Data centre leaders announce US$7bn joint venture

Digital Realty and Blackstone collaborate on a US$7bn data centre investment to address the growing demand for hyperscale data centre space

Leading data centre provider Digital Realty and investment firm Blackstone have announced a significant joint venture to develop four hyperscale data centre campuses. This strategic partnership aligns two industry powerhouses to address the growing demand for hyperscale data centre space, particularly from cloud computing providers and other large technology companies.

Key highlights of the joint venture:
  • Scope: The joint venture will focus on constructing four hyperscale data centre campuses in strategic locations across the globe.
  • Capacity: Upon completion, the campuses are expected to support approximately 500 megawatts (MW) of total IT load, demonstrating the immense scale of the project.
  • Investment: Blackstone will acquire an 80% ownership interest in the joint venture for an initial capital contribution of approximately US$700mn. Digital Realty will retain a 20% stake.
  • Cost-Sharing: After the initial investment, the joint venture parties will share the remaining development costs pro rata.
  • Management Expertise: Digital Realty will assume management responsibilities for the joint venture, overseeing the development and day-to-day operations.

The strategic significance of the partnership

This joint venture between Digital Realty and Blackstone represents a significant strategic move for both companies. For Digital Realty, it expands the organisation’s presence in the hyperscale data centre market, a key growth area driven by the increasing demand for data storage and processing. Blackstone, with its substantial capital resources and investment expertise, gains access to a thriving industry with attractive long-term growth prospects.

The joint venture is expected to have a positive impact on the global data centre market. The addition of four new hyperscale data centre campuses will increase the supply of high-quality infrastructure, addressing the growing demand from cloud providers and other data-intensive companies. This additional capacity will help ensure the continued growth of the digital economy and facilitate the rapid adoption of new technologies.

The campuses are being developed in Frankfurt, Paris, and Northern Virginia, at an estimated cost of US$7bn. These campuses are designed to support the construction of 10 data centres with a potential IT load capacity of approximately 500 MW. Currently, 46 MW of this capacity is under construction, and 33% of it has already been leased. The remaining land capacity is in various stages of pre-construction and will be developed according to customer demand. Approximately 20% of the total potential IT load capacity is expected to be operational by 2025, with the rest coming online in 2026 and beyond.

Delivering capacity to meet demand 

Andy Power, President and Chief Executive Officer of Digital Realty, said: "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.

“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, explained: "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 Gray, President and 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."

Overall, this strategic partnership between Digital Realty and Blackstone highlights the immense potential of the data centre market and the growing need for high-performance infrastructure to support the digital revolution. The joint venture is well-positioned to capitalise on this growth and contribute to the development of a robust global data centre network.

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