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REAL ESTATE TRANSACTIONS | 9 Months Ended
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Sep. 30, 2021
REAL ESTATE TRANSACTIONS |
4. | REAL ESTATE TRANSACTIONS
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 Government Real Estate Solutions, LLC ("GRES"), an unrestricted subsidiary controlled by the Company, for total consideration of $83.2 million, excluding transaction-related expenses. All of the properties were 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, and the balance with the issuance of 1.3 million shares of Class A Common Interests in 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. On December 23, 2020, CoreCivic completed the sale of 42 government-leased properties, including the portfolio of 28 properties acquired in 2020 and the remaining properties acquired in 2017 and 2018, 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 a portion of the amounts outstanding under the Company's Revolving Credit Facility. 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 recognizing the tax protection payments in connection with this sale, the Company reported a net loss on sale of $17.9 million. CoreCivic determined that its joint venture investment in GRES represented a variable interest entity ("VIE") in accordance with ASC 810, "Consolidation". CoreCivic had 100% voting control in GRES. Accordingly, CoreCivic concluded that it was the primary beneficiary of GRES and consolidated 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. During June 2021, CoreCivic provided notice to the partners of GRES of its intent to distribute the remaining assets and terminate the partnership. The Company terminated the partnership in September 2021 and cancelled the Operating Partnership Units for no consideration. As part of the termination, the Company transferred the deed of an idled property located in Detroit, Michigan to the partners of GRES. The Detroit property was previously a government-leased property in the Company's Properties segment. During the third quarter of 2021, the Company reported an increase to stockholders' equity of $17.4 million resulting from the termination of the partnership. On May 28, 2021, CoreCivic completed the sale of two leased properties, the Capital Commerce Center, primarily leased to an agency of the State of Florida in Tallahassee, Florida, and a warehouse property leased to the GSA in Dayton, Ohio, in a single transaction to a third party for an aggregate price of $73.0 million, generating net proceeds of $46.2 million after the repayment of the debt related to the Capital Commerce Center and other transaction-related costs. In addition, on June 29, 2021, the Company completed the sale of a property leased to the GSA in Baltimore, Maryland to a third party for a price of $253.0 million, generating net proceeds of $76.4 million after the repayment of the debt related to the Baltimore property and other transaction-related costs. After repayment of the non-recourse mortgage notes, remaining net cash proceeds from the sale of these three leased properties, which were previously classified as held for sale, were used to pay-down a portion of the amounts outstanding under the Company's Revolving Credit Facility. The Company recognized a total net gain on the sales of these three properties in the second quarter of 2021 of $38.9 million. On May 24, 2021, CoreCivic completed the sale of an idled 12,000 square foot non-core property located in St. Louis, Missouri, with a net book value of $0.8 million at the time of the sale, for net proceeds of $0.6 million, resulting in a net loss on sale of $0.2 million. In addition, on June 25, 2021, CoreCivic completed the sale of an idled 18,000 square foot non-core property, located in Philadelphia, Pennsylvania, for a price of $2.0 million, generating net proceeds of $1.8 million. Pursuant to an agreement to sell the Philadelphia property, in the first quarter of 2021, CoreCivic recognized an impairment charge of $1.3 million associated with this facility, based on its estimated net realizable value less costs to sell. Both the St. Louis and Philadelphia properties were formerly leased to third-party lessees in the CoreCivic Properties segment. Idle Facilities As of September 30, 2021, 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 |
|  | Design |  |  | September 30, |  |  | December 31, |
Facility |  | Capacity |  |  | 2021 |  |  | 2020 |
Prairie Correctional Facility |  |  | 1,600 |  |  | $ | 14,020 |  |  | $ | 14,646 |
Huerfano County Correctional Center |  |  | 752 |  |  |  | 15,397 |  |  |  | 15,895 |
Diamondback Correctional Facility |  |  | 2,160 |  |  |  | 37,052 |  |  |  | 38,346 |
Marion Adjustment Center |  |  | 826 |  |  |  | 10,850 |  |  |  | 11,047 |
Kit Carson Correctional Center |  |  | 1,488 |  |  |  | 51,405 |  |  |  | 52,757 |
|  |  | 6,826 |  |  | $ | 128,724 |  |  | $ | 132,691 |
As of September 30, 2021, CoreCivic also had one idled non-core facility in its Safety segment containing 240 beds with a net book value of $2.9 million, and four idled facilities in its Community segment, containing an aggregate of 740 beds with an aggregate net book value of $13.5 million. CoreCivic incurred approximately $2.0 million in operating expenses at all of these idled facilities for the period they were idle during both the three months ended September 30, 2021 and 2020. CoreCivic incurred approximately $6.0 million and $5.7 million in operating expenses at all of these idled facilities for the period they were idle during the nine months ended September 30, 2021 and 2020, respectively. Two of the four idled facilities in the CoreCivic Community segment are located in Oklahoma. As a result of the lower resident populations from the state of Oklahoma because of the novel coronavirus and related variants ("COVID-19"), CoreCivic 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. CoreCivic reactivated the Turley Residential Center during the first quarter of 2021 pursuant to a new contract awarded from the United States Federal Bureau of Prisons ("BOP") during the fourth quarter of 2020 for residential reentry and home confinement services to be provided in the state of Oklahoma, and provides the BOP additional reentry services at the Company's owned and operated Oklahoma Reentry Opportunity Center, which supplements the existing utilization by the state of Oklahoma, pursuant to this new contract. During April 2021, as a result of lower resident populations from Denver County because of COVID-19, CoreCivic transferred the resident populations at its 90-bed Ulster Facility in Colorado to its Dahlia Facility in Colorado, idling the Ulster Facility. The fourth idle facility in the Community segment, the 60-bed Columbine Facility located in Colorado, was idled in the second quarter of 2020. CoreCivic had a direct contract with the United States Marshals Service to care for detainees at the Company's 600-bed West Tennessee Detention Facility that expired on September 30, 2021 and was not renewed. CoreCivic has been actively marketing the facility to other government agencies, and in August 2021, submitted a formal response to a government agency's request for proposal to utilize the West Tennessee facility. The Company can provide no assurance that it will be successful in entering into a new contract with the government agency. As of September 30, 2021, the West Tennessee facility had a net book value of $20.7 million. CoreCivic evaluates on a quarterly basis market developments for the potential utilization of each of its idle properties in order to identify events that may cause CoreCivic to reconsider its assumptions with respect to the recoverability of book values as compared to undiscounted cash flows. CoreCivic considers the cancellation of a contract in its Safety or Community segment or an expiration and non-renewal of a lease agreement in its CoreCivic Properties segment as indicators 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. Impairments In February 2021, CoreCivic entered into two 30-year lease agreements with the Alabama Department of Corrections ("ADOC") for the development of two correctional facilities in Alabama, which were subject to the successful completion of financing the Company was pursuing on behalf of the state of Alabama. Pursuant to the terms of the leases, ADOC staff would have operated both facilities, and CoreCivic would have retained ownership of the facilities and been responsible for facility maintenance throughout the term of the leases. In the third quarter of 2021, CoreCivic received notice from the state of Alabama of its decision to terminate the leases effective August 6, 2021 so that the State could pursue financing approval through the Alabama Legislature, and utilize COVID-19 relief funds potentially available to the State for prison construction. As a result of the lease terminations, during the third quarter of 2021, CoreCivic reported asset impairment charges of $5.2 million for pre-development activities.

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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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