Why Ukraine May Be the Most Mispriced Market in the World with Bruce Talley

Bruce Talley is an American entrepreneur and frontier market strategist who has spent decades operating in opaque, rapidly changing environments from Russia’s Black Sea coast to Brazil and now Ukraine. He built the largest destination services company at the Sochi Olympics, navigated direct FSB scrutiny, and today is helping global investors access deeply discounted Ukrainian residential markets through the Ukraine Prime Property Fund. In this episode, Bruce shares hard earned lessons on operating in post Soviet systems, spotting opportunity in chaos, and why he believes Ukraine is one of the most compelling markets of the next decade.

In this episode we cover:

• (00:00:00) Bruce’s path from US capital markets to frontier markets
• (00:10:40) Life under the FSB and the moment he knew he had to leave Russia
• (00:22:48) Building Destination Sochi from zero to the largest Olympic services provider
• (00:26:52) Why he reoriented to Ukraine and the thesis behind the Ukraine Prime Property Fund
• (00:40:29) Kyiv as the next great European city and advice for young MBAs

Link to Ukraine Property Fund:  www.ukraine-capital.com

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Transcript

00:00:00 Nick LALL: Welcome to the Insead Emerging Markets podcast. I'm your host, Nick Lall, and I'm here today with Bruce Tally. Bruce is an American entrepreneur and international market strategist who connects Western capital to undervalued cities in Ukraine and select frontier markets. He is the founder of Destination Ukraine and the architect of the Ukraine Prime Property Fund, which he's developed in collaboration with the CEO of Leopard Capital to give global investors early access to deeply discounted residential markets that in many cities trade at a fraction of comparable assets in neighboring European economies. Honorees. Bruce's career began in US capital markets. He worked in the municipal bond business, where he built a significant book of high net worth investors and executed thousands of client transactions. He later focused on selling loan participations, including financing for hotel developments, condominium projects, and Native American casinos. Over the course of his career, he closed more than two point one billion dollars in lifetime sales and early in the post-Soviet era, Talley moved into southern Russia's Black Sea region, where he bought and sold land using his own capital and partners funds. He also launched Destination Sochi in the run up to the twenty fourteen Olympic Games, and became the largest destination services provider in the market, serving over forty five Olympic broadcasters, partners and sponsors. He operated in a commercial environment marked by opacity and intense scrutiny, during which he was monitored by the FSB Twenty fourteen as Russia began its war in Ukraine, the FSB asked its views. Talley stated that Ukraine should make its own decisions without Russian interference, and he then exited Russia shortly thereafter and reoriented his work towards markets better aligned with transparent, rules based commerce. And he's been involved in destination services work in Brazil, Korea, Japan and Ukraine ever since then. And he also recently founded Destination Moldova. So I think there's a lot to cover here, obviously, but maybe it would be interesting to start out by going back to your earlier days when you had that decision to move out to Russia and make your mark out there. I was curious what sparked that. I mean, I'm sure that you saw the economic opportunity, but also just curious if there were any lifestyle or life reasons that someone made career. Obviously been very successful in the States already would decide that, okay, I'm going to move out to Russia, to the Black Sea region and try my luck out there.

00:02:30 Bruce TALLEY: Yeah, that's a great question. And people ask me all the time. why would you do that? What even in people in southern Russia ask me. And you know, when you live as an expat in provincial Russia, you run across an odd mix of people. also living out of your home environment, forces you to, discover things about yourself wherever you go, there you are. As Buckaroo Banzai said in the famous film. but in my case, it was really born out of I think, some intellectual curiosity. I, Probably over romanticized Russia. You know, I, saw several films about the early Soviet era, like the Doctor Zhivago. Right. And then I read some Russian history. I read a lot of Soviet history, some Russian literature. There's something fascinating about Russia. It just it spoke to me, and I don't know why. I know some people have a similar reaction to, I don't know, France or, India or United Kingdom or, any one of a number of places. Mexico. And it just sort of hit me and I started to go, I did a lot of traveling for fun when I was in the bond business I did a lot of scuba diving. I was traveling all over Europe and, Southeast Asia and lots of places. And, I went to Russia, just out of curiosity the first time, and this was some years after the Soviet Union had collapsed. a decade after and, it was really an interesting time and place, and I sensed there was a lot of opportunity. And at that time, I thought that Russia was probably going or was likely to develop in a way that we've seen, say, the Czech Republic develop, where they've got the rule of law and they have, free and fair elections. And I had this expectation as an American, we're always, kind of optimistic. And so I had this expectation that that was the opportunity. At the same time, it's a giant market. And I thought that, look, if people experience the kind of growth in, the economy grows in a way that say, Czech Republic or Poland has. Wow, there's a big market there. There are a lot of things that's going to happen. And I was drawn down to the Black Sea region by friends. And, having worked in the bond business in California for many years and participated, in the growth really by working for an investment banking fund that or firm that underwrote sold traded municipal bonds that financed a lot of the infrastructure, the streets, water, sewer, hospitals, all of these things. A lot of that was built in California using bond issues. So I, expected the Black Sea region, which was a much smaller area than California is, and that's really their warm water coastline. I thought that area was going to grow in the way that California did, or maybe not quite like that, but it started out at such a low base. So I saw opportunity. I mean, it was a combination of, intellectual interests, emotional interest, I guess, and then opportunity.

00:05:26 Nick LALL: Yeah, it's really interesting. I mean, I hadn't thought of it that way, but I guess, coming from California, if you're looking for sort of a similar, geography And in Russia, that might be the place to fix. That's smart.

00:05:40 Bruce TALLEY: Well, it's also it's a danger, too, because you tend to think in terms of what you've seen and experienced before. And, it's not always the same way. Right. And, I think early in my time in Russia, I realized that I'm sure about the Dunning-Kruger effect and the peak of Mount Stupid. And the danger is sometimes you know, a little bit and you think you know much more than you do. And Russia has a way of, letting you know that, you may have overestimated your knowledge. but that's been a valuable lesson in my life. I think about that very often, that. I need to be confident about what I know, but I also need to understand the limitations of my own knowledge. So.

00:06:23 Nick LALL: Totally. I mean, I guess that's how it is whenever you're exploring something new and you need to just do it and get through that phase. curious. I mean, I guess you did start out sort of in, real estate there and then ended up with your, um, your destination services business. I was wondering if you went when you first went out there. I mean, was there a plan in terms of what industries you wanted to work in? I know that you had a lot of experience, selling loan participations, etc. I was wondering if that informed what you did in Russia at all, or you just went looking for opportunities and, then decided to act on what you saw?

00:07:01 Bruce TALLEY: Yeah, I think it was, it was a recognition that so much of the wealth that was has been created in the United States has been created through real estate. I looked at a lot of doing several different things when I was there, we thought about, One time I took a the owner of a small burger chain from Hawaii. Out there, we looked at establishing something along the lines of a, simple in and out, because at this time there wasn't even a McDonald's in Krasnodar, which is a capital Krasnodar region where I live. And so I thought, that that those kinds of things would offer a real opportunity. But there are so many choke points in running a restaurant business, even in a country that that functions pretty well, let alone, Russia. So ultimately I decided against that. But yeah, I looked at a lot of things. I thought that, land offered some good opportunities. And actually, I did pretty well on the first couple purchases that I did. But again, it's so difficult, the, permitting process and, there are so many lessons that I learned along the way. For instance, if you buy a piece of land in Russia, at least this is the case while I was there. you own the land, but you don't own the trees. And so there was this wild situation. This didn't involve me. We we were successful in removing trees and some parcels that had commercial parcels that I owned. I, bought some land and unified it. And, was seeking a building permit, but there was a development. They were trying to build a large development around a golf course near Crescent City. And it turned out that first off, they had a problem because, oh, well, we don't own the trees. So you had to get state permission, government permission to remove the, trees. Well, that was a problem. And then they discovered that the value of the trees that they had, the cost of removing the trees far exceeded their value because of the kinds of trees that they were, and they had to remove tens of thousands of these trees. What do we do with them? And they didn't have any. There was nobody around to process the pulp or do anything. It wasn't suitable for lumber. What do we do with these things? So what they did was they dug this massive pit, and this is maybe five or seven miles from the center of the city of Krasnodar. City of a million people. This regionally very important in Russia. They dug this enormous pit. They dumped all the trees in there, and they set them on fire. And so for weeks and weeks there was smoke and ash billowing through Krasnodar. And I don't know it, there were certain limitations, but there were always sort of loopholes. And I suspected that these people had some, connections or a roof, as they say in Russian, that enabled them to to do that and pollute the air for I mean, I'm kind of laughing about it, but it really wasn't that pleasant for a lot of people for weeks. It was just it went on and on.

00:10:05 Nick LALL: Totally. Yeah. I mean, I guess those are living in any new place. you'll encounter things like this that you're not used to. And I guess especially in frontier or emerging markets, things may not be done.

00:10:16 Bruce TALLEY: Yeah. Well those were actually Russians who were involved in that. But yeah, you always need to understand what you don't understand when you're in those places and it was useful. I said after we left Russia, I set up operations in Brazil and some of the same problems, And so. you tend to think in terms of the universe. You begin to think in terms of the universe of problems that you maybe could not have conceptualized.

00:10:40 Nick LALL: Yeah, definitely. I know in the the intro I mentioned that there was a lot of opacity. And you also had a visit from the FSB there. I was wondering if you have any interesting stories about times that you may have dealt with the government there, or things that you know? I'm sure they also were kind of curious, why is this American guy here trying to run a business so Interesting to hear if there were any dangerous or, strange experiences there that you might have encountered. Right.

00:11:13 Bruce TALLEY: Quite a few. The first time that that I really was encountered, that I encountered the FSB was, actually not. I later spent a lot of time being, questioned, even interrogated, followed. they talked to a lot of people that I was working with, people in restaurants, you know, virtually everybody, because I was working in Sochi, where the Olympics were going to be held, and this was sensitive to them. And then I was also trying to bring development monies into this nearby de facto independent country called Abkhazia, that separated from Georgia. I thought that there was an opportunity there to help the folks get out of poverty, and the Russians seem to want to help me, but really what they were doing is they just wanted to appear to be helping. They didn't really want Abkhazia to develop and grow independently of their control. so that that was when my greatest scrutiny happened, really was during that period of time. But several years before this, I owned some land in a city called Kropotkin, which is in again in Krasnodar region. And I had been going there on a regular basis. I was spending a lot of time there. Well, in Russia you had to get your documents registered in any city that you're in for more than three days. And so, if you're going to one of the larger cities, they just do it through the hotel. But if you're actually living someplace, you have to get registered at the home of where you're, the people that you're renting from, for example, and their documents are required. So I did this, for several years without any problems. But then the officer that was doing managing this changed. And instead of walking in and being, formality took five minutes, he asked me a lot of questions. Oh, you are the American investor that's bought this piece of land, and I see you bought a nice fence around it. Well, law required that you build these steel fences that were about, I don't know, a little over five feet tall around your commercial property. And so it was an expense, but, not something I really wanted to do. Well, he noted this fence. He said it'd be nice if you would buy the fence like that for us. And that was, significant it was twenty thousand dollars fence or something like that, and I refused. And maybe I used some words that I didn't think that he would understand in English. And those were the few words that he did understand in English. And after that, probably it was more my refusal to to bribe him. And that's what he was after. Right. So, The next time I came in to get registered, well, you got this problem. He'd read the law on registration, and he said that I needed to go to the city where my business visa was issued, which was tomorrow first. Well, I was just impractical to go from Moscow to Samara and then back here, and I couldn't be, going back and forth all the time. It was just it was beyond impractical. It was impossible. And so but he indicated he would go ahead and do it anyway. So they registered my documents. I think. I fear I'm making this story a little more involved than it should be. So you went ahead and registered my documents, but I discovered about a year later that what he had been doing is putting violations on my visa. So I had a total of four violations and one wasn't good. But it wouldn't cause you a huge problem. But two, they could deport you. They could cancel your visa, make it impossible for you to ever return. So I invested in property there. I was, just panic stricken and I, at one point we went to some folks in at a higher level than him in order to solve the problem. But I understood by the kind of, predatory looks on their faces that I was just going to be buying a bigger problem. So I opted to not have them solve it. And eventually, the time went away and I was able to get another visa and within, some period of time, those violations were just gone. But in the meantime, I'm going back and forth between Krasnodar and Kropotkin. I'm living mostly in Krasnodar, so I'm walking down the street one day and I go into the night market, and these officers see me. Well, I'm not registered there because they haven't seen me get registered. They assume I must be living there if I'm not, you know, if I'm there. But I'm not registered. then I must be violating the law. So they grabbed me, threw me in the back of the car. They took me to the police station. And this is kind of intimidating, right. And I'm there about five minutes, and they take me upstairs to the offices of the FSB. And the FSB officer was young and bright and, but he spoke to me or questioned me for about five hours about what I was doing there. They really had a lot of questions about, this person I was the only foreigner living in Kropotkin, and I remember thinking, well, the training wheels are off now I'm being interrogated in Russian by the FSB, the successor agency, the KGB, and I'm about, I don't know, nine hundred miles south of the American embassy. So I'm on my own here. And but, after some time, I got a little bit tired, and, I stretched my neck a little bit, and I turned around and on the wall immediately behind me. No further away than that wall is there was a picture and I would say it was, maybe four feet high and two and a half feet wide or something like that. And it was a picture of this guy, Felix Dzerzhinsky. And for any student of Russian history, Felix, or anybody interested in Russian history, Felix or Soviet history. Felix Dzerzhinsky was an ethnic pole born in Belarus who became a committed. He came from a noble family of nobility, right. But he became a committed Bolshevik and he started the, I believe he started the Cheka, which was, you then eventually became NKVD, KGB, FSB. Right. So he was a founder of this State security service. And Old Iron Felix, as he was known, had a lot of people killed and tortured. And so, I'm just appalled looking at this picture. As I've told people before, I'm pretty sure you can go to any police station in Germany, and there are no pictures of Heinrich Himmler on the wall. Right. And so I was just visibly I know the shock registered on my face. I read a biography of this guy, and he was a nasty piece of work. And his image does not come across as kind and friendly either. And, so he sees the shock in my face and, he said, you know, well, what? And I said, well, the guy had a lot of blood in his hands, and his very typical response was, well, difficult times. So that was kind of the genesis of that. But, I would show up in the train station there in Kropotkin and be looking at the wall, you know, with for several years. I could show up anywhere in town and the guy would magically be there in five or ten minutes. So they were even then they were monitoring my movements. And then later, when I was down in Abkhazia and in Sochi, then it was, it was not occasional. It was, every week or two somebody was talking to me.

00:18:30 Nick LALL: Wow.

00:18:31 Bruce TALLEY: Yeah.

00:18:32 Nick LALL: Yeah. No, that's certainly an interesting aspect of doing business there, I guess, which is even different from other frontier markets.

00:18:40 Bruce TALLEY: It is. And, the really interesting thing is we left in twenty fourteen, As, you stated, They asked me my opinion and right around the time of the games, maybe slightly after, maybe even during. That's when the revolution of dignity was going on in, in Kiev. And they asked me my opinion. I said, well, you know, I think Ukraine should be able to chart its own course without Russian interference. And I knew at that point that it was only a matter of time until they began to drop flash drives in people's luggage and claim that they were spies. And that has happened. And I thought, somewhat locally prominent. I've been featured in, Russian television in the news and, virtually every, foreign media outlet that came through Sochi talked to me for, three or four years there. So, I thought I was a pretty good target for that. But the interesting thing is that I have been to Ukraine now since I went to Ukraine many times during the time that I lived in Russia. Just out of curiosity, I always want to know what's around the next corner. And I was familiar with pretty familiar with Ukraine anyway. But since February of twenty twenty two, I've been spending a lot of time in Ukraine. And the interesting thing is, despite the fact I married a Russian woman, I lived in Russia for a long time, have lots of connections there and just, the, difference couldn't be more stark. I expected at some point somebody is going to come to me from the Ukrainian government and say, who are you? What are you doing here? explain yourself a little bit to us because we see you have all these connections with Russia. It hasn't happened. Now, I've been very as I was in Russia. I've been very transparent about who I am. But, Ukraine is a country that's been invaded by Russia. And, so Ukraine under attack is a more free place now than much more free place Now then, rush us in.

00:20:36 Nick LALL: What would you attribute that to? What are the differences between, Ukrainian government or society, civil society compared with Russia?

00:20:44 Bruce TALLEY: That is such a fascinating question, because I think what has happened is that this war has really forged a stronger sense of Ukrainian national identity. And there are a lot of people going back and forth. You know, there were something like eight million refugees immediately, and most of them went through Poland in the beginning right there. You know, they wound up in a lot of places, but Poland was common transit point, and a lot of them are a lot of refugees are still in Poland. And I think that that exposure, that Poland has changed so much in the post-Soviet period. I think that's part of it. I think that younger people especially don't want to live like people are forced to live in Russia. they're rejecting the Soviet mentality. I think they're looking to the West for their inspiration and lifestyle and and freedoms. in terms of some sort of government policy about that stuff. I just don't have any, real insight as to how that operates. I suppose that being an American, especially up until we, stopped supporting them so much. But there's still residual goodwill also, you know, that that opens doors that people feel like, Americans, there are a lot of Americans that have gone there to fight. There are Americans that have given money and, their time in this, this effort and certainly the prior administration put a priority on supporting financially and, with Military material, so.

00:22:20 Nick LALL: Totally makes sense. Um, I guess going to, your before what you're doing now in Ukraine, which is the property fund, you initially started doing destination services even during the middle of the war there. maybe even taking a step back further, if you could just talk about the genesis of Destination Sochi, how you initially got into destination services and then eventually that to other countries as well?

00:22:48 Bruce TALLEY: Yeah, I was in I was in Sochi in two thousand and seven with a great friend of mine, American Guy. I had a number of friends that came over and some became partners on these land projects and super guy. so Mike and I were in Sochi and he looked around and he said, they're going to need so much here. And he said, look, think of all the, I don't know, porta potties and all the help that they're going to need here. And I really had that was I mentioned two thousand and seven, because that was the period when they won the bid for the twenty fourteen games. And so it was kind of in my head. And a couple of other people talked to me about it. I was through Sochi a lot because that was the corridor that I used to get in and out of the Republic of Abkhazia, where I spent much of my time from two thousand and nine through twenty ten. For a couple of years there. I was there about half the time. And so, you know, it was kind of in my mind. And I just began to create content. I had a newsletter about Sochi. I had, uh, did a video channel. I started to connect with people about that. And I really didn't know. I didn't know much about destination services. I didn't know anything about the business around the Olympics. I just knew that there was a big difference between what I felt locals were ready to provide in terms of deliverables and what outside companies were going to expect. So I didn't really know what the business model was, how to charge, and what I was going to charge for. And we, set it up and, pretty. It was really a lot of effort. I, spent a lot of time learning about the, you know, the hotels that weren't branded hotels around. There were these mini hotels off grid, um, crawled on top of every building to determine, is this a place somebody might put a TV studio and eventually, people started coming and you learned what their needs were. They might need transportation or they might need guide service. In the beginning, interpreters and then workforce relocation became a big thing. So we provided long term workforce relocation together with financial management of the contracts. And you couldn't go in and rent one hundred apartments in a in a complex. It just doesn't work that way. The the apartments are all sold out during the building process or sold out, but the builders don't retain ownership. And so you have, that kind of situation where there isn't something standard. And so we would, find the apartments and standardize them for the customers and pay the taxes, rent, utilities, Wi-Fi. We'd even clean. We provided transportation. And as I said, we did TV studios and offices, interpreters, laundry, Sponsor houses. And we were very transparent. We weren't inexpensive, but we were very transparent about what our costs were and what we were charging. And, you know, word spread in the around the games to the Olympic broadcasters, partners and sponsors that we were there. Eventually, we became the largest provider of destination services in Sochi. We had over sixty employees and contracts with about forty five Olympic broadcasters, partners and sponsors. And so I found every customer negotiated all of the services and all the contract contracts. we didn't we didn't fail on anything. And, you know, I took great pride in that. It was a fun and busy and fast time. But when I started, I really I didn't know anything about Nick. I knew nothing about destination services. And, but as I said, I used the tools that I, that I could get the word out about me to the Olympic world.

00:26:24 Nick LALL: It's amazing. and then I guess, you took that to Ukraine. first of all, why did you choose to go to Ukraine? I think we touched on it a little bit already, but, at that point you had the visit from the FSB and you decided it was time to get out of Russia. And then I guess you chose to go to Ukraine. And then I'm also curious about, destination services there, especially during wartime. I mean, why was there a need for it then, and what what were you providing to people?

00:26:52 Bruce TALLEY: Yeah, well, it kind of happened in a couple steps because I had a customer come to me and we had moved something like, I don't know how many hundreds of their people around and buses and, breakfasts and just and we'd provided long term workforce accommodation. And so they asked me to go to Brazil. And so I went down to Brazil. So it wasn't, you know, I didn't there were several steps in a number of years in between. And what drew me back to Ukraine was what happened in twenty twenty two. I thought that my knowledge of the post-Soviet world would be beneficial to companies that were looking to participate in the eventual reconstruction of Ukraine. I didn't want to be a tourist in misery, but I was in Ukraine within about four weeks of you know, they started the war in twenty fourteen, right? They, illegally occupied and annexed Crimea and then destabilized southeastern Ukraine. But the escalation in twenty twenty two was in February. By the end of March, I was in Ukraine and I was again, I didn't want to be a tourist in misery. And there is. So I don't want to downplay any of the, the terrible things that people go through on a day to day basis there. And virtually everyone has a horrible, tragic story in Ukraine. You know, somebody connected to them very closely. But I went over there because I thought maybe, my experience in Russia would be valuable. Ukraine and Russia are very different places in a lot of ways, but they do have there are some similarities in their legal and their business systems. And, Ukraine is. Digitizing their economy and they're increasing their transparency and they're looking westward. This whole experience has pushed twenty Ukraine twenty years further closer to the West, in my estimation. but yeah, I just believe that, my, experience and understanding, I speak Russian with a very imperfect grammar and a bad American accent, but I can quite easily move around over there and, I thought that there was an opportunity to add value for, for Ukraine to help out. It really was a big, big deal and still and remains this way. I mean, for weeks I was glued to, my phone, watching events unfold and talking to people and seeing what was happening. it's just horrifying what the what the Russian military, what the Russian government, through its military is doing to Ukrainian countryside and its people. And, the lies about, oh, they're Nazis and it's NATO's fault, and America is threatening us and bioweapons labs and all of this just bullshit. I'm sorry for the using this word, but it's just there's so many stories and falsehoods and they're repeated. You would hear the lies that are repeated, in Russian media several days later, they would be repeated by quite famous talking heads and even some politicians here in the United States about what the motivations were. So, I want to say something very strongly in support of Ukraine here, that Ukraine is less nationalistic society than Russia is by far. If you look at election results in Ukraine, the far right has never won more than three percent of the vote. So the idea that they're goosestepping around Kyiv or someplace is just it's absurd that Ukraine wasn't a threat. NATO is a defensive alliance. It's not a threat. It's simply that Russia is threatened by ideas, freedom and democracy. And there are so many cross-border connections. many Russians have Ukrainian relatives or, you know, and vice versa. And so or friends and and business connections and so freedom and transparency and fair elections. That is a seed that the Russian government does not want to see growing in Ukraine because it will it would spread across the border quickly, you know.

00:30:59 Nick LALL: Yeah, absolutely. And I think it's interesting, your point that, you know. Depending on the outcome of this war, it seems that Russia's actually pushed Ukraine much more towards the West. And so I was wondering if you could talk a little bit about the economic implications of that and also How you got involved in your property fund there and kind of what the thesis is there and why you believe that there's a lot of opportunity right now in Ukraine.

00:31:28 Bruce TALLEY: Yeah. Well, you know, Ukraine's economy is, you know, of course it contracted, I don't know, thirty or forty percent in the first year. It's grown back. But Ukraine's economy is only something like a little more than twenty percent of what Poland's is. Ukraine's got twenty five percent of the world's black earth, the best agricultural soil in the world, more than any other nation. They've got, you know, the widely discussed rare earths. I you know, that the value on that and the processing, that's something I'm not particularly clear about, but also the cost, for labor, land, everything like that is much cheaper than it is even in Poland, much less, the Netherlands or Germany or someplace else in the EU. So costs are much lower. An employee out the door, Employee costs, we've calculated, are about twenty eight percent of what they are in Poland. May not be completely one hundred percent accurate, but I think that that's about the latest calculation that we did here a few weeks ago that that looks like that's, you know, for a laborer that that's that's fairly accurate. so you've got lower costs, and you've got a motivated population that is looking west that wants, the kind of infrastructure and freedoms that you see in the West. And so, I think there's a big opportunity to, help out in the development there. certainly there'll be hundreds of billions of dollars in public monies, I believe, going in for the reconstruction of of infrastructure and cities and so forth, all over Ukraine. And then private money will follow or maybe be an advance, as we say. what really spurred the the idea behind Ukraine, Prime Property Fund is that of all the things that I did in Russia, the, Best opportunity would have been or was in buying residential because a law works pretty well for buying, selling and renting out residential and buy residential. I primarily mean apartments, something like eighty percent of the population. Ukrainian cities lives in apartments. And so and that's where the folks that that run the government, where they put their money that people are have less confidence in the public, in the securities markets. there just aren't as many places to put your money. And that works pretty well. And people always need a place to live. So if you look at analogous markets to, um, the, you know, the three primary markets that I see. And Ukraine is being a great value in places there between four and ten times ten times less. There's so much cheaper than their, analogues. So I think it's the safest place to invest. I think that ultimately that's probably where the best returns will lie or some of the best returns.

00:34:23 Nick LALL: Sure. Yeah. That certainly makes a lot of sense. I guess given that you're closer to this situation than probably most people listening to this, do you have thoughts on what the, ultimate outcome of this conflict will be? When it'll how it'll resolve, when it'll resolve or, any, how you would hope for, at least.

00:34:44 Bruce TALLEY: I don't know. I mean, one scenario is some sort of a frozen conflict that the best thing that can happen for everyone is if Russia loses. If you follow Doctor Timothy Snyder, he points out that, Germany and Japan, we think of those places as free societies. They've got functioning markets. They've got the rule of law. Why is that? Well, they lost wars. And, you know, that killed tens of millions of people. But they it was for a lot of reasons. It was fortunate that that they lost. But that's the reason that they were able to recalibrate. And until Russia loses, it's probably not going to recalibrate the way it operates. And so what does losing look like? That means getting Crimea back. that means Russia not occupying any, Ukrainian territory. And then maybe the Russian government is forced to, maybe there's a new form of government, maybe they're forced to, A reckoning there. What ultimately happens is it's hard to say, but I think that Russia is got really a lot of problems. they've got they had a demographic problem before this, and then you subtract a million people from the workforce or something like that. That's, that's especially a problem there. They have issues with their infrastructure. The Ukrainians are very being very successful right now. They've destroyed more than twenty percent of Russia's oil refining capacity. And what I read is it gets around thirty or forty percent. The problems. Are almost untenable. it's an interesting time and place. and the other thing I wanted to mention going back to talking about apartments, investing and so forth that I think when we look at, social media or television and we see the damage, you think, oh my gosh, how can anyone possibly think about that? Well, all of Ukraine does not look like Bakhmut. the damage is not uniform. Some cities have been absolutely destroyed. I was in Kharkiv, which is close to the Russian border and was the second largest city in the country. I was there just a couple of weeks after they booted the Russians out. And, really profound damage there. And I wonder if Kharkiv will ever recover to its pre-war levels. It's very close to Russia. So as long as Russia is a threat, that's going to be a problem, I think. there are cities in western Ukraine that, Lviv has had, I think, less than two hundred apartments destroyed out of a total stock of something like two hundred and eighty thousand. Even Kyiv. The latest numbers I've seen are less than seven. Somewhere around six, five, six, seven thousand apartments damaged or destroyed. Well, there are around eight hundred thousand in that city. So, again, horrible tragedy each time. But the war discount is, probably too great for the actual risk there.

00:37:39 Nick LALL: Sure. Yeah. I mean, I think if you're actually looking at the infrastructure and the real estate in these places, it probably hasn't changed as much as the valuation has changed since the war has happened.

00:37:49 Bruce TALLEY: Absolutely, absolutely.

00:37:52 Nick LALL: I guess maybe if you could talk a little bit more about the legacy you hope to leave. I'm sure that you see a huge opportunity economically here in Ukraine, but, are there any other reasons that you think that this is important to do and why you're so interested in being involved in, in Ukraine and the property fund there?

00:38:11 Bruce TALLEY: Yeah. And there might be kind of an unspoken question or thought there too, which is, geez, Bruce, are you guys being predatory? I don't know if you're thinking that, but it's a reasonable question. and the really interesting thing is that if you're going to invest in a frontier market or a post-war market, the spending multiplier for investing in residential is actually greater than anything else you can do. And if you think about it, how does that happen? Well, you add liquidity to the market. that increases, you know, those people that are selling maybe are buying someplace else. professionals are employed. There are lawyers and real estate agents and notaries involved. if you are buying apartments that are new or being constructed that that adds the developers will go out and build and or, construct other ones. And so actually the effect on consumption also in by buying residential is greater than any other effect that you can do if you go out and build a factory. And I hope a lot of people do, I think there are great opportunities to build factories on the, near the Polish border, but that takes several years before you're employing lots of people. And so the effect on consumption actually from buying residential is faster than it is in anything else. And I think and this is this speaks to the legacy, as we go in and get involved, it increases the or decreases the perception of risk on part of other folks. Well, these guys are there. Maybe we should take a look at it too. So my argument is that it's the moral choice.

00:39:56 Nick LALL: Yeah, definitely. making it a more attractive market for people is very needed right now because they do need investment. I maybe just one last question would be, there are probably a lot of young MBAs listening to this podcast, listening to this podcast and thinking, the world is kind of in flux right now. Maybe the US isn't the place to be if it was anymore. Given that you're someone who, went out and lived in Russia, Brazil, other places like that, I was wondering if you have any thoughts on what a person who's considering what to do with their life right now, where, where should they go? What should they do? What would be your advice to them?

00:40:29 Bruce TALLEY: Nick I had this conversation with a guy last night. I was we were talking about Ukraine and I said, Kyiv is going to be the hot city to live in for digital nomads, young people, people looking to, find themselves, find a fortune, find a foothold. I think Kyiv is going to be one of the most important cities in Europe. we kind of think of it as a sort of a backwater, right? But its population of more than three million people, it's beautiful. It's already got this kind of buzz. You know, when you go, there are certain cities that you walk. You go into, I imagine Hemingway in the nineteen twenties in Paris. Right. Or, Berlin has had it for a while, and certainly London and New York have had a buzz for very long times. But, there are kind of peaks and valleys in this, right? Um, around twenty years ago, I thought, ah, Vietnam. I was in Vietnam. I spent some time over there and I thought this you can feel this place is, going to happen. This is a happening place and it still is. But I think that, um, that Kyiv is going to. Well, as I said, it's already got that buzz. And when, when this war stops and all wars do stop, I think there will be a lot of young people that are that will be, you know, they'll be brought in by companies that they work in tech. There are a lot of very sharp folks in Ukraine that are involved in lots of different businesses. There will be a lot of opportunity there. The analog closest analog to Kyiv, in my mind. And maybe some people will argue with me on this, but I think it's Moscow. Again, Moscow doesn't have any right to be. The Russians don't have any right to be invading, attacking and killing Ukrainians and trying to occupy the country. But Moscow has this outsized influence on the rest of Russia. Moscow and Saint Petersburg. And then there's a big drop off in, you know, we've got in the United States, we've got all these regionally and even internationally important cities like Atlanta and Detroit, Boston. And it's not just New York and San Francisco and Washington or Los Angeles, right. I mean, there are lots of cities beyond the Chicago to Minneapolis and Dallas and, Phoenix, San Diego. There are a lot. There are a lot of cities in the United States that are important regionally, nationally and internationally. in Russia, there's a big drop off from Moscow and Saint Petersburg in terms of that kind of influence and importance. And, I think that Kyiv is going to occupy a place like Moscow does for Russia, that all the businesses, that's a governmental business, the legal, the cultural capital of the country. It's a beautiful place. So I think that Kyiv is going to really, really blossom. I also think Odessa is going to be an important place because it's a seaport. It's right now it's the only beach resort. So you've got, an important city for commercial and touristic reasons. And, the center of Odessa is beautiful. And then you've got Lviv. And Lviv is kind of a second cousin to Prague and Krakow. it was part of the old Austro-Hungarian Empire. So you've got the cafe culture and the cobblestone streets, and, it's pretty close to the border of Poland. And so I think young people go to all these places, but especially Kyiv. I look for Kyiv to be, really an exciting city and an important place in the next coming, in the coming decades.

00:44:00 Nick LALL: Definitely. Yeah. I'm sure there will be a lot to do there in the near future. And it is a beautiful place. Yeah, a place to be. Well, thanks so much, Bruce. It was really very interesting conversation and I wish you the best of luck with your property fund.

00:44:13 Bruce TALLEY: Yeah. I just wanted to add one thing. This is, we've talked about that a bit, but this isn't an offer to buy or sell securities. I'm not selling securities here online. We're just talking about what we're doing. So.

00:44:24 Nick LALL: Sure. Absolutely. Well, thank you so much.

00:44:29 Bruce TALLEY: Yeah. Thanks a lot, Nick.