Blackstone Continues To Expand Its Data Center Footprint On The Heels Of A $3.5 Billion Refinancing Deal

Blackstone (NYSE:BK) continues to expand its daat center footprint as artificial intelligence elevates demand for these buildings. Lenders also feel optimistic about data centers, based on Blackstone's being able to refinance 10 data centers owned by subsidiary QTS in a $3.5 billion deal, according to BisNow.

An Eightfold Expansion

Blackstone entered the data center industry when it acquired QTS Realty Trust in 2021 for $10 billion. QTS now operates more than 70 data centers, marking an eightfold increase in less than five years. 

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Those facilities support more than three gigawatts of capacity, making it a viable option for hyperscalers like Meta Platforms (NASDAQ:META) and Amazon (NASDAQ:AMZN) that need more energy for their AI ambitions. 

Blackstone's latest refinance unlocks more capital from its data center portfolio. The funds give the firm flexibility to buy additional facilities or use the cash for other business segments. 

High Capital Requirements Align With Surging Demand

Data centers require significant capital to go from concepts to finished buildings, and that's part of the reason why companies like Blackstone are refinancing their existing properties. Financing makes it easier to build more facilities, and the strong demand for AI and cloud computing suggests that more capital will flow into the industry.

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These facilities currently consume 5% of U.S. power, and that figure is set to double thanks to a $6.7 trillion buildout. Heavy data center concentrations are associated with higher electricity bills, according to CNBC. Higher energy costs and intense capital requirements haven't stopped companies from building and scaling their data center portfolios.

Tech giants have also committed to lucrative deals that make these facilities more attractive in the long run. Meta announced a $27 billion joint venture with Blue Owl Capital (NYSE:OWL) in October to develop the Hyperion data center campus in Richland Parish, Louisiana. 

Lower Interest Rates Make Debt More Attractive

The refinancing deal comes as interest rates continue to drop. The Federal Reserve has cut interest rates twice this year, with the possibility of a third rate cut in December. Lower rates make it more affordable for Blackstone and other firms to borrow money. As rates drop, demand for commercial-backed mortgage securities may increase.

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Financial firms regularly borrow money, even when they have strong balance sheets. The extra funds make it easier to invest in new opportunities and maintain operations.

Blackstone is using its capital to expand its data center operations in a bid to capitalize on AI tailwinds. The company is currently working on a $10 billion data center in Cedar Rapids, Iowa.

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