FedEx's real estate group re-engineers portfolio management

A novel re-organization based on a more scientifically driven subgroup to closely study real estate directions is transforming the way Federal Express (FedEx) deals with its combined United States' city station and retail portfolio.

David Hurtado, managing director of real estate and airport development, who has been with Federal Express for 17 years -- but studied to be a mechanical engineer -- is forming a more precision-oriented real estate information systems group. Details are to be divided among internal real estate agents, each of whom will be accountable for his or her assigned portfolio piece performance.

Hurtado's expanded responsibilities include worldwide portfolio and account management, and international planning and economic analysis. He's also in charge of international airport relations and development, and the company's 2,423 facilities and 128 million sq. ft. of space.

He serves on the Industrial Development Research Council and is a member of the International Association of Corporate Real Estate Executives.

Q: Has FedEx changed the structure of its corporate real estate department and/or the way it treats the function in the last two to three years?

A: Prior to the fall of 1994, the United States city station and retail portfolio was handled locally. In October, responsibility for the combined portfolio was transferred to the real estate group. The U.S. real estate organization was reorganized based on type of transaction: office, industrial and retail. We've also gained approval to start a real estate information systems group. The group will be made up of analysts whose function will be to constantly review our portfolio's performance against the market and industry and to identify trends. They will support our internal real estate agents.

Q: Describe one or two transactions that illustrate either a new way FedEx is handling its space needs or how alliance partners are performing.

A: FedEx is in the process of implementing new concepts for handling its build-to-suit industrial portfolio. These new concepts include: development of alternative portfolio financing methodologies; development of city station design standards and standardized build-to-suit RFP; and advanced financial modeling of proposals to capture and track development costs.

Q: Is telecommuting affecting how much contracted office space FedEx has?

A: FedEx has always been on the leading edge of technology. Many functions have been telecommuting for some time. Some groups are reducing their space requirements through work at home and outsourcing strategies. The major trends in office space are in the design and functionality of the space, especially with regard to the systems development groups. Space for information technology workers is going through a metamorphisis.

Q: To whom do you report? To whom does he or she report?

A: I report to Graham R. Smith, vice president of properties and facilities. He reports to Gilbert D. Mook, senior vice president of the central support services division. Mook reports to our chairman, Frederick W. Smith.

Q: Do you think it's important for a corporate real estate executive to report either to a company's chief financial officer or chief executive officer?

A: The important thing is not to whom you report but whether or not your chain of command is included in the company's strategic planning exercises. The properties and facilities group at FedEx is part of the company's long-range planning committee, which is chaired by the CEO, so we have input at the very beginning of the process, thus enabling the development of sound real estate and airport development strategies. Another critical success factor is ensuring your strategies support the corporation's objectives.

Q: What alliances has FedEx formed, if any? How does your company use service providers?

A: FedEx has three strategic alliances supporting its U.S. real estate group: Commercial Tennessee, Memphis; Fischer & Co., Dallas; Stein & Co., Chicago. These companies have specific geographic areas of concentration and are responsible for developing the transactions. FedEx also has internal real estate agents. In addition, we outsource real estate transaction and construction management duties outside the U.S.

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