Digital Realty and Blackstone forge $7bn data center joint venture

Digital Realty (NYSE: DLR), a leader in cloud- and carrier-neutral data center solutions, in collaboration with Blackstone Inc. (NYSE: BX), has announced a groundbreaking joint venture. This partnership, led by Blackstone-affiliated funds from Infrastructure, Real Estate, and Tactical Opportunities, aims to develop four hyperscale data center campuses across three metro areas on two continents. The total estimated development cost of this venture is approximately $7 billion, set to unfold over the next several years.

Expanding Hyperscale Data Center Capacities

These new data center campuses, located in Frankfurt, Paris, and Northern Virginia, are poised to support about 500 megawatts (MW) of total IT load upon full build-out. The developments plan to feature 10 data centers with approximately 500 MW of potential IT load capacity, of which 46 MW is already under construction and 33% pre-leased. The remaining land capacity is in various pre-construction phases, set to be developed in response to customer demand.

Financial Structure of the Venture

Blackstone will acquire an 80% ownership interest in the joint venture for approximately $700 million of initial capital contributions. Digital Realty, maintaining a 20% interest, will manage the development and operations, for which it will receive customary fees. The subsequent financing for the development costs will be proportionately shared by the joint venture parties.

Leaders’ Perspectives on the Joint Venture

Andy Power, President and CEO of Digital Realty, highlighted the partnership’s role in meeting the demands of hyperscale customers and accessing private capital. Greg Wright, Chief Investment Officer of Digital Realty, reflected on the shift in funding strategy, diversifying capital sources to seize the significant opportunities ahead.

Jon Gray, President & COO of Blackstone, emphasized the once-in-a-generation demand growth in data centers, driven by cloud adoption and AI advancements. Greg Blank and Mike Forman of Blackstone stressed the potential to capitalize on the explosive growth in data, leveraging Digital Realty’s trusted operations.

Closing and Future Developments

The joint venture is scheduled to close in two stages throughout the first half of 2024, subject to regulatory approvals and customary closing conditions. Latham & Watkins and Simpson Thacher & Bartlett LLP are serving as legal counsels for Digital Realty and Blackstone, respectively.

This collaboration between Digital Realty and Blackstone Inc. marks a significant milestone in the expansion of global digital infrastructure, showcasing a strategic blend of technology and investment to develop state-of-the-art hyperscale data centers.