DETAILS DRIVE HIS LEGACY
Fehmi Karahan Refuses to work on multiple projects at the same time. He obsesses over the smallest components. We sit down with the man who is helping transform a suburb but never intended to be a developer.
By Candace Carlisle, Dallas Business Journal
When Fehmi Karahan walked into a meeting with the real estate team from Electronic Data Systems, he was pensive. The Turkish-born developer was one of a number of developers being interviewed in 1998 for a seemingly impossible task: build an urban oasis in West Plano.
Up until that point, Karahan had only built smaller retail centers. He was a lightweight compared to the other national developers going through EDS' selection process.
EDS wanted to build a corporate campus unlike any other in North Texas, building on the foundation of Ross Perot Sr.'s original vision. Perot built the company's headquarters on a former golf course, which led to the formation of Legacy Business Park.
Perhaps it was Karahan's innate knack for detail, or his desire to be a hands-on developer that convinced the real estate team to select him. He was named project developer of what is now known as The Shops at Legacy, the retail anchor of Legacy Town Center and a communal gathering place for Plano residents and corporate clientèle.
Karahan's close industry friends say it was his singular focus on making The Shops a success that solidified the deal.
That's how he works: one project at a time. "People thought I was crazy for trying to do this real estate development," said the president and CEO of The Karahan Cos. in his thoughtful cadence. "At the time, these mixed-use developments weren't known much and people thought it wasn't going to happen. But it's become one of the most successful mixed-use developments in the country."
That was 16 years ago and much has changed. Since then, The Shops at Legacy has become the new gold standard for mixed-use development in North Texas, with other cities attempting to replicate its success in hopes of becoming a corporate magnet.
Like EDS, a growing number of large companies want to locate near amenity- rich developments, such as The Shops at Legacy.
The proximity also plays a role in recruiting and retaining a talented workforce, especially among millennials, who would rather live and shop near their workplace.
That demand from corporate America has fueled Karahan's latest preoccupation: A $2 billion extension of Legacy Town Center known as Legacy West.
In less than two years, the corporate deals have poured into the 240-acre project as Karahan and his partners helped to:
- Land Dallas-based FedEx Office
- Secure a major headquarters relocation with Toyota Motor Co.'s new North American campus
- Tantalize Liberty Mutual Insurance into considering placing a large service center on the acreage west of the Dallas North Tollway
But Legacy West's success wasn't always etched in stone. Before the development group, dubbed Team Legacy, acquired a partnership stake in Legacy West with Plano-based retailer J.C. Penney Co., the group hadn't snagged a large business.
"We wanted to do some massive land planning that would help us create the best value and give us the most flexibility with the changing times," Karahan said. "Two years ago, who would've known we would have so much success in such a short period of time."
Different path to developer
Long before Legacy West and before Karahan was selected as the developer of The Shops, he hadn't thought much about building or creating places.
He was more concerned with getting his master's degree, a worry that brought him to DFW and to the University of North Texas. There he earned his MBA in finance as he waited tables to pay for school.
At the time, Karahan played pick-up games of soccer with teams assembled on the fields at Valley View Lane and LBJ Freeway versus a group of mostly international players. He always played forward, focused on scoring goals.
"I always wanted to win," said the 58-year-old developer, laughing at how it's been more than two decades since he donned his cleats.
It was at those games where Karahan met an older Turkish man, who asked him to join his development company in 1982. The company did well, acquiring property made available through the savings and loan crisis.
Within four years, Karahan was hooked and decided to start his own development firm. He started developing retail projects, including a small strip center at Webb Chapel Road and Lombardy Lane in Dallas. That's when he met Mike Geisler, a partner at Dallas-based Venture Commercial Real Estate.
"I leased the first center he ever built," said Geisler, who for the next three decades watched Karahan evolve as a developer. Karahan went from that small retail strip center to an Albertsons-anchored development, known as MacArthur Crossing, near Irving's Valley Ranch in the early 1990s.
"There was nothing there and I felt like I could do a development and make it successful," Karahan said. "I chased a group that owned the land and they were eager to sell."
Karahan landed a Dallas-based hot concept called Blockbuster and the grocer on the 110-acre mixed-use development. The community thrived on the growing retail, medical, office and hotel on the property, with a number of apartments and businesses deciding to locate in close proximity to the retail development.
The close proximity of retail in a growing residential and business community proved successful — and profitable — and perhaps served as a seed of knowledge for his work with The Shops at Legacy.
His efforts were noticed and some of the biggest real estate developers in North Texas lauded him for the project and certain doors opened for him. But Karahan remains humble for his part in the project's success.
"I happened to be in that market and had the knowledge for the demand and I was able to react and I had the ability to take the risk," he said. "I do that, take the risk. That becomes very important."
Without MacArthur Crossing, it's possible that Karahan wouldn't have been in a meeting with the executives from EDS, and perhaps The Shops would be very different today. He hadn't developed an upscale shopping center before. One would have no reason to think a relatively inexperienced developer could put together a destination-style shopping experience.
But Karahan got his meeting with EDS and his world — and that of Legacy Business Park — changed.
"When the people at EDS chose him, they instilled an amazing amount of trust in him," Geisler said. "He brought the vision they had for this. Fehmi has been such a big part of what The Shops at Legacy has become over the past 15 years or so.
"This meeting was the biggest moment of his life," he added. "It shaped him and he's thrown himself in the development."
Coveted concept comes to life
When The Shops initially opened at Legacy Drive and the Dallas North Tollway in 2002, many business executives feared it wouldn't fair well with two nearby malls opening less than five miles away. Stonebriar Centre Mall sat 2 miles to the northeast and The Shops at Willow Bend sat about 3 miles away.
"Early on, I questioned his concept," said David Craig, developer of Craig Ranch in McKinney, which sits northeast of The Shops. "Although, not initially, over time, The Shops have been extremely successful.
"Fehmi has done a phenomenal job and I give him complete kudos for pulling it off," he added.
Now The Shops serve as a destination for the residents and corporate workers of the 2,800-acre Legacy Business Park. The 15 million-square-foot office park is home to Fortune 500 companies, such as Dr Pepper-Snapple Group, Yum Brands and J.C. Penney, which, in turn, employ more than 55,000 workers.
The concept has become something other large projects want to replicate. Craig wants to create a similar concept around his new corporate hub in McKinney and Lucy Billingsley is working on building the Shops of Cypress Waters, which will help anchor the massive corporate magnet. The development has already landed Dallas-based 7-Eleven Inc.
"Legacy certainly broke new ground in creating an integrated mixed-use community in West Plano," said Tipton Housewright, principal of Dallas-based Omniplan, which has designed a number of mixed-use developments, including Dallas Midtown.
"The new Legacy West takes the corporate office concept to a whole other level," he added.
How West was won
Karahan has the ability to be singularly focused on his development projects, but even as he was finishing The Shops at Legacy, he would often look over his shoulder at the swaths of vacant land near J.C. Penney's corporate campus, worried someone else would develop the site.
In the mid-2000s, he approached the Plano-based retail giant, expressing his desire to develop the land. Instead, he was told J.C. Penney wasn't interested in doing anything. So he waited.
"I had my eye on the property because I knew once it was developed, it would be successful," he said. "It's a natural extension of The Shops."
J.C. Penney eventually decided jettisoning a portion of its unused real estate surrounding its Plano-based headquarters made sense when sales collapsed under former CEO Ron Johnson. The retailer still has a stake in the land.
J.C. Penney told Karahan that, as a publicly-traded company, the retailer needed to put the land sale out to bid. He quickly found out he was one of five vying for the acreage, along with national developers, such as Hines, Lincoln Property Group, Trammell Crow Co. and Forest City.
Once again, Karahan found himself in the underdog role. But now, he had his own connections to flex and cobbled together a top-notch Dallas-based development team.
Team Legacy is made up of Karahan's company, Robert Shaw's Columbus Realty Partners and Dallas-based KDC, which has developed some of the largest corporate campuses in North Texas.
Last year, J.C. Penney awarded the 240 acres to Team Legacy, keeping a stake in the ownership of the $2 billion development now known as Legacy West.
The rest is history, with the project landing Toyota Motor Co.'s North American headquarters and FedEx Office, with more corporate tenants on the horizon.
"It's phenomenal what he's doing in West Plano," said David Palmer, executive vice president with Dallas-based Cencor Realty Services, which is developing an Eatzi's-anchored development within miles of Legacy West.
"The market is leading the way in switching office rents to the triple net format, which is a historically retail format, and passes the property taxes, liability insurance and power a property pays on to the tenant," he added. "It really shows this market is the hottest market of the region."
Office rents in West Plano have gained steam in recent years. West Plano garners more than $1 in rent per square foot compared with the rest of the region, according to CBRE's latest research.
Karahan is also the man that is directing vision for the retail development, said Columbus partner Roger Staubach, who is also JLL's executive chairman of the Americas.
"Fehmi understands the customer," Staubach said. "I think he's a smart, thoughtful guy. He works hard and is very thorough in what he does."
Staubach, through Columbus, is a partner on the Legacy West deal. But he is not tied to directly to the office portion of the development.
Meanwhile, Karahan is focused on meetings and working to fast-track his in-demand development, with anxious corporate tenants, retailers and restaurants wanting to see the new, modern vision of West Plano.
"We want to improve the bridge over the project and connect these two projects," he said. "Once Legacy West is built, we hope to not have Legacy West or Legacy East, but one Legacy."