Digital Realty plans to set up a joint venture with Blackstone-affiliated funds led by Infrastructure, Real Estate, and Tactical Opportunities.

The $7 billion JV will develop four hyperscale data center campuses in Frankfurt, Germany; Paris, France; and Northern Virginia, North America.

Together, they are expected to support 500MW of total IT load across 10 data centers upon full build-out.

46MW is already under construction, and the campuses are 33 percent pre-leased. Around 20 percent of the total potential IT capacity is expected to be delivered through 2025.

“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,” said Andy Power, president and CEO of Digital Realty.

“Digital Realty is focused on executing on the sizable opportunity that lies ahead, and this partnership helps to accelerate the monetization of nearly 20 percent of our industry-leading land bank.”

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

Jon Gray, president and COO of Blackstone, added: “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.”

The two groups will fund their pro rata share of the remaining development costs after the deal closes. Digital Realty will manage the development and day-to-day operations of the joint venture, and will receive customary fees.

The joint venture is scheduled to close in two stages over the course of the first half of 2024, subject to regulatory and other approvals.

In July, Digital Realty announced a joint venture with real estate investment company TPG Real Estate, shifting three already-operating Northern Virginia data centers into a $1.5bn partnership. It also has a $200m JV with Realty Income Corporation.

In Asia, the company has a $1.8bn joint venture with Mitsubishi in Japan and a similar partnership with Brookfield Infrastructure focused on India. Both are developing new data centers.

Blackstone, meanwhile, in July pumped $8bn into data center business QTS to prepare for a “once in a generation” AI boom.