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REAL ESTATE TRANSACTIONS | 12 Months Ended
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Dec. 31, 2020
Real Estate Transactions Text Block |
6. | REAL ESTATE TRANSACTIONS
Acquisitions, Dispositions, and Assets Held for Sale 2018 Acquisitions and Dispositions. On January 19, 2018, CoreCivic acquired the 261,000 square-foot Capital Commerce Center, located in Tallahassee, Florida for a purchase price of $44.7 million, excluding transaction-related costs and certain closing credits. Capital Commerce Center is 98% leased, including 87% leased to the state of Florida on behalf of the Florida Department of Business and Professional Regulation. In allocating the purchase price of this transaction, CoreCivic recorded $40.6 million of net tangible assets and $3.2 million of identifiable intangible assets. On July 17, 2018, CoreCivic acquired a portfolio of twelve properties for $12.0 million, excluding transaction-related costs, 100% leased to the U.S. Federal Government through the General Services Administration ("GSA"), an independent agency of the United States government, on behalf of the Social Security Administration ("SSA"), the Department of Homeland Security, and ICE. In allocating the purchase price of this transaction, CoreCivic recorded $11.1 million of net tangible assets and $1.9 million of identifiable intangible assets. On August 23, 2018, CoreCivic acquired a 541,000 square-foot SSA office building in Baltimore, Maryland ("SSA-Baltimore") for a purchase price of $242.0 million, excluding transaction-related costs and certain closing credits. The office building was purpose built to SSA specifications in 2014 under a 20-year firm term lease expiring in January 2034, and is backed by the full faith and credit of the U.S. Federal Government through the GSA. In connection with the acquisition and as further described in Note 11, CoreCivic assumed $157.3 million of in-place financing that was used to fund the initial construction of the property in 2014. In allocating the purchase price of this transaction, CoreCivic recorded $207.4 million of net tangible assets and $38.9 million of identifiable intangible assets. On September 21, 2018, CoreCivic acquired a 217,000 square-foot, steel frame property in Dayton, Ohio for $6.9 million, excluding transaction-related costs and certain closing credits, that was built-to-suit for the National Archives and Records Administration ("NARA") in 2002. The building is 100% leased to the GSA on behalf of NARA through January 2023 and includes two additional 10-year renewal options. The building provides 1.2 million cubic feet of storage space, approximately 90% of which is dedicated to archives of the IRS. In allocating the purchase price of this transaction, CoreCivic recorded $6.9 million of net tangible assets and $0.7 million of identifiable intangible assets. CoreCivic acquired the 15 properties in 2018 as strategic investments that further diversify the Company's cash flows through government-leased properties and broaden the solutions it provides to its government partners. In the second quarter of 2018, CoreCivic entered into an agreement to sell its former corporate headquarters for $12.6 million. In connection with the agreement, the Company wrote-down the value of the property to its net realizable value, recognizing an asset impairment charge of $1.6 million in the second quarter of 2018. CoreCivic closed on the sale during the third quarter of 2018 and used the net proceeds from the sale to pay-down a portion of the amounts outstanding under the Company's revolving credit facility. 2019 Acquisitions and Dispositions. 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 BOP. 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. This property was acquired through GRES. The property was 100% leased to the Michigan Department of Technology, Management and Budget ("MDTMB") on behalf of MDHHS through June 2028 and included one six-year renewal option at the sole discretion of the MDTMB. During the fourth quarter of 2020, the MDTMB provided notice of its intent to exercise its executive cancellation provision to terminate the lease effective December 31, 2020. In allocating the purchase price of the acquisitions in 2019, CoreCivic recorded $7.4 million of net tangible assets and $0.8 million of identifiable intangible assets. CoreCivic acquired the properties as strategic investments that further expand the Company's network of residential reentry centers and enable the continued delivery of critical services that help people reintegrate into the community, and also further diversify the Company's cash flows through the acquisition of a government-leased property. 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 recognized in the second quarter of 2019 and reflected in loss (gain) on sale of real estate assets on the consolidated statement of operations. 2020 Acquisitions and Dispositions. On January 2, 2020, CoreCivic completed the acquisition of a portfolio of 28 properties, 24 of which the counter-party contributed to GRES, for total consideration of $83.2 million, excluding transaction-related expenses. All of the properties are leased to the federal government through the GSA. CoreCivic financed the acquisition with $7.7 million of cash, assumed debt of $52.2 million, as further described in Note 11, and the balance with the issuance of 1.3 million shares of Class A Common Interests in GRES, an unrestricted subsidiary controlled by the Company, 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. On December 23, 2020, CoreCivic completed the sale of 42 government-leased properties, including the portfolio of 28 properties acquired in 2020 and 11 of the 12 properties acquired July 17, 2018 described above, in a single transaction to a third party for an aggregate price of $106.5 million, generating net proceeds of $27.8 million after the repayment of the debt related to GRES, and other transaction-related costs. Net cash proceeds were used to pay-down the Company's revolving credit facility and are available to recycle into projects generating higher returns. In accordance with a Tax Protection Agreement, the Company agreed to provide certain tax protection payments to the contributing partners of GRES, limited to the cash and certain other resources held by GRES. After considering the tax protection payments in connection with this sale, the Company reported a net loss on sale of $17.9 million. Assets Held for Sale. The Company intends to pursue the sale of additional assets in the Properties segment, utilizing any net proceeds, after the repayment of non-recourse mortgage notes associated with such properties, in furtherance of the Company’s revised capital allocation strategy. As of December 31, 2020, CoreCivic had three real estate assets held for sale. The aggregate net book value of the property and equipment of these three properties, amounting to $241.8 million, and the other assets associated with the properties, consisting of deferred leasing costs and other assets amounting to $37.6 million, are reflected as assets held for sale on the Company's consolidated balance sheet as of December 31, 2020. Although the Company can provide no assurance, based on interest expressed to-date, CoreCivic expects to close on the sale of these assets during 2021. 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 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 will be 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 December 31, 2020, the financing receivable was $147.5 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 were reported as expenditures for facility development and expansions on the consolidated statements of cash flows. During 2020, the Lansing Correctional Facility generated $2.6 million of revenue associated with the non-lease services components of the arrangement, and $8.4 million of interest income. Idle Facilities As of December 31, 2020, CoreCivic had five idled CoreCivic Safety 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 at December 31, |
Facility |  | 2020 |  |  | 2019 |
Prairie Correctional Facility |  | $ | 14,646 |  |  | $ | 14,863 |
Huerfano County Correctional Center |  |  | 15,895 |  |  |  | 16,266 |
Diamondback Correctional Facility |  |  | 38,346 |  |  |  | 39,729 |
Marion Adjustment Center |  |  | 11,047 |  |  |  | 11,351 |
Kit Carson Correctional Center |  |  | 52,757 |  |  |  | 54,041 |
|  | $ | 132,691 |  |  | $ | 136,250 |
As of December 31, 2020, CoreCivic also had one idled non-core facility in its Safety segment containing 240 beds with an aggregate net book value of $3.1 million; three facilities in its Community segment, all of which became idle during 2020, containing an aggregate of 650 beds with an aggregate net book value of $9.2 million; and two previously leased properties in its Properties segment containing 55,000 square feet with an aggregate net book value of $9.5 million. CoreCivic incurred operating expenses at these idled facilities of approximately $7.6 million, $7.1 million, and $7.7 million during the period they were idle for the years ended December 31, 2020, 2019, and 2018, respectively. Two of the three idled facilities in the CoreCivic Community segment are located in Oklahoma. As a result of the lower resident populations from the state of Oklahoma and the impact of COVID-19, CoreCivic Community 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. Closure of the Tulsa facility followed the closure of the 200-bed Oklahoma City Transitional Center during the second quarter of 2020, and the 289-bed Turley Residential Center in Oklahoma in 2019. During the fourth quarter of 2020, the BOP awarded a new contract to CoreCivic for residential reentry and home confinement services pursuant to a solicitation for capacity and services to be provided in the state of Oklahoma. As a result, CoreCivic reactivated the Turley Residential Center during the first quarter of 2021, and provides the BOP additional reentry services at its owned and operated Oklahoma Reentry Opportunity Center (formerly known as the Carver Transitional Center), which supplements the existing utilization by the state of Oklahoma. During the third quarter of 2020, Adams County, Colorado, notified the Company that, pursuant to a re-bid of the managed-only contract at the 184-bed Henderson Transitional Center, a facility in the Community segment the Company leased from Adams County, it awarded the contract to another operator. CoreCivic transitioned operations to the other operator upon expiration of the contract in January 2021. 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 at the time of the sale, for net proceeds of $3.3 million. The gain on the sale of $2.8 million was recognized in the second quarter of 2020. On September 15, 2020, CoreCivic announced that it had entered into a new contract under an IGSA between the city of Cushing, Oklahoma and the USMS to utilize the Company's 1,600-bed Cimarron Correctional Facility in the CoreCivic Safety segment. The Company had previously announced its intention to idle the Cimarron facility during the third quarter of 2020, predominantly due to a lower number of inmate populations from the state of Oklahoma resulting from COVID-19, combined with the consequential impact of COVID-19 on the State's budget. The new management contract commenced on September 15, 2020, and has an initial term of three years, with unlimited 24-month extension options thereafter upon mutual agreement. 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 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, in the second quarter of 2020, CoreCivic reported an impairment charge of $9.8 million on one of the residential reentry facilities in the Community segment in Oklahoma, based on its anticipated use as a commercial real estate property rather than a residential 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 markets.

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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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