Jack Heald: Welcome back everybody to the OZExpo Podcast. I'm your host, Jack Heald, and I'm here today with Tom Ortiz, who is the founder and owner of Sierra Genera. Tom, welcome to the show.
Tom: Thank you, Jack. I appreciate you having me on.
Jack: I just cracked myself up here forgetting your last. Since we don't really know each other at all anyway, tell us a little bit about yourself. This show’s about the Opportunity Zone obviously, but there's a whole lot more to you than that. So, tell us about yourself. Who are you, where did you come from and what brings you here today?
Tom: Yeah, thank you. Born and raised in Reno, Nevada and a fourth generation native here. My kids are fifth generation natives, of Nevada on my side and my wife. So we're pretty proud of about that fact. And I grew up in the construction business and ultimately made the natural progression into the development side. I had always been drawn to real estate and the development side really excited me. And that's primarily on a professional side. I dabbled in a couple of other businesses with a cousin of mine early on out of college. We were fairly successful, but I was always drawn back to the real estate and the construction. We also have a company called Bionic. It is a building system that we're very excited about that I've been working on since I’ve been in the construction business.
Jack: I do want to know more about that. I'm very interested in that. We'll get there in a minute because I'm going to ask you a couple questions.
Jack: So how long have you been in the business?
Tom: I've been in the business all my life, so I would say I've been professionally in the construction business about 35 years.
Jack: And where'd you go to school?
Tom: I went away to college in Los Angeles, to a junior college and played a little college football and immediately came back to northern Nevada. I love Los Angeles, but I love it more to visit and not live there. So I made it about a year there, Jack, and came back to Reno to the University of Nevada--Reno and ended up starting a scrap recycling business with my cousin, who I grew up with.
Dropping out of college in my senior year. And so I think I've got four or five classes to get my degree. Not sure if that'll ever happen.
Jack: College dropouts tend to do very well. I went to work for a colleague who was a college dropout. Might have heard of him. His name was Michael Dell.
Jack: I was his 11th employee way back in the day. So, I'm a big fan of college dropouts to tell you the truth.
Tom: Oh wow.
Jack: So, before we go to this Opportunity Zone stuff, I'm really interested in this Bionic building system that I found out about when I started researching you. But I didn't find out much about it now. Maybe you're just hiding all the details there on the website, but I couldn't find more information. I'm fascinated in alternative building methods. And if you think you've got a way to actually help with the affordable housing situation, then we definitely need to know more about it. Tell us about that.
Tom: Yeah, we really do. So you know, we've intentionally got one landing page as you've probably discovered.
Tom: For buying Bionic. And it kinda just gives enough to maybe get you excited if that's the realm that you're into. But just raised our first panel because it's a panelized system that I'll get into and explain, but we just raised the first panel last week on our very first project. And so to back up though, I've been doing this for years and years. I think I've built every type of home there is to build with the exception of a straw house. Straw homes have a great, R-Value, right? I've built homes out of ocean containers and stick frames obviously, and SIP panel. I mean, you name it, I've done it.
I'm a fourth-generation builder and we've been building the same way for hundreds of years.
Tom: Nothing's changed.
Tom: And, you know, with all the technology we have today, it's hard to believe that in my mind. And what I see, and especially in booms like we're experiencing, it seems like it slows down even more. The technology is just not there in the building side. So I've been searching and just about four years ago, really was serious about and I put a big business plan together because my focus was to do pre- engineered metal stud walls, interior and exterior, but mainly for the exterior and then sheath them with Z board, which is really just a glorified compress board. And I'll expand on that, but so that your panels come in panel form that two men can grab a panel and stand. So the framing of the structure goes extremely quick. And what I was going to do a few years ago was…
Jack: Real quick question: Years and years ago I was looking at a technology called Stress Panel, which was two pieces of OSB and a hunk of Styrofoam…
Jack: Is this a similar kind of, of the similar kind of design?
Tom: Yep. The stress panel is very similar to a Structurally Insulated Panel with the two OSB boards compressed with Styrofoam and then they cut out the windows and have the headers and stuff. So very similar. These are just, instead of using wood, we use metal studs like we do in commercial construction.
Tom: Yup. And so the panels come with the doors and windows and everything cut out. What’s interesting about this, oh go ahead…
Jack: Cases for utilities?
Tom: Cases for all the electrical and plumbing and, and not so much mechanical because that either it comes to the floor from the ceiling. But yes, all the cases are in, and what's unique about this is the panels are true. So I can't put together a house that is not exactly true. And most people would say, that's really neat. But what's interesting about that is if the house is exactly true, then I know what my flooring is like tile, you know, you see guys on tiles on sites where they cut tile and then they measure and they go back and forth. So everything from that perspective, whether it's the siding on the house, the trim around the windows, the interior flooring, the tile, the cabinets, everything is exactly true. So you don't have a lot of wasted time.
Tom: And effort on a job site…
Jack: And that's where the time savings comes from, and I guess labor saving.
Tom:Oh, it's, yeah, it's dramatic. So do a bunch of it inside a warehouse and we do a bunch of it on site.
Jack: That's another bizarre thing, isn't it? We're still building houses almost entirely on site.
Tom: And if, and if you look at Europe and you look at the largest builders in Europe, they're modular builders, and so they're shipping boxes that, whether it's a high rise or a single story, they set it with a crane. And they're adding the component and they're making the connection. And they're ahead of us in that aspect of building for sure.
And I love modular building here, but I think there's something slightly better. And that's what we're doing. We're doing some modular products. And panelized systems and we're kind of mixing those two together. And so, today in the U.S. if you order a manufactured home, it still takes you four or five weeks to set that unit. And to mend it and to bring the carpet back and tape and texture the walls and get it.
So, we believe we can take a house. And our model here is we took an 1,838 square foot home that's a very common track home here that typically takes these guys in this market about 30 to 35 days to frame the structure.
Tom: And then it takes them about 90 to 100 days to complete the project, start to finish. And so I can say today we've taken that house and we're three-and-a-half days to frame it complete as of today. And so we've saved 32 days on the frame and we worked normal hours with a normal crew. And so, we're essentially looking to save 20% on housing costs and 60% on time. So we're looking to build that house that we started turnkey Certificate of Occupancy in 35 days.
Jack: At 20% less cost to the buyer, correct?
Jack: Alright, so let's, let's take that into the Opportunity Zone. When I read about Sierra General, I see both the development side, but I also see a finance side. I don't care which one you want to talk about. Talk about one or both.
Tom: Okay. For Sierra General, it's kind of all in one. What we primarily focus on with Sierra General is finance build the suit for medium- to small-sized companies, which means if you had a company and you said, “Gee, I want to expand,” and whether you're in the same market or you're expanding into another state, you need a specific facility or office or production facility, We'll actually go in and we'll purchase the land, we'll build the building and we'll provide you with the long-term lease. So we do this for credit tenants, private-, public-, municipal- type companies. And so that's where the finance and development comes in and comes together.
Jack: Alright so, Opportunity Zones. What’s your focus right now as it pertains to the Opportunity Zone Program? Are you in the “investigate the community phase” or do you have some specific projects? Where are you?
Tom: We have specific projects. As you know, Nevada got extremely hit so hard during the downturn of 2008 and coming back out of that market, Tesla shows up just east of Reno Sparks to build the Gigafactory about four years ago now. And so that area just 15 minutes east of Reno sparks. It’s the world's largest industrial center. It's over 105,000 acres. It’s fully developed out structure-wise, and has the highway that runs all the way through it. Tesla chose that area and may currently owns about 3,500 acres. And since Tesla's come, well prior to Tesla, there were probably 70-80 large companies, Walmart, Pet Smart, etcetera out there.
And since Tesla, we have Google who has purchased 1200 acres out there, who is currently out of the ground and in excavation phase.. They haven't come out with their announcement of exactly what they're doing, but it's a pretty large project. We have Blockchain, if you're familiar with them. They two years ago purchased 67,000 acres, in this park. The point to that is this entire area is the world's largest industrial center, is in a county called Washoe County, which again is 15 minutes east of Reno and sparks that entire county. Is it in an Opportunity Zone? So we're very bullish on this area. So there's about 150 companies in this Tahoe Reno industrial center and we have several properties out there, industrial properties. We've done finance build suits for publicly traded companies out there. We have the entrance to this project, 23 acres that we've prepared and structured as an Opportunity Zone play for an investor. Um, we've got another…
Jack: This is commercial?
Tom: That's all commercial. Yeah. So that's a mixed-use commercial with two hotels and 40,000 square feet of retail and there's about 15,000 employees daily into Reno Industrial Center and there's no residential in there and there won't be any allowance.
Jack: Does it look to you like there's the opportunity for residential to get established in that area?
Tom: There will be in the surrounding area, but not in the Taho Reno Industrial. It’s zoned industrial and there will never be any housing there now and 15 minutes away. So it's a unique, when we talk about Opportunity Zones, you know, people were talking about the affordable housing and the regentrification, the adaptive reuse in a lot of these areas. And we have such a unique opportunity here in a brand new area to greenfield development and it's primarily commercial. So we'll have mixed use with hotels and restaurants and retail and some office. It’s a very unique application within the Opportunity Zone though would that we're very excited about it because the demand is amazing and there's millions and millions of square feet in the park. And there's nearly a 0% vacancy factor. It's pretty exciting, you know, growing up in the business, I've done single-family and multifamily, commercial, industrial, heavy industrial, mining. So I'm pretty active and pretty diverse and have a pretty good background and innate knowledge of, of the industry.
Jack: So, let's find out a little bit more we know what you do professionally, it sounds like you know what the heck you’re doing. I'm still gonna follow up on this Bionic product. I just interviewed Eddie Lorin yesterday, who's a developer out of Southern California who’s absolutely passionate about affordable housing impact investing. That dovetails with my own personal interests. So that's why I've got to know more.
Jack: What kind of plans have you got for this Bionic system? Is this a technology you're going to be licensing? Is it something you guys have developed yourself? Are you strictly the builders and users of it? How are we going to get this out there in the world?
Tom: Well, that's a great question. It's probably one of the biggest things we really struggle with. Yeah. Currently, you know, I've built all types of different housing components and the one thing you really have to realize in the construction industry is it's like taking ten ocean liners, putting them together and trying to make a U turn in the ocean. It just doesn't happen. It’s a very unique industry. And as an example, it took theair nail gun people seven years to get the framing air nail gun introduced into the construction business.
And you would think, oh my gosh, “Oh, give me five of those hammers,” or “I want to get them, I want all my framers to use air hammers.” And eventually, because they couldn't sell them, they had to take them to job sites with the compressors, show them how to use it and leave it with them in the hopes that they would buy some because they weren't selling air hammers. And so they would do that. And then, it took seven years to introduce the air nail hammer into the industry. And so even after they would introduce them to them, they would drive down the street and they look back, the guy would set it down and pull this ham rounds and start pounding nails again.
And so, to change the industry, we're going to take it slow as we can. As I mentioned, we have the exterior product, we have the ability to do trusses and floor joists we’re going to wait on those. We're going to roll those out within the next year or two. And so you bring up a great question.
Right now, we believe we need to focus on the affordable need. So we're going to have three or four models. You brought up Eddie, and I think I'm kind of familiar with what he's doing down there. He's a pretty big affordable player in that market. And so the demand is so tremendous in California and the areas aren't that large.
We have a patented technology that allows us to actually build a foundation without concrete and it works. And so we have a peer system and then we have concrete wall board and it looks like a house that's sitting on a foundation and we're able to go into a backyard or go into areas that don't have great soil conditions and put piers, then put the floor system in, with our product.
And again, our entire focus is to do this in 30 days. Now with that said, what we're going to do is if we were going to market into Los Angeles, we would get to Los Angeles, we would train, we would train several general contractors, certified approved Bionic builders and along with the sub-trade and then begin marking marketing Bionic into Los Angeles. Right? And so, as people call, we would say, “Oh, we've got three or four or five or 10 certified builders. What are you looking for?”
Tom: And kind of walk them through that. And then we'd have these companies and individuals trained in that area. And then I think we're going to grow it that way. But like I said, it's a great question because we're not entirely sure exactly. We believe that's our approach at this point. But it has changed. It has changed over the last few months.
Jack: It seems like, just as somebody sitting on the outside looking in, you've got what sounds like a manufacturing business that is providing a product for an industry that should be growing based on the projections that we see. Affordable housing is a massive need and the demand is pretty well unceasing and now we've got the Opportunity Zone program. Seems like it would be a natural fit to put the Bionic business into an Opportunity Zone, and grow it that way. You know, focus on the manufacturing side. I'm just spit balling here.
Tom: You’re right. I'll tell you, that's been part of the challenge, We have this concept, we develop it now we're building one SPEC house, we're doing another project next week. We're going to pull our data. Re-analyze, try to perfect the system do a couple more projects and move forward. We do believe that Bionic is the poster child for businesses because, and again, we need to do, we need to raise capital to take our product and our business to the next level that we move into an Opportunity Zone. We raised the capital and I haven't been looking into this, but I do understand that there are regulations as far as the money that you make and where you reinvest it. And in an ideal world, we would be building affordable houses to go into Opportunity Zones. We would make more money and reinvest that into other Opportunity Zones, affordable houses and help other developers do this.
Tom: And so that's what we're most excited about and that's what we're trying to get our arms around in the next 90 to 120 days or so.
Jack: Well, I'm most excited about anybody who's got an ongoing business or has a good business idea.
Everybody's got real estate ideas, but there seems to be a dearth of good business ideas. You know, the money's out there. There's things that make sense from a business standpoint. This is a construction business; we're going to build this particular building or even set of buildings and then we're going to be over. This is the actual manufacturing side of the construction industry. Seems like a natural fit, it really does. Alright listeners, we've got somebody out there who's got a heck of an idea plus a track record. Okay. Well let's find out a little bit more about you.
Outside of being a fourth-generation builder, which is pretty, pretty stinkin’ amazing, is there a fifth-generation builder in the Ortiz family?
Tom: Yeah. I'm not sure if he's going to end up to be a builder, but there sure is. He's a junior at University of Nevada, Reno, studying business and psychology. I'm not sure if, he's got that same itch that I did to get into this business. There's a potential.
Jack: Ellie Lorin was a psychology major, so, yeah. Alright.
Tom: Psychology in college. So maybe there's some kind of correlation here.
Jack: Maybe there is. Okay. Now I'll ask the question I was going to ask, so outside of your business, your work there, what's one of the best things in your life?
Tom: Well, certainly the best thing in my life is my family. I’ve been married for 27 years, three children and we've got an extended family that's very close. That's what pulls the sheet off my face in the morning.
Jack: Oh, that's a good way to say it. I've never asked it that way. What pulls the sheet off your face? I think I know the answer to this question, but I'm going to ask it anyway. What's one thing you still hope to accomplish -- still want to accomplish in your business life?
Tom: Oh boy. So many things. Certainly getting the Bionic system up and new running so we can fulfill the needs of so many people, at least here on the west coast or statewide. I think that's going to be quite daunting. It has been so far. It's certainly enjoyable. We love what we do, but we've got some road ahead for us on that. And I think on the development side, raising capital, as you mentioned before, the money's starting to flow. I probably have 20 investor meetings completed so far on some of the projects that we have control of that we're trying to raise money. I think things are starting to break loose. I think the last release of the final regulations helped. So I think people are getting their ducks in a row and they're going to start funding and I think you're going to see a lot of funding before the end of the year.
Getting back to that question, I think taking Sierra General to that next level and doing some larger projects, getting into that mid-institutional level, right? Where I believe is a good fit for us, for the projects that we bring to the table. We've prepared a lot of big projects like that and been a part of them. But we were never at the level we needed to be to ultimately be the developer ultimately be the contractor. We always played a part, but we've never done a full turnkey major project, $50 million or above. And so to answer that question, it would be, taking the Bionic to that service level of meeting the people's names and, and taking Sierra General into that next level of development.
Jack: If the demand could be generated, what would be the constraints supplying the market with the Bionic system product? I don't know what to call it. I guess it's a combination of both the product and a system, isn't it?
Tom: Yeah, it is. Absolutely. We love to refer to it as a system. One of my partners is a system engineer and he looks at things completely different. It’s amazing. And so it is a system. Certainly our constraints is there's the human race, believe it or not, and the in the sub-trades.
Jack: How does the sub-trades treat this differently? I'm assuming this is the shell of the house and the roof of the house, right?
Tom: Well, so with everything. Our Bionic system is the actual structure and how we build and the sustainability in which we build, which I want to touch on real quickly again. So I mentioned we're using metal studs, we hope within the next 12 to 18 months. We're using plywood, no what on the decks? No siding plywood. We have an alliance and a working relationship with a large hemp manufacturer, and we're going to be doing hemp insulation or hemp wallboard, hemp siding. So we had this plan before, but we were using magnesium board. And if you know anything about magnesium board, hemp is very comparable to magnesium board, which is tough to get and only comes out of China right now. Fire resistant, mold resistant, passive resistance. It doesn't expand. And so with hemp board with hemp insulation and hemp wallboard and siding and wall board, we have the ultimate sustainable house.
Jack: So are there manufacturers who are able to provide the hemp side of it now?
Tom: Correct. Yes. We have one guy that we'd been working with that actually just moved his company to northern Nevada and is acquiring quite a bit of acreage for farming. And he's been doing this with his brother for years and years. He’s probably one of the foremost hemp guys in the world and just happened to meet him, actually ended up meeting in at an Opportunity Zone summit here in Reno about a month-and-half ago. He was looking at how to optimize his business and the hemp business in the Opportunity Zone here in Nevada.
Jack: I would think so. So, I want to pursue this, I'm thinking like an investor now, just have to do this. So let's assume we had sufficient funds that we could start marketing the jeepers out of this Bionic product because somebody who knows how to market to the building industry, somebody knows how to put together messaging that actually communicates the advantages, aside from the obvious financial advantages so that we can start actually generating interest and demand for the product. Then the question becomes what about the supply side? What are the limitations on the supply side of the Bionic system? Where are you right now? Suppose, you got an order for 6,000 houses in Southern California.
Tom: On the supply side and the sourcing, we have a plan and some strategic partnerships aligned now with some pretty major players. So the sourcing of all materials, whether it's the faucets, the toilets, carpet, shingles, we're working on that now. We feel very comfortable with that. And so really it gets back to the bottleneck is the education and the training the industry right now. I've been doing this a long time and just coming out of the ground with this first one, it's a daily conversation with sub-trade. These guys are stuck in how long it takes to wire a house, whether you're, if you're an electrician or you're a plumber, they have it in their mind that it takes a certain period of time.
Tom: And it's so inefficient, “Oh jeez, you know, the guys put the wrong stuff on my truck today, they put two-inch pipe, I need some three inch” and “We gotta do that and we don't have this and this is the damaged part and we'll be back tomorrow.”
We don't want to take anything away from the sub trades. These are people that work super hard and can make good money. And I believe that with our system, they're are actually going to make more money. And so, we're going to supply the materials and all the materials.
We're going to be on site. And so the example I like to use is if we're setting cabinets at our home tomorrow. The cabinets are delivered at 6 a.m. and the cabinets are laid out. And I don't know if you've been out of the job site in a while, but most all cabinets come crated in cardboard and then a pallet and, and so the guys show up, you're paying $45 to $60 an hour and they end up uncrating all the cabinets and taking all this stuff out to the trash. And so you're paying guys $45 to $60 an hour to do this.
Tom: We’re going to set up, and when the cabinets go up, there's no fillers, there's no, “Oh, well this wall's a little thick and I'm going to have to cut this filler. I'm going to have to do this. I'm gonna do that.” Our walls are true. And so when the cabinets go up, it's gone. There's no fillers, there's no adjusting. It goes in clean, everything's straight, and they're going to actually be able to go on the job site, do their job. And you know, doing it in a professional manner and doing it so much more efficiently and not worry about uncrating or what kind of attachments they have. Everything's going to be explained. Okay. Everything will be, you know, laid out and all the attachments and screws and hardware and everything will be there.
The other thing is, in the construction industry you get a lot of things that are damaged. So the guy shows up, and says “Oh, I can't set this because this was damaged, so we'll be back tomorrow,” or “I have to order one.” And that just the domino effect in the building trades because once he can't do his job, then the plumber can’t do his job and it just goes on and on and on. And so the quality assurance, the quality control of getting the proper materials there damage free is a big component as well
Jack: Sounds a little like the IKEA approach to building a house?
Tom: Yeah. Yes it would. Yes.
Jack: Alright. Well, it's time for me to ask you my favorite question to ask my guests.
Tom: Oh boy.
Jack: You get to put on your imagination hat here. You are going to be king of the world for a day, one day and one day only. And in that day, you get to solve one problem and one problem only. Alright, king of the world. One day to solve one problem. What are you going to do?
Tom: Well that's a good question. Well, one thing is if I could just abolish social media posting, that would be…
Jack: I love it
Tom: I'm joking. It's an epidemic.
Jack: Yeah. Okay. I think that's a great, yeah.
Tom: But it would probably take a magic wand as well. If I was king of the world for a day and I could do something, I would, in all seriousness, I'd probably eradicate or try to eliminate discrimination of all form. That would truly be my desire.
Jack: That's a good one. And hard. Well, Tom, this has been a terrific conversation. I've really enjoyed it. And as you can tell, I'm fascinated with your Bionic building system. Before we sign off, are there any last words you'd like to leave us with?
Tom: I appreciate you having me on Jack. This has been fabulous. I don't do a lot of this. I feel like I need to do more. I truly appreciate you having me on and talking to me about what we do.
Jack: Hey, you bet. So, if folks want to get ahold of you, find out more about Sierra General or about the Bionic building system, what's the best way for them to do that?
Tom: Probably the very best way would be my Sierra General email. So it was firstname.lastname@example.org, I feed all my email into that one. So that would be better than phone.
Jack: Alright, well, very good. And I'll remind our listeners that information will be available on the podcast website. Well for Tom Ortiz of Sierra General out of Reno, Nevada. I am Jack Heald for the OZExpo Podcast. Thanks for listening. Be sure to subscribe so you always get notified about any updates and we are just cranking out these interviews by the dozens. We will talk to you next time.Announcer: This podcast is for informational purposes only and does not constitute legal tax or investment advice. For specific recommendations, please consult with your financial, legal, or tax professional.
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