Status of Brauer Museum artwork slated for sale unclear as Moody's downgrades Valparaiso University's rating

Chicago Tribune

05-05-2025

A Valparaiso University spokesperson said Monday that the university has 'made enough progress' in its plans to sell three cornerstone pieces of artwork from the Brauer Museum of Art on campus to move forward with planned dorm renovations.
The exact status of the artwork remains unclear.
'More information will be released to campus regarding some of the sale details in the coming days,' Michael Fenton said in a Monday email to the Post-Tribune. 'As stated in our original plan, the sale of these paintings was to fund the renovations, which are scheduled to begin this summer and last until Fall, 2026.'
The three works in question are 'Rust Red Hills' by Georgia O'Keeffe, Frederic E. Church's 'Mountain Landscape,' and 'The Silver Vale and the Golden Gate' by Childe Hassam.
According to appraisals received by the university, the fair market value of the O'Keeffe is estimated at $10.5 million to $15 million; the Hassam, between $1 million and $3.5 million; and the Church at $1 million to $3 million.
Fenton has said that the projected cost of renovating Brandt Hall and Wehrenberg Hall for first-year students is approximately $8 million. The renovated dorms are slated to have a gallery displaying lesser-known works of art from the Sloan Trust, which provided directly or indirectly for the three paintings being sold off.
'I can confirm that we have made enough progress to move forward with the planned resident hall renovations,' Fenton said.
The update of sorts comes on the heels of a Thursday article in Bloomberg that Moody's Investor Services, Inc. has downgraded Valparaiso University two notches to a junk rating, which could, per the article, raise the university's borrowing costs.
In an April 30 report, Moody's noted that 'the highly competitive student market poses ongoing difficulties for enrollment management. Inability to boost net tuition revenue will further limit financial reserves and the university's capacity to address operating deficits in the short term.'
The negative outlook, Moody's said, 'reflects the potential for continued enrollment challenges resulting in pressure to balance operations.'
Moody's also said the university's 'substantial wealth, totaling nearly $350 million in cash and investments,' as well as strong donor support and its regional reputation, weighed in the university's favor.
'Moreover, management's efforts to restructure operations to cut costs and increase revenue are favorable for long-term prospects,' the report stated.
Fenton said via email that the university will continue to work with Moody's to show everything the university is doing to further strengthen its financial foundation, implement its strategic plan, and address the challenges facing higher education.
'The University is undertaking innovative enrollment strategies, a comprehensive fundraising campaign, and reinvestment in campus operations,' Fenton said.
'As Moody's points out in its statement, we are confident in our ability to continue to meet our mission as a Lutheran institution that prepares students not only for successful lives and careers, but also as servant leaders in church and society.'
Both the university's Moody's rating and its enrollment have struggled in recent years.
Moody's downgraded the university's bond rating two years ago as well. At its peak, in 2016, the university's bond rating was A2 but it's been slipping since then and is now Baa2. The fact that the drop coincided with the university's decreasing enrollment was not a coincidence, a Moody's official said then, and news about the sale of the artwork also was a factor that Moody's took into consideration when doling out Valparaiso University's rating in 2023.
Valparaiso University's fall and new student headcount both dropped in the past two years after numbers began to climb slightly in 2022, as the direct impact of the brunt of the COVID-19 pandemic began to wane. Still, according to enrollment figures on the university's website for August, both numbers are below where they were in the fall of 2019 before the pandemic began.
The university had 852 new students in August, compared to 1,004 five years ago. Likewise, this year's total fall headcount was 2,598 students, compared to 3,521 in fall 2019. Only 16 students from the latter count were in the university's law school, its last cohort before it closed.
The university filed a petition almost a year ago to move forward with the auction of the art from the Brauer Museum to fund freshman dorm renovations, noting a $9 million deficit and declining student enrollment.
A Porter Superior Court judge ultimately granted the petition, which required modifying the trust that provided the artwork to allow for the sale.
Valparaiso University President José Padilla first announced the plans in February 2023, garnering stiff criticism from the campus community, including faculty and students, as well as the art world.
The faculty senate issued a vote of no confidence for Padilla in the fall. He has announced he's retiring at the end of the year.