The GEO Group sold three immigration detention facilities in Adelanto, Calif., to the federal government for $950 million and plans to put part of the money toward buying back stock, the company said Monday.
The Department of Homeland Security, which oversees U.S. Immigration and Customs Enforcement, bought the 1,280-bed Adelanto West ICE Processing Center, the 660-bed Adelanto East ICE Processing Center, and the 704-bed Desert View Annex.
Together, the three hold 2,644 beds and about 501,767 square feet of building space, according to the purchase agreement GEO filed Monday with the Securities and Exchange Commission. The sale closed Oct. 2, when the two sides signed the agreement.
CBRE, the world’s largest commercial real estate services firm by revenue, was the only broker GEO worked with on the sale, the agreement says.
GEO said it expects to net about $705 million after federal and state taxes, fees, and other costs. The Boca Raton, Fla.-based company said it will use that money, along with cash from its operations, to pay down debt, buy back shares of its common stock, and cover other general business needs.
In the same announcement, GEO said its board of directors had raised the company’s stock repurchase authorization by $750 million, to $1.25 billion. The authorization runs through Dec. 31, 2029, and does not require the company to buy any particular amount of stock.
A buyback reduces the number of shares in circulation, which can raise the value of each remaining share and the per-share earnings that investors watch.
The $750 million increase is about $45 million more than the roughly $705 million GEO expects to net from the sale.
George Zoley, GEO’s chairman, chief executive officer, and founder, said in a statement that the company is focused on using its capital to “enhance long-term value for shareholders, including through share repurchases.”
Under its existing contract with ICE, GEO will keep providing what it calls support services at all three facilities. The current term ends Dec. 19, 2029, and a five-year option could extend it to Dec. 19, 2034.
More sales may follow. In its SEC filing Monday, the company said it is in active talks to sell several other facilities it owns to ICE, though any deal depends on the two sides agreeing on a price and on GEO continuing to run those facilities under long-term contracts. GEO said no other agreements are currently in place.
CoreCivic, another for-profit detention company that contracts with ICE, used a similar model this summer.
On July 2, CoreCivic sold the California City Detention Facility and the Otay Mesa Detention Center in California to DHS for a combined $1.5 billion.
Two more facilities followed in August, when CoreCivic sold the Midwest Regional Reception Center in Leavenworth, Kan., and the Prairie Correctional Facility in Appleton, Minn., to DHS for a combined $734 million.
CoreCivic’s purchase agreements, filed with the SEC, also name CBRE as the broker. They say CoreCivic alone was responsible for paying CBRE’s commission under a separate agreement.
The government took ownership in each sale, and the seller kept running the facilities under contracts with ICE.
On Aug. 4, about a month after its California sales closed, CoreCivic’s board raised the company’s share repurchase authorization by $500 million, to $1.2 billion.
Six days later, on Aug. 10, CoreCivic entered a $500 million accelerated share repurchase agreement with a financial institution.
In that kind of deal, a company pays a bank the full amount up front and receives an initial batch of shares right away, with the rest settled later.
The company said it would pay the full $500 million that day and expected to receive about 12.4 million shares at the start.
GEO’s announcement did not include a deal of that kind. Instead, GEO said repurchases may be made over time, including on the open market, at management’s discretion.