Becoming a Bakken Believer

Joe Ryan retraces his journey from skeptic to one of the region’s most active commercial real estate developers.
By Tim Portz | March 28, 2013

Q&A - Interview by Tim Portz

Joe Ryan, president of Oppidan Investments Co., first set foot in the Bakken oil and gas play in December 2011. At the time, he had no commercial dirt or development options under his control and no immediate plans to do so. But, what he observed quickly changed his mind. The region was struggling to accommodate the influx of workers. RVs cluttered parking lots. Lines of customers snaked outside restaurant doors, and developers, who should have been racing to catch up to housing, food and retail shopping demands, were curiously absent. Following Ryan’s first experience in the region, Oppidan Investment Co., made its move and now has nearly one dozen properties under development in seven different communities. The investments, approaching $150 million, will provide much needed retail and residential space to the region. With spring construction season looming, Ryan reflects on the all-of-a-sudden nature of Oppidan’s entry into the vibrant real estate market.

You mentioned initially being skeptical of the potential for you and Oppidan in the Bakken. Why?
I was concerned about the boom and bust cycle of the oil fields in North Dakota. Additionally, it is a new frontier and that is not our sweet spot to pioneer in a market. Also, as merchant developers, I was very convinced that we could build it. But, the question I was concerned with, was could we then sell it?

What did you see or experience that ultimately changed your mind?
I visited the Bakken in the early part of December 2011, and saw all of the activity and demand for services that just weren’t there yet. There were trucks everywhere; no food on grocery stores shelves, RVs parked in parking lots, restaurants with lines out the door including a one-hour wait at McDonald’s. City planners looked at us with their eyes glassed over as they were so overworked and underserved by guys like us. So, many people were saying they could deliver the goods, grocery stores, apartments, and general services, but not many were delivering on their plans. 

I was convinced there was a need and decided to study the resource. Was it sustainable?  I determined that it was and was convinced this was due to the fracking technology primarily, and secondarily, the resource was so vast and growing every day as they identify more shelves of oil and refine the technology to extract even more of it. I quickly became convinced that this was more than oil and economics, but national security and energy independence.  Even Obama could not stop it.

What role is Oppidan looking to play in the area?
We hope to assist in making the overall area more livable for families and help to generate stronger communities.  When I started Oppidan 22 years ago we developed a tag line, “Builder of Towns, Creator of Value,” and in this new venture in the Bakken we are truly executing our mission statement. Our hope is that through our development efforts the area becomes more inviting to sustainable living and therefore strengthens communities. 

Why is commercial real estate development vital as the region develops?
Without commercial development, these communities are not livable and sustainable long term.  This is a 100-plus year run. Sustainability is critical to its success. A transient economy will not work long-term for the area or the resource. These communities that serve the Bakken region need the services that commercial development delivers: food, housing, entertainment, shopping and more.
Oppidan is active in N.D. towns such as Watford City, Stanley, and Tioga. How are these towns able to keep up with the very real infrastructure demands being placed on them to support the explosive growth they are experiencing?
It has not been easy for these cities, but they possess strong financial and human assets. The state of North Dakota and the federal government realize the importance of this region and are assisting them along the way. Guys like Curt Moen in Watford City, Wade Elder in Tioga and Stanley are smart, hardworking guys that really make a difference and get things done right. 

After your first investments in the area, you received some counsel from folks familiar with the area to slow down. Very recently, you’ve heard just the opposite from those same folks.  Why were
professionals with very intimate knowledge of the area and the resource having such a hard time understanding the size of the opportunity for everyone involved?
It amazes me how little people know about how significant this find really is. As more people truly try to understand the potential of this oil-find and the technology around it they become believers. These are smart guys questioning its viability and after I tell them to study it they become believers.

Commercial real estate investments need long-term tenants to realize their profit potential. Clearly your investors are convinced this is a long-term play. What is the most convincing aspect of the region to build confidence in the investment community?
As I mentioned previously, this is more than a 100-year opportunity and once it is objectively and intellectually studied, the service providers, lenders and buyers buy into the long-term viability of the region. With oil production at almost a million barrels per day, and consumer spending up over 62.8 percent on average year-over-year for the past four years, confidence is being built in the investment community. At the same time, the resource is growing as the oil companies are identifying more oil reserves every day.

Can you talk briefly about the active projects you have in the area?
Oppidan is actively working on projects in Dickinson, Minot, Stanley, Tioga, Watford, Williston and New Town. Collectively, we have nearly a dozen different projects in various phases of development. Our projects are a mix of commercial real estate sites and residential apartment complexes. We have nearly 1.5 million square feet of commercial real estate under active development and five different apartment complexes with over 200 individual units. A few of these projects are already underway, but the majority of them kick off this spring.

Have you and your team found it difficult to find subcontractors, materials or skilled laborers for your projects?
We really have not had trouble finding trades and materials for our delivery. I do think this is somewhat overstated and therefore allows a greater spread for the contractors. Our model helps us to keep price and schedule in-line as we use our longstanding strategic partners to assist us in the delivery. As we continue to deliver in the Bakken for our clients, we are able to attract the best of show in terms of the required trades. I think the biggest issue for the trades is to identify how they are getting paid, not their ability to perform. There are many development companies that have big ideas but little to show and the trades get hurt in these situations.  

How important is the region and the opportunity there to the next decade of Oppidan’s growth?
From Oppidan’s perspective, the Bakken will have a positive impact on its future but only in part.  We are active in 26 states, so this opportunity in the Bakken gives us more diversity to our growth as we continue to expand around the country.