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Locations marked with orange squares are motels and hotels purchased since the start of the year by AG Dakota, an entity formed in early January by a group of investors in California. Dave Hooper, senior director of operations for AG Dakota, is moving his family from California to just outside Rapid City, to handle the business in South Dakota.  (Dave Askins/Capital Journal)

 

AG Dakota bought the Fort Pierre Motel a couple weeks ago partly due to the "unique culture" its previous owner, Jodi Schwinler, had established, according to the company's senior director of operations, David Hooper.

It's a special culture of welcoming sportsmen to the north bank of the Bad River that leads Hooper to call it a "Mecca for hunters and fisherman."

But the purchase itself was not unique in South Dakota. The Fort Pierre property is one of 17 motels and hotels across the state the company has acquired since the start of the year, Hooper told the Capital Journal. And there will be more.

Hooper said the company is under contract to purchase a half dozen additional lodging establishments and in negotiations for at least 10 beyond that. The 17 properties already purchased are in the following cities: Fort Pierre, 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.

Who are the people behind AG Dakota? And why did they choose a name that sounds like it could be an agricultural firm, instead of a hospitality company?

The name, registered with the SD Secretary of State in early January, is based on the initials of the principle investor, a man who likes his privacy, Hooper told the Capital Journal. A news release from AG Dakota says 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.

What is AG Dakota trying to do?

Hooper describes the goal 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 says, 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. Second, 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 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.

The new local management team for the Fort Pierre Motel is already in place, Hooper said – Eric and Michel Drageset. They own Total Beauty, the clothing store with attached laundry and tanning bed facility, just down the street from the motel. They're former owners of the Oahe Marina, selling it in 2010.

Finding local managers who can continue the unique culture of a motel is a challenge, Hooper said, but he had it easy with the Dragesets. That’s because the previous owner, Jodi Schwinler, had recommended them. Usually, it's a long drawn-out process with a half dozen interviews, but with the Dragesets, Hooper said, "it was just an instant fit."

What impressed him about the Dragesets, Hooper said, was "their passion, their business knowledge, their understanding of the area." A lot of the fishermen who stay at the Fort Pierre Motel know the Dragesets already, he said, from their time as owners of the Oahe Marina.

Eric Drageset told the Capital Journal that one of the reasons he was interested in slotting in as manager at the motel was "to keep the tradition that Jodi and Mike had with the motel." He said they'd been helpful over the years with various business pointers. The Dragesets will continue to run Total Beauty, he said.

The name of the Fort Pierre Motel will stay the same, as will the others AG Dakota has purchased, Hooper said. But they’ll eventually get a tagline, with updated signage to reflect the new ownership: “Fort Pierre Motel by AG Dakota.”

Another cosmetic change Hooper described this way: “Our color is orange.” That doesn’t mean they’re going to paint everything orange, he said, but people will be able to see a unifying scheme reflected, for example, in the color of the trim.

AG Dakota motels and hotels will eventually all be run off the same property management and payroll software system, Hooper said. An AG Dakota website is being developed where rooms for any of the company’s 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 with 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's news release says, "We believe South Dakota is a business-friendly state."

What's especially favorable about South Dakota's business climate?

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 that 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."

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