Plano Councilman: Fight Against Apartments In Old J.C. Penney Campus Is A Battle Between The Hatfields And McCoys

Plans to add 795 luxury multifamily units inside J.C. Penney's old corporate campus in West Plano came to a screeching halt Monday when city council members found themselves in what one member called a battle between the Hatfields and McCoys. 

And like that epic feud, this one may continue past Monday's showdown.

The Hatfields and McCoys in question are Dreien Opportunity Partners CEO Sam Ware and his affiliated firm, Silo Harvesting Partners, and developer Fehmi Karahan with The Karahan Cos.

Ware was aiming to get zoning approval for two luxury residential apartment buildings to be developed by Trammell Crow Residential and Kairoi Residential on The Campus at Legacy West, his redevelopment of the former J.C Penney campus. Plano has already built the number of multifamily units allotted in its master plan, and Ware's request was not so much for his specific site to be zoned multifamily but for the city to allow more units overall. 

Karahan, who opposes the location of the apartments proposed, is the developer behind the sprawling Legacy West mixed-use development that sits across the street from Ware's project. He sent a letter of opposition to the city as president of the board of directors for the Legacy Association.

He contends the city should stick with the master plan and called Ware's proposal "ill-planned" and not "in the spirit of Legacy." He said he and the association might support residential in Ware's development, just not the design and location Ware's team is proposing.

Though one of the most visible opponents at the council meeting, Karahan is far from alone. The city received roughly 60 formal letters of opposition to Silos' proposal, including from developers Gaedeke Group and Jack Wagner of Republic Property Group — the developer of the nearby Villas at Legacy West — and from major local office users Toyota and FedEx.

The opposition focused on the effects of more apartments in the area, saying units built in The Campus at Legacy West could hurt neighboring developments and make it harder to attract more office users.

The city council voted 4-2 to block the zoning change. It was rejected without prejudice, meaning Silo can reapply for the zoning change, and Ware told Bisnow Tuesday he intends to try again to get approval for residential uses.

Ware said he wanted the apartments to pass city council Monday night so he could create a live-work,-play concept for corporate users. His development group has renovated the former Penney's headquarters into a multi-tenant office building, preserving J.C. Penney as a tenant and attracting NTT Data to the campus. Ware's development group also announced plans earlier this year for luxury Japanese hotel Miyako on the site and anticipates future restaurant and retail development.

The multifamily plan nixed by Plano's city council Monday included the prospect for food trucks on-site, campus upgrades and the build-out of walkways to create connectivity between the campus and surrounding areas, proponents of Ware's plan told city council. 

Ware said he thought a simple zoning case became too complex, and the council members were confused on the specific issues. Ware said from his viewpoint, his site always had the ability for multifamily use, but it was tied to the city's comprehensive master plan that ran out of apartment allotments. Ware said his team was asking for more multifamily allocations on the site to keep up with the area's growing apartment demand. 

“In my 40 years, I’ve never had this happen,” Ware said. “This is Downtown Plano. This is what is supposed to go here. The occupancy in West Plano is 98%. With these apartments, there’s a shortage. They are leased up very quickly. You are going to start losing corporate relocations if you don’t have housing for them, period. Everybody can’t afford a million-dollar house in Plano. These are very nice high-end apartments.”

Ware told Bisnow he views opposition to these apartments as hypocritical, political and ultimately a slap in the face considering his team has pumped roughly $500M into the site so far. 

Dreien Opportunity Partners Chief Operating Officer and co-Managing Partner Jeffrey Blakeley suggested to council members that all of the corporate opposition is about fear of competition from other multifamily developers — including Karahan, who has hundreds of apartments nearby. Ware's team noted that residential development has been contemplated in some form at the site for years. 

Karahan told Bisnow his opposition to the apartments is not about stifling competition, but rather a motion to preserve the Legacy Business Park concept to ensure companies remain attracted to the area.

"In having been involved in the sale of land to major corporations and working with them to attract them to Legacy Business Park, we want the Legacy Business Park to remain as the premier corporate business park," Karahan said after the vote.

"Any deviation from that premier corporate park is a concern of ours, and that is the major reason. It's not against multifamily. It's just that multifamily [needs to be] in certain areas where they need to be ... and not spreading out over Legacy Business Park."

Blakeley struck back at the idea that the old Penney's campus can redevelop as a solely office-centric campus. Touring office tenants keep saying they want a live-work-play environment, he told city council. 

He said the company has "not had one corporate user come up and approach developers on [the] site, [but] we've had several multifamily developers come to us." 

William Dahlstrom, who represented Silos Harvesting at the meeting,  said opponents were asking the city to enforce private covenants, not zoning laws. 

He said in 30 years he has never seen opposition like this to a commercial project.

"I was quite disappointed to see developers opposing developers," Dahlstrom said. 

In This Corner...

Those in support of multifamily at Ware's site include Rutledge Haggard, a member of Plano's historic Haggard ranching family. Haggard wrote a letter to city council, saying he inspected Ware's multifamily plan and finds this type of concept popular among young and old tenants alike. He said he believes the plan serves the area well with so many corporate campuses surrounding it. 

Beal Bank, which provided a loan to help Ware's team facilitate the purchase of the campus, wrote a letter in support saying the multifamily plan is "consistent with their vision to create a high quality of life for its corporate workers consistent with the evolving vision for the original Legacy Business Campus." 

Plano-based Diodes Corp. also sent a letter in support of Ware's multifamily development, asking city council to support the creation of housing that can support the area's workforce. 

Ware also had a sympathetic ear on city council with Councilman Rick Grady saying he was confused as to why everyone is against residential on the site when multifamily is already highly developed near the campus. 

"Why is this piece of property different than the others?" he asked. 

Grady then suggested the debate had become a war between the Hatfields and McCoys, where he sees two powerful interests battling over the issue.

"If I look at the letter of the law, I am not seeing anything here that says the developer can’t do what he wants to do with this piece of land [that] he owns," Grady said.

He also agreed with Silo's claim that waiting for a major corporate tenant doesn't make sense for the campus. 

“If there was a major corporation that would move their headquarters there, wouldn’t we already know it?”

And In The Other Corner...

In his letter on behalf of the Legacy Association, Karahan said Legacy Business Park is 2,600 acres created by Ross Perot Sr. and employers choose it because "of its prestigious reputation for being a first-class business park."

He added, "opportunistic residential development is in conflict with the overall plan and spirit of Legacy."

Karahan said he has sold land to Toyota, Liberty Mutual and JPMorgan Chase, and they all chose Legacy to be across the street from the J. C. Penney headquarters, "not across the street from the ill-planned apartments proposed by this developer."

Karahan told Bisnow Wednesday he is open to future concepts by Ware’s team for multifamily development as long as those plans propose residential construction on campus parcels initially designated as potential multifamily sites, and the new proposal meets the design, location and quality standards of the Legacy Business Park area.

In a statement to Bisnow, Karahan said it is the location of the multifamily sites, not the multifamily itself, that bothers Legacy business owners. 

"You may or may not know that Mr. Ware’s land is subject to recorded deed restrictions that we and JCPenney imposed on the overall site," Karahan said. "These restrictions allow high-quality multifamily on various parts of the JCP campus … just not on the particular parcel Mr. Ware wants. While any multifamily would require a zoning change, we would be more likely to not oppose such a zoning change for a quality project on the parcels that [J. C. Penney] originally intended as potential multifamily sites, and we have communicated that to the Ware team."

Letters from Toyota and FedEx also addressed concerns about the vision for the area, while Gaedeke Group said in a letter that apartments there could derail plans for future office development on its own sites.

"If the image of Legacy, being one of the most premier business parks in the country, is destroyed due to the proposed residential development, it will make it very difficult for us to attract corporate tenants to our buildings and will have severe negative financial impacts in our development," Gaedeke leadership said in a letter. 

City council members Kayce Prince and Shelby Williams voiced concerns about multifamily on the site and said they feared approving the plans may establish a precedent of allowing Legacy corporate campuses to add multifamily going forward. 

Williams said the area's zoning history centered on "low intensity office" and said this specific area, with zoning dating back to 1986, was not intended for residential development. 

It Ain't Over

Ware's partnership has already pulled its zoning four times, Ware said, and his team reduced its original apartment plan from 3,000 units down to about 790.

Ware also said his team took the time to educate council members, but ultimately the plan did not go through Monday. Still, he isn't giving up.

He told Bisnow he will continue to try to push for residential use in The Campus at Legacy West, and that he is exploring the possibility of legal action against parties that intervened against his full vision. He did not specify to Bisnow what groups might be the subject of any legal action or what shape any potential suit might take.

Karahan said there is a way forward for multifamily at The Campus at Legacy West. 

"While Legacy Association has no direct approval controls on this site, I can assure you that the board would of course review and consider a new project ... properly located ... and appropriately designed to be more compatible with adjacent uses and be constructed in a way with long-term quality in mind," Karahan said in a statement to Bisnow.

"Again, our concerns in no way reflect an opposition to multifamily. We just want it done the right way and in the right location."

UPDATE, OCT. 16, 10:33 A.M. CT: This story has been updated to include additional comments from Fehmi Karahan regarding his position on the multifamily proposals at The Campus at Legacy West and his thoughts on future proposals.