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REAL ESTATE TRANSACTIONS | 3 Months Ended
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Mar. 31, 2020
REAL ESTATE TRANSACTIONS |
4. | REAL ESTATE TRANSACTIONS
Acquisitions On January 2, 2020, CoreCivic completed the acquisition of a portfolio of 28 properties, 24 of which the counter-party contributed to a newly formed partnership of the Company's, for total consideration of $83.2 million, excluding transaction-related expenses. All of the properties are leased to the federal government through the General Services Administration ("GSA"), an independent agency of the United States government. CoreCivic financed the acquisition with $7.7 million of cash, assumed debt of $52.2 million, as further described in Note 5, and the balance with the issuance of 1.3 million shares of Class A Common Interests in Government Real Estate Solutions, LLC, an unrestricted subsidiary controlled by the Company ("GRES"), that are convertible into cash or, at the Company's option, shares of the Company's common stock following a two-year holding period on a one-for-one basis (the "Operating Partnership Units"), using a "DownREIT" structure. In allocating the purchase price of the acquisition, CoreCivic recorded $77.4 million of net tangible assets, $7.5 million of identifiable intangible assets, and $4.9 million of tenant improvements. CoreCivic acquired the portfolio of properties as a strategic investment that further diversifies the Company's cash flows through government-leased properties. CoreCivic has determined that its joint venture investment in GRES represents a variable interest entity ("VIE") in accordance with ASC 810, "Consolidation". CoreCivic has 100% voting control in GRES. Accordingly, CoreCivic concluded that it is the primary beneficiary of GRES and consolidates the VIE. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. Included in property and equipment, net of accumulated depreciation, on our consolidated balance sheet as of March 31, 2020 is $82.0 million related to GRES. The debt related to GRES at March 31, 2020 was $52.0 million, as further described in Note 5. Financing Leasing Transactions On January 24, 2018, CoreCivic entered into a 20-year lease agreement with the Kansas Department of Corrections ("KDOC") for a 2,432-bed correctional facility to be constructed by the Company in Lansing, Kansas. The new facility replaces the Lansing Correctional Facility, Kansas' largest correctional complex for adult male inmates, originally constructed in 1863. CoreCivic is responsible for facility maintenance throughout the 20-year term of the lease, at which time ownership will revert to the state of Kansas. Construction of the facility commenced in the first quarter of 2018, and construction was completed in January 2020, at which time the lease commenced. CoreCivic accounts for the lease with the KDOC partially as a financing receivable under ASU 2016-02, "Leases (Topic 842)", with the remaining portion of the lease payments attributable to maintenance services and capital expenditures as revenue streams under ASC 606, "Revenue from Contracts with Customers". As of March 31, 2020, the financing receivable was $150.8 million recognized in Other Assets on the consolidated balance sheet. Prior to commencement of the lease, the costs incurred to construct the facility were reflected as a construction receivable and, as of December 31, 2019, was $137.7 million recognized in Other Assets on the consolidated balance sheet. The cash payments associated with the construction of the project are reported as expenditures for facility development and expansions on the consolidated statements of cash flows. Idle Facilities As of March 31, 2020, CoreCivic had five idled correctional facilities in the CoreCivic Safety segment 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 |  | March 31, |  |  | December 31, |
Facility |  | Capacity |  |  | Idled |  | 2020 |  |  | 2019 |
Prairie Correctional Facility |  |  | 1,600 |  |  | 2010 |  | $ | 14,668 |  |  | $ | 14,863 |
Huerfano County Correctional Center |  |  | 752 |  |  | 2010 |  |  | 16,108 |  |  |  | 16,266 |
Diamondback Correctional Facility |  |  | 2,160 |  |  | 2010 |  |  | 39,293 |  |  |  | 39,729 |
Marion Adjustment Center |  |  | 826 |  |  | 2013 |  |  | 11,247 |  |  |  | 11,351 |
Kit Carson Correctional Center |  |  | 1,488 |  |  | 2016 |  |  | 53,600 |  |  |  | 54,041 |
|  |  | 6,826 |  |  |  |  | $ | 134,916 |  |  | $ | 136,250 |
As of March 31, 2020, CoreCivic also had two idled non-core facilities in its Safety segment containing an aggregate of 440 beds with a total net book value of $3.7 million; two facilities in its Community segment that became idle during 2019, containing an aggregate of 381 beds with a total net book value of $6.0 million; and three previously leased residential reentry centers in its Properties segment that became idle in 2019, containing an aggregate of 430 beds with a total net book value of $9.3 million. CoreCivic incurred approximately $2.1 million and $2.0 million in operating expenses at these idled facilities for the three months ended March 31, 2020 and 2019, respectively. On April 15, 2020, CoreCivic sold one of the idled facilities in its Community segment, containing 92 beds, for a gross sales price of $1.6 million. Based on the anticipated sale, CoreCivic reported an impairment charge of $0.5 million in the first quarter of 2020 based on the realizable value resulting from the sale. CoreCivic considers the cancellation of a contract or an expiration and non-renewal of a lease agreement in its CoreCivic Properties segment as an indicator of impairment, and tested each of the idled properties for impairment when it was notified by the respective customers or tenants that they would no longer be utilizing such property. CoreCivic updates the impairment analyses on an annual basis for each of the idled properties and evaluates on a quarterly basis market developments for the potential utilization of each of these properties in order to identify events that may cause CoreCivic to reconsider its most recent assumptions, such as the agreement to sell a property at less than its carrying value. As a result of CoreCivic's analyses, except for the aforementioned impairment associated with a sale of a residential reentry facility in the Community segment, CoreCivic determined each of the idled properties to have recoverable values in excess of the corresponding carrying values.

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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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