In America any asset class can be securitised and this latest transaction is no exception. Correctional centre manager, the GEO Group, which operates private detention centres in Australia and globally has made a $US356.1 million bid for CentraCore Properties Trust, a correctional real estate investment trust in the United States.
CPT currently owns 13 correctional facilities totaling 8,071 beds, of which 11 facilities totaling 6,945 beds are currently leased to GEO under sale-lease back agreements.
In addition, CPT owns the 400-bed Mesa Verde Correctional Facility, which is leased to Cornell Companies and the 726-bed Delaney Hall, which is leased to Community Education Centers.
Under the terms of the definitive agreement approved by the boards of directors of both GEO and CPT, shareholders of CPT will receive $US32 cash per common share and GEO will refinance CPT’s debt at closing which is estimated to be $US40 million.
GEO currently operates six centres in Australia, including one in Queensland with the Arthur Gorrie centre in Wacol.
The group also operates four centres in Victoria, including the Fulham centre in West Sale; the Melbourne Custody Centre 520 Lonsdale Street, Melbourne CBD, the Nalu Challenge Community centre in Fulham, West Sale and the Pacific Shores Healthcarecore in Maidstone.
In New South Wales, GEO operates the Junee centre in Junee.
"We are pleased with our proposed acquisition of CentraCore Properties Trust,” GEO’s chief executive George Zoley said.
“This acquisition eliminates any uncertainty related to GEO’s control and utilization of these important assets, while at the same time significantly reducing our exposure to escalating facility use costs in the future
“Strategically, the acquisition gives GEO the critical advantage of having ultimate control and ownership of these facilities,” he added.
Following the acquisition of CPT, GEO’s owned facilities will increase from four to 15 out of 62 worldwide facilities under GEO management or under development.
GEO plans to finance the acquisition of CPT including fees and expenses through the use of $57 million in cash and $360 million in debt to be arranged by BNP Paribas.
The Lehman Brothers acted as GEO’s financial adviser and Akerman Senterfitt served as GEO’s legal advisor.
The parties except expect to conclude the transaction by late 2006 or early 2007.
The transaction is subject to the approval of CPT’s shareholders and federal regulatory agencies, and other customary conditions, but it is not subject to financing contingencies.
By Kathryn O’Meara
