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REAL ESTATE TRANSACTIONS | 9 Months Ended
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Sep. 30, 2016
REAL ESTATE TRANSACTIONS |
4. | REAL ESTATE TRANSACTIONS
Activations Pursuant to an agreement with Trousdale County, Tennessee, CCA agreed to finance, design, construct, and operate a 2,552-bed facility to meet the responsibilities of a separate IGSA between Trousdale County and the state of Tennessee regarding correctional services. CCA invested approximately $144.0 million in the Trousdale Turner Correctional Center and construction was completed in the fourth quarter of 2015. In order to guarantee access to the beds at the facility, the IGSA with the state of Tennessee includes a minimum monthly payment plus a per diem payment for each inmate housed in the facility in excess of 90% of the design capacity following completion of the ramp, which occurred in the third quarter of 2016. CCA began housing state of Tennessee inmates at the newly activated facility in January 2016. As of September 30, 2016, CCA housed approximately 2,500 inmates at the Trousdale Turner Correctional Center. In December 2015, CCA announced it was awarded a new contract from the Arizona Department of Corrections to house up to an additional 1,000 medium-security inmates at its 1,596-bed Red Rock Correctional Center in Arizona, bringing the contracted bed capacity to 2,000 inmates. In connection with the new contract, CCA is expanding its Red Rock facility to a design capacity of 2,024 beds and adding additional space for inmate reentry programming. Total cost of the expansion is estimated at approximately $37.0 million to $38.0 million, including $30.5 million invested through September 30, 2016. Construction is expected to be completed late in the fourth quarter of 2016, although CCA began receiving inmates under the new contract during the third quarter of 2016. As of September 30, 2016, CCA housed approximately 1,400 inmates at the Red Rock Correctional Center. In April 2016, CCA was awarded a contract to continue providing residential reentry services for the Federal Bureau of Prisons (“BOP”), which was a rebid of existing contracts at both of CCA’s CAI facilities, CAI-Boston Avenue and CAI-Ocean View. During the contract rebid process, CCA identified an opportunity to consolidate BOP resident populations at both facilities into the 483-bed CAI-Ocean View facility in order to make available the CAI-Boston Avenue facility for other potential partners and more efficiently utilize available capacity. On July 18, 2016, CCA announced that it received an award from the California Department of Corrections and Rehabilitation (“CDCR”) to house up to 120 residents as part of The Male Community Reentry Program (“MCRP”) at CCA’s 120-bed CAI-Boston Avenue residential reentry facility in San Diego, California. The MCRP was designed by the CDCR to provide a range of community-based, rehabilitative services to help participants successfully reenter the community and reduce recidivism. The new contract commenced on August 1, 2016 and contains an initial term extending to June 30, 2018, with three one-year renewal options. Leasing Transactions In May 2016, CCA entered into a lease with the Oklahoma Department of Corrections (“ODOC”) for its previously idled 2,400-bed North Fork Correctional Facility. The lease agreement commenced on July 1, 2016, and includes a five-year base term with unlimited two-year renewal options. However, the lease agreement permitted the ODOC to utilize the facility for certain activation activities and, therefore, revenue recognition began upon execution of the lease. The average annual rent to be recognized during the base term is $7.3 million, including annual rent in the fifth year of $12.0 million. After the five-year base term, the annual rent will be equal to the rent due during the prior lease year, adjusted for increases in the Consumer Price Index (“CPI”). CCA is responsible for repairs and maintenance, property taxes and property insurance, while all other aspects and costs of facility operations are the responsibility of the ODOC. Acquisitions On June 10, 2016, CCA acquired a residential reentry facility in Long Beach, California from a privately held owner for approximately $7.7 million, excluding transaction-related expenses. CCA did not assume any debt as part of the all-cash transaction. The 112-bed facility is leased to Community Education Centers, Inc. (“CEC”) under a triple net lease agreement that extends through June 2020 and includes one five-year lease extension option. CEC separately contracts with the CDCR to provide rehabilitative and reentry services to residents at the leased facility. CCA acquired the facility in the real estate–only transaction as a strategic investment that expands the Company’s investment in the residential reentry market. Idle Facilities CCA has seven idled core facilities that are currently available and being actively marketed to potential customers. CCA considers its core facilities to be those that were designed for adult secure correctional and detention purposes. The following table summarizes each of the idled facilities and their respective carrying values, excluding equipment and other assets that could generally be transferred and used at other facilities CCA owns without significant cost (dollars in thousands):
|  | Design |  |  | Date |  |  | Net Carrying Values |
Facility |  | Capacity |  |  | Idled |  |  | September 30, 2016 |  |  | December 31, 2015 |
Prairie Correctional Facility |  |  | 1,600 |  |  |  | 2010 |  |  | $ | 17,358 |  |  | $ | 17,961 |
Huerfano County Correctional Center |  |  | 752 |  |  |  | 2010 |  |  |  | 17,718 |  |  |  | 18,276 |
Diamondback Correctional Facility |  |  | 2,160 |  |  |  | 2010 |  |  |  | 41,914 |  |  |  | 43,030 |
Southeast Kentucky Correctional Facility (1) |  |  | 656 |  |  |  | 2012 |  |  |  | 22,820 |  |  |  | 23,270 |
Marion Adjustment Center |  |  | 826 |  |  |  | 2013 |  |  |  | 12,238 |  |  |  | 12,536 |
Lee Adjustment Center |  |  | 816 |  |  |  | 2015 |  |  |  | 10,466 |  |  |  | 10,840 |
Kit Carson Correctional Center |  |  | 1,488 |  |  |  | 2016 |  |  |  | 58,884 |  |  |  | 60,039 |
|  |  | 8,298 |  |  |  |  |  |  | $ | 181,398 |  |  | $ | 185,952 |
(1) | Formerly known as the Otter Creek Correctional Center.
From the date each of the aforementioned seven core facilities became idle, CCA incurred operating expenses of approximately $2.3 million and $2.0 million during the three months ended September 30, 2016 and 2015, respectively. From the date each of the aforementioned seven core facilities became idle, CCA incurred operating expenses of approximately $6.0 million and $5.4 million during the nine months ended September 30, 2016 and 2015, respectively. CCA also has four idled non-core facilities with carrying values amounting to $5.0 million and $5.1 million as of September 30, 2016 and December 31, 2015, respectively. CCA considers the Shelby Training Center, Queensgate Correctional Facility, Mineral Wells Pre-Parole Transfer Facility, and Leo Chesney Correctional Center to be non-core facilities because they were designed for uses other than for adult secure correctional and detention purposes. CCA considers the cancellation of a contract as an indicator of impairment and tested each of the aforementioned facilities for impairment when it was notified by the respective customers that they would no longer be utilizing such facility. CCA updates the impairment analyses on an annual basis for each of the idled facilities and evaluates on a quarterly basis market developments for the potential utilization of each of these facilities in order to identify events that may cause CCA to reconsider its most recent assumptions. As a result of CCA’s analyses, CCA determined each of the idled facilities to have recoverable values in excess of the corresponding carrying values. On July 29, 2016, the BOP elected not to renew its contract at CCA’s owned and managed 1,129-bed Cibola County Corrections Center located in New Mexico. CCA prepared to idle the facility upon expiration of the contract on October 30, 2016. CCA performed an impairment analysis of the Cibola County Correctional Center, which had a net carrying value of $29.7 million as of September 30, 2016, and concluded that this asset has a recoverable value in excess of the carrying value. On October 31, 2016, CCA announced a new contract award to house up to 1,116 ICE detainees at the Cibola facility. The contract contains an initial term of five years, with renewal options upon mutual agreement.

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- Definition The entire disclosure for real estate transactions including acquisitions, real estate closures and idle facilities, sales, construction of new facilities, activations, and other leasing transactions. + References No definition available. + Details
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