Williston, ND, March 15, 2013 --(PR.com
)-- North Dakota is shoveling out from its first major storm of the winter. Not that eight wimpy inches of new snow slows down anything here, however. There are still 30,000 oil wells to drill.
But while the usual frenzied “gett’er done” double time pace continues, western North Dakota now faces a more daunting challenge: building infrastructure that supports a new way of life and culture.
The discovery of the giant Bakken oil and gas field, which the United States Geological Survey describes as the “largest continuous oil accumulation ever assessed by the USGS,” bodes fundamental changes for western North Dakota. People are coming. Lots of people.
Just ask Don Nickell. He is president and chief operating officer of Nakota Development, LLC. The morning Nakota opened their two Value Place extended-stay hotels in Williston in September 2012, “we had people sitting in their cars in the parking lot, waiting for us to open the doors,” said Nickell.
Since then, their Value Place hotels have had an enviable percent occupancy rate (86 percent in October) charging $699 per week, triple the rate of most Value Place facilities nationwide.
Nickell is confident more customers are waiting. He’s in good company.
Lynn Helms, director of North Dakota’s Department of Mineral Resources, told an audience at the 2012 North Dakota Association of Oil and Gas Producing Counties that western North Dakota can expect about 250,000 additional people settling west of Highway 83 to help produce oil and natural gas.
It’s more than just about oil and gas, however. Housing is of particular concern. The demand is moving beyond man camps and regular hotels. Mike Anderson, director of the North Dakota Housing Finance Agency expects growth to continue in the state for the next 15 to 20 years.
The bar is rising fast. The November announcement that the investment firm Kohlberg Kravis Roberts & Co. (KKR) will build a series of housing developments in Williston signaled the entrance of serious capital into western North Dakota housing.
KKR describes the opportunity to invest in shale gas and oil as “historic,” and that “infrastructure growth is at the heart of this question.”
Appearing on CNBC’s investment program, “Squawk Box,” KKR’s managing director of global real estate, Ralph Rosenburg, said Williston is suffering from a “dramatic undersupply of permanent housing. So we're actually building a neighborhood, 810 multifamily units and 727 single family home lots, a neighborhood with parks and trees.”
Thus, while thousands of men are living in temporary man camps, a gaping supply hole remains for those seeking housing for two-to-four-month jobs, assignments typical for places like the Bakken. In addition to the thousands of energy company geologists, landmen, environmental technicians, and engineers, who will house the workers building the thousands of new homes and apartments?
Firms like Nakota Development are already two steps ahead in the game; they acquired the Value Place franchise territory rights for North Dakota, Montana, and Wyoming and promptly built two hotels and have a third under construction, a Value Place in Dickinson they expect to open June 2013. Secondly, Nakota has already purchased, or acquired options on, land for additional construction.
The master plan, according to Nakota CEO Art Cahoon, is to invest an estimated $200 million in the development of twenty new extended stay hotels over the next five years in the Bakken and other shale development areas under their asset holding company, U.S. Shale Lodging Corp. Their willingness to invest their own money and complete their first two hotels on schedule bought Nakota a rare commodity: street cred.
Why would he take on this job?
“There’s an excitement here, an energy that you don’t find in many places. There are huge rewards here, too, among the highest in the country,” he said.
Despite the significant construction and operating challenges in the Bakken, including the scarcity of materials and high labor costs, Nakota has established itself as the gold standard developer and operator in the Bakken. “Current investors, which include all Nakota’s senior management team, are enjoying huge returns on their investment,” said Cahoon.
While Cahoon declined to give specifics, he confirmed that he expects upcoming Nakota and U.S. Shale Lodging Corp Value Place hotels to command superior rates, often two to three times the national average, and enjoy high occupancy levels. Their low employee count, labor model controls, and operating expenses, he said, assures Nakota of being the low cost provider of new, affordable lodging in each market they enter. Based on current economics, industry insiders estimate that U.S. Shale Lodging Corp could, at the end of its 4-5 year investment cycle, achieve operating profits of $40 - $50 million.