CYRUSONE INC. This Report on Form 10-Q, together with other statements and information publicly disseminated by our company, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. In particular, statements pertaining to our capital resources, portfolio performance, financial condition and results of operations contain certain forward-looking statements. Likewise, all of our statements regarding anticipated growth in our funds from operations and anticipated market conditions, demographics and results of operations are forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "estimates" or "anticipates" or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and we may not be able to realize them. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. 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: (i) the potential widespread and highly uncertain impact of public health outbreaks, epidemics and pandemics, such as the COVID-19 pandemic; (ii) loss of key customers; (iii) indemnification and liability provisions as well as service level commitments in our contracts with customers imposing significant costs on us in the event of losses; (iv) economic downturn, natural disaster or oversupply of data centers in the limited geographic areas that we serve; (v) risks related to the development of our properties including, without limitation, obtaining applicable permits, power and connectivity and our ability to successfully lease those properties; (vi) weakening in the fundamentals for data center real estate, including but not limited to, increased competition, falling market rents, decreases in or slowed growth of global data, e-commerce and demand for outsourcing of data storage and cloud-based applications; (vii) loss of access to key third-party service providers and suppliers; (viii) risks of loss of power or cooling which may interrupt our services to our customers; (ix) inability to identify and complete acquisitions and operate acquired properties; (x) our failure to obtain necessary outside financing on favorable terms, or at all; (xi) restrictions in the instruments governing our indebtedness; (xii) risks related to environmental, social and governance matters; (xiii) unknown or contingent liabilities related to our acquisitions; (xiv) significant competition in our industry; (xv) recent turnover, or the further loss of, any of our key personnel; (xvi) risks associated with real estate assets and the industry; (xvii) failure to maintain our status as a REIT (as defined below) or to comply with the highly technical and complex REIT provisions of the Internal Revenue Code of 1986, as amended (the "Code"); (xviii) REIT distribution requirements could adversely affect our ability to execute our business plan; (xix) insufficient cash available for distribution to stockholders; (xx) future offerings of debt may adversely affect the market price of our common stock; (xxi) increases in market interest rates will increase our borrowing costs and may drive potential investors to seek higher dividend yields and reduce demand for our common stock; (xxii) market price and volume of stock could be volatile; (xxiii) risks related to regulatory changes impacting our customers and demand for colocation space in particular geographies; (xxiv) our international activities, including those conducted as a result of land acquisitions and with respect to leased land and buildings, are subject to special risks different from those faced by us inthe United States ; (xxv) the continuing uncertainty about the future relationship between theUnited Kingdom and theEuropean Union following theUnited Kingdom's withdrawal from theEuropean Union ; (xxvi) expanded and widened price increases in certain selective materials for data center development capital expenditures due to international trade negotiations; (xxvii) a failure to comply with anti-corruption laws and regulations; (xxviii) legislative or other actions relating to taxes; (xxix) any significant security breach or cyber-attack on us or our key partners or customers; (xxx) the ongoing trade conflict betweenthe United States andthe People's Republic of China ; (xxxi) increased operating costs and capital expenditures at our facilities, including those resulting from higher utilization by our customers, general market conditions and inflation, exceeding revenue growth; and (xxxii) other factors affecting the real estate and technology industries generally. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. For a further discussion of these and other factors that could impact our future results, performance or transactions, see Part I, Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the year endedDecember 31, 2020 , and our other filings with theUnited States Securities and Exchange Commission ("SEC"). Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. We disclaim any obligation other than as 32 -------------------------------------------------------------------------------- required by law to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors or for new information, data or methods, future events or other changes. 33 --------------------------------------------------------------------------------
Overview
Our Company. We are a fully integrated, self-managed data center real estate
investment trust ("REIT") that owns, operates and develops enterprise-class,
carrier-neutral, multi-tenant and single-tenant data center properties. Our data
centers are generally purpose-built facilities with redundant power and cooling.
They are not network specific and enable customer connectivity to a range of
telecommunication carriers. We provide mission-critical data center real estate
assets that protect and ensure the continued operation of information technology
("IT") infrastructure for approximately 939 customers in 55 data centers,
including one data recovery center, in 16 markets (11 cities in the U.S. ;
London, U.K. ; Singapore ; Frankfurt, Germany ; Amsterdam, The Netherlands and
Dublin , The Republic of Ireland ).
We continue to monitor the global outbreak of the novel coronavirus (COVID-19)
and to take steps to mitigate the potential risks to us posed by the pandemic.
We provide a critical service to our customers and are considered an essential
business by most governments, and our employees are continuing to operate our
data centers. To date, our data center portfolio remains fully operational and
we have experienced minimal disruptions in our business, including construction
projects. Currently, our supply chain remains fully functional, with redundancy
of supply for key operational and construction-related products. We have not
been notified by customers of any significant delays in expected implementation
timelines. We have taken precautions with regard to employees and facility
hygiene, imposed travel restrictions on employees and implemented additional
protocols such as social distancing and limiting the number of people at our
facilities to protect those required to work on-site at our facilities including
employees, customers and vendors and suppliers. Also we have not experienced any
significant delays in the collection of revenue and customers requesting relief
or other rent concessions have not been significant in number or amount as of
this filing. We continue to evaluate recent developments involving COVID-19
cases and monitor developments that impact our business and respond as we
believe is warranted.
Our Portfolio
Our 55 data centers, including one recovery center, total 8.3 million Gross
Square Feet ("GSF"), of which 83% of the Colocation Square Feet ("CSF") is
leased and has 933 megawatts ("MW") of power capacity. This includes 12
buildings where we lease such facilities comprising approximately 11% of our
total GSF as of June 30, 2021 . Also included in our total GSF, CSF and MW are
pre-stabilized assets (which include data halls that have been in service for
less than 24 months or are less than 85% leased) with approximately 416,655 GSF
and 28% of the CSF is leased with capacity of 50 MW of power.
In addition, we continue to invest primarily in global digital gateway markets
and have properties under development comprising approximately 0.8 million GSF
and 64 MW of power capacity. The estimated remaining total costs to develop
these properties is projected to be between $278.0 million and $358.0
million . The final costs to develop are likely to change depending on several
factors including the customer capital improvements required based on the future
lease contracts executed on such properties. We also have 493 acres of land
available for future data center development.
Operational Overview
The following discussion provides an overview of our capital and financing
activity, operations and transactions for the six months ended June 30, 2021 and
should be read in conjunction with the full discussion of our operating results,
liquidity and capital resources included in this Form 10-Q, as well as the risk
factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the
year ending December 31, 2020 .
Outlook
We seek to maximize long-term earnings growth and shareholder value primarily through increasing cash flow at existing properties and developing high-quality data center assets and campuses at attractive cash yields with long-term, stable operating income. In addition, the Company will, from time to time, acquire existing properties which meet our strategic criteria, offer in-place cash flow and have strong growth prospects. Fundamental secular trends for data center real estate have remained strong, including the exponential growth in global data, the growth of e-commerce and demand for outsourcing of data storage and cloud-based applications. Large cloud-based demand, in particular, is strong in theU.S. andEurope . The favorable trends have attracted new capital funding for multiple data center platforms, including both public and private companies, leading to significant increases in supply in most major markets in which we operate. While demand remains robust, the supply outlook has led to pricing pressure in some markets, particularly with large hyperscale customers that are driving an increase in demand, which we expect to continue in 2021. Recent improvements in general economic growth in theU.S. andEurope in first six months of 2021 have been positive, however uncertainty remains as the COVID-19 pandemic continues, which could result in declines in economic growth in markets where we operate. More generally, in response to the pandemic, government economic support to businesses and individuals impacted by the pandemic may not continue or be effective at alleviating the abrupt economic deterioration experienced to date, and both 34 -------------------------------------------------------------------------------- the short-term and long-term impact of these actions on economic growth remains uncertain. As a result, the impact of the current state of the economies where we do business on our company is unknown. In terms of capital investment, we will continue to pursue selective development of new data centers primarily in global digital gateway markets where we project demand and market rental rates will provide attractive financial returns.
We may, from time to time, selectively dispose of non-strategic assets to recycle capital and enhance long-term growth in earnings and cash flows, as well as to improve the overall quality of our portfolio.
Our access to the investment grade debt capital markets is critical to managing our business. We recently completed senior debt issuances in 2021 and 2020 along with the amendment of our credit facility in 2020 at favorable terms to extend our near-term maturities and reduce our overall borrowing rates. We are committed to maintaining our investment grade ratings and have a strong balance sheet. We anticipate having sufficient liquidity to fund our capital and operating expenses, including costs to maintain our properties and distributions, though we may finance investments, including developments and acquisition, with the issuance of new shares of our common stock, proceeds from asset sales or through additional borrowings. Please see "Financial Condition, Liquidity and Capital Resources" for additional discussion. Inflation TheU.S. and European economies where we operate have experienced low inflation over the last several years, and as a result, inflation has not had a significant impact on our business over this period. Recent indicators of inflation in theU.S. andEurope , however, indicate increases in prices which may impact our costs to construct, build and operate our data centers. Our business may be adversely impacted by inflation as our customer leases generally do not provide for annual increases in rent based on inflation. As a result, we bear the risk of increases in the costs of operating and maintaining our data center facilities. Most of our leases have rent escalators, typically ranging from 1-3% per annum; in addition most of our leases are structured to pass-through the cost of sub-metered utilities. In the future, we expect more of our leases to be structured to pass-through utility costs. In addition, approximately 71% of our leases, based on annualized rent, expire within six years which enables us to replace existing leases with new leases at then existing market rates.
Summary of Significant Transactions and Activities for the Six Months Ended
Real Estate Acquisitions, Development and Other Activities
During the six months ended
InJune 2021 , the Company entered into lease amendments for the two data center leases located inLondon, United Kingdom to extend the lease terms. Per lease modification accounting rules under ASC 842, these leases were classified as finance leases on the modification effective date. Previously these leases were accounted as operating leases. The finance lease asset and liability are presented in Buildings and improvements and Finance lease liabilities in the Condensed Consolidated Balance sheets, respectively.
In
During the six months endedJune 30, 2021 , cash capital expenditures were$361.7 million , of which$355.2 million related to the development and construction of data centers. We continue to make a significant investment to build and develop data centers which will require additional capital investment. The expansion and development of additional power capacity and building square feet during the six months endedJune 30, 2021 primarily related to development in key markets, primarily inNorthern Virginia ,Dublin ,Paris ,Frankfurt ,Phoenix ,San Antonio ,Somerset ,Madrid andLondon .
Capital and Financing Activity
Financing Activity
Credit Facilities
As of
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On March 31, 2020 , CyrusOne LP , a Maryland limited partnership (the "Operating
Partnership"), and subsidiary of the Company, entered into an amendment to its
credit agreement, dated as of March 29, 2018 (as so amended, the "Amended Credit
Agreement"), among the Operating Partnership , as borrower, the lenders party
thereto (the "Lenders") and JPMorgan Chase Bank, N.A ., as administrative agent
for the Lenders. Proceeds from the Amended Credit Agreement were used, among
other things, to refinance and replace the credit facilities under the Company's
prior credit agreement.
The Amended Credit Agreement provides for (i) a $1.4 billion senior unsecured
multi-currency revolving credit facility (the "Revolving Credit Facility"), (ii)
senior unsecured term loans due 2023 in a dollar equivalent principal amount of
$400.0 million (the "2023 Term Loan Facility"), and (iii) senior unsecured term
loans due 2025 in a principal amount of $700.0 million (the "2025 Term Loan
Facility"). The Amended Credit Agreement also includes an accordion feature
pursuant to which the Operating Partnership is permitted to obtain additional
revolving or term loan commitments so long as the aggregate principal amount of
commitments and/or term loans under the Amended Credit Agreement does not exceed
$4.0 billion . The Revolving Credit Facility provides for borrowings in U.S.
Dollars, Euros, Pounds Sterling, Canadian Dollars, Australian Dollars, Japanese
Yen, Hong Kong Dollars, Singapore Dollars and Swiss Francs (subject to a
sublimit of $750.0 million on borrowings in currencies other than U.S. Dollars).
The Revolving Credit Facility matures on March 29, 2024 with one 12-month
extension option. The 2023 Term Loan Facility matures on March 29, 2023 with two
1-year extension options, and the 2025 Term Loan Facility matures on March 28,
2025 .
Senior debt
On
OnJanuary 22, 2020 ,CyrusOne LP andCyrusOne Finance Corp. closed an offering of €500.0 million aggregate principal amount of 1.450% senior notes dueJanuary 2027 (the "2027 Notes"). Capital Activity
During the three months ended
During the second quarter of 2021, the Company entered into sales agreements pursuant to which the Company may issue and sell from time to time shares of its common stock having an aggregate sales price of up to$750.0 million (the "2021 ATM Stock Offering Program"). The 2021 ATM Stock Offering Program replaced a prior program. During the three months endedJune 30, 2021 , the Company entered into forward agreements for 3.0 million common shares for estimated net proceeds of approximately$232.0 million , subject to adjustment for a floating interest rate factor and scheduled dividends. During the three months endedJune 30, 2020 , the Company entered into forward agreements for 4.2 million common shares for estimated net proceeds of approximately$296.1 million , subject to adjustment for a floating interest rate factor and scheduled dividends. The Company currently expects to fully physically settle the remaining forward equity sale agreements byJune 2022 and receive cash proceeds upon one or more settlement dates at the Company's discretion, prior to the final settlement dates under the forward equity sale agreements, in which case we expect to receive aggregate net cash proceeds at settlement equal to the number of shares specified in such forward equity sale agreements multiplied by the relevant forward price per share. The weighted average forward sale price that we expect to receive upon physical settlement of the agreements will be subject to adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread and (ii) scheduled dividends during the terms of the agreements. As ofJune 30, 2021 , there was$513.4 million under the 2021 ATM Stock Offering Program available for future offerings.
Concentration of Revenue
We define our annualized backlog as the twelve-month recurring revenue (calculated in accordance with generally accepted accounting principles inthe United States of America ("GAAP")) for executed lease contracts achieved upon full occupancy which have not commenced as of the end of a period. Our backlog as ofJune 30, 2021 andDecember 31, 2020 was approximately$129.1 million and$101.0 million , respectively. During the six months endedJune 30, 2021 , one customer represented 19% of our revenue. We expect 59% of our backlog lease contracts to commence in the second half of 2021 and 41% in 2022 and thereafter. Because GAAP revenue for any period is generally a function of straight-line revenue recognized from lease contracts in existence at the beginning of a period, as well as lease contract renewals and new customer lease 36 --------------------------------------------------------------------------------
contracts commencing during the period, backlog as of any period is not necessarily indicative of near-term performance. Our definition of backlog may differ from other companies in our industry.
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Results of Operations
Three and Six Months Ended June 30, 2021 , Compared to Three and Six Months Ended
June 30, 2020 :
IN MILLIONS, except share and per share data
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 $ Change % Change 2021 2020 $ Change % Change
Revenue:
Colocation rent $ 224.8 $ 207.5 $ 17.3 8 % $ 445.1 $ 411.5 $ 33.6 8.2 %
Metered power reimbursements 53.0 37.1 15.9 43 % 126.1 71.9 54.2 75.4 %
Equipment sales 2.1 6.9 (4.8) (70) % 2.6 9.4 (6.8) (72.3) %
Other revenue 4.7 4.9 (0.2) (4) % 9.4 9.5 (0.1) (1.1) %
Total revenue 284.6 256.4 28.2 11 % 583.2 502.3 80.9 16.1 %
Operating expenses:
Property operating expenses 121.8 99.0 22.8 23 % 257.6 191.6 66.0 34.4 %
Sales and marketing 3.7 3.8 (0.1) (3) % 7.5 8.5 (1.0) (11.8) %
General and administrative 16.6 20.3 (3.7) (18) % 39.6 47.2 (7.6) (16.1) %
Depreciation and amortization 123.7 109.7 14.0 13 % 245.1 217.8 27.3 12.5 %
Transaction, acquisition, integration and other
related expenses 0.1 0.1 - n/m 0.2 0.5 (0.3) (60.0) %
Impairment losses and loss on asset disposals 0.1 2.4 (2.3) (96) % 0.6 2.4 (1.8) (75.0) %
Total operating expenses 266.0 235.3 30.7 13 % 550.6 468.0 82.6 17.6 %
Operating income 18.6 21.1 (2.5) n/m 32.6 34.3 (1.7) (5.0) %
Interest expense, net (14.8) (13.9) (0.9) 6 % (29.9) (29.9) - n/m
Gain on marketable equity investment - 50.4 (50.4) (100) % 2.4 65.1 (62.7) (96.3) %
Loss on early extinguishment of debt - - - n/m - (3.4) 3.4 (100.0) %
Foreign currency and derivative gains (losses),
net 1.4 (13.9) 15.3 (110) 16.8 (8.8) 25.6 n/m
Other (expense) income (0.1) 0.1 (0.2) n/m (0.2) - (0.2) n/m
Net income before income taxes 5.1 43.8 (38.7) (88) 21.7 57.3 (35.6) (62.1) %
Income tax benefit 2.3 1.2 1.1 92 % 3.9 2.4 1.5 n/m
Net income $ 7.4 $ 45.0 $ (37.6) (84) $ 25.6 $ 59.7 $ (34.1) (57.1) %
Operating gross margin 6.5 % 8.2 % (21) 5.6 % 6.8 % (17.6) %
Capital expenditures:(1)
Investment in real estate $ 182.4 $ 255.1 $ (72.7) (28) % $ 355.2 $ 448.1 $ (92.9) (20.7) %
Recurring capital expenditures 3.9 6.4 (2.5) (39) % 6.5 9.9 (3.4) (34.3) %
Total $ 186.3 $ 261.5 $ (75.2) (29) % $ 361.7 $ 458.0 $ (96.3) (21.0) %
Metrics information:
CSF(2) 4,888,627 4,426,664 461,963 10 % 4,888,627 4,426,664 461,963 10.4 %
Leased rate(3) 83 % 83 % - % n/m 83 % 83 % - % n/m
(1) Expenditures that expand, improve or extend the life of real estate and
non-real estate property are capital expenditures. Management views its capital
expenditures as comprised of acquisitions of real estate, development of real
estate, recurring capital expenditures and all other non-real estate capital
expenditures. Purchases of land or buildings from third parties represent
acquisitions of real estate. Capital spending that expands or improves our data
centers is deemed development of real estate. Replacements of data center
equipment are considered recurring capital expenditures. Purchases of software,
computer equipment and furniture and fixtures are included in non-real estate
capital expenditures.
(2) CSF represents the GSF at an operating facility that is currently leased or
readily available for lease as colocation space, where customers locate their
servers and other IT equipment.
(3) Leased rate is calculated by dividing CSF under signed leases for colocation
space (whether or not the lease has commenced billing) by total CSF.
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The three months ended
Operations
As ofJune 30, 2021 , we had approximately 939 customers, many of which have leases at multiple locations. Our recurring revenues consist of rental revenue for colocation space and metered power reimbursements based upon customers with leases, and our nonrecurring revenues consist of equipment sales and installation services based on contracts with customers. We provide customers with data center services pursuant to leases with initial terms ranging from three to ten years. As ofJune 30, 2021 , the weighted average remaining term was 3.8 years based upon annualized rent. Lease expirations through 2023, excluding month-to-month leases, represent 30% of our total GSF, or 42% of our aggregate annualized rent as ofJune 30, 2021 . At the end of the lease term, customers may allow the contract to expire, sign a new lease or automatically renew pursuant to the terms of their lease. The automatic renewal period could be for varying lengths, depending on the terms of the contract, such as, for the original lease term, one year or month-to-month. As ofJune 30, 2021 , 2% of our GSF was subject to month-to-month leases. Revenue For the three months endedJune 30, 2021 , revenue was$284.6 million , an increase of$28.2 million , or 11.0% compared to$256.4 million for the three months endedJune 30, 2020 . Revenue increased$3.9 million for the three months endedJune 30, 2021 compared to the same period in 2020 due to favorable currency translation. Fluctuations in revenue are dependent upon our ability to maintain our existing revenue base, sell new capacity, and maintain or increase rental rates at our properties. Recurring rent churn percentage of 0.8% for the three months endedJune 30, 2021 decreased by 0.3% as compared to the 1.1% for the three months endedJune 30, 2020 . The Company calculates recurring rent churn percentage as any reduction in recurring rent due to customer terminations, service reductions or net pricing decreases as a percentage of rent at the beginning of the period, excluding any impact from metered power reimbursements or other usage-based billing.
CSF increased 10% at
Revenue increased$28.2 million for the three months endedJune 30, 2021 , as compared to the three months endedJune 30, 2020 primarily due to the following: •$18.7 million increase in colocation rent, primarily due to a$26.7 million increase for new leasing at completed developments atU.S. and European properties, partially offset by$8.0 million of rent churn related to expired leases; •$15.9 million increase in metered power reimbursements primarily due to new leasing and higher usage; and •$1.1 million increase in interconnection revenue; partially offset by •$4.8 million decrease in equipment sales and associated installation services with one significant customer during the three months endedJune 30, 2020 ; and •$2.7 million of lower termination fees and other revenue.
Operating Expenses
Property operating expenses
For the three months endedJune 30, 2021 , Property operating expenses were$121.8 million , an increase of$22.8 million , or 23.0%, compared to$99.0 million for the three months endedJune 30, 2020 , primarily due to the following: •$27.6 million increase in property operating expenses primarily due to increases in electricity, repair and maintenance, personnel costs, contract services, rent and taxes and insurance related to the expansion at existing properties and newly developed properties placed in service in theU.S. andEurope ; partially offset by •$4.8 million decrease in equipment cost of sales due to lower equipment sales volume associated with one significant customer during the current quarter.
Sales and marketing expenses
For the three months endedJune 30, 2021 , Sales and marketing expenses were$3.7 million , a decrease of$0.1 million , or 2.6%, compared to$3.8 million for the three months endedJune 30, 2020 . 39 --------------------------------------------------------------------------------
General and administrative expenses
For the three months endedJune 30, 2021 , General and administrative expenses were$16.6 million , a decrease of$3.7 million , or 18.2%, compared to$20.3 million for the three months endingJune 30, 2020 , primarily due to the following: •$3.6 million decrease in legal fees primarily due to the receipt of proceeds from the resolution and settlement of certain litigation; and •$1.2 million decrease in other general and administrative expenses; partially offset by •$0.9 million increase in employee related and stock compensation expense primarily due to new grants; and •$0.2 million increase in license fees and support for information systems.
Depreciation and amortization expense
For the three months endedJune 30, 2021 , Depreciation and amortization expense was$123.7 million , an increase of$14.0 million , or 12.8%, compared to$109.7 million for the three months endingJune 30, 2020 . This increase was primarily driven by asset additions that were placed in service after the second quarter of 2020. SinceJune 30, 2020 , approximately$1,034.1 million of new data center assets have been placed in service. Depreciation and amortization expense is expected to increase in future periods as we complete the development of properties and installation of equipment and facilities to support our operations.
Non-Operating Income and Expenses
Interest expense, net
For the three months endedJune 30, 2021 , Interest expense, net was$14.8 million , an increase of$0.9 million , or 6.5%, as compared to$13.9 million for the three months endingJune 30, 2020 , primarily due to the following: •$0.8 million increase related to cash settlements on cross currency and interest rate swaps; •$0.5 million increase primarily due to a$344.2 million increase in average debt outstanding; and •$0.1 million increase due to lower capitalized interest as a result of the Company's lower overall average interest rate; partially offset by •$0.5 million decrease related to an increase in interest income primarily due to interest on a sales tax refund. We anticipate drawing on our Revolving Credit Facility to fund, in part, our capital requirements for investments in data centers and other capital expenditures, accordingly, we anticipate our interest expense to increase in future periods.
Gain on marketable equity investment
For the three months endedJune 30, 2020 , the Gain on our marketable equity investment in GDS Holdings Limited ("GDS") was$50.4 million . See Note 7, Equity Investments, for information related to our accounting for our equity investment in GDS.
Foreign currency and derivative gains (losses), net
Foreign currency and derivative gains (losses), net were a gain of$1.4 million and a loss of$13.9 million for the three months endedJune 30, 2021 andJune 30, 2020 , respectively, as a result of the translation adjustment on our undesignated EURO denominated borrowings.
The six months ended
Revenue For the six months endedJune 30, 2021 , revenue was$583.2 million , an increase of$80.9 million , or 16.1% compared to$502.3 million for the six months endedJune 30, 2020 . Revenue increased$7.0 million for the six months endedJune 30, 2021 compared to the same period in 2020 due to favorable currency translation. Fluctuations in revenue are dependent upon our ability to maintain our existing revenue base, sell new capacity, and maintain or increase rental rates at our properties. Recurring rent churn percentage of 2.6% for the six months endedJune 30, 2021 increased by 0.5% as compared to the 2.1% for the six months endedJune 30, 2020 . The Company calculates recurring rent churn percentage as any reduction in recurring rent due to customer terminations, service reductions or net pricing decreases as a percentage of rent at the beginning of the period, excluding any impact from metered power reimbursements or other usage-based billing. 40 -------------------------------------------------------------------------------- The revenue increase of$80.9 million for the six months endedJune 30, 2021 , as compared to the six months endedJune 30, 2020 is primarily due to the following: •$54.2 million increase in metered power reimbursements primarily due to a$27.7 million increase from Winter Storm Uri inTexas and$26.5 million due to new leasing and higher usage; •$33.5 million increase in colocation rent, primarily due to a$51.2 million increase for new leasing at completed developments atU.S. and European properties, partially offset by$17.7 million of rent churn related to expired leases; and •$2.4 million increase in interconnection revenue; partially offset by •$6.8 million decrease in equipment sales and associated installation services with one significant customer during the six months endedJune 30, 2020 ; and •$2.4 million of lower termination fees and Other revenue.
Operating Expenses
Property operating expenses
For the six months endedJune 30, 2021 , Property operating expenses were$257.6 million , an increase of$66.0 million , or 34.4%, compared to$191.6 million for the six months endedJune 30, 2020 , primarily due to the following: •$72.6 million increase in property operating expenses primarily due to: •$57.6 million increase in electricity due to$31.9 million increase from Winter Storm Uri inTexas and$25.7 million increase related to expansion at existing properties and newly developed properties placed in service in theU.S. andEurope ; and •$15.0 million increase in property operating expenses primarily due to increases in repair and maintenance, personnel costs, contract services, rent and taxes and insurance related to expansion at existing properties and newly developed properties placed in service in theU.S. andEurope ; partially offset by •$6.6 million decrease in equipment cost of sales due to lower equipment sales volume associated with one significant customer during the current period.
Sales and marketing expenses
For the six months endedJune 30, 2021 , Sales and marketing expenses were$7.5 million , a decrease of$1.0 million , or 11.8%, compared to$8.5 million for the six months endedJune 30, 2020 , primarily due to lower personnel costs as a result of changes in the organization structure, decline in travel expenses as company travel has been restricted sinceMarch 2020 as a result of the pandemic, lower advertising and lower professional and consulting fees.
General and administrative expenses
For the six months endedJune 30, 2021 , General and administrative expenses were$39.6 million , a decrease of$7.6 million , or 16.1%, compared to$47.2 million for the six months endingJune 30, 2020 , primarily due to the following: •$7.0 million decrease in personnel costs including severance due to the departure of our Chief Executive Officer in the prior year period and a general reduction in force; •$1.5 million decrease in legal fees primarily due to the receipt of proceeds from the resolution and settlement of certain litigation; and •$0.4 million decrease in other general and administrative expenses; partially offset by •$0.8 million increase in license fees and support for information systems; and •$0.5 million increase employee related stock-based compensation primarily related to new grants.
Depreciation and amortization expense
For the six months endedJune 30, 2021 , Depreciation and amortization expense was$245.1 million , an increase of$27.3 million , or 12.5%, compared to$217.8 million for the six months endingJune 30, 2020 . This increase was primarily driven by asset additions that were placed in service after the second quarter of 2020. SinceJune 30, 2020 , approximately$1,034.1 million of new data center assets have been placed in service. Depreciation and amortization expense is expected to increase in future periods as we complete the development of properties and installation of equipment and facilities to support our operations. 41
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Non-Operating Income and Expenses
Interest expense, net
For the six months endedJune 30, 2021 andJune 30, 2020 , Interest expense, net was$29.9 million . The following activity occurred during the period: •$4.5 million decrease due to the repayment of a portion of the Amended Credit Agreement which decreased interest expense by$10.8 million , partially offset by a$381.5 million increase in average debt outstanding which increased interest expense by$6.3 million ; •$0.4 million decrease related to an increase in interest income primarily due to interest on a sales tax refund; offset by •$3.8 million increase related to cash settlements on cross currency and interest rate swaps; and •$1.1 million increase due to lower capitalized interest as a result of the Company's lower overall average interest rate. We anticipate drawing on our Revolving Credit Facility to fund, in part, our capital requirements for investments in data centers and other capital expenditures, accordingly, we anticipate our interest expense to increase in future periods.
Gain on marketable equity investment
For the six months endedJune 30, 2021 , the Gain on our marketable equity investment in GDS was$2.4 million , a decrease of$62.7 million , compared to$65.1 million for the six months endedJune 30, 2020 . The decrease was primarily the result of our disposition of our remaining investment in GDS inJanuary 2021 . See Note 7, Equity Investments, for information related to our accounting for our equity investment in GDS.
Loss on early extinguishment of debt
InMarch 2020 , the Company entered into an amendment to its credit agreement resulting in a Loss on early extinguishment of debt of$3.4 million primarily due to the expensing of deferred financing costs related to the repayment of the$3.0 Billion Credit Facility.
Foreign currency and derivative gains (losses), net
For the six months endedJune 30, 2021 , Foreign currency and derivative gains (losses), net were a$16.8 million gain as a result of the translation adjustment on our undesignated EURO denominated borrowings. For the six months endedJune 30, 2020 , Foreign currency and derivative gains (losses), net were an$8.8 million loss which was primarily the result of gains from the settlement of our Euro/USD cross-currency swap that were not designated as hedges and changes in the fair value were immediately recognized in earnings. 42
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