Communication & Collaboration: How Successful Modular Design and Fabrication Teams Work w/ Mid-Rise Modular[podcast transcript]

John McMullen  00:00

Hello and welcome to Inside modular, the podcast of commercial modular construction, brought to you by the Modular Building Institute. Welcome everyone. My name is John McMullen. I'm the Marketing Director here at MBI. Today I'm joined by Peter DeMaria and Diego Rivera of MID-RISE Modular, among other things, Peter and Diego are here to talk about the modular building design process, and what younger designers should know about being part of a modular project team. Peter, Diego, welcome.

 

Peter DeMaria  00:29

Morning, John.

 

John McMullen  00:31

Good morning. Tell me about yourself. Peter, we'll start with you. What's your background? And how did you get started in modular architecture?

 

Peter DeMaria  00:37

Thanks, John. Started out in architecture school. If we really want to go back far, I was able to meet Buckminster Fuller when I was a young fellow. I was in undergraduate school, was in art school and swore I'd never be an architect because my brother was in architecture school, working his tail off every night, and I was out, having fun at artists parties in New York, right. But it all changed. And I had a great professor. And I think that's happened often for many people. There's always a mentor, a professor out there that really changes the way you view the world. And at that point, I was able to meet Bucky Fuller and it was quite inspirational, put me on a different path. I went off to architecture school, University of Texas in Austin, and then migrated west to Los Angeles, opened my own architectural practice, and did primarily traditional work up until about 2003 to 2004, I got frustrated with the cost of things and started to explore… I was teaching at that time took a year sabbatical. And really went around the world to see what was an alternative way of building that wasn't stopping me as much as traditional wood frame construction was doing. And I unveiled, you know, the cargo container as having the most potential, but the least amount of research had been done on it. So, I was fortunate, had some great clients in 2005. And built what I believe is the first legal cargo container-based building in the United States, a two story residence down at Redondo Beach. And that kind of set me up on an alternative path from the traditional architectural practice that I had, and I really leveraged out what you could do that container and the next logical jump was to move into the world of modular. And once I got into steel modular, I understood all the benefits of it. And I've not looked back and right now, Diego and I have come together, and I think we're creating something that's really going to serve the masses, we think we've come upon something that's valuable. And we want to share it, we want to bring it out there to the world and have the most amount of impact on the people who need a housing solution most. So that's, that was like 30 years in a nutshell, right? So, then I find myself here in Los Angeles, and I travel back and forth from Austin, Texas, to LA. And Diego and I’ve been working parallel to each other for the last two decades. But we didn't know that we were in each other's backyards, until we met thanks to the Modular Building Institute at the World of Modular about a year and a half or so ago. And we've been doing fantastic ever since.

 

John McMullen  03:17

Lots of that's an amazing background. Thank you, Peter. Diego, tell me about yourself and your background.

 

Diego Rivera  03:23

Oh my God, that's interesting then when you go after Peter, so let's see if I can do better than that, you know, I'm going to try. Same thing, you know, learn the hard way went to architecture school, became an architect went to school here in LA called SCI-Arc. After I graduate, I realized that after $150K to $100,000 in debt, there was nothing in my brain besides a big ego as well as a bunch of architects who teach me how to do things. So, I took a year sabbatical and went through all the traits as a Latino living in California took advantage of the color of my skin, and got jobs, mopping roofs, installing drywall, doing light gauge framing. Now I've got to every job as I'm going through, so I'll get a drywall I get a job work my way in after a week, especially mopping roofs. I know how to read plans. Okay, I then come to the office and then you become an estimator, after a couple weeks to a month on and I was like, Hey, listen, I went to architecture school. I'm just learning the trades, thank you for the opportunity and then I work my way out by the year through all the trades, until I learn about light gauge. So, within that process, that journey, I got hired by fiber cement manufacturer in Latin America, to go preach fiber cement with light gauge across the world. So, I was like the young architect who graduated United States going to third world countries, utilizing framing systems with a substrate which was a fiber cement. So that took me to a journey of about 10 to 15 years, where I got to learn a lot about manufacturer ISO 9000, ISO 14,000 and all the qualifications that those big manufacturers have. 10 years into that, I got married, got kids decided to come back to the States - Mom and Dad and everybody was here. So, I came back to the States kept working for the fiber cement manufacturer working on ICC, doing architecture inspections, writing the code, everything that has to do with fiber, cement and light gauge. And then about 14 years ago, somebody told me that there was an industry and there was a guy in Southgate putting in a panel shop that he may need help. So, I step in, started working, got into the to the world that we call it, you know, a panel world and been doing light gauge panels, load bearing, type one construction, in the California market for over 14 years. But like Peter said, about a year ago, I said, you know what this is, this is easy, you know, because we're doing, we're building for DPR, for all the general contractors, the big guys, the billion dollar GC’s. And then I was like you don't want I want to see what happens when you put this together, and you do a volumetric thing. So went to the World of Modular and met Peter right there. And we took on the challenge of generate MID-RISE, I've been a steel guy all my life - I have never built a house out of wood. That's why we choose MID-RISE - compliant with codes and everything else, we want to go above five stories where we're not competing against wood, it's impossible to compete price wise, you know, they're two different products. I think every system has its place in this industry. And as an industry, we should be helping each other. And that's the journey that we're on right now, you know, create two lines of divisions, we still have a light gauge panel where we're very successful here in California, and that pays the bills. And now we're taking a couple of modular jobs. Now we're designing with those panels and building them into a 3d unit.

 

John McMullen  06:40

Very good. Both of you have sounds like extensive backgrounds in traditional construction, traditional design, what challenges did you both face? When you first started tackling modular projects? What was your What was your biggest hurdle?

 

Peter DeMaria  06:54

Yeah, sure. Yeah. Believe it or not, I don't think we satisfy those challenges until like connected with Diego a year and a half or so ago. It didn't matter how well I could draw how well I could design, how detailed my drawings were, at the end of the day, someone had to fabricate this. And as an architect, the architect was working with a client and convinces the clients that hey, let's go into the modular space. So, at that point, you must be able to deliver a modular fabricator and a team that is going to execute, okay.  In the traditional world, I can go out there and get three or four bids, right and then interview everybody but at the end of the day, it's you know, strong predictability there - you're going to find a reputable builder who's going to do a decent job.

 

Diego Rivera  07:39

You know, the beautiful thing about what we do with Peter is I keep telling Peter, you dream - I'll build it. You dream where those walls go, you dream the architecture, let me take care of what happens inside those walls. So, building what's inside the walls is the secret and coming from the 2D world, the panels and the connections and the different inspections that you have on a low bearing job you know, nine stories, six stories, incorporating that into your M/E/P, your mechanicals and everything else. It is challenging to understand what these boxes are. But when we come from the panel world, when we pre manufacture panels before foundations have already been poured, it's been a game changer of me understanding the needs that a volumetric architect needs. And, for Peter to immerse in preconstruction, where basically, construction is about getting logistics correct. So, we're playing our logistics game against a financial outcome. So, we both believe as architects that the secret is in the drawings. And that's something that this industry lacks. The ratio of people that we have in our team is for every one brain thinking and drawing, we have four hands working. So, if you don't have that ratio in your company, of brains against hands, and you're not believing in digital twin, it's very challenging to spend money on robotics, role formers and equipment, and try to get the return on investment when the brains are not there.

 

Peter DeMaria  09:01

Part of what we're doing at MID-RISE, where Diego's team and in our shop are working down to a tolerance level of a 16th of an inch and roll forming our own studs and joists. We have all the equipment in a 100,000 square feet factory inside and 100,000 square feet outside. So, we have the capability of doing all these things and what we're doing now is also working with fellow architects. Typically, architects do not bring in another architect to work them unless there's a small boutique firm and they need an associate architect. But in our case, we share our technology. We share our details, we share our fabrication capability, right… with the hope that these other folks will want to adopt it. We have no worries about being the so-called white label of what's being fabricated. We're behind the scenes. We're kind of almost hired as a consultant to the primary architect much the way a structural engineer would be hired. And we've signed all the NDAs and the non-competes. We're not interested in taking any clients from the other architects, we simply want to work with them and kind of float the industry boat together. We have plenty of work on our own. I can design, yet there's only so many buildings I can design. The opportunities are brimming…there's so much going on right now. And that's where our efforts are focused. And we've been fortunate, in the last year and a half, to do some things that I didn't think were weren't possible. But what has unlocked it is exactly that first point, that ability to fabricate, not just put it together, but to do it with the level of efficiency, that does translate into all those great things in the world of modular being, speed, speed, speed, and quality. And things are getting very, very competitive in terms of pricing. But that speed and quality that gives you a return on your investment…I think is unmatched by the other technology. So, I think that's been the biggest hurdle. I know that was a long answer to a short question. But that is what's been the hurdling for the last over almost two decades… to find that now, I believe we, I think we have it.

 

John McMullen  11:04

So, tell me about your modular design process. Now how does it start? And how is that process sort of evolved over time since you started?

 

Peter DeMaria  11:15

Right now, it's happening, it's a little bit different than it was originally. Originally, we'll work with a client who comes to us, we will show them traditional way of to put the buildings together, and then we show them the modular benefits, and those clients will work with us directly, we will design that building, but my design work does not start in the traditional manner. Just about everything that's been in my design palette, has almost nothing to do with the design of the building per se. I'm worried about logistics, I'm worried about shipping, I'm worrying about you know, the building rattling as it's being moved to the jobsite, and modules, how large of a module can I move down the street? And how big of a module can I pick up? How far can my crane boom out, I haven't spoken about aesthetics, creating a positive environment where people's lives are going to thrive. That didn't come into the picture yet. So, what happens is, I'm almost like a chef…who is in the kitchen. And I must figure out how all these appliances and all this equipment works before I can really start mixing things. And that's also a hurdle for architects who are not in the modular world. They're not used to doing that, right. So, there's a kind of re-learning of the parameters by which you, you design. So that's part of our DNA now, that something that is a natural extension of us. So, we're working on a project, it's rather easy for us to sit down with the client hit the ground running and really move forward. When it's another architect who comes to us. I think, in general, architects are trained and they're problem solvers. Across the board. they're trained, they're educated to be problem solvers. And whenever someone comes to them with a project, they say “Yes, we do those projects”. Can you do a gas station? Yes, you do single family homes. Yes, you do. Nuclear power plants? Yes. Because they know, they must solve challenges, and they're not scared to go after those projects. So, when they come to us, and they've designed a building, and after they’ve designed a building in a traditional manner? They ask, can you make it modular for us, and if there was any level of discipline, there is an order, and, you know, and how the building is organized? It works and other times is you have to reconfigure things, and you kind of have to fit it into the “ice cube” tray per se. So, it gets designed, but it can drag out a little bit, but typically, the client is the one who will drive that. The clients are the ones who go to the architects and want to dabble in this world of modular, can we do it? And how do we do it? And those are the people we reach out to…those architects who have those clients and we say, you know, but let us help you. Let's make that part of your personal design palate and your creative outlet. So, the process, once those architects get up to speed on the know-how, they get it easily.

 

Diego Rivera  14:06

Then to add to that, the next way, what are we doing our is what Peter is dreaming… we're telling Peter, this is just a cookie, you can use the oven or the toaster, don't be using that big oven, because you're going to, you're going to kill the cost. So, what we do for that is we believe in parametric models. So, we'll take it from the architectural level, even from the bidding stage, we want you I usually tell people when they use AutoCAD, Bluebeam or any other software's to do estimating, I call it finger painting, we don't finger paint here, we grab the model of the building and we're doing it… we do a parametric Revit model. And out of that parametric model, we get all the data that is needed to be able to be efficient on the price. So that's how we price our buildings and as we move forward on the contracts and under deals that we're working with our owners, we can use this parametric model to make decisions on equipment, on the size of the electrical panels and everything else that have an immediate impact on the budget before we make any decisions, and before we even bat an eyelid. So, I think that's where we complement each other…where Peter can dream within the needs of the budget. And then we come behind almost as an inspector, just making sure that at the end of the day is feasible for the price based on what the project and the site is needed.

 

John McMullen  15:23

From a from an architectural point of view, and you both have brought up great points that go outside of the bounds of just pure architecture. But from an architectural point of view, are most modular projects similar? are the ones that you do, are they are they similar? Or does each project sort of have a unique module design that requires starting from scratch.

 

Peter DeMaria  15:45

But we could look at it both ways, I think if you're going to be more efficient in this, in this space, you're going to want to come up with some standardization, because I think that's where the level of efficiency comes from. Can you do custom projects, sure. But when that happens, most of the folks who are attracted to modular want to get things done quickly; they want to do things have been excellent quality and they’re trying to do things of great value, a decent value proposition, and they don't want to go custom - it falls back into the traditional world of doing it…Then we create a little palette. Now we would love to be like “In n Out Burgers,” where they've got three or four options on the menu. And that's it. But an intense amount of research and development has gone into creating that module…creating that standardized module…because you must make some assumptions about how the masses of society want to live in a one bedroom, or two bedroom or three-bedroom apartment or something along those lines. And you make some blanket statements. But very often, it's not about how we have lived in the past, where we're designing is, “…how do we want to live…” that becomes the drawing inspiration behind what we do. And then when you combine that with all those technical things we were talking about before, it becomes this, this mix – a heavily mixed level of aesthetics and technical progress. And you cannot leave the technical out. And I'm very open and you say listen, we'll design it and someone else will figure out how to build it right? That never happens with us. And it's interesting that Diego mentioned in our parametric model, one of the benefits we have in our shop, is we have the steel roll forming machines and you know, 30 to 40 guys putting things together there…and we have six or seven project managers who are working exclusively in Revit, AutoCAD…they put these models together, but they all started out on the floor of the factory. They all started out running the roll forming machines, fastening everything together. And they've all been with us at least eight years. So that means that when they're working at Revit, or a compression table and they're inputting information, they know firsthand how it comes together. There's no disconnect between the people drawing and the people who are fabricating. That's massive, that's huge. That's why Diego and I got together – I noticed he had something going on – something that I haven't seen, something that I know is required. And I see it firsthand. And it's wild, because I'll go into the factory, and I'm feeding off it as the architect, I'm seeing the way they're doing things and that design pallet that I have is now getting bolstered. Right, because I can see how these things are put together in a more efficient manner. I think that's pretty much how I I've seen, you know, the development of it. And I know…Diego, what do you think in that regard?

 

Diego Rivera  18:33

You know, repetitious, that's the secret, correct, that's where you make the money. Use an 80-20 rule, you know, 20% of the cost of those modulars is the bathroom, the kitchen and all the MEPs. So, we must standardize the MEPs and give the ability anything that is outside that 20% control, to be flexible. So, we standardize our bathrooms, we standardize our kitchens, our connections, our MEP, right where the money is. And then we let the architecture fly, and the boundaries of the site, the boundaries of the building and the needs of the customers. But the core budget for the core cost of the modular unit in my understanding is the bathroom, the kitchen, and all the connections that we standardized. So, we're trying to be flexible with the rest of the building. A standardized bathroom - there's only so much you can do with them, you know, an ADA bathroom, a regular bathroom, and then all you do is you change colors, sizes, but then you keep the main core of the building, and you use that 80/20 rule.

 

Peter DeMaria  19:46

You know, along those same lines I'm going to add to that very often when I speak to fellow Architects, they assert that if you're doing these modular buildings at any large scale, they usually end up looking like minimum-security prisons. You said there's no there's no flexibility In the design of the aesthetics, and what we've done is part of our entire approach, we integrate a unitized facade into our modules, that unitized facade enables us to swap out materials, various material, their colors, all to give the building its own identity -things don't have to look alike We’ve achieved a level of variety, that's enabling us to avoid all of that repetition. We're working on a project here in South Los Angeles, with developer Anthony Gude, and Gude Capital. And it's interesting, because we put together this entire building, and then our modular elevator, which is typically just the shaft has become this point where we have these shifting marquee shapes going around the elevator all the way up this eight-story building. And it becomes the iconic image of the building. And it kind of steals the show. And suddenly, the rest of the building is fine. It's perfect. It's not boring, but you have this one aesthetic feature that really sets it off. And I think that's up to the Architect - the Architects must take leadership on modular design to show what those possibilities are. Things do not have to be boring by any means. And you'll see that project eventually, it's quite nice. I think however that we would be lying if we told you repetition is not important. We can do whatever you’d like, but repetition is part and parcel to what we do.

 

John McMullen  21:38

With all the experience that you both have acquired. Would either of you consider yourselves a specialist in modular design? I asked because it seems like many designers include modular in their skill sets, they'll do traditional, they'll do modular, but there are few, at least in my experience, who are truly specialists in the field, what are your What are your thoughts on that? Do people need to specialize?

 

Peter DeMaria  22:03

I'm going to answer first.  Diego is a specialist. I don't know anyone in this field, in the 2D panel world that knows that industry and executes like he does. There are so many who've written books, white papers, given lectures, and I've seen them all. But at some point, the rubber hits the road. This is why I connected with Diego, I went to his fabrication shop, and they were doing it – not just talking and writing about it. And he's been doing it for 12 years, he's not been doing this because it became a cool hip thing to do. Diego explains how you how you got to this point, or maybe help John out with that, because I do believe you're the specialist. I know you're humble…but not too often, ha-ha! But I think you'd be humble this time. So, give John a general idea how you got to where you are and what it takes so that the other folks out there who want to follow in your footsteps have some general path and some guidelines on how to achieve that.

 

Diego Rivera  23:02

I think being humble is the secret of being a specialist. Because we learn how to, we learn from all those mistakes we make - you must add it up. I think it's just an accumulation of mistakes and who's brave enough to admit it, and then be able to pass it on to the next generation. So, we have different rules at our shop, you know, we have a full schedule - we do a lot of jobs with DPR, and the big General Contractors and they have different building concepts.  Synching with their construction schedules and trying to implement that is a great challenge. There are certain rules that we have in the shop – for example…who's at fault?  the one receiving bad info or drawings or the one giving bad info or drawings? In our shop, it’s the one receiving because if you're receiving something that is not where it needs to be, you should not move forward - stop the line! We believe in keeping things simple. The only way one can move up in our shop, is if you bring me somebody better than yourself to take your job. So, John, if you come to me and said Diego, I am tired of sweeping floors, I want to place some screws, you better bring me a guy that sweeps floors better than you for you to move up. So that has created a level of dependency in the team - and trust. You know, I always say that there's a big difference between respect and admiration. Everybody respects the guy that writes the check. But if you start admiring your team, and your team admires you and you create this camaraderie, this group where the mistakes are just the result of our growth – this is where great things happen. In our industry, I read something on LinkedIn this weekend. It has become common where nowadays, the best advisors are those who have failed in the industry because they sold their souls to capital - they needed more money to buy all this equipment. Even though they were smart guys, they are going out of business because they must keep “feeding the beast”. You must see what your abilities are, so we're very cautious on the jobs we take. We're growing very steady, but slow. Everything, all our equipment, is all paid off. We don't owe money to anybody besides rent and electricity. So being debt free and having the ability to dream and be challenged, is what is allowing us to grow. Are we making millions of dollars? No, not yet, but we're paying our bills, and all our people are paid. This gives us the ability to think clearly - so many new modular companies, by taking capital and raising funds, don't have the ability to slow down and think.

 

John McMullen  25:33

Follow up question for you, Diego, what education and development do young architects need to really get skilled with modular design? What paths should they follow to get their education?

 

Diego Rivera  25:46

You know, there's a saying that the professor shows up when the student is ready, correct? There's so much learning in the streets. Are you really willing to pay the price that you really need to take that year-off sabbatical and go mop floors, put in screws, placing this before your ego, before being an architect - are you ready? They'll pay you, you know, go do red lining for a firm. And all you do is red line…and you dream, and you copy paste. I think Architects should have the ability to go to school and the ability to then go to the job site. If you look how Architects are raised at the rest of the countries besides the United States, they get to build, they go to the job sites. Architecture, because of legal circumstances, and construction have been ruled by lawyers more than architects and builders. You don't have that ability to spend many hours on design and construction because you're too busy protecting yourself.  You don't want to release your Revit model, because it's not a construction document. I understand it’s a huge economy and a huge industry and that everybody needs to protect themselves. The process of going to school, should include going to the job sites and learning how to put in a screw. Students should really understand what they’re building.

 

John McMullen  27:01

You mentioned, when the students ready to learn, the professor will arrive. I love that saying I'm sure I just butchered it. But I think I paraphrase it well enough. How can architects who are experienced in modular design best share their knowledge with younger designers? Are there best practices? Are there methods that you've either done yourself or witnessed that you think work particularly well?

 

Diego Rivera  27:25

You know, like I told you experiences and making mistakes, I also say that there's a difference between sweat and saliva. A lot of people have a lot of saliva, a lot of pictures. You know, Architects have kind of two things, and I'll probably be offending architects, but they have the projects that pay the bills, and they have the projects that stroke their ego, because they get published in a magazine. But if you can find that middle point where you can teach the next generation from your mistakes and teach them to walk away from that Architect ego and assume responsibility, they’ll learn that it is okay to make a mistake. The challenge is not to make the same mistake twice. And then let them know, you’re there to lead people. You need to walk away from your own persona, lead and build teams.

 

John McMullen  28:14

Peter, I want to follow up on something you said earlier about wanting to work with other teams, are there any best practices you've discovered to help with that communication and idea sharing within a team of designers?

 

Peter DeMaria  28:28

Oh, sure. I mean, the communication channel is probably the linchpin in all of it. We're set up on Microsoft Teams and we work with an international team. We've got Architects and Engineers in Europe and South America that are part of our team. When you have that type of distance, and it's purely digital, communication must be tight. In addition to that, you have drawing standards and shared libraries. And I think that's where most of the work goes into creating a modular company. You must create a library, you must create an ordering system, you must create the standards by which everyone's moving in the same direction, utilizing the same tools, same details. It's a language, it's like learning a new language. So that's one thing. Then there’s the rest of it. The project managers that we have at our Revit stations, we pull them in and make each one of them an expert in a different facet of buildings. So, we now have in-house, one person now who's really specializing in just mechanical, another who's electrical, plumbing, etc. So, we're empowering them with this knowledge and they're starting to see how this all ties together as a greater whole. That same enlightenment must happen when we work with fellow Architects. We must give them all that information. We must give them the drawings, we must share just about everything that we've created, if we hope to be on the same page, we must share the playbook if we're going to move that offense down the field. So, I think in many instances, it's just a matter of everyone getting on the same page so that there's no miscommunication. And quite frankly, across the board, I don't know what the huge percentage is, but everything we are doing, when it comes to the planning, and the architecture and engineering, is to reduce the amount of errors and in the field -  to create a high level of predictability in all of this, and the only way to do that is to share the information so that we're all on the same page. We do not have the luxury of putting that note at the top of our drawings, that says, “contractor shall verify all prior to construction and notify the architect that there are any problems”. That doesn't exist in our world. We’ve had success with our system and best practices and we’re working with a few different companies already…and they have embraced all. And now they've become “modular”, I'm not going to call them specialists yet, but they're very friendly to it, because they see the benefits that come with it.

 

Diego Rivera  31:13

Something that we’ve done is walk away from project managers and we’ve created product managers. So, we have the product manager for mechanical, electrical, plumbing and for everything else. And we also have a theory here in the shop that the more we teach, the more you need us. So, the more we share, the more you're going to need us because we want to be a source of information, we want to be the ones doing the research, we want to be the ones helping architects, so they can have their beautiful building and they let us take care of whatever happens inside of the walls. Let us pay attention to the MEP, the outlets, the rough openings, the locations of your ADA bathrooms, let us help you red line, let us help with everything else that has to do with making a more cost-efficient building while you keep the integrity of your design. We want to be that resource for architects, engineering firms, or anyone who wants to get into the modular world.

 

Peter DeMaria  32:01

John, you know, you asked that question earlier about the students and a few programs out there. I used to teach at University of Texas. University of Texas has a design build program there. It's spearheaded by a gentleman named Coleman Coker. There's another program at University of Kansas, it's run by Dan Rockhill. They have design build programs, where the students are spending a semester building a residence or building some type of structure and this is where the rubber hits the road. The students show up and they're not in the cool architectural black suit or turtleneck – they’re in work boots, and they've got tool bags, and they're making it happen. Those students have a huge advantage over the students who are purely in the studio because they understand how critical it is to understand construction. They probably learn quite a bit about what you don't want to do out on the construction site and that further feeds them to adopt a “we need to resolve a problem before we get to the construction site” mindset or a constant questioning of “how can we do this better in the factory”. So, I would recommend any student who's really interested to reach out to respective design/build programs at architecture schools, that's a place where you would start.

 

John McMullen  33:12

Well, speaking of where students are learning and how they're learning, are there any new tools, AI, for example, that you feel have the potential to change how designers deliver their projects that maybe these students are being introduced to now,

 

Peter DeMaria  33:26

I think that a couple of things are happening. Obviously, AI is enabling us to do the macro work much easier as we start to reconfigure buildings very, very quickly. Simple little modules can be grouped, taking into consideration the sun, the angle of the sun, solar penetration, the neighbor views, your views away from the building, all those things enable you upfront to configure your buildings more efficiently. But where I get a little nervous or a little scared, is that so many people are just going to rely on that machine to configure the building, and they're going to say, “okay, my job is done now”. It's easy to get wrapped up and be enamored with what's happening in the world of modular and modular construction, people are fascinated by it, but at the end of the day, it's a means to an end - it's really serving a larger purpose because we're creating spaces for human beings. And that gets left out of the equation. I'm not sure how successful those AI generated buildings are going to be. I've seen plenty of examples in the past where, yes, it's a shelter, you got a roof over your head, it doesn't leak. But conversely it is also a horrible space, and I don't want to be in that space for longer than 20 minutes! This gets back to the minimum-security prison phrase that I've heard repeatedly. When AI can take into consideration the cultural elements, how people live in that neighborhood, and all the other nuances that impact the quality of life there, at that point, I’ll think it's great. In the meantime, we must settle with the Architects who see the world a little bit differently and make observations that lead to incredible contributions to a neighborhood. So, we’re not against, technology - we're deeply embedded in it, and we see it as a tool, just like everything else we have here in our studio and factory.

 

Diego Rivera  35:13

To add to what Peter's saying, there’s a fellow that Peter introduced me to…W.Edwards Deming. He was the gentleman who helped reconstruct Japan after World War II and he had a couple of good quotes. He said, “… without data, you're just another person with an opinion...”  So, for AI to work, you need data. In our shop, we've been collecting data for the past 10 to 12 years. So, I know how to track the carpenter numbers are when he's putting number 10 screw on a 16 gauge to a 12-gauge piece of track.  We're taking to this to the next generation - we're writing an algorithm where you have three variables that you must consider when you do modular - one is your schedule that you're going to deliver. The second is the resources you have that day in the shop. And the third one is the procurement of the materials. Determining what panel stage to do next week, which is predicated on the team performance, which is also based on the people you have, and then…how will you be able to leverage those resources to be productive and to make money? So, I think data is the secret for AI – it will not work without any resources. Deming also had another good quote that he said, “…In God we trust, all others bring the data…” So, a lot of the new shops are trusting in God, but they're not trusting resources – most importantly data and experience. And that's where the Professor and the Student thing comes in. When there's knowledge, mistakes being made, and all that information has been accumulated, there is a benefit for all - you must share that with everybody and be accountable for it.

 

Peter DeMaria  36:52

Related to this same topic, there’s a quote I often use “…the Stone Age didn't end because they ran out of stones…”  AI is going to play a more and more dominant role with what's taking place in our industry. And we're embracing it. I'm curious where it's going to be in a year from now, five years from now, and I can't get my arms around it, but I’m genuinely excited about it.

 

John McMullen  37:15

This conversation seems to have crescendoed in a couple of different ways. Tell me about the formation of MID-RISE Modular and all the experience that you've brought to it… all the excitement, all the technology? What led the two of you to create MID-RISE Modular and what's your goal with the company.

 

Peter DeMaria  37:37

Good things have happened. I've been in the modular space for almost two decades. About five, six years ago, I was fortunate to get aligned with a company called HBG Modular, which we created with late Max Azria and a few folks here in Los Angeles. And they took my knowledge in the container world and sent me off to China to work with a great team of people from the US. We were able to get our China factory approved by HCD here in Sacramento - State of California certified. We created a bunch of prototypes, and ultimately a five-story apartment building here in Los Angeles. We also did a homeless project here in Los Angeles, and really took volumetric modular to a scalable level. Now, I had been involved primarily with boutique tech projects, one off houses, ADUs, but never housing that would have impact on the masses - really helping the people who needed it most. So HBG resulted in three or four buildings here in Los Angeles. I then consulted to another company hoping to work on multifamily projects but that didn't work out. I then ran into Diego - we were receiving design awards for the projects that I mentioned earlier at the MBI World of Modular conference. Spent a whole bunch of time with him and he explained everything that he was working on in the panel world.  I told him that what he had created is exactly what is needed in the 3D volumetric modular industry - he's a production partner. When I got to his shop and saw the culture that was in-place and the work that they were producing, I realized that this guy had solved a problem for the volumetric world that he wasn't even working on. He solved the problem in the 2D world which could easily be readapted into the 3D world. Diego expressed that he wanted to make the jump in the 3D world, but he wasn’t sure – he expressed, “we don't know what you know”. For me, it was kind of vice versa - I didn't have the skill set or the resources to do what he was doing. So, it kind of fit like a hand in a glove quite nicely. Once we got together, we realized that we had to continue the path with the 2D panels because he had level of expertise there. And then we slowly started infusing the volumetric vocabulary into everything and instead going after those types of projects we went into R&D mode. We did not expect to start any 3D volumetric projects for at least six months but that all changed rapidly.  We're now working on an Los Angeles based 88 unit, eight story volumetric project. That's happening concurrently with the panelized projects that we're working on. We find ourselves designing and developing building projects for our clients but in other instances, we're the “white label” fabricators to other modular companies. Much in the same way, we’re functioning as the modular architecture specialists supporting traditional architectural firms. We the “Intel Inside” for modular companies and Architects. We have a diverse company and I think the regardless of what's taking place, it seems to be always a demand for the panels and now this is starting to take place with our volumetric solutions

 

Diego Rivera  41:00

I got enchanted by all these ideas that Peter has as an Architect…you know, I still dream as an Architect, even though we build things day to day. When we talk and we see what was coming in, especially living in the world of panels, living in the type one construction, assisted living, doing nothing in wood, and with a demand for everything above five storys, we recognized - there's a big challenge here - the City of LA, and this is my prediction, within the next five years is going to go noncombustible. So, I don't think anything within the metro area of LA is going to be able to be done in wood, because the density is not going to allow it – higher density will not allow for noncombustible buildings. I've been living in the noncombustible building industry for the past 10 years. So, when I saw the level of precision that we do on the panels, what the industry is doing in the future, where the market is going, and the knowledge that Peter brings on the volumetric side it was encouraging. But more than that, and most importantly, we have already established a successful business that pays the bills. We don't have to get a loan and get in debt to try to create a volumetric business, it was a no brainer. We created a subdivision to the existing operation. The existing operation is running on its own paying the bills while we're dreaming on the side about volumetric buildings. Peter and I were going to take a year sabbatical just to learn and go across the world to see who's doing what. But you know, we just got pulled in. We got a project already and with the level of coordination and digital twins that we run in the panel industry - it felt secure enough for us to take on this new challenge. I think it’s going to be a great experience. We're crawling, hopefully, you know, by the end of the year, we'll be walking, I don't know if you're going to be running but we’ll do more than enough to survive while the panel business keeps growing.

 

John McMullen  42:45

Have there been any potholes or hurdles that you've had to navigate in the past year and a half with the beginning of MID-RISE Modular anything you didn't expect?

 

Peter DeMaria 42:55

They say it's a cliche, right? All these hurdles, or all these problems, prompt you to come up with other solutions. And the worst day can also be the best day. And that's happened in some regards. I’ll let Diego talk to you about our current facility and how we've shifted gears, and now have taken on new facility. I'm sitting in our new office today and there are some pleasant things happening – like changes to the building and planning code and policymakers getting far more friendly to what we're doing as modular builders. We realized a very long time ago that you can be the most visionary Architect in the world and have everything resolved, but the policymakers are so tied to what we're doing. The ADU laws in California, the SB-9 laws and what Diego was talking about earlier with noncombustible combustible construction changes on the horizon - it's all an attempt by the policymakers to have more density in existing cities, instead of you know, promoting sprawl and people moving further and further out into the suburbs. Bringing people back to the inner city and what that means is increasing tax revenue. And when all that happens, the building code starts changing. We're doing an eight-story building, ADU units and there are no parking requirements because we're within a half mile of a transit hub. That's major when you consider the impact of not having to provide a parking garage on the budget for the developer. We’re putting up 88 units and although I don’t believe density is the answer to everything, we now have a team, and we collaborate with these other industry players to make a positive impact.

 

Diego Rivera  44:42

Besides that, I think one of the biggest challenges too, is having the banks and the financial world understand the cash flow. We're building and we still must convince lenders. You ended up paying all this money up front, and you're acquiring all these materials and schedules, but lenders still want to run it as a traditional construction. So, there's a difference right there between still having the mentality of traditional construction but being able to adapt cash flow to manufacturing is a challenge. So, the line between manufacturing and traditional construction, I think, is where the biggest challenge is that we see. But once you get the right lender, once you get the right customer - everything else is flowing. It's just a matter of cash flow. What Peter's saying, back in November, we were challenged by the landlord where we're staying here in LA; we've been here for close to 14 years paying less significant amount of rent compared to what the neighborhood commands. The landlord came back in November and said, “Hey, Diego, it's time to raise the rent”. I said, well, I've been getting monthly increases for the past decade. He goes, no, no, no, no. market rate is four times what you're paying.  I was paying 54 cents a square foot and he came back and said that market rate is $2. I'm like, what, $2? That's $200,000 a month for rent. Multiply those times one year and that's $2.4 million. If the construction industry makes 20% profit, we need to sell $10 million of work just to pay the rent. So, we're like, Peter, we're in trouble. What are we going to do? So, within people that we know, you know, we're in the industry, we started looking south, and went to Mexico. I know a couple of red iron manufacturers there who do chassis and structural steel, who delivered to California. We worked a deal with a joint venture and we're in the process of opening our shop in Mexico while we keep a small operation in LA to manage the installation. At our LA factory, I have an American flag & “Made in America” banners, very proud of building everything here in the States. But California is pushing us away… we considered going to Nevada, and then keep going east, but the market is here in California.  These new laws between Mexico and United States enable us to use 100% American products. By nearshoring, we utilize Mexico labor and bring back quality products with the same building code compliance as our work generated in the States?

 

John McMullen  47:35

It makes sense. I mean, so in terms of projects and you alluded to a couple before, Peter, what's on the horizon for MID-RISE Modular? Over the next year or two, you mentioned an eight story, another project. Do you have anything else in the pipeline, something you've talked about?

 

Peter DeMaria 47:53

Sure, I mean, the panelized projects that we're working on to support the other fabricators are a big part of what we do. And we really excel at that. Now we're doing some work in Hawaii. We're on shortlist to do student housing projects here with UC system. We also have a series of folks who have come to us with SB9 lots who are dividing single family residential zoned property into four. Four units are becoming a repetitive cookie cutter type of solution that can apply across the state of California. So we're creating that menu that we spoke about earlier, where we have a solution for a developer who come to us and is getting something right off the shell and they're ready to go. The other developers that we're working with, they don't just do a one-off project with us - they're now presenting all these other projects, because they see the benefits. I don't want to say we're early stage, but we're doing some projects that are big out of the gate. We also don't want to run into a spot where we just take all the work, we possibly can, or we’ll start compromising the quality. We don't want to go the route of some of the other modular companies that have simply failed because they could not keep up with the workload. You must respect how the machine runs, or you’ll destroy what's so great about it. I think Diego has a very healthy perspective on this. We have constant meetings about the workflow and, and the team is putting everything together so that we're always producing quality, it seems to be at the core of everything that we're doing. So, it will not surprise me if we grow slowly and steadily and continue to do excellent quality work. And I'd prefer it that way. I think that's the vision for next year, maybe even two or three years - where we'll work out every little detail we have, so that when we deliver something, it is highly predictable, no change orders. And it just a beautiful and quality project.

 

Diego Rivera  50:16

Going back to what I was telling you - being able to be debt free, it's allowing us to dream like this. So, what's in the pipeline in the panel business, we probably have a couple of assisted living projects, probably in the range of 250,000 to 300,000 square feet of buildings, where it's just panels. That's probably 15,000 panels between walls and floors. We’re also becoming this white label for existing modular companies in the city, who are choosing to become an assembler, you know, they all think, hey, we're going to be Tesla, we're going to be Boeing, we're going to build modulars. And we supply with them. And now with the operation that we have in Mexico, we're also integrating all the structures and chassis. So, we supply the chassis, we supply the walls, ceiling and floors, and they put it together, they do the MEP along with everything else. And for us, all we want to do is give them the best panel and modules they can. So far, we’ve delivered 80 units for this one customer, and we just signed a contract for another 188 units, and maybe 500 more by the end of the year - they're projecting 1500 units for us next year. So, this is just building parts, you know, kits or parts, or walls, floors, and metal chassis – this is what they value. And what we do is to our level of precision. So, if you don't know how to do the structural part precisely including the box and the chassis, the MEPs don’t really matter if the building is not going to come together structurally. So, our level of precision on the panel and being able to accommodate other modular companies who require precision, especially on the chassis, is our strong point, It’s an honor for us to have them respect our level of quality. We don't compete against them, but we’re a great complement to their existing operation and that’s allowing us to learn and to pay the bills. We have our first project of our own that hopefully will be done by 2025.

 

John McMullen 52:37

Peter and Diego, thank you so much just clearly a wealth of knowledge and experience that both of you bring to MID-RISE into the industry. Really, thank you so much for your time today. I really appreciate it. Peter, Diego, if people are interested in getting in touch with you what's the best way for them to do that.

 

Peter DeMaria  52:52

They can contact us at MID-RIISE Modular.com or  diego@midrisemodular.com or demaria@midrisemodular.com. We're very pro-active and you won't get passed on to a salesperson. We prescreen and there are times when we say no to a whole bunch of projects that we know are just not conducive to what modular brings to the table. John, we want to thank you because you're a great conduit to the entire industry, not just the modular industry alone, but the entire construction industry. Just to give us a forum to discuss and share what we're doing right now is important. We'll be talking about some other things we have on the burner for TEAMprefab - Center for Modular Architecture (www.teamprefab.com) and that's part of our whole vision. We really do appreciate what you and all the folks there at MBI. It's a great, great asset to our industry. Thank you.

 

John McMullen  53:45

Well, I appreciate it. Glad to have you guys as members. And I hope to see you at the next World of Modular. I guess we'll be in Vegas next year. So hope to see you there. Yeah, we should go to the one in Europe, or the one in Europe. Absolutely. Brussels. I'll be there.

 

Diego Rivera  53:59

Oh, there you go. We may see you there. All right. Thanks again. Hey, thank you, John.

 

John McMullen  54:03

My name is John McMullen. And this has been another episode of Inside modular the podcast of commercial modular construction. Until next time,