BISMARCK, ND—Thousands of oil and natural gas workers have begun flowing into North Dakota to help exploit the vast underground shale formations through the technique of hydraulic fracturing. This oil and gas boom has created the need for every type of real estate imaginable and investment has also just begun flowing in.
A partnership between affiliates of New York-based Edge Principal Advisors, LLC, Radiant Partners and an undisclosed private investor, for example, just sold the 850,000-square-foot Kirkwood Mall in Bismarck to CBL & Associates Properties, Inc. First developed in 1971, the Kirkwood Mall remains the second largest mall in North Dakota. The sellers acknowledge a direct connection between their original investment in the property and its proximity to the new oil fields, also known as the Bakken Shale Formation.
"Edge recognized the growth potential of this market due to its proximity to the Bakken Shale Formation," says Jeff Walker, a principal at Edge. "The Kirkwood Mall represented an opportunity for us to benefit from that growth while simultaneously owning a high-quality asset."
In May, GlobeSt.com reported that the communities of western North Dakota needed new, permanent built-out communities with multifamily housing, retail, storage, office space and medical buildings. The United States Geological Survey estimated on April 30 that the region had 7.4 billion barrels of recoverable oil recoverable through hydraulic fracturing, or “fracking,” a 27-year supply at the current rate of production, and about double what the agency estimated in 2008.
Kirkwood Mall has a low vacancy rate and has enjoyed strong revenue growth in recent years. In 2012, the sales per-square-foot at the mall increased by over 15%. Tenants at Kirkwood Mall include Target Corp., J.C. Penney Company, Inc. and Chico's FAS Inc.
Evan Mallah, also a principal at Edge, notes "we see this as further evidence that institutional investors are migrating toward markets with significant exposure to natural resources. Edge continues to pursue investment opportunities in locations that should outperform as a result of increased oil and natural gas production."
Edge officials say the Kirkwood Mall was acquired by Edge through its first discretionary fund, Edge Principal Investments, L.P. Edge is currently deploying its second investment fund, Edge Principal Investments II, L.P., which has approximately $300 million of committed equity.
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
