Legacy West: How One Mixed-Use Deal Generated $500M in Profits

One deal. Ten years. $500M of profits.
This is why everyone wants to be a developer.

Legacy West started as a cornfield. Fehmi Karahan secured the land off-market and led the vision for what would become one of the most successful mixed-use projects in the country.

In 2015, he partnered with Invesco and apartment developer Robert Shaw to combine luxury retail, corporate office users, and hundreds of multifamily units into a vibrant mixed-use environment.

All-in development cost: $282 million (per Invesco presentations to a pension fund investor)

In 2019, Invesco's core fund bought out Fehmi and Shaw (per the Dallas Morning News). And earlier this week, they completed the round trip by selling the stabilized asset for $785 million.

Rough deal math: Fehmi, Shaw, and Invesco built the project at a 7.4% stabilized YOC (per 2017 pension presentation) and sold to Kite/GIC in the mid 6% range (per Green Street). Note that the 10-year treasury has increased from 2% to 4%+ since this deal broke ground, so this $500M+ outcome may be a relative disappointment compared to underwriting from a few years ago.

On its Q1 earnings call, Kite Realty Group laid out the details of this week's sale. It now owns 52% of a joint venture with GIC owning the remaining 48%. The partnership assumed a $304 million loan at 3.8%. The project is stabilized, but Kite believes it can generate nearly 300 bps of upside by bringing rents to market.
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Legacy West exemplifies why development draws so many to real estate. Vision, risk, and long-term value creation. It's incredible when it works. Even trophy assets trade in tough markets, and sometimes the long game pays off.

Congratulations to all involved: Kite Realty, GIC, Invesco, Eastdil, and the teams who helped shape this project. ...especially the CRE Analyst alumni, team leaders, and guest speakers who have been involved with this special project.

PS -- This deal touches on nearly every topic we cover in FastTrack.

Development? Fehmi profiled Legacy West and shared his remarkable story as a guest speaker in a recent cohort. Sales? Eastdil often runs a mock buyer interview during our sessions. Joint ventures? Students negotiate JV structures similar to the Kite/GIC partnership. Debt? We break down the implications of borrowing rates on returns and deal viability.

If this sounds like the kind of learning you’re looking for, we’re finalizing the next FastTrack cohort this week. DM us to discuss.