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REAL ESTATE TRANSACTIONS | 6 Months Ended
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Jun. 30, 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 partnership 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 June 30, 2020 is $81.5 million related to GRES. The debt related to GRES at June 30, 2020 was $51.8 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 June 30, 2020, the financing receivable was $150.3 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, $137.7 million was 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 June 30, 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 |  | June 30, |  |  | December 31, |
Facility |  | Capacity |  |  | Idled |  | 2020 |  |  | 2019 |
Prairie Correctional Facility |  |  | 1,600 |  |  | 2010 |  | $ | 14,473 |  |  | $ | 14,863 |
Huerfano County Correctional Center |  |  | 752 |  |  | 2010 |  |  | 15,949 |  |  |  | 16,266 |
Diamondback Correctional Facility |  |  | 2,160 |  |  | 2010 |  |  | 38,860 |  |  |  | 39,729 |
Marion Adjustment Center |  |  | 826 |  |  | 2013 |  |  | 11,142 |  |  |  | 11,351 |
Kit Carson Correctional Center |  |  | 1,488 |  |  | 2016 |  |  | 53,158 |  |  |  | 54,041 |
|  |  | 6,826 |  |  |  |  | $ | 133,582 |  |  | $ | 136,250 |
As of June 30, 2020, CoreCivic also had one idled non-core facility in its Safety segment containing 240 beds with a total net book value of $3.2 million; three facilities in its Community segment, including two that became idle during 2020, containing an aggregate of 549 beds with a total net book value of $11.3 million; and three previously leased residential reentry centers in its Properties segment, containing an aggregate of 430 beds with a total net book value of $9.2 million. CoreCivic incurred approximately $2.0 million and $1.7 million in operating expenses at these idled facilities for the period they were idle during the three months ended June 30, 2020 and 2019, respectively. CoreCivic incurred approximately $4.0 million and $3.6 million in operating expenses at these idled facilities for the period they were idle during the six months ended June 30, 2020 and 2019, respectively. On April 15, 2020, CoreCivic sold an idled facility in its Community segment, containing 92 beds, for a gross sales price of $1.6 million. In anticipation of the 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. On May 26, 2020, CoreCivic sold an idled non-core facility in its Safety segment, containing 200 beds with a net book value of $0.5 million, for net proceeds of $3.3 million. The gain on the sale of approximately $2.8 million was recognized in the second quarter of 2020 and reflected in other income on the consolidated statement of operations. During the third quarter of 2020, predominately due to a lower number of inmate populations in the state of Oklahoma resulting from COVID-19, combined with the consequential impact of COVID-19 on the State's budget, CoreCivic agreed with the State to idle the Company's 1,692-bed Cimarron Correctional Facility in the CoreCivic Safety segment during the third quarter of 2020. As of June 30, 2020, the net book value of the Cimarron facility was $73.3 million. CoreCivic Community also transferred the remaining resident populations at its 390-bed Tulsa Transitional Center to Oklahoma's system, idling the Tulsa facility during the third quarter of 2020. As of June 30, 2020, the net book value of the Tulsa facility was $2.4 million. 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, CoreCivic reported an impairment charge of $9.8 million on one of the residential reentry facilities in Oklahoma, based on its anticipated use as a commercial real estate property rather than a reentry facility. The fair value measurement for the Oklahoma residential reentry facility was estimated using unobservable Level 3 inputs, as defined in ASC 820, using market comparable data for similar properties in the local market.

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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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