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CyrusOne Inc (CONE)
Q3Â 2020 Earnings Call
Oct 29, 2020, 11:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and welcome to the CyrusOne LLC Third Quarter 2020 Earnings Results Conference Call. [Operator Instructions]
I would now like to turn the conference over to Michael Schafer, Vice President of Capital Markets and Investor Relations. Please go ahead.
Michael Schafer -- Vice President of Capital Markets and Investor Relations
Thank you, Grant. Good morning, everyone, and welcome to CyrusOne's Third Quarter 2020 Earnings Call. Today, I am joined by Bruce Duncan, President and CEO; and Diane Morefield, CFO. Before we begin, I would like to remind you that our third quarter earnings release, along with the third quarter financial tables, are available on the Investor Relations section of our website at cyrusone.com. I would also like to remind you that comments made on today's call and some of the responses to your questions deal with forward-looking statements related to CyrusOne and are subject to risks and uncertainties. Factors that may cause our actual results to differ from expectations are detailed in the company's filings with the SEC, which you may access on the SEC's website or on cyrusone.com. We undertake no obligation to revise these statements following the date of this conference call, except as required by law. In addition, some of the company's remarks this morning contain non-GAAP financial measures. You can find reconciliations of those measures to the most comparable GAAP measures in the earnings release which is posted on the Investors section of the company's website.
I would now like to turn the call over to our President and CEO, Bruce Duncan.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Thank you, Michael, and welcome to CyrusOne's third quarter earnings call. To begin the call, let me address the leasing results for the quarter. I'd like to be straightforward, and the only thing I can say about our leasing results for the third quarter is that they were very disappointing. We have talked about the lumpiness of the hyperscale business and how the timing of these larger deals can impact bookings from quarter-to-quarter. This quarter is reminiscent of the fourth quarter of 2019, which was followed by two very strong quarters in the first half of this year. But the bottom line is that we have to produce much better results in the fourth quarter, and we are confident that we will. It is up to us, the CyrusOne team, to deliver. We continue to be very positive on the broader demand signals and are encouraged by what we are hearing in discussions with our customers. Beginning with slide four. You can see the financial results for the quarter, which Diane will discuss in her remarks. We have leased $107 million in annualized revenues through the first three quarters, which is higher than our total 2019 bookings. The result is our revenue backlog remains high at $82 million, positioning us well for continued growth in 2021 and beyond. Moving to slide five. During the quarter, we delivered 45,000 square feet, 6-megawatt fully leased data hall at our Somerset location in the New York Metro area. Additionally, we have 345,000 colocation square feet and 78 megawatts under development with customer lease commitments on 63% of the square footage. To support our continued growth in London, we recently acquired 33 acres of land, with capacity for approximately 100 megawatts, which would give us plenty of runway in that market. However, this will be a longer-term development as the land requires rezoning. We continue to strengthen our balance sheet, issuing $400 million of 10-year notes with a coupon of 2.15%.
We also raised nearly $220 million in forward equity through our ATM program during the quarter and have more than $410 million in available equity. Our leverage remains low, and we have substantial liquidity to fund the business. Slide six provides details for third quarter leasing and year-to-date results. The higher average pricing for the quarter reflects the significant weighting toward enterprise deals, with 86% of revenues signed attributable to this segment. As of the end of the quarter, the revenue contribution from enterprise and hyperscale customers across the portfolio was roughly equivalent, with enterprise accounting for 51% of revenue. However, we have seen a significant increase in hyperscale leasing volume, with this segment accounting for over 70% of bookings year-to-date as compared to 51% in 2019. In addition, we are very pleased with the success we've had in Europe, which has accounted for over half of the new revenue signed. The pricing has been healthy at $129 per kilowatt, and the weighted average lease term is nearly eight years. Turning to slide seven. Our high-margin interconnection business continues to grow at a mid-teens rate with third quarter revenue up 15% compared to last year. This is now a nearly $60 million run rate business that represents approximately 6% of total company revenue. Importantly, we also recently announced our 0 carbon by 2040 pledge, under which we have committed to operate carbon-free by 2040. Details on this and other ESG priorities and initiatives is included in our 2020 sustainability report, which was published earlier this month and is available on our cyrusone.com website. The report provides a comprehensive overview of our efforts, encompassing areas including energy and carbon, water consummation, social responsibility and governance. We are a bit behind in doing this, but it is important to us not only because it is important to our customers and shareholders but because it is the right thing to do. Moving on to slide eight. The quarter was very busy.
As I mentioned on the last earnings call, it was my hope and intention to visit all of our people and our facilities in the United States and Europe during the quarter to help me assess what our priorities should be. Unfortunately, as a result of the COVID situation, I was not able to do all of this. However, I was able to meet with our European team and tour their sites and facilities as well as a few in the United States. But there is more to do, and I plan to see the rest of the empire by the end of the year. I came away from these recent visits with an even greater appreciation for the quality of our people, their relentless focus on taking care of our customers and the power of our platform. I would like to give the entire CyrusOne team a shout-out and big thank you for all that you are doing, taking care of our customers and business during this very strange time. We have made a number of important changes in our senior management ranks and have assembled a strong group of smart, experienced and talented people to lead the company forward. I'm very excited to welcome John Hatem back to the team as our Chief Operating Officer. As you know, John was instrumental to the growth and success of CyrusOne for nearly a decade. He has more than 20 years of industry experience building data centers for some of the largest financial institutions in the world before joining CyrusOne in 2011. In his previous role with the company as Executive Vice President of Data Center Design and Construction, John developed and implemented improvements to designs and processes that decreased build costs and accelerated delivery times particularly for scale builds. As a result, CyrusOne had tremendous success growing its business with hyperscale companies and generating attractive returns. He is well known and well respected in the industry, and he has very long-standing relationships with many of our customers.
John is here in the room with us today to answer your questions. Our new CFO, Katherine Motlagh, has served for the last five years as CFO of Europe, Africa and Latin America at American Tower, which, as many of you know, is a leading global infrastructure REIT with an enterprise value of nearly $140 billion. Her role there oversaw divisions with total revenue of over $2.5 billion. And her broad international experience will be incredibly valuable to us as we continue to grow our international footprint. Prior to joining American Tower, she held CFO roles within divisions at Ericsson and Nokia. Katherine's extensive CFO experience and background in both technology and real estate make her a great fit for the role at CyrusOne, and we are very excited to have her join the team. Brent Behrman, who's been with the company for the last four years as Executive Vice President of Solutions Engineering, has assumed the role of Executive Vice President of Sales. Brent has 15 years of experience in the data center industry, serving as Senior Vice President of Global Sales for both Compass Datacenters and Digital Realty before joining CyrusOne. Like John, Brent is well known and well respected in the industry, and he also has strong relationships with many of our key customers. Lastly, we have realigned the HR function under Robert Jackson, our General Counsel. Robert has been with CyrusOne for five years and has an extensive REIT and real estate background. And I look forward to partnering with him on our talent strategy as well as his other areas of responsibility, including oversight of our broad ESG initiatives. In summary, we have an outstanding team with a great mix of data center, real estate and technology backgrounds and a track record of success. Turning to slide nine. As I mentioned earlier, it was a busy quarter, visiting our people and sites and talking with lots of our stakeholders, including our customers, vendors, investors, analysts, bankers as well as many other industry participants, to hear their thoughts on where the industry is going and about the opportunity for CyrusOne.
The bottom of the slide highlights some of the key observations on the space and CyrusOne in particular. The secular demand trends that have driven industry performance are expected to continue, providing a backdrop for strong growth over the next few years. In the United States, the high returns and access to attractively priced capital has created a competitive environment while, in Europe, the acceleration in demand from hyperscale companies, along with a more supply constrained landscape, have resulted in compelling opportunities across these markets. Our proven track record, broad geographical presence and investment-grade status position us well, but we continue to trade at a meaningful discount to our peers. This has been attributed to a number of different factors, and we want and need to close that gap. Slide 10 shows our key near-term priorities. First, we have to produce stronger leasing results in the United States. We have lost share over the last couple of years, and we need to improve in this area. We have capacity across our key markets, which was an issue at times last year. It's well known that hyperscale development yields have compressed. We are targeting yields on these developments in the 8% to 10% range, which we believe will allow us to be very competitive while still generating good returns for our shareholders. In Europe, we remain focused on ensuring we have the capacity to position ourselves to capture the hyperscale business. These companies continue to expand their footprints across key European markets and are increasingly taking down larger quantities of capacity. We have development projects ongoing across these markets as well as powered shell and land to support our continued growth. Upon completion of the 56 megawatts we have under development, our near-term European footprint will be 163 megawatts, representing nearly 20% of our total footprint. Lastly, the senior management team will officially be put in place at the end of this week when Katherine joins the team.
With the team in place, we will now be evaluating together all the key areas of the business, including, among other things, our capital allocation strategy, our existing portfolio of assets, our funding strategy and our cost structure. We are going to be very focused on closing the valuation gap between us and our very good competitors. We know that to do this, we need to have a consistent message with clear and consistent goals, and we need consistent execution quarter in and quarter out. To that end, we expect, COVID willing, to have an in-person Investor Day in 2021, and we're targeting midyear. That will give all of our investors and analysts an opportunity to meet and hear from the leaders of our company. At that meeting, we plan to articulate our strategy and goalposts, which can be used to measure our progress and evaluate our results. In closing, as we head into the last couple of months of the year, we were in a strong position with capacity across our markets and significant liquidity. The demand trends remain strong, and our team is focused on increasing our bookings, capitalizing on the strong platform we have built. And it is up to us, the CyrusOne team, to get it done, and I am confident we will. Diane will provide more color on our financial performance for the quarter and give an update on our guidance for the year. But before I turn the call over to her, I'd like to congratulate her on a very distinguished career and thank her for her outstanding contribution to CyrusOne over the last four years. I have known Di for over 20 years, and not only does she have tremendous respect within the real estate community, she is also a truly wonderful human being. I think I speak for everyone at CyrusOne in saying that we will all miss her leadership, her wisdom and her enthusiasm. I wish her all the best in her retirement, although she will be here full time through the end of the year to assist with the transition. And I know going forward, she will keep plenty busy with all her Board commitments.
So thank you. Di?
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Good morning, everyone, and thank you, Bruce, for those very kind words. I have truly enjoyed my four years here at CyrusOne, having the opportunity to work with a great group of people and being part of an exciting company and platform and a dynamic industry that plays such an important role at the intersection of real estate and technology. I've also enjoyed working with all of you in the investment community, not only here at CyrusOne but with many of you over the years in my previous roles as well, and I thank you for all your support over the years. Turning to slide 12. Revenue and normalized FFO per share each grew 5% compared to the third quarter of 2019. Churn remained low at 0.6% in the quarter, so we are decreasing the upper end of our churn guidance range from 7% to 6%. For the full year, we anticipate churn to be between 5% and 6%, and we are actually trending toward the lower end of that range, although we do expect that fourth quarter churn will be slightly elevated compared to recent quarters. Moving to slide 13. NOI and adjusted EBITDA increased 4% and 3%, respectively, compared to the third quarter last year. The slight decrease in the NOI and adjusted EBITDA margins is driven primarily by a higher percentage of 0 margin pass-through metered power reimbursements this quarter as compared to last year. As slide 14 shows, the revenue contribution from our U.S. markets remains well balanced. Our continued European expansion will further diversify our portfolio and a significant portion of our backlog consists of deals in these markets. Turning to slide 15. Our development pipeline largely reflects projects that support the revenue backlog, as Bruce mentioned, with 63% leased on a CSF basis and roughly 70% in terms of megawatts as of the end of the quarter.
In addition to 78 megawatts of power capacity under construction, which is weighted toward our European market, we also have 321,000 square feet of powered shell under development. The total cost to complete the projects is approximately $300 million at the midpoint of the estimated range, and we have substantial liquidity to fund this construction. Upon completion of these projects, our portfolio will consist of nearly five million colocation square feet. Moving to slide 16. We continue to strengthen the balance sheet. And as Bruce mentioned, in September, we took advantage of historically low long-term interest rates, issuing $400 million of 10-year senior notes with a coupon of 2.15%. The net proceeds were used to repay $300 million of outstanding indebtedness under unsecured term loans maturing in March of '23 and for general corporate purposes. The transaction further smooths and extends our maturity schedule, increasing our weighted average remaining debt term to 6.3 years. And the weighted average interest rate on all of our debt remains very low at 2.13%, and our percentage of fixed-rate debt has increased to 77%. The fixed-floating mix is now in line with our targeted mix given our investment-grade status and is more in line with that of our peers and other IG-rated REITs. Slide 17 summarizes our key balance sheet metrics. And as you can see, we are well positioned to continue to fund growth opportunities and maintain significant financial flexibility with $1.7 billion in available liquidity as of the end of the quarter. Again, as Bruce mentioned, during the quarter, we raised nearly $220 million in forward equity through our ATM program. And combined with ATM forward sales during the second quarter, we have a total of $413 million in available forward equity.
The available proceeds from sales made during the quarter replaced nearly $220 million in equity that we did draw down during the quarter to repay revolving borrowings outstanding and manage our leverage ratio. We continue to opportunistically monetize our GDS investment, selling approximately 160,000 shares during the quarter, generating net proceeds of approximately $13 million. Year-to-date, we have sold approximately 400,000 shares and raised a total of approximately $33 million in proceeds. As of the end of the quarter, we still owned approximately 1.9 million GDS shares with a total value of $155 million based on their share price at September 30. Adding the value of this position to the value of the forward equity raised through our ATM program, we have a total of nearly $570 million in available equity and equity substitutes to fund the business going into 2021 and to continue to manage our leverage. Turning to slide 18. Our $82 million revenue backlog positions us well for growth next year and beyond. Just over 1/3 of the revenue is expected to commence in the fourth quarter. And as I've mentioned in prior quarters, $26 million of the backlog is associated with 22.5 megawatts expected to deploy in 4.5 megawatt blocks annually from mid-2022 to mid-2026. The corresponding capital commitment for this lease is also phased in over the 4-year ramp period to align the capital spend with the commencement of the revenue. Moving to slide 19. We have updated our guidance ranges for the full year based on results through the first three quarters. We have tightened the ranges for total revenue and adjusted EBITDA while maintaining the midpoint.
We have increased the lower end of the guidance range for normalized FFO per share by $0.05, which increases the midpoint of the range by $0.025 as we are trading slightly higher on this metric as a result of our actual year-to-date performance. Based on our guidance midpoint, you'll note there is an implied sequential decline in normalized FFO per share in the fourth quarter compared to the third quarter. This is primarily driven by a European income tax accrual true-up as well as the full quarter impact of shares issued in the third quarter associated with the drawdown of equity I just mentioned. Lastly, we are increasing our guidance for capital expenditures to a range of $900 million to $1 billion, which is an increase of $50 million at the midpoint compared to our prior guidance and is primarily driven by the London land purchase. In closing, we are focused on ensuring we are well positioned to support our customers as they continue to grow and expand. As Bruce mentioned, the demand outlook remains positive with a continuation of the underlying trends that have driven growth in this sector.
We appreciate you participating on the call, and we're now happy to take any questions. [Operator Instructions] With that, thank you. And Grant, please open the line for questions.
Questions and Answers:
Operator
[Operator Instructions] Our first question will come from Jonathan Atkin with RBC Capital Markets. Please go ahead.
Jonathan Atkin -- RBC Capital Markets -- Analyst
Thanks very much. I wanted to ask about leasing and about operations. So on the leasing side, I wonder if you can give us a flavor for kind of how many at-bats you have in 4Q. Is it broadly distributed across a number of markets in the U.S. and Europe? Or is it a smaller number of larger deals? If you can maybe give us a little bit of flavor for that opportunity that you're looking forward to in 4Q in terms of leasing. And then on operations, if John wants to maybe provide a little bit of a comment on the company that he left and the company that he's now the COO of. What are kind of your observations? What's changed? What's different? What are your priorities going forward now that you're in the COO seat? Thanks very much.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Great. Well, let me start. I would say, again, what we're looking at in the fourth quarter -- and again, we're very bullish in terms of where we are. The enterprise business has been steady for us. You saw it was steady in the third quarter, and we continue to think that will continue to be steady. But the hyperscale business has to pick it up. And we've got a lot -- much things going on in both Europe and the U.S. And again, it's incumbent upon us, our team, to execute, and we got to get it done. But again, we're very optimistic and positive on where we stand today. John, you want to talk about your reflections? And welcome home.
John Hatem -- Executive Vice President and Chief Operating Officer
Thank you. Thank you, Bruce. Hi guys, how are you? So I left about one and half years ago, and all I could say is this business has continued to evolve and continued while I was gone. And it's kind of a constant thing in this business. I've been doing this for a long time. And I think priority for me and the team is really get focused on creating the right products for our customers, whether they're hyperscale or enterprise, right, and make sure we're doing the right thing by our customers and our shareholders. Kind of do what we used to do, right?
Jonathan Atkin -- RBC Capital Markets -- Analyst
Thanks very much.
Operator
Our next question will come from Frank Louthan with Raymond James. Please go ahead.
Frank Louthan -- Raymond James -- Analyst
Great, thank you. So Bruce, talk to us a little bit about -- you're disappointed a little bit with the bookings. What changed? You had good -- pretty good momentum in the first half. What's changed? And what specifically are you -- changes are you making or going to put in place with the sales organization or what have you kind of to really pick this up and get the bookings back to where you'd like for them to be?
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
All right. Well, Frank, what's changed, number one, what we said -- we've been saying not just last quarter when I was on the call but before that is the hyperscale business is a lumpy business. So it's not sort of -- it's not like the enterprise, which is steady Eddie. It's very lumpy. So I'm not sure -- and again, we had one of these in the fourth quarter of '19 in terms of the slow quarter. So I'm not sure that's changed. But again, business is good, and we're expecting a good fourth quarter. In terms of changes, we've made a couple of changes, I would say, looking at that in terms of -- to drive business. Number one, we have a new Head of Sales. Brent Behrman is our new Head of Sales. He ran sales for Digital. He ran sales for Compass Datacenters. Very good leader, well respected by the team. And I'm very glad he's taken on this role, and he's taken it on with abandon. So I think that's the focus. And the second thing is in terms of the returns that we're looking for, as you saw in my remarks, our view of the unlevered returns, if you will, of 8% to 10%. Again, that gives us -- doing that using the leverage we use -- we're not high levered. Using our leverage of 5.5 times or whatever, you can get mid-teen returns for the equity. So we think, again, by being a little bit more aggressive, that would help the business, too. But we're encouraged. There's good demand out there, but it's up to us to deliver. And as I've mentioned, I don't mince words. I was disappointed in our leasing -- the hyperscale leasing in the third quarter, and I don't plan to be disappointed in the fourth quarter.
Frank Louthan -- Raymond James -- Analyst
Alright. Thank you very much.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Thank you.
Operator
Our next question will come from Colby Synesael with Cowen. Please go ahead.
Colby Synesael -- Cowen -- Analyst
Hi, great. Thank you. Bruce, you made a lot of management changes in a pretty short amount of time. And I know I have fielded questions on that. I know you have as well. What did you see in the just few months that you've been there that pushed you to make so many changes just so quickly? I imagine it wasn't just the trajectory of what you're expecting for 3Q leasing. And then secondly, when you think longer term, how do you think about balancing top line growth versus near-term dilution? We're starting to see some of your peers giving some targets in terms of how much they want to be growing their FFO or OFFO per share. Recognizing that while the demand's out there, they want to be cognizant of not diluting investors too much in that near term as they go and pursue some of those bigger opportunities. How are you guys thinking about that? Thank you.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Okay. So let's start with the first one. In terms of the team, when I came here and did my listening tour and see what's going on, I -- the team wasn't functioning as well as a team in terms of there was some areas I thought we could do better. So to me, I'm very excited about John coming back. John is action-oriented. He's focused. He's a proven commodity in terms of -- and he's got great relationships not only within the company but outside the company with our key customers. And asking some of our salespeople, they would say if they could only have one person to come into a meeting to close a deal with a customer, it'd be John Hatem. So that's, in fact -- and I didn't meet John until probably two months into my listening tour, but I kept hearing, "Talk to John, talk to John." So I talked to John. We had a number of conversations. And I said he'd be great to come back as a partner in terms of running this thing. And I'm glad he's back, and he's a great teammate. So I think that's great. I would say Robert in terms of taking on HR, very, very strong person. This is additional responsibility. And we've got a very good HR group that he's working with.
And I think that that's good. Brent, we've talked about it. I think he's a very good leader. He's done this before for a number of companies running sales. And we needed -- again, we underperformed over the last couple of years, especially in the U.S., and we needed to pick it up. And Di, I couldn't convince to stay, so she's leaving us. But with her help and whatever, we found a great replacement for her, and I think you'll all be very impressed with Katherine. I think she's very good. So again, there have been changes. There have been changes fairly quick. But I'm a great believer in, if you see something, you should make the moves and move forward and lock arms and get things to happen. So Katherine starts at the end of this week, as I said, and the team's going to be hard at work. As it relates to how we view top line and sort of bottom line, I would say you need both. You need some growth -- you need top line growth. But I think it does come back to looking at how you -- what you deliver on a per-share basis. So I think you're going to see more focus on that as well as the top line growth. There will be much more focus on a per-share metric.
Colby Synesael -- Cowen -- Analyst
Okay Thank you.
Operator
Our next question will come from Jordan Sadler with KeyBanc Capital Markets. Please go ahead.
Jordan Sadler -- KeyBanc Capital Markets -- Analyst
Thank you. Good morning. Bruce, I guess I was interested to hear sort of your sort of 100-day take and assessment and the takeaways. And the one thing that sort of struck me as sort of new was sort of this initiative to increase or improve the U.S. leasing share. And I'm kind -- because it seems like in Europe, you'll stay the course, and in other ways, you'll stay the course. So this change in cadence or strategy, is that the right read that this is a primary shift that you see right away from the first 100 days? And then what do you plan to do to sort of implement that change?
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Well, I would say the U.S. -- again, we've got a big position in the U.S. I mean it's the dominant part of our company right now. Europe at the end of next year would be about 20%. But -- so what we need to do, again, when you lose share is to figure out why you're losing share. And we've got good positions in terms of capacity throughout, and we just got to make sure we're focused on getting attention to that capacity. So again, it's sales-driven. I think the changes -- what we're doing about it, as I mentioned, we have a new leader in the sales area and we're going to -- in terms of new -- figuring out better incentives to try and get focus on these assets. But there's going to be a focus on these assets because we think there's a good opportunity. There's great demand out there, but we've got to win our share.
Jordan Sadler -- KeyBanc Capital Markets -- Analyst
I guess I might have been a little -- sorry. I wanted to clarify my question because the one thing I sort of missed there was you guys bought a piece of land in London again this quarter. The prior management team has sort of actively shifted capital away from the U.S. and toward Europe. And I guess what I'm wondering is, will capital, do you think, shift more toward -- you as a capital allocator, are you making the decision to shift capital more actively back toward the U.S.?
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
No, no, no, you should not take that. You should take this as we've got a lot of land and positions in the U.S. that we need to maximize that, the money we've invested that we haven't got any value for. So we need to get value out of that. In terms of -- if you look at -- in terms of the new land parcels we're working on, bought or whatever, I would say we are focusing strongly on the European markets. And again, we believe that there's great opportunity there. So don't take this that we think -- that we're allocating new capital to the U.S. and forgetting Europe. I would say the focus is making sure we have all we can in Europe to handle the growth we're seeing there. But in the U.S., we have a lot of capital that's in place or land available that we need to get some traction on, that we've been a little bit weak in terms of finding customers for.
Jordan Sadler -- KeyBanc Capital Markets -- Analyst
Got it. Thank you.
Operator
Our next question will come from Eric Luebchow with Wells Fargo. Please go ahead.
Eric Luebchow -- Wells Fargo -- Analyst
Great, thanks for taking the question. Bruce, just on the 8% to 10% return requirements in the U.S. So do you think that maybe you've missed out on deals in the past in the U.S. because you weren't aggressive enough on price and you plan to change that going forward? Do you think it was more supply related because you didn't have inventory in certain markets like Ashburn last year? And I guess, as you look longer term, do you think that range is sustainable? Have you seen any signs of kind of stabilization of pricing in the U.S. given the number of competitors, both public and private? Thanks.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
I would say we missed for two -- I said, in some cases, we missed last year or whatever because we didn't have product in the market. I would say we missed some this year and last year because it was too aggressive. And we thought that the pricing was too aggressive, and we didn't want to play at those rates. And I guess from our standpoint today, as we look at the 8% to 10%, if you put a modest leverage on, you can get mid-teens returns on your equity, and that's not bad with long-term leases. So I think we're a little bit more aggressive as it relates to that.
John Hatem -- Executive Vice President and Chief Operating Officer
And hey Eric, it's John. So I mean we definitely see opportunity on the development side to kind of maintain yields, right, with what our hyperscale customers really need in the space, what their priorities are and our enterprise customers. So like I said earlier, it's key for us to -- on the operations side to make sure we're matching our products for what our customers need, what the rates are in the market, what the competition is in the market. And we have a phenomenal platform to do that.
Eric Luebchow -- Wells Fargo -- Analyst
Great. Thank you.
Operator
Our next question will come from Nick Del Deo with MoffettNathanson. Please go ahead
Nick Del Deo -- MoffettNathanson -- Analyst
Bruce, if the basis of competition for hyperscale deals is shifting even more toward pricing or the returns that operators are willing to accept, how well positioned do you feel you are to compete on that dimension? Do you think that the scale of your biggest competitor gives them any sort of structural leg up? And how much more volume do you think you need to drive using the new return target to create a similar amount of value as you would have under your old targets?
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Well, I would say a couple of things. I would say I think we have a big enough scale to take care of our customers. We can't be everywhere where they are. But when you look at what's going on -- when I look at -- when we look at like Northern Virginia, there are a lot of people there that aren't international we're competing against or don't have a lot of different footprints, and they're getting deals done. So it's not like the customer is just saying, "We're not going to do business with you because you don't have an international footprint." So for us, again, we've got great relationships with many companies, and we have those relationships because we've been able to deliver and meet their expectations on many fronts, not just price. Price is really the last thing. You got -- there's lots of other factors that are very important factors. And sometimes, I would think relationships are getting better pricing because they want to do business with you. But it's still very competitive, so -- and we're seeing that.
John Hatem -- Executive Vice President and Chief Operating Officer
Yes. So Nick, on the dynamic with the platform that we have, right, that we've developed over decades here, right, to really initially focus on the enterprise and the things that the hyperscalers need in the space, I mean, there's -- it's not a commodity. We talked about it being -- you talked about it being a commodity business, but it's not really. I mean these guys have requirements, just like they have requirements for their own facilities, that really fit into a platform that we can deliver, right, and the larger players in the States can deliver.
Nick Del Deo -- MoffettNathanson -- Analyst
Okay. Thank you.
Operator
Our next question will come from Sami Badri with Credit Suisse. Please go ahead.
Sami Badri -- Credit Suisse -- Analyst
Hi, thank you. Thank you for the question. I want to go back to the 8% to 10% yield, and maybe, Bruce, just to get an idea on how you think about this number. Is this a year one type of number, as in right when the facility is up, it hits a certain utilization rate and then you get that 8% to 10%? Or is that like for the life of the deal or a certain period of time, like three or four years? And that's part one of the question. Part two of the question is, do you see the European leasing dynamics being in line to that range, below or above? And then same framework against the U.S. dynamics would be very helpful for us.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
All right. That 8% to 10% yield is really a stabilized yield, getting it up, built and leased over time because there's usually phases, whatever. In terms of how we compare the U.S. to Europe, I would say, right now, Europe has a little bit more favorable economics to the U.S., but that can change over time. But right now, it's a better environment to invest than what we're seeing like in Northern Virginia.
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Yeah. When we look at particularly the long-term deals, there is typically some ramp. But even for the hyperscale, they tend to ramp fairly quickly. So yeah, we underwrite sort of going in the average and ending yield, but the stabilized is what we're saying in that range.
Sami Badri -- Credit Suisse -- Analyst
Got it, got it. And then maybe just a follow-up. It sounds like there is some productivity in the background. There are things going on in the pipeline. How should we be thinking about your capex in 2021? Because some of your peers are already alluding to a pickup in capex spend that looks very similar to 2020 and 2021, and I guess that ends up translating into some of your per-share economics or your per-share metrics. Could we just get an early idea on what we should be modeling or thinking about from a capex perspective?
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
We're looking forward to giving you that in our fourth quarter call in February of '21.
Sami Badri -- Credit Suisse -- Analyst
Got it. Thank you.
Operator
Our next question will come from Ari Klein with BMO Capital Markets. Please go ahead.
Ari Klein -- BMO Capital Markets -- Analyst
Thanks. Given all the changes at the top, what are you seeing from an employee attrition standpoint, particularly on the sales front? And what kind of heavy lifting do you -- does there need to be done there from maybe a hiring standpoint as well?
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
We've seen 0 people leaving on the sales front. I think people are pretty energized having Brent in that position. So right now, everything is good.
John Hatem -- Executive Vice President and Chief Operating Officer
Yeah. And Ari, I mean, for myself coming back, I mean, the team I left here one and half years ago is here, right? And that was the team that helped drive a lot of our success historically. They're excited about the new leadership. I mean they're excited I'm back and excited to work with Brent and team and everybody to kind of get back to winning.
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Yes. And I would echo, in the finance org and really across the organization, we have very minimal attrition. And look, I think something to recognize, particularly if people are in the REIT industry, the data center industry is a great place to be. There's a lot of other industries that...
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Amen.
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Yeah. Bruce and I have both worked in some of those that are much more stressed. So I think people are excited about working for CyrusOne, our platform. Some of the changes have been reenergizing. And this is a great industry to be a part of, so I don't think people are jumping ship.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Just Di.
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Yeah. Maybe I'm not the smart one in the room, I guess.
Ari Klein -- BMO Capital Markets -- Analyst
Good luck moving forward, Diane. But then just, Bruce, you highlighted the mix of asset, markets -- and markets in your focus -- in one of your focus areas. Can you just elaborate a little bit on what that would mean? Are there markets in the U.S. you'd potentially exit or additional markets you'd consider entering?
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Well, I think there's -- yeah, I think we would look at everything in terms of where we might slim down, where we might exit, where we might go in. But yes, there's a lot that we're going to look at. So again, we'll be back to you. But again, the team is going to be all over that in terms of -- when we start together as a team as of Friday.
Ari Klein -- BMO Capital Markets -- Analyst
Thanks.
Operator
Our next question will come from Simon Flannery with Morgan Stanley. Please go ahead.
Simon Flannery -- Morgan Stanley -- Analyst
Great, thank you very much. Good to hear the commentary on the fourth quarter leasing outlook. Could you just take us out a little bit more on the medium term and the -- what really has happened in a post-COVID environment in terms of digital transformation? What are you hearing from the hyperscalers and the enterprises in terms of how they're thinking about the medium-term demand and the sustainability of the strong leasing the industry has seen in 2020? Thanks.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
I would say the hyperscalers are very encouraged in terms of when they look at their business, they see that there is -- they don't think this is a blip. They think this is -- there's good growth over the next few years, and they're planning accordingly. So we're very encouraged. It's broad-based.
John Hatem -- Executive Vice President and Chief Operating Officer
Yes. Simon, I mean, to second that, just coming back and from the time I was away, I mean, the demand is real. I mean COVID has logically just kind of pushed the demand for technology up, which, obviously, we're an underlying foundational component of that. So it's good. I mean even the enterprise customers that we talk to -- it's amazing that we still keep conducting business and everything keeps running. And whether people are home or on sites, the demand is real. And I think the capacity that was kind of stored -- like what the hyperscalers thought they had is going to last them a couple of years has kind of been consumed, and they're looking for growth.
Simon Flannery -- Morgan Stanley -- Analyst
And any change in their desire to in-source that or outsource?
John Hatem -- Executive Vice President and Chief Operating Officer
Yes. So on the in-source versus outsource, I mean, this has been a constant theme for years with the hyperscalers. And I mean, I think they come out and talk about -- they target like a 50% build versus lease. And you'd see some variance, right, between some of the hyperscalers. Some of that is based on timing. But haven't heard anything that would change that assumption.
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Well, the fact that they've signed very long-term leases is that they are going to maintain a good portion of their data center footprint, obviously, in third-party facilities.
Simon Flannery -- Morgan Stanley -- Analyst
Thank you.
Operator
Our next question will come from Erik Rasmussen with Stifel. Please go ahead.
Erik Rasmussen -- Stifel -- Analyst
Yeah, thanks. First, Diane, best of luck in your retirement. And certainly, nice working with you if this is, in fact, your last call. Maybe just for Bruce, back again to some of the priorities. But are you worried that you may have lost too much momentum and maybe missed some of the hyperscale cycle this time around, especially in the U.S., in the key markets like Northern Virginia? And then how does -- that new yield range of 8% to 10%, what does that do to invigorate sort of the discussions with customers and how they've been receptive to that? Thank you.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Well, yeah, I think we had a quarter that we -- missing quarter, I would say, in terms of hyperscale. Because -- but again, as we say, it's lumpy. So the conversations didn't stop, and if anything, it just gets pushed into the next quarter. So I would say that I don't think we missed. We may have missed some business over the last 18 months on pricing and not having product available, but I don't see that as an issue going forward. And I think that from our standpoint, we think we've got a great product. And we think with John coming back, it would even be a better product. And I think that with the relationships with our customers and being a little bit more flexible in terms of -- on pricing, that we should be able to continue to show some pretty good growth. But again, it's up to us to deliver.
Erik Rasmussen -- Stifel -- Analyst
Thank you.
Operator
Our next question will come from David Guarino with Green Street Advisors. Please go ahead.
David Guarino -- Green Street Advisors -- Analyst
Hey, thanks. Bruce, this one's for you. I'm just kind of wondering, given your real estate background, I'm sure you've been monitoring the supply picture, given all the new interest and capital we've seen from private companies since this year kind of started. So I guess how do you think about the supply landscape and how do you think that will evolve as we head into next year? And could we possibly see a distribution of the leasing pie shift away from CyrusOne to some of those new competitors?
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
That's interesting. I would say we are seeing -- again, I was in Northern Virginia a few weeks ago. And in terms of the amount of new supply there, it was eye opening. But -- and you see new money coming into it. Again, I think it's a function of -- they're coming in there because there's demand. And as long as there's demand and demand on the price that people can get decent returns, you're going to continue to see that supply. So I think the one thing that -- CyrusOne has a lot more to offer than a lot of these new players. We have a platform. We have a platform with people who can deal with all these different issues, which is front and center is safety, security. They go through a -- they want to make sure -- this is important to them, and they want to make sure they're dealing with people who have a proven track record. So I think that's a big plus. But John, anything you want to add?
John Hatem -- Executive Vice President and Chief Operating Officer
Yeah. I mean we've seen it through the years, right, David. I mean where some small players have come into the space, they'll get a deal from a hyperscaler. And sometimes, that hyperscaler doesn't get another bit of business or they look somewhere else. Like Bruce said, it's not all about price for these folks. Obviously, it's important, right, and they have to keep making money. But it's the platform, I think, that's super important for us larger people in the space.
David Guarino -- Green Street Advisors -- Analyst
That's helpful. Makes sense. And then just as a follow-up, maybe you can talk about pricing. And I appreciate the disclosure on what hyperscaler yields are today. But one of the questions we constantly get asked and we're trying to figure out is how low can we see yield go before it just doesn't justify starting development projects. And maybe just kind of give us some color on how you think about where yields could go before you guys would just kind of throw in the towel on new projects.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Well, I mean, I think if you look at the yield -- I mean, if you look at yields that are in the 6% range and you put 50% leverage on it, whatever, it'll be probably like a 9% or 10% yield or whatever, which -- return on equity, which isn't that exciting in terms of trying to do that. And so that -- and again, it depends on how much leverage these private guys can put up, more leverage if the banks will do it. But at some point, that will stop. So for us, we think there's plenty of business around that we can do in the 8% to 10% range. And again, it's incumbent upon us to make sure we can find these good customers that -- and transact at these rates because when you put 50% leverage on, it's still a return on equity of 15%.
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Yeah. And we still got, again, very steady business from enterprise because almost all our data centers are colocations. So a blended yield -- that helps the blended yield going to the higher side because the smaller deals are not priced as aggressively as the large long-term hyperscaler.
David Guarino -- Green Street Advisors -- Analyst
Thanks. That's great. And Diane, it's been great working with you.
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Thanks, David.
Operator
Our next question will come from Matt Niknam with Deutsche Bank. Please go ahead.
Matt Niknam -- Deutsche Bank -- Analyst
Hey, thank you for taking the question. Bruce, you talked a bit about wanting to sort of close that valuation gap with peers. And so I'm wondering, what do you see as the next steps or milestones in helping close that gap with peers? And now that you've got the pieces of the management team put in place, how should investors think about the timeline before these new pieces kind of gel together to help CONE better improve leasing share and enhance returns? Thanks.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Well, again, as I said in the remarks, we're going to be looking at a lot of different components in terms of capital allocation, portfolio mix and all that with the team. And together, my hope is that we can do this in fairly short order so that by the next time we're together, we'll have a real -- a plan in terms of what we're trying to accomplish and where we're going. So I would -- we're going to be all over this.
Matt Niknam -- Deutsche Bank -- Analyst
Can I -- just one follow-up also. In terms of the lighter leasing volumes in 3Q, particularly around hyperscale, it sounds as though the demand side is still there. The customers are still pretty active. And it seems like it was a little bit more in terms of company-specific issues. But I'm wondering, have you seen any signs of hyperscale customers entering more of a digestion phase after a very strong first half of the year?
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
No, we think that their -- we think the appetite is still very strong.
Matt Niknam -- Deutsche Bank -- Analyst
Great, thank you.
Operator
Our next question will come from Michael Rollins from Citi. Please go ahead.
Michael Rollins -- Citi -- Analyst
Well thanks, and good morning. I've also got Michael Bilerman on the line, and we each have a question for you this morning. So first -- so I'm just curious. If I look at the rent schedules, it looks like domestic rents were up about 2% year-over-year. And presumably within that, the hyperscale is growing. Can you unpack what's happening a bit, whether it's by region or customer vertical, in terms of where some of those headwinds on domestic rents may be? And I'll throw it over to Michael.
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Well, do you want that one...
Michael Bilerman -- Citi -- Analyst
I'll let you answer that one, and then I'll come back on at the end.
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Okay. Yeah. Because I -- we might forget it by the time it gets to your question. The -- yes, U.S. revenue, the headwind obviously is churn in the U.S. and again, really from our hyperscales -- I'm sorry, I said that backwards, from our enterprise customers. The enterprise customers, particularly in some of our legacy assets, those leases were written a long time ago and at a different point in the market as far as market rates. So that's definitely the headwind. Obviously, we're still increasing revenue in the U.S., but not to the extent of Europe, just given the European growth of new assets we're building there. And there is more pricing power in Europe, and we have 0 churn in Europe. So that's really what's driving it. And the markets that have been under the most pressure in our portfolio is certainly Houston, and that's as much about just the concentration of oil and gas customers there and then some in Cincinnati and a bit in Dallas. Generally, that's the demand -- I'm sorry, that's the pressures there.
Michael Bilerman -- Citi -- Analyst
And Bruce, it's Bilerman. It's good to be back on CyrusOne calls after a multiyear absence.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Welcome home, Michael. Welcome home.
Michael Bilerman -- Citi -- Analyst
Thank you, Bruce. So I want to go to this -- the 100-day listening tour, and you listed a wide variety of constituencies that you spoke with, pretty wide-ranging in terms of people and getting their views. And the last bullet on slide nine, where you talked about the valuation gap, you sort of talked about turnover, management turnover, the leasing, consistency in execution and communication. And it appears as though you've already addressed a lot of those to try to move forward. What I want to know is how consistent was the feedback across all of those constituencies you spoke to. And what are these some -- when you say other factors, what would some of those other factors be to address overall?
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
I would say that the feeling about the company is that we said a lot of different things and did a lot of different things that -- not just consistent with what we said. So it wasn't clear what was the priority and where we were going. And so we need -- the market really didn't understand what the program was. Di, what would you add?
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Yeah. I think it was that. But also, having said that, I think there were a lot of things that were done right. I think the company was always pretty good at seeing where the puck was going and being ready to hit the hyperscale customers when we were enterprise based. And certainly, the Zenium acquisition and having a footprint in Europe has proven to be very successful.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Very successful.
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
So -- but I think the other thing that's always been probably a pressure on our multiple discount is just the level of capex as compared to our size. And particularly, when we were smaller, we were consistently spending more capital than even our revenue. And that, I just think, was a bit of a risk factor that again depressed our multiple at some level.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Yeah, in terms of the amount of development and also the amount of equity we were issuing, too.
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Right. And there's a lag when you're doing that much development. Even when it's pre-leased, there's certainly a lag before it shows up in your financial metrics. So I think it was just a combination of a lot of things. But I think we shouldn't lose sight that it's a great platform and the company has done a lot of things right as well.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
I think that is a very good point. Again, it's a very good company. We've got a great platform. And again, it's incumbent upon us to take it as a team and move forward.
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Yeah. And they hired me four years ago. That was brilliant.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
And now you're leaving.
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Just kidding.
Michael Bilerman -- Citi -- Analyst
Thank you.
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
You are welcome, Michael. Welcome back.
Operator
Our next question will come from Richard Choe with JPMorgan. Please go ahead.
Richard Choe -- JPMorgan -- Analyst
Hi. I just wanted to follow up a little bit. And given your, I guess, pretty stabilized capacity and the development table, if things are continuing the way they are, I assume the development table won't change. But if things weaken, is there the ability to pull that back? And maybe just give us a little color on how you look at the current development table because it is kind of substantial for 4Q and 1Q, just to get a sense there.
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Yeah. Our developments are obviously geared toward our successful leasing and our backlog. So the -- and as we mentioned, the developments currently under development in the table in the supplemental disclosure is roughly 63% leased on a square footage basis, but almost 70% in megawatts. So that can vary quarter-to-quarter. This is a really strong pre-leasing statistic for what we are spending capital on, so we're pleased with that. But then part of our CIP is shell because we do want to build shell. And we mentioned that there were times, particularly in Northern Virginia, that we didn't have shell capacity to be able to meet a time line for some of the larger deals that were getting done. So we do have shell in all our key markets as well. And then we build out, obviously, the data halls as we lease -- as we pre-lease. So I think we're in good shape with our current development capital. And again, we increased the total for the year, but that was really with the land purchase we made in London in the third quarter.
John Hatem -- Executive Vice President and Chief Operating Officer
Yeah. Richard, I mean, to add to that, I mean, 20% of that cost, right, when we think about a build is the land in the shell, right? And the 80% is kind of that data center fit-out, right, which is -- in our platform in the U.S., like we could kind of shuffle that to wherever we need it, wherever the actual leasing happens, which gives us an advantage to move quickly and alleviate the risk of those things on the capital side.
Richard Choe -- JPMorgan -- Analyst
Great. Thank you.
Operator
Our next question comes from Tim Long with Barclays. Please go ahead.
Tim Long -- Barclays -- Analyst
Thank you. Maybe one and then just a real quick follow-up. Just talk a little bit about the enterprise in the quarter. Could you just give us a little color on kind of new logos compared to existing customers and kind of macro COVID impacts in that part of the business? And then just the Q4 churn going higher, anything specific to that? And is that more short term in nature? Thank you.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Michael, why don't you take the first one, and Di will take the second.
Michael Schafer -- Vice President of Capital Markets and Investor Relations
Yeah. We -- the vast majority of the leasing with enterprises in the third quarter was with existing customers. We added, I think, eight new logos. We did $9 million of leasing. Again, as you see in our deck, the vast majority of the leasing in the quarter was with enterprises, and that $9 million is in line with historical trends. So for the most part, the leasing with the enterprises in the third quarter was consistent with what we've seen over the last couple of years. Obviously, it's hyperscale we got to do a better job of. And with respect to the churn in the fourth quarter, there's nothing unusual about that. If you look at -- our expectation for the year is a range of 5% to 6%. We brought down the upper end of that range, but that level of churn for the year is consistent with what we've seen historically. It just so happens to be weighted toward the fourth quarter, but nothing unusual to call out.
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Yeah.
Tim Long -- Barclays -- Analyst
Okay. Thank you very much.
Michael Funk -- Bank of America -- Analyst
Our next question will come from Michael Funk with Bank of America. Please go ahead. Yes, thank you for spending the call for me, I appreciate it. A couple, if I could. First, Diane, for you, a bit of an historic question. Looking back, you commented earlier about messaging being one of the things you heard from the constituents. In January of this year, you put an 8-K out talking about a pullback in hyperscale activity. I thought a more kind of tempered expectation that you turned around and record a near-record first half of the year and then obviously, the dip back in 3Q. So is there a change in visibility or sales cycle on the hyperscale side?
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
I don't recall us in the first quarter talking about pullback in hyperscale. Going into 2019, particularly in Northern Virginia, I recall we did say that we thought the hyperscale activity in Northern Virginia in '19 over '18 would be down. And it was, in fact, down like 50%, but that was last year.
Michael Funk -- Bank of America -- Analyst
Yeah. The 8-K you put out in January, I thought you said that -- when you announced some of the head count reductions in January, I thought you said that you expected maybe lower expectations. I can double check that.
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Oh, I think it was more referring to the slowdown from '19 led us to the rightsizing of our head count. And we had to grow in Europe, and so the head count reduction was primarily in the U.S. So I think it was more of a reflection of the slowdown in '19 than what we thought '20 was going to be. So I'm sorry for that if that was a confusing message. But yeah, I think that, again, Bruce and the team will continue to look at the cost structure, but like any good business, you're always looking at your cost structure and if there's things you can do on the margin there.
Michael Funk -- Bank of America -- Analyst
But no change in the sales cycle from hyperscale, nothing you've seen?
John Hatem -- Executive Vice President and Chief Operating Officer
No. Yeah. I mean -- Michael, I mean, the only thing that's really changing is the size, right? The cycle -- they're bigger gulps, right, which goes to more lumpiness, right, in the business. That would be...
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Right.
Michael Funk -- Bank of America -- Analyst
If I could squeeze one more. I know we're kind of going long here on time. If I can squeeze one more quick one in for Bruce. So your listening tour -- I mean I'm assuming or I expect maybe you often talk to some of the larger customers. And wondering what you heard from them on the reasons maybe that you didn't get the share you deserve on the hyperscale side.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
I would say the question is whether you have the product where they want it. And in some cases, we don't have the product where they had it. And other times, maybe your price isn't -- or maybe someone else has something that is different than you that benefits what they want to or more attractive in terms of where their other facilities are and it fits better than where our facility is. I mean, I think location is a big part of it. But I think our customers -- in talking to our customers, I think they're very happy with the performance of how we -- what we've done for them, not just on the initial leasing, but more importantly, day in and day out, dealing with issues, i.e. -- be it COVID, be it security, be it safety. It's important to them, and we -- the team under John's leadership now in terms of operations is all over this.
John Hatem -- Executive Vice President and Chief Operating Officer
Yes, Michael.
Michael Funk -- Bank of America -- Analyst
Okay guys. Thanks for the [Indecipherable] Michael, Bruce. Thank you Diane.
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Thanks Michael.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Thanks.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Bruce Duncan for any closing remarks.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Thank you, operator. And again, thank you for joining us on this call. We appreciate it very much. We appreciate your interest, and we look forward to continuing our conversations. If you have any questions, you can talk to Di, Michael or myself, and we look forward to it. Thank you.
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
Thank you.
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Bye.
Operator
[Operator Closing Remarks]
Duration: 70 minutes
Call participants:
Michael Schafer -- Vice President of Capital Markets and Investor Relations
Bruce W. Duncan -- President, Chief Executive Officer, and member of the Board of Directors
Diane M. Morefield -- Executive Vice President and Chief Financial Officer
John Hatem -- Executive Vice President and Chief Operating Officer
Jonathan Atkin -- RBC Capital Markets -- Analyst
Frank Louthan -- Raymond James -- Analyst
Colby Synesael -- Cowen -- Analyst
Jordan Sadler -- KeyBanc Capital Markets -- Analyst
Eric Luebchow -- Wells Fargo -- Analyst
Nick Del Deo -- MoffettNathanson -- Analyst
Sami Badri -- Credit Suisse -- Analyst
Ari Klein -- BMO Capital Markets -- Analyst
Simon Flannery -- Morgan Stanley -- Analyst
Erik Rasmussen -- Stifel -- Analyst
David Guarino -- Green Street Advisors -- Analyst
Matt Niknam -- Deutsche Bank -- Analyst
Michael Rollins -- Citi -- Analyst
Michael Bilerman -- Citi -- Analyst
Richard Choe -- JPMorgan -- Analyst
Tim Long -- Barclays -- Analyst
Michael Funk -- Bank of America -- Analyst
