Digital Realty Pays $3.5B for Stake in NoVa Data Centers

Digital Realty has acquired an ownership interest in three hyperscale data centers in Northern Virginia for approximately $3.5 billion from Blackstone-affiliated funds. Total consideration includes $1.2 billion in cash and $2.3 billion in Digital Realty shares.

The portfolio carries a gross value of $7.8 billion, with an expected initial stabilized cap rate exceeding 6.5 percent.

Namely, Digital Realty purchased Blackstone’s 80 percent interest in two 96-megawatt data centers in Manassas, Va., and a 50 percent interest in one 96-megawatt data center in Sterling, Va. The facilities are fully leased to three investment-grade hyperscale tenants, which signed 15-year agreements with annual rent escalations of 3.6 percent.

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The properties were originally part of a $7 billion joint venture created by Digital Realty and Blackstone in late 2023 to develop 10 hyperscale data centers across Northern Virginia, Frankfurt and Paris. Following the current acquisition, Digital Realty has become the sole owner of the three Northern Virginia facilities, while continuing its partnership with Blackstone on the remaining assets.

Earlier this year, Digital Realty closed its first U.S. hyperscale data center fund, securing almost $3.3 billion of total equity commitments. The investment vehicle will focus on owning and developing properties in markets such as Northern Virginia, Charlotte, N.C., Dallas, Atlanta and New York City.

Data centers remain investor darlings

The deal comes as data center owners continue to consolidate their AI and cloud infrastructure portfolios amid sustained demand from hyperscale customers. The transaction also reflects the ongoing investor appetite for Northern Virginia data centers, as the region still boasts the lowest vacancy rate (0.3 percent) and record levels of absorption (some 1148 megawatts), according to a first-quarter CBRE report.

At the end of last year, Ares Management Corp. acquired an operating facility totaling 165 megawatts and a data center site in Northern Virginia. The 314-acre project will come online in multiple phases, with the first one comprising two data centers with 200 megawatts of combined power capacity.