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Digital Realty (DLR), Blackstone Unveil $7B Data Center Deal
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Digital Realty (DLR - Free Report) , the leading global provider of cloud and carrier-neutral data center solutions, recently entered into a groundbreaking joint venture with Blackstone Inc. (BX - Free Report) , a global alternative asset manager. The $7 billion venture aims to develop four hyperscale data center campuses across Frankfurt, Paris and Northern Virginia, supporting approximately 500 megawatts of total IT load upon full build-out.
In this strategic partnership, Blackstone-affiliated funds specializing in Infrastructure, Real Estate and Tactical Opportunities will acquire an 80% ownership stake in the joint venture for an initial capital contribution of around $700 million. Digital Realty will retain a 20% interest and will manage the day-to-day operations of the joint venture, earning customary fees.
The four campuses are slated to host 10 data centers, with a total estimated development cost of $7 billion over the next several years. Presently, 46 MW of the potential 500 MW IT load capacity is under construction, with a commendable 33% pre-leasing. The remaining land capacity is in various pre-construction phases, anticipated to meet growing customer demand. It is projected that 20% of the total potential IT load capacity will be delivered by 2025, with the remaining expected in 2026 and beyond.
Andy Power, the president and CEO of Digital Realty, emphasized the significance of partnering with Blackstone, stating, "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." This collaboration accelerates the monetization of nearly 20% of Digital Realty's industry-leading land bank.
Greg Wright, the chief investment officer of Digital Realty, highlighted the venture as the culmination of a record year of capital recycling, emphasizing the shift in funding strategy to diversify capital sources and strengthen the balance sheet.
The joint venture, scheduled to close in two stages during the first half of 2024, is subject to regulatory nods, other approvals and customary closing conditions. Once completed, the collaboration is poised to capitalize on the explosive growth in data, combining Digital Realty's expertise in data center operations with Blackstone's extensive capital resources and sector experience.
In conclusion, DLR's strategic partnership with Blackstone positions the company for accelerated growth in the hyperscale data center market. As data centers experience unprecedented demand growth, this collaboration leverages the strengths of both entities to capitalize on the significant opportunities presented by the evolving digital landscape. Investors should keep a close eye on Digital Realty as it navigates this transformative joint venture to meet the evolving needs of the data-driven world.
Shares of this Zacks Rank #3 (Hold) company have increased 28.6% in the past six months, outperforming the industry’s rise of 2.7%.
The Zacks Consensus Estimate for Lamar’s current-year FFO per share of $7.31 suggests projected growth of 1.7%.
The Zacks Consensus Estimate for STAG Industrial’s 2023 FFO per share has moved marginally upward in the past two months to $2.28 and indicates an estimated increase of 3.2% year over year.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.
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Digital Realty (DLR), Blackstone Unveil $7B Data Center Deal
Digital Realty (DLR - Free Report) , the leading global provider of cloud and carrier-neutral data center solutions, recently entered into a groundbreaking joint venture with Blackstone Inc. (BX - Free Report) , a global alternative asset manager. The $7 billion venture aims to develop four hyperscale data center campuses across Frankfurt, Paris and Northern Virginia, supporting approximately 500 megawatts of total IT load upon full build-out.
In this strategic partnership, Blackstone-affiliated funds specializing in Infrastructure, Real Estate and Tactical Opportunities will acquire an 80% ownership stake in the joint venture for an initial capital contribution of around $700 million. Digital Realty will retain a 20% interest and will manage the day-to-day operations of the joint venture, earning customary fees.
The four campuses are slated to host 10 data centers, with a total estimated development cost of $7 billion over the next several years. Presently, 46 MW of the potential 500 MW IT load capacity is under construction, with a commendable 33% pre-leasing. The remaining land capacity is in various pre-construction phases, anticipated to meet growing customer demand. It is projected that 20% of the total potential IT load capacity will be delivered by 2025, with the remaining expected in 2026 and beyond.
Andy Power, the president and CEO of Digital Realty, emphasized the significance of partnering with Blackstone, stating, "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." This collaboration accelerates the monetization of nearly 20% of Digital Realty's industry-leading land bank.
Greg Wright, the chief investment officer of Digital Realty, highlighted the venture as the culmination of a record year of capital recycling, emphasizing the shift in funding strategy to diversify capital sources and strengthen the balance sheet.
The joint venture, scheduled to close in two stages during the first half of 2024, is subject to regulatory nods, other approvals and customary closing conditions. Once completed, the collaboration is poised to capitalize on the explosive growth in data, combining Digital Realty's expertise in data center operations with Blackstone's extensive capital resources and sector experience.
In conclusion, DLR's strategic partnership with Blackstone positions the company for accelerated growth in the hyperscale data center market. As data centers experience unprecedented demand growth, this collaboration leverages the strengths of both entities to capitalize on the significant opportunities presented by the evolving digital landscape. Investors should keep a close eye on Digital Realty as it navigates this transformative joint venture to meet the evolving needs of the data-driven world.
Shares of this Zacks Rank #3 (Hold) company have increased 28.6% in the past six months, outperforming the industry’s rise of 2.7%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are Lamar Advertising Company (LAMR - Free Report) and STAG Industrial, Inc. (STAG - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Lamar’s current-year FFO per share of $7.31 suggests projected growth of 1.7%.
The Zacks Consensus Estimate for STAG Industrial’s 2023 FFO per share has moved marginally upward in the past two months to $2.28 and indicates an estimated increase of 3.2% year over year.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.