Sections

Weather Forecast

Close

Vote for the Globe Best of 2018 Nominations through Saturday, Sept. 22

Unnamed California investor buying up SD motels

FORT PIERRE, S.D.—A Fort Pierre motel is one of the newest of 17 motels and hotels across South Dakota that a California-based company called AG Dakota has acquired since the start of the year.

And there will be more.

David Hooper, AG Dakota senior operations director, said the company is under contract to purchase six more lodging establishments and in negotiations for at least 10 beyond that.

The 17 properties, besides Fort Pierre and already purchased, are in the towns of Whitewood, Rapid City, Martin, Kadoka, Murdo, Kennebec, Presho, Mitchell, Chamberlain, Canistota, Salem, Arlington, Clear Lake, Ipswich and Lemmon.

Dale Zomer, a broker with NAI Sioux Falls, is representing AG Dakota in the real estate transactions, Hooper said.

The "AG" in the company name, registered with the South Dakota Secretary of State in early January, is based on the initials of the principal investor, a man who likes his privacy, Hooper said. A news release from AG Dakota said it's "a family-owned company with Christian and American values at its core. We have been in the hospitality business since 1999."

The roughly two-decade track record includes two resorts in Palm Springs as well as dozens of apartment complexes and commercial buildings, Hooper said.

Asked about the phrase "Christian and American values," Hooper said they wanted everyone to feel welcome at their hotels, Christian and non-Christian alike, adding that the basic value it encompassed was the idea of "doing unto others as you'd have them do unto you."

The specific inclusion of "American," Hooper said, was meant to clarify that the investment was coming from American citizens — because there's been speculation that it was foreign money that was fueling the acquisition of so many South Dakota hotels.

Hooper pegged the sum already spent, including the purchase of the Fort Pierre property, at around $15 million. But he said significant renovations would be made to several of the properties, and the 10-year plan calls for around a $50 million investment.

Hooper described the goal of the company partly in terms of what it's not: "We're not trying to take over all the hotels and motels in a place and then spike prices; we're absolutely not trying to do that."

What AG Dakota is trying to do, Hooper said, is to invest in "towns, cultures and experiences."

He means that in two senses. First, there's money to be made in the hospitality industry in small towns in rural America, and South Dakota specifically. Secondly, he sees AG Dakota's business activity as helping to shore up one piece of the economy of small towns, which will help them survive.

Some of the towns where AG Dakota has bought properties are estimated by the U.S. Census Bureau to have shrunk since the last count in 2010. Murdo is estimated to have dropped from 488 to 461 residents in 2016. And Ipswich is estimated to have lost three residents since 2010, down to 951 in 2016.

Hooper pointed to Ipswich, where AG Dakota has bought the Hospitality Hotel, as an example of how a lodging establishment can be a crucial piece of a community's economy. He first described how a variety of circumstances had left the hotel with just the manager on staff. She's a woman who also manages a grocery store, and was struggling to keep things together.

When he looked at the sprinkling of guests who were staying at the Hospitality Hotel this time of year, his initial thought after the purchase was to close the place temporarily, to give the manager a breather, until a complete management team and staff could be put in place.

But he hadn't factored in the contractors for the local turkey barn construction company — who come in and stay 4-6 weeks at a time, Hooper said. So when concerns about economic impact were raised by Ipswich locals, Hooper reversed course and decided he needed to find a way to keep the place open during the transition.

An AG Dakota website is being developed where rooms for any of the companies properties can be booked. For now the properties show up under any of the online travel agencies, like Expedia.com.

AG Dakota has one hotel in North Dakota and one in Minnesota, Hooper said, but the rest are in South Dakota.

Why South Dakota? It was a question Hooper's wife asked, because the plan is for the Hoopers to move their three kids from southern California to just outside Rapid City. "Fly out here and after you've been here a week, ask yourself if you still have that question," he told her. She fell in love with the place, he said.

But liking a place is not the same as being able to run a successful lodging enterprise there. Hooper said another main reason is South Dakota is a business-friendly state.

It's not because of any business tax incentives — Hooper said AG Dakota is not using any. He said the lack of a state income tax matters some because it allows a little more of the money a company pays to a employee to wind up in the employee's pocket. He also said South Dakota has has a culture of tourism "built into it."

He also said in California the general business climate is one that's influenced by the eagerness of people to file lawsuits over trivial matters in an effort to win damages.

Mainly, Hooper said, in South Dakota, "You can run your business the way you want to run it."

Advertisement