It’s plausible that it was an error in the initial reasoning for buying it, but CEA will additionally have to likely take a huge loss on selling it, and I think it’s unlikely that that makes sense from a cost-effectiveness standpoint.
My vague sense, partially from the Open Philanthropy update is that reputation management was the primary consideration here.
I mean it in the sense that they will have to sell substantially below market value if they want to sell it quickly.
This kind of property tends to have huge bid-ask-spreads and the usual thing to do is to continue operating the property while looking for a buyer (my guess is they would succeed at selling it eventually at market value, but it would take a while).
the usual thing to do is to continue operating the property while looking for a buyer
Is that true even when “operating” means “making commitments to events many months out”? Which I would expect to make the building hard to sell.
(Though I guess you could switch to a new operating mode where you only do bookings on quite short notice? But I expect that would lose a very large part of the value of events since many of the people you want to attend can’t do things on 3w notice)
Sales for this kind of property would almost always have many months of notice, so I don’t think scheduling things 6 months in-advance would deter potential buyers.
It would be pretty normal and standard for a buyer to have to wait 6 months before they can take possession of the property, so I don’t think this would matter that much. And my guess is 6 months is plenty of time for Wytham to provide most of its value.
So the question is basically whether the (upkeep costs + opportunity cost of money—benefit from events) is more or less than discount from selling quickly?
We don’t know from this announcement that they are planning to prioritise rapidity of sale over time-adjusted return—it could still make sense to not continue e.g. paying as many salaries, and to have declared it shut down as a project.
Yes, totally possible. I am just specifically claiming that given that the cost of capital is one of the major expenses for this project, it would be surprising to me if it wasn’t worth the marginal cost of operating it on financial grounds, at least until some kind of buyer was found.
I am trying to make a pretty concrete claim about how I expect a benefit calculation to come out if done well, and definitely could be wrong (the thing that I have higher confidence in is that this decision wasn’t very sensitive to such a cost-benefit calculation and seems more driven by other factors).
It’s plausible that it was an error in the initial reasoning for buying it, but CEA will additionally have to likely take a huge loss on selling it, and I think it’s unlikely that that makes sense from a cost-effectiveness standpoint.
My vague sense, partially from the Open Philanthropy update is that reputation management was the primary consideration here.
What do you mean by take a huge loss? I’m not sure paper losses are relevant here.
I mean it in the sense that they will have to sell substantially below market value if they want to sell it quickly.
This kind of property tends to have huge bid-ask-spreads and the usual thing to do is to continue operating the property while looking for a buyer (my guess is they would succeed at selling it eventually at market value, but it would take a while).
Is that true even when “operating” means “making commitments to events many months out”? Which I would expect to make the building hard to sell.
(Though I guess you could switch to a new operating mode where you only do bookings on quite short notice? But I expect that would lose a very large part of the value of events since many of the people you want to attend can’t do things on 3w notice)
Sales for this kind of property would almost always have many months of notice, so I don’t think scheduling things 6 months in-advance would deter potential buyers.
It would be pretty normal and standard for a buyer to have to wait 6 months before they can take possession of the property, so I don’t think this would matter that much. And my guess is 6 months is plenty of time for Wytham to provide most of its value.
So the question is basically whether the (upkeep costs + opportunity cost of money—benefit from events) is more or less than discount from selling quickly?
Yep, I think that would be a reasonable calculation.
We don’t know from this announcement that they are planning to prioritise rapidity of sale over time-adjusted return—it could still make sense to not continue e.g. paying as many salaries, and to have declared it shut down as a project.
Yes, totally possible. I am just specifically claiming that given that the cost of capital is one of the major expenses for this project, it would be surprising to me if it wasn’t worth the marginal cost of operating it on financial grounds, at least until some kind of buyer was found.
I am trying to make a pretty concrete claim about how I expect a benefit calculation to come out if done well, and definitely could be wrong (the thing that I have higher confidence in is that this decision wasn’t very sensitive to such a cost-benefit calculation and seems more driven by other factors).