Top Dallas commercial property developer KDC has formed a new venture with a Canada real estate giant and a longtime Dallas partner in a move that could significantly expand its operations.
Toronto-based Cadillac Fairview has acquired a 50% stake in KDC, which has built major local projects including Plano’s Legacy West and the CityLine development in Richardson.
Owned by the Ontario Teachers’ Pension Plan, Cadillac Fairview manages more than $36 billion of assets in Americas and the United Kingdom.
As part of the new venture with KDC, Cadillac Fairview and Dallas’ Compatriot Capital have teamed up on a new $800 million fund for additional mixed-use developments and corporate office campus projects across the U.S.
“We have five or six opportunities that are already on the front burner,” said KDC CEO Steve Van Amburgh. “With the pandemic behind us we wanted to close the transaction as quickly as we could.
“We are very excited about what is in front of us,” he said. “It’s going to allow a really solid team of people to grow the business.”
KDC currently has commercial projects valued at more than $1.1 billion under development in Denver, Nashville, San Antonio and Raleigh, N.C.
Van Amburgh said the alternative to the deal with Cadillac Fairview and Compatriot was to continue funding developments on a piecemeal basis.
“That is really difficult when you are talking about the dollars it takes on large mixed-use projects,” he said. “For a long period of time we are going to be capitalized and have the ability internally to fund large projects.
“Across our company we have six very large - over one million square foot mixed-use projects,” Van Amburgh said. “The amount of equity that would be required for all of those is probably in excess of $500 million.”
The development potential for the company is even larger with project financing.
“Our thought was it will be somewhere between $2 billion and $3 billion in assets with very conservative leverage,” Van Amburgh said.
Cadillac Fairview in the 1980s was a major player in the Dallas real estate market and built some of downtown’s tallest skyscrapers. The huge property firm is currently expanding to Europe and Asia.
Cadillac Fairview also partners with Dallas-based Lincoln Property Co. on apartment projects.
“We are thrilled to be joining forces with KDC and Compatriot given their strong reputations, commitment to high quality assets, and long-standing client relationships,” Duncan Osborne, executive vice president of investments at Cadillac Fairview said in a statement. “We are also excited about the prospect of bringing new partners together and believe that Cadillac Fairview’s existing strategic partnership with Lincoln Property Co.’s residential division can play a unique role as we seek out mixed-use opportunities and maximize our collective expertise to grow KDC.”
KDC for 12 years has worked with Compatriot Capital, which is division of Dallas’ Sammons Enterprises.
“This partnership represents a shared vision to build a premier business in the development and ownership of office and mixed-use properties, an asset class that is particularly dynamic and exciting in today’s economy,” Mark Van Kirk, president of Compatriot Capital, said in a statement.
KDC - originally Koll Development Co. - has been in business for more than 30 years. The Dallas partners acquired control of the company in 2004.
The firm has built 145 commercial projects totaling 36 millions square feet and valued at over $9 billion nationwide.
The sale to Caddillac Fairview is the first major change in ownership at KDC in almost two decades.
“If they were going to give us the capital, they wanted an investment in the platform as well,” Van Amburgh said. “We own half of the company and control the company and control it through management.
“This will recapitalize our company.”