Prison REIT Expands Strategy

PALM BEACH GARDENS, FL-Correctional Properties Trust, the locally based REIT formed to capitalize on the trend to privatization of corrections facilities, plans to expand its scope to mental health and higher education properties. The two additional areas of government real estate operate on the same model as prisons, explained Charles R. Jones, president and CEO, during a second-quarter earnings conference call, and they, too, are within the trend to government-pursued privatization at the federal, state and local levels, he said.

Jones did not disclose any specific facilities and locations, but said, “CPT will invest in business development in these areas.” He also said that within the correctional facilities’ sector, he sees additional opportunities in “privately owned smaller properties.” Typically, CPT acquires correctional facilities and leases them back long term.

It has begun development of a 600-bed addition to its prison in Lawton, OK. The $23-million expansion also includes renovation of the kitchen and other areas to accommodate the expanded occupancy. Comparing this to a stand-alone build-to-suit, Jones said CPT obtained “an extended lease for 10 years after completion.” The Lawton addition, he added, “is expected to have a positive impact on our 2006 revenues.”

CPT’s second-quarter net income fell slightly to $4.5 million, compared with $4.6 million for the same quarter of 2004. This year’s second-quarter revenue rose to $7 million, an increase from $6.8 million for the same quarter a year ago. CPT currently owns 12 correctional facilities in nine states with an aggregate design capacity of 7,156 beds.