RD Michigan Property Owner I LLC secures preliminary BBB rating for $14 billion data center notes

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Michigan data center BBB rating

Highlights

RD Michigan Property Owner I LLC received a preliminary BBB rating from KBRA for its $14 billion data center notes, supported by four triple-net leases fully guaranteed by Oracle Corporation.
Construction, led by Walbridge Aldinger, LLC, begins November 2025 with key permits and equipment in place, but faces elevated risk from project scale, timing, and labor availability, mitigated by limited Related Companies parent guaranty and strict lease terms.
KBRA cites an average debt service coverage ratio of 1.13x and landlord-favorable lease protections as supporting a Stable Outlook, with rating upgrade unlikely before project completion and downgrade risk tied to construction or credit setbacks.

Rating basis and construction timeline

As reported by Kroll Bond Rating Agency, the preliminary BBB rating reflects a financing structure tied to four triple-net leases covering the full campus, with Oracle Corporation guaranteeing the tenant’s obligations. The project includes four buildings, Core, Compute 1, Compute 2, and Compute 3, and is designed so that lease cash flow does not depend on renewals to support note amortization.

Construction begins in November 2025 under Walbridge Aldinger, LLC, with all key permits secured and all owner-furnished, contractor-installed equipment procured, while final fit-out purchase orders remain pending. KBRA says construction risk is elevated because of the scale of the development, potential delays, equipment procurement constraints, and labor availability, although those risks are partly offset by a limited parent guaranty from The Related Companies, L.P., date certain rent commencement, and the absence of a late-delivery termination option for the tenant.

Lease protections and credit implications

Under the triple-net lease structure, operating responsibilities for the core and data halls pass fully to the tenant at its own expense after construction is complete. KBRA says that leaves the landlord with no obligation to maintain the premises, including the building structure, after final completion, and the leases are not expected to include service level agreements.

The agency also points to landlord-favorable lease terms, including limited termination rights, restricted rent abatement opportunities, and controls on lease assignment. It says these features, together with an average rating case debt service coverage ratio of 1.13x, support the preliminary rating and the Stable Outlook.

KBRA says an upgrade is unlikely during the construction period, though a higher rating could follow once the project is operational if tenant credit quality improves. A downgrade could occur if construction falls behind schedule, the general contractor is replaced by a weaker counterparty, collateral changes reduce debt service coverage, or the lessee’s credit quality deteriorates.

In our earlier coverage of KBRA’s rating actions on Research-Driven Pagaya Motor Asset Trusts and Research-Driven Pagaya Motor Trust transactions, we described how the agency affirmed and upgraded multiple note classes across seven Pagaya auto ABS deals based on collateral performance and increased credit enhancement. We also highlighted Pagaya’s updated financial metrics and the underwriting and servicing framework supporting the platform, which KBRA considers in its ongoing surveillance of these securitizations.

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