Digital Realty's European bond run pre-funds a build cycle that now reaches Osaka in 2028

Digital Realty is using European debt markets to fund a construction pipeline that stretches years ahead, and the pricing of its latest deals shows what that money costs.

On Oct. 6, the data center landlord closed CHF510 million of Swiss franc notes and priced €1 billion of 10-year euro notes, which closed on Oct. 9. A day later, on Oct. 7, its Japanese joint venture with Mitsubishi Corp. broke ground on a 24-megawatt facility in Osaka that is not scheduled to open until the fourth quarter of 2028.

The Swiss deal, issued through finance subsidiary Digital Constellation B.V., came in three tranches: CHF225 million at 1.6803% due 2029, CHF185 million at 2.0600% due 2032 and CHF100 million at 2.4150% due 2036. The euro notes, issued by Digital Euro Finco LLC, priced at 99.289% of par with a 5.125% coupon and mature Oct. 9, 2036. The 2036 Swiss notes mature Oct. 6, 2036. Both were sold outside the United States under Regulation S.

The two deals do different jobs. The Swiss notes add long-dated money at coupons under 2.5%, though the gap with the euro coupon mostly reflects lower Swiss franc interest rates rather than cheaper funding once currency is taken into account. The euro deal adds size, and the company plans to allocate an amount equal to its net proceeds to eligible green projects. Digital Realty said the Swiss proceeds, about CHF508.39 million net, would first temporarily repay borrowings under its global revolving credit facilities, then fund development, acquisitions and general corporate purposes. Paying down the revolver frees capacity for the next round of construction spending.

KIX15, in Ibaraki, Osaka, shows where that spending goes. It will provide 24 megawatts of IT capacity with hybrid air and liquid cooling, a design aimed at the denser hardware AI customers are installing. It is the fifth building on the KIX campus, and once complete it will bring MC Digital Realty's Japan portfolio to 10 data centers and about 220 megawatts.

Investors will look for two things next: how much of KIX15 and similar projects is preleased before completion, and whether Digital Realty keeps funding in Swiss francs and euros as U.S. rates move.