Barings, The Fallon Co. Recap Raleigh Office Project

301 Hillsborough. Image courtesy of Barings

The Fallon Co. and Barings have closed a joint venture for the recapitalization of 301 Hillsborough, the trophy office project within Fallon’s mixed-use Raleigh Crossing development in downtown Raleigh, N.C.

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The partners have not disclosed the financial terms of the joint venture. However, when Fallon broke ground on the approximately 280,400-square-foot tower in the summer of 2019, the Downtown Raleigh Alliance listed the building’s development cost as $160 million.

Located at 301 Hillsborough St., 301 Hillsborough constitutes the initial phase of Raleigh Crossing, which will consist of three towers rising from a parking podium and retail base. With the assistance of exclusive leasing agent CBRE, the 19-story office building landed Pendo as its first tenant in a spring 2019 prelease agreement for 125,000 square feet, or 45 percent of the space. The state-of-the-art, Duda Paine Architects-designed structure will also feature more than 12,000 square feet of street-level retail space, a host of coveted amenities, smart building systems and green design elements.

Fallon and Barings have partnered on projects in the past and this time around, Barings found 301 Hillsborough an ideal fit for its value-add real estate investment strategy that centers on market locations bolstered by a highly educated workforce and a substantial STEM employer presence. The recapitalization comes as the construction of 301 Hillsborough reaches 50 percent completion.

Recapitalization trending

Some experts saw it coming in 2020. “We predicted rising interest in recapitalizations and a subsequent increase in recap transaction volume in the years ahead, and the pandemic seems to have given that call a boost as well,” according to advisory firm Park Madison Partners’ 2021 outlook report. Notable transactions in the fourth quarter include Spear Street Capital’s recapitalization of the 856,600-square-foot Arborcrest Corporate Campus in Blue Bell, Pa., with the $225 million sale of a 90 percent stake in the life science asset to Sidra Capital. Additionally, Columbia Property Trust Inc. and Allianz Real Estate partnered on the recapitalization of the 381,000-square-foot office building at 221 Main St. in San Francisco in a deal that valued the asset at $400 million.

It appears 2021 will have no shortage of recap activity. “Real estate private fundraising will pick up, with recapitalizations and longer-life vehicles gaining in popularity,” according to the Park Madison report.