Inside Modular: The Podcast of Commercial Modular Construction
Communication & Collaboration: How Successful Modular Design and Fabrication Teams Work w/ Mid-Rise Modular
Peter DeMaria and Diego Rivera of Mid-Rise Modular unpack the intricate dynamics of integrating modern architectural methods into successful multi-story modular projects. Peter and Diego also share their insights on the logistical challenges and precision required in modular construction. The discussion highlights how aesthetics and technical expertise must harmonize to produce efficient and visually appealing buildings. They also touch on the role and potential of AI, as well as the importance of research and development, repetition, and standardization—particularly in cost-intensive areas like bathrooms and kitchens—to enhance efficiency and quality.
Peter DeMaria and Diego Rivera of Mid-Rise Modular unpack the intricate dynamics of integrating modern architectural methods into successful multi-story modular projects. Peter and Diego also share their insights on the logistical challenges and precision required in modular construction. The discussion highlights how aesthetics and technical expertise must harmonize to produce efficient and visually appealing buildings. They also touch on the role and potential of AI, as well as the importance of research and development, repetition, and standardization—particularly in cost-intensive areas like bathrooms and kitchens—to enhance efficiency and quality.
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 DiMaria 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 and Diego, welcome.
Peter DeMaria:Morning, john, good morning.
John McMullen: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:Thanks, John. I started out in architecture school. If I really want to go back far, I was able to meet Buckminster Fuller when I was a young fella.
John McMullen:Oh wow.
Peter DeMaria:And I was in undergraduate school, was in art school, where 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 artist parties in New York, right. But it all changed when I had a great professor, and I think that's happened often for many people. There's always a mentor or 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. It put me on a different path. I went off to architecture school at the University of Texas in Austin and then migrated west to Los Angeles, opened my own architectural practice and did primarily traditional work.
Peter DeMaria:Got to about 2003, 2004, got frustrated with the cost of things and started to explore. I was teaching at that time, took a year sabbatical and clearly went around the world to see what was an alternative way of building. That wasn't stopping me much of the way the traditional wood frame construction was doing and I unveiled, you know, the cargo container at having the most potential but the least amount of research had been done on it. So I was really fortunate, had some great clients in 2005 and built what I believe is the first legal cargo container-based building in the United States. It was a two-story residence down in Redondo Beach and that kind of set me off on an alternative path, the traditional architectural practice that I had, and I really leveraged out what you could do with that container and the next logical jump was to move into the world of modular.
Peter DeMaria: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 really 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 housing and a great housing solution most. So that was like 30 years in a nutshell, right. So now I find myself here in Los Angeles and travel back and forth from Austin, texas, to LA, and Diego and I have been actually working parallel to each other for the last almost 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:Well, that's an amazing background. Thank you, peter Diego. Tell me about yourself and your background.
Diego Rivera:Oh my God, that's interesting when you go after Peter. So let's see if I can do better than that. You know I'm going to give it a try. Same thing, you know learn on 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 one hundred and fifty two hundred thousand dollars in debt, there was nothing in my brain besides a big ego of a bunch of architects who teach me how to do things. So I took a year sabbatical and went through all the trades as a Latino living in California, took advantage of the color of my skin and got jobs mopping roofs, installing drywall, doing ligage.
Diego Rivera:Now I go to every job. Hey, I'm un trabajo, so I'll get a trabajo. I get a job, work my way in. After a week especially mopping roofs I was like, hey, I know how to read plans, okay, come to the office. So then you're becoming an estimator A couple of weeks in, a month on, it was like, hey, listen, I actually went to architecture school, I'm just learning the trades, thank you for the opportunity and worked my way out about a year through all the trades until I learned about ligage. So within that process, that journey, I got hired by a fiber cement manufacturer in Latin America to go preach fiber cement with ligage across the world. So I was like the young architect who graduated in the United States, going to third world countries utilizing framing systems with a substrate which was a fiber cement.
Diego Rivera:So that took me to a journey of about 10, 15 years where I got to learn a lot about manufacture, iso 9000, iso 14000, and all the qualifications that those big manufacturers have. 10 years into that, 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 ligage. And then about 14 years ago somebody told me that there was an industry, there was a guy in Southgate putting a panel shop that he may need help. So I step in, start working, got into the 2D world that we call it, you know, panel world and been doing light gauge panels, low 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 easy. You know because we're building for DPR, for all the general contractors, the big guys, the billion-dollar GCs. And then I said you know what I want to see, what happens when you put this together and you do a volumetric thing. So I went to the World of Manager, met Peter right there and we took on the challenge of generating mid-rise.
Diego Rivera:I've been a steel guy all my life I have never built a house in wood. That's why we choose mid-rise, complying with codes and everything else. We want to go about 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 this industry and as an industry, we should be helping each other. And that's the journey that we're on right now Create two lines of divisions. We still have a ligage panels where we're very successful here in California and that pays the bills, and now we're taking a couple of modular jobs where now we're grabbing those 2D panels and building them into a 3D unit.
John McMullen:Very good. Both of you have, it 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 biggest?
Peter DeMaria:hurdle. I 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 now is working with a client and convinces the client, say, hey, let's go into the modular space. So at that point you have to be able to deliver a modular fabricator or 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 interview everybody, but at the end of the day, there's some you know strong predictability.
Diego Rivera:You're going to find a reputable builder who's going to do a decent job you know, the beautiful thing about what we're doing with peter is I 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 load-bearing job you know nine stories, six stories incorporating that into your MEP pads, your mechanicals and everything else.
Diego Rivera:It is challenging to understand how boxes are. But when we come from the panel world, when we pre-manufactured panels before foundations are already been poured, it's been a game changer of me understanding the needs that a volumetric architect needs. And also for Peter to emerge, the pre-construction, where basically construction is about logistics, correct, so we're playing a 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 locks. 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 formings and equipment, and try to get the return on investment when the brain is not there.
Peter DeMaria:Part of what we're doing at Midrise where Diego's team and in our shop they're working down a tolerance level of a 16th of an inch, role-forming our own studs and joists. We have all the equipment 100,000 square foot factory inside, 100,000 outside so we have the capability of doing all these things. What we're doing now is also working with fellow architects. Typically, architects do not bring in another architect to work with 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 okay, 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 sign 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. There's only so many buildings I can design right. But the opportunities are brimming.
Peter DeMaria:There's so much going on right now and that's where our efforts are focused, and we've been really fortunate in the last year and a half to do some things that I didn't think were possible. But what has unlocked it is exactly that first point that the ability to fabricate and to fabricate not just put it together but to do it with a level of efficiency that does translate into all those great things in the world of modular being. You know speed, speed, speed and quality and things are getting very, very competitive in terms of pricing, but that speed and quality give you a return speed, speed, speed and quality and things are getting very, very competitive in terms of pricing, but that speed and quality give 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 hurdle for the last, over almost two decades, to find that. But now I believe we, I think we have it.
John McMullen:So tell me about your modular design process now. How does it start and how has that process sort of evolved over time since you started?
Peter DeMaria: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'll show them traditional way to put the buildings together and then we show them the buildings together and then we show them the modular benefits, and those clients will work with us directly. We will design that building.
Peter DeMaria:But my design work does not start in the traditional manner. Just about everything that's feeding 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 logistics. I'm worried about shipping. I'm worrying about the building rattling as it's being moved to the job site. And I have 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?
Peter DeMaria: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's in the kitchen and I have to 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. So there's a kind of relearning of the parameters by which you design. So that's part of our DNA now. That's something that's a natural extension of us. So when 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.
Peter DeMaria:When it's another architect who comes to us, I think in general architects are trained. 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, 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 have to solve challenges and they're not scared to go after those projects.
Peter DeMaria:So when they come to us and they've designed a building and say, okay, we've designed our building in a traditional manner, can you make it modular for us? And I think, okay, if there was any level of discipline there and order and how the building is organized, it works. And other times you have to reconfigure things and you kind of have to fit it into the ice cube tray per se. So the design phase can drag out a little bit, but typically the client is the one who will drive that. The clients are the one who go to the architects. Listen, I want to dabble in this world of modular. Can we do it and how do we do it? Those are the people we reach out to, those architects who have those clients and say you know, let, let us help you, let us make that part of your, your arsenal, your palette and your creative outlet. So the process once those architects get uh up to speed on the um, the know they'll get it easily.
Diego Rivera:And then to add to that, the next step what are we doing? Our end is what? Well, peter is dreaming. We're telling him hey, 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 kill the cost. So what we do for that is we believe in parametric models. So we'll take the architectural level even from the bidding stage.
Diego Rivera:I usually tell people when they use Bluebeam or any of those softwares to do estimating, I call it finger painting. We don't finger paint here. We grab the house or the model or the building that 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 on the deals that we're working with our owners, we have the ability to this parametric models to make decisions on equipment, on size of the electrical panels and everything else, and have an immediate impact in the budget before we make any decisions and before we even buy an outlet. So I think that's where we complement each other, where Peter has the ability to 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: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, or the ones that you do? Are they similar or does each project sort of have a unique module design that requires starting from scratch?
Peter DeMaria:Well, you can look at it both ways. I think if you're going to be more efficient 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 of excellent quality and they're trying to do things of great value, a decent value prop in it all. Once you go custom, it falls back into the traditional world of doing things. Now we have created a little palette. You know we would love to be like In-N-Out burgers, right where they've got three or four options on the menu and that's it.
Peter DeMaria:But the intense amount of research and development has gone into creating that module, creating that standardized module, because you have to make some assumptions about how the masses of society want to live in a one-bedroom or a two-bedroom or a 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. When we're designing, it's how do we want to live, and that becomes the drawing inspiration behind what we do right? And then you combine that with all those technical things we were talking about before, it becomes this mix, heavily mixed level of aesthetics and technical prowess and you cannot leave the technical out and very often 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, you know, a parametric model, one of the benefits we have in our shop. If we have this shop with roll forming machines and you know 30, 40 guys putting things together there, we have six or seven project managers who are working exclusively in Revit, autocad and they put these models together. But they all started out on the floor of the factory. They all started out running the roll-forming machine, fastening everything together, and they've all been with us at least eight years. So that means that when they're at that Revit table and they're inputting information, they know firsthand how it comes together.
Peter DeMaria: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 said, diego, you've got something going on that I haven't seen, that I know is required and and I see it firsthand and it's wild because I'll go into the factory and I'm feeding off of it. As the architect, I'm seeing the way they're doing things in that that palette that I have is now getting bolstered right because I can see how these things are put together in a more efficient manner. So I think that's pretty much how I've seen development on it and, diego, what do you think in that regard?
Diego Rivera:I think, just to add to this yes, repetitious is the secret, correct, that's where you make the money.
Diego Rivera:But if you try to use an 80-20 rule, 20% of the cost of those modulars is the bathroom, the kitchen and all the MEPs.
Diego Rivera:So we have to standardize the MEPs and give the ability to the bedrooms the world where I do panels the size of the bedroom, the size of anything that is outside that 20% control be flexible. So we standardize our bathrooms, we standardize our kitchens, our connections, our MEPs, right where the money is, and then we let the architecture fly on the boundaries of the site, the boundaries of the building, the needs of the customers. But the core budget or the core cost of the modular unit which, in my understanding, by doing numbers and looking at it, it's the bathroom, the kitchen and all that area with all the connections are we standardize and we create a palette for those. So we're trying to be flexible on the rest of the building and the standardized bathroom and 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:You know along those same lines. I'm going to add to that. Very often when I speak to fellow architects, you know, if you're doing these modular buildings of any large scale, they usually end up looking like minimum security prisons. You said there's no flexibility in the design or the aesthetics. In the design or 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, the thickness of material, the color, all of that. They give the building really its own identity. Things don't have to look like the building next door. That we did two years ago. So we think we've achieved a level of variety that's kind of veiling all of that repetition where we leverage all the efficiency from.
Peter DeMaria:We're working on a project now here in South Los Angeles with a developer and it's Anthony Gude, it's Gude Capital, and it's Anthony Goudet, it's Goudet Capital. And it's interesting because we put together this entire building and then our modular elevator, which is typically just a shaft, has become this point where we have these shifting marquee shapes going around 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 all of a sudden, 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 have to take leadership on it 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. So I think, though, we would be lying if we told you repetition's not so important. We can do whatever you like. It's part and parcel to what we do.
John McMullen:With all the experience that you both have acquired, would either of you consider yourselves a specialist in modular design? I ask 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 thoughts on that? Do people need to specialize?
Peter DeMaria:I'm gonna answer that first, diego. Diego is a specialist. I don't know anyone in this field in that 2D panel world that knows that industry and executes like he does. There's so many who've written books, white papers, giving lectures, and I've seen them all. But at some point the rubber hits the road. And Diego this is why I connected with him when I went to the shop. They were doing it and he's been doing it for 12 years. He's not been doing this for just last week because it became a cool, hip thing to do. Diego, explain 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 not too often, but I think you'll be humble this time. So give them 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 or some guideline on how to achieve that.
Diego Rivera:I think being humble is the secret of being a specialist. Correct, because we learn on the nose All the mistakes we make. You have to add it up. I think a specialist is just an accumulation of mistakes. Who's brave enough to admit it and be able to pass it on to the next generation or the next people? So we have different rules in the shop. We have a pool schedule. We do a lot of jobs with DPR, with the big GCs, that they have different concepts, lean construction, pool schedules and try to implement that.
Diego Rivera:There's certain rules that we have in the shop. Who's at fault, the one receiving or the one giving? And our shop is the one receiving, because if you're receiving something that is not where it needs to be, don't move forward. Stop the line. We believe in drawings, simple things. The only way you move up in our shop is if you bring me somebody better than you to take your job. So, john, if you come to me and say, diego, hey, I'm tired of sweeping floors, I want to put some screws, you better bring me a guy that sweeps floors better than you in order for you to move up. So that has created a level of dependency on the team and also trust.
Diego Rivera: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, it is where things happen. I think that's what a lot of other things in the industry happen, and a lot of leaders will. You know. I read something on LinkedIn this weekend and I put a little comment where nowadays, the best advisors are everybody else who has failures in the industry because they weren't able to be smart enough to survive, because they bought their souls to capital, because they needed more money. They buy all this equipment even though they were smart guys.
Diego Rivera:Here they are going out of business because you had to keep feeding the bees, so you have to see what your abilities are. So we're very cautious on the jobs we take. We're growing very steady but slow. Everything we owe is paid off. We don't owe money to anybody besides the rent and the electricity. So being debt-free and having the ability to dream and being challenged is what is allowing us to grow. Are we making millions of dollars? No, but we're paying our bills. Our people is paid and it gives us the ability to think, which a lot of these new modular companies, by taking capital and money and raising funds, they don't have the ability to slow down and think.
John McMullen:Follow-up question for you, Diego. What education and development do young architects need in order to really get skilled with modular design? What paths should they follow to get their education?
Diego Rivera: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 that are you really willing to pay the price? Are you willing to take that year's sabbatical and go mop roofs, put screws, before your ego of being an architect walks away? Or you're ready to pay? You know, go do red lines for a firm and all you do is you do red lines for a firm and all you do is you do red lines and you dream and you copy paste. So I think architects should have the ability to go to school. They should have the ability then to go to the job site.
Diego Rivera:If you look how architects are raised in the rest of the countries besides united states, they actually get to build as soon as they're out, they go to the job sites. An architect here here, because of legal circumstances, because I think construction is being ruled by lawyers more than architects and builders you don't have that ability to spend that many hours because you're protecting yourself. You know you don't want to release your Revit model because it's not a construction document and we're doing all these documents, documents and it's. I understand it's a huge economy.
John McMullen:It's a huge industry that everybody needs to protect themselves. But within the school, within the process of going to school, they should go to the job sites and learn. I'm sure I just butchered it, but I think I paraphrased 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: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. You know, and I'll probably be offending architects, but they have the projects that pay the bills and they have the projects that raises their ego because they get published in a magazine. But if you can find that middle point where you can teach the next generation of the mistakes and what you've done and share that and walk away from that ego that you're the architect, but assume the responsibility that it's okay to make a mistake, that it's okay to repeat itself, the problem is not to make the same mistake twice, hopefully, and then just lead. You have to lead Leaders are there to lead people and you need to walk away from your own persona and build teams.
John McMullen: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:communication and idea sharing within a team of designers. Sure, I mean, the communication channel is probably the linchpin in all of it. We're set up on teams. We actually work with an international team. We've got folks in Europe, engineers in Europe, we have architects in South America that are all part of our team, and when you have that type of distance and it's purely digital, that has to be really tight. In addition to that, you have standards with all of your drawings, standards that can be shared, libraries and I think that's where most of the work goes into on creating the modular company. You have to create a library, you have to create an ordering system, you have to create these 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. The rest of it, I think right now, those folks that I told you, the project managers that we have on our Revit stations we need to pull them in and make each one of them an expert in a different facet of building. So we have one person now who's really specializing in just mechanical, another who's just electrical, plumbing facades. So we're empowering them with this knowledge. So they're starting to see that how this all ties together, you know, to a greater whole.
Peter DeMaria:And that has to happen at the same level. When we work with fellow architects, we have to give them all that information, we have to give them the drawings, we have to share just about everything that we've created If we hope to be on the same page. We have to share the playbook if we're going to move that offense down the field, right? So I think in many instances it's just a matter of everyone getting on the same page so 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 the engineering is to reduce the amount of errors in the field and to create some level of predictability in all of this.
Peter DeMaria: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. This contractor shall verify all prior to construction and notify the architect if there are any problems, right? That doesn't exist in our world. So we're circumventing all of that because it has to happen before we even we pass it off to any other team. So we've had success with this. We work with a few different companies already that have embraced it, and now they've you know, they've become modular. You know I don't want to call it specialists yet, but they're they're very friendly to it because they see those benefits that come with it.
Diego Rivera:And something that we've done is, you know, walk away from the project managers and create product managers. So we have the product manager for MEP, 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 hopefully helping architects so they can have their steady building, and let us take care of whatever happens inside the walls. Let us pay attention to the MEP, the outlets, the ROF openings, the locations of your ADA bathrooms.
Diego Rivera:Let us help you. Just redline everything else that has to do to make a more efficient and cost-efficient building, while you keep the integrity of your design. So that's what we think we want to be that resource for architects, engineering firms or anyone who wants to get into the modular world.
Peter DeMaria:And John, you know you asked that question earlier about the students and there's a few programs out there. I used to teach University of Texas, right, and University of Texas has a like a design-build program there and I can't remember the exact name, but it's run 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 building and the rubber hits the road there.
Peter DeMaria:These folks show up and they're not in you know the cool architectural block turtleneck. They're in work boots and they've got tool bags and they're making it happen. And those folks, I've got to believe, have a huge advantage over the folks who are purely in the studio, right, because they understand how critical it is. Actually, they probably learn more. So what you don't want to do out in the construction site, right, and that feeds them to say you know we need to resolve this problem before we get to the construction site and how can we do that in the factory? So I would recommend any student who's really interested in modular that and you're in architecture school, that's a place where you would start.
John McMullen: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:I think a couple things are happening. It's obvious that the AI is enabling us to do the macro work much easier. In other words, I can start to reconfigure buildings very, very quickly, right? Simple little modules can be grouped into taking into consideration the sun, the angle of the sun, solar penetration, the neighbor's views, your views away from the building. All those things enable you up front to configure your buildings more efficiently.
Peter DeMaria:But what I get a little nervous about, a little scared about, is that so many people are just going to rely on that machine to configure their building and they're going to say, okay, my job is done now and it's really 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 if that gets left out of the equation, I'm not sure how successful those buildings are going to be. And I've seen plenty of examples in the past where, yes, it's a shelter, You've got a roof over your head, it doesn't leak, but I don't want to be in that space for longer than 20 minutes. Right, this gets back to the minimum security prison phrase that I've heard over and over again.
Peter DeMaria:But AI is able to take into consideration the cultural elements, how people live in that neighborhood and all the other things that impact the quality of life there. At that point, I think it's great. In the meantime, we're going to have to settle with the architects to see the world a little bit differently and make some observations, say you know what? I've created an incredible contribution to this context, to this neighborhood, to this piece of property. So we are not against technology, I can tell you that much. We are deeply embedded in it and I see it as a tool, just like just like everything else we have here. We're embracing it.
Diego Rivera:Yeah, you know, to add to what Peter's saying, I think the best tools. You know, there was a fellow that actually Peter introduced me to. I never knew about him, Edward Deming. You know he was the gentleman who helped the Japanese reconstruct Japan after World War Two.
John McMullen:And he had a couple of good quotes.
Diego Rivera:He said that without data, you're just another person with an opinion. So for AI to work, you need data. So, like in our shop, we've been collecting data for the past 10 years 12 years. So I know what Jose in the back numbers are when he's putting a number 10 screw on a 16 gauge to a 12 gauge piece of track. And now we're taking it to the next generation.
Diego Rivera:We're trying to write an algorithm where you have three variables that you have to take into account when you do modular. One is your schedule that you're going to deliver. The other one is the resources you have that day in the shop, and the other one is the procurement of the materials. The other one is the resources you have that day in the shop, and the other one is the procurement of the materials. So how do you know what panel, what stage to do next week and everything else based on the team, based on the people you have, and be able to leverage those resources to be productive and make money? So I think data is the secret for AI.
Diego Rivera:Ai would not work without any resources. He 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 or whatever your God is, but they're not trusting on resources and data and experience. And that's where the professor and the student and all this thing comes in, when there's knowledge and there's mistakes being made and all that mistakes. All those information has been accumulated for the benefit of all and you have to share that with everybody and be accountable for it.
Peter DeMaria:There's a quote I use that the Stone Age didn't end because they ran out of rocks. Right, this is coming. Ai is going to play a more and more dominant role in 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, even five years from now, and I can't get my arms around it, but I'm genuinely excited about it.
John McMullen:Well, it seems like a good time. Conversation seems to have crescendoed in a couple of different ways. Tell me about the formation of MidRise 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 MidRise Modular and what's your goal with the company?
Peter DeMaria:A few things have happened here. I've been in that modular space almost for two decades, on and off, and then about five, six years ago I was fortunate to get aligned with a company called HBG Modular which we created with the late Max Azria and a few folks here in Los Angeles, took my knowledge in the container world and sent me off to China and worked with a great team of people from the US, was able to get our China factory approved by HCD here in Sacramento, state certified and we created a bunch of prototypes and ultimately a five story apartment building here in Los Angeles. We did a homeless project here in Los Angeles and really took that portion of Modsler to a scalable level. Now I have been involved primarily with boutique type projects one-off houses, adus, things like that but never something where it would have impact on the masses and then really help the people who need it most. So that company resulted in three or four buildings here in Los Angeles but then went to another company hoping to work on the multi-family project. That didn't work out and I was in a spot where I said, gosh, I'd really love to get back to this.
Peter DeMaria:And I ran into Diego. We were getting awards for the projects that I mentioned earlier at the world of modular and just hit it off with him and spend a whole bunch of time with him, and he explained everything that he was working on the 2d panel world and I said this is exactly what we need in the 3d panel and he's a production partner. I also spoke about that earlier and once I got back to a shop and saw the culture that was there and the work that they were producing, I realized that this guy had solved the problem in the volumetric world that he wasn't even working on. He solved the problem in the 2D world. It was easily readapted into the 3D world and in our discussions Diego was telling me listen, we want to make the jump in the 3D world, but we're not sure, we don't know what you know, okay, and it was kind of vice versa. I didn't have the skillset, I didn't have the resource to do what he was doing. So it kind of fit like a hand in a glove quite nicely.
Peter DeMaria:And then, once we got together, I think that we realized that we had to continue on the path with the 2D panel world because he had a level of expertise there.
Peter DeMaria:But we slowly started infusing the volumetric vocabulary into everything and started to go after those types of projects. We did not expect to have a 3D biometric project, likely for another six months or so, but we're working on a nice size, 88 unit, eight story biometric project. Now that's in combination with the panelized projects that we're currently working on as well. We find ourselves not just developing or building projects for our clients, but we're the white label to other fabricators, much in a way that we would be the modular architect, the specialist in architecture for the traditional architect. We are now the intel inside for other fabricators and that's a result of those folks seeing the same thing that I saw and what Diego had created in the 2D panel world. So I think we have a pretty diverse company and I think that, regardless of what's taking place, there seems to be always a demand for the panels, and now it's starting to take place, obviously with the volumetric.
Diego Rivera:Yeah, and in my side, you know I got enchanted by all these ideas that Peter had as an architect. You know I still dream as an architect, even though we build things day to day.
Diego Rivera:And then when we talk and we see what was coming, especially living in the world of panels, living in the type one construction assistant living, nothing in wood, everything above five stories we're like there's a big challenge here. The city of LA, in my prediction, is when the next five years is going to go non-combustible. So I don't think nothing within the metro area of LA is going to be able to be done in wood because the density is not going to allow that Density would allow for non-combustible buildings. I've been living in the non-combustible buildings. I've been living in the non-combustible buildings for the past 10 years. So when I saw that level of precision that we do on the panels, what the industry is doing in the future, where the market is going, the knowledge that Peter brings on the volumetric side, but, most important thing, have already established business that pays the bills. So we don't have to go get a loan and get in debt to try to create a volumetric business, it was a no-brainer. So we create a subdivision to the existing operation. The existing operation is running on its own, paying the bills While we're dreaming on the side building this volumetric.
Diego Rivera:Peter and I were going to take a year sabbatical just to learn and go across the world and see who's doing what. But we just got pulled in and we got a project already and the level of coordination and digital twins that we run in the other industry. It was secure enough for us to take this new challenge and we're looking forward. 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 we're going to be running, but we'll be enough to survive while the panel business keeps growing.
John McMullen: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:Well, they say it's a cliche, right? All these hurdles or all these problems prompt you to come up with other solutions. Right, 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 have shifted gears and now have taken on a new facility. I'm sitting in our new office today, and a year ago we were not even thinking about this at all, but there's some challenges that did pop up in that regard. Other things that are happening is there's some really pleasant things happening.
Peter DeMaria:You would think that the change in the code and the policymakers are getting far more friendly to what we're doing as modular builders, and 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 and the ADU laws in California, the SB9 laws, what Diego was talking about earlier with the non-combustible.
Peter DeMaria:It's all an attempt by the policymakers to have more density in existing cities. Instead of promoting sprawl and people moving further and further out into the suburbs, they're bringing people back to the inner city and what that means is raising in tax dollars, right. And when all that happens, the buildings start changing. We're doing an eight-story building, 88 units. There's no parking because we're within a half mile of a parking transit hub. That's major. Do you know what that does to the impact of the budget for the developer? They're putting up 88 units now instead of 30. And I'm not saying that density is the answer to everything, but I'm telling you that we have to team and collaborate with these other players in order to make an impact, to make that positive impact.
Diego Rivera:Besides that, I think one of the biggest challenges, too, is having the banks and the financial world understand the cash flow of a building like this, and that's what we're trying to still convince lenders and even though the customer, the architect, is on road, it's just the lender how do you end up paying all this money up front and you're acquiring all these materials and schedules, but they 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 have a cash flow, and a different phase, which is manufacturing. 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 and everything else is flowing, it's just a matter of cash flow. So what Peter is 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 very significant amount of money compared to what the neighborhood does.
Diego Rivera:So, he came back in November and said hey, diego, it's time to raise the rent. I said, well, I've been getting month increases for the past decade. He goes no, no, no, no. Market rate is four times what you're paying. I was paying, I'll give you the number. I was four times what you're paying. I was paying. I'll give you the number. I was paying 54 cents a square foot. He came back and said a market rate is two dollars. I'm like what? Two dollars? That's two hundred thousand dollars a month for rent. Multiply that times a year, that's 2.4 million dollars. So I was like I said okay, what? Who in the construction industry makes 20% profit or maybe 10% profit needs to sell $10 million just to pay the rent.
Diego Rivera:So we're like Peter, we're in trouble. What are we going to do? So, within people that we know we're in the industry, we start looking south and went into Mexico, went into the Tijuana area. I know a couple of red iron manufacturers there who do chassis and structure steel, who delivered to california, worked the deal within, did a joint venture and we're actually in the process of opening our shop in mexico where we keep a small operation in la to manage the installation and the work of the 2d panel where we develop the volumetric.
Diego Rivera:But you know, I keep thinking. I mean, you come to our shop. I have an american flag made in america, very proud of building everything, but california is pushing us away, you know. And as we go to nevada and then keep going east, but the market is here and um all these new laws between mexico and and united states, where you still use 100% American products, you go across the border and you use, you know, near-shoring and you're able to use some of their labor and bring back the quality of the products, complying with the same code, complying with everything else. It makes sense, I mean.
John McMullen:So, in terms of projects, what's and you alluded to a couple before, peter, but 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 can talk about?
Peter DeMaria: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. At the moment we're doing some work in Hawaii. We're on short list to do student housing projects here with UC system. We also have a series of folks who've come to us with SB9 lots who are really dividing single-family residential zone property into four units now and that's becoming almost like 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, right where we have a solution where someone can come to us and get something right off the shelf and they're ready to go.
Peter DeMaria:The other developers that we're working with they don't just kind of go in and do one project with us.
Peter DeMaria:They're now presenting all these other projects because they see those benefits and I don't want to say we're early stage, but we're doing some projects that are pretty big out of the gate and we also don't want to run into a spot where we just take all the work we possibly can we start compromising the quality or don't have a way to fabricate it, and we don't want to go the route of some of the other modular companies that have simply failed.
Peter DeMaria:Just kind of business could not keep up either with that workload could not produce. Just kind of business could not keep up either with that workload could not quality. It seems to be at the core of everything that we're doing. So it would not surprise me if we grow slowly and steadily and continue to do excellent quality work, and I actually prefer it that way. So I think that's probably the vision for the next year or two, maybe even two or three years, where we'll work out every little detail we have so that when we deliver something it's highly predictable, no change orders and it's just a beautiful quality project.
Diego Rivera:You know, and to add to that to Peter. You know, going back to what I was telling you, being able to be debt-free. It's allowing us to dream like this, correct? So what's in the pipeline? In the panel business, we probably have a couple of assistant living projects, probably in the range of 250,000, 300,000 square feet of buildings where it's just panels, that's probably 15,000 panels between walls and floors, 15,000 panels between walls and floors.
Diego Rivera:We're also becoming this wide 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're going to sell. You know we're going to. So we bought, you know we drink their Kool-Aid. We'll make them the best panel they need and we supply with them. And now, with the operation that we have in Mexico, we're also integrating all the structures, steel and chassis. So we supply the chassis, we supply the walls, we supply the floors. They put it together, they do the MEP, they do everything else and for us, all we want to do is give them the best panel they can have. So so far we deliver 88 units for this customer. We just signed a contract for 188, maybe 500 by the end of the year and they're projecting 1,500 units by next year.
Diego Rivera:So this is just building parts.
Diego Rivera:You know kits of parts walls, floors and metal chassis and what they value and what we do is our level of precision. So if you don't know how to do the structural part, precise the box, the chassis, meps and all that, it doesn't really matter if the building is not going to come together once you build it. So our level of precision on the 2D panel and being able to accommodate this other modular companies who require, especially on the chassis, I think out of the LA shop, out of the LA modular companies we supply to four of them as a white label. You know I won't give you names or nothing like that, but it's an honor for us for them to respect our level of quality. We don't compete against them because we're actually we're a small modular company doing our own buildings, but we can be a great complement to their existing operation. So that's allowing us to learn to be humble enough to pay the bills and we have our first project of our own that hopefully will be done by 2025. And then we'll see what happens from there.
John McMullen:Peter Diego, thank you so much. Just clearly a wealth of knowledge and experience that both of you bring to MidRise and to 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:go at midrisemodularcom or demaria. At midrisemodularcom we're very active. You won't get passed off to a salesperson. We prescreen. We say no to a whole bunch of projects that we know are just not conducive to what Modular brings to the table. And, john, I just want to thank you because you're a great conduit to the entire industry not the Modular industry alone, but to the construction industry, and just modular industry alone, but to the construction industry and 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 with Team Prefab Center for Modular Architecture. That's part of our whole vision and that's for another conversation. But we really do appreciate what you're doing and all the folks there at MBI. It's a great asset to our industry. Thank you.
John McMullen:Well, I appreciate it. I'm 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.
Diego Rivera:Yeah, we should go to the one in Europe.
John McMullen:Oh, the one in Europe, absolutely Brussels. I'll be there.
Diego Rivera:There you go, we may see you there.
John McMullen:All right, thanks again, thank you.
Peter DeMaria:John, my name is John.
John McMullen:McMullen, and this has been another episode of Inside Modular, the podcast of commercial modular construction. Until next time.