Key Takeaways:
Digital Realty is paying $3.5 billion to take control of three fully leased hyperscale data centers in the world's largest data center market.
Digital Realty agreed to acquire Blackstone's 64% stake in three Northern Virginia data centers for $3.5 billion, adding 288 megawatts of hyperscale capacity in the top US data center market.
"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," Greg Wright, chief investment officer at Digital Realty, said.
The portfolio comprises two 96 MW facilities in Manassas and one 96 MW facility on the Digital Dulles campus in Sterling, all 100% leased to three investment-grade hyperscale customers with a blended AA- credit rating. Digital Realty paid $1.2 billion in cash and $2.3 billion in stock, representing a gross property value of $7.8 billion at an expected stabilized cap rate above 6.5%. Two of the data centers are expected to stabilize in the first half of 2027, with the third following in the first half of 2028.
The deal deepens Digital Realty's exposure to Northern Virginia, which hosts more than a third of the world's internet traffic, as AI and cloud demand drive a construction boom. Blackstone, which will also sell $2.35 billion of Digital Realty shares through Morgan Stanley, retains joint venture positions with Digital Realty in Paris and Frankfurt.
The transaction is expected to be accretive to Digital Realty's core funds from operations per share in both 2027 and 2028 as development completes and rents commence, according to Chief Financial Officer Matt Mercier. The 15-year leases carry 3.6% annual rent escalators, providing predictable revenue growth in an asset class where power constraints are making new supply increasingly difficult to bring online.
Consolidating the lead in a power-constrained market
The deal strengthens Digital Realty's position as the largest global data center provider, with more than 300 facilities across 55 metros in 30 countries. Blackstone, meanwhile, continues to monetize its data center investments after a rapid build-out phase. The firm's data center portfolio now exceeds $55 billion, including full ownership of QTS and CoreWeave, and it recently completed the $16.1 billion acquisition of Australian data center operator AirTrunk. A QTS affiliate also closed on nearly $500 million in land purchases in Bessemer, Alabama, for a hyperscale project, signaling that Blackstone is rotating capital rather than exiting the sector.
What the share sale means for investors
Digital Realty shares will absorb $2.35 billion of new supply as Blackstone sells its stake through an underwritten offering by Morgan Stanley. The company itself receives none of the proceeds — the shares are being sold by Blackstone alone. For investors, the question is whether the dilution from the share sale offsets the accretion from the asset purchase. The deal's 6.5% stabilized cap rate compares favorably with Digital Realty's cost of capital, and the AA- credit quality of the tenants reduces lease-up risk in a market where vacancy rates for new hyperscale supply remain near zero.
This article is for informational purposes only and does not constitute investment advice.
