The end of LCAP

[GammaZeta]

This past week the alumni of Gamma Zeta received notice that LCAP, after about 10 years in operation, will be "going out of business" and liquidating all their property.

I received many communications about LCAP over the past two years about several "incidents" similar to what happened to Gamma Zeta, which I will not repeat here but everyone is familiar with.

However, I think we should view this as a learning experience instead of a defeat or a loss.

The first thing we should learn is: stay in the FRATERNITY business, and nothing else.

I've always questioned why a fraternity would go into the real estate business. Sure, the motives were good; help the chapters, provide housing, etc.

But in reality it turned into something much worse. Many chapters experienced the line between brotherhood and business becoming cloudy. When it was convenient to be brothers, LCAP communicated as brothers. When it was time for business, brotherhood did not exist. When it was the chapter that tried to operate as a business, LCAP pulled the "brotherhood" card.

Again, we should stick to the fraternity business. We shouldn't begin marketing t-shirts, we shouldn't begin providing classes, we shouldn't begin managing real estate, we shouldn't operate a LXA travel agency.

I also think this was a case of a good idea, poorly executed. When we hire for a position in the general fraternity, a specific education or life experience isn't always necessary to become an ELC.

But when you're dealing with millions of dollars of property across the nation, you need to have people in charge with real estate and legal experience.

I think there may be a spot at HQ for someone to help and consult chapters about property and real estate. Someone with both legal and real estate experience to help chapters get their finances in shape, form a budget and keep health and safety codes up to date.

Maybe LCAP could tranform into regional boards of volunteers to help with housing issues for chapters that request help.

In the end, we need to live and learn.

[john1082]

I agree that we need to stay with what we know and stay away from what we don't know. We can't develop enough expertise, fast enough, to go 'exploring'. LCAP was a great idea in theory but in practice did not work well at all for various reasons.

I harbor no ill will towards LCAP but I regret that it did divert out attention and energies and perhaps resources away from doing what we do best - and that is supporting undergraduate chapters in programming and membership.

Regional boards? Hmm.... A thought. Some fraternities do have regional boards, of sorts, but they don't appear to be in the property business.

[GammaZeta]

Yeah, I think I agree that it was too much of a diversion and took up too many resources that could have been better spent.

I am a big fan of regional boards. Nothing paid, just volunteers. An organization that is local enough to understand the regional chapters better than IHQ.

Maybe have one person to help with property, one to help for finances, etc. Maybe get a lawyer or two for legal issues. It wouldn't be anything forced onto chapters, just a group of alumni volunteers with experience to help out if needed.

Right now, with Gamma Zeta in hibernation (and hopefully waking up very soon), I have some time to donate to keep involved. I don't have a lot of time to focus on one chapter exclusively, but I'd like to be available if any New England chapters needed help on a smaller issue.

[LCA_Pi_1298]

What has never been clear to anyone is that the Fraternity has been in the property management business for over 60 years. Housing is a core business of the Fraternity. By most measures, many alumni identify the 'house' as their fraternal experience more so than any other thing.

The headquarters has had some role in local housing since the 1940s. The role has included the constitutional requirement that assets of a chapter be turned over to headquarters in the event of suspension of operations (something that hasn't been enforced for the past decade), the issuance of first and second mortgages, and the ownership of properties. Over those 60 or 70 years, the Fraternity frequently benefitted from housing operations, but it remains unclear today how large of a benefit it provided.

What is clear is that when LCAP spun off the housing assets from the balance sheet of the General Fraternity, the false results of the performance of the housing assets became abundantly clear. Part of the problem was a lack of understanding as to how to account for the real estate transactions properly - an issue that wasn't completely cleaned up until a 2004 audit and dated back 20 years or more. Secondly, prior to 1999 the performance of the individual properties were not tracked . When LCAP started we finally were able to understand what properties made money and lost money and by 2004 at least some of the organization was educated as to the accounting and operational issues.

Were there mistakes made along the way? Absolutely. In fact the biggest mistake was being a brother before being a property manager too many times. For example, having faith that chapters would get their acts together when several of the chapters didn't want to get their acts together. It may come as a shock to some of you, but some of our members are part of chapters that don't understand what being a fraternity means. Many times chapters that reach that low point are not able to recover. Sometimes it took an extra year or two to figure out that point had been reached and frequently at a great financial expense.

Were there successes? Yes, lots of them, and that is something that continues to be overlooked. Rhode Island, North Texas, Butler, South Carolina, Oklahoma State, and Shippensburg are all examples of chapters that grew by 100% or more after LCAP stepped in to assist with recruitment, improve the living conditions, and solicit alumni support (note that two of those three things have nothing to do property management, but any house corp officer knows they are critical success factors for any chapter and chapter house). LCAP chapters grew substantially faster and more consistently from 2003 through 2007 than any other measured subsection of chapters in Lambda Chi Alpha.

Your Grand High Zeta has chosen to take the easy way out. Instead of looking to our largest, successful peers and figuring out how to be successful ourselves, they instead decided to wipe out the existing LCAP board and bring in a new board that consisted of members who openly stated they objected to the entire concept of LCAP - they were brought in as a liquidation team and they are executing that plan. The reasons for this were simply the result of not having an understanding of the options.

The Sig Eps, Pikes, and Sigma Chis are on the list of groups that have figured out how to run a national house corporation (along with nearly all of the women's groups). Instead of doing its homework, the leadership of Lambda Chi Alpha has simply chosen to run the other way.

LCAP was never about making a profit which was probably a misunderstanding on the part of the GHZ as well. LCAP was about protecting and preserving the assets of the Fraternity. If LCAP was empowered as it should have been to seize assets of defunct chapters, rescue houses that are being foreclosed or seized by tax leins, and was subsidized by undergraduate dues to cover some of the overhead, then LCAP would have been successful and would have had sufficent assets to make a significant impact on the entire housing stock of Lambda Chi Alpha.

The sub-prime mortgage crisis and raises in commercial real estate interest rates that the country is facing are going to have an impact on the Lambda Chi housing assets as well. As loans come due in the coming months and years LCAP would have been able to be called on to rescue and preserve many of our chapters. Instead, many houses will be lost. By dissolving LCAP the Fraternity will have no mechanism to assist these chapters.

Some of the collegiate members of the client chapters of LCAP had negative feedback regarding the operation of LCAP. However, priorities were established and in place for work that got done and investments that were being made in the chapter houses. What was never clear unfortunately was that cash was always tight for LCAP. Like many house corporations, it takes about 6-10 years to make significant rent or occupancy adjustments to offset operating expenses and to become cash flow positive. LCAP is 8 years old this year and is very near the point where operations would have become cash flow positive. If LCAP had been extended for another couple of years, it would have overcome that curve and would have become the tool of the Fraternity that it was always intended to be.

The decision to fold up LCAP is a bad one and it will have lasting negative impacts on Lambda Chi Alpha. One of the greatest loses is that some of the most knowledgable housing volunteers of the fraternity have been shunned and may not be willing to share their expertise going forward. I am fortunate to be a member of a chapter that has a strong house corporation of its own since clearly our general fraternity is not willing to be a leader in the housing business going forward.

Joe Klimek

[HONKY660]

Joe you made many good points. Many fraternal groups do a great job managing properties. My girlfriends sorority, Zeta Tau Alpha, has a great, probably the best property management group all greek orgs. You would think that we would share and ask for ideas with our neighbors down the street, to be better at our endeavor into the housing market.

[AA1038]

Interesting...not one word about this on the HQ web site.

Of course, the content there is older than dirt, so I shouldn't be surprised.

When I was at Butler, HQ held the mortgage for our chapter house. The move by LCAP to come in, make long-overdue repairs (even if they did screw up the two rooms in the house--formal LR and library--that were dedicated to deceased brethren), and the like helped the chapter grow and strengthen.

Again, like the killing off of the printed C&C, an action taken to both create and kill something without conversations, at least, with a broader group of brothers.

This is sad.

Art Hebbeler

[Tom Earp]

Brother Joe, LCAP was a good idea and as many know it was not at times properly instituted. I too know of some of the many pluses, but I also have heard of some of the negatives.

Two of the negatives that I have heard from Alumni of course are UMass and Mo.Un.

One of the pluses not mentioned was Un. Ark which is a big house.

I never totaly agreed with turning over chapter assets from chapter housing corporations to IHQ no matter what.

While LCAP was a nice idea in princiable, it was as you say under funded and with out that it became a quagmire and got lost in the shuffle.

But what seemed wrong with the whole idea was taking control of property and not having the availability to run the program.

GammaZeta, as far as regional Boards as you are refering to will not toataly work. There has to be a central authority and we have that in place.

You will find that having a volunteer group soon runs into problems with people getting burned out and quicking. While good in theory it over the long haul will not work. I have been working with my Zeta for 42 years and am getting burnt out as many will do.

The demise of LCAP may make some happy, but, if run in the proper way would be very good in protecting the property for the future. Trying to build a new house today is very costly. I know as we just had a new house built and we as the house corporation owned the property. 3 3/4 million just doesn't get you much like it used to especially in college towns.

[john1082]

The shut down of LCAP is a relatively new (last month or so) development. I suspect that the next issue of the C&C should have a notice regarding the closure.

Originally Posted by AA1038

Interesting...not one word about this on the HQ web site.

Of course, the content there is older than dirt, so I shouldn't be surprised.

When I was at Butler, HQ held the mortgage for our chapter house. The move by LCAP to come in, make long-overdue repairs (even if they did screw up the two rooms in the house--formal LR and library--that were dedicated to deceased brethren), and the like helped the chapter grow and strengthen.

Again, like the killing off of the printed C&C, an action taken to both create and kill something without conversations, at least, with a broader group of brothers.

This is sad.

Art Hebbeler

[GammaZeta]

A word of advice for people in authority;

Never complain, never explain.

[Tom Earp]

Oh and never say anything?

Remember, we as LXA Brothers are the voice in most cases!

GammaZeta, have you ever been to a Regional or National meeting?

Many of us have been there and see how it is supposed to work!

[Shane Foley]

I don't know if the decision to close LCAP is a good decision or not. I would like to say that there should be more transparecy regarding these types of significant decision. Joe was also correct that good (and generous) alumni were shunned by this process. I just hope all the numbers work out in the end (read between the lines)!

[EM1843]

I'm sad to see LCAP go as I thought it was a good idea which had a number of successes. I was hoping that UF would be able to get some help funding upgrades to our house through them.

[GammaZeta]

Yes Tom, I have been to many LXA meetings.

What Brother Klimek says is a clear signal of what one of LCAP's problems were.

"that don't understand what being a fraternity means"

THAT is one of the problems. From what I understand, it was never in LCAP's authority to place judgment on what being a fraternity means. Why was LCAP suddenly in charge of what chapters to close, what chapters should recolonize, what chapters violated risk management, what chapters didn't meet their recruitment goals, what chapters should do for ritual, etc.

From what I have heard from other chapters and witnessed, LCAP seemed to exceed their powers. They didn't just focus on real estate, but started to overstep what they were set up to do by getting involved in recruitment, ritual, starting new chapters, setting house policy, etc. The line between General Fraternity and LCAP started to blur. After a while, it wasn't just IHQ making the calls on risk management, recruitment.

However, I don't blame LCAP for doing so. It was inevitable for the position they were in. For example, recruitment. How could LCAP NOT usurp power from IHQ in recruiting to make sure that a house they owned and rented to a chapter would meet full occupancy.

Maybe the lines between the two organizations became too blurred and distorted.

[john1082]

I've not heard of LCAP being involved in these portions of chapter operations. Given the physical distance between LCAP in Indy and the chapters under LCAP 'care', I would really wonder if LCAP was really involved in all these things.

I've been wrong before but in this case I haven't heard what others apparently have heard.

[PiLambda1]

For cryin out loud would somebody in my chapter please hit the powerball and build us a house? I've been active for 4 years already...and no 20-room house to enjoy, remember, and grow in...

Do your part PLZ...buy a ticket!