Many state lawmakers are voicing concerns over what they say is a lack of transparency in the ownership of the Rapid City One Stop.
The facility, which opened in 2022, was meant to streamline and modernize state operations by housing all Rapid City-area state offices in a single location.
The project, along with a similar facility in Sioux Falls, came under scrutiny during the 2025 legislative session over the cost and length of the leases. Some lawmakers also questioned why the state did not own the buildings in the first place. This culminated in the passage of a bill requiring legislative oversight over major state lease contracts.
The state granted both projects to Dream Design International. But the company sold a majority share of the Rapid City One Stop several years ago.
SDPB spoke with several lawmakers who said they were unaware of the sale of shares even as they discussed the project in the 2025 session. While none of the lawmakers pointed to wrongdoing, they did question the oversight into where South Dakota’s taxpayer-funded rent is paid.
Background
SDPB analyzed public real estate and business documents for both the Rapid City and Sioux Falls One Stop locations and determined Dream Design International was likely not the only owner of the Rapid City property.
The state does not own either of the two buildings it is leasing through 2055. According to a February 2025 The Dakota Scout article, South Dakota hasn’t “traditionally” owned the properties where state employees work outside of buildings like state prisons and the state Capitol building in Pierre.
Hani Shafai, President of Dream Design, confirmed to SDPB he sold the majority of shares “years ago” to Boyd Watterson Asset Management, a Cleveland-based company. Shafai said he sold shares to acquire more cash prior to building the Sioux Falls One Stop building.
Shafai said rent money from the state flows into a limited liability company, in this case RC State Building, LLC, and then what is left on the bottom line, after paying loan and other maintenance costs, is split between shares. He did not provide the exact split in shares but said Boyd Watterson bought a majority-share stake in the real estate. Dream Design is still maintaining the grounds and general upkeep of the facility.
He said inflation and COVID drove material costs up, which caused the interest rates to jump on the loan needed to build the Sioux Falls facility.
“Most of these projects, they were big enough that not too many people have the equity or the cash equity to even come up with the down payment. And typically, those projects that are 20-to 25-to 30% in cash equity and the rest is financed,” Shafai said. “The interest difference between a 3.18% and a 6.48% [rate] is, you know, basically quite a bit. That's almost $3 million a year in additional finance cost.”
In an instance like that, a leaser like Dream Design doesn’t have many options. One is to raise the rent cost for the state on the Sioux Falls site, which Shafai said was only a “handshake deal” at the time. However, Shafai said that was a nonstarter.
“Even though we did not sign the lease, we committed to the state at a rent rate, and they set their budget and their plans based on that rate. In that case, we did not ask the state for a higher rent,” Shafai said. “We just stayed with our word that we gave them in the proposal, and we never asked them to adjust that rent. But we put more cash into it because you ruin your reputation if you don’t stick with your word.”
Because Dream Design wasn’t willing to raise rent costs, Shafai said they “had to look at non-conventional financing to fund” the Sioux Falls One Stop following the higher priced interest rates. Shafai said Boyd Watterson approached Dream Design for shares of the real estate investment.
“We never offered it for sale to anybody else. They approached us, and they approached us on other assets,” Shafai said. “But they liked that asset because of its stability, and that raised enough cash that we needed.”
The lease agreement includes a 10% increase every five years on rent costs due to an annual compounding 2% inflation rate.
SDPB emailed and called Boyd Watterson Asset Management requesting an interview about the investment to ask if they are still the primary shareholder and whether they’re acting on behalf of another investor. SDPB never heard back.
Boyd Watterson’s website shows that it’s an investment advisor “specializing in fixed income and real estate” that manages over $19 billion in assets as of June 30, 2025. Boyd Watterson’s real estate strategies “invest in commercial properties (office, warehouse and flex space) leased predominantly to high credit-quality tenants.” That’s in line with the state of South Dakota who, according to the Bureau of Finance Management, has maintained a AAA credit rating for the past nine years for all three major agencies.
In South Dakota, there’s nothing in lease agreements that requires property owners to notify the state if ownership changes occur in any capacity.
The Bureau of Human Resources and Administration, or BHRA, oversees state property procurements, including the One Stop projects. In a response to an SDPB question on the topic, a BHRA official said “Buildings leased by state government across South Dakota are privately owned. If an owner sells all or portions of the property, they have a right to do so. Leases are for the property and transfer between owners.” In another email, the same spokesperson said, "The property owner is not required to notify the state of their private financial transactions."
So, in this instance, Shafai and Dream Design didn’t have to notify the state they had sold the majority of shares for the building. However, Shafai said he did.
“In my opinion, I owe it to the state to let them know of any change in ownership or a change in operation in those facilities, regardless of if I have it on writing or not,” Shafai said.
A BHRA spokesperson said the agency has no documentation of Shafai’s notification. But a BHRA employee who dealt directly with the deal told SDPB in an email “Yes, I believe the state was notified.”
When SDPB asked the BHRA for a response, a spokesperson said, “If the state was notified, that information did not make it to the commissioner’s office.”
Legislative Reaction
The state’s knowledge of the transaction comes into play when considering what information was shared with legislators during discussion on the One Stop projects.
Some legislators say they were never informed of a majority change in any capacity. Both Senate Pro Tempore Chris Karr and former Democratic legislator from Sioux Falls Linda Duba told SDPB they were unaware of the sale.
“When we were in hearings on this, we were told that Dream Design was the vendor,” Duba said. “So, this was never disclosed to us in any of the meetings or the questioning sessions we had with BOA.”
Duba was not a lawmaker during the 2025 session but was on the legislative appropriations committee when the projects were discussed in years prior.
Karr, a Republican from Sioux Falls, said there’s been pushback from the Republican executive branch in the past on bills to put long-term lease and capital expenditure projects to go through an appropriations process. But one such bill, SB 145, did make it through last session.
“I appreciate the Rhoden Administration in being willing to work on that,” Karr said. “However, we keep uncovering more and more information that shows that we were left in the dark on purpose, especially with the One Stops.”
Karr said not being fully informed puts a strain on the Legislature’s trust of other departments.
Sen. Mark Lapka was also unaware of Boyd Watterson’s investment. He serves as an appropriator in the Legislature. However, Lapka said he’s not losing too much sleep over it.
“I’m not overly concerned about it as long as the lease is still active and it’s operating as it was originally agreed to,” Lapka said. “It’s something that, if it would become a problem, I’m sure the company would let us know then.”
Leola Republican Sen. Lapka said he doesn’t believe the state has “any business in private matters,” but can see why sharing the information in cases like these could be pertinent.
“Being that the state is paying for the lease of the facility, to ensure that the terms of the lease are remaining intact it would be good to have information if any aspect is changing,” Lapka said.
Rep. Liz May is an appropriator who was also unaware of the transaction. She said this is one of the challenges with mixing government and non-government money.
“If it’s just a business and what they do, we don’t have any say over. Of course, there’s regulations, and whatever, but when you start mixing taxpayer dollars with private businesses—whether it be a TIF or something like this—this is what the result is,” May said. “By that happening, we’re caught off guard.”
Sen. Karr called it a transparency issue because the rent dollars come from state citizens.
“When you’re using taxpayer dollars, and you’re building something or you’re going to rent something with a large dollar amount like this, [the Legislature] should know everything there is to know about it: who we’re doing business with, where those dollars are going to go, how this came to be,” Karr said. “And the fact is we didn’t know. So, to sit here and say that ‘It’s private enterprise, and does it really matter who owns it?’ That’s not the case when you’re dealing with government and taxpayer dollars. We should know and it should all be brought forward. You’re starting to talk about tens of millions of dollars and a commitment for decades. We should know who we’re doing business with and where those dollars going.”
Democratic Appropriations member, Rep. Erik Muckey, had similar concerns over transparency.
“The state has severe transparency issues if a company can substantially shift ownership during procurement or contract phases and not be required to report that change,” Muckey said. “That is a basic tenet of virtually every federal contract and should be a practice in South Dakota if it isn’t currently.”
The Democrat from Sioux Falls added it’s something lawmakers should give their attention to.
“There is a multitude of reasons why someone may find value in a long-term real estate lease agreement with the state of South Dakota,” Muckey said. “It shouldn’t come as a shock to anyone.”
Lawmakers SDPB spoke to expressed interest in looking into the issue further to see what the state could do without inhibiting the practices of a private business.
