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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________
Commission File Number: 001-35789

CyrusOne Inc.
(Exact name of registrant as specified in its charter)
Maryland46-0691837
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2850 N. Harwood Street, Suite 2200, Dallas, TX 75201
(Address of Principal Executive Offices) (Zip Code)

(972) 350-0060
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $0.01 par valueCONEThe NASDAQ Global Select Market
1.450% Senior Notes due 2027CONE27The Nasdaq Stock Market LLC



    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    

Yes      No  
    Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    
Yes      No  




    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
    If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
Yes      No  
There were 122,536,028 shares of common stock outstanding as of April 23, 2021 with a par value of $0.01 per share.



EXPLANATORY NOTE

Unless otherwise indicated or unless the context requires otherwise, all references in this report to "we," "us," "our," "our Company" or "the Company" refer to CyrusOne Inc., a Maryland corporation, together with its consolidated subsidiaries, including CyrusOne LP, a Maryland limited partnership. Unless otherwise indicated or unless the context requires otherwise, all references to "our operating partnership" or "the operating partnership" refer to CyrusOne LP together with its consolidated subsidiaries.

CyrusOne Inc. is a real estate investment trust, or REIT, whose only material asset is its ownership of operating partnership units of CyrusOne LP. CyrusOne Inc. does not conduct business itself, other than acting as the sole beneficial owner and trustee of CyrusOne GP, a Maryland statutory trust, issuing public equity from time to time and guaranteeing certain debt of CyrusOne LP and certain of its subsidiaries. CyrusOne Inc., directly or indirectly, owns all of the issued and outstanding operating partnership units of CyrusOne LP as of March 31, 2021 and has the full, exclusive and complete responsibility for the operating partnership's day-to-day management and control. Effective February 1, 2021, the Company reorganized CyrusOne LP to classify the partnership as a regarded entity under the provisions of the Internal Revenue Code of 1986, as amended (the "Code"). See Part I, Item 1A "Risk Factors-Risks Related to Our Organization Structure" of our Annual Report on Form 10-K for the year ended December 31, 2020, as amended ("Form 10-K") for more information. CyrusOne Inc. itself does not issue any indebtedness but guarantees the debt of CyrusOne LP and certain of its subsidiaries, as disclosed in this report. CyrusOne LP and its subsidiaries hold substantially all the assets of the Company. CyrusOne LP conducts the operations of the business, along with its subsidiaries, and is structured as a partnership with no publicly traded equity. Except for net proceeds from public equity issuances by CyrusOne Inc., which are generally contributed to CyrusOne LP in exchange for operating partnership units, CyrusOne LP generates the capital required for the Company's business through CyrusOne LP's operations and incurrence of indebtedness.

As of March 31, 2021, the total number of outstanding shares of our common stock was approximately 122.5 million.
On November 19, 2020, the Securities and Exchange Commission (“SEC”) adopted amendments to Regulation S-K Items 301, 302 and 303, which became effective on February 10, 2021. Although mandatory compliance is not required until our fiscal year ending December 31, 2021, early adoption is permitted, and as previously disclosed we elected to early adopt amended Regulation S-K Items 301, 302 and 303 in our Form 10-K.



INDEX
 Page
PART I. FINANCIAL INFORMATION
PART II. OTHER INFORMATION



PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CyrusOne Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share amounts)
(unaudited)
March 31, 2021December 31, 2020
Assets
Investment in real estate:
Land$207.3 $208.8 
Buildings and improvements2,046.6 2,035.2 
Equipment3,596.5 3,538.9 
Gross operating real estate
5,850.4 5,782.9 
Less accumulated depreciation(1,867.5)(1,767.9)
       Net operating real estate3,982.9 4,015.0 
Construction in progress, including land under development1,053.3 982.2 
Land held for future development262.3 268.3 
Total investment in real estate, net
5,298.5 5,265.5 
Cash and cash equivalents240.9 271.4 
Rent and other receivables (net of allowance for doubtful accounts of $2.1 and $3.5 as of March 31, 2021 and December 31, 2020, respectively)
389.8 334.2 
Restricted cash1.4 1.5 
Operating lease right-of-use assets, net239.7 211.4 
Equity investments22.9 67.1 
Goodwill455.1 455.1 
Intangible assets (net of accumulated amortization of $257.2 and $249.3 as of March 31, 2021 and December 31, 2020, respectively)
149.2 157.8 
Other assets114.3 133.4 
Total assets$6,911.8 $6,897.4 
Liabilities and equity
Debt$3,337.4 $3,409.0 
Finance lease liabilities28.6 29.1 
Operating lease liabilities277.9 249.1 
Construction costs payable137.5 133.0 
Accounts payable and accrued expenses168.9 151.3 
Dividends payable62.0 63.3 
Deferred revenue and prepaid rents183.2 174.1 
Deferred tax liability48.2 53.0 
Other liabilities53.3 77.3 
Total liabilities4,297.0 4,339.2 
Commitments and contingencies
Stockholders' equity
Preferred stock, $0.01 par value, 100,000,000 authorized; no shares issued or outstanding
  
Common stock, $0.01 par value, 500,000,000 shares authorized and 122,535,975 and 120,442,521 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively
1.2 1.2 
Additional paid in capital3,628.6 3,537.3 
Accumulated deficit(1,010.2)(966.6)
Accumulated other comprehensive loss(4.8)(13.7)
Total stockholders’ equity2,614.8 2,558.2 
Total liabilities and equity$6,911.8 $6,897.4 

The accompanying notes are an integral part of the condensed consolidated financial statements.
5


CyrusOne Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
Three Months Ended March 31,
20212020
Revenue$298.6 $245.9 
Operating expenses:
Property operating expenses135.8 92.6 
Sales and marketing3.8 4.7 
General and administrative23.0 26.9 
Depreciation and amortization121.4 108.1 
Transaction, acquisition, integration and other related expenses0.1 0.5 
Impairment losses and loss (gain) on asset disposals0.5 (0.1)
Total operating expenses284.6 232.7 
Operating income14.0 13.2 
Interest expense, net(15.1)(16.0)
Gain on marketable equity investment2.4 14.7 
Loss on early extinguishment of debt (3.4)
Foreign currency and derivative gains, net15.4 5.1 
Other expense(0.1)(0.1)
Net income before income taxes16.6 13.5 
Income tax benefit1.6 1.2 
Net income$18.2 $14.7 
Weighted average number of common shares outstanding - basic120.4 114.9 
Weighted average number of common shares outstanding - diluted120.5 115.1 
Net income per share - basic$0.15 $0.13 
Net income per share - diluted$0.15 $0.13 

The accompanying notes are an integral part of the condensed consolidated financial statements.
6


CyrusOne Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
(unaudited)
Three Months Ended March 31,
20212020
Net income$18.2 $14.7 
Other comprehensive income (loss):
Foreign currency translation adjustment(15.0)(24.0)
Net gain (loss) on hedging instruments23.9 (1.1)
Comprehensive income (loss)$27.1 $(10.4)

The accompanying notes are an integral part of the condensed consolidated financial statements.
7


CyrusOne Inc.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(in millions)
(unaudited)

Stockholders' Equity
 Shares of Common Stock OutstandingCommon StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated Other Comprehensive Income (Loss)Total
Stockholders'
Equity
Balance as of January 1, 2020114.8 $1.1 $3,202.0 $(767.3)$(1.2)$2,434.6 
Net income— — — 14.7 — 14.7 
Issuance of common stock, net0.2 0.1 0.5 — — 0.6 
Stock-based compensation expense— — 3.7 — — 3.7 
Tax payment upon exercise of equity awards— — (6.3)— — (6.3)
Foreign currency translation adjustment— — — — (24.0)(24.0)
Net loss on cash flow hedging instruments— — — — (1.1)(1.1)
Dividends declared, $0.50 per share
— — — (58.4)— (58.4)
Balance as of March 31, 2020115.0 $1.2 $3,199.9 $(811.0)$(26.3)$2,363.8 

Balance as of January 1, 2021120.4 $1.2 $3,537.3 $(966.6)$(13.7)$2,558.2 
Net income— — — 18.2 — 18.2 
Issuance of common stock, net2.1 — 95.8 — — 95.8 
Stock-based compensation expense— — 4.4 — — 4.4 
Tax payment upon exercise of equity awards— — (8.9)— — (8.9)
Foreign currency translation adjustment— — — — (15.0)(15.0)
Net gain on cash flow hedging instruments— — — — 23.9 23.9 
Dividends declared, $0.51 per share
— — — (61.8)— (61.8)
Balance as of March 31, 2021122.5 $1.2 $3,628.6 $(1,010.2)$(4.8)$2,614.8 

The accompanying notes are an integral part of the condensed consolidated financial statements.
8


CyrusOne Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Three Months Ended March 31,
20212020
Cash flows from operating activities:
Net income$18.2 $14.7 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization121.4 108.1 
Provision for bad debt expense(1.1)(0.1)
Gain on marketable equity investment(2.4)(14.7)
Foreign currency and derivative gains, net(15.4)(5.1)
Proceeds from swap terminations 2.9 
Impairment losses and loss (gain) on asset disposals0.5 (0.1)
Loss on early extinguishment of debt 3.4 
Interest expense amortization, net1.6 2.0 
Stock-based compensation expense4.4 3.7 
Deferred income tax benefit(2.6)(2.0)
Operating lease cost5.2 6.2 
Other (income) expense(0.1)0.3 
Change in operating assets and liabilities:
Rent and other receivables, net and other assets(43.4)(29.4)
Accounts payable and accrued expenses18.4 (1.2)
Deferred revenue and prepaid rents8.5 3.2 
Operating lease liabilities(6.5)(5.6)
Net cash provided by operating activities106.7 86.3 
Cash flows from investing activities:
Investments in real estate(175.4)(196.5)
Proceeds from sale of equity investments46.6  
Equity investments (3.3)
Proceeds from the sale of real estate assets4.4  
Net cash used in investing activities(124.4)(199.8)
Cash flows from financing activities:
Issuance of common stock, net95.8 0.6 
Dividends paid(63.0)(58.4)
Proceeds from revolving credit facility90.3 244.4 
Repayments of revolving credit facility(124.2)(623.1)
Proceeds from Euro bond 550.6 
Proceeds from unsecured term loan 1,100.0 
Repayments of unsecured term loan (1,100.0)
Payment of deferred financing costs (13.6)
Payments on finance lease liabilities(0.7)(0.7)
Tax payment upon exercise of equity awards(8.9)(6.3)
Net cash (used in) provided by financing activities(10.7)93.5 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(2.2)0.9 
Net decrease in cash, cash equivalents and restricted cash(30.6)(19.1)
Cash, cash equivalents and restricted cash at beginning of period272.9 77.7 
Cash, cash equivalents and restricted cash at end of period$242.3 $58.6 
Supplemental disclosure of cash flow information:
Cash paid for interest, including amounts capitalized of $4.9 million and $6.0 million in 2021 and 2020, respectively
$12.8 $8.3 
Non-cash investing and financing activities:
Construction costs payable137.5 183.4 
Dividends payable62.0 58.7 
The accompanying notes are an integral part of the condensed consolidated financial statements.
9

CyrusOne Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (unaudited)
(in millions of dollars, except per share)


1. Description of Business

CyrusOne Inc., together with CyrusOne GP (the "General Partner"), a wholly-owned subsidiary of CyrusOne Inc., through which CyrusOne Inc. wholly owns CyrusOne LP (the "Operating Partnership") and the subsidiaries of the Operating Partnership (collectively, "CyrusOne", "we", "us", "our", and the "Company") is an owner, operator and developer of enterprise-class, carrier-neutral, multi-tenant and single-tenant data center properties. As of March 31, 2021, all of the issued and outstanding operating partnership units of CyrusOne LP are owned, directly or indirectly, by the Company. Our customers operate in a number of industries, including information technology, financial services, energy, oil and gas, mining, medical, research and consulting services, and consumer goods and services. We currently operate 54 data centers, including one recovery center, located in the United States, United Kingdom, Germany, The Netherlands, The Republic of Ireland and Singapore.
On January 24, 2013, the Company completed its initial public offering (the "IPO") of common stock and its common stock currently trades on the NASDAQ Exchange under the ticker symbol "CONE".

2. Summary of Significant Accounting Policies
Risks and Uncertainties
The novel strain of the coronavirus (COVID-19) identified in China in late 2019 has globally spread throughout Asia, Europe, the Middle East and the Americas and has resulted in authorities implementing numerous measures to attempt to contain the virus. This includes travel bans, shelter in place regulations and other restrictions and shutdowns. We continue to monitor the global outbreak and to take steps to mitigate the potential risks to us posed by the pandemic. To date, our data center portfolio remains fully operational and we have experienced minimal disruptions in our business, including construction projects, however, we have modified our business practices by temporarily closing our corporate headquarters and regional locations, transitioned non-essential employees to working remotely from their homes, implemented restrictions on the physical participation in meetings and significantly limited business travel, all of which have disrupted how we operate our business and may remain in place for an indeterminate amount of time. The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions, the distribution and effectiveness of vaccines and the impact of these and other factors on our employees, customers, suppliers and vendors. The effect of the pandemic and measures implemented by authorities could disrupt our supply chain, which currently remains fully functional, including the provision of services to us by our vendors and could result in restrictions on construction activities. There has been and continues to be considerable uncertainty about the impact of these measures and restrictions on our Company and customers and the effects of these measures and how long they will remain in effect, which could adversely impact our employees, customers, vendors and suppliers resulting in a material adverse effect on our business, financial condition, results of operations, cash flows and ability to pay dividends as well as the market price of our common stock.
Interim Unaudited Financial Information
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission ("SEC") on February 19, 2021. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been omitted from this report on Form 10-Q pursuant to the rules and regulations of the SEC.
Results for the interim periods in this report are not necessarily indicative of future financial results and have not been audited by our independent registered public accounting firm. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments necessary to present fairly our condensed consolidated financial statements as of March 31, 2021 and December 31, 2020, and for the three months ended March 31, 2021 and 2020. These adjustments are of a normal recurring nature and consistent with the adjustments recorded to prepare the annual audited consolidated financial statements as of December 31, 2020. All amounts reflected are in millions except share and per share data.

10

CyrusOne Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (unaudited)
(in millions of dollars, except per share)

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of the Company, as well as all wholly-owned subsidiaries and any consolidated variable interest entities. All intercompany balances and transactions have been eliminated in consolidation.
Investment in Real Estate
Acquisition of Properties
Investment in real estate consist of land, buildings, improvements and integral equipment utilized in our data center operations. We expect most acquisitions to be an acquisition of assets rather than a business combination as our typical acquisitions consist of properties whereby substantially all the fair value of gross assets acquired is concentrated in a single asset set (land, building and in-place leases), which are treated as asset acquisitions.
Impairment Losses

When events or circumstances indicate that the carrying amount of a real estate investment may not be recoverable, we review the carrying value of the asset. When such impairment indicators exist, we review an estimate of the undiscounted future cash flows expected to result from the use of the real estate investment and proceeds from its eventual disposition and compare such amount to the carrying value of the real estate investment. If our undiscounted cash flows indicate that we are unable to recover the carrying value of the real estate investment, an impairment loss is recognized. An impairment loss is measured as the amount by which the real estate investment's carrying value exceeds its estimated fair value. We did not record any impairment losses for the three months ended March 31, 2021 or 2020. These fair values were based on unobservable inputs and the determination of fair value of real estate assets to be held for use is derived using the discounted cash flow method and involves a number of management assumptions relating to future economic events that could materially affect the determination of the ultimate fair value. Such assumptions are Level 3 inputs and include, but are not limited to, projected vacancy rates, rental rates, property operating expenses and required capital expenditures. These factors require management's judgment of factors such as market knowledge, historical experience, lease terms, tenant financial strength, economy, demographics, environment, property location, age, physical condition and expected return requirements, among other things. The aforementioned factors are taken as a whole by management in the determination of fair value. See Fair Value Measurements below for further information on fair value.
Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents include all non-restricted cash held in financial institutions and other non-restricted highly liquid short-term investments with original maturities of three months or less. Restricted cash includes cash equivalents restricted by contract or regulation, including letters of credit.
Equity Investments

We hold investments in various joint ventures where the Company evaluates its ability to influence the operating or financial decisions of the investee in applying the appropriate method of accounting for such investments. Influence tends to be more effective as the investor's percent of ownership in the voting rights of the investee increases. Our equity investments represent less than 20% of the voting rights of the investees and we do not exercise influence over the investee's operating and financial decisions. Accordingly, we do not account for our equity investments using the equity method of accounting. For further information about our equity investments, see Note 7, Equity Investments.

Our equity investments are carried at cost because we do not exercise influence over the operating and financial decisions of the ventures and there is no readily determinable fair value and our investments are recorded at cost less impairment, if any. Dividends paid from operating profits are reported as a component of net income, while other dividends are reported as a return of capital.

11

CyrusOne Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (unaudited)
(in millions of dollars, except per share)

Revenue Recognition

Our revenue consists of lease revenue and revenue from contracts with customers.

Lease Revenue:
Our leasing revenue primarily consists of colocation rent, metered power reimbursements and interconnection revenue and is accounted for under Accounting Standards Codification (“ASC”) 842, Leases (“ASC 842”). We generally are not entitled to reimbursements for rental expenses including real estate taxes, insurance or other common area operating expenses.
a. Colocation Rent Revenue
Colocation rent revenues, including interconnection revenue, are fixed minimum lease payments generally billed monthly in advance based on the contracted power or leased space. Some contracts may provide initial free rent periods and rents that escalate over the term of the contract. If rents escalate without the lessee gaining access to or control over additional leased power or space at the beginning of the lease term, the rental payments are recognized as revenue on a straight-line basis over the term of the lease. If rents escalate because the lessee gains access to and control over additional power and or leased space, revenue is recognized in proportion to the additional power or space in the periods that the lessee has control over the use of the additional power or space. The excess of revenue recognized over amounts contractually due is recognized as a straight-line receivable, which is included in Rent and other receivables in our Condensed Consolidated Balance Sheets. Some of our leases are structured on a gross basis in which the customer pays a fixed amount for colocation space and power. The revenue for these types of leases is recorded in colocation rent revenue.
b. Metered Power Reimbursements Revenue
Some of our leases provide that the customer is separately billed for power based upon actual or estimated metered usage generally at rates then in effect. Metered power reimbursement revenue is variable lease payments generally billed one month in arrears, and an estimate of this revenue is accrued in the month that the associated power is provided and recorded in metered power reimbursements revenue.
Revenue from Contracts with Customers
Revenue from our managed services, equipment sales, installations and other services are recognized under ASC 606, Revenue from Contracts with Customers ("ASC 606").
Equipment sold by us generally consists of servers, switches, networking equipment, cable infrastructure and cabinets. Revenue is recognized at a point-in-time when control of the equipment transfers to the customer from the Company, which generally occurs upon delivery to the customer.

Managed services include providing a full-service managed data center, monitoring customer computer equipment, managing backups and storage, utilization reporting and other related ancillary information technology services. Management service contracts generally range from one to five years.
Installation services include mounting, wiring, and testing of customer owned equipment. The installation period is typically short term in duration, and accordingly, revenue from the installation of customer equipment is recognized at a point-in-time once the installation is complete and the performance obligation is satisfied. Other services generally include installation of customer equipment, performing customer system re-boots, server cabinet and cage management, power monitoring, shipping and receiving, resolving technical issues, and other services requested by the customer. Other service revenue is measured based on the consideration specified in the contract and recognized over time as we satisfy the performance obligation.
We adopted the practical expedient in ASC 606 that allows the Company to not disclose information about remaining performance obligations that have original expected durations of one year or less, the amount of the transaction price allocated to the remaining performance obligations and when we expect to recognize that amount as revenue for the year. We have also adopted the “as invoiced” practical expedient, whereby the Company recognizes revenue in the amount that directly corresponds to the amount of value transferred to the customer.

Contract assets were $0.4 million as of both March 31, 2021 and December 31, 2020. Contract liabilities were not material as of both March 31, 2021 and December 31, 2020.


12

CyrusOne Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (unaudited)
(in millions of dollars, except per share)

Rent and Other Receivables
Receivables consist principally of rent receivables including straight-line rent receivables. A general reserve may be recognized as an allowance for doubtful accounts when collectibility is not probable, after applying the overall collectibility constraint under ASC 842. Straight-line rent receivable, net was $171.6 million and $172.6 million at March 31, 2021 and December 31, 2020, respectively. The allowance for doubtful accounts is estimated based upon historic patterns of credit losses for aged receivables as well as specific provisions for certain identifiable, potentially uncollectible balances.
Foreign Currency Translation and Transactions
The financial position of foreign subsidiaries is translated at the exchange rates in effect at the end of the period, while revenues and expenses are translated at average exchange rates during the period. Gains or losses from translation of foreign operations where the local currency is the functional currency are included as components of Other comprehensive income (loss). Gains or losses from foreign currency transactions are included in determining net income.
Stock-Based Compensation
We have a stock-based incentive award plan for our employees and directors. Stock-based compensation expense associated with these awards is recognized in General and administrative expenses, Property operating expenses, and Sales and marketing expenses in our Condensed Consolidated Statements of Operations. We measure stock-based compensation at the estimated fair value on the grant date and recognize the amortization of stock-based compensation expense over the requisite service period. Fair value is determined based on assumptions related to stock volatility, risk-free rate of return and estimates of market and company performance.
Fair Value Measurements
Fair value measurements are utilized in accounting for business combinations, asset acquisitions, testing of goodwill and other long-lived assets for impairment, recording unrealized gain on available-for-sale securities, derivatives and related disclosures. Fair value of financial and non-financial assets and liabilities is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The three-tier hierarchy that prioritizes certain inputs used in the methodologies of measuring fair value for asset and liabilities, is as follows:
Level 1—Observable inputs for identical instruments such as quoted market prices;
Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs); and
Level 3—Unobservable inputs that reflect our determination of assumptions that market participants would use in pricing the asset or liability. These inputs are developed based on the best information available, including our own data.

Derivative Instruments

We primarily hedge our foreign currency risk by borrowing in the currencies in which we invest. We may use derivative financial instruments, such as cross-currency swaps to manage foreign currency exchange rate risk related to both our foreign investments and the related earnings. In addition, we occasionally use interest rate swap contracts to manage interest rate risk and limit the impact of future interest rate changes on earnings and cash flows, primarily related to variable-rate debt.

Derivative instruments are measured at fair value and recorded in Other assets and Other liabilities, depending on our rights or obligations under the applicable derivative contract. Derivatives that are not designated as hedges must be adjusted to fair value through earnings.

Designated Derivatives. We may choose to designate our derivative financial instruments, generally cross-currency swaps as net investment hedges in foreign operations. At inception of the transaction, we designate the derivative financial instrument as a hedge of a specific underlying exposure, including the risk management objective and the strategy for undertaking the hedge transaction. We formally assess both at inception and at least quarterly thereafter, the effectiveness of our hedging transactions. Due to the high degree of effectiveness between the hedging instruments and the underlying exposures hedged, fluctuations in the value of the derivative financial instruments will generally be offset by changes in the cash flows or fair values of the underlying exposures being hedged.
13

CyrusOne Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (unaudited)
(in millions of dollars, except per share)


In addition to the net investment hedges described above, we may issue debt in a currency that is not the same functional currency of the borrowing entity to hedge our international investments. We designate the debt and related accrued interest as a net investment hedge to offset the translation and economic exposures related to our international investments. If the debt and related accrued interest exceeds the designated amount of our international investment, the foreign currency remeasurement on the unhedged portion of the debt during the period is recognized in Foreign currency and derivative gains, net.

For cash flow hedges, such as interest rate swaps, we report the effective portion of the gain or loss as a component of other comprehensive income (loss) and reclassify it to the applicable line item in the Condensed Consolidated Statements of Operations, generally Interest expense, net over the corresponding period of the underlying hedged item. The ineffective portion of a derivative financial instrument’s change in fair value is recognized in earnings, generally Interest expense, net at the time the ineffectiveness occurred. To the extent the hedged debt related to our interest rate swaps and forwards is paid off early, we write off the remaining balance in Other comprehensive income (loss) and recognize the amount in Interest expense, net in the Condensed Consolidated Statements of Operations.

Undesignated Derivatives. Derivative instruments, such as cross-currency swaps, for which hedge accounting is not applied are recorded at fair value in Other assets and Other liabilities and gains and losses resulting from changes in the fair value are reported in Foreign currency and derivative gains, net in the Condensed Consolidated Statements of Operations.

In addition, we may choose to not designate our interest rate swap and forward contracts. If a swap or forward contract is not designated as a hedge, the changes in fair value of these instruments is immediately recognized in earnings in Interest expense, net in the Condensed Consolidated Statements of Operations.

3. Recently Issued Accounting Standards

Recently Adopted Accounting Pronouncements

Reference Rate Reform

On March 12, 2020, the FASB issued Accounting Standard Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2021, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives in our financial statements consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

Income Taxes

On January 1, 2021, we adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies various aspects related to the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. The adoption did not have a significant impact on the Company.

Financial Instruments - Credit Losses

On January 1, 2020, we adopted ASU 2016-13, Financial Instruments-Credit Losses (CECL), which requires certain financial assets to be presented at the net amount expected to be collected. CECL and its related amendments apply to our customer contract trade receivables, notes receivable and net investments in leases. Our Rent and other receivables are primarily comprised of rent receivables, which are not within the scope of this sub-topic. The adoption did not have a significant impact on the Company because of our limited exposure to financial instruments subject to this standard.




14

CyrusOne Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (unaudited)
(in millions of dollars, except per share)

New Accounting Pronouncements Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Topic 470) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Topic 815). This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock, and amends the guidance for the derivatives scope exception for contracts in an entity's own equity. The ASU also amends and makes targeted improvements to the related earnings per share guidance. The ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The standard allows for either modified or full retrospective transition methods. The Company is currently evaluating this ASU to determine the impact it may have on its financial statements.

4. Revenue Recognition

Lease Revenue
Lease revenue primarily consists of colocation rent and metered power reimbursements from the lease of our data centers. Colocation leases may include all or portions of a data center, where customers may also lease office space to support their colocation operations. Revenue is primarily based on power usage as well as square footage. Customer lease arrangements customarily contain provisions that allow for renewal or continuation on a month-to-month arrangement, and certain leases contain early termination rights. We do not include any of these extension or termination options in a customer’s lease term for lease classification purposes or for recognizing lease revenue unless we are reasonably certain the customer will exercise these extension or termination options at lease commencement. At lease commencement, early termination is generally not deemed probable due to the significant economic penalty incurred by the lessee to exercise its early termination right and to relocate their equipment installed in our facilities. Generally, our customer lease arrangements do not provide any option to purchase and are classified as operating leases. We have substantial revenue primarily related to lease revenue from one customer that represented approximately 18% and 20% of our total revenue for the three months ended March 31, 2021 and 2020, respectively.

15

CyrusOne Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (unaudited)
(in millions of dollars, except per share)

At March 31, 2021, the future minimum lease payments to be received under non-cancellable operating leases, excluding month-to-month arrangements and metered power reimbursements are shown below (in millions):
As of March 31, 2021Minimum Lease Payments
2021$602.9 
2022692.4 
2023553.0 
2024429.9 
2025358.4 
2026277.0 
Thereafter710.0 
Total$3,623.6 

At March 31, 2020, the future minimum lease payments to be received under non-cancellable operating leases, excluding month-to-month arrangements and metered power reimbursements are shown below (in millions):
As of March 31, 2020Minimum Lease Payments
2020$569.2 
2021651.8 
2022552.2 
2023440.4 
2024341.8 
2025285.4 
Thereafter739.8 
Total$3,580.6 
Revenue from Contracts with Customers
Revenue from equipment sales and the installation of customer equipment is recognized at a point-in-time. Title to such assets are transferred to the customer, and the benefits of the installation service are typically consumed at the completion of the service.
Disaggregation of Revenue

For the three months ended March 31, 2021 and 2020 lease revenue disaggregated by primary revenue stream is as follows (in millions):
Three Months Ended March 31,
Lease revenue20212020
Colocation (Minimum lease payments)$220.3 $204.0 
Metered power reimbursements (Variable lease payments)73.1 34.8 
Total lease revenue$293.4 $238.8 

16

CyrusOne Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (unaudited)
(in millions of dollars, except per share)

For the three months ended March 31, 2021 and 2020, revenue from contracts with customers disaggregated by primary revenue stream is as follows (in millions):
Three Months Ended March 31,
Revenue from contracts with customers20212020
Equipment sales and services$0.5 $2.5 
Other revenue4.7 4.6 
Total revenue from contracts with customers$5.2 $7.1 

Other revenue related to contracts with customers in the table above includes managed services and other services revenue of $4.0 million and $4.1 million for the three months ended March 31, 2021 and March 31, 2020, respectively.

Total revenues from contracts with customers generated from operations outside of the United States were insignificant for the three months ended March 31, 2021 and $0.7 million for the three months ended March 31, 2020.

Accounts receivable associated with revenue from contracts with customers were $1.5 million and $2.3 million as of March 31, 2021 and December 31, 2020, respectively.

5. Leases - As a Lessee

Right-of-use ("ROU") assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. Variable lease payments consisting of non-lease components and services are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation is incurred.

ASC 842 defines initial direct costs as only the incremental costs of signing a lease. Initial direct costs related to leasing that are not incremental are expensed as general and administrative expense in our Condensed Consolidated Statements of Operations. As a result of electing the package of practical expedients, initial direct costs incurred prior to January 1, 2019 (the effective date for ASC 842) have not been reassessed.

Our operating lease agreements primarily consist of leased real estate and are included within Operating lease ROU assets and Operating lease liabilities on the Condensed Consolidated Balance Sheets. Many of our lease agreements include options to extend the lease, which are not included in our minimum lease payments unless they are reasonably certain to be exercised at lease commencement. Rental expense related to operating leases is recognized on a straight-line basis over the lease term.

We operate five data center facilities and have a data center under development subject to finance leases. The remaining terms of our data center finance leases range from one to twenty years with options to extend the initial lease term on all but one lease. As a result of electing the package of practical expedients, data center finance leases are included in Buildings and improvements, Equipment and Finance lease liabilities in our Condensed Consolidated Balance Sheets. In addition, we lease 12 data centers and 3 offices supporting our sales and corporate activities under operating lease agreements. Our operating leases have remaining lease terms ranging from less than two years to twenty-four years and one ground lease in Houston has a lease term that expires in 2066.

The components of lease expense are as follows (in millions):
Three Months Ended March 31,
 20212020
Operating lease cost$5.2 $6.2 
Finance lease cost:
   Amortization of assets0.5 0.4 
   Interest on lease liabilities0.4 0.4 
Total net lease cost$6.1 $7.0 

17

CyrusOne Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (unaudited)
(in millions of dollars, except per share)

Supplemental balance sheet information related to leases is as follows (in millions, except lease term and discount rate):
 March 31, 2021December 31, 2020
Operating leases:
   Operating lease right-of-use assets$239.7 $211.4 
   Operating lease liabilities$277.9 $249.1 
Finance leases:
   Property and equipment, at cost$34.9 $34.7 
   Accumulated amortization(7.7)(7.1)
Property and equipment, net$27.2 $27.6 
Finance lease liabilities$28.6 $29.1 
 
Weighted average remaining lease term (in years):
Operating leases14.714.3
Finance leases(a)
18.318.2
 
Weighted average discount rate:
Operating leases3.6 %3.7 %
Finance leases(a)
4.6 %4.7 %
(a) Excludes a 999-year ground lease in Dublin, The Republic of Ireland entered into during the third quarter of 2019. The Dublin property is under active development and the finance lease is included in Construction in progress, including land under development on the Condensed Consolidated Balance Sheets.

Supplemental cash flow and other information related to leases is as follows (in millions):
 Three Months Ended March 31, 2021Three Months Ended March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$6.5 $5.6 
Operating cash flows from finance leases0.4 0.4 
Financing cash flows from finance leases0.7 0.7 
 
Non-cash right-of-use assets obtained in exchange for lease liabilities:
Operating leases$33.2 $50.6 

Maturities of lease liabilities were as follows as of March 31, 2021 (in millions):
 Operating Leases Finance Leases
2021$21.6 $3.1 
202229.8  3.0 
202325.8  2.0 
202421.3  1.5 
202519.7  1.5 
202614.8  1.7 
Thereafter240.9  29.0 
Total lease payments$373.9  $41.8 
Less: Imputed interest(96.0) (13.2)
Total lease obligations$277.9  $28.6 

18

CyrusOne Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (unaudited)
(in millions of dollars, except per share)

Maturities of lease liabilities were as follows as of December 31, 2020 (in millions):
 Operating Leases Finance Leases
2021$27.8 $4.2 
202227.9 3.0 
202323.9 2.0 
202419.4 1.4 
202517.8 1.5 
Thereafter221.6 30.5 
Total lease payments$338.4  $42.6 
Less: Imputed interest(89.3)(13.5)
Total lease obligations$249.1  $29.1 

6. Investment in Real Estate

Leases of real estate

In February 2021, the Company entered into a 20-year lease comprising a 130,000 square feet building and commenced development of a 18 megawatt ("MW") data center in London, United Kingdom. We have three renewal options for 15 years each which were not reasonably certain at commencement and the lease was classified as an operating lease.

In March 2020, the Company entered into a 25-year lease comprising a 45,000 square feet building and commenced development of a 27 MW data center in Paris, France, which was preleased to a customer. We have one renewal option for 25 years which was not reasonably certain at commencement and the lease was classified as an operating lease.

Real estate related capital expenditures

Construction in progress was $1,053.3 million and $982.2 million, including land which was under active development of $4.8 million and $5.1 million as of March 31, 2021 and December 31, 2020, respectively.

For the three months ended March 31, 2021, our capital expenditures were $175.4 million, and substantially all of our investing activity related to our development activities. Our capital expenditures for the three months ended March 31, 2021 primarily related to the acquisition of land for future development and continued development in key markets, primarily in Dublin, Frankfurt, London, the New York Metro area, Northern Virginia, Paris, Phoenix and San Antonio.
For the three months ended March 31, 2020, our capital expenditures were $196.5 million, primarily related to continued development in key markets, primarily in Amsterdam, Austin, Dallas, Frankfurt, London, Northern Virginia, Phoenix and Raleigh-Durham.
There were no impairment losses recognized for the three months ended March 31, 2021 or 2020.

19

CyrusOne Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (unaudited)
(in millions of dollars, except per share)

Real Estate Investments and Intangible Assets and Related Depreciation and Amortization

As of March 31, 2021 and December 31, 2020, major components of our real estate investments and intangibles and related accumulated depreciation and amortization are as follows (in millions):
As of:March 31, 2021December 31, 2020
CostAccumulated Depreciation and AmortizationNet book valueCostAccumulated Depreciation and AmortizationNet book value
Investment in real estate
   Building and improvements$2,046.6 $(663.6)$1,383.0 $2,035.2 $(639.4)$1,395.8 
   Equipment3,596.5 (1,203.9)2,392.6 3,538.9 (1,128.5)2,410.4 
Intangible assets
   Customer relationships$247.1 $(165.9)$81.2 $247.1 $(163.1)$84.0 
   In-place leases139.8 (79.4)60.4 140.4 (74.6)65.8 
   Other contractual19.5 (11.9)7.6 19.6 (11.6)8.0 
      Total intangible assets$406.4 $(257.2)$149.2 $407.1 $(249.3)$157.8 

Depreciation and amortization are calculated using the straight-line method over the useful lives of the assets. The typical life of owned assets are as follows:
Buildings30 years
Building improvements30 years
Equipment20 years

Leased real estate and leasehold improvements are depreciated over the shorter of the asset's useful life or the remaining lease term. Depreciation expense was $109.0 million and $94.9 million for the three months ended March 31, 2021 and 2020, respectively.

Other contract intangible assets include tradenames, favorable leasehold interests and above market leases. Amortization expense related to intangibles was $12.4 million and $13.2 million for the three months ended March 31, 2021 and 2020, respectively.

7. Equity Investments

The Company has the following equity investments where it has a noncontrolling interest in the investees (in millions).
Equity Investments as of:
InvesteesEquity MethodMarch 31, 2021December 31, 2020
GDS, Class A share equivalentFair value$ $44.2 
ODATA investmentsCost method22.9 22.9 
Equity investments$22.9 $67.1 

During January 2021, we disposed of our remaining investment of approximately 0.5 million GDS Holdings Limited ("GDS") American depositary shares ("ADSs") for net proceeds of approximately $46.6 million.
20

CyrusOne Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (unaudited)
(in millions of dollars, except per share)

The Company recognized Gains (losses) on marketable equity investment in GDS ADSs held and sold as follows:
Three Months Ended March 31,
IN MILLIONS20212020
Net gain on marketable equity investments$2.4 $14.7 
Less: Net gain recognized on marketable equity investments sold2.4  
Unrealized gain on marketable equity investments held$ $14.7 

The gain on investment was recognized in the Condensed Consolidated Statements of Operations in Gain on marketable equity investment.

As of March 31, 2021 and December 31, 2020, the Company had a total investment of $22.9 million in four unconsolidated ventures in Brazil, Chile, Colombia and Mexico, with ODATA, a Brazilian headquartered company, specializing in providing colocation services to customers across multiple industries. In evaluating the appropriate accounting method for its ventures with ODATA, we considered our voting interests and ability to exercise significant influence over the operating and financial policies of each venture and concluded that the Company does not exercise significant influence and our investments are accounted for using the cost method. During the three months ended March 31, 2020, the Company made additional investments totaling $3.3 million in ODATA. The Company made no additional investments in ODATA during the three months ended March 31, 2021.

8. Other Assets

As of March 31, 2021 and December 31, 2020, the components of Other assets are as follows (in millions):
March 31, 2021December 31, 2020
Deferred leasing and other contract costs$64.9 $62.4 
Prepaid expenses19.5 19.1 
Non-real estate assets, net12.0 13.8 
Other assets17.9 38.1 
Total$114.3 $133.4 

Non-real estate assets, net primarily consists of administrative related software and computers and office equipment, which are depreciated or amortized over the shorter of the assets useful life or the lease term. Other assets primarily includes land deposits, fuel inventory, other receivables, deferred tax assets, net of allowance and other deferred costs.
21

CyrusOne Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (unaudited)
(in millions of dollars, except per share)

9. Debt
As of March 31, 2021 and December 31, 2020, the components of Debt are as follows (unless otherwise noted, interest rate and maturity date information are as of March 31, 2021) (in millions):
March 31, 2021December 31, 2020Interest RateMaturity Date
Amended Credit Agreement:
    Revolving Credit Facility:
March 2024(b)
      EUR Revolver$351.8 $275.9 
Monthly EURIBOR + 1.00%
      GBP Revolver(a)
34.5 157.0 
Monthly LIBOR + 1.00%
2023 Term Loan Facility(c)
100.0 100.0 
Monthly LIBOR + 1.20%
March 2023
2025 Term Loan Facility700.0 700.0 
Monthly LIBOR + 1.20%
March 2025
2024 Notes, including bond discount of $0.6 million and $0.7 million, respectively
599.4 599.3 2.900 %November 2024
2029 Notes, including bond discount of $1.5 million and $1.6 million, respectively
598.5 598.4 3.450 %November 2029
2027 Notes, including bond discount of $0.7 million and $0.6 million, respectively(d)
585.7 612.6 1.450 %January 2027
2030 Notes, including bond discount of $4.6 million and $4.7 million, respectively
395.4 395.3 2.150 %November 2030
Deferred financing costs(27.9)(29.5)— — 
Total$3,337.4 $3,409.0 
(a) - Monthly USD LIBOR and GBP LIBOR as of March 31, 2021 was 0.11% and 0.06%, respectively.
(b) - The Company has an option to exercise a one-year extension option, subject to certain conditions.
(c) - The Company has an option to exercise two 1-year extension options, subject to certain conditions.
(d) - The 2027 Notes represent €495.3 million, including bond discount of €0.7 million, of Euro bonds.

Credit facilities

On March 31, 2020, CyrusOne LP, a Maryland limited partnership and subsidiary of CyrusOne Inc., 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 $3.0 Billion Credit Facility (as defined below).
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.
The interest rates for borrowings under the Amended Credit Agreement are, at the option of the borrower, based on a floating rate or base rate, plus a margin determined by reference to a pricing grid based on the lower of (i) the rate corresponding to the then applicable credit rating for the Operating Partnership’s senior unsecured debt or (ii) the rate corresponding to the then applicable ratio of the Company’s consolidated total indebtedness to its gross asset value. The Amended Credit Agreement includes certain restricted covenants, requirements to maintain certain financial ratios, including with respect to unencumbered assets, and events of default.
22

CyrusOne Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (unaudited)
(in millions of dollars, except per share)

On March 31, 2020, borrowings of $1.3 billion under the Amended Credit Agreement were used to repay the $3.0 Billion Credit Facility, which consisted of a $1.7 billion revolving credit facility ("$1.7 Billion Revolving Credit Facility"), which included a $750.0 million multicurrency borrowing sublimit, a 5-year term loan with commitments totaling $1.0 billion and a $300.0 million 7-year term loan (collectively, the "$3.0 Billion Credit Facility"). The aggregate outstanding principal balance under the Amended Credit Agreement as of March 31, 2020, was $1.3 billion, and the Company recognized a loss on early extinguishment of debt of $3.4 million in connection with the repayment of the $3.0 Billion Credit Facility.
The current administrator of LIBOR will cease to publish one-month EUR LIBOR and GBP LIBOR after December 31, 2021, and USD LIBOR after June 30, 2023. There is a risk that the LIBOR transition could increase our interest and other costs relative to our outstanding subordinated debt. We may not be able to refinance those instruments on terms that reduce those costs to the level we would have expected if the administrator of LIBOR were to continue publishing indefinitely. Also, the transition from LIBOR could impact or change our hedge accounting practices.

We pay a facility fee calculated based on the aggregate revolving commitments. The facility fee rate varies based on ratings-based pricing levels, and is currently equal to 0.25% per annum of the aggregate revolving commitments. The facility fee was $0.7 million and $1.1 million for the three months ended March 31, 2021 and March 31, 2020, respectively.
As of March 31, 2021, we had $100.0 million, $700.0 million and $386.3 million outstanding under the 2023 Term Loan Facility, the 2025 Term Loan Facility and the Revolving Credit Facility, respectively, and additional borrowing capacity under the Amended Credit Agreement was approximately $1.0 billion, net of $8.4 million of outstanding letters of credit.
Senior notes
Euro bonds
On January 22, 2020, the Operating Partnership and CyrusOne Finance Corp., a single-purpose finance subsidiary, both wholly-owned subsidiaries of the Company (together, the "Issuers"), completed a public offering of €500.0 million aggregate principal amount of 1.450% senior notes due January 2027 (the “2027 Notes”). The Company received proceeds of €495.3 million, net of discount, underwriting costs and other deferred financing costs. The Company used the proceeds to repay floating rate Euro denominated obligations and fund continued development in Europe.
The 2027 Notes are senior unsecured obligations of the Issuers guaranteed by CyrusOne Inc., which rank equally in right of payment with all existing and future unsecured senior indebtedness of the Issuers. The 2027 Notes are effectively subordinated in right of payment to any future secured indebtedness, if any, to the extent of the value of the assets securing such indebtedness. The 2027 Notes may be redeemed at our option prior to their scheduled maturity dates at the prices and premiums and on the terms set forth in the respective indentures governing the notes.
US bonds

On September 21, 2020, the Issuers completed a public offering of $400.0 million aggregate principal amount of 2.150% senior notes due November 2030 (the "2030 Notes"). The Company received proceeds of $392.6 million, net of discount, underwriting costs and other deferred financing costs. The Company used the proceeds to repay $300.0 million of the outstanding indebtedness under the Operating Partnership's 2023 Term Loan Facility, to repay the then outstanding balance of $20.0 million on the US Revolver balance under the Revolving Credit Facility and the remainder for general corporate purposes. In connection with the repayment of outstanding indebtedness of the senior unsecured term loans due March 2023, the Company recognized a loss on early extinguishment of debt of $3.1 million in the three months ended September 30, 2020.

On December 5, 2019, the Issuers completed a public offering of $600.0 million aggregate principal amount of 2.900% senior notes due November 2024 (the "2024 Notes") and $600.0 million aggregate principal amount of 3.450% senior notes due November 2029 (the “2029 Notes”). The Company received proceeds of $1,197.4 million, net of discounts, underwriting costs and other deferred financing costs. The Company used the proceeds to finance the repurchase of all of its 5.000% senior notes due 2024 (the “Old 2024 Notes”) and all of its 5.375% senior notes due 2027 (together with the Old 2024 Notes, the "Existing Notes"), including the payment of consent payments, for the redemption and discharge of Existing Notes that remained outstanding after the completion of the tender offers and consent solicitations, for the payment of related premiums, fees, discounts and expenses and for general corporate purposes. In connection with the repurchase of the Existing Notes, the Company recognized a loss on early extinguishment of debt of $71.8 million in the three months ended December 31, 2019.

The 2024 Notes, 2029 Notes and 2030 Notes are senior unsecured obligations of the Issuers guaranteed by CyrusOne Inc., which rank equally in right of payment with all existing and future unsecured senior indebtedness of the Issuers. The 2024 Notes, 2029 Notes and 2030 Notes are effectively subordinated in right of payment to any future secured indebtedness of the
23

CyrusOne Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (unaudited)
(in millions of dollars, except per share)

Issuers, if any, to the extent of the value of the assets securing such indebtedness. The 2024 Notes, 2029 Notes and 2030 Notes may be redeemed at our option prior to their scheduled maturity dates at the prices and premiums and on the terms set forth in the respective indentures governing the notes.
Financial debt covenants
Our debt agreements contain customary provisions with respect to events of default, affirmative and negative covenants and borrowing conditions. The most restrictive covenants are generally included in the Amended Credit Agreement. The Amended Credit Agreement requires us to maintain certain financial covenants including the following, in each case on a consolidated basis, a minimum fixed charge ratio, maximum total and secured leverage ratios, maximum net operating income to debt service ratio and a maximum ratio of unsecured indebtedness to unencumbered asset value. In order to continue to have access to amounts available under the Amended Credit Agreement, the Company must remain in compliance with all of that agreement's covenants. As of March 31, 2021, we are in compliance with the financial covenants of our debt agreements.

10. Fair Value of Financial Instruments and Hedging Activities

Fair value measurements are based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering assumptions in fair value measurements, a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity's own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy) has been established. 

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets and liabilities that we have the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability that are typically based on an entity's own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement requires judgment and considers factors specific to the asset or liability.
The fair value of Cash and cash equivalents, Rent and other receivables, Construction costs payable, Dividends payable and Accounts payable and accrued expenses approximate their carrying value because of the short-term nature of these financial instruments. The carrying value, exclusive of deferred financing costs, for the revolving credit facilities and the floating rate term loans approximate estimated fair value as of March 31, 2021 and December 31, 2020, due to the floating rate nature of the interest rates and the stability of our credit ratings.
We determine the fair value of our derivative financial instruments using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates and implied volatilities. We determine the fair values of our interest rate swaps using the market standard methodology of netting the discounted future fixed cash receipts or payments and the discounted expected variable cash payments. We base the variable cash payments on an expectation of future interest rates, or forward curves, derived from observable market interest rate curves. We base the fair values of our net investment hedges on the change in the spot rate at the end of the period as compared with the strike price at inception.

We incorporate credit valuation adjustments to appropriately reflect nonperformance risk for us and the respective counterparty in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we consider the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees.

We have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy. Although the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties, we assess the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.
24

CyrusOne Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (unaudited)
(in millions of dollars, except per share)



The carrying value and fair value of other financial instruments are as follows (in millions):
March 31, 2021December 31, 2020
Carrying ValueFair ValueCarrying ValueFair Value
Debt:
Variable Rate Debt:
     Revolving Credit Facility$386.3 $386.3 $432.9 $432.9 
     2023 Term Loan Facility100.0 100.0 100.0 100.0 
     2025 Term Loan Facility700.0 700.0 700.0 700.0 
Fixed Rate Debt:
     2024 Notes - 2.900%(1)
599.4 634.8 599.3 640.7 
     2029 Notes - 3.450%(1)
598.5 623.0 598.4 644.1 
     2027 Notes - 1.450%(1)
585.7 591.0 612.6 619.9 
     2030 Notes - 2.150%(1)
395.4 370.1 395.3 388.6 
Derivative Contracts:
     Cross Currency Swaps Liability(2)
29.6 29.6 52.2 52.2 
     Interest Rate Swap Liability(2)
5.9 5.9 7.0 7.0 
     Interest Rate Swap Asset(2)
    
Equity Investments carried at Fair Value:
     GDS equity investment(3)
  44.2 44.2 
(1) - The fair value of notes are based on quoted market prices for these notes, which is considered Level 1 of the fair value hierarchy.
(2) - The fair values of our cross currency and interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash flows and the discounted expected variable cash flows based on an expectation of future interest rates derived from Level 2 observable market interest rate curves.
(3) - The fair value is based on quoted market prices for the GDS ADSs, which is considered Level 1 of the fair value hierarchy.

Hedging Activities

When we use derivative instruments, it is generally to reduce our exposure to fluctuations in interest rates and foreign currency exchange rate movements. We have not entered into, and do not plan to enter into, financial instruments for trading or speculative purposes. To manage foreign currency exposure, we have entered into Euro denominated debt and cross-currency swaps to hedge the Company's net investment in its Euro functional currency consolidated subsidiaries and the variability in EUR-USD exchange rate.

Accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the designation of the derivative, including whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as foreign currency risk or interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge.

For derivatives designated as "cash flow" hedges, the change in the fair value of the derivative is initially reported in Other comprehensive income ("OCI") in our Condensed Consolidated Statements of Comprehensive Income (Loss) and subsequently reclassified into Gain (loss) when the hedged transaction affects earnings, or the hedging relationship is no longer highly effective. We assess the effectiveness of each hedging relationship whenever financial statements are issued, or earnings are reported and at least every three months. We also use derivatives, such as foreign currency swaps, that are not designated as hedges to manage foreign currency exchange rate risks. The changes in fair values of these derivatives that were not designated
25

CyrusOne Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (unaudited)
(in millions of dollars, except per share)


or did not qualify as hedging instruments are immediately, recognized in earnings within the line item Foreign currency and derivative gains, net in the Condensed Consolidated Statements of Operations.

The following table summarizes the Company's derivative positions as of March 31, 2021 and December 31, 2020, (in millions):
March 31, 2021December 31, 2020
Maturity DateNotional AmountHedged RiskAssetLiabilityAssetLiability
Designated derivatives
Cross Currency Swaps
EUR - USD3/29/2023$250.0 Net investment hedge$ $14.7 $ $26.0 
EUR - USD3/29/2023250.0 Net investment hedge 14.9  26.2 
Interest Rate Swaps
USD Libor3/29/2023300.0 Interest rate hedge - Float to fixed 5.9  7.0 
Total$ $35.5 $ $59.2 

Cross-Currency Swaps

The Company has entered into cross-currency sw