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REAL ESTATE TRANSACTIONS | 12 Months Ended
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Dec. 31, 2021
REAL ESTATE TRANSACTIONS |
6. | REAL ESTATE TRANSACTIONS
Acquisitions, Dispositions, and Assets Held for Sale 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. CoreCivic disposed this property in 2021, as further described hereafter. 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 gain (loss) 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, 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 were 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. 2021 Dispositions. 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. Assets Held for Sale. As of December 31, 2021, CoreCivic had two facilities in its CoreCivic Community segment held for sale. The aggregate carrying value of the property and equipment of these two facilities, amounting to $7.0 million, was reflected as assets held for sale on the Company's consolidated balance sheet as of December 31, 2021. The Company subsequently closed on the sale of one of these two facilities in February 2022 and expects to close on the sale of the second facility in March 2022. 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, were reflected as assets held for sale on the Company's consolidated balance sheet as of December 31, 2020. The Company subsequently closed on the sale of these three properties in 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 replaced 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, 2021 and 2020, the financing receivable was $145.0 million and $147.5 million, respectively, recognized in Other Assets on the consolidated balance sheet. During 2021 and 2020, the Lansing Correctional Facility generated $4.5 million and $2.6 million, respectively, of revenue associated with the non-lease services components of the arrangement, and $8.8 million and $8.4 million of interest income, respectively. Idle Facilities As of December 31, 2021, CoreCivic had six 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 |  | 2021 |  |  | 2020 |
Prairie Correctional Facility |  | $ | 14,416 |  |  | $ | 14,646 |
Huerfano County Correctional Center |  |  | 15,230 |  |  |  | 15,895 |
Diamondback Correctional Facility |  |  | 36,917 |  |  |  | 38,346 |
Marion Adjustment Center |  |  | 10,743 |  |  |  | 11,047 |
Kit Carson Correctional Center |  |  | 50,950 |  |  |  | 52,757 |
West Tennessee Detention Facility |  |  | 20,622 |  |  |  | 20,842 |
|  | $ | 148,878 |  |  | $ | 153,533 |
As of December 31, 2021, 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, and four idled facilities in its Community segment, containing an aggregate of 740 beds with an aggregate net book value of $11.4 million, one of which is a community facility classified as held for sale as described herein. CoreCivic incurred operating expenses at these idled facilities of approximately $8.0 million, $7.4 million, and $7.1 million during the period they were idle for the years ended December 31, 2021, 2020, and 2019, respectively. The 2021 amount excludes the expenses incurred at the West Tennessee Detention Facility during the fourth quarter of 2021. As more fully described hereafter, the West Tennessee facility was idled upon the expiration of a USMS contract on September 30, 2021. However, CoreCivic has retained a certain staffing level at the facility in order to quickly respond should the Company enter into a new contract with a government agency in the near-term. 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 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, which is now under an agreement to be sold as further described hereafter. 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 USMS 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. As of December 31, 2021, the West Tennessee facility had a net book value of $20.6 million. CoreCivic had a direct contract with the USMS to care for detainees at its 1,033-bed Leavenworth Detention Center that expired on December 31, 2021 and was not renewed. The Company has been actively marketing the facility and is currently in discussions with, and has submitted proposals to, other potential government partners to utilize the Leavenworth facility. As of December 31, 2021, the Leavenworth facility had a net book value of $54.2 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. The Company estimated undiscounted cash flows for each facility with an impairment indicator, including the idle facilities described above. The Company’s estimated undiscounted cash flows reflect the Company’s most recent expectations around potential utilization of the facilities and projected cash flows based on historical cash flows, cash flows of comparable facilities, and recent contract negotiations for utilization. The Company concluded that the estimated undiscounted cash flows exceeded carrying values for each facility as of December 31, 2021. Other Real Estate Impairments During the fourth quarter of 2021, CoreCivic entered into separate purchase and sale agreements for its 120-bed Fox Facility and Training Center and its idle 90-bed Ulster Facility, two residential reentry facilities in the Community segment. The two facilities are located in Denver, Colorado and have recently been under-utilized by Denver County. CoreCivic concluded the sale of these two properties met the criteria for classification as assets held for sale as of December 31, 2021, requiring the properties to be valued at the lower of current carrying value or fair value less costs to sell. The aggregate gross sales price of the two properties is expected to be $9.9 million, resulting in a gain on sale of approximately $2.0 million to be recognized upon completion of the sales expected to occur in the first quarter of 2022, after recognizing an impairment in the fourth quarter of 2021 of $2.0 million for one of the facilities to reflect the lower fair value less costs to sell upon its recognition as an asset held for sale. 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 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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