Prairie Business September 2013

Developing the Bakken

Real estate firms from around the world enter the market pg. 24

ALSO Talk of the Town - Minot

The Magic City prospers post-flood, mid-boom pg. 38

Saving History, Benefiting the Future

Redevelopment of historic Fergus Falls building expected to boost local economy pg. 48

KRIS BEVILL Under

KRIS BEVILL Editor

kbevill@prairiebizmag.com

Under development

To say that real estate development in the region is on the upswing would be an understatement. Communities are breaking building permit records and new developments are springing up nearly everywhere you turn in cities throughout the Dakotas and western Minnesota. And it’s not just a few houses here or a new grocery store there. I spoke with many developers for this issue who are investing hundreds of millions of dollars into massive projects including hotels, housing developments, retail strip malls and more.

Of course, the Bakken region is a hotspot for development right now as communities call for more everything. In "Developing the Bakken," (page 24) we highlight methods developers are using to finance their laundry list of projects, including overseas investments and Wall Street equity funds. Competition appears to be getting stiffer for developers in the Bakken, but there is plenty of work to go around if building permit numbers are any indication. Last year’s building permit valuations for Williston, Minot and Dickinson, N.D., totaled more than $1 billion and communities throughout the region continue to grow.

Communities outside of the Bakken are also growing rapidly. In Sioux Falls, S.D., the city is building a $117 million events center, scheduled to be complete next fall. The city issued 4,516 building permits through July, making the first half of this year the fourth busiest on record. In Bemidji, Minn., approximately $50 million in new development projects is slated for the town’s south shore. Grand Forks, Fargo and Bismarck, N.D., are also experiencing major growth in terms of new housing projects, hotels and retail projects. There are simply too many to list, but we’ve tried to zero in on the largest and most unique projects that are either currently under construction or scheduled to begin construction within the next year. Check out our digital edition for details.

Finally, a quick reminder: We are accepting nominations for our annual 40 under 40 list until Oct. 1. Don’t delay in submitting your nomination and be sure to check out our December issue for the results. Nomination details are available at www.prairiebizmag.com/pages/40under40form.

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MIKE JACOBS,Publisher

RONA JOHNSON, Executive Editor

KRIS BEVILL, Editor

BETH BOHLMAN, Circulation Manager

KRIS WOLFF, Layout Design, Ad Design

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Editor:

KRIS BEVILL

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Editorial Advisors:

Dwaine Chapel, Executive Director, Research Park at South Dakota State University; Bruce Gjovig, Director, Center for Innovation; Lisa Gulland-Nelson, Vice President, Marketing and P.R., Greater Fargo Moorhead EDC; Tonya Joe (T.J.) Hansen, Assistant Professor of Economics, Minnesota State University Moorhead; Dusty Johnson, Chief of Staff for South Dakota Gov. Dennis Daugaard’s office; Brekka Kramer, General Manager of Odney; Matthew Mohr, President/CEO, Dacotah Paper Company; Nancy Straw, President, West Central Initiative

Prairie Business magazine is published monthly by the Grand Forks Herald and Forum Communications Company with offices at 375 2nd Avenue North, Grand Forks, ND 58203. Qualifying subscriptions are available free of charge. Back issue quantities are limited and subject to availability ($2/copy prepaid). The opinions of writers featured in Prairie Business are their own. Unsolicited manuscripts, photographs, artwork are encouraged but will not be returned without a self-addressed, stamped envelope.

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Agriculture: Our enduring strength

BY MATTHEW D. MOHR

We are benefiting financially in North Dakota from the extraction of carbon-based natural resources, but our long-term regional strength is agriculture and the many businesses here that support our farmers and ranchers.

According to a recent North Dakota State Historical Society publication, from 1890 to 1950 the number of farms grew from 27,611 with about 7.6 million acres of land to 65,410 farms with about 41.1 million acres. The average number of acres per farm also increased significantly during this time frame, from an average of 277.43 acres per farm in 1890 to 629.78 acres per farm in 1950. This statistic supports the fact technological advancements have been made in land production, and also provides an indication why there are fewer people employed on farms today than in the past.

Although farm employment may be down in numbers, the statistics do not necessarily reflect the many jobs which have been created in the region for equipment manufacturing, food processing and agribusiness research and development.

From the giant manufacturers such as Case IH and Bobcat to many successful smaller manufacturers such as Willrich and Amity Technology, our region is dominated by great agribusiness opportunities.

Employment in our region is strong due to the oil boom and we have seen tremendous wealth flow into the hands of many land and mineral rights owners the past few years. Realistically, the mineral wealth has always been here, we just discovered a way to turn the wealth to cash flow. This tremendous cash flow has created a whole new economic environment. The long-term investors and land owners are using the newfound excess cash to improve production techniques and buy more land.

Oil and coal extraction may be a permanent part of our state’s economy, and we should be thankful for the windfall we are receiving, but agriculture is our enduring stronghold. PB

Matthew D. Mohr CEO, Dacotah Paper Co. mmohr@dacotahpaper.com

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Helping those riding the ND ag and oil boom

BY ROB MONTGOMERY

North Dakota is in the national headlines on a frequent basis due to its booming agriculture and oil businesses. But there’s another news headline that is very applicable to our state — CNN’s recent rating of the best jobs in America.

Last year, CNN analyzed jobs in America and rated financial advising as the the sixth best job in the U.S. because of the great personal and financial rewards that advisors receive by helping others achieve their dreams. We aren’t talking about wheeling and dealing in the stock market. This is helping people with real life needs — like people in North Dakota who have found themselves in the enviable position of new wealth. But with new wealth comes new responsibilities, including protecting those new dollars for the future when the winds of economic change may shift yet again.

Let’s take a look at some of the stats. Last year North Dakota once again blew every state out of the water in economic growth. North Dakota’s gross domestic product (GDP) rose 13.4 percent in 2012, the fastest in the nation, according to a report released by the U.S. commerce department’s Bureau of Economic Analysis. Texas was a distant second, with real GDP growth of 4.8 percent. The national average was 2.5 percent.

Bruce Gjovig, founder of the Center for Innovation at the University of North Dakota, said in a recent Reuters article that the boom could be creating up to 2,000 millionaires a year in North Dakota. The same article points out that Mountrail County, positioned in the middle of North Dakota oil country, is now among the 100 richest U.S. counties.

Sure, some of this new wealth is showing up in new pick-up trucks, overseas vacations and second

homes in warmer climates. And enjoying what you reap is indeed an important aspect of our new economy. But helping people with the sometimes complicated tasks of protecting new wealth and continuing to grow their life savings for their children and grandchildren is what makes financial advising one of the best jobs in America.

In fact, CNN lists work satisfaction as a key component in making financial advising one of the best jobs in America. According to CNN, “Advisers help clients achieve financial success, which feels pretty warm and fuzzy. And they can hang a shingle for themselves, work as part of a larger firm or even work virtually if their clients are comfortable with it.”

The salary and anticipated demand for financial advisors are also worth noting. Median pay for financial advisors across America is $90,000, according to CNN, with top pay over $200,000. The U.S. Bureau of Labor Statistics reports that the U.S. economy will need 66,400 more financial advisors by 2020.

As a native North Dakotan, I don’t believe there’s a better place in the country to join the ranks of financial advisors today than our growing state. As David Wald, a financial advisor at Securian’s Bismarck, N.D., office says, “I wanted to help people, and their two top needs are health and money.”

So mothers, don’t let your sons become cowboys. Here in North Dakota, your sons and daughters can have one of the best jobs in America by becoming a financial advisor. PB

Rob Montgomery President, Securian Financial Advisors of North Dakota rob.montgomery@securiannd.com

Research park encourages economic development

BY DWAINE CHAPEL

The Research Park at South Dakota State University is a strong economic and real estate development tool set up to encourage collaboration between university and industry professionals.

The park lies adjacent to the SDSU campus and encompasses 125 acres with complete infrastructural amenities installed. It hosts the Innovation Center, SDSU Seed Tech Lab and a 15,000-square-foot spec building. The initial master plan is currently being revisited to ensure that the economic-based park aligns with the local economic development corporation.

The park provides a unique opportunity for entrepreneurial growth in the Innovation Center. It sits within a stone’s throw away from a dynamic and diverse collection of forward-thinking researchers located on the SDSU campus. The university provides faculty, graduate students and undergraduate students a strong and positive environment to commercialize technological innovation.

The park’s board of directors has created a strong partnership with Sioux Falls, S.D.-based Lloyd Companies in setting up a 15,000-square-foot spec building. Businesses interested in the building are provided the opportunity to have the space built out to their own specifications.

The board has worked to ensure development by creating relationships with capital investors. Businesses interested in moving to the Research Park are provided several options to get started. They may be provided low interest funds to build as well as options to rent to own.

The research park has redesigned its website to assist in locating the amenities associated with the Innovation Center as well as building sites and available building space within the park. The site can be viewed at www.researchparkatsdstate.com.

Recruiting research to the area is one of the key tasks for the research park staff. The marketing consists of developing strong industry relationships with businesses that have the potential of creating collaborative partnerships with SDSU. The faculty at SDSU plays a strong role in this process. It is their expertise that is showcased to industry. It is the unique knowledge base that exists on campus that encourages businesses to locate in the park.

Marketing the high quality of human capital located at SDSU is an important component to the continued growth of the research park. There have already been key successes, with researchers from around the globe relocating into the park.

Continued economic and real estate development of the park will provide sustainable growth for the community and region. The process will take 15 to 25 years to complete. The research park provides a unique and important tool for the local economic development corporation and university to build into the future. PB

Dwaine Chapel Executive director Research Park at South Dakota State University Dwaine@researchparkatsdstate.com

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Being prepared for development is key to growth

BY HAROLD STANISLAWSKI

Shovel-ready sites simplify the development process and greatly reduce risk by eliminating most of the unknowns from the site selection decision and increasing the predictability of getting the land developed, the building constructed, and the business up and running. Fergus Falls and other cities in Minnesota have gone through steps to certify our industrial parks as “Shovel Ready.” A process has been developed by the Department of Employment and Economic Development of Minnesota (DEED) to accomplish the shovel-ready certification for interested communities.

Benefits for community, site owners

Shovel-ready certification offers several benefits for communities and site owners, but let’s begin with the most important: Increased visibility in a crowded marketplace. Minnesota’s shovel-ready sites are heavily marketed at national conferences and trade shows as well as on the property search tool DEED provides for site selectors. The result is improved visibility for both the community and the community site. Certified shovelready status is fast becoming a standard for sites being marketed throughout Minnesota. Having certified sites demonstrates that communities, including micropolitan communities such as Fergus Falls, are progressive, business-oriented and prepared for new development. For communities serious about taking their efforts to attract new commercial and industrial growth to a whole new level, the Shovel-Ready Site Certification Program is the natural next step. Shovel-ready sites are in growing demand among companies and site selection consultants, and they are an increasingly popular tool for communities to attract new business and industry. It has been our experience that the more ready a site is, the easier it is to market to a prospective buyer.

What you need:

• Sites that have had all planning, zoning, surveys, title work, environmental studies, soil analysis and public infrastructure engineering

completed prior to putting the site up for sale.

• Site must be under the legal control of a community or other third party.

• A description of the current owner.

• Documentation of title to the property. This is a benefit to companies and site selectors because it takes much of the time, expense, unpredictability and risk out of development.

• Aerial photos noting site boundaries.

• The current price offering for the land.

• Infrastructure including sewer, water, gas, electrical and telecommunications.

• Distances to major highways and interstates.

• Rail access.

• A list of any economic incentives zones the land area qualifies for, such as New Market Tax Credits, EB5 designation, TIF, SBA Hubzone, and any state and federal economic development legislation.

• Expansion possibilities.

• Current real estate taxes and special assessments on all parcels that make up the site.

Because the sites are more likely to catch the eye of corporate site selectors or site selection consultants, they’re also a distinct competitive advantage for site owners and communities. To learn more about how to become a certified shovel ready site contact your state economic development office.

Minnesota offers economic tools that also can assist getting a project off the ground. It is best to contact your local economic development officials to learn what the options might be. Another important factor in site selection is the service and relationship building that is essential in making a deal happen and then helping the owners and employees thrive in the community. That requires teamwork and a desire to succeed. PB

Harold Stanislawski Executive director, Fergus Falls Economic Improvement Commission Harold.stanislawski@ci.fergus-falls.mn.us

SMART DESIGN FOR SMART COMMUNITIES.

Marco named Cisco partner of the year

Marco Inc. was named the 2013 Break Away Partner of the Year from Cisco during its annual partner summit held in June in Boston. Marco is the only Minnesota headquartered company to win an award at this year’s event. Marco received the award in honor of its commitment to planned and well-executed accelerated growth and for its investment in several specializations. Marco currently provides communications services to customers in the Dakotas, Minnesota, Wisconsin and Iowa.

Sioux Falls electronics recycler gets environmental thumbs up

Bargain Bytes, a Sioux Falls, S.D.-based company specializing in recycling and refurbishing computer components, computer hardware and other consumer electronics, has received eStewards certification from the Basel Action Network in recognition of its responsible and safe recycling practices. In order to become certified, the company demonstrated to third-party auditors that its workers are protected from workplace emissions, that toxic electronic waste is not disposed of in landfills, that electronics are recycled domestically rather than shipped to outside drop points and that hidden private data is destroyed as part of the recycling process. According to BAN, Bargain Bytes is the first company in the Dakotas to achieve e-Stewards certification.

SD promotes tourism destinations to Chinese

The South Dakota Department of Tourism recently hosted its first Chinese familiarization tour to showcase the state as a tourism destination for Chinese travelers. Twelve Chinese tour group operators spent four days in the state visiting Rapid City, Badlands National Park, Sturgis, Deadwood, Mount Rushmore National

Memorial, Crazy Horse Memorial and Custer State Park. Maureen Droz, international and domestic trade sales manager, says the tour has already resulted in booked trips from Chinese tour operators.

Skincare, beauty web retailer raises $1 million

Glisten, a Fargo-based high-end skincare and beauty products web retailer, recently raised $1 million in seed capital investment from a number of angel investors to build the company’s inventory and expand its marketing efforts. A brick-and-mortar location is also in the works. Company founder Tommy Leikas says the seed capital raised is the company’s first step in its goal to become a global leader in the beauty and cosmetics business.

Sanford recognized for IT use

Sanford Health facilities in Aberdeen and Sioux Falls, S.D., and Fargo, N.D., have received “Most Wired” designations from Hospitals & Health Networks magazine based on survey information and a benchmarking study that measures the level of information technology (IT) adoption in U.S. hospitals and health systems. To date, Sanford has installed its electronic medical

records (EMR) system in 30 of its 35 hospitals. The organization plans to install the EMR system at its remaining five hospitals within the next year.

Cirrus Aircraft makes progress on personal jet program

Duluth, Minn.-based Cirrus Aircraft announced it has made significant progress toward certification of its Vision SF50 personal jet program. The company has acquired manufacturing equipment to build the new airplane and will build conforming aircraft for further certification testing while continuing to prepare its Duluth headquarters and Grand Forks, N.D., manufacturing facility for production. The first delivery of the new product is scheduled for 2015.

Lawrence & Schiller, SEP Connect partner

Sioux Falls, S.D.-based Lawrence & Schiller TeleServices has partnered with California-based SEP Connect, a world leader in search engine placement, to sell search engine placement services to businesses. Lawrence & Schiller will hire new sales people dedicated to the project while SEP Connect will provide training and back-end support services.

Marco Inc. CEO Jeff Gau and Tony Mason, partner account manager for Cisco, with Marco’s partner of the year award.

PHOTO: MARCO INC.

Exports up in ND metro areas

Export data from the U.S. Department of Commerce’s International Trade Administration shows a substantial increase in merchandise exports from North Dakota’s three metro areas from 2011 to 2012. The Fargo-Moorhead area exported a record $786 million in merchandise in 2012, up 8 percent from the previous year. Grand Forks-East Grand Forks exports totaled $225 million, up 28 percent from 2011. Bismarck’s merchandise exports totaled $64 million in 2012, up 45 percent from the previous year.

Key export categories included machinery and crops in the Fargo and Grand Forks areas and chemicals and machinery in Bismarck.

Grand Forks airport, FedEx ink 10-year lease

The Grand Forks (N.D.) Regional Airport Authority has signed a 10-year lease agreement with Federal Express Corp. (FedEx) for its North Dakota sort facility. FedEx flies two Boeing 757s daily into Grand Forks and sorts cargo into smaller aircraft and trucks for distribution throughout the state. The relationship between the airport authority and FedEx dates back to 1984.

As part of the lease agreement, the airport authority will complete a 3,000-square-foot addition and an $800,000 upgrade to the sorting facility. The addition is expected to be complete by early October.

AE2S receives GIS award

AE2S (Advanced Engineering and Environmental Services Inc.) received the special achievement in GIS (Geographic Information System) award during the 2013 Environmental Sciences Research Institute International User Conference held July 10 in San Diego. The firm’s work on the North Dakota Western Area Supply Project played a significant role in its earning the award, according to Roger Grimsley, AE2S geomatics manager. “We work with a number of

municipalities and regional water systems in the heart of oil country in western North Dakota, and we leverage GIS to help the region quickly respond to rapid growth with ensuring that future needs are also considered,” he says.

Medgene Labs gets grant for cancer research

Brookings, S.D.-based Medgene Labs has received a grant from the National Institutes of Health for research related to breast cancer. The product development company will receive more than $135,000 in Small Business Innovation Research grant funding for the initial phase of a project aimed at developing methods to deliver treatments to stimulate the regeneration of the lymphatic system in breast cancer survivors. The company expects the initial award to lead to additional funding for more than $1 million to support the project’s second phase.

Medgene is a portfolio company of Innovation Partners, a venture capital firm with offices in Brookings and Sioux Falls, S.D.

Edgewood acquires 4 SD senior living communities

Grand Forks, N.D.-based Edgewood Group LLC has expanded its South Dakota operations

to include assisted living communities in Mitchell, Sioux Falls and Watertown, and an independent living community in Watertown. Edgewood Real Estate Investment Trust, a North Dakota unincorporated business trust created for the purpose of owning assisted living and memory care communities acquired the properties and entered into a long-term agreement to lease the facilities to Edgewood Group. The trust currently owns six assisted living communities in Minnesota, South Dakota and Idaho, and is in the process of purchasing more, which it will also lease to Edgewood Group.

Waste Management acquires 2 ND energy companies

Waste Management Inc. announced it has acquired Williston, N.D.-based Summit Energy Services and Liquid Logistics. The company says the acquisitions will enhance its environmental service offerings to oil and gas industry customers working in the Bakken region. The acquisition includes 140 employees from the two companies. The same private owner held both companies. Other terms of the deal were not disclosed.

A group of agricultural machinery buyers from Africa tour a Titan Machinery dealership near Moorhead, Minn. The tractor shown is manufactured in Fargo at Case New Holland.

PHOTO: HEATHER RANCK, U.S. COMMERCIAL SERVICE

SD Community Foundation gives $15K for rural housing

The South Dakota Community Foundation, a nonprofit organization focused on investing in programs that promote the social and economic well-being of the people of South Dakota, awarded a $15,000 grant to Dakota Resources on behalf of the Rural Housing Collaborative. The RHC consists of representatives from 26 organizations and exists to address the challenges of rural housing.

The grant received from the South Dakota Community Foundation will support the Home Address project. The project was launched in 2012 with a purpose of assisting rural communities in developing housing plans. Selected sites include Miller, Wagner, Faulk County and Martin/LaCreek District Pine Ridge Reservation.

ND Tourism offers $750K grant for infrastructure development

North Dakota Tourism is offering a grant to one or more tourism attractions that can draw more visitors to the state. Funds can be used for building new attractions, major expansions, offering a new experience or supporting services for visitors.

The program is a matching grant program, meaning that sponsors must provide one dollar for every dollar of grant money requested. The deadline for applications is Oct. 18. More details are available at NDtourism.com.

Corporate Technologies among Top 100 cloud services providers

Nine Lives Media, a division of Penton, has ranked Corporate Technologies LLC among the world’s Top 100 Cloud Service Providers.

“We are excited to be named to Talkin’ Cloud’s list of top cloud service providers again this year,” CEO Jim Griffith says. “As one of the

largest managed service providers in the country, we continue to look for affordable and scalable technology solutions for our small- and medium-sized clients and utilizing cloud services was a perfect fit. We plan to grow our cloud service practice and look forward to supporting the evolving technology needs of our customers.”

Border States Electric acquires UtiliCor

Border States Electric has agreed to purchase Tennessee-based The UtiliCor Corp., a sales and services company for electrical and communications products serving the Tennessee Valley Authority, Arkansas and part of Missouri.

BSE CEO Tammy Miller says the acquisition strengthens BSE’s position in the utility market and complements its Harris Electric division in Tennessee.

Aldevron part of 1.3 million euro research project

Biotechnology firm Aldevron is participating in a three-year joint research project in

Germany to generate synthetic blood vessel bypasses for coronary artery disease patients and to improve treatment options for artery blockages. The total cost of the project is expected to be about 1.3 million euros.

Aldevron is headquartered in Fargo. The company's Frieburg, Germany, office will participate in the project, which is being partially funded by the German state.

Business consultancy firm relocates

Mojo, a Fargo-based brand consultancy firm recently relocated to a new location in downtown Fargo. Founded in 2007 by Mark Olson, a former brand director at Great Plains Software and Microsoft Business Solutions, Mojo specializes in helping businesses develop brand strategies that simplify and clarify their products and services.

Representatives of the South Dakota Community Foundation present a $15,000 contribution to Dakota Resources on behalf of the Rural Housing Collaborative to support the Home Address Program.

PHOTO: SOUTH DAKOTA COMMUNITY FOUNDATION

Starion Financial hires Neurohr as business banking officer

Todd Neurohr has joined Starion Financial as a business banking officer. He is located at the bank’s Mandan, N.D., location.

In his role, Neurohr maintains and develops existing loan portfolios and works to build and strengthen customer relationships. He also works to develop new loans, promoting and selling additional bank products and services.

Neurohr has 20 years of agricultural lending experience, most recently as a farm loan manager.

Bremer Bank names Peterson president, CEO of Grand Forks charter

Tammy Peterson has been promoted to president and CEO of Bremer Bank’s Grand Forks charter. Peterson has spent her entire career at Bremer Bank, most recently as a senior vice president and senior business banking manager in Grand Forks. She will be responsible for bank locations in Grand Forks, Grafton, Larimore, Fordville and Gilby, N.D., and Fisher, Crookston and Warren, Minn.

Peterson joined Bremer in 1996 as a credit analyst. Three years later, she was promoted to a business banker, taking on expanded supervisory and leadership responsibilities over the next nine years. In 2007, she developed and began managing the Small Business Administration department for North Dakota. A year later, she was promoted to senior vice president and business banking manager for the Grand Forks Charter. Peterson has a bachelor’s degree in accounting from the University of North Dakota.

Ackerland joins Western State Bank

Matt Ackerland recently joined Western State Bank as vice president of retail banking. His duties include directing and supervising the retail banking efforts in the bank’s seven locations.

Ackerland has over 12 years of experience in the banking industry. Prior to joining Western, he served as a district manager at Wells Fargo. He currently resides in Fargo with his wife and two children.

Petty named dean of enrollment at USD

The University of South Dakota has hired Mark Petty as dean of enrollment. Petty, a native of Sioux City, Iowa, will manage enrollment services overseeing the undergraduate admissions operation.

Petty previously served as associate vice president and dean for admission at Iowa Wesleyan College. His accomplishments there include enrolling the largest freshman class in three decades for two consecutive years, increasing the average student profile of the entering class and implementing a new scholarship program as the institution changed athletic affiliations. Petty was also an active member of the Iowa Association for College Admission Counseling where he most recently served as president. Additionally, he was a member of the Iowa ACT Council, planning chair for Iowa Private College Week, president of the Mount Pleasant Area Chamber Alliance and the 2010 Iowa ACAC Admissions Professional of the Year.

Spectrum Aeromed hires project coordinator, promotes 3

Rammie Olson has joined Spectrum Aeromed in a newly created position as project coordinator. In this role, Olson will guide projects from the initial sale to delivery and will serve as the primary liaison to customers. She will coordinate the activities of all collaborators on air medical equipment projects from sales, design, and product development.

Former project manager Michael Gallagher has been promoted to director of production. Gallagher’s new role in the company calls for him to oversee the production, quality assurance, project management and purchasing departments.

Boyd Johnson has been promoted from quality assurance manager to production and quality assurance manager. Johnson now supervises the welding and fabrication department in addition to his responsibilities as quality assurance manager.

Laurie Lundstrom was promoted from assistant office manager/AS9100 coordinator to assistant office manager/AS9100 management representative. She will continue her duties as assistant office manager and also manage the implementation and maintenance of Spectrum Aeromed’s quality management system, ensuring it complies with the requirements of AS9100 Rev C and ISO 9001:2008. She will also serve as the lead internal auditor for the program.

Todd Neurohr

Tammy Peterson

Matt Ackerland

Rammie Olson

Mark Petty

Hellerstein, McCracken elected to MDU Resources board

Mark Hellerstein and William McCracken have been elected to the MDU Resources Group Inc. board of directors.

Hellerstein is the retired president, CEO and board chairman of St. Mary Land & Exploration Co. (now SM Energy Co.). He led St. Mary's growth from an $80 million private company to a $2.5 billion public company listed on the NYSE. His 17-year career at the company also included positions as executive vice president and chief financial officer.

McCracken is the retired CEO and board chairman of CA Technologies, one of the world's largest information technology management software companies. He currently serves as an executive adviser to the company.

SDSMT professor to lead mathematical association section

Kyle Riley, head and associate professor of the Department of Mathematics & Computer Science at the South Dakota School of Mines & Technology, has been named chair elect of the Rocky Mountain Section of the Mathematical Association of America, the organization’s highest ranking officer. Beginning in April 2014, Riley will serve a two-year term on the executive committee, managing finances of the regional section, planning annual conferences and spearheading the effort to establish future conferences. The MAA is the largest professional society for mathematicians in North America. It supports a professional development program and fosters mathematical excellence at the high school, undergraduate, graduate and professional levels.

Kyle Riley

Mark Hellerstein William McCracken

Ciara Stockland, founder of retail outlet store MODE, recently franchised the concept and plans to open 75 locations within the next decade.

PHOTO: STUDIO A PHOTOGRAPHY

Retail owner gets into franchise mode

Fargo-based outlet store sets goal of 75 stores in 10 years

BY KRIS BEVILL

Ciara Stockland had been running her first retail boutique, a Fargo-based maternity clothing store called Mama Mia, for about a year when her husband presented her with a challenge and opportunity: A freight company he worked for had amassed a quantity of random merchandise in damaged shipping containers and someone needed to sell it. Could she do it? Stockland agreed to give it a try and turned the vacant retail space next to Mama Mia into a temporary store to sell the goods at liquidated prices. She received such positive responses from customers that she set her sights on growing the concept into something bigger, combining outlet store and retail boutique concepts to bring a sophisticated atmosphere to the low-price, liquidated merchandise model.

The result, MODE, opened in Fargo in April 2008. The concept and customer list continually grew from the start, leading Stockland to launch a wholesale division in 2009 dedicated to brokering goods between large suppliers and buyers throughout the country and a plan to expand the store’s reach to include other communities. Not willing to drive the long distances between store locations in other parts of the region, Stockland determined that franchising the MODE concept would be worth the expense. “We felt like franchising was the best way to [expand] because we would be opening stores in communities where women know their customer,” she says.

MODE’s first franchise location opened in 2011 in Bismarck, N.D., followed by another in Grand Forks, N.D. Earlier this year, the franchise’s first South Dakota location opened in Sioux Falls. Stockland’s near-term plans are to continue expanding the franchise to other communities in the Dakotas, specifically Minot, N.D., and Rapid City, S.D., and in Minnesota. The company’s ideal community ranges in population from 60,000 to 200,000 and has a significant number of female residents, preferably between the ages of

35 and 40. “We have demographics that we want to hit, so we don’t want to go into communities that are too small to support it,” Stockland says. “Minnesota has a lot of potential for quite a few stores.”

Long term, Stockland’s goal is to open 75 stores within the next 10 years in locations stretching from Winnipeg, Manitoba, to Laredo, Texas. “We feel that from here to Texas, that Midwestern person loves value,” she says. “We want to hit the whole Midwestern corridor all the way down.”

So far, all of MODE’s franchisees have been customers of the store. Stockland plans to continue seeking owneroperators as future franchisees, at least for the short term, because she believes they will spend time in the store and get to know their customers best. On average, a MODE franchisee can expect to invest about $120,000 for a 1,500square-foot store and will be responsible for paying a 6 percent royalty fee on the store’s gross sales.

Stockland declined to provide revenue data from the Fargo location, but says the company has grown substantially since 2010. She backs it up by pointing out the increase in sales of the company’s main item — $40 designer jeans. In 2010, the Fargo location sold 1,000 pairs of $40 jeans. This year, Stockland expects MODE’s four stores will sell more than 10,000 pairs.

While she’s confident in the brand and franchise concept, Stockland admits that launching a national retail franchise concept from Fargo can make spreading awareness of the opportunity a challenge. She combats that by attending conferences, brainstorming with customers and vendors and networking everywhere she goes. “We travel a lot for the product we buy and everywhere we go we talk about MODE,” she says. “We’re ready to sell them and make it happen.” PB

Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

North Dakota Developments LLC is raising funds in Australia to build workforce lodging near Watford City, N.D. IMAGE: NORTH DAKOTA DEVELOPMENTS LLC

Developing the Bakken

Real estate opportunities in western ND attract investors from around the world

BY KRIS BEVILL

If you’re a real estate developer and you’re not considering options in western North Dakota, you’re missing out on a $1 billion construction market, says Jeff Zarling, president of Williston, N.D.-based Dawa Solutions Group. Building permit valuations last year in the Bakken’s three hub communities — Williston, Minot and Dickinson — totaled more than $1 billion with millions of dollars in additional activity taking place in other oil patch communities like Watford City, Stanley and Tioga. And Zarling says the pace of development shows no signs of slowing down soon. Dawa Solutions Group will host a conference later this month in Bismarck focused on providing the most recent Bakken-related development information to real estate developers, investors, construction companies and service providers.

“It has taken a long time to prove to developers and investors that this energy development is different than the two previous oil development cycles in North Dakota,” Zarling says. “We have come a long way since the first hotel and apartment projects cracked the nut in 2008.”

International Interest

The list of developers working in the Williston Basin has indeed become increasingly diverse in the past 12 to 24 months as investors and developers who initially hesitated to enter the market have come to view it as a long-term play. Regional developers who were among the first to recognize

western North Dakota’s emerging market continue to be active in the area, but they are now sharing the space with Wall Street investors and international firms representing investors from Australia to Singapore. Among them is North Dakota Developments LLC, a subsidiary of UK-based real estate investment firm Property Horizons.

“We’re looking to capitalize, as everyone is, on the huge boom that is happening in western North Dakota,” says North Dakota Developments CEO Robert Gavin.

Property Horizons began exploring commercial and residential real estate investment opportunities in the Bakken about two years ago, according to Gavin. After concluding that the situation was not a typical boom-bust oil cycle, the company formed North Dakota Developments and spent about a year building relationships before moving forward with project plans.

The company is currently at various stages of development on three projects with a combined estimated cost of about $250 million. A workforce lodging project just outside of Watford City known as the Great American Lodge has been permitted for 204 beds and is expected to be fully operational this month. Gavin says the company has already submitted an application to add another 240 beds and could potentially expand to 1,000 beds in the future if demand warrants the increase and regulators approve. At 1,000 beds, the property represents a $70 million investment, which will be funded by overseas investors. Earlier this year, North Dakota Developments successfully raised between $4 million and $5 million over the course of five weeks in Australia to help fund the project and the company expects to gather up to $40 million in the coming year. Gavin says Australia has been a successful fundraising market for the company’s North Dakota projects because that country is also experiencing a commodity boom by way of iron ore, so investors understand the situation they are being asked to participate in. “When they hear about a boom happening because of the availability of another commodity such as oil it’s very easily recognizable to them because that’s what they are experiencing in their own country,” he says.

North Dakota Developments has also tapped investors in Singapore for its Bakken projects. Gavin says that market has produced slightly more investment dollars than Australia to date, but he expects Australia’s significantly larger population to offer greater long-term fundraising potential.

Other projects in the works at North Dakota Developments include a $75 million, 228-acre residential

development north of Williston known as Horizon Ridge. The development is expected to consist of high-end, singlefamily homes ranging in price from $300,000 to $400,000. In late July, Gavin said the company was finalizing a marketing plan for the development and expected to finance the project through local banks, which he says are quite comfortable financing residential properties.

Additionally, the company is awaiting tribal approval to move forward on a $100 million, 40-acre mixed use development in New Town which is expected to include housing and a travel center.

After two years of boots-on-the-ground involvement in the Bakken, Gavin says he’s noticed that there are good and bad aspects of being a foreign business in the area. “The bad thing is you really need to put a lot of time and effort into building up relationships and trust,” he says. “It’s not like London or New York City where you can bring a big suitcase of money and do business. It’s about trust … and it takes a lot of time to be trusted. But the great thing about working with Midwesterners is once you’ve built that trust and credibility up, they’re great people to work with. By doing the groundwork we’re now progressing things incredibly fast and making huge progress.”

Gavin agrees that many developers and investors doubt the reality of the Bakken’s real estate climate until they make a site visit and see it for themselves. His company has established a Williston office and regularly entertains clients to show them the opportunities available for investment. He believes the root of the misunderstanding is as simple as the terminology used most frequently to describe the production ramp up. “The problem is that when people hear the word ‘boom’ they also think ‘bust,’” he says. That notion should be discredited, he says, adding that his firm is fully committed to the Bakken’s development. “We wouldn’t put all our resources from three offices across three continents into North Dakota if we didn’t think this was a long-term project that we’ve committed to,” he says. “We fully intend to be in western North Dakota for the next 20 to 30 years.”

Enter Wall Street

Compared to international firms, regional developers may have cultural and technical advantages when dealing with the people and climate in western North Dakota, but they also face challenges in the unique business environment. Paul Hegg, president and CEO of Sioux Falls, S.D.-based real

estate investment and development firm Hegg Companies, says his firm began exploring the Bakken’s development opportunities about two years ago and soon learned that the fast pace of business is unlike anywhere else. “You don’t get 60 to 90 days to look at an opportunity. You have a week,” he says. “You have to react fast and if you don’t, you lose out on the deal.”

Land prices can change by the day, sometimes by the minute, he says, so companies need to be nimble and able to lock in prices quickly. Construction costs are also higher in the Bakken compared to other areas in the region. Additionally, Hegg cautions that acquiring financing for Bakken projects is not always easy, and it is not likely to be had at normal market condition terms. He says that while it’s

Paul Hegg, president and CEO of Hegg Companies, has formed a private equity fund to attract Wall Street investors to Bakken region projects. PHOTO: HEGG COMPANIES

not uncommon to finance 75 to 80 percent of a project in South Dakota, the current standard in the Bakken is 50 to 60 percent loan to cost. “That in itself is a sweeping change from what people expect,” he says. “It requires more equity, or what we’ve done, which is bring in Wall Street money.”

Hegg formed a private equity fund known as Bakken Select earlier this year with the specific intent of educating Wall Street investors on real estate opportunities in western North Dakota and raising money to finance its development projects. The structure of the fund is rather unique in the Bakken market, according to Hegg, in that it creates a stopgap between the first position mortgage and equity, resulting in an equity commitment that more closely resembles normal market conditions. Hegg says investors have been attracted to the company’s local knowledge and expertise, but also to the fact that the company has scaled its projects up to a size worthy of investment. “They aren’t really going to look at anything that isn’t north of $100 million in size, so we scaled it north of that number which attracted them to us and allowed us to create that unique financing structure,” he says. “We think we’re one of the few that has come to the market with that concept.”

While Hegg Companies remains active in markets in

Sioux Falls and elsewhere throughout the region, most of the company’s focus is now on the Bakken. The company is currently developing several projects with a combined estimated cost of $100 million. Among them is a $42 million, 239-unit high-end apartment complex in Minot known as North Highland Apartments. Construction began in August and the entire complex is expected to be complete next summer. The company is also working on an office space in Williston, workforce housing in Watford City and storage facilities throughout the region.

Local Funding

Joe Oppidan, president of Minneapolis-based Oppidan Investment Co., says his company does not find financing to be particularly difficult in the Bakken region and he takes pride in the fact that the firm uses internal equity and community and regional banks to finance its projects. “This is rural America in an emerging growth industry in a state that is multi-dimensional,” he says. “We have to work with our lenders and price appropriately [and] the lenders are there. The smaller banks, the regional banks that have got to work for loans, understand it.”

Oppidan Investment Co. also became involved in the (continued on page 30)

Scott Johnson, a developer at Oppidan Investment Co., stands in front of the company’s Watford Plaza development in Watford City, N.D. PHOTO: OPPIDAN INVESTMENT CO.

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Bakken region about two years ago. It has made rapid progress since, completing apartment buildings in Watford City and Williston and welcoming its first tenants to a 120,000-square-foot commercial development in Watford City and a 180,000-square-foot commercial development in Minot. The company is also at various stages of development on large commercial projects in Tioga, Stanley and Dickinson and a residential development in New Town. All told, Oppidan estimates the company’s financial stake in the Bakken region to total more than $150 million.

“We’re going vertical,” he says. “This is not speculative development. We’re truly in the game to elevate the lifestyle to

assist the livability of these communities in whatever fashion they will allow and are requesting.”

While the Bakken region is not Oppidan Investment Co.’s main focus, Oppidan says he is passionate about developing that region because he hails from a small Minnesota Iron Range town and understands the mining economy. “I just like making projects happen in these smaller communities,” he says. “We just need to educate people that this oil thing is going to go for a long time and give them the opportunity to see it first-hand.” PB

Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

Conference to Focus on $1 Billion Bakken Market

In late September, developers, investors, builders and service providers will come together in Bismarck, N.D., to attend the Bakken Construction Summit. The two-day conference, hosted by Williston, N.D.-based Dawa Solutions Group, will be held Sept. 25-26 at the Bismarck Civic Center in Bismarck, N.D., with the goal of providing attendees the opportunity to explore construction and development opportunities throughout the Williston Basin’s $1 billion market. Kathy Neset of Neset Consulting will deliver a keynote presentation on the current industry conditions in the Bakken region and the future direction of energy production in the area. Nancy Hodur and Dean Bangsund, researchers at North Dakota State University, will present a review of economic studies conducted on employment, housing and population projections throughout the Williston Basin. Additionally, city officials from Bakken communities will present their latest plans for development. Breakout sessions will cover a variety of topics, including the hotel market, finance, housing and workforce retention.

For registration and detailed agenda information, visit BakkenConstructionSummit.com.

Rising Up to Meet Demand

Large developments throughout the region illustrate overall growth

BY KRIS BEVILL

It is no secret that the Bakken region of North Dakota is a hotbed of real estate development activity. But communities throughout the Dakotas and western Minnesota are experiencing their own building booms, thanks to a variety of reasons including prosperous agriculture economies and growing populations. Included below is an overview of some of the most interesting projects taking place in the area.

Sioux Falls

According to Ron Bell, chief building official for the city of Sioux Falls, S.D., building permits issued from January through July this year totaled 4,516 —

Construction workers are a common sight along Veterans Boulevard in West Fargo, N.D., as new businesses are built to support the growing community.

PHOTO: KRIS BEVILL, PRAIRIE BUSINESS MAGAZINE

the fourth busiest year in the city’s history in terms of permit numbers. The city experienced an “incredible surge in building activity” in the early part of the year but began to slow down in June, which Bell says is understandable given the high rate of activity early in the year. Nearly 90 percent of the building permits issued so far this year has been for residential projects, which is typical for the city.

After putting the project on hold for several years, Universal Properties LLC recently began work on an 80-acre residential and business development in northwest Sioux Falls dubbed University Hills Village. The company had hoped to begin construction in 2009, but tabled it due to the global recession. “We took it off the table with the slowing of the economy,” says Danielle Merrow, broker and owner of Dynamic Real Estate LLC. “For the past year, we’ve been ramping up momentum on the project. There’s a huge influx

of interest in the northwest. We’re really excited to be part of the growth of the area.”

The first apartment building is scheduled to be complete next summer and will include 122 units. The entire project could include up to 10 apartment buildings, housing 1,500 people, when complete sometime within the next decade, according to the company. Singlefamily and multi-family homes are also planned as well as restaurants, shops and office spaces.

The city of Sioux Falls is also undertaking a massive development project and is nearing structural completion of the Denny Sanford PREMIER Center, also known as the Sioux Falls Events Center. When complete, the $117 million project will provide a state-of-the art facility for sporting events, concerts, conventions and other large gatherings. The center will be built to accommodate

The $117 million Sioux Falls Events Center is scheduled to be complete next fall.

PHOTO: KOCH HAZARD

12,000 people and will add 64,000 square feet to the existing facilities. The center is expected to be complete next fall.

Bemidji Area

Dave Hengel, executive director of Greater Bemidji, the economic development agency for the Bemidji, Minn., area, says the city of Bemidji is experiencing a major surge in development activity along the city’s south shore near the Sanford Events Center. More than $50 million will be invested in new developments in that area over the next 12 months and will include two hotels, a restaurant and a 40-unit townhome community, according to Hengel.

North of Bemidji, work is nearing completion on a $1.8 million clinic in Bagley, Minn., the result of a collaborative effort among Sanford Health, Greater Bemidji, the city of Bagley, TEAM Industries, the Headwaters Regional Development Commission, First National Bank Bemidji, Deerwood Bank, Riverwood Bank and Security Bank USA. Greater Bemidji will own the building and lease it to Sanford Health. TEAM Industries, an engineering and manufacturing firm with approximately 280 employees at its Bagley headquarters, donated $200,000 toward the land purchase and construction costs. The city provided tax-increment financing and loans while Headwaters Regional Development Commission and participating banks assisted with the project’s financing.

Hengel says Greater Bemidji was willing to step in as owner of the new clinic building, which will be three times larger than the current clinic, because the clinic will contribute to the agency’s goal of recruiting new businesses and talent to the region by providing qual-

ity healthcare and therefore also improving quality of life. “We are a fairly aggressive region, interested in driving development and creating prosperity for our region,” he says. “If that entails constructing a building to support development, we will find a way. We are open to using non-traditional means to support development and ensure we are a very business-friendly region.”

The new clinic is expected to open by winter.

Grand Forks

A number of new developments are being added in Grand Forks, N.D., particularly along what has been dubbed the 42nd Street corridor, which runs parallel to Interstate 29 and provides access to the Alerus Center, the University of North Dakota and Altru Health System. Recent development projects include a 600bed student housing facility and multiple hotels near the Alerus Center.

ICON Architectural Group has been very active in developing the corridor, serving as owner/developer of two large projects and championing a larger effort to transform the area into a destination center for students, visitors and local residents. The company recently completed the 42nd Street Square, a 15,000-square-foot, $3 million retail strip center, which will soon welcome its first tenant. The firm is also responsible for the 42nd Street Commons, a $2 million, mixed-use project which will include underground parking, commercial space and three floors of high-end apartments. The Commons is the third building on ICON’s corporate campus. ICON and engineering firm AE2S are both headquartered in the

The Sanford Bagley Clinic is scheduled to be complete this winter and will be approximately 10,800 square feet, three times larger than the current clinic. IMAGE: MJ ARCHITECTURAL STUDIOS INC./SANFORD HEALTH

Professional Services Building on the campus.

Mike Kuntz, a principal at ICON, says the overall vision for the corridor is to create a space that includes public art installations, an outdoor concert venue, a destination space that could be used for events such as markets and festivals, and low-density, mixed-use retail and housing developments. ICON and other proponents of the project are working with the city to plan those elements ahead of development in order to avoid doubling back afterward to design art features and parks. Kuntz has been instrumental in designing the initial plan for the corridor and says he was inspired by Omaha, Neb., which he says has been successful in spreading art throughout the city, resulting in a distinct feel that sets it apart from other Midwest cities. Grand Forks residents have called for more art and entertainment options to be added to the city and the plan for the corridor appears to be well-received to date, however it will likely be some time before the vision becomes a reality.

Building permit valuations were approaching last year’s total by the end of July this year, according to city officials. In 2012, the city issued 1,506 permits for a total value of about $127.7 million. Between January and July this year, the city issued 903 permits, valued at nearly $126 million. City planner Brad Gengler says the multi-family residential market is the busiest it’s been in over a decade. Among the developers active in that sector is Enclave Development, which recently broke ground on a $18.8 million, 141-unit master planned rental community known as Cottage Grove Apartments and Townhomes. A grand opening for the apartment phase of the project is expected in February. Enclave Development is also developing a 192-unit retirement community, dubbed Silver Waters, which is scheduled to open

next July. The total project cost is $25 million, according to firm cofounder Austin Morris.

Fargo Metro

Development activity of all types is outpacing previous years throughout the Fargo metro area. From January through July, Fargo issued 1,457 building permits with a combined value of more than $204 million, approximately $46 million above last year’s permit valuations for the same time period. “We’re on a real busy pace,” says Jim Gilmour, city planner.

Demand for all types of housing in the Fargo area has been strong throughout the year this year, resulting in a fast-paced housing development market. The city of Fargo issued more single-family, twin home and apartment unit permits during the first half of this year than the same time frame last year, and Gilmour says that trend will continue as developers hurry to meet continued demand. A quarterly report on apartment vacancies for the Fargo metro area during June, typically the slowest time of the year for apartment rentals, showed an overall vacancy factor of just 2.56 percent for 23,000 units. Lack of available units is being reflected in rental prices, which are increasing and will continue to go up until sufficient supply is introduced to the market, according to the report. Gilmour says there are currently more than 30,000 apartment units in Fargo and if demand continues at its current rate it could take two years of fast-paced development in order to bring the overall vacancy rate up to the acceptable 4 percent.

A number of new hotels and commercial spaces are also being developed throughout the metro area. In June, KAJ Hospitality broke

ICON Architectural Group is active in developing the 42nd Street corridor in Grand Forks, N.D., and is developer/owner of the 42nd Street Square. IMAGE: ICON ARCHITECTURAL GROUP

ground on a 103-room Cambria Suites and a 15,000-square-foot conference center in West Fargo. The Cambria Suites West Fargo is expected to cost more than $17 million and will create 75 jobs at the hotel and convention center when complete next spring. The project is located along the 9th Street and Veterans Boulevard corridor, which is being rapidly developed. Nine of the top 20 permits in valuation issued by the city in 2012 were located along that corridor.

In Fargo, any remaining undeveloped lots along 45th Street near West Acres Mall are prime real estate. Several projects are planned for the area, including a $13 million, 60,000-square-foot retail strip mall dubbed Prairie Stone Center. The center is owned and developed by a new partnership between Rick Berg and Ace Brandt, two well-known names in real estate. Goldmark Schlossman Commercial Real Estate Services Inc. is the project’s broker. As of mid-August, a groundbreaking for the center was scheduled for early September, with an anticipated completion date of next spring. Jim Buus, vice president of Goldmark Schlossman, says the center is being developed with an eye toward quick-serve restaurants, high-end retailers and service providers and women-centric health and wellness businesses. He expects the project will draw in national chains that are new to the area and higher-end businesses. “Due to the higher than average rent structure and the high-impact location we expect it to be upscale-types of retailers and service businesses,” he says. A number of potential tenants had signed letters of intent by mid-August and Buus expected to begin completing lease agreements in the near future.

Bismarck

The city of Bismarck actually issued fewer permits in the first half of 2013 as compared to last year, but the valuation of permits issued is

well above last year’s. Nearly $232 million in permits were issued through July this year compared to about $156 million during the same time frame last year, according to the city. A wet spring is to blame for any slowdown in permits issued, according to city engineer Mel Bullinger, who says development activity is quite brisk, primarily on the north side of the city. A new elementary school and high school are planned for that area of the city and a number of large residential projects are expected to be developed near the schools, he says. Additionally, engineering firm KLJ is locating its new headquarters, an 80,000square-foot facility, on the north side of Bismarck.

Brian Ritter, acting executive director of the Bismarck-Mandan Development Association, says that overall development activity has definitely increased over the past year. “We’re fortunate in that we have a dynamic, diverse economy that features strong government, medical and energy sectors while also benefitting from activity in the Bakken and agriculture,” he says. Included on the list of large projects is a redevelopment project downtown which will convert a city block into a three-story mixed use space for restaurants, offices and residential condominiums. Ritter says the project, called Broadway Centre, is believed to be the first of its kind in Bismarck. A new Walmart Supercenter in Mandan has spurred additional developments in the surrounding area, including a new hotel, office spaces and eateries, he says. A number of public projects are also underway, including a $13 million parking ramp in downtown Bismarck, a $27 million expansion to the Bismarck Civic Center, and a more than $40 million expansion at the North Dakota Heritage Center. “Needless to say, we’re very excited about Bismarck-Mandan’s future,” Ritter says.” PB

Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

Prairie Stone Center, a 60,000-square-foot retail center located along 45th Street in Fargo, is expected to be complete next spring. IMAGE: GOLDMARK SCHLOSSMAN COMMERCIAL REAL ESTATE SERVICES INC.

Good Life, Magic City!

Minot, North Dakota is booming with business from the oil industry and more. But there’s more to life than business, so we’re building a great quality of life at the same time. Minot is home to a dynamic downtown, beautiful parks, new schools, stores, apartments, family neighborhoods and soon, a new airport. We’re booming with the good life!

Re-imagining the Magic City

Minot continues to rebound and reshape itself

BY KRIS BEVILL

Minot, N.D., has experienced a population boom over the past few years in relation to oil production in the nearby Bakken region. Main thoroughfares including Broadway, shown here, now bustle with traffic 24 hours a day.

PHOTO: ROBERT LINDEE

In June 2011, more than 11,000 residents were forced to evacuate Minot, N.D., as the Mouse River rose to a historic level and threatened to destroy the city causing more than $100 million in damages to the city’s infrastructure. At about the same time, the oil boom in the nearby Bakken region kicked into high gear and Minot began experiencing a surge of interest from businesses and workers wanting to make Minot their home base. As clean-up commenced and residents returned to their homes, the Magic City faced the interesting challenge of recovering from a historic flood while simultaneously accommodating historic new population growth. It’s difficult to pinpoint the exact current number of residents, given the continued rapid growth rate, but best estimates place Minot’s current population somewhere between 45,000 and 48,000 people, compared to the U.S. Census count of 40,888 in 2010.

Indeed, the oil boom in western North Dakota has had an obvi-

ous impact on the community and continues to be a major driver in the city’s growth. The Great Plains Energy Park has been fully leased by various oil service companies since opening in 2010 and has generated more than $300 million in capital investment from a $3.5 million infrastructure investment. Halliburton Co. is the largest tenant of the park and has enabled the city to expand its infrastructure in that area to further support the city’s growth, according to Jerry Chavez, president of the Minot Area Development Corp. In fact, he says the park has been so successful that a second energy park is being developed to provide even more space for oil-related service companies seeking work space in the area.

The community is also investing in making the most of its proximity to rail by developing the Port of North Dakota. Billed as the largest development between Seattle and Chicago in BNSF Railway territory, the port provides easy transloading for oil and agriculture businesses and is expected to become a significant draw to the city’s industrial corridor. In late July, Chavez says five businesses had so far agreed to locate at the port. Among them is United Pulse Trading Inc., which recently completed a $30 million food processing plant capable of processing more than 75,000 metric tons of locally grown pulse crops such as lentils, chickpeas and dry beans each year. The plant will employ approximately 45 people.

The United Pulse plant serves as an example of Minot’s continued focus on agriculture, which remains the state’s top industry. And while oil is expected to also remain a major part of Minot’s economy for many years, the MADC has identified manufacturing as another industry with great potential for growth in the city and is actively recruiting new businesses such as Missouri-based pipe manufacturer United Poly Systems, which received initial approval from the city’s MAGIC Fund Screening Committee in late July for a $400,000 grant to build a facility at the port.

Steady Sources

While Minot is happily welcoming new businesses to the city, previously existing economic drivers continue to play a vital role as well. The Minot Air Force Base, with approximately 6,700 full-time employees, accounts for up to 29 percent of the area’s economy, according to John MacMartin, president of the Minot Area Chamber of Commerce. He points out that dependents living on the air base often fill lower-paying jobs that don’t provide enough

income for an individual with rent or mortgage to pay. “With our unemployment rate as low as it is [about 2 percent], any base dependent who wants a job has one,” he says. “If the base was to suddenly close and those dependents were no longer in the area, it would be devastating.”

Minot State University will celebrate its centennial this month. The university contributed $183.6 million to Minot’s economy in fiscal year 2011, according to a North Dakota University System economic impact report. Student spending generated another $67 million in economic activity. In the fall of 2010, approximately 3,000 full-time students were enrolled at the university. Business activity resulting from MSU’s expenditures was capable of supporting 497 secondary jobs in 2011 in addition to the 632 positions at the university, according to the report.

Trinity Health continues to be the city’s largest private sector employer, with about 2,500 full-time employees as of the first quarter of 2013.

Imagining a New Downtown

Minot is also rebuilding its downtown to be better than ever. Millions of local, state and federal dollars have been earmarked for the “Imagine Minot” downtown redevelopment effort, including $18 million recently awarded from the U.S. Economic Development Administration disaster recovery fund for infrastructure repairs and expansions to support the redevelopment. The total redevelopment plan is expected to cost $140 million and includes plans for housing as well as business and entertainment spaces. One of the most unique projects planned for the area is Artspace, which will provide space for arts and cultural activities on the ground floor and affordable housing for artists and their families on upper levels. The project recently received a nearly $98,000 grant from the U.S. Department of Agriculture to provide assistance to Native American artists and entrepreneurs and will provide space to the Turtle Mountain Tribal Arts Association for training, workshops and gallery space.

Residential Development

Like other oil patch communities, Minot has struggled to keep up with demand for all types of housing for its residents, but city leaders say progress is being made. The city has launched an entry-level home initiative and is challenging developers to build 2,000 homes in the $150,000 price range. Many new apartment complexes are also in the works. In May 2012, the city issued just six

(continued on page 42)

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apartment unit building permits. This May, 150 apartment unit permits were issued.

Single-family home construction was down this May compared to the previous year, but MacMartin says flooded homes that have been renovated are entering back into the market and new homes that were previously selling at inflated prices are beginning to come down in price, reflecting a housing market that is returning to normal as availability catches up with demand. Likewise, he says rent prices for apartments are decreasing somewhat as more units are built. “The apartments haven’t fallen enough yet in price point, but as hundreds of apartments come onto the market, that should help,” he says.

MacMartin says Minot is dedicated to maintaining quality of life for its residents and wants to attract families to the city. It has also made an effort to control its growth in a way that maximizes available infrastructure without putting too much pressure on existing residents. “Minot isn’t growing just for growth’s sake,” he says. “I think we’re taking a careful approach to what we’re doing.” PB

Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

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SOURCE: MINOT AREA DEVELOPMENT CORP.

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2012.

Mike did.

“Your online magazine is stellar.”

- Mike Hammerberg, retired Cooperstown, N.D., educator.

Instructor Greg Blanchfield teaches CDL students the basics of driving truck as part of a training course offered at the campus of Lake Region State College in Devils Lake, N.D. PHOTO: ERIN WOOD, LAKE REGION STATE COLLEGE

Demand drives new trucker training course

Training program teaches new recruits truck driver basics

BY KRIS BEVILL

Aprogram recently developed and implemented by Cankdeska Cikana Community College, a tribal college located on the Spirit Lake Reservation near Devils Lake, N.D., and TrainND Northeast, located at Lake Region State College in Devils Lake, is training a new pool of recruits to fill the need for commercial driver’s license (CDL) drivers throughout the region. The program is unique in that it is designed for students with no prior experience driving big rigs. While other programs require trainees to have a standard set of skills, this program allows the extra time needed to bring students up to speed and provide them with the knowledge they need to continue on the road toward obtaining their CDL license.

“We have students who have never driven a manual transmission, and never backed up even a small trailer, but they are looking for a career and we are willing to take the extra time to train them,” says Greg Blanchfield, CDL trainer.

Edie Armey, director of TrainND Northeast, says TrainND’s short-course for drivers was developed with the agricultural industry in mind and requires attendees to have a CDL permit before taking the course. The longer version now offered at LRSC includes a week of training to prepare students to take their permit test, complete with hands-on training using semis owned by Blanchfield and leased by TrainND. The program was made possible through a combination of Job Service of North Dakota funding, geared toward providing training for veterans and Native Americans in fields such as welding and truck driving, and a grant obtained by CCCC. The cost to attend the

course is about $5,500, compared to $1,000 for the 45-hour short course. Two training sessions have been held so far, with a total of 20 students. Of those, seven participants have received their CDLs and are currently employed, according to Evelyn McDonald, director of workforce training at CCCC.

Armey foresees continued demand for CDL training in the eastern part of the state due partially to industry growth, but also because companies are losing workers to higher paying opportunities in western North Dakota. And job opportunities there, and throughout the region, are expected to continue to increase as well. Job Service projects an 18.4 percent increase in the transportation and material moving job category by 2014. Armey says TrainND is planning an industry forum in Grand Forks, N.D., on Oct. 9 to gauge interest in raising funds to continue providing CDL training as needed. The state has provided a $1 million grant to TrainND to use as deemed necessary and could be utilized for CDL training, but the grant is a dollar-for-dollar match program so industry members will need to step in to provide some of the training money, she says.

South Dakota is facing similar CDL driver shortages, according to Dawn Dovre, director public affairs at the South Dakota Department of Labor and Regulation (DLR). “The DLR has identified truck drivers as one of our high-demand, high-wage occupational groups,” she says. “We realize the opportunities available for truck drivers and are working to supply a workforce for those job openings.”

South Dakota provides financial assistance for CDL students and has purchased equipment for training providers in the past, according to Dovre. All four of the state’s technical institutes offer CDL training as do several other training centers. The state has also received a Community Development Block Grant to further support truck driving training. PB

Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

Back from the brink

Fergus Falls approves redevelopment plan for historic Kirkbride complex

BY KRIS BEVILL

Ray Willey was flipping through a National Trust for Historic Preservation magazine one day about a year ago when his attention was immediately captured by a photo of a “beautiful, structure — like a Lichtenstein castle." The photo was included in a section that listed historic buildings in danger of being demolished. “I thought, ‘There’s got to be a way to do something,’” he says. “I couldn’t believe that this could be a candidate for being torn down.”

experience redeveloping historic properties around the country. Spurred by Willey’s desire to save the Kirkbride, the company evaluated the property and determined that not only was the Kirkbride structurally sound, it had potential for rental income and offered favorable financial incentives. The firm submitted a redevelopment proposal, and received unanimous approval from the city council earlier this year.

The century-old Kirkbride building in Fergus Falls, Minn., is listed on the Federal Register of Historic Places and is one of only a few remaining examples of a building design popular in the late 19th century for mental health treatment facilities.

The building in the photo was the historic Kirkbride building in Fergus Falls, Minn. Built in the late 1800s, the massive complex — sprawling across more than 600,000 square feet — has been listed on the Federal Register of Historic Places since 1986. Originally one of three state insane asylums, it had been used most recently as a mental health treatment facility, operating as the Fergus Falls Regional Treatment Center until the state closed the facility and sold the property to the city in 2007. The city had since been trying to attract developers to the property, offering incentives including a state redevelopment grant that could help ease the financial burden of redeveloping the historic property, but no takers had been found and the city was facing a looming grant deadline and no other options besides demolishing the complex.

But, as fate would have it, Willey is CEO of Georgiabased Historic Properties Inc., a company with 30 years of

The estimated $41.4 million project, designed by Fargo-based Mutchler Bartram Architects, is slated to include a 60-unit apartment complex, a 120-room boutique hotel complete with conference and lounge space as well as indoor/outdoor pool and spa amenities, a health club for hotel guests and tenants, an 83,000-square-foot eatery section and office space for property managers and employees. It is the largest project ever undertaken by Historic Properties and is its first Minnesota property. The company formed a stand-alone subsidiary, Historic Kirkbride LLC, to carry out the project and has brought in Charles Noh, co-chairman of California-based hotel management firm Bernard Hotels International, as a principal partner for the hotel portion of the project, which accounts for about half of the complex’s square footage.

The optimistic timeline for completion has city work beginning this fall, followed by renovations beginning next July and a grand opening occurring by Christmas 2015,

PHOTO: CITY OF FERGUS FALLS

but Willey anticipates that the complex financial aspects and sheer size of the Kirkbride will demand a lengthier timeline. The company plans to package together a number of financial mechanisms to fully fund the project, including an EB5 Regional Investment Center loan for up to $23.5 million, several federal and state historic tax credit programs and federal housing and urban development (HUD) funding.

Fergus Falls Mayor Hal Leland says the city council is “absolutely delighted” that the Kirkbride restoration project is finally happening and the city will do “everything humanly possible” to help restore the complex’s position as an economic engine for the community. “We’ll have to provide the infrastructure that is needed and the efforts to preserve the structure and help secure the kind of financing [Historic Kirkbride] needs in order to move this project forward,” he says. “I think we’re prepared very much to stand behind that and make this successful.” PB

Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

Monday, Sept. 23 – Switchfoot Concert

Tuesday, Sept. 24 Friday, Sept. 27 – Soccer vs. Winona; Alumni and Friends Reunion Saturday, Sept. 28 – Parade, Tailgating & Football, plus a special Centennial Celebration photo

Marketing on the move

Mobile marketing strategies grow in importance as handheld device use increases

BY KRIS BEVILL

Earlier this year, Gartner Inc., one of the world’s leading information technology research and advisory companies, released data that forecasts a nearly 8 percent decline in the worldwide traditional computer market this year as consumers increasingly shift their daily usage habits to handheld devices. The firm expects that trend will continue in coming years and predicts a steady decline of desktop and notebook computer sales through 2017 as tablet and mobile phone sales continually increase.

For business owners, understanding the consumer's shift from computer to mobile device use can be critical to developing the appropriate website and marketing campaign. If more consumers are using mobile devices to search the Internet for information, businesses need to ensure their websites are designed to function on those devices. There are a number of options available, ranging from simply designing the site to be mobile friendly to responsive design, which enables the website to automatically resize for the device used to access the site.

Brian Meckler, marketing adviser at Absolute Marketing Group in Fargo, N.D., says businesses in the Midwest are a little behind the coasts in terms of optimizing websites for mobile users, however an increasing number of his firm’s clients are keeping mobile capabilities and social media in mind when going through the website design process. Cost remains a barrier for some business owners considering mobile optimization options, but Meckler says that while those designs, particularly responsive design, may be slightly more expensive than other options, the added cost is often not as much as customers anticipate.

Absolute Marketing has been assisting Fargo-based JL Beers in imple-

menting a mobile-ready, social media-based marketing plan for the past four years. Lance Thorson, partner and director of development at JL Beers, says the bar/restaurant embraced that type of marketing strategy in part because its initial location, a 24-seat facility in downtown Fargo, was too small to warrant a mass media marketing campaign. The business has since expanded to include multiple locations in North Dakota, South Dakota and Minnesota but it continues to employ a mobile-heavy marketing strategy. The business touts a text club program, which allows the business to communicate directly with its customers, and recently introduced a smartphone app, developed by Absolute Marketing, that features up-to-date beer menus and the ability for customers to take notes and provide feedback to the business.

The company’s mobile marketing strategy will also make it easier to spread the word about new location openings as JL Beers moves forward with a recently announced franchise plan, according to Thorson. Customers in new markets who have patronized an existing JL Beers location and have stayed in touch through social media will be easy to inform about new store openings.

Thorson says the company has invested “a good amount” of money to develop the specialized app and mobile marketing strategy, but he believes it has already proven to be worth the cost. “You see people using the app, you see people talking about it … I think it’s been a great method for us,” he says. “Everyone has an iPhone or an Android now and they’re the searching the Internet that way for instant information. If you’re able to provide that, you’re steps ahead.” PB

Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com

Fargo-based JL Beers targets handheld device users through a marketing campaign that includes a text club and a specially designed app for smartphones. PHOTO: JL BEERS

ND doubles energy production in 5 years

Diversified energy strategy contributes to growth throughout all industry sectors

BY KRIS BEVILL

In 2007, North Dakota established the EmPower Commission to develop a comprehensive energy policy for the state’s diverse and growing energy industry. Sixteen representatives from all of the state’s energy industries were elected to the commission and asked to work collectively to develop the state’s diverse energy resources in order to meet the energy needs of North Dakota and the nation without government mandates. The commission set a goal to double the state’s total energy production by 2025. This summer, the commission announced the state has met that goal — 13 years ahead of schedule.

“Our group set a goal to double North Dakota’s energy production from all sources by 2025 in an environmentally friendly way to drive economic growth and help the nation achieve greater energy independence,” says Al Anderson, commissioner of the North Dakota commerce department and EmPower Commission chairman. “That goal is now met, 13 years early, with an overall increase of 154 percent. This is a significant accomplishment for the state of North Dakota.”

Considering the accelerated ramping up of oil and gas production in North Dakota since 2007, it comes as no surprise that the state would surpass any energy production goal set pre-boom in record time, but it should be noted that the state’s renewable energy producers also experienced significant growth over the past five years, due at least partially to the EmPower Commission’s support for renewable energy production incentives and strong energy policies across all sectors for the overall industry growth. According to data gathered from the U.S. Energy Information Administration, renewable energy production in North Dakota, including wind, ethanol, biodiesel and biomass sources, has increased by 225 percent since 2007. Marketed natural gas is up 125 percent while oil production has increased by a whopping 386 percent

Data gathered from the U.S. Energy Information Association shows that overall energy production has more than doubled since the formation of the North Dakota EmPower Commission in 2007. SOURCE: NORTH DAKOTA DEPARTMENT OF COMMERCE, U.S. ENERGY INFORMATION ASSOCIATION

Increased oil and gas production contributes heavily to North Dakota’s energy production growth rate, but the state’s renewable energy industries have also grown significantly since 2007. SOURCE: NORTH DAKOTA DEPARTMENT OF COMMERCE, U.S. ENERGY INFORMATION ASSOCIATION

since 2007. The commission noted in a news release that the state’s lignite industry also continues to play a vital role in the state’s energy mix, accounting for a $3 billion economic impact.

It is unclear whether the commission will establish a new energy production goal. It is currently focusing on identifying value-added marketing opportunities for energy-related products, concentrating on ethanol and natural gas liquids, and is backing a study to evaluate those options. Results of the study are expected to become available next spring.

Mike Fladeland, manager of business development at the North Dakota Department of Commerce, says the state’s growing energy sector and interest in value-added options translates into the potential for a number of new business opportunities throughout the state. “The oil and gas business and other energy resources are going to be around for a long time, but we want to get past the point where we’re depending primarily on those raw resources and sending them down the pipeline elsewhere for value to be added,” he says. “We want to add that value here.” PB

701-306-8561,

Prairie Business

kbevill@prairiebizmag.com

Kris Bevill Editor,

"Our group set a goal to double North Dakota's energy production from all sources by 2025 in an environmentally friendly way to drive economic growth and help the nation achieve greater energy independence. That goal is now met, 13 years early, with an overall increase of 154 percent."

- Al Anderson North Dakota commerce department commissioner, Empower Commission chairman

Multi-million dollar rail terminal planned for ND

Stark County officials consider impacts of facility

BY BRYAN HORWATH

If two Washington developers have their way, Belfield, N.D., could be home to a multimillion dollar rail terminal site.

Stu Stiles and Jim Hereford of Belfield Railroad Enterprises fielded questions from about a dozen attendees at a public informational meeting Aug. 14 at Memorial Hall, where a number of concerns were raised about the proposed facility.

Plans for a 440-acre site — three miles east of Belfield — to be rezoned from agricultural use to industrial use were slated to go before the Stark County Zoning Board on Aug. 29. Stating the project would be expected to cost “north of $40 million,” Hereford said the complex could eventually provide up to 200 jobs.

Most of the concerns raised at the meeting centered around increased truck traffic in the area — especially on Highway 10 — that would materialize as a result of the facility, which would be largely for importing and storing frac sand and other construction and oil field-related supplies.

“I’m very concerned about the added truck traffic that this would bring,” said Curt Buckman of Belfield. “I have a daughter who’s going to be 16 and is just starting to drive. It’s dangerous enough on the roads in this area, but old (Highway) 10 was one of the last safe roads around. Most of the traffic there is local people.”

Touting the economic impact the facility

would have on the Belfield area, Stiles said the terminal site would bring good-paying jobs, largely as the result of a frac sand manufacturing plant that would be on-site.

“We describe it as a multi-use rail facility,” Stiles said. “There’s a company called Epropp that has an option with us to purchase 51 acres on the property. They’re a company that has a patented process to manufacture a ceramic proppant product. It’s an interesting endeavor. He will tell you that he believes a manufacturing plant could employ 105 people and we believe that these will be head-of-household jobs — permanent employment for people.”

Stiles said the facility would be different from outfits like the Bakken Oil Express, which is west of Dickinson, because it would mainly import product.

South Heart Mayor Floyd Hurt expressed his concern about the possibility of increased truck traffic — something Hereford acknowledged would become reality — while Peggy O’Brien raised several concerns, including the aesthetic nature of the facility and its proximity to Theodore Roosevelt National Park, which is about a 20-minute drive from Belfield. PB

Bryan Horwath Energy reporter, Forum Communications Co. bhorwath@thedickinsonpress.com

A 440-acre rail terminal project proposed near Belfield, N.D., could create up to 200 jobs according to the project's developers.

Employment

Exchange

Rates Homes Built Home

Prices May-13 May-12 187 211 87.84 79.44 Average Rig CountPrice May-13 May-12 8,915 7,205 810,129 639,277 211 180 Producing Wells Average Daily Production Total Permits |BY THE NUMBERS| | SPONSORED BY | Jan2000 Jan2002 Jan2004 Jan2006 Jan2008 Jan2010 Jan2012 Jan2014 1.6 1.5 1.4 1.3 1.2 1.1 1 0.9 Canadian Dollars to One U.S. Dollar Jan2000 Jan2002 Jan2004 Jan2006 Jan2008 Jan2010 Jan2012 Jan2014 7 6 5 4 3 2 1 0 Percent E ective federal funds rate 10-year treasury constant maturity rate 2000 2002 2004 2006 2008 2010 2012 1500 1000 500 0 Number of units per 1000,000 population MN ND SD Jan2000 Jan2002 Jan2004 Jan2006 Jan2008 Jan2010 Jan2012 Jan2014 15 10 5 0 -5 -10 Percent change from one year ago US MN ND SD

North Dakota Department of Economics. Reach him at david.flynn@business.und.edu.