Blackstone Moving on Another Data Center Venture

An affiliate of New York City private equity giant Blackstone Group is expanding its holdings in data center properties with Corporate Office Properties Trust.

In a new joint venture, Blackstone Real Estate has agreed to buy a 90% interest in eight single-tenant data center properties, totaling 1.3 million square feet and valued at $293 million, from Corporate Office Properties Trust, which will keep the remaining 10%.

This is the second time a Blackstone entity has teamed up with COPT on a joint venture in the real estate investment trust’s data centers, having completed the first in the summer of 2019.

In the latest venture announced this week, Blackstone Real Estate had already acquired two of COPT’s wholly owned data center properties valued at $90 million. The second part of the deal has Blackstone Real Estate acquiring a 90% interest in six other data centers.

COPT officials would not identify any of the properties involved due to confidentiality agreements with the tenants.

COPT currently owns six data center properties in another joint venture with GI Partners. In COPT’s third-quarter earnings report filed with the Securities and Exchange Commission, the REIT said it had a firm commitment to sell its partnership interest in that venture.

COPT would not confirm that those were the properties being sold to Blackstone Real Estate.

All eight of the centers are fully leased out to single tenants, a COPT spokesperson said. COPT has developed several data centers for tenants tied to the defense and information technology industries.

“We believe data centers will continue to benefit from strong secular tailwinds, including immense demand growth as internet traffic and the use of cloud services continue to rise,” Tyler Henritze, head of acquisitions in the Americas for Blackstone Real Estate, said in a statement.

The global coronavirus pandemic created a 40% surge in internet traffic driven by growth in video streaming, video conferencing, online gaming and social networking, according to the International Energy Agency. And new technologies such as artificial intelligence and the advanced 5G network are expected to drive further use.

The sale of the data center properties will net COPT about $165 million, which it will use to pay down debt, the REIT said in its earnings report.

The remaining six sales are expected to close before the end of the year.

In June 2019, COPT completed a similar sale of seven single-tenant data center properties to a joint venture with Blackstone Real Estate Income Trust. Those centers contained 1.2 million square feet of warehouse space and sold for $265 million.