Making the Most of Your Commercial Roofing Investment - PODCAST TRANSCRIPTION

Editor's note: The following is the transcript of a live interview with Kyle Nurminen with Total Roofing Systems. You can read the interview below or listen to the podcast.

Megan Ellsworth: Hello, everyone. Welcome back to the AskARoofer podcast. My name's Megan Ellsworth.

Lauren White: And I'm Lauren White.

Megan Ellsworth: And we're so excited to be chatting with the one and only Kyle Nurminen today. Hi Kyle, how you doing?

Kyle Nurminen: Great, Megan. Hi, Lauren. How are you guys doing?

Lauren White: Doing good.

Megan Ellsworth: Let's just dive right in and have you introduce yourself.

Kyle Nurminen: Sure, will do. My name's Kyle Nurminen. I'm in southeast Florida, headquartered out of Stuart for Total Roofing Systems and Dynamic Metals and sister companies and specialize in all things metal roofing. We've been expanding more and more into the commercial as of late. You've probably heard of some updates of us providing our metal panel retrofits and Tedlar film now. Been doing a lot of that. It's been a lot of the talks here with CoffeeShop, so we're excited about that. So combined with bringing the original owner out of retirement to be our lead estimator, Richard McEwen, he founded Total Roofing many, many years ago and he's back with us, so it's been really exciting.

So we focus on metal panel retrofitting and hybrid roof solutions on large commercial and community projects statewide, and primarily residential high-end residential metal roof installs throughout southeast Florida. So with that above, and beyond that, you also know about the last talk that we had, thanks for having me on, that was about the SeedRegion Skilled Trades initiative, some of the philanthropic work we do. We're always trying to work with boys and girls clubs and so on and so forth and original businesses to combine efforts to build the future workforces of our industries and skill trades in general. So that's something we're really passionate about and continuously working on as well.

Megan Ellsworth: That's awesome. Amazing.

Kyle Nurminen: Yeah.

Lauren White: Great. Well, and so today we're talking about avoiding shortcuts. So in roofing, commercial roofing particularly. So what are some of the downsides to people maybe using some of these quick roofing solutions, and what should businesses consider before making an investment in their roof?

Kyle Nurminen: Yes. Just to kind of narrow the topic a little bit, because it could be so broad between residential and commercial. I did highlight the commercial work that I do in my current position because that was the main concern as far as investment. So I just want to say that everything I say from this point forward is more, even if you're a residential owner, property owner, I'm looking at your roof as an asset. I'm looking at it as an investment. I'm looking at it as 30% of the overall value of your asset in some cases. So roofing is very, very costly and how you manage that is very, very important. So that's what we're here to discuss today. I'm not sure sure if I answered your question though.

Megan Ellsworth: No, you did great.

Lauren White: Yeah. I guess just are there downsides to these people utilizing these kinds of quick solutions?

Kyle Nurminen: Yes. Yeah. Okay. Yes, absolutely. Because as you look at it as an investment now. It's somebody... You could just be purchasing a property and somebody said, "Oh, we just put a 20-year restoration on it and it's got 20 years to go." And you get up there and you find out within six months that your roof is leaking all over the place. And really, yeah, it was a 20-year roof restoration, but it was put over three wet roofs that were falling apart.

All right. So that's one example of a downside is just taking someone's word for it. A system is not always a system. Another downside is obviously on the resale value. And if you are trying to sell a property and you haven't properly maintained your roof system and somebody comes in that knows what they're looking at during the purchase of a sale, it can really interfere with your sale, with your closing of your sale. I've seen complete bids just go out the window and deals get dropped at the last minute because of the roofing. They've called me in, try to find a compromise between a situation and so on and so forth. So taking shortcuts just doesn't pay when you look at your roof system as an asset. So we're going to get more into specifics on that. But definite downsides is the loss of value, the misconception of what the value actually is just based on one opinion and not an accurate physical assessment.

Megan Ellsworth: So let's keep going on that and can you share some insights on how a quality commercial roof can help save businesses in the long run?

Kyle Nurminen: Yeah, actually even on, that's why community associations and HOAs are very much in line with commercial operations as well is in your forecast and your plannings of reserves. If you are actively and regularly inspecting roof systems, particularly before and after storm seasons here in Florida and anytime you're thinking about selling, anytime you're making upgrades and additions to your properties, you should always be doing overall roof assessments and figuring out what timeline, what's going on. And just to assume on a community aspect where there's 45 buildings in one community, you can't assume that all those roofs that were built as particular time are on the same timeline. Storms and weather patterns and everything affect buildings in different ways with different exposure. So if you are actively on top of that and you are forecasting and planning appropriately, then you're not special assessing your community or you're not trying to sell, trying to dump an asset as an investor, we're just trying to dump it before we have to put all this money in the roof.

Or you're not the owner user that's buying a facility that's been flipped three or four times already and had band-aids on band-aids and band-aids and told you have 10 years on your roof system. I'd be cautious to buy any building that said, I only had 10 years left on my roof system, because no matter what, you're on the downside of that roof life, and what's the truth. So if you know what you're dealing with, then you can have more accurate discussions about what the value of that asset is and you can compromise during each transaction and everybody can be a little bit happy. Compromise is a compromise. It is what it is, but it doesn't leave one. That's the whole purpose of this conversation is with owner users, building owners being left holding the bill for years and years and years of prior mistakes and quick solutions and just passing the buck.

Megan Ellsworth: Yeah, well said.

Kyle Nurminen: Thank you.

Lauren White: And kind of continuing on that, you touched on the aspect of maintaining a commercial roof. So how important is that maintenance and what are some best practices for building owners to know about maintaining their roof?

Kyle Nurminen: First thing they need to know whether residential or commercial is every single warranty has some type of maintenance requirement. Just like your vehicle. You can't just buy a vehicle and say, "I got 20 years on my drive train," and never change the transmission fluid. On the engine, never change the oil. Every roof is just the same. And why these continued transactions keep on going on paper warranties, I put down a mechanically attached 45-mil TPO in a high wind velocity zone versus is a 60-mil fully adhered TPO people think A TPO roof is a TPO roof. It's totally has to do with how it's applied, the durability of the product, which manufacturer it is, who installed it and without the details that they installed it. So there's so much that goes into it. So every single roof system, even if I have...

We do metal panel retrofitting. We do a two-inch mechanical standing seam. So where you have all these old exposed fastener, our panel commercial roof systems, we take it and lay it over with a two-inch seamless roof and as long as it's less than 60 feet, we can run it in one roof from the ridge to the eve in one cut. So there's no horizontal seams, there's no penetrations to that entire roof. That is legitimately going to be like a 40-year roof. And people are judging their timelines on 20 year roofs, and they're not understanding the concepts. But still, if you have penetrations and I have a soil stack coming through that roof, I still have a 15 to 20 year boot stack vent that I'm using the flash stack pipe penetration in. Wherever I'm tying into another wall, what is the condition of the wood that's overlapping my counter flashing that joins that wall?

Skylights? Skylights down here are a big hassle. They use fiberglass skylights and they cook out. They actually cook out from the UV and they end up with all the fabric sitting on top of like a sponge for water. And then they wonder why, "Well, my skylight is not leaking, it's my roof where it meets the skylight." No, it's the skylight. And then so those are proactive things and measures that you need to constantly stay above and above and beyond, up to. AC units on the commercial side. Holy moly, handful of worms there. I don't care what you have on your roof system if you have multiple things to be serviced up to, you have all different types of contractors going up there, chops on their feet, dropping their tools, taking a panel off and dropping it into your membrane and cutting it, and they don't know how to properly flash when they change a unit into whatever you're using as a roof penetration. Those caulkings and sealants could be incompatible. They can be corrosive to the roof system and then not realize it. And they can be just in a way where insulated pipe is going into a roof flashing, so that's impossible to seal it when it's got a flex insulate no matter what water's going to go in there.

So these are all types of things above and bond in the roof that affect your overall investment. So if you have a 20 year TPO roof and you have all this mechanical stuff up there and you have no walk pads and you have a grease hood from a pizza restaurant that's just leaking out on your TPO roof, it's going to eat it. You would need a PVC to help hold up to that type of an atmosphere. So we don't realize it's not just about what the roof is and the paper warranty on the material, it's really about the overall aspect of the property, and that overall asset, and what's being done in it.

Megan Ellsworth: Whole picture. You have to look at the whole picture.

Kyle Nurminen: Absolutely. And if you manage that property, it can save you money over the long run.

Megan Ellsworth: Yeah, I didn't think about a grease hood for pizza places or restaurants. That's interesting.

Kyle Nurminen: They don't change them. They start overflowing, then they rust out and then when they rust out they just remove them. So it just jumps off the roof. You see a lot of metal roof pizza shops and you see that one rusted panel going all the way down there. That's just the grease going down the roof.

Megan Ellsworth: Whoa. That's crazy.

Kyle Nurminen: Yeah.

Megan Ellsworth: I had no idea.

Kyle Nurminen: Just eating it up.

Megan Ellsworth: That's also something that I didn't really think about either is on a residential roof, you're not really tramps and around up there every couple months or twice a year or whatever. It's like once a year to put up Christmas lights, if that. And with commercial roofs it's different, because there is so much up there that needs to be maintenanced and taken care of. And so you are getting a lot more footwear and people up there. So that's something to think about, too.

Kyle Nurminen: A lot more foot traffic, a lot more maintenance, a lot more exposure, a lot more different types of penetrations and other trades. But on the flip side of that, you mentioned that the biggest problem on the residential side is just out of sight, out of mind. You don't even know that you have a problem brewing for five to 10 years on some cases, depending on what it is.

Megan Ellsworth: So true. So true. So are there any common mistakes that businesses tend to make when investing in a commercial roof?

Kyle Nurminen: Yes, actually that's the number one concern that drove this conversation. And as I mentioned at the beginning, I deal primarily in portfolio management. So it can be across the state, it can be across region, it can be across the nation. Back when I started, we were putting down 30-year roofs with 20-year warranties. Today you're putting down 20 year warranted roofs that are 15-year roofs depending on the circumstances.

And so the current practice has always been basically you can have an investment firm that's managing all these in these funds, whether it's a real estate investment trust or it's just a company with private equity and invest in private equity and specifically in certain types of real estate. And they're like headquartered in Texas so to speak. And then their facilities manager department is all the way up in New York and those decisions are driven. They manage a regional representations throughout the southeast of Florida, and Florida, and so on.

So they have agents sporadically around the southeast. Each one of those would have a relationship with someone like me in their area and they would rely upon that person for their sometimes limited, often limited perspective and skillset. So their capabilities, their experience in the market, and also what are their priorities. Even roof consultants, I've said it in the past, everybody has their certain biases, certain manufacturers that they like, certain that they recommend. Our job is always to discuss all the advantages and disadvantages of every single option. There's never any perfect option for any one investor. And these decisions that are being made are being passed from say, Texas to New York down to Florida, then to a regional local contractor who has a relationship with the regional agent who is only going by... He is trying to have that conversation of what's best for the property manager or what's best for that investment firm. They're not thinking about the guy who's paying into that fund. They're not thinking about the guy that's putting their life term investment or diversifying their portfolio by investing in these REITs or getting it with this firm to manager, do some extra investments.

And then that contractor doesn't necessarily have the investors' best point. Their job is to really ultimately sell a roof. So if they don't do this type of roof system, their opinion is going to be swayed. If they haven't come up through hurricanes to see the multitude of ways of multiple roof systems and how they fail, they may understand what's going on on the TPO section, but when it gets to the metal section, they have no clue what they're really looking at.

So the problem is the decision-making process has been notched so far down the chain that I feel like if it was my money in this pool or in this fund, and I was promised that my investments were going into premium class B real estate, industrial real estate, and then I put one of my businesses in those roofs and I actually found out what was on the roof, I wouldn't be too happy. So that's what's happening now is in the past and the history of the industry has been always to pass the buck and to do the least amount to maximize, because they have a commitment. That firm's, that real estate manager, that trust manager's primary objective is to most efficiently manage that fund to yield the highest return for their investor.

So they're just like, "Okay, well I have this much of a segue. They have a certain amount of expectation. Once I meet that, I'm out." They don't want to extend their responsibility any farther. And of course they don't want to do any less to make sure that they actually still pass a quality asset onto the next person. That's not their concern. So I understand how it happens, but that's the biggest mistake that people are making is they're passing the buck or the decision-making process or relying on certain people all the way out that aren't really looking at the big picture of what they're doing for that one fund that maybe all over the nation or in a certain region. They have all these different opinions everywhere. They don't have one central person that knows all of it who can really look at the big picture and if you could save some money over here and bring it over here, they're just looking at one investment at a time with all different types of perspectives all the way across the board. So it's not the best, most efficient way to manage an investment fund.

Megan Ellsworth: Yeah. No, that makes sense. And I think that's really the meat of what we're trying to get to in this podcast is that what you said right there, the investors, all these people, this whole team of people buying a piece of property or a warehouse or whatever and putting, it needs a new roof, and no one's really hands-on, and they're just putting money into it, and they don't know what's going on. And then 20 years the line, or 10 years down the line, that roof is failing because of not maintaining it or there were not the right decisions made in the beginning of the process.

Lauren White: Well, and with that process, because there's so many different components to the roofing process, are there any specific, I don't know, details or kind of red flags even that building owners should be on the lookout for as they're making this big investment or their commercial roof, whether that's best way to choose a contractor, materials, et cetera?

Kyle Nurminen: I really think that any type of portfolio manager that has multiple investments spread across multiple regions should have one key person that is actually hands on. That actually flies around the country or drives throughout their region and takes nothing, concentrates on nothing but the roofing. They're looking at... The guys who make these decisions are overall facilities experts. They've been in facilities management for some of the top facilities management companies in the world for most of their career, and they go to manage these funds and they know how to understand contractors, what they're telling. They have their own network of contractors in a lot of cases, and they understand the ones that know what they're talking about, the ones that are just blowing smoke. And so that's their job a lot.

But with roofing alone being so much of a percentage of that asset, you really need a roofing expert that has seen all types of roofing fail and succeed in applications and understand what a high wind velocity event might actually do to a roof that you can't see when you're looking at it.

You can have a proactive maintenance guy or a service crew come through, there's a lot of national companies that do. I've worked for some of the best that have really good service programs and they go proactive maintenance and they clean off the roof, they pressure wash it once a quarter or twice a year and depending on the roof system, or even once a year, depended on the situation, and then they clean up all the debris, they clean off the gutters, the scuppers, the drains, they reforce all the caulkings. They stay on that thing like everything. But that doesn't notice the fact that we had a high wind event or a hail event on a certain occasion or all these AC units were actually changed out and now the roof sits low in a certain area and it's ponding water where it never did before. It's all types of situations that go above and beyond proactive maintenance that when you start planning on putting a value to an asset, you really need to take that key person to review that entire history and get his boots freshly on that roof before the point of sale or before the point of purchase on both sides of the fence and not looking at it as one individual estimate.

If it's going to be $250,000 to reroof this facility and they say, "I have 10 years," and I go out there and I find out that it's just a bandaid on it. It needs reroofed now. Then I'm going to take $250,000 off the price of my deal. And that goes both ways. And the buck needs to really back up to their original point of action, the original transaction, the original investor in that asset that we've had, the one who's claiming that they're passing on a quality asset. So it's integrity across the board and it's almost impossible to maintain that integrity for that investor that is trusting all these people to manage this correctly without that one key person really concentrating on the big picture of all just the roof assets alone.

Lauren White: Let's talk about some of the successes of these commercial roofs. Do you have a success story about a business that invested in their commercial roof, whether that was through maintenance or from the beginning, and saw improvements in maybe their operations or energy efficiency or anything like that?

Kyle Nurminen: All right, so I'll explain this recent project was right in our hometown in Stuart, Florida. Three story with retail on the first floor, private parking, a real tight area, and had that beautiful barrel tile Tuscan looks. So it's typical southwest, southeast Florida style stucco SPS building with barrel tile on top. But underneath in the middle of that whole roof is a four-foot parapet, and then this whole flat roof. So they have tile roof, then they have stucco walls all the way around this flat roof. And then they have a PVC membrane on a really good slope, like 12 inches of EPS insulation over a ventilated metal deck with a Duro-Last PVC over it. And it's got good drainage and it's teetering off to parapet walls and it has drains and overflow scuppers. It's standard system, it's 15 years, and they can't figure out where they're having all these problems.

I got the phone call from a board member. The management company had already had their decision made on their roofer, and the board wasn't happy. They weren't confident in just knowing that the management company had it taken care of it with their roofer. Like I said, everybody has their relationships. They have these people that they rely on for many years. They give them really good prices that yield higher returns, but not everything is always their area of expertise.

As soon as I started talking to this board member and they're explaining to me this whole wall situation, and I got out there and I assessed, I said, "All your problems are at these walls." And I said, "The Duro-Last membrane is really, it's a 15 year Duro-Last membrane. It should be at least a 20-year roof, 25 depending on the circumstance, how it's well maintained. It's got walk pads on it." Actually it was doing all right.

The problem was the parapet walls and now the tiles were all leaking because when they ran these tiles at top of the parapet, they never ran any type of a ridge cap across. They just mortared off the end of the tile. So all the mortar was cracking, the vulnerable point at the highest point slope right at the top of the roof was failing. So all the water's trickling down. It's leaking all the roof system. The tile roof were all rotting out. The sheathing was rotting out and leaks everywhere. And the flat was in good condition, so to speak. There was some scrim issues around the drain. Maybe somebody had taken a shovel and cleaned up some debris a little bit and damaged it over the years, what have you. But they were looking for a total roof solution for that. And the solution that I was proposed was they were doing, basically they'd slice that, leave that installation in place, slit the membrane to relieve the stress of the existing membrane, and put over a hardboard installation or [inaudible 00:24:36] and then do a built up modified, which is very durable roof system on top of that, hot asphalt applied. Traditional, built up, modified membrane. I was like, "Okay."

But they hadn't been apparently been in the building. And then they did just do the reflat and then they were going to put new tile back. And then they also said that they were interested in maybe putting metal on slope as well. So I said, "We could do tile or slope, both ways. But what's nice about the metal is the fact that in this case it will do your transition better at the top of that parapet wall because that seems to be where all your problems are suddenly from." So I was like, "Why don't we just run the membrane all the way up the wall, and why are we going with a hot asphalt insul system?" If anybody had visited, the people who own this building that live in this building would realize that almost all of them have a dog in this house, in this building and there's nowhere to put a kettle but right up next to the building. So if you're running a hot asphalt kettle next to a building with dogs in it for a week or two, that's not the right solution.

So once again, anybody might've been invested in this management firm or in this company or this asset or a piece of property or even a retail storefront down, bought maybe a condo in here that they were investing in. They're out of touch with all this stuff. And I was the first person out of six previous bids that came in and said, "Why don't we run the membrane up the wall?" I said, "We can run a PVC membrane, go up the wall and over it and then do a metal cap sheet and your waterproofing, it's all seamless all the way through."

Yeah. So we recently did that and there's static. It was the right solution. We just came back with another, we went with a fiber tight PVC, a little bit better than a Duro-Last in my professional opinion. It is a better scrim. It doesn't dry out as much. It's an Elvaloy, so it's not a traditional PVC, so it doesn't have the plasticizers in it that dry out a lot here in Florida. So it is a matter of fact a better membrane. It's not the same membrane, and it is more expensive. But that was the right material, for the right condition, for the right situation, and we had to have knowledge of all types of roof systems and what was going on with the whole big picture to actually come up with that. So that's one of my favorites.

Megan Ellsworth: Wow. That's awesome. And yeah, exactly like I said, thinking outside the box, not just doing what everyone else is bidding. That's also what customers and people looking for a commercial roof should look for in a contractor. So all you out there listening, that's... Look for Kyle.

Kyle Nurminen: Well, yeah like I said, the big problem, and that's the bulk of this conversation, is that when you're looking at things from a bigger picture, you don't always have that one person that's consistent. You can. They are few and far between in the industry. A lot of them are private roof consultants, licensed roof consultants. That person doesn't necessarily have to be a licensed roof consultant to do what I'm doing. I'm not a licensed roof consultant, but my experience stands for itself and as far as what I'm looking at and what other contractors do, and not bashing the other contractor, not telling, "Oh, they screwed that up, or they're doing that wrong." But just listening to the customer and saying, "What's important to you? Okay, but what I hear you saying is this, but that doesn't jive with what I'm actually seeing." Or that doesn't jive with the solution that you've been provided.

Like I said, the hot asphalt with the dogs, and that would've been a nightmare, and we avoided all that. So there's so many different perspectives that yeah, you really need that one key person. Portfolio managers and investment funds should keep you just in charge of their roofing. That is that final say that does all those. You can still have your regionals for the initial upfront. You can still have your regionals for ongoing maintenance, although there are national companies that have ongoing maintenance programs that are really good as well. So that might manage it a little bit more consistently, but it still takes that one person oversight to really make the best decisions that have the investors, that owner's, best interest in line.

Megan Ellsworth: Yeah. Well, Kyle, thank you so much for sharing your wisdom. Anything else business owners should know? I know you just kind of touched on that a little bit, but anything else to add before we wrap up?

Kyle Nurminen: Yeah, I think one of the questions we didn't talk about was... I want to hit it. If you are looking into real estate investment, one of the questions was what are the types of businesses that are particularly interested in that? Are there any particular types of businesses in the industry where naturally they tend toward these shortcuts, toward these short submissions? And I have to say there's two of them and they're retail plazas and storage facilities. Incompatible materials, lack of knowledge, just expecting that I have a metal roof so I have a 30, 40 year asset, and they don't realize what's going on. So anybody who's looking into especially a pre-owned storage facility, would definitely want to have somebody out front look at that roof no matter what, and make that part of their transaction.

Megan Ellsworth: Well Kyle, thank you so much for bearing with us and sharing your wisdom. This has been a fabulous episode of the AskARoofer podcast and we can't thank you enough for joining us.

Lauren White: Thank you so much.

Kyle Nurminen: All right, ladies, thank you. You have a Merry Christmas.

Lauren White: You, too.

Megan Ellsworth: Merry Christmas. Happy new year, happy holidays, everyone out there listening make sure to go to askaroofer.com to learn more, and to submit any questions you have about your roof that we will definitely answer and get to on this podcast. So Lauren, signing out.

Lauren White: See you next time.