MANASSAS AND STERLING, VA. — Data center firm Digital Realty has agreed to purchase a $3.5 billion equity stake in three data centers located in the Northern Virginia cities of Sterling and Manassas from Blackstone-affiliated funds. The portfolio maintains a gross value of $7.8 billion, reflecting an expected initial stabilized capitalization rate of over 6.5 percent.
The portfolio is comprised of three data centers — two in Manassas, one in Sterling — which each contain 96 megawatts of IT capacity. Digital Realty will purchase Blackstone’s 80 percent interest in the Manassas properties and 50 percent interest in the Sterling facility, including assumed debt and remaining capital expenditures to complete the ongoing development.
Two of the data centers are expected to stabilize in the first half of 2027 while the third is anticipated to stabilize in 2028. The data centers are all fully leased for 15 years to investment-grade hyperscale customers, and rent will escalate annually by 3.6 percent.
The transaction will see Digital Realty pay Blackstone $1.2 billion in cash as well as $2.3 billion in Digital Realty shares for a blended 64 percent equity interest in the properties. Digital Realty was an original partner in the $7 billion joint venture that these properties are a part of, which sought to add 10 hyperscale data centers across Northern Virginia.
“We have developed a strong partnership with Blackstone through the successful ongoing development of these assets, and we continue to work together across the remaining data center investments in our joint ventures in Northern Virginia, Paris and Frankfurt,” says Greg Wright, Chief Investment Officer of Digital Realty. “This transaction reflects the next phase of that relationship, allowing us to increase our ownership in a portfolio of fully leased, high quality hyperscale assets that extend our runway for growth and pipeline of product for the continued expansion of our strategic private capital platform.”
The transaction is expected to close on June 30, subject to customary closing conditions.
Northern Virginia has seen an explosion of data centers in the last few years. The Northern Virginia Regional Commission estimates that 70 percent of global internet traffic flows through the more than 250 data centers in the region. Ashburn, Va., which is located just 10 minutes west of Sterling, is colloquially known as “Data Center Alley.”
— Matthew Auchincloss