Next Up Previous Contents Index
Next: Diversify out of Up: Autodesk confronts an Previous: Don't buy back

Don't buy real estate

I don't think it would be wise to make any large real estate purchases at this time (in particular, buying a campus site and the initial buildings there). Every indication is that the real estate market is in a downtrend, with no immediate end in sight. Given the overall debt crisis and the amount of highly-leveraged speculative real estate that could come on the market in a real credit crunch, we may be seeing only the beginning of a prolonged bloodletting in California real estate. Even if things get no worse than they presently are in Texas, that's still quite a way from California's present situation.

Conserving cash is the primary motivation. Not wishing to buy into a bear market in real estate is a secondary consideration. Even if you reject both of these rationales, however, I still think we'd be well served by leasing rather than buying simply on the standpoint that Autodesk is a software company, not a real estate company. Why dilute our business focus by starting up a property management operation, even if for our own exclusive use? If the argument in favour of buying is that we would make money by owning our facilities, then I'd suggest that rationale deserves even closer scrutiny because it counsels speculation in California commercial property as the justification for commitment of Autodesk's funds.

I'm not against speculation. But I believe in speculating in things that are likely to go up. I don't think California real estate in 1990 would be on anybody's hot list.[Footnote]

Editor: John Walker