Bank of N.D. bringing together smaller lenders for Bakken projects

MINOT, N.D. – Investors and developers interested in helping solve North Dakota’s housing shortage often run into a common problem: how to finance multi-million dollar projects.

Community banks in the state don’t have the ability to finance deals of that magnitude, national lenders don’t have a presence in western North Dakota and out-of-state banks are wary, said Jeff Zarling, organizer of the Bakken Investor Conference being held this week in Minot.

A new program through the Bank of North Dakota is combining resources of community banks to finance projects that none of the individual banks could do alone.

“We’re hoping that is one solution for opening up more commercial lending in western North Dakota,” said Zarling, president of DAWA Solutions Group, a business development firm based in Williston.

The program was one of the topics highlighted Thursday in the Bakken Investor Conference, which attracted more than 200 attendees from around the country and a few foreign countries.

Tom Redmann, commercial loan officer for the Bank of North Dakota, said the state-owned bank has now done two multi-bank loans, known as subparticipation loans. One loan was a small, pilot project and a larger loan involved several banks.

First International Bank, founded in Watford City, was the lead lender to finance the Renaissance Heights apartment development in Williston that’s being developed by Investors Real Estate Trust of Minot.

First International Bank then partnered with the Bank of North Dakota, which backed a significant chunk of the loan but also involved 12 smaller lenders, Redmann said. The total project cost is $63 million and the loan was for $42 million, he said.

One of the participants was Garrison State Bank, a small-town bank that never would have been able to get involved in a Bakken project without partnering with the Bank of North Dakota, said Garrison Senior Vice President Norman Thoreson.

Some banks from eastern North Dakota participated in the program, but Redmann pointed out that none of the banks from the eastern part of the state were represented at the conference.

“The eastern part of the state is fairly convinced that the western part of the state is just going to fall off the side of the planet,” Redmann said. “They’re not too sure that this oil play is for real.”

He added that eastern North Dakota banks are interested in the Bakken, but they need to get more comfortable with it.

National banks such as U.S. Bank and Wells Fargo are primarily staying on the sidelines when it comes to the Bakken, Redmann said.

The Bank of North Dakota has financed a lot of projects in oil country in the past two years, but is starting to worry about being too heavily concentrated in that area and may not be able to jump in as heavily, Redmann said.

Another presenter, Jon Nelson of Hegg Development Group, spoke about how to position major projects to get the attention of Wall Street. Hegg Development, based in Sioux Falls, S.D., expects to break ground on $100 million of development in the Bakken this year, with help from Wall Street financing, Nelson said.

“Wall Street is paying attention to the Bakken,” Nelson said.

The conference continues through today.

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