WATFORD CITY, ND—Geologists tout the arid Bakken region in western North Dakota as the world’s next Saudi Arabia, and thousands of oil workers have begun pouring into its small towns. And although many natural resource booms attract only transient housing, Ken Hartog, one of many real estate entrepreneurs that have relocated to the area, says these towns need permanent built-out communities with new multifamily housing, retail, storage, office space, medical buildings and every other type of real estate.
“We’re beyond the speculative stage,” he says, “and it’s just getting started.” 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.
“It’s like the Middle East, say in 1975,” Hartog adds. “People were worried that would go back to what it had been five years previously, but look at it now. This is the same thing.” Two years ago, after a real estate career primarily in Los Angeles, Hartog started Bakken Real Estate Partners in Williston, the largest town in the western basin. The firm just closed on the purchase of the Lincoln RV Park in Watford City, a small town just south of Williston. Hartog plans to include as many as 150 RV spots on the 26-acre site and “develop it out with retail at the front, a convenience store, restaurant and a strip mall with whatever the community needs. My plan is to make permanent structures that will be there forever.”
Although the 2010 Census tagged the population of Williston and Watford City as 14,716 and 1,744, respectively, BusinessInsider.com estimated that Williston may have ballooned up to nearly 30,000. “There is a shortage of everything; there is nothing that is not in short supply,” Hartog adds. Many of the workers pouring in make as much as $100,000 a year, but the housing shortage forces them to live in “mancamps,” transitory houses that look like military-style barracks.
But taking advantage of the boom is not easy. In addition to RV parks, Hartog has also developed homes, but “everything I’ve done I’ve done with my own money. I’d like to start raising some outside money to satisfy the demand you see out here.” However, debt financing is still difficult to arrange. The Bakken region only has two national banks, Wells Fargo and US Bank, and the economic collapse remains too raw a memory for financiers to take what they see as risks.
“It’s like the Internet in 1999,” Hartog says of the real estate market in western North Dakota. The entire region is set for transformational change, but those with capital to invest still need assurance the changes are not short-lived. “Everyday it’s getting better; everyday there are more permanent structures; everyday there are 100 new workers and this drilling is going to go on for at least twenty years and probably much more. This is not a transitory market.”