Blackstone, Digital Realty form $7bn data center development joint venture

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Blackstone, Digital Realty form $7bn data center development joint venture

Digital Realty and Blackstone are establishing a $7 billion joint venture to develop hyperscale data centers in Europe and North America.

Blackstone-affiliated funds led by Infrastructure, Real Estate and Tactical Opportunities and Digital Realty will develop four hyperscale data center campuses across three metro areas in Europe and North America.

The developments are expected to support approximately 500 megawatts (MW) of total IT load upon full build out of all campuses.

Blackstone will acquire an 80% ownership interest in the joint venture for approximately $700 million of initial capital contributions, while Digital Realty will maintain a 20% interest.

Subsequent to closing, the joint venture parties will fund their pro rata share of the remaining development costs. Digital Realty will manage the development and day-to-day operations of the joint venture, for which it will receive customary fees. 

The four hyperscale data center campuses are located in Frankfurt, Paris and Northern Virginia and have a total estimated development cost of approximately $7 billion over the course of the next several years. The campuses are planned to support the construction of 10 data centers with approximately 500 MW of potential IT load capacity. Of this capacity, 46 MW is under construction and is 33% pre-leased. The remaining land capacity is in varying phases of pre-construction and is expected to be developed to meet customer demand. Approximately 20% of the total potential IT load capacity is expected to be delivered through 2025, with the balance expected to be delivered in 2026 and beyond.  

“By partnering with Blackstone, the world’s largest alternative asset manager, Digital Realty is better able to deliver capacity to meet the burgeoning demand of our hyperscale customers, by accessing a deep pool of likeminded private capital,” said Andy Power, President and Chief Executive Officer of Digital Realty. “Digital Realty is focused on executing on the sizable opportunity that lies ahead and this partnership helps to accelerate the monetization of nearly 20% of our industry-leading land bank.”

Greg Wright, Chief Investment Officer of Digital Realty, added, “Partnering with Blackstone marks the culmination of a record year of capital recycling and aptly reflects the shift in our funding strategy, to diversify our sources of capital and bolster our balance sheet in order to capitalize on the significant opportunity that lies ahead.”

Jon Gray, President & COO of Blackstone, said, “Data centers are experiencing once-in-a-generation demand growth, driven by cloud adoption and the AI revolution. Digital infrastructure is one of our highest conviction investment themes as a firm, and this transaction with a trusted data center operator in Digital Realty is another example of how we are investing behind this trend.”

Greg Blank, Senior Managing Director at Blackstone Infrastructure, and Mike Forman, Managing Director at Blackstone Real Estate, added, “Blackstone’s deep pools of capital and extensive sector experience position us to capitalize on the explosive growth in data. We look forward to partnering with Digital Realty to develop high-quality data centers in top markets around the world.”   

The joint venture is scheduled to close in two stages over the course of the first half of 2024, subject to certain regulatory and other approvals, as well as other customary closing conditions.

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