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To all graduate brothers:
As you may know, we are moving forward with a purchase of a fraternity house at 447 W. College Avenue, and moving out of Heritage Grove. Please accept my sincere apologies. We should have notified all of the brothers of this change in direction much sooner. There really isn’t an excuse for it, although I can tell you that since we were notified of the exorbitant release price for the Heritage Grove property on January 10 (a full year after we began asking them for cost information), we have been working diligently to secure Phi Sigma’s place at FSU.
Here’s some information that I’ve developed to explain our decision, and please accept my apologies for the delay in letting you know. Please know that this was in no way intended to hide information from the generous graduates who have supported this effort, but an innocent oversight.
Heritage Grove property – we currently rent here, and the five year window to purchase the building was open in January 2009. This was a bond-issue project, so it has some different aspects. We’ve had the property “snap” appraised based upon the revenue it can generate (500 per month, 48 units) at 2.4 million. The Leon County Educational Facilities Authority is asking for a “release price” (that is, the amount of the bond remaining, divided by the number of properties there are to sell – 8 -) of 3 million.
The primary reasons for not moving forward with a purchase at Heritage Grove were:
$3,600 per month association fees once we purchase the house (this totals nearly $45,000 per year in HOAA costs alone, which would have broken the back financially of the fraternity)
Asking price is $500 k above what we can pay, or what a lender would lend
Down payment requirement is larger than what we have in the bank right now.
Not a true purchase, 75 year lease
The Leon County Educational Facilities Authority isn’t open to creative financing options (like holding a second mortgage for us)
When we discovered that the Heritage Grove property was not an option for us, we immediately began searching for an appropriate place for FIJI at FSU. What we found was the property at 447 W. College Avenue. 447 West College Avenue is a greatly renovated property on College Avenue and is scheduled for completion Summer of 2009. In contrast to the property we now rent at Heritage Grove, this property is a more traditional-style fraternity house. On the first floor there are three bedrooms and large common living, dining and study rooms. Upstairs there are 10 bedrooms with bathrooms, each with double occupancy. The developers have an asking price of $2.1 million, and are assisting us with creative financing options.
Primary reasons for moving forward with the 447 W. College Ave. property were:
Proximity to campus – it’s one block from Westcott Fountain
More traditional style house that the undergrads like, and we also “grew up” with at 922
Price is lower than at Heritage Grove
No association fees
True purchase, not a lease
The developers will hold a substantial second mortgage for us
The undergraduates are instituting a parlor fee to assist in payment
All of the graduate brothers who have seen the house have been excited about the prospect of moving into a more traditional style fraternity house, and the undergraduates are thrilled about the prospect of moving to a great house only one block from Westcott Fountain. They’ve instituted a $100 per semester parlor fee for all brothers not living in the house, and had a waiting list of more than 40 brothers waiting to sign leases at $500 per month.
Many graduates have expressed a desire to see how the cash flow from the property will “shake out” over the course of a year, so here are some financials for your information:
Revenue generation:
26 leases @ $500 per month - $13,000 per month
$100 parlor fee per brother (not living in the house), per semester = $15,000 per year, or $1,250 per month
Current conservative graduate donation stream is $1000 per month – the undergrads are starting a fundraising initiative – a graduate dues program of $18.48 per month – the more people that sign on to that after we purchase the house, the more per month we will see coming in.
Payments responsible from House Corp:
Payment on Mortgage of 1,900,000 at %6.125 for 25 years: $11.927.28
Property Insurance – $500.00 per month
We don’t owe property tax, since we are non-profit, and the bank isn’t requiring PMI. The undergraduates will be responsible for utilities, cable, internet, pest control, etc. so Delta Colony’s costs are fairly limited.
Monthly income: $15,250.00
Monthly liabilities: $12,427.28
This leaves $2,822.72 each month to go toward the maintenance and reserve fund.
We are going to require 12 month leases, so we don’t anticipate flagging revenues in the summer. Also, as the fraternity grows, so do parlor fee collections.
Thank you for your generous support. Without graduates like you, we would not be moving forward to a new house. Your support is greatly appreciated. Please feel free to contact me with any further questions.
Sincerely,
Rob
Rob Klepper
Geiger & Associates
1846 Junwin Court
Tallahassee, FL 32308
850/942-6685 (phone)
850/933-8762 (cell)
850/942-1057 (fax)
rob.klepper@geigerpr.com
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