South Dakota Rural Enterprise has a variety of products and services to assist your local or regional economic development organization. Information on South Dakota Rural Enterprise products and services can be accessed on our website at www.sdrei.org. The following real life example illustrates how using two South Dakota Rural Enterprise products on one transaction enhanced the success of a business expansion project. The two South Dakota Rural Enterprise products used in this transaction were Capital Investment Fund (CIF) and the South Dakota Community Capital Fund (SDCCF).

We are currently working with Mobridge-based North Central South Dakota Economic Development Corporation (NCSDEDC) and Wells Fargo Bank in the expansion of One World Distribution, Inc. (OWD) www.owd.com. This fulfillment organization, with customers all over the world, is owned and run by Thomas E. Unterseher and Heather K. Bohr. The company relocated its corporate headquarters from California to Mobridge about ten years ago. It has grown its staff to approximately 60 employees and hopes to enhance employment to over 80 employees with the planned expansion. The project will feature the acquisition of an existing 30,000 square foot facility and the addition of another 30,000 square feet to that facility to provide a 60,000 square foot fulfillment center. The total project cost is a seven-figure investment.

“This is an excellent example of great teamwork between all parties to make a project come to reality,” said Jackie Heil, NCSDEDC director. “The collaboration not only assured OWD would stay in Mobridge, as they may have decided to relocate to another community or state, but it also added to the regional employment and tax base.”

Wells Fargo Bank loan officer Travis Vetch in Mobridge assisted with a first lien on the real estate. A Wells Fargo loan was leveraged on a first lien position at approximately 30% loan to value. NCSDEDC then leveraged their financial resources, using their participation in the South Dakota Rural Enterprise SDCCF, and partnering with David Hauschild at Mid-Dakota Economic Development Corporation, also a participant. The two groups were happy to work together to increase the total loan amount requested from OWD for the expansion project in Mobridge. The SDCCF loan is a second lien with terms that offered OWD a 25 year fixed rate loan near 7%. 

Through South Dakota Rural Enterprise’s advance commitment to the Community Reinvestment Fund, the OWD transaction is the first New Markets Tax Credit transaction in the State of South Dakota. NMTC provides the purchaser of the mortgage on the secondary market with tax credits. In return, the investor in the loan lowers the required rate of return. The NMTC feature of this transaction made the 7% fixed rate 25 year term possible.

The advantage of using the SDCCF loan program is to provide long term fixed rate financing to a project along with financing up to 90% total loan to value. SDCCF works well with the local bank as it gives the bank an excellent security position and provides SDCCF with local expertise on the transaction.  

NCSDEDC then worked with South Dakota Rural Enterprise to obtain a CIF loan, which is made directly to the local or regional development corporation. NCSDEDC in turn lent the money to OWD to assist with the completion of the entire project. CIF terms are very attractive for the development
corporation, offering these features:

1. Ten year term.
2. Current 4.5% fixed rate for the first 5 years, with the rate to adjust for the remaining 5 years at a rate not to exceed 5%.
3. Loan is unsecured, which allows a lot of flexibility for the development corporation.
4. Repayment is interest only with quarterly payments and the principal is due at the end of the ten years with the option of extending the balance. 
5. No prepayment penalty.
6. Funds can be used as capital for any purpose the development corporation    desires and is not tied to a transaction or deal. It also has no requirements as to job creation, etc.

Currently, South Dakota Rural Enterprise has various CIF loans outstanding across the state with development corporations that range from $50,000 to $2 million dollars. There are 18 participants in the SDCCF.

The OWD story is not only a success for OWD but also for everyone involved. Not all transactions require two Rural Enterprise products or services but this is a great example of how we can help your local or regional development corporation be successful in its mission.

2006 AUTUMN REPORT
	Statewide groups strategize for future
	Micro-enterprise a major priority
	Combine products to boost development
	Training sessions put NMTC to work
	Ten years - and growing stronger
	Meadowlark Project

From the Credit Officer:
Dick Werner

Blueprint for Excellence:
Implementing Best Practices