Lenders including Goldman Sachs are going to market next month with the sixth mortgage-backed securities offering tied to Blackstone-controlled data centers, an endorsement of the asset manager's strategy that demand will keep rising for these properties.
Since Blackstone acquired data center owner QTS Realty Trust in 2021 for $10 billion, data center use has surged through rapid advancements and adoption of artificial intelligence. Blackstone has seen the value of its investment grow accordingly, and lenders have lined up to fund QTS’ newest properties.
With the latest deal, Blackstone will have used CMBS financing to secure $8.7 billion in loans over the past four years backed by QTS data centers, according to CoStar data. Blackstone bought QTS through its funds, including Blackstone Real Estate Income Trust, which now has a 13% stake.
“As AI models continue to make significant leaps in efficiency, we believe this should catalyze more usage and adoption, driving demand for data centers,” Blackstone REIT reported this month in a letter to shareholders. “In fact, amidst recent developments and press around the space, large technology companies such as Meta, Microsoft, Amazon, and Google have announced plans to invest heavily in their digital infrastructure this year."
QTS has a $25 billion development pipeline that is 100% pre-leased to investment-grade technology companies on 15 years or longer contracts at high profit margins, the REIT said. QTS also owns land that could support another $80 billion of development.
"We believe QTS’ land bank, access to power and ability to execute with speed positions us to capture outsized demand in the space,” the REIT added.
Blackstone declined to comment to CoStar News.
Properties backing loan
The upcoming CMBS deal, BX Trust 2025-VLT6, is a $2.05 billion offering backed by three data centers located outside of Richmond in Sandston, Virginia, and one additional data center in Atlanta.
Goldman Sachs is leading a lineup of nine lenders that will originate the loan and issue the securities.
Loan proceeds will be used to refinance existing debt of $1.76 billion, return cash equity of $192.9 million to Blackstone, and fund reserves for buildout of additional capacity, according to Morningstar DBRS, which is rating the offering.
Morningstar DBRS reviewed the appraisal reports prepared by real estate firm Newmark’s valuation and advisory group that concluded an “as-is” value of $3 billion for the four data centers.
Investment-grade tenants account for about 67.8% of leased power in the portfolio, according to Morningstar.
The largest tenant, accounting for 35.5% of the rent, is an investment-grade digital media company with nearly 10 years remaining on its lease.