Blackstone And Digital Realty Forge $7B Data Center Alliance: Powering The Future Of Cloud And AI

Blackstone Inc BX and Digital Realty Trust Inc DLR plan to create a joint venture to develop four hyperscale data center campuses across three metro areas on two continents.

The data center campuses, located in Frankfurt, Paris, and Northern Virginia, will have a total estimated development cost of around $7 billion over the next several years. 

Related: Blackstone Eyes European Real Estate Opportunities Amid Easing Central Bank Rates: Report

The campuses are expected to support the construction of 10 data centers with approximately 500 MW of potential IT load capacity, of which 46 MW is under construction and 33% pre-leased. 

The companies project about 20% of the total potential IT load capacity is to be delivered through 2025, with the remaining anticipated in 2026 and beyond. 

"Digital Realty is focused on executing on the sizable opportunity that lies ahead and this partnership helps to accelerate the monetization of nearly 20% of our industry-leading land bank," said Andy Power, President and Chief Executive Officer of Digital Realty. 

Blackstone will have an 80% ownership interest in the joint venture for approximately $700 million of initial capital contributions, while Digital Realty will have a 20% interest. 

The joint venture is projected to close in two stages in H1 2024, subject to certain regulatory and other approvals and other customary closing conditions.

Post closure, 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 customary fees.

"Data centers 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 center operator in Digital Realty is another example of how we are investing behind this trend," commented Jon Gray, President & COO of Blackstone.

Price Action: DLR shares are trading higher by 1.47% at $136, and BX shares are down 0.71% at $113.05 premarket on the last check Friday.