KBRA assigns BBB rating to RD Michigan Property Owner I notes tied to Michigan data center project

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KBRA rates Michigan data center notes

Highlights

KBRA assigned a BBB rating with Stable Outlook to RD Michigan Property Owner I LLC’s $14 billion senior secured notes, backed by four triple-net leases to Oracle America Cloud Services LLC and guaranteed by Oracle Corporation.
Construction for the four-building Michigan data center campus, managed by Walbridge Aldinger, LLC, starts November 2025 with substantial completion expected between December 2026 and January 2028 amid ongoing elevated construction risk.
Debt stability is supported by lease structure featuring tenant responsibility for operations, limited termination rights, an average rating case debt service coverage ratio of 1.14x, and low reliance on lease renewal for note amortization.

Rating basis and project timeline

As reported by Kroll Bond Rating Agency, the BBB rating applies to RD Michigan Property Owner I LLC’s $14 billion senior secured notes, with the project structured around four triple-net leases to Oracle America Cloud Services LLC and guaranteed by Oracle Corporation.

The issuer is financing a four-building campus made up of the Core, Compute 1, Compute 2 and Compute 3 facilities. Construction, managed by Walbridge Aldinger, LLC, begins in November 2025, and substantial completion is expected on a staggered basis between December 2026 and January 2028.

KBRA says all key permits have been secured and purchase orders for owner-furnished, contractor-installed equipment and final fit-out have been procured. It says construction risk remains elevated because of the project’s scale, possible delays, equipment procurement constraints and labor availability, although this is partly offset by a limited parent guaranty from The Related Companies, L.P., a fixed rent commencement framework and the absence of a late-delivery termination option for the tenant.

Lease structure supports note stability

Under the triple-net lease structure, operating responsibilities for the core and data halls sit with the tenant at its own expense after construction is completed. The landlord does not have to maintain the premises, including the building structure, following final completion, and the leases are not expected to include service level agreements.

KBRA says the rating is also supported by limited tenant termination rights, restricted rent abatement opportunities and the lack of reliance on lease renewal for note amortization. It highlights an average rating case debt service coverage ratio of 1.14x and says the Stable Outlook reflects expectations that the project performs in line with its rating case, with limited cash flow volatility under four long-term leases.

The agency says an upgrade is unlikely during construction, but one could occur after operations begin if tenant credit quality improves. A downgrade could follow if construction falls behind schedule, the general contractor is replaced by a weaker counterparty, changes to the collateral pool reduce debt service coverage, or the lessee’s credit quality deteriorates.

Our earlier article on KBRA’s surveillance review of the MSC 2020-CNP CMBS deal highlighted stable performance in the City National Plaza office collateral backing the transaction. We noted KBRA’s updated valuation and cash-flow metrics, including its KNCF and KBRA value conclusions, alongside a slightly improved in-trust KLTV and a Perform credit view reflecting steady performance within the current structure.

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