Fargo developer embroiled in legal battle over South Dakota housing projects
Jan. 16—FARGO — Fargo developer Jesse Craig has filed bankruptcy papers in federal court in North Dakota involving three housing projects in Watertown, South Dakota, that are part of a legal dispute between Craig and the bank that provided financing for the projects.
The bankruptcy cases were filed under Chapter 11 of U.S. bankruptcy code, which allows a debtor to reorganize their finances and debts to continue operating a business.
The cases are tied to three housing projects Craig launched in Watertown in recent years — Parkside Place, Generations on 1st and The Ruins — and all three identify Craig as "managing member" of the developments.
The three developments are also at the heart of three foreclosure lawsuits that Red River State Bank of Halstad, Minn., filed in 2024 that name Craig among the defendants.
According to information contained in documents filed in South Dakota state court, the three foreclosure actions are very similar to one another and at least one asserts that Craig and other defendants, including Craig's wife, Mulinda Craig, defaulted on several loans and mortgages linked to the Watertown housing projects.
In its lawsuits, Red River State Bank is asking the court for financial judgments as well as authority to foreclose on mortgaged properties.
While the foreclosure cases remain pending, the court has authorized a receiver to do things like manage property and collect income until debts are resolved.
Jesse and Mulinda Craig have filed counterclaims in state court against Red River State Bank alleging breach of contract; breach of good faith and fair dealing; actual fraud; and constructive fraud and deceit.
According to the counterclaims:
Around 2017, Jesse Craig was approached by a Fargo banker that he knew who at the time had recently taken a job with a bank in Watertown.
The banker told Craig that Watertown was in need of housing and introduced Craig to Watertown officials in hopes the developer would build apartments in the city.
Watertown officials offered Craig tax incentives to defray front-end costs connected with starting developments and incentives were ultimately approved.
Around 2020, the banker who introduced Craig to Watertown officials took a job with Red River State Bank and officials with that bank began contacting Craig about possibly providing the financing he would need for three projects.
Believing that adequate financing would be provided by bank officials, Craig initiated financing for three projects, according to the counterclaims filed with the court.
However, after the Parkside Place project was completed in 2021 Red River State Bank "was unable or unwilling" to provide the project with permanent financing it had promised, leaving a gap of about $1 million between the financing promised and the $4.2 million the project ended up getting, according to the counterclaims.
The counterclaims also allege that after Generations at 1st opened in early 2022, the bank failed to provide promised permanent financing for that project as well and the counterclaims further state that the bank was ultimately unable or unwilling to fund work needed to complete The Ruins housing project.
Had the promised permanent financing been forthcoming, various short-term "overline" loans would have been retired or otherwise satisfied, according to the counterclaims, which also state the bank eventually leveled an ultimatum: sell the two completed properties to a bank official for the amounts owed on them — which the counterclaims assert was less than the fair market value — or face foreclosure.
The counterclaims ask the court to dismiss the lawsuits brought by the bank and to impose unspecified judgments against the bank for breach of contract and fraud.
Messages left for Jesse Craig and Red River State Bank were not returned at the time this story was published.
Jesse Craig and his family have been a part of a number of apartment developments in Fargo.
Recent projects include the BLOC commercial/apartment complex now being built in the 1600 block of University Drive South in Fargo.
While Jesse Craig played an initial role in helping get the BLOC project started, Great States Development and Great States Construction are now leading that project, which is expected to be completed by late summer 2025.
When finished, the BLOC development will have about 126 apartment units and about 15,000 square feet of commercial space.
When it comes to the housing projects in Watertown that remain in litigation, Generations on 1st, Parkside Place and The Ruins are all currently up for sale, according to commercial property listings for Watertown.
Generations on 1st
has a listed price of $13.6 million;
Parkside Place is listed for $6.8 million
and
The Ruins is listed for $15.4 million.
