A drive for better-kept buildings

With energy costs zooming and real estate expensive, more executives are paying attention to their companies' physical structures. Jerry Kokos, president and chief executive of VFA Inc. of Boston, which specializes in maintaining buildings, spoke with Boston Globe reporter Thomas C. Palmer Jr.

Q: Most executives like to think about business, not buildings. You help them maintain value, but don't they find ''managing capital asset data" boring?

A: It has been neglected, even though it accounts for more than 40 percent of the assets on a business's balance sheet. It's not a sexy asset, but people are now realizing the value it can have.

Q: Where are you doing business now?

A: One of our largest customers is the state of Louisiana. We had 30 people in the field doing assessments, prior to the hurricane, for all state-owned facilities. Now we're doing damage assessment to see how we can help them.

Q: With events like Hurricane Katrina causing energy prices to rise, are more people taking an interest in energy management?

A: With energy pricing, there's more and more demand for solutions.

Q: VFA helps manage more than a billion square feet of space. What's the limit for a relatively small company like yours?

A: Our software is very scalable and can be deployed across billions of square feet. The limit is growing on the services portion, which is still an ''arms-and-legs" business, people-based. But even there we rely on partners, which are very large.

Q: Some of your 275 customers include Bank of America, Ford Motor Co., the US Army, the City of Boston, the University of California system, Massachusetts Institute of Technology, and Children's Hospital of Boston. Do they come and go?

A: They generally enter a one-year contract. Ninety-five percent renew their software contract and continue using our service. It's a nice part of our business, a recurring revenue model. The data tends to get old, and they will return to update that data, by assessing a portion of their real estate portfolio every year. For example, our contract with the US Navy -- they look at 20 percent of their portfolio a year.

Q: You deal with obvious maintenance issues, like the condition of a roof. But what kinds of things aren't usually considered by property owners?

A: The structural integrity of the building, as well as the condition of all the major systems, HVAC. We also address the functional adequacy [of a building] -- how suitable are they to house a prison, hospital, or health provider.

Q: Do you get to the level of, say, linoleum floors?

A: We can deal right down to the furniture level. With Fleet Bank [now Bank of America], it was a branding exercise, where they wanted each building not only maintained to a certain quality level but also to have the same look and feel. We don't do interior decoration.

Q: What does it cost to have VFA put together a plan for a company?

A: The common denominator is square footage. The second thing is the complexity of the building. It varies from 5 to 15 cents per square foot per assessment for one year.

Q: Managing capital planning is a major part of your business. The other is managing existing facilities. In a way, are they the same thing?

A: Not really. We help people with the planning part of their facilities management -- understanding capital requirements over multiple years, the reinvestment required to sustain those. We're more long-term planning.

Q: How did a former US Coast Guard officer end up helping people take care of their property?

A: The Coast Guard sent me to Yale to get a business degree, and it was there that I was introduced into [dealing with] problems. Later, at VFA, I saw in the buildings side a real need for planning that didn't exist. There was no process for prioritizing competing funds between buildings -- do I invest in the gym or the classroom? At first I thought, ''This is boring, I've got to do something more exciting."

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.