Chef April Ausitn is relocating her business to a location on the east side of Sioux Falls.  This new location allows for a smaller venue that seats around 50 people. According to the article, Chef April said, “We’re hoping to do birthday parties, rehearsal dinners, anniversaries, baby showers, pretty much anything. The east side is struggling for a little small event area. People are like, ‘Where can we go?’” The space will seat up to about 50 guests, and the look will be “a little modern, very black and white and wood tones. Very pretty and elegant, but not too much where people feel uncomfortable.” The color scheme will make it easy for people to incorporate their own pops of color.”

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Starbucks is opening a location on the southeast side of Sioux Falls.  According to Raquel Blount in the the article, “…the density of housing out there and the growth to the east, the new apartment project and all the growth down 57th,” she said. “I think this will help them position themselves strategically to serve all the emerging neighborhoods and growing population areas.” Stadium Commons apartments are owned by Signature Real Estate Income Fund IV, LLC, the close proximity of a coffee shop will be another added value to future tenants of the property which is currently under construction. 

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A multifaceted development in south-central Sioux Falls, major investments in booming Harrisburg and an expansion of a popular southwest Sioux Falls apartment community. They’re all projects being funded with support from equity raised by Ernst Capital Group, which partnered with developer Clint Ackerman, owner of Signature Cos., to support several of his current projects. “They didn’t have much time to raise the funds we needed, and it went very well,” said Ackerman, who previously has worked with Ernst in financing his developments. “As always, they are the most professional equity group out there. We have a great long-lasting relationship, and I look forward to continuing it.” The projects within Signature Fund IV represent what was, until just recently, Ernst’s largest fund, with just under $22 million in capital raised. “It was committed very quickly,” partner Chris Daugaard said. “The momentum of the region is continuing to propel interest in being part of these projects. And with our model, we can plan the fund, structure and size it around what the developer is looking to do and create a unified team and plan.” Here’s a closer look at the projects under construction thanks to this partnership.

Stadium Commons

It’s rare – and soon nearly unheard of – to find nearly 20 undeveloped acres in the heart of south Sioux Falls, but that’s what Signature was able to acquire on the northeast corner of 69th Street and Cliff Avenue. “Our plan is to put 10 acres of multifamily in the back and use the remaining portion for commercial,” Ackerman said. “We held off on foundations until spring, but now we’re going full force.” The first 258-unit apartment building will include an attached two-story clubhouse and full slate of amenities, including a swimming pool, extensive indoor-outdoor community space and a fitness center. The plan is to open the first apartments in 2023. On the commercial side, “we have half of the eight lots under contract and are working on the fifth,” Ackerman said. “It’s a combination of retail centers and stand-alone users, and we’ve been happy with the level of interest we’ve received.” From Ernst’s perspective, “this is a valuable opportunity for development,” Daugaard said. “It’s such a prominent intersection; it’s appealing for multiple uses. That’s one of the strengths of the Signature team is the ability to acquire these larger tracts of land and do a multitude of uses, including residential and commercial. And bringing more residents to the immediate area supports and attracts additional retail and services.”

Creekside Commons, Creekside Plaza 2

The community of Harrisburg is showing every day that it can support more residential and commercial activity – so Signature is building on the success of its Creekside development with more retail and living opportunities. Creekside Commons, a 168-unit town home community, is about one-third constructed and is expected to take about 18 more months to complete. “Everything in that area is complementary,” Daugaard said. “There’s commercial across the street, which brings more traffic, a new day care, and the adjacency to the main commuter traffic in and out of town and around the school just continues to be where people want to locate.”

Creekside Plaza 2, a new 9,200-square-foot retail center, also is included in Signature Fund IV and will mirror its predecessor, which was part of a previous fund. “The original retail center has been fully leased since the day we got it completed, and we’ve started to sign up the first tenants at Plaza 2,” Ackerman said. “We expect it will be 50 percent full in the next two weeks to 30 days.” He anticipates the retail building will be done with its exterior and shell in 60 days, so tenants can begin opening by fall. “When we funded Creekside 1, it was a bit unique for us as a spec retail and office building, but it filled so quickly and ahead of expectations it gave us confidence there would be more demand,” Daugaard said. “All the housing next door is going to support that – and you can’t beat being right next to a B&G Milkyway.”

85 Commons

The success of Signature Cos.’ West Pointe Commons development in southwest Sioux Falls has led to a second phase. This one is called 85 Commons for its location at 85th Street and Townsley Avenue. The 55-unit building is about 60 percent complete and should be ready in the next six months, Ackerman said. “West Point Commons was essentially full for the last four years, so we know we need additional capacity in that area,” he said. 85 Commons will offer a mix of one-, two- and three-bedroom units with attached garages and a choice of floor plans and unit features. “Southwest Sioux Falls is  in high demand as a place to live, so we’re excited to help offer more options,” Daugaard said. “This is just blocks from Harrisburg Explorer Elementary and Platinum Valley Park, and we know it will appeal to a broad range of residents.”

Prairie Village Commons

Signature Cos. also is expanding in the Des Moines market, and the latest fund with Ernst supports that growth as well. The company’s Prairie Village Commons will be 127 town home-style units in the western suburb of Waukee. A groundbreaking is scheduled soon and construction is expected to last two years. “The Des Moines market is a larger metro than Sioux Falls, but the two operate similarly,” Ackerman said. “Waukee was ranked one of the fastest-growing communities in the nation, and we’re fortunate we got there a few years ago.” The market also is one Ernst views favorably. “The fundamentals of Des Moines and Sioux Falls are very similar,” Daugaard said. “So when we can invest in a known market with a known developer, we consider that a favorable opportunity.”

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Every deal Ernst Capital Group makes passes across his desk. And in the near decade Nick Gates has been with the firm, that’s a lot of deals. “The first opportunity I had was Ernst Capital,” said Gates, who joined the team in 2012. “I started here, and I’m still working to help us and our investors find the next good investment.” Gates was one of the firm’s first employees, and his career has grown with Ernst Capital. A native of Mitchell, he went to Dakota Wesleyan University with majors in mathematics and business. The latter led him to earn his MBA at USD immediately after graduation. “I graduated from DWU in 2010 when it was a tough time for business coming out of the Great Recession,” Gates said. “So I went and finished my MBA and applied for a host of jobs after that.”

One of them was at Ernst Capital, where he was hired as a financial analyst – but in reality became a jack-of-many-trades as one of a few employees. “I did anything from helping in HR, taking care of the trash and running financial models,” he said. “At the time, like in many small businesses, I filled in anywhere that was needed. When I started, I didn’t really know much about real estate. They don’t teach about it in college.” As Gates and the firm grew, he came to focus more on the due diligence review process, assisting with regulatory compliance, deal structuring and management of investment partnerships. “Some days I might look at three or four hours of financials; other days I might work with legal counsel to finalize operating agreements or a prospectus for investments,” he said. “I may have a closing coming up. So it’s a broad range of things related to real estate.”

He became a partner at the firm in 2015 and has spent the past 18 months helping Ernst navigate through the current low interest rate environment and strong interest from investors. “Our real estate investment opportunities have been pretty steady, and we’ve had the benefit of selling a couple assets, which has kept us busy and investors happy,” Gates said. “We’ve grown significantly over the last couple years, but we’re always looking to grow more while maintaining a responsible strategy and effective controls.” Ernst Capital has “a broad growth track” ahead, he predicted. “We’re in five or six markets within a 400-mile radius of Sioux Falls, and I see us expanding to 15 to 20 markets within 800 miles over the next 10 years,” he said. “Our goal is really to meet investor expectations. There’s a lot of capital  looking for a place to invest, and we’re fortunate to work with some great development partners who help us create those opportunities.”

When he’s not at work or on a golf course, you’ll most likely find Gates keeping busy with his wife, Jennifer, and 3-year-old Remington. “To be honest, Ernst Capital has just been a great opportunity,” he said. “I’ve had the opportunity to learn and grow, and I really enjoy what I do putting deals together. Some of our longest deals have taken over a year to put together, and the feeling when it falls in place is just fun. Of course, not every deal comes together, but even when they don’t, it makes the next deal that much better.”

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Queen City Balloon Bar is opening a storefront location on the east side of Sioux Falls.  Ryan Egan and his wife, Christine, have been running the balloon bouquet business for years out of their home. “We do upscale balloon decorations and gifts,” he said. “It’s more of a boutique than going into a party store and doing something quick”, according to Ryan. The store’s hours will vary Tuesday through Saturday.  

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A record building year in Sioux Falls and similarly strong activity regionwide is driving significant interest in real estate investing. Whether you’re currently invested in local real estate or considering it, knowing market conditions and potential challenges is key to understanding your opportunity. We sat down with Chris Daugaard, a partner in Ernst Capital Group, for insight on the market today and looking ahead. 

How would you describe the state of the real estate investment market today? What are some of the themes through the first three quarters of the year? The real estate investment market is strong, very competitive and growing. Through the first three quarters, we continue to see interest in investment real estate and growing interest from firms that are located outside of the region. You see competition and higher prices for any property that hits the market.

You’ve consistently invested in Sioux Falls and regional markets like it. How are you perceiving the strength of those markets currently relative to the rest of the country? Around the country, the last two years have seemingly increased growth in certain areas and slowed growth in others. Markets in the Upper Midwest seem to have fared relatively well compared to much of the country. Sioux Falls is as strong as we’ve ever seen it and I think still flies a bit under the national radar. That is changing. 

You have invested primarily in multifamily but also in some retail and office properties. Multifamily is in a historically tight market. What does that mean for Ernst Capital and future investment prospects? It means that we continue to focus on multifamily investments, as the demand is there. Labor and material availability is what is limiting more multifamily development at this point, not opportunity. Sioux Falls has strong office and retail markets, as well, counter to the narrative that the pandemic has created in other places. Some coastal cities have significant downtown vacancy, retail vacancies and slowing trends. Sioux Falls is seeing the opposite. We have a robust downtown office market and new retailers starting and building in Sioux Falls, and the market seems to be just getting better, not worse.

Sometimes intense markets can lead to some bad decision-making. Are there any cautions you might share for real estate investors? It goes back to the popular quote, “Trust, but verify.” Excitement and good marketing don’t take the place of investors doing their own homework. It’s important to seek good information from people you trust. If you hear about how good a potential investment is, it’s OK to ask the person offering that investment for some documentation. What makes it a good investment? Would this investment work well in a slower, more “normal” market? Additionally, because a hot market can require quick decisions, it’s important to do your homework ahead of time. What exactly are you looking for as an investor? What type of property, what characteristics are important? Knowing that all ahead of time can help you make quick decisions about an investment property when there’s competition. We provide investors a more passive, measured approach to investment real estate. That way, they don’t have to be in the heat of competition to buy properties themselves.

What are some of the most common questions you’re receiving from current or potential investors? We are hearing a lot of questions about Congress, the state of the economy and what’s happening with the two main bills under consideration. A lot of investors are also looking at the stock market and wondering how much room there is left to run.

Looking ahead, what are your expectations for the remainder of the year and into 2022? We’re expecting the multifamily market to remain strong, with more announcements for new construction and new businesses planning to open in Sioux Falls and the region. We’re blessed to live in an area that is a great place to live, work and invest.

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Real estate investing can be a complicated topic, especially for the uninitiated. Explaining it is what keeps Chris Daugaard excited about his role. “What I really like about working with investors is taking what can be a complex or uncommon topic like development or finance and trying to describe it to people who don’t do this as a day-to-day job,” said Daugaard, a partner in Ernst Capital Group. “I don’t come from a real estate background. I’m not a deep finance guy. So it’s fun for me to explain things how I relate them and have people get as excited about our projects as I do.”

It’s an exciting time for Daugaard, personally and professionally. He and his wife, Emily, recently welcomed their first son, James. At Ernst, activity is so busy his days are filled with project and investor communication. Luckily, he has found a way to balance both, as one of his favorite activities is driving around the community with his son napping in the backseat. “I drive around town for a couple hours seeing projects going on and what’s going up while he catches a nap,” Daugaard said. “I really enjoy seeing the communities we are working in develop and being part of it.”

It was a bit of an unlikely career path for the Dell Rapids High School graduate who grew up thinking he might become an electrical engineer and went to SDSU with that in mind. “I was going to go somewhere in state because that’s what I could afford, and I was paying my own way,” he said. “I liked technology – still do – science and math, so that had me looking at School of Mines and SDSU, and I chose SDSU because I wanted to play in the drum line for marching band.” His academic direction changed after a year when he pursued economics and political science instead, ultimately graduating with a political science major and minors in business and economics. “I graduated a semester earlier than planned to help my dad campaign, and the plan was to go to business school,” Daugaard said.

One of three children of Dennis and Linda Daugaard, he had grown up around his father’s career in the South Dakota Legislature. In 2010, Dennis Daugaard was elected governor of South Dakota. But here’s a perhaps little-known fact about the family: Chris Daugaard also has a history of top elected office. He served as student body president both in high school and at SDSU. “And before I worked on my dad’s campaign, if you’d asked me whether I would consider running for office someday, the answer probably would have been yes,” he said. “With today’s political climate, it’s harder to say.”

His first job, as an analyst for the Public Utilities Commission, was in state government but was focused on policy and technology and less on politics. “I was able to work with the state’s telecom industry but also on wireless service, broadband and renewable energy. I really enjoyed that.” After getting married, Daugaard’s career took him to Sioux Falls, where he worked first as a business analyst and then in the corporate organizational development group at Raven Industries. “I really enjoyed my time there and had planned for it to be my career when I unexpectedly learned Ernst Capital was looking for someone to be an analyst, working on their portfolio and entities in addition to working with investors to raise capital for new investments,” he said. “So I looked at it as an opportunity to do something different and still do analysis while also helping our area communities grow and develop.”

He joined the firm in 2014 and was made a partner three years later. “My day-to-day involves visiting with our current investors as there is always something new going on with our portfolio and something to look forward to, but also meeting with people who aren’t as familiar with Ernst or who are looking to participate in the growth of the region – as an investor, developer or interested community member.” He also oversees the firm’s marketing and communications, and works personally with a few hundred investors.

Ernst generally looks to invest within a 400-to-600-mile radius of Sioux Falls. “We’re happy to be here and looking to grow within the region,” Daugaard said. “We’re working with people who are fun and rewarding to do business with – that’s the type of relationship we’re looking for both from an investor and a partnership standpoint.”

For fun, you’ll likely find him and his family downtown listening to music or checking out a new eatery. “And I like to golf, and my dad and I do a river canoeing backpacking trip every year,” he said. “I’m just very glad to be in South Dakota, doing what I’m doing and growing here personally and professionally. We’re very fortunate to live and work in this part of the world.”

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According to a recently published article, many Sioux Falls area property management companies are seeing historical highs in occupancy and leasing of rental properties. Many Sioux Falls properties are anywhere from 99 to 100 percent leased. “Anything that is coming vacant is almost already spoken for even before it becomes vacant,” according to the article.  

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