Digital Realty Pays $3.5B for Blackstone Data Center Stakes
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Digital Realty Pays $3.5B for Blackstone Data Center Stakes The deal reflects the operator’s strategy to scale its footprint amid surging AI-driven demand for data center infrastructure, while potentially signaling Blackstone’s shift toward higher-return investments. Digital Realty has agreed to buy back the ownership interests of Blackstone-managed funds in three fully leased Northern Virginia data centers for $3.5 billion, a cash-and-stock transaction that would give it 100% control of facilities totaling 288 MW of IT capacity. The purchase follows a 2023 joint venture under which Digital Realty and Blackstone partnered to develop hyperscale data centers in Northern Virginia, Paris, and Frankfurt. Under that agreement, Blackstone acquired majority ownership interests while Digital Realty continued to develop and operate the facilities. The deal includes 80% ownership interests in two 96 MW data centers in Manassas, Virginia, and a 50% ownership interest in one 96 MW data center in Sterling, Virginia, held by Blackstone-managed funds. At 100% ownership, the assets are valued at approximately $7.8 billion, including assumed debt and remaining capital expenditures to complete development. Digital Realty will pay approximately $1.2 billion in cash and approximately $2.3 billion in common stock. The companies said the purchase is expected to close on June 30, subject to customary closing conditions. “This transaction reflects the next phase of that relationship, allowing us to increase our ownership in a portfolio of fully leased, high-quality hyperscale assets,” said Greg Wright, chief investment officer at Digital Realty, in a statement. Portfolio Is Fully Leased According to the company, the three data centers are fully leased to three investment-grade hyperscale customers under leases averaging 15 years. The portfolio has a blended average AA- customer credit rating and average annual rent escalators of 3.6%. Two of the data centers are expected to stabilize in the first half of 2027, with the third in the first half of 2028. In a statement, Matt Mercier, chief financial officer at Digital Realty, said the purchase is expected to be accretive to Core Funds From Operations per share in both 2027 and 2028 as development is completed and rental revenue begins. Why Scale and Power Access Win in the AI Buildout Industry analysts see the move as a scale play aligned with accelerating AI-driven demand. “For Digital Realty, this makes perfect sense," said Steven Dickens, CEO and principal analyst at HyperFrame Research. “The move will give them more scale and footprint at a time when demand is voracious, and scale is a clear path to being the winner in AI. Digital Realty is proving to be a critical lynchpin in AI build-out, and its recent efforts to bring higher-value services, particularly in cross-cloud interconnect, are starting to move it up the AI stack at a crucial stage in the AI cycle. “Having more interconnect points, and crucially more available, rapidly deployable data center power and space, is a key differentiator. The company is winning because of scale and execution, and this news is yet another datapoint on the curve.” Dickens added that the deal may also reflect Blackstone’s capital allocation strategy: “Is Blackstone acknowledging that the returns on DCs are going to be similar to those of utility companies, and they are freeing capital for higher-margin returns?” The companies said they will continue partnering on the remaining data center investments in their joint ventures in Northern Virginia, Paris, and Frankfurt. The purchase comes as demand for hyperscale infrastructure continues to rise. According to JLL, global data center capacity could nearly double to 200 GW by 2030, driven largely by hyperscale cloud expansion and AI demand. McKinsey & Company has noted that AI workloads are reshaping data center economics, power planning, and leasing decisions, and their influence is already evident in most new builds.
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