Digital Realty Pays $3.5B for Blackstone's 64% Stake in Three Virginia Data Centers

Digital Realty Trust closed a $3.5 billion acquisition of Blackstone's 64 percent equity interest in three Northern Virginia data centers, paying $1.2 billion in cash and $2.3 billion in stock. The transaction gives Digital Realty full ownership of facilities it already operated as majority partner, eliminating a passive equity holder from assets now worth roughly $5.5 billion on an enterprise basis.

The three centers sit inside the Ashburn-to-Manassas corridor, the world's densest concentration of hyperscale capacity and the primary landing point for transatlantic fiber. Digital Realty has held controlling stakes since the original joint-venture formation with Blackstone in prior development rounds, but this buyout removes structural friction at a moment when power allocations in Loudoun County are being parceled out in 10-megawatt increments rather than the 50-to-100-megawatt blocks that were standard eighteen months ago. Dominion Energy has publicly stated it cannot guarantee new interconnection capacity before 2027 without transmission upgrades. Digital Realty now owns the entire stack—land, power contracts, and existing tenant relationships—without needing Blackstone consent for capital deployment or lease restructuring.

The $2.3 billion equity component is the largest stock consideration Digital Realty has issued in a single transaction since the 2017 DuPont Fabros acquisition. Blackstone receives approximately 82 million shares at current pricing, a roughly 8 percent dilution to existing Digital Realty holders, but the REIT maintains its investment-grade rating and avoids tapping the unsecured bond market at spreads that widened 40 basis points in the past ninety days. The deal structure suggests Digital Realty views its equity as undervalued relative to the replacement cost of comparable Northern Virginia capacity, where new builds are penciling at $18 million per megawatt versus the implied $11 million per megawatt Digital Realty is paying in this buyout. Blackstone exits with a blended return in the mid-teens on capital deployed between 2019 and 2021, converting illiquid data-center equity into a liquid DLR position it can distribute or sell without moving the secondary market.

What matters for allocators is the power moat, not the building count. Northern Virginia represents 35 percent of total U.S. hyperscale supply, but Dominion's moratorium on new utility commitments means existing power contracts have become the bottleneck asset, not physical square footage. Digital Realty's three centers carry legacy interconnection agreements predating the current grid constraints, giving the REIT the ability to re-lease space at premiums that reflect power scarcity rather than construction cost. The company has already guided to contractual rent escalators of 4 to 6 percent annually on hyperscale renewals, but spot leases on powered shell in Ashburn are clearing closer to 12 percent year-over-year increases when power allocation is included in the package.

Operators should track two follow-on events. First, whether Digital Realty announces a preferred equity or joint-venture capital raise within sixty days to reload its balance sheet for the next acquisition, likely targeting European facilities where power constraints are less binding and yields remain wider. Second, watch for Blackstone's DLR share distribution to limited partners in its real-estate funds, expected before the March 31 quarter close. If Blackstone retains the equity rather than distributing it, that signals the firm views data-center REITs as undervalued relative to private comps it continues to buy at higher multiples in secondary transactions.

Digital Realty now controls 22 megawatts of Northern Virginia power capacity without a minority partner. Dominion's next transmission hearing is scheduled for May.