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NEWARK-Correctional Properties Trust, a REIT, has acquired Delaney Hall, a 726-bed minimum security correctional facility here, paying “approximately $21 million” for the asset. The seller was the Roseland, NJ-based Community Education Centers, which will continue to operate it under the terms of a 10-year triple-net lease, as well as under separate operating agreements with Essex and Union counties in New Jersey and the state’s Department of Corrections.

CEC’s lease starts at an initial rate of 11%, with 3% fixed annual increases. Under generally accepted accounting principles, the lease revenue will be recognized at a straight-line rate of 12.61%. The Palm Beach Gardens, FL-based CPT, meanwhile, completed with deal with cash on hand plus $17 million drawn under its bank credit facility at a current interest rate of LIBOR plus 200 basis points.

“The sale and leaseback of Delaney Hall is an important step toward providing capital to fund our continued growth,” according to John J. Clancy, founder, president and CEO of CEC. His company opened the facility, which is located adjacent to the newly constructed Essex County Jail, in early 2002.

“Completing this transaction is significant for several reasons,” adds CPT president and CEO Charles R. Jones. “Not only does the acquisition add an important new dimension to our portfolio from a lessee and geographical perspective, it also establishes a valuable relationship with Community Education Centers, a high-growth provider of correctional services.”

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