A Foundation for the Kingdom A New Beginning

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A Foundation for the Kingdom A New Beginning

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2. Memories The Current Situation Survey and Findings The New Vision The Plan Call to Action Overview

3. Memories CHI PHI-- What are your memories?

4. The Memories How do we ensure that future young men have the same opportunities?

5. 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

6. ……Fraternities still offer a unique and maturing experience to learn leadership and create life-long friendships! The Current Situation

7. 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. The Current Situation

8. 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 Current Situation

9. The Current Situation 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

10. 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 The Current Situation

11. The Current Situation 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

13. 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

14. 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

15. The Plan

16. 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

17. 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

18. 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

19. Giving Pyramid Targeted Need for Pledges Payable Over 3-year Period Level Pledge Amount # of Pledges The Order of the Chakett Society $500,000+ 1 The Scarlet & Blue Society $250,000 2 The Distinguished Alumni Society $100,000 3 The Leadership Society $50,000 2 The Kingdom Society $25,000 10 The Alpha Delta Society $10,000 20 Order of the Alumni Society $5,000 30 Order of the Brotherhood $3,000 60 Chi Phi Supporter $1,000 70 Total Pledged - $2,250,000 Total Pledges – 198 (20% Participation)

20. 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

21. 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

22. 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

23. “…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.”

24. 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 !

25. 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 !

26. 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.

27. 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.

28. Giving Pyramid Targeted Need for Pledges Payable Over 3-year Period Level Pledge Amount # of Pledges The Order of the Chakett Society $500,000 1 The Scarlet & Blue Society $250,000 2 The Distinguished Alumni Society $100,000 3 The Leadership Society $50,000 2 The Kingdom Society $25,000 10 The Alpha Delta Society $10,000 20 Order of the Alumni Society $5,000 30 Order of the Brotherhood $3,000 60 Chi Phi Supporter $1,000 70 Total Pledged - $2,250,000 Total Pledges – 198 (20% Participation)

29. 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)

30. Some current Chi Phi Alumni already Invested are…….

32. Addendum The following slides outline some of the house requirements in more detail

33. 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

34. 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

35. 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

36. Fourth Priorities: Library Upgrades Maintenance Endowment Fund

37. 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

38. 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) Chi Phi Business Plan

39. 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 Chi Phi Business Plan

40. 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) Chi Phi Business Plan

41. Chi Phi Business Plan

42. 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 Chi Phi Business Plan

43. 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)

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