American Real Estate Partners (AREP) is ramping up its expansion in the data center sector, with its newly closed fund set to finance between 12 and 15 of PowerHouse Data Centers’ projects across multiple jurisdictions.

In an interview, the firm’s Co-founder and President, Brian Katz, said his vision is for PowerHouse to become the preeminent developer of data centers in the US, leveraging a joint venture model and strategic equity partnerships to maximize its reach and impact.

AREP’s other Co-founder and CEO is Doug Fleit, who also serves as the CEO of PowerHouse Data Centers

PowerHouse Data Centers, a wholly owned subsidiary of AREP, has grown beyond its initial focus in Ashburn, Virginia to a national scale. With power availability and land constraints in key markets, the firm has positioned itself to develop sites where it can deliver large-scale power in 24 to 36 months—a timeline that aligns with the needs of major cloud and AI infrastructure providers.

AREP’s latest investment vehicle, Strategic Opportunity Fund IV, closed recently, with at least 80% of its capital earmarked for data center development at PowerHouse. The fund provides both development capital and construction financing, enabling Powerhouse to secure land, navigate permitting, and advance projects before raising additional capital to build.

The fund’s GP (General Partner) structure plays a critical role in scaling PowerHouse’s data center projects. Unlike traditional private equity funds, which typically finance deals independently, AREP employs a highly leveraged joint venture (JV) model, allowing it to maximize its USD 300m GP fund into over USD 9bn in total buying power.

The fund operates on a 90/10 JV split, meaning that AREP contributes 10% of the equity while large institutional partners provide 90%. This model allows PowerHouse to execute large-scale projects without tying up excessive capital in a single deal.

“It’s a very scaled structure that allows us to control and deploy significant amounts of capital into deals across the country,” he said.

Its previous fund, raised in 2021, was USD 60m, allowing for USD 1.8bn of deployment capacity focused on Ashburn, VA – a fund that is “now closed and doing quite well,” he said. “And we’ve already started having realizations in that fund.”

AREP recently struck a financing deal structured as a 95/5 JV with Blue Owl for a CoreWeave-anchored project in Richmond, VA, for which it was provided USD 600m construction loan.

Another deal involving a 90/10 JV with Harrison Street built a 265 MW hyperscale campus in Ashburn, including a USD 586m financing.

The firm is also preparing to announce several new developments in the coming months, including projects in Spotsylvania and Ashburn, Katz said.

While developing projects in Ashburn, power constraints became an issue, particularly at Dominion Energy, which Katz and PowerHouse took as a cue to expand nationally where that could secure large amounts of land and power.

The company on February 25 announced a new 768-acre campus in Ellis County, Texas, with a 1.8 GW switchyard planned on site. It is also planning large campuses in Pennsylvania, Kentucky, North Carolina, and Dallas.

AREP’s GP fund model enhances investor returns through carried interest structures. In a typical real estate private equity deal, limited partners (LPs) pay carried interest to the GP. However, in AREP’s structure, the carried interest earned from institutional JV partners flows back to the fund’s investors, boosting overall returns.

The firm has no immediate plans to exit PowerHouse, with Katz emphasizing that they are “enjoying the ride” and remain focused on further expansion.