Digital Realty has closed its inaugural U.S. hyperscale development fund, an effort that represents a new approach to securing development capital for the world’s largest data center provider.

At the same time, the public REIT signaled a renewed commitment to pursuing private capital strategies to fund new data center build-out, announcing the hire of two executives to help lead its dedicated fund team. 

A Digital Realty data center in Ontario, Canada

The closure of Digital Realty’s first private development fund comes almost exactly a year after it was launched. The fund received $3.25B from a range of institutional investors — including public pensions, sovereign wealth funds, endowments and foundations, corporate pensions, insurance and asset managers, and family offices — to support more than $10B of new hyperscale investment. 

The fund owns 80% of a portfolio of Digital Realty’s stabilized data centers and preleased development sites, including properties in Northern Virginia, Dallas, Atlanta, Charlotte, New York and Northern California. Digital Realty maintains a 20% ownership stake and manages the fund. 

Creating a private development fund was a novel approach to leveraging existing data centers to raise the capital needed to build new ones — a major challenge for developers across the digital infrastructure space. The arrangement allows institutional investors to receive a steady stream of income from the fully leased data centers, while Digital Realty uses the invested capital to cover predevelopment and development costs without relying on project-specific debt. 

Digital Realty told investors the fund is part of a $15B liquidity pool from private capital it calls “dry powder” to bank land and power ahead of demand to be able to deliver capacity on short timelines when Big Tech tenants need it.

“We remain focused on sourcing and delivering hyperscale data center capacity to support our customers’ accelerating requirements, and private capital is playing an increasingly important role in how we prudently and efficiently scale PlatformDIGITAL,” Digital Realty Chief Investment Officer Greg Wright said Monday in a written statement.

“Strengthening our private capital capabilities enhances our customer focus, expands our ability to fund growth, and positions Digital Realty for durable long-term value creation.”

Digital Realty plans to continue using this new private capital strategy to augment the on-balance-sheet financing strategies it has traditionally used to fund new development, announcing Monday that it is adding a pair of experienced executives with private capital and fund management backgrounds to its leadership team. 

Former CBRE Senior Managing Director Michael Yang will join Digital Realty as the firm’s executive director for fund management. Yang previously held various investment management roles at Goldman Sachs, NEPC, GID and AEW Capital Management.

The company also brought on Bradley Petersen to serve as managing director for private capital fundraising. Prior to Digital Realty, Peterson held a similar position at Jamestown LP following stints at Garrison Investment Group and Aetos Capital Real Estate.

Capital Group is opening a major East Coast operations hub in Charlotte, the company announced in a release Thursday.

An aerial view of Charlotte

The new hub will be a base for the investment firm’s legal, compliance, technology and data work, and it will also support its domestic and international growth, according to the release. The firm said it had selected Charlotte due to the metro area’s “strong and growing talent pool” in the financial services space and its thriving business scene. 

“Charlotte stood out as a natural fit for Capital Group’s next phase of growth,”  Capital Group Chief Operating Officer Rob Klausner said in a press release from the city of Charlotte.

Capital didn’t disclose the exact location of the hub, but Axios reports it will be in Uptown Charlotte. 

The hub will bring in an additional $5.2B in state tax revenue over 12 years, according to the North Carolina governor’s office. The state is making available up to $17M in reimbursement funds through the state’s job development investment grant program because of the firm’s estimated $60M investment in the state. 

As part of the move, the firm will close its office in Virginia’s Hampton Roads area by the end of 2027, Bloomberg reported. 

In the same announcement, Capital said it would invest in its newly purchased Los Angeles headquarters. This past week, the company entered an agreement with a Brookfield Properties entity to purchase the Bank of America Plaza office tower at 333 S. Hope St. in Downtown Los Angeles. It previously leased 320K SF of office space at the tower in a long-term lease that was set to expire in 2030. 

Capital boasts more than 9,300 associates in 33 offices across the world, including Asia-Pacific, Europe and North America. Sixteen of those offices are in the U.S., with four in California.

Cambridge Realty Capital has provided $43,360,100 in HUD-insured Section 223(f) financing for four senior housing properties located in Illinois, Washington, and Iowa.

According to Cambridge’s Managing Director Tony Marino, the Illinois transactions consisted of two affordable rental apartment properties for seniors totaling 196 units located in Chicago, Illinois.

The Washington transaction was provided to South Pointe, a 42-bed assisted living facility located in Everett. The Iowa financing was provided to Gardens of Cedar Rapids, a 112-bed facility in Cedar Rapids that offers skilled care, assisted living, and memory care services.

Cambridge’s early rate lock program was utilized, which allowed the owners to lock rates before all HUD approvals were obtained. This enabled each borrower to mitigate risk associated with rising interest rates and contributed to a more predictable and efficient HUD execution, including assurance that the financings included sufficient funds to complete long-term repairs and improvements.

Register Today to “Be in the Room” when Michael Brennan receives Connect CRE’s Lifetime Achievement Award and will participate in the Keynote Interview with Kevin Brennan, also of Brennan Investment Group. Join us at Connect Industrial Midwest 2025 on the afternoon of Wednesday, March 5, at Joe’s Live in Rosemont, IL, for this exclusive presentation! 

M&T Realty Capital Corporation provided $38.71 million in financing for 29-17 40th Ave., a 103-unit affordable property in a Long Island City Qualified Opportunity Zone. Loan originators Matt Newton and Todd Trehubenko of the M&T RCC office in Boston arranged the Freddie Mac Targeted Affordable Housing loan on behalf of The Davis Companies, SB Development and Hazelton Capital Group.

“By working closely with the sponsors and Freddie Mac’s Targeted Affordable Housing group in this challenging interest rate environment, we were able to execute on a timeline that fit the needs of the sponsors’ business plan for this Opportunity Zone project,” said Newton. “The dedication from all parties was crucial in getting this deal across the finish line.”

Twelve of the units at 29-17 40th Ave. will be restricted to tenants earning 130% of the Area Median Income and 19 will be restricted to those earning 80%.

Advantage Capital announced the financial closing of The Harbor at Quantico Creek. Funded in connection with the Virginia Housing Opportunity Tax Credit program, the development will deliver affordable housing for seniors in the Town of Dumfries, Virginia.

The Harbor at Quantico Creek will include 125 units of affordable housing with 81 one-bedroom and 44 two-bedroom apartments, serving households aged 62 and older. “Housing costs have risen dramatically in the Washington metropolitan area, and The Harbor at Quantico Creek will provide much-needed affordable housing for our area seniors,” said William Fiederlein, Vice President, Advantage Capital.

Developed in partnership with Pillar Church of Dumfries, the community will feature amenities, including a fitness center, library, and more. “This development is a reflection of our commitment to creating quality, affordable housing that meets the needs of seniors in our communities,” said Robert Byrne, Vice President, Community Housing Initiative.

Just under 1 in 10 homes that broke ground in the United States in 2024 was being built for a tenant, not an owner, according to John Burns Research and Consulting data. 

Single-family rentals accounted for more than 1 in 4 rental unit construction starts in 2024.

Investors poured a combined $57B into single-family rentals in 2021 and 2022. Capital flows slowed in 2023 as rising interest rates squeezed deals, but the sector bounced back, with investment nearly doubling year-over-year to $6.3B in 2024. Analysts expect more growth ahead. 

“This niche is only 6, 7 or 8 years old, but it gained a ton of traction, not only on the demand side from tenants moving into a purpose-built rental community but also on the development side,” said Chris Nebenzahl, vice president of rental research at John Burns. “Developers have seen that demand and have really met the demand.”

Single-family rentals have exploded into the housing market, with 124,825 new rental homes built since 2017. Unit completions have grown in each of the last six years, and 2024 set the new high-water mark for deliveries with more than 34,000 units, according to Point2Homes data, an SFR leasing platform and subsidiary of Yardi Matrix. 

Private equity continues to pour money into the sector to take advantage of macroeconomic and cultural shifts that have made renting more attractive. Persistently high home prices, exacerbated in the last two years by elevated interest rates, have contributed to the sector’s success.

Single-family build-to-rent homes accounted for 27% of all rental housing starts last year, and SFRs accounted for 9% of all single-family housing starts, according to John Burns. 

“Institutional investors are increasingly favoring purpose-built developments over acquisitions, further boosting the growth of SFR/BTR properties,” Doug Ressler, manager of business intelligence at Yardi Matrix, wrote in an email. 

New SFR construction was up 41% year-over-year in 2024 even as traditional housing starts fell by 2%, according to John Burns. A quarter of the SFR developers, operators and investors surveyed by the research firm expect to break ground on more units this year compared to last. 

Today, it is cheaper to rent than to buy in all of the country’s 50 top metros, with the median mortgage priced around $2,703 per month, while rent in a comparable city is around $1,979 per month, according to Bankrate. Homeowners, unlike renters, also have to contend with property taxes, insurance and repair bills. 

Renting becomes even more attractive when factoring in that 30-year mortgage rates are floating between 6% and 7%, up from the sub-3% rates that were common before the Federal Reserve tightening policy in 2022. 

“It’s still expensive, and we’re waiting for our incomes to come up, but you don’t hear that many complaints about rents anymore. But you’re hearing more about home prices, and that’s because home prices have continued to go up,” said Ken Johnson, a housing economist and the real estate chair at the University of Mississippi.

Homebuyers look at today’s prices and sense that the market is near a peak, giving them more reason to hold off on closing a sale, he said. There are signs that Wall Street investors agree.

The stocks of Invitation Homes and American Homes 4 Rent, the two largest public SFR firms, are trading somewhere between a 20% and 35% discount on their net asset values, The Wall Street Journal reported. 

Invitation Homes has been trading at a discount since early 2022, but the gap has widened by 10 percentage points over the last 12 months. With home prices elevated, large institutional investors that own more than 1,000 homes accounted for just 0.3% of U.S. home purchases in the third quarter, according to Point2Homes. 

Sun Belt markets have drawn the bulk of investment in the last five years, after the pandemic provided a burst of energy to existing migration trends driving Americans south. 

Nearly 4,300 new build-to-rent homes broke ground in Phoenix in 2024, the most of any major city. It was followed by Atlanta, which saw 3,236 units break ground, Dallas, Houston and Charlotte. Since 2017, developers have broken ground on 42,000 single-family rentals across those five cities alone. 

“The concept is going to be most effective in large metropolitan areas that are growing,” Johnson said, highlighting cities with large populations of young professionals.

But SFR owners and developers have found themselves in regulatory crosshairs in recent years as the nation’s housing affordability crisis deepens.

Lina Khan, the head of the Federal Trade Commission under former President Joe Biden, took a parting shot at SFR providers in the waning days before President Donald Trump took over the White House. 

The FTC issued a mid-January request for public comment seeking input about how the federal watchdog could probe SFR operators and their impact on the housing market. The investigation would target at least 30 firms, each of which owned at least 1,000 rental units, the FTC said. 

“This proposed study would shed much-needed light on the mega-investors that have amassed huge portfolios of single-family rental units and potentially contributed to the housing challenges that Americans face,” Khan said in a statement at the time. 

FTC commissioners unanimously approved the notice, but it is unclear whether Trump’s nominee to replace Khan, Andrew Ferguson, will follow through with a probe. 

Private equity’s interest in housing has drawn scrutiny for years, including a 2022 ProPublica investigation that found the investment firms were behind 85% of Freddie Mac’s largest apartment deals since 2013.

Earlier this year, New York Gov. Kathy Hochul proposed blocking hedge funds and private equity firms from buying up large numbers of homes in the state. Similar proposals have been floated in Nevada and Minnesota. 

Analysts who spoke to Bisnow said private equity’s interest in single-family housing was a positive development for housing affordability. The build-to-rent communities popping up across the country are a supplement to housing options rather than a replacement, they said. 

It takes tens of millions of dollars in upfront investment to build homes for rent, and the cash has to come from somewhere, Johnson said. 

“We see politicians saying that we don’t need Wall Street or private equity in the rental market or building homes for ownership. That’s a prescription for disaster,” he said. “I don’t hear people saying we don’t need professional investors in the stock market. People that know what they’re doing create price efficiency and liquidity in the housing market.”

AJ Capital Partners and Simon Property Group are joining forces on a massive luxury outlet mall in Nashville.

The project, dubbed Nashville Premium Outlets, includes a 325,000-square-foot mixed-use center with approximately 75 retailers, restaurants and a hotel. The project could include residential space and big-box retailers sometime in the future.

The outlet mall will rise at the intersection of Interstates 65 and 840, and construction is expected to start in 2026.

Retail and dining tenants will be similar to those found in other Simon Property Group outlets. Those existing centers boast brands such as Armani, Balenciaga, Valentino, Fendi — as well as more common brands like Ann Taylor, Old Navy and Gap.

Simon Property Group also owns The Mall at Green Hills and the Opry Mills Mall and operates more than 230 properties worldwide.

Tanger Factory Outlets recently opened a retail outlet in Antioch, one of the area’s fastest-growing suburbs.

IPA Capital Markets, a division of Marcus & Millichap, has secured $174 million in joint venture equity and debt financing for the acquisition of 55 Riverwalk Place, a 348-unit multifamily property located in West New York, NJ. Built in 2006, the property is located adjacent to the Hudson River, directly across from Manhattan.

The New York-based IPA Capital Markets team of Marko Kazanjian, Max Herzog, Andrew Cohen and Max Hulsh arranged acquisition financing with Bank of America on behalf of their client, a new joint venture between a New York-based multifamily owner/operator focused on acquiring value-add apartment assets in the Northeast and a global institutional investment manager.

“The acquisition represents a significant value-add opportunity for the sponsor,” said Kazanjian. “In Q4 2024 alone, our team secured approximately $150 million in JV equity partnerships with an additional $100 million in progress. We are excited about the continued momentum as we begin 2025 and look forward to further expanding our business.”

An Atlanta-based hotel developer bought the East Nashville site where it is planning a Marriott hotel. Dream Capital paid $5 million for a 1.41-acre property near the East Bank, located at 751 S. Fifth St., where it is eyeing an eight-story, dual-branded Marriott hotel. The seller was Professional Services Inc., which paid $58,290 for the site in 1991.

The project has a 2-level parking podium with 6 levels of hotel space above. Dream Capital’s hotel will offer 265 rooms. The third level will include an outdoor amenity area with a pool, fire pit and outdoor dining and seating areas. The ground level of the building will offer around 7,000 square feet of retail space.  Levels 4-8 include rooms for the two hotel brands as well as a rooftop bar amenity.

Nashville-based Kimley-Horn and Charlotte-based Oda Architecture are leading design for the project. The proposed hotel sits near the new Nissan stadium and other big East Bank projects.

S2 Capital acquired ‘The Landing at Pleasantdale’, a 618 garden-style apartment community. 72 buildings make up the gated community that’s on over 75 acres. Built in 1985, Pleasantdale is located at 3497 Meadowglenn Village Lane in Doraville, GA, a northeast Atlanta suburb.

S2’s Scott Everett further explains the deal, “Data suggests an inversion of the supply-demand imbalance, leading to significant positive absorption for Atlanta in conjunction with the first positive YoY occupancy gain in Q3 24 since Q1 22. Additionally, current effective rents sit $280 below comparable market properties, having witnessed a -12% drop in rents onsite YoY while surrounding comps have increased +1%, giving S2 conviction in their ability to execute their value-add business plan and deliver a superior living experience to tenants.”

S2 plans to renovate 90% of the units to compete with comparable renovated properties in the submarket.