Digital Realty and Blackstone announce hyperscale data centre development JV

Digital Realty, the largest global provider of cloud- and carrier-neutral data centre, colocation and interconnection solutions, and Blackstone has announced that Blackstone-affiliated funds led by Infrastructure, Real Estate and Tactical Opportunities have agreed to establish a joint venture with Digital Realty to develop four hyperscale data centre campuses across three metro areas on two continents. 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 centre 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 centres 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 monetisation 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 capitalise on the significant opportunity that lies ahead.”

Jon Grey, President & COO of Blackstone, said, “Data centres 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 centre 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 capitalise on the explosive growth in data. We look forward to partnering with Digital Realty to develop high-quality data centres in top markets around the world.”

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