Digital Realty Acquires Blackstone's Stake in Virginia Data Centers

What happened

Digital Realty acquired Blackstone's 80% interest in two 96-megawatt data centers in Manassas, Virginia, and its 50% interest in another 96-megawatt facility in Sterling. The transaction values the three properties at $7.8 billion and was funded with $1.2 billion in cash and $2.3 billion in Digital Realty shares. The deal closed on Tuesday, with Blackstone affiliates immediately offering their newly acquired Digital Realty stock at up to $188 per share, a 2.9% discount to the prior day's closing price of $190.58.

Why it matters

The acquisition increases Digital Realty's ownership in fully leased hyperscale assets located in Northern Virginia, widely considered the country's largest and most strategic data center market. For Digital Realty, the deal expands its control over high-quality infrastructure in a region critical to hyperscale computing and AI workloads. For Blackstone, the sale represents a partial exit from investments made in 2023, allowing it to realise gains on data center assets while retaining exposure through remaining joint ventures. Blackstone still holds more than $150 billion in data center assets and has identified another $160 billion of pipeline opportunities.

Bigger picture

The transaction reflects Wall Street's continued capital deployment into data centers driven by AI infrastructure demand, even as some projects face growing local opposition. Northern Virginia, known as Data Center Alley, has seen intense investment activity but also rising resistance from residents concerned about resource consumption, environmental impact, and quality of life. A recent Gallup poll found 70% of Americans oppose AI data center construction in their local areas, citing excessive water and energy use. Some developers, including Compass Datacenters backed by Brookfield, have already withdrawn from planned projects due to community pushback. Blackstone, which acquired QTS in 2021 and AirTrunk in 2024, manages over $1.3 trillion and bills itself as the largest global data center provider. It launched Blackstone Digital Infrastructure Trust in May 2024 to acquire already built and leased properties benefiting from the AI boom.

What to watch

Watch for Digital Realty's integration of the newly acquired assets and whether it can maintain full occupancy in a market facing regulatory and community headwinds. Monitor how Blackstone deploys the $3.5 billion in proceeds and whether it continues to scale back data center exposure or pursues new pipeline opportunities from its $160 billion identified backlog. Broader sector trends include ongoing local opposition to new data center construction, potential regulatory constraints around resource usage, and whether AI-driven demand growth justifies current valuations. The performance of Blackstone Digital Infrastructure Trust and investor appetite for data center assets will signal market confidence in the AI infrastructure thesis.