What Does Blackstone And Digital Realty’s $7 Billion Joint Venture Mean For Data-driven Businesses?

The modern world runs on data.

It doesn’t matter if you’re talking about individuals or businesses, data is the most valued currency at the moment.

Businesses especially thrive on data. While it’s important for businesses to get their hands on as much data as possible, it’s also vital to store, access and analyze them effectively. This is why businesses are always on the lookout for comprehensive database management strategies, leading to major investments in data centers.

Recently, we reported that Databricks was making moves to enhance their data management services.

Now, Blackstone Inc., the world’s largest alternative asset management company and Digital Realty, the largest global provider of cloud- and carrier-neutral data center, colocation and interconnection solutions, have jointly brought us some interesting news!

What’s the partnership all about? Let’s explore!
 

What Did The Two Companies Announce?

 

• Through a news release, Blackstone announced the creation of a joint venture with Digital Realty.

• The purpose of the JV is to develop four hyperscale data center campuses across three metro areas on two continents and will be located in Frankfurt, Paris and Northern Virginia.

• The total estimated cost of development will be approximately $7 billion and will span several years.

• The campuses are planned to support 10 data centers with around 500 megawatts (MW) of total IT load capacity upon full build, out of which 46 MW is under construction, with 33% pre-leased.

• The remaining land capacity is currently in varying phases of pre-construction and is expected to be completed soon. 

• As per the release, approximately 20% of the total potential IT load capacity is expected to be delivered through 2025. The delivery of the balance is slated for 2026 and beyond.

 

What Does The Joint Venture Comprise Of?

 

• While Blackstone will possess an ownership interest of 80%, Digital Realty will have 20%.

• This will also see Blackstone have an initial capital contribution of $700 million.

• The joint venture, which is subject to certain regulatory and other approvals and other customary closing conditions, will be closed in two stages over the course of the first half of 2024.

• Post-closing of the deal, both companies will fund the remaining share of development costs.

• Ahead of this, Digital Realty will manage the development and day-to-day operations for which it will receive its customary fees.

 

What Did The Stakeholders Say?

 

• 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 monetization of nearly 20% of our industry-leading land bank.”

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

• Jon Gray, President & COO of Blackstone, said, “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.”

• Greg Blank, Sr. MD at Blackstone Infrastructure and Mike Forman, MD at Blackstone Real Estate, said, “Blackstone’s deep pools of capital and extensive sector experience position us to capitalize on the explosive growth in data. We look forward to partnering with Digital Realty to develop high-quality data centers in top markets around the world.”

Do you think the joint venture between Blackstone and Digital Realty will spark other companies to make similar tie-ups? Will this partnership enhance data management for Digital Realty’s clients?

Let us know in the comments below!