Blackstone’s Next Play: Data Centers for AI Boom

Blackstone’s flagship fund is quietly making a major push in the data center sector, recognizing the growing need for the properties as artificial intelligence proliferates.

The Blackstone Real Estate Income Trust turned into a seller in recent months to support its data center play, the Financial Times reported. BREIT has looked to increase liquidity to fund purchases as well as to meet redemption requests.

Since last fall, BREIT hasn’t made any large purchases, turning off the spigot after making roughly $60 billion in acquisitions from the beginning of 2021 through last year’s third quarter. In the interim, the real estate investment trust has parted with $10 billion in assets, including Simply Self Storage for $2 billion.

Much of the proceeds from those sales have gone towards appeasing investors who have been lining up for months to withdraw money, forcing BREIT to limit withdrawals. BREIT has honored more than $8 billion of those requests since November.

But BREIT has also been stockpiling funds to build properties that can handle growing computing demand as artificial intelligence becomes ubiquitous.

Blackstone has already committed more than $8 billion to build data centers for large technology companies. The Blackstone Group has spent more than $1 billion in recent years to buy land for data centers in five states.

The roots of BREIT’s activity in the data center sector were planted two years ago, when it partnered with Blackstone’s infrastructure fund to acquire QTS Realty Trust for $10 billion, according to the Financial Times. Since then, the leased space for the data center-specific REIT has tripled and could double again with the planned investment. The valuation of QTS has doubled since its acquisition.

BREIT has told its investors that the “AI arms race” is a “once-in-a-generation engine for future growth in data centers.” Some officials have even said the data center investment could become its most profitable.

Blackstone is hardly alone in its optimism for AI. Amazon, for one, plans to spend $7.8 billion to develop additional data centers in Ohio for its cloud computing unit.

— Holden Walter-Warner