WATFORD CITY, ND—Thousands of oil and gas workers recently poured into this arid region in western North Dakota and quickly overwhelmed the housing stock of its small towns and cities. And MondayOne, a California-based developer, just became the latest firm to scout the area and see an opportunity. They will begin constructing the 105-unit Pheasant Ridge town home community here in late summer with the first move-ins expected by the end of the year. But unlike many projects targeting the newly-arrived oil workers, these new homes will feature three-bedrooms, and MondayOne officials hope they will attract families and form the building blocks of a new community.
Geologists tout this region, known as the Bakken, as the next Saudi Arabia. The United States Geological Survey estimated on April 30 that the region had 7.4 billion barrels of oil recoverable through hydraulic fracturing of the underground shale formations, a 27-year supply at the current rate of production, and about double what the agency estimated in 2008. Four thousand wells have already been drilled and as the hydraulic fracturing, or “fracking,” technology improves, the amount of recoverable oil will increase even more.
“We've seen many oil workers considered temporary employees that would like to live in North Dakota and bring their families,” says Kenny Dewan, the founder and CEO of MondayOne. But the current crop of temporary housing, much of it consisting of so-called “man-camps,” seems undesirable for any oil worker thinking of a serious future. “They want a nice place where they can bring the wife and kids.” Initially, however, they may rent out much of the space to oil companies working the Bakken.
The development will take place in two phases with 45 town homes built this year and the remaining 60 completed in 2014.
But the booming region still has a shortage of local banks with the wherewithal and experience to finance significant construction, making new housing like Dewan's project scarce. Furthermore, “a lot of the conventional lenders are still not comfortable lending for projects in North Dakota,” says Dewan. A lender needs a certain level of comfort with a borrower's financial strength and have some understanding of a given project's location, he adds. But ironically, the region's thin population means few people have any experience building large housing developments or any other kind of substantial commercial real estate.
A lack of infrastructure also handicaps builders. “A lot of these [proposed] development sites don't have water and sewer connections in place,” Dewan says. A year ago, when company officials began scouting the region, “we knew we did not want to buy land that would take a year-and-a-half to build on.” The Pheasant Ridge site, by contrast, had the needed infrastructure in place. “We paid a little extra.”
MondayOne is currently negotiating with two lenders, one from Minnesota and another from California, for construction loans. Dewan does not want to disclose any names until they finalize the terms, but he says the company has a long-standing relationship with the California lender. “They feel very comfortable with who I am and what we've done over the years.” The California lender did its due diligence on the North Dakota location and seems satisfied. However, “our interest rate will be a little higher than we're accustomed to in California.”
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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.
