Digital Realty Falls After $3.5B Blackstone Buyout

Digital Realty announced a $3.5 billion agreement to acquire Blackstone’s blended 64% equity interest in three hyperscale data centres in Northern Virginia. The consideration consists of $1.2 billion in cash and $2.3 billion in Digital Realty stock.

The assets carry a gross value of $7.8 billion, including debt and remaining development capital expenditure. The package includes Blackstone’s 80% stakes in two 96-megawatt facilities in Manassas and a 50% interest in a 96-megawatt site in Sterling. Each property is fully leased to investment-grade hyperscale customers under 15-year contracts, with a blended average tenant credit rating of AA- and annual rent escalators of 3.6%.

Shares fell roughly 5% in premarket trading on the announcement. Investors cited near-term dilution from the $2.3 billion stock component, which increases shares outstanding, and concerns about funding the $1.2 billion cash portion given high development costs in the data-centre sector. Market reaction followed recent capital activity by Digital Realty, including an at-the-market share offering that raised about $1.2 billion, land purchases totaling roughly 1,440 acres near Kansas City for future development, and separate moves to raise its stake in Teraco and acquire Columbia Capital.

Analysts noted the deal’s initial stabilized capitalization rate is above 6.5% for the fully leased hyperscale facilities. Some analysts pointed to ongoing demand from cloud and artificial intelligence customers as a factor that has been associated with compression in cap rates for hyperscale properties.

Digital Realty’s finance team projected the acquisition will add to core funds from operations per share once the assets are stabilized. Digital Realty CFO Matt Mercier stated, “This transaction is expected to be accretive to Core FFO per share in each of 2027 and 2028, as development is completed and rents commence.” Greg Wright, chief investment officer, characterized the deal as an opportunity to increase ownership in fully leased hyperscale assets.

The company highlighted the long leases, investment-grade tenants and built-in rent escalators as elements that will support cash flow once development is complete and the facilities reach stabilization.