Overview
During the three months ended
•finished the period with our portfolio 92.0% occupied and 93.9% leased; •placed into service 283,000 square feet in two newly-developed properties that were 100.0% leased as ofMarch 31, 2022 ; and •sold our wholesale data center for$222.5 million , resulting in a gain on sale of$28.6 million . We used the proceeds to repay a portion of of our Term Loan Facility and the remainder to repay borrowings under our Revolving Credit Facility. With regard to our operating portfolio square footage, occupancy and leasing statistics included below and elsewhere in this Quarterly Report on Form 10-Q, amounts disclosed include information pertaining to properties owned through unconsolidated real estate joint ventures. We discuss significant factors contributing to changes in our net income in the section below entitled "Results of Operations." In addition, the section below entitled "Liquidity and Capital Resources" includes discussions of, among other things: •how we expect to generate and obtain cash for short and long-term capital needs; and •material cash requirements for known contractual and other obligations.
You should refer to our consolidated financial statements and the notes thereto as you read this section.
This section contains "forward-looking" statements, as defined in the Private Securities Litigation Reform Act of 1995, that are based on our current expectations, estimates and projections about future events and financial trends affecting the financial condition and operations of our business. Forward-looking statements can be identified by the use of words such as "may," "will," "should," "could," "believe," "anticipate," "expect," "estimate," "plan" or other comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate. Although we believe that the expectations, estimates and projections reflected in such forward-looking statements are based on reasonable assumptions at the time made, we can give no assurance that these expectations, estimates and projections will be achieved. Future events and actual results may differ materially from those discussed in the forward-looking statements. We caution readers that forward-looking statements reflect our opinion only as of the date on which they were made. You should not place undue reliance on forward-looking statements. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: •general economic and business conditions, which will, among other things, affect office property and data center demand and rents, tenant creditworthiness, interest rates, financing availability, construction costs and property values; •adverse changes in the real estate markets, including, among other things, increased competition with other companies; •governmental actions and initiatives, including risks associated with the impact of a prolonged government shutdown or budgetary reductions or impasses, such as a reduction in rental revenues, non-renewal of leases and/or reduced or delayed demand for additional space by our strategic customers; •our ability to borrow on favorable terms; •risks of property acquisition and development activities, including, among other things, risks that development projects may not be completed on schedule, that tenants may not take occupancy or pay rent or that development or operating costs may be greater than anticipated; •risks of investing through joint venture structures, including risks that our joint venture partners may not fulfill their financial obligations as investors or may take actions that are inconsistent with our objectives; •changes in our plans for properties or views of market economic conditions or failure to obtain development rights, either of which could result in recognition of significant impairment losses; •risks and uncertainties regarding the impact of the COVID-19 pandemic, and similar pandemics, along with restrictive measures instituted to prevent spread, on our business, the real estate industry and national, regional and local economic conditions; •our ability to satisfy and operate effectively under federal income tax rules relating to real estate investment trusts and partnerships; •possible adverse changes in tax laws; •the dilutive effects of issuing additional common shares; •our ability to achieve projected results; •security breaches relating to cyber attacks, cyber intrusions or other factors; and •environmental requirements.
We undertake no obligation to publicly update or supplement forward-looking statements.
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Occupancy and Leasing
The tables below set forth occupancy information pertaining to our portfolio of office and data center shell properties:
March 31, 2022 December 31, 2021 Occupancy rates at period end Total 92.0 % 92.4 % Defense/IT Locations: Fort Meade/BW Corridor 90.2 % 90.0 % NoVA Defense/IT 88.6 % 89.5 % Lackland Air Force Base 100.0 % 100.0 % Navy Support 92.9 % 93.9 % Redstone Arsenal 91.3 % 90.8 % Data Center Shells 100.0 % 100.0 % Total Defense/IT Locations 93.3 % 93.2 % Regional Office 81.8 % 87.3 % Other 66.2 % 66.2 % Annualized rental revenue per occupied square foot at period end$ 32.59 $ 32.47 Rentable Occupied Square Feet Square Feet (in thousands) December 31, 2021 21,710 20,070 Vacated upon lease expiration (1) - (288) Occupancy for new leases - 189 Developed 283 283 Other changes 13 - March 31, 2022 22,006 20,254
(1)Includes lease terminations and space reductions occurring in connection with lease renewals.
During the three months ended
Annualized rental revenue is a measure that we use to evaluate the source of our rental revenue as of a point in time. It is computed by multiplying by 12 the sum of monthly contractual base rents and estimated monthly expense reimbursements under active leases as of a point in time (ignoring free rent then in effect and rent associated with tenant funded landlord assets). Our computation of annualized rental revenue excludes the effect of lease incentives. We consider annualized rental revenue to be a useful measure for analyzing revenue sources because, since it is point-in-time based, it does not contain increases and decreases in revenue associated with periods in which lease terms were not in effect; historical revenue under generally accepted accounting principles inthe United States of America ("GAAP") does contain such fluctuations. We find the measure particularly useful for leasing, tenant, segment and industry analysis. Tenant retention rate is a measure we use that represents the percentage of square feet renewed in a period relative to the total square feet scheduled to expire in that period; we include the effect of early renewals in this measure.
Results of Operations
We evaluate the operating performance of our properties using NOI from real estate operations, our segment performance measure, which includes real estate revenues and property operating expenses from continuing and discontinued operations and UJV NOI allocable to COPT. We view our NOI from real estate operations as comprising the following primary categories:
•office and data center shell properties: •stably owned and 100% operational throughout the current and prior year reporting periods being compared. We define these as changes from "Same Properties"; •developed or redeveloped and placed into service that were not 100% operational throughout the current and prior year reporting periods; and •disposed; and •our wholesale data center that we sold onJanuary 25, 2022 . 29 -------------------------------------------------------------------------------- In addition to owning properties, we provide construction management and other services. The primary manner in which we evaluate the operating performance of our construction management and other service activities is through a measure we define as NOI from service operations, which is based on the net of the revenues and expenses from these activities. The revenues and expenses from these activities consist primarily of subcontracted costs that are reimbursed to us by customers along with a management fee. The operating margins from these activities are small relative to the revenue. We believe NOI from service operations is a useful measure in assessing both our level of activity and our profitability in conducting such operations. Since both of the measures discussed above exclude certain items includable in net income, reliance on these measures has limitations; management compensates for these limitations by using the measures simply as supplemental measures that are considered alongside other GAAP and non-GAAP measures. A reconciliation of NOI from real estate operations and NOI from service operations to income from continuing operations reported on the consolidated statements of operations is provided in Note 14 to our consolidated financial statements.
Comparison of Statements of Operations for the Three Months Ended
For the Three Months Ended
2022 2021 Variance (in thousands) Revenues Revenues from real estate operations$ 142,280 $ 137,830 $ 4,450 Construction contract and other service revenues 53,200 16,558 36,642 Total revenues 195,480 154,388 41,092 Operating expenses Property operating expenses 57,181 53,276 3,905
Depreciation and amortization associated with real estate operations
34,264 34,500 (236) Construction contract and other service expenses 51,650 15,793 35,857 General, administrative and leasing expenses 8,544 8,406 138 Business development expenses and land carry costs 783 1,094 (311) Total operating expenses 152,422 113,069 39,353 Interest expense (14,424) (17,519) 3,095 Interest and other income 1,893 1,865 28 Credit loss recoveries 316 907 (591) Gain on sales of real estate 15 (490) 505 Loss on early extinguishment of debt (342) (33,166) 32,824 Equity in income of unconsolidated entities 888 222 666 Income tax expense (153) (32) (121) Income (loss) from continuing operations 31,251 (6,894) 38,145 Discontinued operations 29,573 815 28,758 Net income (loss)$ 60,824 $ (6,079) $ 66,903 30
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NOI from Real Estate Operations
For the
Three Months Ended
2022 2021 Variance (Dollars in thousands, except per square foot data) RevenuesSame Properties revenues Lease revenue, excluding net lease termination revenue and provision for collectability losses$ 132,505 $ 131,157 $ 1,348 Lease termination revenue, net 221 1,362 (1,141)
Provision for collectability losses included in lease revenue
- (124) 124 Other property revenue 859 507 352 Same Properties total revenues 133,585 132,902 683
Developed and redeveloped properties placed in service 7,527
2,409 5,118 Wholesale data center 1,980 7,334 (5,354) Dispositions 1 1,681 (1,680) Other 1,167 838 329 144,260 145,164 (904) Property operating expenses Same Properties (54,161) (51,655) (2,506)
Developed and redeveloped properties placed in service (2,065)
(562) (1,503) Wholesale data center (1,025) (3,823) 2,798 Dispositions 1 (298) 299 Other (902) (636) (266) (58,152) (56,974) (1,178) UJV NOI allocable to COPT Same Properties 926 917 9 Retained interest in newly-formed UJVs 154 - 154 1,080 917 163 NOI from real estate operations Same Properties 80,350 82,164 (1,814)
Developed and redeveloped properties placed in service 5,462
1,847 3,615 Wholesale data center 955 3,511 (2,556) Dispositions, net of retained interest in newly-formed UJVs 156 1,383 (1,227) Other 265 202 63$ 87,188 $ 89,107 $ (1,919) Same Properties NOI from real estate operations by segment Defense/IT Locations$ 73,586 $ 74,659 $ (1,073) Regional Office 6,459 7,201 (742) Other 305 304 1$ 80,350 $ 82,164 $ (1,814) Same Properties rent statistics Average occupancy rate 91.7 % 93.6 % (1.9 %)
Average straight-line rent per occupied square foot (1)
(1)Includes minimum base rents, net of abatements and lease incentives and excluding lease termination revenue, on a straight-line basis for the periods set forth above.
OurSame Properties pool consisted of 176 properties, comprising 92.4% of our portfolio's square footage as ofMarch 31, 2022 . This pool of properties changed from the pool used for purposes of comparing 2021 and 2020 in our 2021 Annual Report on Form 10-K due to the addition of nine properties placed in service and 100% operational on or beforeJanuary 1, 2021 and eight properties owned through an unconsolidated real estate joint venture that was formed in 2020. 31 --------------------------------------------------------------------------------
Regarding the changes in NOI from real estate operations reported above:
•developed and redeveloped properties placed in service reflects the effect of 10 properties placed in service in 2021 and 2022; and •dispositions, net of retained interest in newly-formed UJVs reflects the effect of our sale of a 90% interest in two data center shells in 2021.
NOI from Service Operations
For the
Three Months Ended
2022 2021 Variance (in thousands) Construction contract and other service revenues$ 53,200 $ 16,558 $ 36,642 Construction contract and other service expenses (51,650) (15,793) (35,857) NOI from service operations$ 1,550 $ 765 $ 785
Construction contract and other service revenues and expenses increased due primarily to a higher volume of construction activity in connection with several of our tenants. Construction contract activity is inherently subject to significant variability depending on the volume and nature of projects undertaken by us primarily on behalf of tenants. Service operations are an ancillary component of our overall operations that typically contribute an insignificant amount of income relative to our real estate operations.
Interest expense
Interest expense decreased due to lower weighted average interest rates in the current period resulting primarily from debt refinancings that we completed in 2021.
Loss on extinguishment of debt
The loss on early extinguishment of debt recognized in the prior period was attributable to our purchase of unsecured senior notes pursuant to tender offers.
Discontinued operations
Discontinued operations includes our wholesale data center, which we sold on
Funds from Operations Funds from operations ("FFO") is defined as net income computed using GAAP, excluding gains on sales and impairment losses of real estate (net of associated income tax) and real estate-related depreciation and amortization. FFO also includes adjustments to net income for the effects of the items noted above pertaining to UJVs that were allocable to our ownership interest in the UJVs. We believe that we use theNational Association of Real Estate Investment Trusts ("Nareit") definition of FFO, although others may interpret the definition differently and, accordingly, our presentation of FFO may differ from those of other REITs. We believe that FFO is useful to management and investors as a supplemental measure of operating performance because, by excluding gains on sales and impairment losses of real estate and investments in unconsolidated real estate joint ventures (net of associated income tax), and real estate-related depreciation and amortization, FFO can help one compare our operating performance between periods. In addition, since most equity REITs provide FFO information to the investment community, we believe that FFO is useful to investors as a supplemental measure for comparing our results to those of other equity REITs. We believe that net income is the most directly comparable GAAP measure to FFO. Since FFO excludes certain items includable in net income, reliance on the measure has limitations; management compensates for these limitations by using the measure simply as a supplemental measure that is weighed in balance with other GAAP and non-GAAP measures. FFO is not necessarily an indication of our cash flow available to fund cash needs. Additionally, it should not be used as an alternative to net income when evaluating our financial performance or to cash flow from operating, investing and financing activities when evaluating our liquidity or ability to make cash distributions or pay debt service. Basic FFO available to common share and common unit holders ("Basic FFO") is FFO adjusted to subtract (1) preferred share dividends, (2) income attributable to noncontrolling interests through ownership of preferred units in theOperating Partnership or interests in other consolidated entities not owned by us, (3) depreciation and amortization allocable to noncontrolling interests in other consolidated entities and (4) Basic FFO allocable to share-based compensation awards. With these adjustments, Basic FFO represents FFO available to common shareholders and common unitholders. Common units in theOperating Partnership are substantially similar to our common shares and are exchangeable into common shares, subject to certain conditions. We believe that Basic FFO is useful to investors due to the close correlation of common units to common shares. We believe that net income is the most directly comparable GAAP measure to Basic FFO. Basic FFO has essentially 32 --------------------------------------------------------------------------------
the same limitations as FFO; management compensates for these limitations in essentially the same manner as described above for FFO.
Diluted FFO available to common share and common unit holders ("Diluted FFO") is Basic FFO adjusted to add back any changes in Basic FFO that would result from the assumed conversion of securities that are convertible or exchangeable into common shares. We believe that Diluted FFO is useful to investors because it is the numerator used to compute Diluted FFO per share, discussed below. We believe that net income is the most directly comparable GAAP measure to Diluted FFO. Since Diluted FFO excludes certain items includable in the numerator to diluted EPS, reliance on the measure has limitations; management compensates for these limitations by using the measure simply as a supplemental measure that is weighed in the balance with other GAAP and non-GAAP measures. Diluted FFO is not necessarily an indication of our cash flow available to fund cash needs. Additionally, it should not be used as an alternative to net income when evaluating our financial performance or to cash flow from operating, investing and financing activities when evaluating our liquidity or ability to make cash distributions or pay debt service. Diluted FFO available to common share and common unit holders, as adjusted for comparability is defined as Diluted FFO adjusted to exclude: operating property acquisition costs; gain or loss on early extinguishment of debt; FFO associated with properties securing non-recourse debt on which we have defaulted and which we have extinguished, or expect to extinguish, via conveyance of such properties, including property NOI, interest expense and gains on debt extinguishment (discussed further below); loss on interest rate derivatives; demolition costs on redevelopment and nonrecurring improvements; executive transition costs; issuance costs associated with redeemed preferred shares; allocations of FFO to holders of noncontrolling interests resulting from capital events; and certain other expenses that we believe are not closely correlated with our operating performance. This measure also includes adjustments for the effects of the items noted above pertaining to UJVs that were allocable to our ownership interest in the UJVs. We believe this to be a useful supplemental measure alongside Diluted FFO as it excludes gains and losses from certain investing and financing activities and certain other items that we believe are not closely correlated to (or associated with) our operating performance. We believe that net income is the most directly comparable GAAP measure to this non-GAAP measure. This measure has essentially the same limitations as Diluted FFO, as well as the further limitation of not reflecting the effects of the excluded items; we compensate for these limitations in essentially the same manner as described above for Diluted FFO. Diluted FFO per share is (1) Diluted FFO divided by (2) the sum of the (a) weighted average common shares outstanding during a period, (b) weighted average common units outstanding during a period and (c) weighted average number of potential additional common shares that would have been outstanding during a period if other securities that are convertible or exchangeable into common shares were converted or exchanged. We believe that Diluted FFO per share is useful to investors because it provides investors with a further context for evaluating our FFO results in the same manner that investors use earnings per share ("EPS") in evaluating net income available to common shareholders. In addition, since most equity REITs provide Diluted FFO per share information to the investment community, we believe that Diluted FFO per share is a useful supplemental measure for comparing us to other equity REITs. We believe that diluted EPS is the most directly comparable GAAP measure to Diluted FFO per share. Diluted FFO per share has most of the same limitations as Diluted FFO (described above); management compensates for these limitations in essentially the same manner as described above for Diluted FFO. Diluted FFO per share, as adjusted for comparability is (1) Diluted FFO, as adjusted for comparability divided by (2) the sum of the (a) weighted average common shares outstanding during a period, (b) weighted average common units outstanding during a period and (c) weighted average number of potential additional common shares that would have been outstanding during a period if other securities that are convertible or exchangeable into common shares were converted or exchanged. We believe that this measure is useful to investors because it provides investors with a further context for evaluating our FFO results. We believe this to be a useful supplemental measure alongside Diluted FFO per share as it excludes gains and losses from certain investing and financing activities and certain other items that we believe are not closely correlated to (or associated with) our operating performance. We believe that diluted EPS is the most directly comparable GAAP measure to this per share measure. This measure has most of the same limitations as Diluted FFO (described above) as well as the further limitation of not reflecting the effects of the excluded items; we compensate for these limitations in essentially the same manner as described above for Diluted FFO. The computations for all of the above measures on a diluted basis assume the conversion of common units in COPLP but do not assume the conversion of other securities that are convertible into common shares if the conversion of those securities would increase per share measures in a given period. 33 -------------------------------------------------------------------------------- The table below sets forth the computation of the above stated measures, and provides reconciliations to the GAAP measures associated with such measures: For the Three Months Ended March 31, 2022 2021 (Dollars and shares in thousands, except per share data) Net income (loss)$ 60,824 $ (6,079) Real estate-related depreciation and amortization 34,264 37,321 Depreciation and amortization on UJVs allocable to COPT 526 454 Gain on sales of real estate (28,579) 490 FFO 67,035 32,186 FFO allocable to other noncontrolling interests (1,042) (1,027) Basic FFO allocable to share-based compensation awards (362) (162) Basic FFO available to common share and common unit holders 65,631 30,997 Redeemable noncontrolling interests (6) -
Diluted FFO adjustments allocable to share-based compensation awards
27 - Diluted FFO available to common share and common unit holders 65,652 30,997 Loss on early extinguishment of debt 342 33,166
Diluted FFO comparability adjustments for redeemable noncontrolling interests
- 458
Diluted FFO comparability adjustments allocable to share-based compensation awards
(2) (167)
Diluted FFO available to common share and common unit holders, as adjusted for comparability
$ 65,992 $ 64,454 Weighted average common shares 112,020 111,888 Conversion of weighted average common units 1,384 1,246 Weighted average common shares/units - Basic FFO per share 113,404 113,134 Dilutive effect of share-based compensation awards 426 261 Redeemable noncontrolling interests 132 - Weighted average common shares/units - Diluted FFO per share 113,962 113,395 Redeemable noncontrolling interests - 940 Weighted average common shares/units - Diluted FFO per share, as adjusted for comparability 113,962 114,335 Diluted FFO per share$ 0.58 $ 0.27 Diluted FFO per share, as adjusted for comparability$ 0.58 $ 0.56 Denominator for diluted EPS 112,578 111,888 Weighted average common units 1,384 1,246 Anti-dilutive EPS effect of share-based compensation awards - 261 Denominator for diluted FFO per share 113,962 113,395 Redeemable noncontrolling interests - 940
Denominator for diluted FFO per share, as adjusted for comparability
113,962 114,335 34
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Property Additions
The table below sets forth the major components of our additions to properties
for the three months ended
Development$ 63,997
Tenant improvements on operating properties (1) 6,824 Capital improvements on operating properties 6,832
$ 77,653
(1)Tenant improvement costs incurred on newly-developed properties are classified in this table as development and redevelopment.
Cash Flows
Net cash flow from operating activities increased$12.0 million when comparing the three months endedMarch 31, 2022 and 2021 due primarily to a decrease in interest expense paid resulting from debt refinancings completed in 2021 that affected the timing of our interest payments on unsecured senior notes and reduced the borrowing rates on such notes. Net cash flow provided by investing activities increased$177.0 million when comparing the three months endedMarch 31, 2022 and 2021 due primarily to$220.8 million in proceeds from properties sold in the current period (including our wholesale data center), partially offset by a$34.4 million increase in cash outlays for development and redevelopment of properties in the current period.
Net cash flow used in financing activities in the three months ended
•net repayments of debt borrowings during the period of
Net cash flow provided by financing activities in the three months ended
•net proceeds from debt borrowings of$87.9 million , which included the net increase from our issuance of 2.75% Notes and purchase of 3.60% Notes and 5.25% Notes (and related early extinguishment costs); offset in part by •dividends to common shareholders of$30.9 million .
Supplemental Guarantor Information
As ofMarch 31, 2022 , COPLP had several series of unsecured senior notes outstanding that were issued in transactions registered with theSEC under the Securities Act of 1933, as amended. These notes are COPLP's direct, senior unsecured and unsubordinated obligations and rank equally in right of payment with all of COPLP's existing and future senior unsecured and unsubordinated indebtedness. However, these notes are effectively subordinated in right of payment to COPLP's existing and future secured indebtedness. The notes are also effectively subordinated in right of payment to all existing and future liabilities and other indebtedness, whether secured or unsecured, of COPLP's subsidiaries. COPT fully and unconditionally guarantees COPLP's obligations under these notes. COPT's guarantees of these notes are senior unsecured obligations that rank equally in right of payment with other senior unsecured obligations of, or guarantees by, COPT. COPT itself does not hold any indebtedness, and its only material asset is its investment in COPLP. As permitted under Rule 13-01(a)(4)(vi), we do not provide summarized financial information for theOperating Partnership since: the assets, liabilities, and results of operations of the Company and theOperating Partnership are not materially different than the corresponding amounts presented in the consolidated financial statements of the Company; and we believe that inclusion of such summarized financial information would be repetitive and not provide incremental value to investors.
Liquidity and Capital Resources
As of
We have a Revolving Credit Facility with an aggregate commitment by the lenders of$800.0 million , with the ability for us to increase such commitment to$1.25 billion , provided that there is no default under the facility and subject to the approval of the lenders. We use this facility to initially fund much of the cash requirements from our investing activities, including property development/redevelopment costs, as well as certain debt balloon payments due upon maturity. We then subsequently pay down the facility using cash available from operations and proceeds from long-term borrowings, equity issuances and sales of interests in properties. The facility matures inMarch 2023 , and may be extended by two six-month periods at our option, provided that there is no default under the facility and we pay an extension fee of 0.075% of the total availability under the facility 35 --------------------------------------------------------------------------------
for each extension period. As of
Our senior unsecured debt is rated investment grade by the three major rating agencies. We aim to maintain an investment grade rating to enable us to use debt comprised of unsecured, primarily fixed-rate debt (including the effect of interest rate swaps) from public markets and banks. We also use secured nonrecourse debt from institutional lenders and banks primarily for joint venture financings. In addition, we periodically raise equity when we access the public equity markets by issuing common shares and, to a lesser extent, preferred shares. We have a program in place under which we may offer and sell common shares in at-the-market stock offerings having an aggregate gross sales price of up to$300 million . Under this program, we may also, at our discretion, sell common shares under forward equity sales agreements. The use of a forward equity sales agreement would enable us to lock in a price on a sale of common shares when the agreement is executed but defer issuing the shares and receiving the sale proceeds until a later date. We believe that our liquidity and capital resources are adequate for our near-term and longer-term requirements without necessitating property sales. However, we may dispose of interests in properties opportunistically or when market conditions otherwise warrant. In addition, we believe that we have the ability to raise additional equity by selling interests in data center shells through joint ventures.
Our material cash requirements, including contractual and other obligations, include:
•property operating expenses, including future lease obligations from us as a lessee; •construction contract expenses; •general and administrative expenses; •debt service, including interest expense; •property development/redevelopment costs; •tenant and capital improvements and leasing costs for operating properties (expected to total approximately$70 million during the remainder of 2022); •debt balloon payments due upon maturity; and •dividends to our shareholders.
We expect to use cash flow from operations during the remainder of 2022 and annually thereafter for the foreseeable future to fund all of these cash requirements except for property development/redevelopment costs and debt balloon payments due upon maturity.
During the remainder of 2022, we expect to spend approximately$230 million on development/redevelopment costs, most of which was contractually obligated as ofMarch 31, 2022 ; we expect to fund these cash requirements using, in part, any available remaining cash flow from operations, with the balance funded primarily using borrowings under our Revolving Credit Facility, at least initially. As ofMarch 31, 2022 , we had$100 million in debt balloon payments due inDecember 2022 that we expect to repay using borrowings under our Revolving Credit Facility or proceeds from new long-term debt borrowings. As we use our Revolving Credit Facility to fund development/redevelopment costs and debt balloon payments, we intend to free up borrowing capacity by paying it down using proceeds from sales of interests in data center shells, property sales, new long-term debt borrowings and/or issuing common shares. Beyond 2022, we expect to continue to actively develop and redevelop properties and fund using, in part, any available remaining cash flow from operations, with most of the balance funded initially using borrowings under our Revolving Credit Facility. We provide disclosure in our consolidated financial statements on our future lessee obligations (expected to be funded primarily by cash flow from operations) in Note 5 and future debt obligations (expected to be refinanced by new debt borrowings or funded by future equity issuances and/or sales of interests in properties) in Note 9. Certain of our debt instruments require that we comply with a number of restrictive financial covenants, including maximum leverage ratio, unencumbered leverage ratio, minimum net worth, minimum fixed charge coverage, minimum unencumbered interest coverage ratio, minimum debt service and maximum secured indebtedness ratio. As ofMarch 31, 2022 , we were compliant with these covenants.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements for information regarding recent accounting pronouncements.
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