Blackstone Pumps $8B into QTS for AI Data Centers
QTS has tripled its leased space and doubled its value since the BREIT acquisition.
Blackstone Real Estate Income Trust (BREIT) is betting big that the generative AI arms race among tech giants will drive a wave of data center expansion to meet the massive processing needs of large language models.
The $70B fund is investing $8B in a data center expansion of QTS, according to a report in the Financial Times.
“Large technology companies are in the midst of an AI arms race which we believe will be a once-in-a-generation engine for future growth in data centers and [which] is driving tremendous demand on the ground,” BREIT told investors, FT reported.
Tech giants including like Microsoft, Google, Meta and Amazon will need to invest about $1T to build the digital infrastructure to handle the soaring computing demand from generative AI, according to independent research firm Dell’Oro Group.
QTS has exponentially expanded its footprint—and nearly doubled its value—since BREIT and two other Blackstone funds acquired QTS in 2021 for $10B. The data center player has tripled its leased space since the acquisition and its value is approaching $20B, the report said.
FT said QTS has spent $1B buying land for new data centers in five US states, including 400 acres in South Carolina the company acquired for $11M. The company plans to double its existing capacity, with the development cost for each new facility pegged at $1B.
In November, Prince William County in Virginia approved a 2,139-acre, 28M SF data center cluster that will sit in proximity to the Civil War battlefield at Manassas. QTS will be one of the anchor tenants of what will be known as the Prince William Digital Gateway.
The encroachment of data centers into rural areas of Prince William County touched off a pitched battle with NIMBY activists last year. Anti-data center activists had specifically drawn their battle lines around the historic site, also known as the Battle of Bull Run. Instead, the county’s Board of Supervisors gave the green light—in a 5-2 vote during a 14-hour session to the Digital Gateway project.
In March, QTS produced updated plans which indicate the company will build 16 data centers across 850 acres at Prince William Digital Gateway.
In recent weeks, BREIT has sold off $10B in assets across a range of other sectors, including a deal earlier this month to sell Simply Self Storage to Public Storage for $2.2B, as well as the $800M sales of a Texas resort. Last year, BREIT sold a 49% stake in two Las Vegas casinos for $2.8B.
The fund also has paid out $9.4B in redemption requests made by investors since the end of November, when BREIT started prorating redemptions.