A trio of partners has formed a venture to invest in hyperscale data centers, beginning stateside with the intent to expand into Europe.
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San Diego-based REIT Realty Income is joining data center investment management company Cloud Capital and an undisclosed global institutional investor in the venture, both named partners announced this week.
The partners are focused on “stabilized hyperscale assets leased to investment-grade tenants on long duration, triple-net leases,” Realty said in a Tuesday press release.
Out of the gate, the venture is poised to acquire three assets in Northern Virginia's Data Center Alley valued at over $6B. The first acquisition is expected to close in the third quarter of the year. That data center is fully leased. The venture expects to acquire the two other assets, which are still under development, once they are completed.
Realty said it expects to hold a 45% equity stake in the initial three-asset investment, with a $1.4B investment over time. It intends to fund the initial portion of that sum, $700M, between the second and third quarters of the year.
“Today's announcement affirms the strength of our business model and its ability to translate across sectors, including digital infrastructure,” Realty Income CEO Sumit Roy said in the release.
Cloud Capital, which has acquired 30 data center assets globally since its founding in 2020, will hold a minority investment in the joint venture's initial three assets, according to Realty. Its sister company, CloudHQ, will provide property management and development management services to the portfolio.
“As the digital infrastructure market continues to mature, specialized sector expertise and proprietary sourcing are increasingly critical,” Cloud Capital President and Chief Investment Officer Shariar Mohajer said in a separate release.
“Our dedicated platform, longstanding industry relationships and vertically integrated capabilities enable us to access differentiated investment opportunities and build portfolios with resilient cash flow, attractive long-term fundamentals, and long-term value creation for our partners,” he added.
Realty Income entered the data center market in November 2023 when it partnered with data center REIT Digital Realty to fund two build-to-suit Northern Virginia data centers. At the time, Realty Income invested $200M for an 80% equity stake in the portfolio.
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