KBRA Assigns a Rating of BBB to RD Michigan Property Owner I LLC's $14 Billion Senior Secured Notes
1 May 2026 | New York
KBRA assigns its BBB rating to RD Michigan Property Owner I LLC’s $14 billion senior secured notes. The Outlook is Stable.
Related Digital and Blackstone (the sponsors) have formed the special-purpose entity RD Michigan Property Owner I LLC (the issuer) to finance the construction of a 974MW data center campus in Washtenaw County, Michigan, consisting of four buildings: the Core (Building 1), Compute 1 (Building 2), Compute 2 (Building 3), and Compute 3(Building 4). The campus is fully leased under four triple-net-leases (NNN) to Oracle America Cloud Services LLC, guaranteed by Oracle Corporation.
Key Credit Considerations
(+/-) Construction Risk
Construction, managed by Walbridge Aldinger, LLC, began in November 2025. All key permits have been secured, and all owner-furnished, contractor-installed (OFCI) equipment and final fit-out purchase orders have been procured. Contractor replacement costs are estimated at 7%-13% of the guaranteed maximum price (GMP), while the total contingency represents approximately 12.4% of the project budget. Substantial completion will occur on a staggered basis, with substantial completions expected between December 2026 and January 2028. Given the scale of the project, construction risk is elevated due to potential delays, equipment procurement constraints, and labor availability. However, the project benefits from a limited parent guaranty from The Related Companies, L.P. during construction, a date certain rent commencement, no termination option for late delivery afforded to the tenant, and substantial schedule cushion relative to the expected lease timeline.
(+) Operational Risk Passed Through to Tenant
Given the NNN lease structure, all operational responsibilities of the core and data halls are borne by the tenant at its sole expense. The landlord has no obligation to maintain any aspect of the premises, including the building structure, following final completion of construction. The leases are not expected to include any service level agreements.
(+) Strong Lease Provisions
Under each lease, the tenant has limited termination rights and rent abatement opportunities. Additionally, each lease benefits from a date certain rent commencement. Collectively, these provisions favor the landlord and support lease stability. Additionally, the tenant may only assign the leases to a third party with written consent from the landlord, unless the assignee is an affiliate of the tenant, then assignment may occur without landlord consent. Subleasing is permitted, although landlord consent is required in the event the prospective sublessee is an affiliate of the landlord.
Rating Rationale
The rating reflects the KPRS of Strong, well-mitigated construction risk, and absence of reliance on lease renewal for note amortization. The project benefits from a parent guaranty for construction completion and full pass-through of operating costs upon completion. In addition, each lease includes landlord-favorable provisions, including limited termination rights, date certain rent commencement, and minimal rent abatement opportunities for the tenant. These factors, along with the average rating case debt service coverage ratio (DSCR) of 1.14x, support the rating on the notes.
Outlook
The Stable Outlook reflects KBRA’s expectation that the project will perform in line with the rating case, with limited cash flow volatility supported by four long-term NNN leases that provides full pass-through of operating expenses and restricts tenant termination rights. A rating upgrade is unlikely during the construction period. Once the project is operational, an upgrade could occur if tenant credit quality improves. A rating downgrade could occur if construction does not progress according to schedule or the general contractor is replaced with a weaker counterparty, changes to the collateral pool (including by way of asset sales, building releases, casualty, or condemnation) result in lower-than-expected debt service coverages, or if the credit quality of the lessee deteriorates.
Rating Sensitivities
A rating upgrade is unlikely during the construction period. Once the project is operational, an upgrade could occur if tenant credit quality improves.
A rating downgrade could occur if construction does not progress according to schedule or the general contractor is replaced with a weaker counterparty, changes to the collateral pool (including by way of asset sales, building releases,casualty, or condemnation) result in lower than expected debt service coverages, or if the credit quality of the lessee deteriorates.
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