A Foundation for the Kingdom A New Beginning CHI PHI FRATERNITY ALPHA DELTA Chapter PENNSYLVANIA STATE UNIVERSITY A New Beginning

A Foundation for the KingdomA New Beginning

CHI PHI FRATERNITYALPHA DELTA Chapter

PENNSYLVANIA STATE UNIVERSITY

A New Beginning

• Memories

• The Current Situation

• Survey and Findings

• The New Vision

• The Plan

• Call to Action

Overview

Memories

• CHI PHI-- What are your memories?

“... I believe in the future of Chi Phi Fraternity.”

•Brotherhood?•Good Times?•Learning?•Leadership?•Lifetime Friendships?•All of the Above?

The Memories

• How do we ensure that future young men have the same opportunities?

• There has been a paradigm shift on campus– Students have more options than ever for off-campus

living and extracurricular activities– Students have many other ways to communicate; texting,

IM’s, email, FaceBook, etc. – It’s the “Me” generation. “Brotherhood” does not readily

resonate with many young men– Students’ expectations today, right or wrong, are different

than ours. – There are more poorly managed fraternities than ever

before, however PSU President, Dr. Spanier has made a commitment to rejuvenate Greek life because……

The Current Situation

“A Man’s word is his bond.”

……Fraternities still offer a unique and maturing experience to learn leadership and create life-long friendships!



• The condition of our house has significantly deteriorated over the last 25 years.* – Alumni have not spent the money required to

adequately maintain the house nor keep up with technology, security and safety standards

– Actives have not treated the house with the respect it deserves….and demands

– The poor condition of the house has ultimately bred some sub-par brothers which is adversely impacting recruitment

• These problems have been compounding for many years. Recent events are simply a manifestation of deep rooted problems.

* Details of house requirements shown at the end of this presentation


• Our Competition is moving ahead:– Dorms and dorm dining are better than ever– New apartments have all the latest amenities– Beta Theta Pi – Raised over $6,000,000; one donor’s

individual gift exceeded $3,200,000– Sigma Chi – Raised over $2,000,000*– Phi Sigma Kappa – Raised over $950,000** To date


“... The hand of Brotherhood is always extended.”

“Truth, Honesty, and Personal Integrity are the foundations…”


• CHI PHI at PSU is now at a crossroads. – House is in bad physical shape– Financials are weak– Too few actives– Quality of many of the actives is marginal– Alumni Participation--historically weak – New sprinkler ordinance required the house to be shut down if

not brought into compliance by September 2008– We have decided to shut the house down and are exploring

our options

• Key Positive– Alumni Involvement is now at an all-time high. Presently, there

are 25+ alumni members actively involved in the leadership to renovate and rebuild our fraternity

• The bottom line is that we cannot attract the quality of brother we want with the present shape of our house.

• So what are our options?– Shut the House Down and Sell the Property

• This would end an 84-year heritage for over 950 alums and deprive future PSU men from continuing the Alpha Delta tradition





• So what are our options?– Do a Little

• Raise $300,000-$600,000- enough money to install a sprinkler system, and one or two other major infrastructure renovations

• Allow us to limp along--possibly survive, not thrive• Require us to develop another fund raising campaign 5-7 years

from now to sustain our weak position in the market

– Do it the Right Way!• Define a new strategy for CHI-PHI • Raise the money for a complete renovation • Create an ongoing maintenance fund • Re-colonize while enacting new “rules” for protecting our

investment

Background:49 Chi Phi alumni surveyed regarding best options regarding futureRange in Graduation years: 1937 to 1999, Mean & Median Graduation Year = 1974

Finding Summary: * 77% believed best option was to renovate the existing chapter house with emphasis on substantial interior/exterior renovations, safety issues (such as meeting code) & aesthetics* 21% believed the best option was to establish a maintenance endowment fund to guarantee the preservation of the chapter/house in the future* 2% believed we should raze the current chapter house and build a new one at our current location* 0% believed buying a chapter house at a new location was the best option

1930 1940 1950 1960 1970 1980 1990 2000

0

1

2

3

4

5

6

7

8

Grad year

Fre

quen

cy

Histogram of Grad year, with Normal Curve

Survey & Findings


The New Vision

• A Stronger Alumni Organization– More volunteers, less work per volunteer

• A Solid and Sustainable Financial Plan• Raise the capital required for all major

improvements and ongoing maintenance• A Brand New, Stronger Chapter

– Built from a small nucleus of existing actives• Protect our Investment

– Live-in House Parent and on-going maintenance plan

• A Strong & Effective Alumni Organization– Develop & implement more effective house/alumni

association– Spread workload, task specific positions & term limits– Improve active/alumni relations as alumni will “do their part”– Outsource certain functions– House parent

• Implement & maintain quarterly association meetings– Post agendas & track performance on web site

• Increase alumni engagement & pride in Chi Phi– Alpha Delta Data, improve web site & annual outings

The Plan


The Plan

We will NOT move ahead with the rebuild of the house, until every box below is filled in!

Chi Phi Fraternity - Alpha Delta Chapter House Association

AffinityBob Martin

Annual Fund

1920-49 - Open1950-54 - Open1955-59 - Open1960-64 - Open

1965-69 - Open1970-74 - Open

1975-79 - Gary Lambert1980-84 - Open

1985-89 - Wally Kuhns1990-94 - Jeff Mercando

1990-94 - Jon Knipe1995-99 - Han Pak

2000-04 - Noah Buck2005-08 - Open

Gary BradfordERA Captains

Bob MartinVP Capital Campaign &

Fundraising

Chapter Advisor

OpenBrotherhood Board

Recruiting

OpenNew Member Program

OpenJob/Internships

Gordon BrownVP Active Relations

Renovations CommitteeRich Flynn

Fred FleschJon Hopkins

Renovations CommitteeSteve KenahJeff Setzer

Tom KenningtonHouse Maintenance

OpenHouse Security

Steve SavilleVP Renovations/Maint

OpenActive Budget

Jim CurcioLease/Billing/Deposit

OpenLegal/Insurance

Michael AntonettiAndrew Schultz Jr.

co-VP Finance & Treasurer

Ryan BuffWeb Site

Andy Schultz, Sr.Alpha Delta Data

Paul CinquegraneGary Lambert

Annual Golf Outing

OpenOther alumni Events

Jon KnipeSuccession Planning

CommitteeChair & 4 members

Pat FlanaganVP Alumni Relations& Board Secretary

OpenPresident

• A Solid and Sustainable Financial Plan- Enabling fire code compliance mandated by the

borough- Allowing for refurbishment to bring Chi Phi on par with

neighboring fraternities with prudent leverage- Providing a self-sustaining maintenance fund to

assure long-term maintenance and upkeep

The Plan


• Raise the capital required for all major improvements and ongoing maintenance- $2,250,000 is needed- Work prioritized to minimize cost duplication- Cash-out refinance proceeds coupled with alumni

donations over 3 years enable house to be fully renovated with prudent debt burden

- Fund of ~$500,000 established to initially service debt during new brotherhood ramp-up and provide for on-going maintenance and repairs

The Plan


The 3-Year Financial Plan• Cash out Refinance Proceeds coupled with $2.25M in Alumni donations• Gut & Renovation Plan

– Shut House Summer 2008– Reoccupy newly renovated home in Fall 2010 (Sooner if funds allow)– Ramp to full occupancy by 2011 (can support cash flows at 20 actives minimum)

Priority 1 - $950K- Major systems to address while walls are open for sprinkler installation- Includes safety & security items and cosmetic repairs

Priority 2 - $250K- Floors, roof repairs, re-pointing, club room refurbishment

Priority 3 - $500K- Bathrooms in basement- Open up tube room- Commercial grade tile - Window replacement & associated cosmetic repairs- Woodwork refurbishment- Skim coat & paint

Priority 4 – $550K - Common Computers in Library

- Library upgrades - Computer Server- Maintenance Fund

The Plan


Giving PyramidTargeted Need for Pledges Payable Over 3-year Period

Level Pledge Amount # of PledgesThe Order of the Chakett Society $500,000+ 1The Scarlet & Blue Society $250,000 2The Distinguished Alumni Society $100,000 3The Leadership Society $50,000 2The Kingdom Society $25,000 10The Alpha Delta Society $10,000 20Order of the Alumni Society $5,000 30Order of the Brotherhood $3,000 60Chi Phi Supporter $1,000 70

Total Pledged - $2,250,000 Total Pledges – 198 (20% Participation)

The Financials


• A Brand New, Stronger Chapter – Rebuild the Active Brotherhood and Culture

• Renovation timeline helps assure exit of existing members• Evaluate remaining underclassmen, if applicable, and perform

membership reapplication– Over 50% of current members do not meet minimum expectations

– Reapplication process in Fall 2009

– Rebuild membership from core group who meet or surpass expectations

• Develop best practice rush (new member recruitment) program– Partner with Chi Phi National & PSU Greek Life Office

– Minimum requirements to qualify as Rush Chairman

– Recruiting events will be dry/semi dry

– Alumni Recruiting & New Member Program Chairs engagement

The Plan


• Rebuild the Active Brotherhood and Culture– Raise standards & expectations of the actives and the chapter

• Obtain University’s “Standard of Excellence” designation for fraternal organizations

• Continue with Brotherhood Board• Increase philanthropy and campus leadership• Maintain house GPA above 3.0• Clearly defined goals & expectations and consistent accountability

– Implement effective & reasonable control of actives• House parent• Weekly inspections for damage & cleaning• Open house parties and combines banned permanently• All other social functions restricted to lower level• Enforce house-wide smoking ban• Brothers will have daily duties even with a new pledge class

The Plan


Protect our Investment- Live-in house parent provides guardian oversight and

implements Housing Association and University requirements and guidelines in exchange for Room & Board.

- Self-sustaining maintenance fund provides for long term care of house while minimizing alumni fatigue resulting from ongoing requests for donations to support ‘band-aid’ approaches.

The Plan


“…I believe in the future of the Chi Phi Fraternity. When I put forth my best effort and combine that with the strength of my Brothers, we can achieve victory.”

Call to Action


• Never in the long life of (Alpha Delta) Chi Phi has the chapter been so close to being shut down permanently.

• We are that point….right now!

• We are all from different era’s and have our own unique memories of our times at 360 E. Hamilton…..but we share one common bond……..……..we are Chi Phi brothers

• The easy way out is to do nothing…..live with the memories and the friends we made

• We don’t believe this is what most alumni want, rather, we believe they want to assure the future of Chi Phi at PSU

• And we believe we CAN accomplish this if we pull together NOW !

Call to Action


SUMMARY The plan as developed by an active and dedicated group of alumni during the last 18 months is:

– Raise $2,250,000– Fill in Alumni Organization Chart– Temporarily shut the house down for renovations– Re-colonize– Protect our investment with a live-in house parent– Enact new rules for the actives

• These are radical steps----but they are needed

• Other PSU fraternities have successfully taken these steps to sustain their future…..there is no reason we can’t succeed too !

Call to Action


How will we accomplish this ?

Through YOUR financial and volunteer support

• All of us are at different stages of our lives and have different financial situations.

• Many of us are in a position to donate $1,000 to $10,000 over 3 years• Some of us could donate $25,000 to $75,000 • And a few of our brothers could fund a substantial part of this

renovation on their own with a million dollar donation• Many of us could donate some time by volunteering as a member of

the Alpha Delta Chapter Housing Association

The bottom line is everyone can give something. We need YOUR support to reach our goal.

Call to Action


How will this work ?

• First year donations will be kept in a special account and will be returned (at your request) if we do not reach $2,250,000 in pledges and/or alumni organization chart is not completed

• Because of this, and the goal to open the newly renovated house by fall 2010, we need to receive everyone’s commitment as soon as possible!

• Once the pledge goal is met, we will proceed with executing the plan

• If we do not reach our goal, then most likely the house will be sold……...and the Alpha Delta Chapter of Chi Phi will reach the end of an era.

Call to Action


Giving PyramidTargeted Need for Pledges Payable Over 3-year Period

Level Pledge Amount # of Pledges

The Order of the Chakett Society $500,000 1The Scarlet & Blue Society $250,000 2The Distinguished Alumni Society $100,000 3The Leadership Society $50,000 2The Kingdom Society $25,000 10The Alpha Delta Society $10,000 20Order of the Alumni Society $5,000 30Order of the Brotherhood $3,000 60Chi Phi Supporter $1,000 70

Total Pledged - $2,250,000 Total Pledges – 198 (20% Participation)

The Financials


Alpha Delta Chapter House Naming Opportunities

– House $500,000 + (1)– Large Clubroom $250,000 + (1)– Small Clubroom $250,000 + (1)– Library $100,000 + (1)– Bar/Party Room $100,000 + (1)– Veranda $100,000 + (1)– Chapter Room $ 50,000 + (1)– House Father Living Suite $ 50,000 + (1)– Individual Rooms $ 25,000 + (10)– Custom Bricks for Fire Place/Walkway

• Large $10,000 + (20)• Medium $5,000 + (30)• Small $3,000 +

(60)– Campaign Plaque $1,000 & other donors + (70)

Call to Action


Some current Chi Phi Alumni already Invested are…….

Call to Action


John Pursley 1941

James Jones 1952

Richard McCartney 1952

Richard Headlee 1955

Alan Larson 1960

Andrew Schultz 1960

C. Henry Barner 1961

Duane Junker 1963

Richard Krouse 1963

Richard Flynn 1967

Thomas Thomas Jr. 1967

Frank Cook Jr. 1972

Arthur Hoecker Jr. 1972

David Brockway 1977

William Marsh Jr. 1977

Ed Spangler 1977

Robert DiBella 1977

John Meyer 1978

Daniel Vogel 1984

Martin Shoup 1985

Gordon Brown 1987

Robert Martin 1987

D. Scott Hallman 1987

Mr. Douglas Muhl 1987

Gary Bradford 1988

James Curcio 1988

Mr. Walter Kuhns 1988

Jon Hopkins 1989

Paul Cinquegrane 1990

Thomas Kennington 1990

Rich Konzmann 1990

Michael Antonietti 1990

Jeffrey Swartz 1990

Eric Cerniglia 1991

Jeffrey Mercando 1992

Mr. Eric Oberfield 1992

Jonathan Knipe 1993

Vance Moss 1994

Vince Moss 1994

Chad Levant 1995

Spencer Matusky 2002

Matthew Kriebel 2004

Ryan Buff 2005

Brandon Paull 2006

Eric Balboni 2006

Adam Hiner 2007

Nick Kurjiaka 2007

Matthew Schulman 2007

Jacob Chernansky 2008

Justin Olsen 2008

Joseph Franck 2008

Jon Krause 2008

Bryan Gleaves 2009

Taner Gokce 2009

Jolin Heins 2009

Kevin Rosenbaum 2009

Matt Gannon 2009

Timothy Wikert 2009

Zachary DeWalt 2009

Jeff Paules 2010

Sean Causgrove 2010

Join Your Brothers… Help us preserve the memories and lay a new “Foundation for the Kingdom”

We Need Your Help!

Addendum

• The following slides outline some of the house requirements in more detail

• First Priorities:– Sprinkler System– Steam Heat Feeds/Returns– Overflow Plumbing for Bathrooms– Upgraded Electrical– Ceiling and Wall Repairs– Replacing Wood Doors with Metal– Upgrade bathroom fixtures– Commercial Grade Carpeting

The Kingdom’s Needs

• Second Priorities:– Replace/Refinish Hard Wood Floors– Refinish Circular Stairway– Repair Slate Roofing– Repointing– Replace French Doors – Club Room/Basement– Replace Club Room Fixtures– Replace Club Room Furniture, Carpets & Curtains


• Third Priorities:– Skim Coat & Paint All Hallways– Refinish Baseboard & Landing Woodwork– Replace Hallway Lighting– Commercial Grade Tile Hallways– Interior Repointing & Foundation Repairs– Addition of Men’s Bathroom– Window Replacements


• Fourth Priorities:– Library Upgrades– Maintenance Endowment Fund



Chi Phi Business Plan

• Form a Pennsylvania limited liability company Chi Phi Residential, LLC (“CPR, LLC”) to own, operate and maintain the income asset

• Offer Member ownership interests only to Alpha Delta Alumni• “CPR” operations shall be governed by the Member-approved “LLC

Operating Agreement”• Member ownership tax treatment to be governed according to the

Pennsylvania Limited Liability Company Act (19__)• Member’s percentage ownership is in direct proportion to their equity

investment• Member’s exposure to liability is limited to each Member’s percentage

ownership interest in the LLC• LLC may be managed by either an Owner-Member known as

“Managing Member” or by a non-owner known as “Manager”• The “Managing Member” may consist of more than one Member

• The Officers of the LLC may be composed of the existing individuals on the ADCHA organizational chart in their same roles

• The LLC officers and various committees shall develop and implement task specific positions and assignments

• The Managing Member shall out-source certain regular maintenance functions (gardening) and preventative maintenance programs, such HVAC

• Conduct job search to employ a “House Parent” to oversee on-site management (comparable to an on-site “Resident Manager” in the multi-family environment)

• Regular LLC Member meetings held on-site, and/or by video/tele-conferencing

• Managing Member shall provide quarterly Financial & Operating Statements (via ADCHA website)



• Capitalize house re-build- Raise estimated $2,250,000 house rebuild budget- Refinance any existing debt after completion of construction- Establish trust fund for start-up expenses (including debt service

as may be applicable)

• Create self-perpetuating trust fund for ongoing Operations & Maintenance (O&M)- Establish income generating trust fund for O&M



Advantages of Limited Liability Companies (LLC’s) as real estate investment vehicles

• LLC’s are generally treated as partnerships for federal income tax purposes

• LLC Member’s exposure to risk is generally limited to actual investment in the LLC (compared to partnerships in which partner liability may be unlimited)

• Pass-through taxation avoids double tax on profits (compared to corporations where income is taxed at entity level – corporate net income tax – and also taxed at individual level upon distribution to shareholders)





Advantages of LLC cont’d

• Flexibility of Partnership without S-Corp restrictions• LLC Members receive “Member Shares” (no stock or

classes of shares)• No limit to number of Members• A “Member” may consist of individuals, corporations,

partnerships, LLC’s, or any legal entity (domestic or foreign)

• LLC liquidation is generally treated as a partnership (no tax effect)

• LLC Formation and annual upkeep are simple and inexpensive and may be performed by Managing Member

• Meetings may be by conference call and by quorum• LLC causes preparation of annual K-1’s for each

Member

Disadvantages of LLC’s

• Members who are compensated must be paid by guaranteed payments which are subject to self employment tax

• Pennsylvania law controls Pennsylvania LLC’s without consideration to other States’ LLC laws

• Pennsylvania LLC’s are subject to ‘capital stock tax’ and must file a PA Corporate Tax Report (RCT-101) (compared to partnerships not so covered)

• For LLC’s treated as partnerships under federal tax law, if 50% or more of the capital and profit interests are sold or exchanged within a 12-month period the LLC terminates under federal tax law



Tax Filing Requirements

• LLC’s may be Single-Member or Multi-Member• Multi-Member LLC’s may choose tax treatment as

partnership or corporation for federal income tax purposes (Schedule C or E – Schedule for individuals)

• Pennsylvania LLC’s (no matter how taxed) are subject to capital stock tax and must file Corporate tax Report (RCT-101)



Documents

A Foundation for the Kingdom A New Beginning CHI PHI FRATERNITY ALPHA DELTA Chapter PENNSYLVANIA STATE UNIVERSITY A New Beginning