Data Center Boom: Digital Realty and Blackstone Team Up for $7B Hyperscale Expansion

By Greg Tavarez, TMCnet Editor  |  December 28, 2023

Let’s talk about Digital Realty.

Digital Realty delivers the full spectrum of data center, colocation and interconnection solutions, which brings companies and data together. Through its platforms, Digital Realty gives its customers access to the connected communities that matter to them with a global data center footprint of 300-plus facilities in 50-plus metros across more than 25 countries.

For example, PlatformDIGITAL, the company's global data center platform, provides customers with a secure data meeting place and a proven Pervasive Datacenter Architecture solution methodology for powering innovation and efficiently managing Data Gravity challenges.

With that said, Digital Realty was finding it difficult to deliver capacity to meet the demand of its hyperscale customers. To overcome that hurdle, Digital Realty and global investment firm Blackstone joined forces to develop four massive hyperscale data center campuses across three major metropolitan areas on two continents, with a total estimated cost of $7 billion over the coming years.

The planned campuses will rise in key strategic locations: Frankfurt and Paris in Europe, and Northern Virginia in the U.S. These tech hubs represent a confluence of strong digital infrastructure, robust connectivity and burgeoning demand from major cloud providers and hyperscale players.

This strategic partnership signals a bold commitment to meet the surging demand for data center capacity driven by the growth of cloud computing, streaming services and data-hungry internet applications.

The campuses are envisioned to house a total of 10 data centers, with a potential IT load capacity of approximately 500 megawatts upon full buildout. Notably, 46 MW of this capacity is already under construction and has secured 33% pre-leasing commitments, highlighting the immediate market appetite for these facilities.

“Data centers are experiencing once-in-a-generation demand growth, driven by cloud adoption and the AI revolution,” Jon Gray, President and Chief Operating Officer of Blackstone. “Digital infrastructure is one of our highest conviction investment themes as a firm, and this transaction with a trusted data center operator in Digital Realty is another example of how we are investing behind this trend."

The joint venture, spearheaded by Blackstone's Infrastructure, Real Estate, and Tactical Opportunities arm, will see the investment firm acquire an 80% ownership stake for an initial $700 million capital contribution. Digital Realty will hold the remaining 20% share and will handle the development and day-to-day operations, earning customary fees for its expertise.

“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,” said Greg Wright, Chief Investment Officer of Digital Realty.

The joint venture is scheduled to close in two stages over the course of the first half of 2024, subject to certain regulatory and other approvals, as well as other customary closing conditions.

Edited by Alex Passett
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