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.

A California investment firm picked up a data center built in 1992 near Atlanta Hartsfield-Jackson International Airport.

The 760 Doug Davis Drive data center purchased by Menlo Equities.

An affiliate of Menlo Park, California-based Menlo Equities purchased 760 Doug Davis Drive in Hapeville for $65.5M from Digital Doug Davis LLC, an entity registered to the Dallas address of Digital Realty Trust, according to Fulton County records.

The 383K SF facility is off Virginia Avenue and just outside the airport. Digital Realty purchased the facility from Delta Air Lines in 2011 for $63M, according to the Reonomy real estate database.

Neither firm responded to a request for comment as of press time. 

Menlo bought the 33-year-old data center for $171 per SF, a relative bargain compared to the $300 per SF average for data center sales in Georgia over the past year, according to data from Avison Young. The average data center sold for  $465 per SF nationally. 

Buying older data centers and spending to upgrade their power capacity makes sense considering Georgia Power is fielding 8 gigawatts of pent-up demand from potential data center users in Georgia, Avison Young associate Nick Steen said. 

“For an existing data center, upsizing the power is a great opportunity,” Steen said.

Atlanta is the fastest-growing and second-largest data center market in the country after developers tripled capacity by more than 1,200 megawatts over the past year, according to CBRE. The metro area led all major data center markets in 2024 with 700 MW of absorption.

Menlo has been an active investor in the metro area market. In 2020, the firm purchased 30 Ivan Allen Blvd., the 15-story, 281K SF office building in Downtown Atlanta overlooking the Interstate 75-85 interchange. Menlo also purchased the empty office portion of Lincoln Properties’ Echo Street West development in December for around $60M.

Digital Realty owns three other data centers in Metro Atlanta, including the 10-story 56 Marietta St. colocation tower in Downtown Atlanta. Digital Realty also filed an application in May to develop a 1.9M SF data center campus on 97 acres within the former U.S. Army base Fort Gillem in Forest Park. 

The REIT plans to create a mix of hyperscale and colocation facilities at the Fort Gillem project, citing the site’s proximity to Downtown Atlanta, vacancy rates of less than 1% and competitive-costing power as lures for the project, Digital Realty Chief Investment Officer Greg Wright said during an April earnings call. 

The firm also announced a new data center campus in Charlotte earlier this year.

“We think those are both critical markets for us, as we’re really excited to have between those two projects over 600 MW of developable capacity,” Wright said.

Data center REIT Digital Realty is looking to build a pair of large-scale campuses in Charlotte and Atlanta that together could total as much as 600 megawatts of capacity.

A Digital Realty data center in Northern Virginia

In Charlotte, Digital Realty filed plans last week for what would be North Carolina’s largest data center campus, GovTech reports. The 156-acre campus would house more than 3M SF of data center space across two buildings, with the two-phase project ultimately yielding as much as 400 megawatts of capacity. 

The Dallas-based data center giant acquired the site, located 12 miles west of downtown Charlotte at 12899 Moore’s Chapel Road, in November for $160M, according to the Charlotte Business Journal. The parcel is undeveloped but sits next to a major logistics complex used by Amazon. Rezoning approval from the Charlotte City Council will be required for the project to move forward as planned. 

Further expansion in Charlotte is likely to follow for Digital Realty, with the company’s leadership saying on its quarterly earnings call Thursday that the firm has acquired three additional parcels in the Queen City. One of those parcels is adjacent to the Moore’s Chapel Road site — a 48-acre property that the company acquired for $20M. 

The other two properties are adjacent to the company’s existing data center in the city — a 2-megawatt facility that the firm says it will expand to a 12-megawatt campus. The two downtown parcels were acquired for a combined $16M.

 In Georgia, Digital Realty plans to build a 200-megawatt campus on 97 acres in the Atlanta suburb of Forest Park, company leaders said on the earnings call. The vacant property was acquired last quarter from TPA Group for $120M, according to CoStar. Digital Realty already has three data centers in the Atlanta market: two in downtown Atlanta and one in nearby Douglas County.  

In addition to its land acquisitions and development plans, Digital Realty also revealed Thursday that it launched a $10B hyperscale-focused data center fund focused on U.S. markets. The fund, which raised $1.7B in the first closing, includes five operating properties and four development sites, with assets located in Northern Virginia, Dallas, Atlanta, Charlotte, New York and Northern California. 

Digital Realty’s development plans capped a strong first quarter for the REIT, which reported data center revenues up 7% year-over-year and a record leasing backlog of $919M. The firm’s development pipeline grew to 814 megawatts, 63% of which is already preleased. 

Digital Realty completed the purchase of 155 acres at 12899 Moores Chapel Road in Charlotte to build a data center. The company bought the site from The Keith Corp. for $160 million.

Digital Realty is headquartered in Austin, Texas, and owns and operates data centers worldwide. The company has over 300 data centers across more than 55 metro areas globally.

The Charlotte Business Journal reports Digital Realty’s acquisition appears to add to a string of data center investments piling up in North Carolina and the Charlotte region.

Digital Realty’s acquisition appears to add to a string of data center investments piling up in North Carolina and the Charlotte region. PowerHouse Data Centers and Town Lane recently bought 122 acres off University City Boulevard for $45.5 million. That site will be home to a five-building, 2.5 million-square-foot data center campus.

Microsoft Corp. has started construction on three data centers in Catawba County. Those facilities are part of a $1 billion investment the tech giant announced in 2022.

CIM Group closed on an initial $125 million loan commitment with a potential increase of up to $200 million to Applied Digital, a company specializing in High-Performance Computing (HPC) data center solutions. The loan will fund the construction of Applied Digital’s HPC Campus in Ellendale, North Dakota.

“As a long-term investor in digital infrastructure, CIM Group appreciates and supports the great strides Applied Digital is making with its diversification into next-generation digital infrastructure designed to serve global technology companies,“ said Avi Shemesh, Co-Founder and Principal, CIM Group.

In October 2023, Applied Digital began construction on the campus’s first building, a 100 MW, 342,000-square-foot data center. Additionally, Applied Digital has entered into exclusivity and executed an LOI with a U.S.-based hyperscaler for a 400 MW capacity lease at this campus.

“CIM’s financing facility will be instrumental in solidifying Applied Digital’s position as a leading HPC data center owner and operator,” said Wes Cummins, Applied Digital’s CEO.