When Dallas-area developer Fehmi Karahan first shopped around the subject of a mixed-use component in West Plano’s Legacy area, he was greeted with skeptics. Critics dissed his idea of an open-air retail center within striking distance of the Shops at Willow Bend (Plano) and Stonebriar Mall (Frisco), both of which were being planned.
Additionally, “When I first started in 1998, my lender didn’t want to underwrite the office component,” said Karahan, who is president and CEO of Karahan Cos. Some 20 years later, things are much different. Karahan’s mixed-use Legacy West has been an undeniable success. And the open-air center — Shops at Legacy — has silenced critics; it’s been a good amenity draw for companies such as Toyota and FedEx, to name a few.
Karahan shared his story and experiences with participants at The Real Estate Council’s “Market Matters: Mixed-Use Summit,” which took place in February. In an interview with Greg Kraus, Invesco Real Estate Acquisitions Group Managing Director, Karahan discussed his upbringing in Istanbul, Turkey, and how it formulated the open-air marketplace idea that would eventually be the hallmarks of both the Shops at Legacy and Legacy West.
“When you live in Istanbul, you see pedestrian-friendly environments everywhere,” he told Kraus.
“I thought I could create a place to help people do both—shop and eat—and put in a pedestrian-friendly, inviting environment.”
People like watching people, Karahan went on to say; they don’t, for example, like to eat in empty restaurants. “Growing up in Istanbul, I thought about all of this,” he said. “I wanted to bring an alternative to the closed-in mall, with beautiful landscaped trees and outdoor cafes.”
These days, there is talk about amenities when it comes to attracting and retailing talent. “Companies are attracted to Legacy because it’s an urban core,” Karahan said. “Corporations want to give their employees the best amenities.”
Shops at Legacy and Legacy West have become successful case studies, but there was still a learning curve. “One big complaint was not having sufficient parking in the early going,” Karahan said. “So, in the following phases, we included much more parking.”
That Legacy West is a success there is no doubt. Karahan was quick to praise capital partners (such as Invesco), corporations who took space there, and partner developers Jackson Shaw and KDC.
“Legacy is one of a kind,” he said. “Not because of me, but because of the vision of the Perot family.”
Karahan also indicated that both business leaders and public officials need to put in the effort.
In answer to a participant question as to whether a Legacy-type development could be set in South Dallas, he honestly said it would be difficult to duplicate.
“If you were able to attract some companies, if you could get a business to commit to the area, it could lead to retail and mixed-use projects,” he said. “But there would have to be a combined effort from the public and private leadership to make things happen.”
A CANDID LOOK AT THE METROPLEX’S MIXED USE
Mixed-use seems to be the byword in development these days, and The Real Estate Council’s “Market Matters: Mixed Use Summit” on Feb. 14 delved into issues concerning this product type. A panel of mixed-use developers, moderated by David Evemy, Senior Vice President of Strategic Planning and Research for Sarofim Realty Advisors, focused on trends, technology, and challenges inherent with such developments.
Mike Ablon, Partner, Pegasus Ablon on technology in mixed-use:
Ten years ago, in the Design District, we used social media to blog, and 50 percent of our leasing was conducted online; tenants could pay their rent in the middle of the night. Today, we look at that and go, “duh.” Ten years ago, that was pushing the limit. We’re evolving so that every light switch has a chip in it, and you can talk to the refrigerator. We continue to see the shift toward integration of technology. Not just hardware, but how it affects everything we do with multifamily.
Jonathan Brinsden, CEO, Midway on “the new experience:”
The new experience is insanely local; developers aren’t cranking out the same apartment building and dropping it in different cities. It takes a level of understanding and patience to execute that experience well. One of the things we’re looking at is that real estate is starting to look like hospitality. People want user-friendly hospitality, and we’re asking how we can drive hospitality through all real estate types.
Kristian Teleki, senior vice president, Matthews Southwest on challenges in repurposing older buildings into mixed use:
There is no magic to the process. It all matters how good your due diligence is when you’re buying the asset, and ideally surrounding yourself with great partners. It’s as much of an art as it is a science: It involves managing expectations with your team, corralling risk, and understanding capital partners. Involve the city with the process and have as many good team members as you can on many fronts.
Mark Cover, Senior Managing Director and CEO for Southwest USA and Mexico, Hines Interests LP on challenges in developing mixed use:
Mixed use is fantastic for the second owner. It’s tough on the developer unless they have the staying power to stick with it for a long time. There’s no getting around that ... it’s not about the cheapest bottom line for the company. Everything needs to serve the occupant. I challenge our people to, say, pick a 42-year-old divorce attorney with two little kids, and ask, ‘How can I simplify his life with real estate?’ If we can figure that out, we end up with a great piece of real estate.
John Zogg, Managing Director of Leasing for Crescent Real Estate Equities LLC on the cycle:
This market feels a little different. We have to watch jobs, but capital is disciplined. For the first time, there really is disciplined capital, and developers aren’t going crazy. Toyota came to Legacy, and their advertisers and suppliers came to the Crescent. Those are big deals. That engine is still rolling well. As long as we continue, Dallas will be in really good shape.