/index.htm; 5 http://- quickfacts.census.gov/qfd/states/25/2507000.html and http://- quickfacts.census.gov/qfd/states/13/1304000.html; 6 http://www.bloomberg.com/news/2013-03-13/u-s-oil-output-rises-to-highest- level-since-july-1992.html; 7 http://www.census.gov/newsroom/releases/archives/- facts for features_special_editions/cb10-ffl5.html Note: Although the Team believes that retrofit projects will result in some level of carbon reduction, there can be no assurance regarding the amount of carbon reduction that will result from a particular project or the projects as a whole. Deutsche Asset & Wealth Management RREEF Retrofit Partners, L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only June 2014 In evaluating and structuring each project, the Partnership will focus exclusively on the return aspects of the project and not the project's ability to reduce carbon. For example, if a particular project could be structured in two alternative ways, one that generated a higher return and resulted in less carbon reduction, and another that generated a lower return but resulted in more carbon reduction, the Partnership would pursue the former and not the latter structure. EFTA01469430 RRP72 - Southern Financial 04 Project Management Process EFTA01469431 RRP72 - Southern Financial Project Targeting — Illustrative Project Criteria In sourcing and evaluating potential project opportunities, the Partnership will focus on the project's return profile and some or all of the following criteria: Target Characteristics 1 2 3 4 5 6 7 Geographic Location Building Sector Owner Profile Project Profile Project type Illustrative Criterial • Dense urban environments offering relative ease of install and follow-on sales • Energy markets and utilities provide substantial financial incentives for demand savings • Regulations have resulted in mandated energy efficiency, fuel conversion or disclosure requirements • Focus on the United States and Canada • Local climates with high amount of variability (e.g. hot summers and cold winters) • Utility regions with blended electricity costs over $0.10/kWh • Ideally buildings larger than 300k square feet • Annual pre-project utility expenses of at least $1.2m • Contains large, end-of-life equipment for a simpler and higher cost retrofit • Commercial buildings, including office and retail • Municipal, Universities, Schools and Hospitals (MUSH) • Large multi-family residential, especially with central equipment and fuel conversions • Owners with future portfolio sales opportunities, such as real estate funds and retail companies • Limited access to or desire to use capital, providing demand for 3rd party financing • Lack of energy efficiency expertise • $2 - $5m in total project cost2 • Target 25% energy savings over existing energy usage • Typical project has 5 year simple payback with a 10 year ESA contract • Projects will target the machine room such as HVAC and deemphasize multi- EFTA01469432 tenant space where possible • Associated controls to maximize the savings on new, efficiency equipment • Additional upgrades to maximize returns as needed 1 The project selection criteria listed above are provided for illustrative purposes only. The Partnership may pursue projects that do not meet certain of the criteria above if it determines the project would otherwise meet the Partnership's return and other objectives. 2 The Partnership may pursue projects that are less than $2 million or more than $5 million in size. The Partnership may pursue a limited number of larger projects, up to $25 million in project size (subject to the per-project concentration limits set forth in the Partnership's definitive documents). Deutsche Asset & Wealth Management RREEF Retrofit Partners, L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only June 2014 EFTA01469433 RRP72 - Southern Financial Project Targeting — Origination Partners The Partnership will seek to develop a broad range of "origination partner" relationships to source a pipeline of attractive project opportunities) Originator Type Real Estate Facility Management Firms Companies that provide real estate servicing to large, multi-property firms; typically do not have the capability or focus to compete for energy efficiency deal execution and financing Project Developers Independent firms that generate revenue from designing an energy efficiency retrofit solution for a client, but do not have the capability to finance the deal Original Equipment Manufacturers (OEMs) Suppliers of energy efficiency equipment do not always have the optimal model or capacity to finance the sale and often looking for a financing partner in exchange for selling their equipment Independent Consultants These consultants are common in the energy efficiency retrofit industry and are relied upon heavily to help owners evaluate retrofit options Other Firms A range of other firms, from engineering to opportunistic sales firms would be willing to operate in this space for sales commissions or being awarded related work Origination Focus Large Commercial Office Multi-Building Owners Large Commercial Office, MUSH Market, Large Multi-Family Residential, Industrial All Types MUSH Market, Single Building Owners All Types 1 Potential origination partners are third parties who will be under no contractual obligation to refer projects to the Partnership, and as such, there can be no assurance that they will actually refer potential projects to the Partnership. The expectation is that such origination partners will be compensated for project referrals and such costs will be treated as a project expense. Deutsche Asset & Wealth Management RREEF Retrofit Partners, L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only June 2014 EFTA01469434 RRP72 - Southern Financial Project Management Process Overview The Partnership expects to source, develop, build and manage projects by using experienced, high quality service providers who will be supervised by the Team at all stages1,2 Building Pre-profiling Project Engineering and Development - Go/no-go - Letter of intent signed I 3rd party firms identify attractive project opportunities I Standardized information gathering to vet projects ll Broad network of referral services - Facility managers - Consultants - Equipment manufacturers Paid only for completed projects Define screening criteria Review proposals Select projects to progress Negotiate ESA letter of intent Define underwriting criteria Review interim milestones and authorize expenditures II Negotiate ESA contract IIPropose deals for Project Committee approval Ongoing Active Construction Energy Management and Invoicing Project Committee Approval ESA signed Gross Max Price construction contract signed I Baseline energy audit EFTA01469435 I Engineering design (multi-step) and pricing I ESA financial modeling I Building owner alignment I Limited roster of experienced developers I 3rd party engineering assurance partner Project close out I Competitively bid trades I Award contracts I Project construction I Project commissioning and close out I Single construction manager oversees all trades and work II Guaranteed max price contracts I Owner's representative agent coordinates project specific items I Review/action reports on schedule, costs, and risks I Authorize payments I Manage change requests and owner concerns IIApprove commissioning milestones and project close out Formal control points 1 As referred to elsewhere in this presentation, the Team expects to contract with various third parties for purposes of providing sourcing, audit, engineering, design, commissioning, construction, installation, energy usage measurement and monitoring, and invoicing services to projects. Although the Partnership has identified likely third - party ser