Rebuilding Ukraine: What Modular Manufacturers, Dealers, and Developers Need to Know w/ OFC, Inc [podcast transcript]

Welcome everyone, my name is John McMullen and I'm the Marketing Director here at MBI. Today I'm talking with Bruce Talley, Chief Operating Officer at OFC Incorporated. Bruce is here to discuss the crisis in Ukraine, and what modular manufacturers and dealers need to know if they're interested in helping in the relief effort.

Bruce, thanks for being here.

Bruce Talley 

Thanks a lot, John.

John McMullen 

So let's dive right in. Tell me about yourself, Bruce. What's your background with OFC and what piqued your interest in modular and offsite construction?

Bruce Talley 

It's a bit of a story, John. I started out worked in investment banking for a long time, bond issues, loan participations. Then I grew interested in, of all places, Russia. I went to Southern Russia, bought and sold commercial land, and eventually started in and ran what became the largest destination management company in Sochi before the Olympic Games there.  So we employed about 60 people. We did workforce relocation together with financial management of contracts. We did TV studios, offices, warehouses, staffing, translators, transportation systems, laundry, you name it for the Olympic broadcasters, partners, and sponsors that were there for the two- or three-year period before the games. And really, this was my entree into modular building because a real dynamic guy named Michael Pitts approached me in 2012. And he had the idea of providing housing, which was in real short supply in Sochi. Sochi's a very narrow city stuck between the Black Black Sea and the Caucasus Mountains. He had the idea of providing housing solutions to the Organising Committee, what Michael proposed and really, Michael and I proposed to the Organising Committee was using cargo container conversions and/or other modular solutions for the ceremony's folks. They had about 2000 people that they were employing, and there really wasn't a good housing solution. Lots of small off-grid, mini hotels and, and things like that. But in order to put 2000 people in one place where you can house, secure, feed, and then transport them to and from the Olympic Stadium, that was our solution.  Ultimately, the solution didn't didn't pan out with the Organising Committee, they spent an absolute fortune on bringing in several cruise ships.

But it intrigued me the ideas, the usages of modular housing, and especially cargo container conversions in these kinds of situations, disasters, whether it's climate related or conflict, the refugees or internally-displaced people, as a result of conflict, it's clear that modular building is going to be a really important feature all over the world going going forward.

John McMullen 

So you mentioned conflict and the really, there's the one big one in the world that everyone's talking about now, of course, that's the war in Ukraine. You have an extraordinarily broad business background, it's taken you all over the world. But tell me about your connection with Ukraine.

Bruce Talley 

Certainly, living in provincial Russia for about 10 years, I also spent a good deal of time in Ukraine. A lot of the cities that you hear the news I've been to multiple times: Kyiv, Kharkiv, Kherson, Sevastopel, Mykolaiv, Odesa. So, I know the country very well. I was there for personal reasons, and also investigating opportunities. I spent a lot of time and of course, despite the war, there have always been some cultural similarities between Russia and Ukraine.  So it's an interesting country has some differences. And so, I learned quite a bit about Ukraine during my decade or so in Russia. Since then, since the conflict is started. I've been over there several times for extended periods, to gather information, talk to friends, see what's happening on the ground, and also to take over medical supplies to the Foreign Legion that's been operating there.

John McMullen 

So what have you seen there since the war started? What are the conditions on the ground that you've witnessed?

Bruce Talley 

You know, it's really is varied from region to region in Ukraine. The western part of Ukraine, until last night in Kyiv, particularly, hadn't been hit very hard with shelling I understand that. The Kyiv was again hit last night hadn't been hit too badly. But the further east you go the you know, and of course, south, the more devastating the the destruction, the damage in the in the human human loss and human tragedy spent. Kyiv, the center, had some damage, not a lot at that time or during the times that I was there, I was in Kharkiv. And it was really horrific to see the difference.  Kharkiv was a large city, second largest in the country, lots of young people, there's a number of universities, and very close to the Russian border. So it was shelled at the time that I was there, shelled before shelled after. And I went through a region called Saltivka. And I've been there multiple times, you know, 10 years, eight years, 12 years ago, and this region had lot has large apartment blocks, some of them several blocks long. And I'm thinking of an area specifically that was maybe a mile and a half long, six 800 yards wide, and had dozens of these very large apartment buildings with hundreds and hundreds of apartments in each one. Each of these buildings sustained enough damage to render it. In total uninhabitable there are some individual apartments that people can live in, there's a couple of percent of people that probably still are, are living their age and people that don't have other alternatives.

But around there, in Saltivka, you saw the smaller kind of neighborhood grocery stores also been shelled, shot out, these are maybe 800 to 2000-3000 square feet. And then the large market which is too far away, large outdoor market suffered a great deal of damage the center with where all fruits and vegetables, dairy products are sold, badly damaged. And literally hundreds and hundreds of metal kiosks around selling everything from tennis shoes to, you know, batteries, all very badly damaged. And I know that your listeners have probably seen video and pictures there. But it's absolutely the case, they've done a great job of representing the damage. And, of course, in some of the smaller cities that were occupied by separatists, and by the Russian military, you know, some of those are just completely devastated.

John McMullen 

So with with all the damage that you've just recounted within in all different types of, of buildings, living/multifamily buildings, markets, storefronts, what's the best solution to get structures in place, you know, now or in the short term? Are there different types of solutions that you're thinking about might work? Or is would one be better than the other? What do you think?

Bruce Talley

Well, I think it's going to depend somewhat on preferences. You know, you have in Ukraine, some of the power has been devolved from the central government to municipalities. That's always been an issue in that part of the world. And the inclination, I think, now is that mayors don't want to necessarily hand that back. So, that decentralization does allow for a more case-by-case solution, which I think is always better, right? And I think that you're going to have different problems in different cities. And I think you're going to have different solutions that are going to work, I think you're going to have a little different perspective. Several of the cities in the West, I've had conversations with extensive conversations with about what the recovery might look like. Are they building temporary? Are they building permanent? So I don't think there's going to be a one size fits all for any of these.

I think that some of the cities are going to opt for relatively inexpensive, temporary accommodations that can ultimately be moved, repurposed, sold. Some of them are talking about solutions that may be more permanent but still can be rapidly constructed, you know, other kinds of modular solutions.  So I'm sorry if I've been sort of vague there, but I don't see a perfect answer that encapsulates how it's going to happen. I will say that housing has got to be a key part of it, because in the small towns, you'll see a lot of these homes had been, they may be single family homes, relatively small in size, but they may have been occupied by Russian soldiers and completely trashed.

The apartment buildings, and they'll have those these large apartment blocks, even in a relatively small city of, you know, 10 or 20,000 people, you'll have some of these areas that are comprised mostly of fairly large apartment buildings. A lot of those have been damaged in the small cities and of course in the larger cities.  So it's going to be I think housing is going to be necessary. We can look at opportunities in schools. Many of these large apartment buildings will have a preschool on the on the bottom floor. So those have been badly damaged. And I think that, you know, I look at cargo container conversions for some of the some of the stores and some of the kiosks around the markets, I think those can be an excellent, quick solution.

John McMullen 

So you mentioned earlier the decentralization of power I could see that certainly being a challenge to getting different types of buildings into different places and get relief where it needs to go. I was wondering if you could speak to that just for a second, and perhaps also about what other challenges there may be to getting modular or container base buildings built in Ukraine now.

Bruce Talley 

Yeah, it's a great question, John. Logistics are going to be, and currently are, a big issue. Right now, there are long lines across the border into Ukraine from Poland, which is really become the primary point for, you know, goods that have been been shipped in. So that's, that's going to be a big issue. How do you get materials in? And of course workforce. I think that's going to drive a lot of this. The mayor's are very sensitive to the idea that, look, there folks have been out of country, in some cases, for more than six months have they begun to rebuild a life in Poland, or the Netherlands, or Germany, or Romania, or someplace else. And so what will bring people back and it's this prospect of employment. So I think that's something that's really driving a conversation in Kyiv. But also, on the, as you say, on the municipal level. And outside of Kyiv, there's a strong possibility of a development park being put in and we're looking to participate there. This development park would allow companies to bring in products and goods and show what they can do.

John McMullen 

What about financing? How would that be handled?

Bruce Talley 

Well, I think that's really going to drive everything. There's been the beginnings of conversations about this, and some very well placed people with the German Marshall Fund had been talking about it. And that the thinking is, I think, right now, since the United States has taken the lead on providing the military equipment, the ammunition, artillery, all this, that probably European Union will have a bigger stake in the in the rebuilding effort. So there'll be a lot of American money, there'll be a lot of European money. There'll be British, I suppose, Canadian, Japanese and other participants as well. But it looks to me like there, there will be a tremendous amount of money, there's probably going to be a serious look at systemic reforms in Ukraine so that investors or donors from from these large economies can be relatively confident that the money's not going to disappear. So there's there probably will be be systemic reforms, there will probably be some looking at building codes, those kinds of things to make sure that they're, you know, in line with European standards.  And so I think that's where the money will come from.

My personal opinion is that American companies and Canadian companies as well, European companies, are going to have a real advantage because these are the economies, these are the governments, these are the people that have been very supportive of Ukrainian war effort. And I can tell you, John, that in traveling around in Poland, and especially Ukraine, I don't think I've ever been any place in my lifetime, and I've traveled to more than 60 countries, I don't think I've been any place that is as pro-American as, as I say, as Poland, and especially, especially Ukraine are right now, people would hear my American accent, and give me free rides.

John McMullen 

Wow.

Bruce Talley 

And this is in a place where fuel has gotten very, very expensive because of the war.

John McMullen 

I would imagine.

So obviously, I mean, the war is ongoing. A lot of things are up in the air, in terms of, you know, logistics, financing, everything. But let's say the war ends tomorrow. You've talked about the immediate needs for housing, for some social infrastructure. But let's let's look at the next three to five years. How do you think that's going to look in terms of rebuilding?

Bruce Talley 

That's a little bit of a difficult question for me to answer because there are so many unknown unknowns here. It's, it's going to be hard. I mean, the different times in this process of Again, to feel a little more optimistic that, you know, the Russian military may collapse and this thing could end quicker than we think. And then, and of course, this isn't based upon my feelings. Clearly, there's going to be a great deal of infrastructure that needs to be rebuilt around the country, you know, bridges, train stations, hospitals, these are absolutely critical. And and I'm not sure anybody's gotten their arms around exactly how bad the situation is. And then I think you have to think about housing and employment.  So what it looks like I don't know, I know that some of the people are talking about an American "recovery coordinator" because of US/American credibility and prestige may be important in in pulling all this together. There's talk that there may be some form of war insurance. So if you're going in directly with your people, with your your plant with your operations, perhaps there's a way that that can be secured so that you're not taking quite as big a risk and in an area that's seen, you know, the worst conflict Europe has had since 1945.

John McMullen 

So I've been following on LinkedIn for a while there are a few manufacturers that are up and running and manufacturing in Ukraine right now. But let's say you're based in America, or Canada or Europe, what would a modular manufacturer or developer need to know to get started?

Bruce Talley 

You know, clearly, you've got to think about transporting supplies about your location about the legal environment on the ground, there are a lot of things to consider. Are you bringing your employees in? What does that look like in terms of employment law in Ukraine? A lot of issues if a company wants to do that. I think they should contact me. We have legal resources. We have cultural understanding. We speak Russian. Some of our associates clearly speak Ukrainian as well. So I think that the short answer is contact us or contact me.  But in the long run, there's a there's a pretty good learning curve there. I think a lot of what's going to happen is going to go through Poland in one form or another. So that's a that's going to be I believe a jumping off point. And clearly Warsaw is going to be an important city for the near future.

John McMullen 

Whenever there's a good modular community in Poland that are members of MBI. So hopefully, that can serve as a little touch point for people in the industry looking to connect both you and the greater industry going into Ukraine. Bruce, I really appreciate your time today. I don't know if you have anything else that you feel that manufacturers or developers need to know, in order to, you know, stay engaged and get involved...

Bruce Talley 

Yeah, thanks, John, I believe that there's a big opportunity for modular builders to take part to add value in Ukraine to help ease suffering and to make some money. I mean, that's the point of drive this. And this, I'm sure this will be the largest reconstruction effort maybe in the world since 1945. And then in dollar terms, you know, it's it's really going to be massive, the estimates range from multiple hundreds of billions of dollars on. So I think there's an opportunity there.

John McMullen 

So I think, you know, definitely is there's a lot a lot of buildings to build a lot of people to help. So I'm sorry we're here. I wish we were not. But in terms of, you know, opportunities for the industry, this certainly is one. And I hope that, speaking for the industry, I hope that we can be of all the assistance we can be.

Bruce Talley 

You know, I wanted to add one more thing, John. When we're talking about getting involved in Ukraine, there is a steep learning curve, there are cultural and legal barriers that will be new to it, especially to North American companies. So it's possible. But if a manufacturer a builder wants to acquire our abilities, our knowledge, our culture, cultural understanding and language skills, and ability to bridge that gap, you know, I think we can we can do that very well.

John McMullen 

Excellent, excellent. I appreciate it, Bruce. And you are with OFC Incorporated, what's your website and how do people get in contact with you?

Bruce Talley 

OFCI.com. And I can be reached at bt@ofci.com. And that's in case it wasn't clear. That's an O as in Oscar, F as in Frank, C as in Charlie, I as in India .com.

John McMullen 

Awesome. Thank you, Bruce. Again, I really appreciate your time today. Very important information. I hope eventually things will turn around and we can get people the help that they need.

Bruce Talley 

Yeah, it's hard not to cover one's eyes when you see all the suffering.

John McMullen 

All right, Bruce, thank you so much.

My name is John McMullen and this has been another episode of Inside Modular: The Podcast of Commercial Modular Construction. Until next time.