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A growing empire, but Gov. Burgum’s Kilbourne Group doesn’t own most of downtown Fargo

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This is a detail of a building owned by Kilbourne Group seen Wednesday, March 7, 2018, at 109 Broadway North, Fargo. Michael Vosburg / Forum News Service3 / 6
This is a detail of a building owned by Kilbourne Group seen Wednesday, March 7, 2018, at 122 Broadway North, Fargo. Michael Vosburg / Forum News Service4 / 6
This is a detail of a building owned by Kilbourne Group seen Wednesday, March 7, 2018, at 121 5th St. N., Fargo. Michael Vosburg / Forum News Service5 / 6
This is a detail of a building owned by Kilbourne Group seen Wednesday, March 7, 2018, at 119 5th St. N., Fargo. Michael Vosburg / Forum News Service6 / 6

FARGO – Next to the Kilbourne Group’s new Roberts Commons mixed-use building in the heart of downtown here is a large hole in the ground where a parking lot owned by the Dillard family used to be.

RoCo is still a few months from completion but the developer has already driven pilings into the clay soil in preparation for another six-story mixed-use building.

“If we have three to four projects under construction at one time, that’s what we’re looking forward to doing,” Kilbourne President Mike Allmendinger said, referring also to ongoing renovations at the Black Building and the former Metro Drug building on Broadway.

The Dillard building is the latest of many construction projects the company has taken on since it was founded in 2006 by Doug Burgum, the entrepreneur-turned-governor of North Dakota. In those dozen years, Kilbourne’s real estate empire has grown by leaps and bounds with company property on seemingly every block from University Drive North east to the Red River. Many of them bear Kilbourne’s stylized green and blue “K” logo.

But Kilbourne’s dominance isn’t quite what it appears.

“There’s this misconception he owns 50 percent of the downtown. I’d be surprised if it's 10 percent,” said Jim Gilmour, who runs the city’s Planning Department.

City property records back up Gilmour’s assessment. Kilbourne owns 20 acres, or just 4 percent of downtown land, and its buildings total 730,000 square feet, or 8 percent of the total for all buildings. Its properties are assessed by the city at $62 million, just 7 percent of total downtown property value.

Those figures will naturally get larger as Kilbourne embarks on upcoming projects such as the Kesler Block, south of RoCo, in a year or two and the Block 9 highrise, estimated to cost nearly $100 million, this year.

Today, even while Kilbourne’s downtown footprint remains relatively small, it’s still pretty big compared to other private property owners. In the number of acres it owns, the company ranks third among landowners right behind BNSF and Sanford Health. In terms of building size measured in square feet, the company ranks second only behind Sanford. By property value, it’s also second behind Sanford.

Turning point

In Kilbourne’s early years, the company was slow to acquire properties. Between 2006 and 2014, it bought only about half a dozen properties, including iconic ones such as 300 Broadway, which it built on a parking lot next to the Fargo Theatre, and the Loretta building on Broadway, which it renovated.

Then in 2015 and 2016, it suddenly started gobbling up dozens of properties, including the real estate empires of Jerome Feder and Leland Swanson. That’s because Kilbourne had a sudden infusion of cash around that time.

“From 2006 to 2014, Kilbourne Group was not about making money,” said Allmendinger, who’s been with the company since the start.

Burgum, who famously sold his Great Plains Software company to Microsoft, founded Kilbourne to carry out his vision of a revitalized downtown, and investments in those years were not about returns on investment but how they fit the vision, Allmendinger explained.

“In 2014, we recognized that to be a sustainable downtown Fargo, we have to be able to attract capital,” he said. So Burgum invited other investors to join him and Kilbourne now has more than 70 of them, Allmendinger said.

Some who have dealt with Kilbourne have gotten the impression that Kilbourne has bottomless pockets.

Doug DeMinck, the former owner of the Nestor bar, said last year that he tried to buy the property but Kilbourne offered double what the property owner originally asked.

Allmendinger said Kilbourne’s reputation has led some property owners to ask for the moon but the company has turned down some offers and it has even been outbid on other properties. “We’re disciplined about the work we do.”

Raising the bar

Kilbourne wasn’t the first firm to invest in downtown, but it’s done it in a bigger, more visible way.

Gilmour said Kilbourne has helped to show the market’s potential and other developers have followed with more investments. “I think they’ve raised the bar for everyone that’s done housing downtown.”

Al Anderson, commercial real estate services director for Fargo’s Park Co. Commercial, credits Kilbourne with making risky investments, especially in projects that involve complete overhaul of older buildings. “I’m glad Doug did this and his group,” he said. “There’s not a lot of people that could've done that, quite honestly.”

But with more interest in doing business downtown, costs are going up, according to Anderson. Property owners are asking for higher rent from tenants and raising prices for would-be developers.

It'll be interesting to see how it all comes together in the near future, he said. Downtown still has vacancies today, but those might be all but spoken for in as little as five years.

Kilbourne’s response to rising costs has been to include studio apartments and small retail spaces in its buildings. The ground floor of the old Metro Drug building, for example, used to house one business but is now being subdivided into spaces for three.

“Having spaces available for small local business owners to start their businesses is a critical component of our future success,” Allmendinger said. The challenge, he said, is the high construction costs downtown.

Travis Koch, chairman of the Downtown Community Partnership, said the higher costs probably affect different businesses differently, but it’s undeniable that all this interest in downtown has brought more potential customers. In February, he said, DCP saw nearly 1,000 people turn up in subzero temperatures for its downtown coffee and cocoa crawl.

Allmendinger said in the scheme of things, Kilbourne is a pretty small developer. Others own more and build more in other parts of the city, but he said can understand why his company gets a lot of scrutiny. It’s because Kilbourne is making changes to a historic neighborhood and not building on new land that affects few people, he said. “This is the cultural center of our city, this is the historic center of our city, and people care about our cultural center.”

Timeline
  • 2000: Great Plains Software leader Doug Burgum starts Kilbourne Design Group to save the Northern School Supply building from demolition. It’s later renovated and donated to North Dakota State University as Renaissance Hall.
  • 2006: Burgum, having earlier sold Great Plains to Microsoft, starts the Kilbourne Group, a new company, with himself as the only investor. The first project is construction of the 300 Broadway building on the parking lot south of the Fargo Theatre.
  • 2007: Kilbourne buys the Smith, Follett & Crowl building, where Mezzaluna is now, and the Straus Clothing Building where Halberstadt’s is now.
  • 2008: Kilbourne buys the Pence Automobile building and one next door. It later sells the buildings to the Family Healthcare Center.
  • 2009: Kilbourne negotiates option to buy US Bank Plaza. This is where the group now proposes to build the Block 9 highrise.
  • 2010: Kilbourne buys the Loretta building.
  • 2012: Kilbourne buys the Loudon building where Fargo Rubber Stamp used to be and the attached Ball building. It later demolishes the Ball building because of structural problems.
  • 2013: Kilbourne buys St. Mark’s Lutheran Church, which later becomes the Sanctuary events center.
  • 2014: Kilbourne takes on other investors for the first time. The group now has more than 70.
  • 2015: Kilbourne goes on a shopping spree this year, buying the Black Building, Woodrow Wilson High School, Jerome Feder’s substantial downtown real estate portfolio, the entire block around Sahr’s Sudden Service, the Mathison’s building and the Nestor bar.
  • 2016: Kilbourne goes on another shopping spree, buying LeLand Swanson’s substantial downtown real estate portfolio, Schumacher Goodyear, American Legion and two pieces of land off University by the railroad tracks. Kilbourne also won the right to develop a parking ramp and mixed-use building on a city parking lot; this is now the Roberts Commons, or RoCo development.
  • 2017: Kilbourne strikes a deal with the Dillard family to build on land north of RoCo. Having completed the parking ramp, the group takes control of the city parking lot south of RoCo.
  • 2018: Kilbourne hopes to break ground on the Block 9 highrise.
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