The end of LCAP

[GammaZeta]

"Brothers When Convenient." Ya know, when LCAP took over Gamma Zeta,they said they would take brotherhood out of the equation. Then when we had to SUE them to get releif (we won), they accused us of NOT being brothers.

[GammaZeta]

Ok, ok, ok.

I've been holding off doing this for a while. Five years ago I originally joined this board to tell others about what shady business practices LCAP had pulled on Gamma Zeta.

When I told the TRUTH about what happened between LCAP and Gamma Zeta, people called me a liar, that I was bitter, that I didn't know what I was talking about, tha LCAP was a stand up group for LXA and that us trouble makers at Gamma Zeta were always in the wrong.

Well, I HAVE to say it...

I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO...

Wow, does that feel good.

[docroc67]

Originally Posted by GammaZeta

Ok, ok, ok.


Well, I HAVE to say it...

I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO, I TOLD YOU SO...

I KNEW YOU WOULD! I KNEW YOU WOULD! I KNEW YOU WOULD! I KNEW YOU WOULD! I KNEW YOU WOULD! I KNEW YOU WOULD! I KNEW YOU WOULD! I KNEW YOU WOULD! I KNEW YOU WOULD! ... AND SO FORTH AND SO ON!
Yours in ZAX,

ZetaUpsilon

[GammaZeta]

DocRoc, at least give me SOME credit for waiting this long to do it.

I originally wasn't going to, but that last letter by Lenoxxx forced me to.

[EE-BO]

Originally Posted by lenoxxx

They are holding us liable for past ‘losses’. A property with a reasonable value of around $400,000 could be OUR cess-pit again for $806,000! Thanks LCAP! I was quite astounded by the large amount of losses, i wondered how they could have gotten a loan on the property with that kind of negative cash flow, and then they showed us their books… the past 3 years worth, because they don’t keep any more than that. They were calculating ‘depreciation’ with their losses. So a year they take in roughly $13,000 positive cash flow, the house ‘lost’ $30,000 in value, so that year they lost $17,000 on the property.

Please forgive me dropping into this forum, but I just had to respond to this. I am very sorry to hear about what is happening with this chapter and their house. Assuming the facts as presented are accurate (I am just saying that since I only know what I have seen here- I have no reason to not believe them), then this is far beyond bad brotherhood.

Let's say the house is worth $400,000 as you say. $30,000 a year in depreciation is pretty steep for two reasons.

First, land is not depreciable- and certainly not for tax purposes! (more on that in a moment.)

Second, even assuming the structure itself is worth 75% of the total value of the property including the land- that would still mean they are depreciating the house in 10 years time ($300K/$30K a year) and that is overly aggressive. 15-40 years is a more typical depreciation period for a structure.

What kind of organization is LCAP? How is it designated? Is it a non-profit entity? Do they have to prepare annual audited reports?

If so, then I would encourage you guys have a legal/accounting whiz or two do some serious digging. Because if the numbers they are presenting to you are what they are using to do their own internal accounting- then there are potentially issues based on the information I am seeing here.

Next- if LCAP is a non-profit entity, then what is its mission statement?

If the mission statement is, as I assume, to provide housing for members of the non-profit entity LXA- then by trying to force you to purchase the home in excess of fair market value they are violating their non-profit purpose and that is your best ammunition to hit them hard and force them to sell a new Housing Corporation the property at a fair price- which would be LCAP's initial investment LESS any net returns they have seen, and by that I mean tangible returns- none of this over-aggressive depreciation nonsense.

If we were talking about a public company, I would assume there is a lot here I do not know since this deal- as described on this site- is so far afield of what is appropriate. But when you get into the realm of non-profits and non-business management of entities like fraternities where politics can take over common sense very quickly, then this scenario is actually pretty believable even though a seasoned businessman cringes at the sight of it.

The stupid thing here is that if you do not raise the money they are demanding, LCAP has to sell the house on the open market for a lot less money and then LCAP risks costing LXA a chapter- or at the very least doing it serious damage. It becomes a lose-lose for everyone. The only reason I can imagine this is happening is that those balloon notes that were referenced have crippled the organization and they need to get extra money in some places to make up for capital losses or payment demands in other places (which is also legally tricky.)

Best of luck to you guys in this. What a mess!

PS- I almost forgot. It would be interesting to know what kind of loans LCAP was taking on. An organization in that kind of role is expected to invest very conservatively. If they were riding the rails in getting loans, that is potentially another actionable issue for which the Board- and not individual chapters- could be held personally financially responsible.

[GammaZeta]

EE-BO, that is a GREAT post. A lot of answered questions still linger about MILLIONS of dollars.

I believe that LXA should open EVERY BOOK AND EXPENDITURE of LCAP and post them online, immediately. Salaries, travel, expenses, repairs, etc.

Millions of dollars were put into the hands of people with NO real estate experiece, NO landlord experience, NO construction experience, NO management experience.

What experience did they have? They were friends with and sucked up to the higher ups.

Where did that get us? IN THIS MESS.

LCAP IS LXA'S DIRTY, DARK SECRET.

OPEN THE BOOKS NOW!!!!

[EE-BO]

Originally Posted by GammaZeta

Millions of dollars were put into the hands of people with NO real estate experiece, NO landlord experience, NO construction experience, NO management experience.

Again, assuming this is how things really are (just my way of being open-minded since this is not a situation I know about), that is a real shame because I would think the key advantage of a centralized Housing Corporation for an entire fraternity would be the ability to have one management team of alumni who were experts in real estate, business law, property management etc.

Beta is going the complete opposite direction. We never had nationally centralized management of chapter housing, but these days there is no support at all- not even to give alumni basic assistance with small legal questions and the like. I do not like this at all since it pretty much "hopes" that every chapter will have alumni with the right expertise to run a housing corporation.

I very much like the concept of what LXA did, but it appears the trouble was in the execution.

Being on my chapter's housing corp. I hear a lot of stories about other chapters and even other fraternities since a lot of us keep in touch to share advice and the like.

Many years ago, there was a particularly strong chapter of a fraternity at a very good school which had a Housing Corporation that owned the house outright. The original donors had long since passed away and at the time of this incident the Board members were not people who had put in much, none in most cases, money to the housing corporation- nor was there really any appropriate expertise.

After 2 major renovations to the house in a 10 year period, there was a new mortgage taken out and the housing corp did not want anything to do with it, so 2 alumni took on personal liability. Then when the chapter had some rough times numbers-wise, the housing corp did nothing and the 2 alumni panicked and sold the house without telling anyone for well below market- in fact below tax appraisal- to a real estate speculator who flipped it for a 6 figure profit not long after. The proceeds barely paid off the second mortgage and so there was almost nothing left where just weeks before there had been a $1 million + house.

This is one of the worst stories I know of, but I have heard similar ones. Housing Corporations tend to have very strict charters and rules, but if they are not being followed- and if the properties are not being well managed- then multi-million dollar assets can be completely screwed up by people who are in charge of them but never made any contribution to their creation and maintenance.

A well-run central housing corporation authority could avoid those risks, and I am just sorry it appears that you guys' case it was the same old story that happens to all of us- only now on a larger scale.

For all practical purposes, I doubt any of the LCAP Board will ever suffer for anything they might have done inappropriately. But the questions I outlined above would at least help any movement from the alumni in determining just what they are facing and how to proceed. If LCAP is a non-profit entity or has some other special tax designation, then that gives outsiders with a connection to the entity (ie the alumni) a lot of ability to force the books to be opened.

The good news is that when people do something inappropriate with someone else's money and there is a paper trail, it is not too hard to knock them into shape fast. You just need to know where to get the right baseball bat.

[GammaZeta]

"The good news is that when people do something inappropriate with someone else's money and there is a paper trail, it is not too hard to knock them into shape fast. You just need to know where to get the right baseball bat."

Only problem is, NOTHING WILL EVER BE DONE.

Will HQ take any acton? Never. They are just as at fault. They ALLOWED incompetence to run LCAP. They hired the people. They allowed it to go on for years.

There never was a business model.

Like I said before, they should have hired an outside, accountable property management firm to run the properties. Ownership would still be in LXA's name.

But this isn't the best part of it!!!!

In a few years, we will be in the SAME exact situation. More buddies will be hired, actions will be unaccounted for, no one will question, and those that do will be put into a witch hunt.

This happens all the time. I'm beginning to think the people at LCAP/HQ care LESS about the general fraternity as time goes on and MORE in lining their own pockets and making jobs for themselves and buddies.

I have a solution thought that I will be posting shortly.

[lenoxxx]

I like what our new poster from Beta is saying.

I think that in retrospect LCAP, never listened

and now is still not listening to anyone, and if you listen to the kid from Michigan State- they are using the fraternities laws to hide behind.

Lame

[EE-BO]

Originally Posted by GammaZeta

Only problem is, NOTHING WILL EVER BE DONE.

Will HQ take any acton? Never. They are just as at fault. They ALLOWED incompetence to run LCAP. They hired the people. They allowed it to go on for years.

There never was a business model.

Like I said before, they should have hired an outside, accountable property management firm to run the properties. Ownership would still be in LXA's name.

But this isn't the best part of it!!!!

In a few years, we will be in the SAME exact situation. More buddies will be hired, actions will be unaccounted for, no one will question, and those that do will be put into a witch hunt.

All very solid points that I think can be applied to many fraternities today as national office structures and fundraising models are fundamentally shifted.

I think in many cases the shifts are intelligent approaches to a changing world. The difficulty is that leadership are often reluctant to be transparent about what they are doing because they know there will be criticism. But at the end of the day, there will always be critics- and so when you are not forward with your plans you just alienate even more people who are more upset about being left in the dark than about the long term game plan and how it can be practically executed.

With something like LCAP there is an inherent additional difficulty since you are talking about housing. That is the one aspect of fraternity life that absolutely demands a businessman's approach, and to put it in the hands of people with a different mindset and skill set is dangerous.

As to your comments about professional management and getting into the same mess every few years- this is, I think, the sad story of every fraternity at the chapter, alumni and national level. Preserving and passing down historical knowledge to capable leadership is very difficult.

Add in real estate management and running a non-profit that engages in mortgage transactions, and an entity like LCAP has far less ability to financially absorb periods of mismanagement- plus the general implications of bad decisions can have an incredible impact. And note that mismanagement does not necessarily mean fraud or malice. More often mismanagement is the result of people getting in over their heads.

If a fraternity adopts a policy that proves unpopular or ineffective, they can just change it if the leadership realizes it will cost them membership.

But poor management of a housing entity that has engaged in legal transactions with banks or other third parties, and must manage significant non-cash assets under the scrutiny of the IRS and other legal bodies has far less breathing room to make mistakes. And to be fair to LCAP- given the massive changes in the housing market in recent years including property appreciation, scarcity of real estate in proximity to major universities and a whole new range of mortgage options which are much less stable than traditional mortgages; it is quite possible that these were well-intentioned people, perhaps even somewhat familiar with real estate, who got caught up in a mess.

The right answer is to get the numbers and find out what really happened. And yes, the witch hunt concern is a valid one. Quite frankly, if LCAP and LXA are not letting out financial information to alumni who have the status and education to be of assistance- you are going to have to find guys like that who are willing to risk being ostracized for doing a good deed for the benefit of the present and future of LXA.

If you want a financial expert to look at whatever public reports are available on LCAP- PM me and I can at least take a closer look. When I first came to this site I had just become an advisor to my chapter, and Tom Earp was a HUGE help to me- and has been all this time- giving me advice on how to do my work- and his advice has been key to my success. If I can help you guys out in some small way in return, I am happy to do it.

I think goal #1 is to find out what is really going on and then decide later the extent to which there were inappropriate or reckless actions later. Odds are this is just an honest effort that went bad because people did not know what they were doing. That does not make those guys bad brothers, but it still does not help the chapters who might get unfairly messed over in the short term.

[EE-BO]

Originally Posted by lenoxxx

I think that in retrospect LCAP, never listened

I think non-profits naturally chase off a lot of potential business leaders because so often it is about personalities and politics to an extent that can bring financial ruin or short term disaster.

In all the things I do in life, dealing with centralized non-profit organizations is the most frustrating. There is just too much of a personal stake going on there most of the time. And I have run into plenty of people- in Beta and elsewhere- who would rather see the whole thing fall apart than admit their personal vision is flawed or needs to be part of a comprehensive team effort.

When I came onto the housing corp for my chapter, one of the first Board members we got rid of was someone who flatly stated that if his specific vision did not come to light then it would be better for our 120+ year old chapter with a clean continued existence to fold and be recolonized under the direction of what he wanted (which was not even totally in line with our national's current policies on colonization.)

[lenoxxx]

EE-BO;

Just to give you a clear cut example, which re-inforces what you said.

With our LCAp Property at Shippensburg, we asked several times to get leases for the house in Jul/August to have them for when school starts- most leasing is done by the end of october for dorms, and off campus. In addition, everyone does 1 year leases so kids can live in houses for 12 months- exception being dorms, and our house was off campus.


We were given leases by christmas at the earlies, and told it ws impossible to get them when we needed it (thus hurting our ability to help them make money) and they went with semester/summer/ semester leases. this actually hurt renitng and cost revenue by making a rent that was way too high for the market on a monthly basis. And kids abused it every summer by just living there and not paying. We had two alumni suggest going to a 12 month lease for everyone with less per month, but more months. Kids at SU were ok paying 325/ mo for 12 months, but not 420 for 7 months (and you would never get someone to sign a summer only lease). Sort of like the car payment idea of "what can you pay per month" do determine what kind of car you buy. Illogical, but it was how things were.

This was presented as a way to make more renters interested and raise revenue- we were told- it was too hard to change the way LCAp did business. And it was flatly refused- they floundered and we had alumni quitting in disgust. This would have had less paperwork (and it would have taken about 15 minutes to change the contract verbiage to have one contract, not 3) and built more profit and revenue.

There was no excuse for this but ego and hubris In my humble opinion

[GammaZeta]

Can't blame the housing market for LCAP's problems. Property near a university/college are ususally always the most desirable, in demand property in any housing market. They also are able to withstand any major increases or decreases in the housing market.

[rgrater]

Has anyone who has received a offer from LCAP to repurchase their house had the item "write down of property value" in their purchase price calculation, and if so, did you get any explanation as to what this charge was? LCAP included a $316,041 line item for this in our price to repurchase our house, but I still cannot figure out what this charge was for . . .

[GammaZeta]

Also, I would recommend an immediate title search, specifically looking for mortgages.

For instance, on Gamma Zeta, LCAP immediately took out a mortgage on the property with the Lambda Chi Ed. Foundation for $175,000. Good luck trying to get another mortgage from a lending institute with another outstanding mortgage on the property.

Great job, LCAP. Screwing the alumni and undergrads out of their homes, making it impossible for them to ever get their houses back.

I hope you sleep well at night knowing your mismanagement has caused great pain and suffering to thousands of undergrad LXA's that don't know where they will be living next year.

Bravo.

*For clarification; I am referring to the PRE-collapse LCAP, NOT the current volunteers who were put in the difficult situation of trying to fix this mess without bankrupting the fraternity.