KBRA Assigns a Rating of BBB to RD Michigan Property Owner I LLC's $14 Billion Senior Secured Notes

NEW YORK--(BUSINESS WIRE)--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.

To access ratings and relevant documents, click here.

Click here to view the report.

Methodology

• Project Finance & Infrastructure: Project Finance Global Rating Methodology

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

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