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Blackstone, Digital Realty Form $7B Data Center Joint Venture

Data center REIT Digital Realty and investment giant Blackstone are partnering on the development of 10 hyperscale data centers.


The $7B development joint venture plans to build data centers on four campuses in Paris, Northern Virginia and Frankfurt, Germany, all scheduled to be built within the next six years, the companies announced Thursday. Digital Realty plans to operate and lease the facilities, while Blackstone would provide the bulk of the development capital. 

The deal, expected to close next year, has Blackstone taking an 80% ownership stake and making an initial capital contribution of $700M. The partners would fund the remaining development on a pro rata basis after closing. 

In all, the data centers included in the partnership are expected to provide around 500 megawatts of capacity for cloud providers and other Big Tech tenants. Digital Realty already owns the land and has secured the power commitments for all four planned campuses, The Wall Street Journal reported.

Around 20% of the JV’s planned development is expected to be delivered by 2025, with the rest delivered in 2026 and beyond, the companies said. Forty-six megawatts of the project are already being built by Digital Realty, with a third of that capacity pre-leased. 

This is far from Blackstone’s first foray into the data center business. The investment giant acquired QTS Realty Trust in 2021, a take-private deal valued at $10B, and it has been aggressively fueling its expansion ever since. QTS’ development pipeline has grown to $15B from just $1B in 2021, the WSJ reported.

For Digital Realty, which owns or operates around 300 data centers globally, the deal with Blackstone is its second development joint venture in less than a month. On Nov. 13, Digital Realty announced a partnership with REIT Realty Income to complete a pair of data centers in Northern Virginia. Realty Income invested $200M to acquire an 80% interest in two pre-leased facilities, which total 48 MW of capacity. 

Digital Realty’s leadership had hinted that multiple development joint ventures were on the horizon during its earnings call in late October. Although it is one of the largest global operators and developers in the booming data center sector, the firm has faced skepticism from investors over its ability to fund growth while simultaneously increasing liquidity and lowering its debt load from levels that had analysts nervous. 

Digital Realty’s leadership has framed the joint ventures as a key part of a broader effort to fund new development while raising cash and lowering debt on the company’s balance sheet. 

"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," Digital Realty Chief Investment Officer Greg Wright said in a statement Thursday.