MARQUETTE UNIVERSITY

MEMORANDUM FOR FILE

On March 12, 1997 a meeting was held at the Foundation office to discuss the financial condition and needs of Marquette University (University) as it relates to the Campus Town Project. The meeting was attended by:

Marquette University Representatives:

Reverend Patrick J. Burns, S.J.

Kenneth H. Smits , Vice President

Beth Corbin , Controller

Bradley Foundation Representatives:

Michael S. Joyce

Robert N. Berkopec

Beginning in 1993 Marquette University issued bonds and other notes to fund the acquisition, construction and renovation of the Campus Town Project. Total funds expended for the Campus Town Project was in the $50,000,000 to $60,000,000 range.

Campus Town Project consists of two not-for-profit organizations:

Campus Neighborhood Association, Inc. -- Primarily involved with residential and apartment units

Hilltop Enterprises, Inc. -- Primarily involved with the commercial portion of the Campus Town Project

Campus Town Project has achieved many of its non-financial goals including:

1.	Reduction of crime (40% reduction)

2.	Elimination of drug houses and the number of liquor licenses

3.	Enhancement of neighborhoods with some increase in property values

4.	Some new development from other private parties but such development is far below expectations

Campus Town Project has not achieved its financial goals especially related to the residential and apartment units. The commercial unit portion has positive cash flow but is not sufficient to fund the residential and apartment units financial shortfall.

In retrospect the University representatives identified the following problems:

1.	The rental revenue projections were unrealistic.

2.	Rehabilitation costs are higher than anticipated. Additional funds of $2,000,000 to $5,000,000 are needed to upgrade the current properties.

3.	The purchase price for acquiring properties may have been excessive. The University representatives indicated that the estimated market value of the properties is approximately $15M - $16M versus the related debt outstanding of $33.7M .

Outstanding debt at June 30, 1996 associated with the Campus Town Project is summarized below:

($000's omitted)

CNAI Series 1993 A Revenue Bonds,

5.3% to 5.7%, maturing through 2018	$23,340

CNAI mortgage payable, 7.0% to 10.5%,

due in various installments through 2005	1,372

CNAI note payable, non interest bearing,

monthly installments through 2000	542

CNAI note payable, 7.25%, monthly installment

through 2000	4,209

HEI note payable, 4% maturing through 2015	4,170

CNAI note payable, 10.0%, monthly installments

through 1999	31

$33,664

The net effect of the aforementioned problems is that approximately $2,000,000 of annual debt service cost associated with the Campus Town Project must be funded from the other unrestricted sources of the University. This financial drain is significant since the University has experienced an enrollment decline (12,000 in mid 80's to 10,000 in 1997) and related operating losses associated with the educational activities of the University.

The good news is that Marquette University is still a relatively financially sound organization as exhibited by the following financial highlights for the year ended June 30, 1996:

($000's omitted)

Total assets	$445,302

Investments at cost	$169,260

Net assets	$290,726

Notes and bonds payable	$95,565

Statement of activities (before accounting changes):

Unrestricted operations	($6,559)

Temporarily & Permanently Restricted	12,924

Campus Neighborhood Associates, Inc.	($4,953)

Hilltop Enterprises, Inc.	14

Milwaukee Medical Research Foundation	($434)

Consolidated Total - Excess revenues over expenses	$992

The University has instituted a number of initiatives to deal with the overall University operation and the Campus Town Project including:

1.	Studies by Arthur Hill (Campus Town Project alternative strategies) and Arthur Andersen (general operations evaluation)

2.	"Right sizing" initiatives to balance education resources with reduced enrollment

3.	Implementation of formal fund raising campaign:

Initial silent campaign	$25M

Future long range campaign	$250M

(The priority for the initial silent campaign

funds would be for debt service or debt retirement)

The alternative strategies for the Campus Town Project include:

1.	Retain entire project

--	Requires at least $2,000,000 annually for debt service funding.

--	Additional $2M - $5M needed to upgrade current properties.

2.	Sell all properties or at least the housing and apartment units

--	Since the market value to loan value is only about 50% at least an additional $15,000,000 would be needed to defease the bonds.

--	The ideal situation is to sell all properties as a package but achieving this goal is remote.

According to the University representatives the sell option is preferred since the University would rater not be a property manager.

The University representatives did not make any specific request to the Bradley Foundation. Possible alternatives include:

1.	One or more year grant commitment to fund all or portion of the unfunded debt service payments. Temporary funding of the debt service payments would buy some time for the University to obtain contributions from its planned fund raising campaign. Grant could be structured as a challenge grant.

2.	Direct grant to University to retire a portion of the debt. Outstanding debt with higher interest rates totals approximately $5,612,000 at June 30, 1996.

3.	Program related investment (PRI) to permit retirement of the aforementioned $5,612,000 of debt. The PRI should have little or no interest with liberal repayment terms to have a meaningful impact.