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SOLAR ROOF LEASES

SOLAR ROOF LEASES. CREATING INCOME AND VALUE WITH OTHERWISE UN-USABLE SPACE.

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SOLAR ROOF LEASES

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  1. SOLAR ROOF LEASES CREATING INCOME AND VALUE WITH OTHERWISE UN-USABLE SPACE Confidential. This information shall only be distributed to persons that have executed a Confidentiality Agreement. Under no circumstances shall this information be shared with anyone outside of the entity that received this directly from Clean Energy Systems, LLC or it’s affiliates.

  2. Company Information The program is a hybrid solar program with a very different business model. We have never accepted institutional financing, does not rely on federal grants, and has never required a credit check from their customers. Our group currently owns over $10,000,000 in solar equipment assets, free and clear of any liens or encumbrances.. We provide long term lease options to the commercial and residential markets, and has rapidly expanded to become one of the fastest growing, independently owned solar leasing companies in the United States. With almost 200 completed projects throughout the country, we have developed partnerships with both tax equity investors and innovative commercial real estate developers. This has created a symbiotic relationship between two very different industries. Now, more than ever, commercial office buildings, retail properties, and industrial development projects are becoming more interested in strategies that not only increase occupancy and retention, but that also add the maximum dollar value to their buildings without leveraging cash flow. We provide a solution to this growing need, using a commercial roof lease.

  3. Company Information (Continued) “We rent commercial rooftops by the square foot, then improve the space with state of the art, non-invasive solar equipment. Most of the time, this area of a building is usuallyconsidered dead space and un-rentable. Since our model is completely scalable, We can become the largest and most secure tenant of any commercial property manager’s portfolio. Our ability to rent an unlimited number of rooftops makes it easy to see how we are creating new possibilities in such a distressed market. Furthermore, the power our equipment produces, gives building owners the option to offer energy savings to their other tenants, positively impacting the occupancy and overall retention. This fusion of interests is made possible by some very creative resourcing and recent changes to the renewable energy industry itself. We have truly created a custom offering for the current commercial markets, our ability to "self fund" has set us apart from 99% of the competition, and has given us the freedom to innovate and align with industries that otherwise may have never considered solar as a viable option to pursue.”

  4. Lease Details We have an innovative and lucrative approach to converting commercial buildings to clean, renewable energy. We will sign a 20 year lease for up to 80% of the total roof space of almost any building in the United States. In doing so, property owners and tenants alike benefit through additional income and reduced power expenses. By signing a roof lease, building owners will increase the net operating income and therefore value of their buildings without adding a single square foot to the structure. We will first determine the power requirements of a particular building and calculate how many units will be necessary to produce that power. Each unit requires 400 square feet of roof space and will produce a guaranteed amount of power equal to $100 a month (Arizona power rates). Each unit will typically generate $125 to $150 a month depending on factors such as weather, cloud coverage, and other issues that would prevent direct sun light to the solar panels. Because of these environmental unknowns, We guarantee $100 a month of power. Any additional power then becomes the benefit of the tenant or the entity that pays for the power for the user. The landlord or building owner will execute a 20 year roof lease for the agreed amount of space for the solar units. The tenant, or user, shall sign an equipment lease for the same units for the duration of their tenancy with the landlord. The roof lease payments will be paid to the owner accordingly: If the building is occupied, the landlord shall receive $1.00 annual rate, per square foot of roof space, in monthly increments, after we receive payment from tenant for the equipment lease. If the building is vacant, the landlord shall receive $.33 annually after we receive payment for the power generated by the systems from the local power company.

  5. Lease Details The Roof Lease relies on three primary sources of funding in order to install free and clear systems. They are: • Federal Tax Credits • Monetized Depreciation • Tenant Improvements These three components of capital sources can be connected, over-lapped, or interwoven with each other to create a custom package for the building owner or investor. A Roof Lease has options and benefits not seen with a typical interior lease. The first is a tenant improvement that is universal to any tenant that occupies the property. We will maintain the equipment for the remaining twenty year lease. This includes non-intentional damage, manufacturer defects, equipment malfunction, and several other items that may prevent the equipment from functioning properly. This prevents any unexpected maintenance expenses to the landlord. The second benefit is that the owner/investor does not have to expand their existing building to increase the income and overall increases value. The third benefit is an option to benefit from the transfer of federal tax credits/depreciation resulting in a substantial discount in the building owner or investor’s tax liability. It is effectively turning a tax bill into a revenue stream.

  6. Roof Lease Details There are two Roof Lease options with us. They are as follows: Option 1. Roof lease (tenant pays power): $55 a square foot for Tenant Improvements. The owner will re-direct their tax liability for the solar equipment to be installed on their building. The owner shall receive rent of $1.00 per square foot annually and receive $59.24 in tax savings in year one. Tenant will receive the power at a 10% savings. Option 2. Roof lease (Landlord pays power pays power): $55 a square foot for Tenant Improvements. The owner will re-direct their tax liability for the solar equipment to be installed on their building. The owner shall receive $59.24 in tax savings in year one. Landlord will receive the power at a 40% savings. Upon ratification of the Roof Lease, the equipment will be delivered to the building, we will execute leases with the owner’s interior tenants for the equipment being installed. This shall be for the term of their lease. As the interior tenant pays us their equipment lease payments, we will pay the owner within five days. In the event that the space is vacant, the Roof Lease rate shall change to $.33 a square foot, paid annually, for the power that is generated by the system and sent to the power grid and purchased by the local power company. Once a new tenant is obtained for the space, we will increase the lease rate once the new tenant has signed the equipment lease and starts making payments.

  7. Sample Numbers The following graph depicts some example buildings that install solar equipment on eighty percent of their roof space. They pay $55 per square foot for Tenant Improvements, receive $1.00 per square foot annually in lease income and have an effective tax rate of 35%. The total recapture time for the Net Tenant Improvement Cost is less than one year.

  8. Simple Flow Chart This flow chart simplifies the order in which the events take place: We find out how much taxes were paid to IRS in the last 1 to 3 years by the owner, depending if the income was passive or active in nature. We issue a K-1 for that amount. K-1 is given to the owners CPA to be turned in to the IRS. 2 to 3 months IRS will issue a refund to the owner. Once owner receives IRS refund, we will start installing solar equipment at that time. 6. The owner shall release the IRS refund to us for the tenant improvement budget. This is the $55 per square foot figure. 7. Owner shall hold a long-term lease with us for a dollar a square foot annually.

  9. Frequently Asked Questions Question: HOW EXACTLY WOULD THIS BENEFIT MY BUILDING? Answer: There are multiple benefits to the installation of solar equipment through us. The first is the additional income on space that is typically unusable or un-rentable. Another would be added value due to the additional income. An increase in net operating income would directly result in a higher building value with the same capitalization rate as the income prior to the installation of this equipment. Building owners also benefit by transferring a tax liability into an income generator in the larger TI model. The installation of renewable power sources also demonstrates to the community a degree of corporate responsibility. Question: WHO IS RESPONSIBLE FOR ANY POTENTIAL DAMAGE? Answer: We will maintain the equipment and replace as necessary. Deliberate damage is not covered by our firm. Question: WHY DOES CES REQUIRE A TI (TENANT IMPROVEMENT) ALLOWANCE? Answer: There is a significant initial expense for the solar equipment and installation. We has several ways to cover the majority of these costs, but not all. The tenant improvements assist with the installation the remaining $48 a square foot shall be covered by us. Question: WILL I STILL HAVE ACCESS TO MY ROOF FOR ROUTINE MAINTENANCE? Answer: Yes. Question: WILL YOU NEED ANY OF MY BUILDING’S INTERIOR SPACE FOR ANY EQUIPMENT? Answer: No. All of the equipment is installed on the exterior of the building. Question: HOW DO YOU STORE THE POWER? Answer: The power is not stored. It is either used by the tenant or sent back to the power grid for credit.

  10. Frequently Asked Questions Question: WILL INSTALLATION VOID MY ROOF WARRANTY? Answer: No. We have two ways of affixing the panels to your roof. One that punctures the roof and one that does not. If we determine that the puncture method is necessary for your installation, we will pay to have the roof warranty re-certified after installation. Question: DOES MY TENANT HAVE TO SIGN A 20 YEAR EQUIPMENT LEASE IF THEIR LEASE FOR THE SPACE IS ONLY 5 YEARS? Answer: Your tenant will only be responsible for the equipment lease for the duration of their tenancy with the landlord. If the space is vacated, the roof lease will then revert to $.33 a square foot for the power produced that will be sent to the local power company. Question: WILL MY TENANTS SAVE MONEY TO SWITCH OVER? Answer: Yes. The amount your tenant pays in equipment lease payments will be less than the cost of the power that will be produced. The percentage of savings will vary due to several factors including weather and power company rates, but the incentive will be significant enough that it will be attractive to the tenants to switch over. Question: HOW MUCH SPACE WILL YOUR EQUIPMENT TAKE ON MY ROOF? Answer: Each unit requires 400 square feet of space. The number of units required will be based on your specific needs. Typically, not more than 80% of the roof will be covered.

  11. Frequently Asked Questions Question: ONCE I SIGN THE LEASE, HOW SOON WILL THE EQUIPMENT BE INSTALLED? Answer: Construction can begin as early as a few weeks. Question: WHAT HAPPENS IF THE PANELS ARE DIRTY, DO THEY STILL WORK? Answer: Yes. The system will still work but will produce the maximum amount of power when they are free from any type of obstruction from the sun. It is in the tenant’s best interests to periodically hose off the panels to insure that they do not have any hindrance of sun exposure. Question: WHAT HAPPENS IF THE TENANT IS LATE OR STOPS PAYING THEIR EQUIPMENT LEASE? Answer: CES relies on the payments for the equipment lease to pay the rent for the roof. If the tenant is late or does not pay, then the rent payment will also be delayed until the tenant’s lease status is current. Question: HOW IS THE LANDLORD PAID THE ROOF RENT AND WHEN? Answer: Once payment is received from the tenant for the equipment lease, a check is then sent to the landlord within ten days for the roof lease. Question: WHAT IS “LEVERAGED” TAX EQUITY Answer: Leveraged tax equity is the ability to “write off” or depreciate 100% or more of any expense or investment. With our offering, the tenant improvement allowance can be recaptured by the building owner. Question: DO THE SOLAR PROJECTS HAVE TO BE INSTALLED IN ARIZONA? Answer: No. We can install anywhere in the United States. If you get sun, we can install equipment on your building.

  12. Frequently Asked Questions Question: WHAT HAPPENS WHEN I SELL MY BUILDING? Answer: The roof lease will transfer with the building just as any tenant leases would. This will actually increase the value and NOI of the building making it more attractive to a prospective buyer. Question: WHAT HAPPENS IF A TENANT DOES NOT WANT TO SIGN THE EQUIPMENT LEASE? Answer: It would be in tenant’s best interest to sign the lease as the lease payment would be less then their power bill, but if they refuse, the roof lease would revert to a vacant building rate of $.33 a square foot, paid annually. Question: HOW HEAVY IS THE EQUIPMENT? DO YOU NEED A SPECIAL ROOF LOAD CAPACITY? Answer: The weight of the panels and equipment are equivalent to 2.8 pounds per square foot, which is very minimal and should not be a factor. Question: IF I AM BUILDING A NEW BUILDING, DO I STILL NEED TO CONNECT TO THE LOCAL POWER SUPPLIER? Answer: Yes. The solar panels will supplement the power provided by the local power company. If the panels produce more electricity than is used, the excess will be returned to the power grid and the power company will issue a credit on your power bill. If more power is used than produced by the panels, then the power company will supply the additional power necessary. Question: THE ROOF OF MY BUILDING IS OLD AND WILL NOT LAST 20 YEARS. WHAT HAPPENS WHEN I NEED A NEW ROOF? Answer: We will remove the equipment from your roof and coordinate with your roofing contract to re-install the equipment in the most efficient and waterproof manner. We will also pay for the removal and re-installation of our equipment.

  13. Frequently Asked Questions Question: IF THERE IS A POWER OUTAGE, WILL THE SOLAR PANELS STILL WORK? Answer: No. There are components to the system that still require power from the grid. Question: DO I NEED SPECIAL WIRING IN MY BUILDING TO ACCOMMODATE THE SOLAR? Answer: No. The system is tied in to your existing wiring. Question: CAN THIS COVER 100% OF MY BUILDING’S POWER REQUIREMENTS? Answer: It is possible. This depends on your size of roof and power demands. Question: WILL I HAVE ANY TAX SAVINGS FOR GOING GREEN? Answer: Yes. There are multiple options to save on taxes. Please speak with your representative and tax advisors to determine your specific tax strategies. Question: WILL THE LOCAL MUNICIPALITIES ALLOW THE PANELS TO BE INSTALLED IF THEY ARE SEEN FROM THE STREET? Answer: Yes. There are several laws that prevent CC&R’s, associations, or local rules from discriminating against the installation of solar panels. Question: WHAT HAPPENS WHEN THE SPACE IS VACANT? Answer: The solar panels will continue to produce power and will send it to the power grid for the power company. The power company will then pay us, on an annual basis, for the power produced. We will then pay you $.33 a square foot, annually, for the space that is occupied by the solar panels.

  14. Contact Us Thanks for your interest in our solar roof leasing program. We would be happy to address any questions and/or concerns your company might have. To continue moving forward on this business proposal please contact us using the information below: Point of Contact: Jeremy Richardson Managing Partner Direct Phone: 305-849-7830 Email: jrichardson@financier.com

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