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REAL ESTATE TRANSACTIONS | 6 Months Ended
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Jun. 30, 2019
REAL ESTATE TRANSACTIONS |
4. | REAL ESTATE TRANSACTIONS
Acquisitions On February 20, 2019, CoreCivic acquired the South Raleigh Reentry Center, a 60-bed residential reentry center in Raleigh, North Carolina, for $0.9 million, excluding transaction-related expenses. In connection with the acquisition, CoreCivic provides reentry services for both male and female residents under custody of the Federal Bureau of Prisons ("BOP"). In allocating the purchase price of this transaction, CoreCivic recorded $0.9 million of net tangible assets. CoreCivic acquired the property as a strategic investment that further expands the Company's network of residential reentry centers. On May 6, 2019, CoreCivic acquired a 36,520-square foot office building in Detroit, Michigan, for $7.2 million, excluding transaction-related expenses, that was built-to-suit for the state of Michigan's Department of Health and Human Services ("MDHHS") in 2002. The property is 100% leased to the Michigan Department of Technology, Management and Budget ("MDTMB") on behalf of MDHHS through June 2028 and includes one six-year renewal option at the sole discretion of the MDTMB. Financing Leasing Transactions On January 24, 2018, CoreCivic entered into a 20-year lease agreement with the KDOC for a 2,432-bed correctional facility the Company is constructing in Lansing, Kansas. The new facility will replace the Lansing Correctional Facility, the State's largest correctional complex for adult male inmates, originally constructed in 1863. CoreCivic will be responsible for facility maintenance throughout the 20-year term of the lease, at which time ownership will revert to the State. Construction of the new facility commenced in the first quarter of 2018 and is expected to be completed during the first quarter of 2020. CoreCivic expects to account for the lease with the KDOC as a multiple element lease with a portion of the lease payments attributable to the capital lease. In addition, portions of the lease payments will be attributable to maintenance services and capital maintenance, representing two separately valued non-lease components. As of June 30, 2019, CoreCivic has capitalized $109.3 million associated with the construction of the project. Idle Facilities As of June 30, 2019, CoreCivic had six idled correctional facilities that are currently available and being actively marketed as solutions to meet the needs of potential customers. 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 CoreCivic owns without significant cost (dollars in thousands):
|  |  |  |  |  |  |  | Net Carrying Values |
|  | Design |  |  | Date |  | June 30, |  |  | December 31, |
Facility |  | Capacity |  |  | Idled |  | 2019 |  |  | 2018 |
Prairie Correctional Facility |  |  | 1,600 |  |  | 2010 |  | $ | 14,830 |  |  | $ | 15,278 |
Huerfano County Correctional Center |  |  | 752 |  |  | 2010 |  |  | 16,340 |  |  |  | 16,660 |
Diamondback Correctional Facility |  |  | 2,160 |  |  | 2010 |  |  | 40,588 |  |  |  | 40,962 |
Southeast Kentucky Correctional Facility |  |  | 656 |  |  | 2012 |  |  | 20,677 |  |  |  | 21,098 |
Marion Adjustment Center |  |  | 826 |  |  | 2013 |  |  | 11,564 |  |  |  | 11,770 |
Kit Carson Correctional Center |  |  | 1,488 |  |  | 2016 |  |  | 54,626 |  |  |  | 55,507 |
|  |  | 7,482 |  |  |  |  | $ | 158,625 |  |  | $ | 161,275 |
CoreCivic also has two idled non-core facilities and one idled residential reentry facility containing an aggregate of 729 beds with an aggregate net book value of $8.3 million. CoreCivic incurred approximately $2.8 million and $3.2 million in operating expenses at the idled facilities for the three months ended June 30, 2019 and 2018, respectively. CoreCivic incurred approximately $5.9 million and $6.7 million in operating expenses at the idled facilities for the six months ended June 30, 2019 and 2018, respectively. During the second quarter of 2019, CoreCivic idled one residential reentry center in Oklahoma due to declining utilization from the state of Oklahoma and the consolidation of residents into the Company's other reentry facilities located in the state. Further, the Company received notice during the second quarter of 2019 of the BOP's intent to award the rebid of a contract at one of the Company's residential reentry facilities in Arizona to another operator. The residential reentry facility in Arizona is expected to be idled in the third quarter of 2019 at the expiration of the BOP contract. As a result of the residential reentry center in Oklahoma becoming idle and the expectation that the residential reentry center in Arizona will become idle, CoreCivic tested the facilities for impairment during the second quarter of 2019. CoreCivic concluded that the residential reentry facility in Oklahoma had a recoverable value in excess of the corresponding carrying value. CoreCivic concluded that the residential reentry facility in Arizona would likely be marketed for use other than as a residential reentry facility, and therefore, recorded an asset impairment of $4.3 million to reduce the carrying value of the facility to its estimated fair value as a commercial real estate property. CoreCivic considers the cancellation of a contract as an indicator of impairment and tested each of the idled facilities for impairment when it was notified by the respective customers that they would no longer be utilizing such facility. CoreCivic 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 CoreCivic to reconsider its most recent assumptions. As a result of CoreCivic's analyses, CoreCivic determined each of the idled facilities to have recoverable values in excess of the corresponding carrying values. On May 1, 2019, the BOP announced that it elected not to renew the contract at the Company's 2,232-bed Adams County Correctional Center in Adams County, Mississippi. On June 28, 2019, the BOP executed an amendment to the existing contract to allow ICE to use up to 660 beds to care for adult male detainees. The Company is negotiating a new IGSA to continue to allow ICE to utilize the remaining available beds at the Adams facility. On July 18, 2019, the BOP contract, which was originally scheduled to expire on July 31, 2019, was extended to August 30, 2019. As of July 31, 2019, the Company cared for approximately 350 detainees from ICE and 500 BOP inmates at the Adams facility. As a result of the transition at this facility, CoreCivic performed an impairment analysis of the Adams facility, which had a net carrying value of $97.8 million as of June 30, 2019, and concluded that this asset has a recoverable value in excess of the carrying value. On May 16, 2019, CoreCivic announced that it had entered into a new contract under an IGSA between Torrance County, New Mexico and ICE to activate the Company's 910-bed Torrance County Detention Facility in Estancia, New Mexico. The Torrance facility had previously been idle since 2017 and had a net carrying value of $34.6 million as of June 30, 2019. The new management contract commenced on May 15, 2019, and has an initial term of 60 months, with unlimited extension options thereafter upon mutual agreement. Either party may terminate the contract with 120 days' written notice. CoreCivic expects to begin accepting ICE detainee populations into the Torrance facility in the third quarter of 2019. On May 23, 2019, CoreCivic announced that it had entered into a new contract under an IGSA between the City of Eden, Texas and the U.S. Marshals Service ("USMS") to activate the Company's 1,422-bed Eden Detention Center in Eden, Texas. The new agreement also permits ICE to utilize capacity at the facility at any time in the future. The Eden facility had previously been idle since 2017 and had a net carrying value of $37.6 million as of June 30, 2019. The new management contract commenced on June 1, 2019, and has an indefinite term. Either party may terminate the contract with 30 day s' written notice. CoreCivic began accepting USMS inmate populations into the Eden facility in the third quarter of 2019. Asset Dispositions On June 24, 2019, CoreCivic sold a property which was leased to a third-party and located in Chester, Pennsylvania for $3.4 million. The property had a net carrying value of $3.1 million at the time of the sale, with the gain on the sale of $0.3 million reflected in other (income) expense on the consolidated statement of operations.

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- Definition The entire disclosure for certain real estate investment financial statements, real estate investment trust operating support agreements, real estate owned, retail land sales, time share transactions, as well as other real estate related disclosures. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 970 -URI http://asc.fasb.org/topic&trid=2156125 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 978 -URI http://asc.fasb.org/topic&trid=2134977 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 976 -URI http://asc.fasb.org/topic&trid=2134846 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 974 -URI http://asc.fasb.org/topic&trid=2156429 Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 972 -URI http://asc.fasb.org/topic&trid=2134617 + Details
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