Question & Insight: David Hirsch, Site Selection Magazine, July 2003

ite Selection: Describe the scope of your responsibilities as Masco’s Director of Property Management.

David Hirsch: It means I’m responsible for 44,075,436 square feet [4.1 million sq. m.] of buildings in the world. That’s 32,935,061 square feet [3.06 million sq. m.] domestic and 11,140,375 square feet [1.03 million sq. m.] non-U.S. That’s 149 manufacturing buildings, 137 warehouses and about 500 leases. My role is to site select, buy, sell, lease, build, move, audit and maintain all this property.

Hirsch: I created the real estate department when I came here about 18 years ago. I hired everyone who’s here today – there are 27 of us now. We started out as a smaller group doing fewer things, mainly buying, selling and leasing – but not lease administration. Today we do manage lease administration worldwide, and we also construct all our buildings. We used to use a design-build approach, overseeing a general contractor with our own project managers. But we have evolved into acting as our own construction manager, where we manage all the subcontractors. We have an in-house architect, so we do the initial design and then hire local architects in the area in which we are building.

Hirsch: It’s totally centralized. Our operating units look directly to us to manage the process. The benefit is that you’re better able to manage your subcontractors. You don’t have any change-order problems – you tell the sub what you want done and you make the adjustment. You don’t have immobilization costs that you would have with a contractor. The savings per project are 15 to 20 percent, very substantial savings off the top.

Hirsch: It’s actually not that large an in-house group. We contract with our superintendents locally. They are contract workers, so they are not on my staff. The construction managers are [on staff], and that’s the only cost to the company.

Hirsch: If they can do it. There’s a lot of risk involved, because you’re taking on the responsibility of the entire project – there’s no one to blame but yourself if things don’t turn out the way you want. But we have direct control over the quality of the construction. We have added on to buildings that we have had general contractors construct, and we can do a better job for less money. With a design-build approach and a fixed-price contract, the temptation exists to try and cut corners. We don’t have to do that. We don’t have their overhead and don’t have to charge a fee, which results in substantial savings.

       
Other savings come from buying the pre-engineered steel buildings directly from the manufacturer. We’ve been successful creating alliances with suppliers where we can leverage our buying power.

Hirsch: Most of them are surprised because of the risk you have to be willing to take and the expertise you must have to do it. There are some companies that do this themselves, such as Home Depot, because they build the same thing over and over. But I don’t know anyone who does this who builds so many kinds of buildings. There’s less risk if you build the same box everywhere. A Home Depot in Los Angeles is the same as one around New York City. Size is the only variable. We have to build a completely different kind of building for someone in the paint business or window business than for someone in the steel faucet or brass business.

Hirsch: We’re right there. One staff member is dedicated to strategic planning. He goes to all the divisions’ strategic planning meetings and helps them before they even present their plans to management. He helps ensure that their cost estimates are correct, for instance.

Hirsch: That would be our database. Without it, we couldn’t possibly manage all the leases. It’s an integral part of the lease management administration that we do. Beyond that, it’s central to everything else we do. It stores all the drawings and photos electronically, all our legal documents are kept there electronically so you can see a portion of a purchase agreement or a lease if you want. We keep the data for our risk management department – the fire insurance values and appraised values for property tax – that’s all in the database. It keeps track of all the properties worldwide, even a small office in Singapore. We know how to get there, what it looks like, who’s there – anything you’d need to know about the location. All of this is accessible remotely.

Hirsch: We had to build it, because there’s nothing like it anywhere else. I’ve had companies that want to buy it from me, but we can’t support it – we’re not in that business. But we’re always improving it. We’re in the process of moving it from FoxPro to [Microsoft] Access, so it’s much easier to use. Vendors have tried to sell me things that they said would do this, and they couldn’t come close to what we do. They have systems that are just a piece of this, not the whole thing.

Hirsch: It benefits me because we’re trying to create an organization that is more relevant to my people than the organizations that existed in the past. Many of us who are members of IAMC have that same view – we weren’t pleased with the other organizations out there in terms of servicing our needs as managers of companies like mine, of which there are close to 70. And they’ve all joined for that reason.

       
It’s doing that. It’s growing, and people have been very happy with the two forums we have had. The economic development and service companies also see this as a different approach.

Hirsch: Right now, we’re trying to grow the association. But there are lots of areas and opportunities to take a stand on issues, which could help us in different ways. Besides, that’s something that good, professional associations do.

       
Also, we could look at how asset managers are compensated, how they are treated in their companies, who they report to – things like that we can be talking about. In my case, management knows how much money we’re making for them – they like it. We report that. We are an essential part of the profit and loss of this company. I’d like to see others in the industry make their management appreciate how important asset management can be in the larger sense. Most large corporations have a lot of assets, and they’re not always well managed. Yet it’s an awfully big part of the balance sheet that has to be dealt with.