The US government has spent nearly US$1.5 billion to acquire two Californian detention facilities from prison operator CoreCivic. This transaction marks one of the largest real estate deals related to the expansion of immigration enforcement under the Trump administration.
The US Department of Homeland Security (DHS) acquired the 1,994-bed Otay Mesa Detention Centre in the greater San Diego area for US$739.2 million. Additionally, it purchased the 2,560-bed California City Detention Facility in Kern County, north of Los Angeles, for US$732.6 million. CoreCivic announced these details. The deals closed on 2nd July.
Strategic Realignment in Acquisitions
CoreCivic expects to continue managing both detention facilities under contracts with US Immigration and Customs Enforcement (ICE), although these agreements can be terminated by the agency. The management contract for California City runs until August 2027, while the agreement for Otay Mesa is valid until December 2029.
These transactions represent a slight strategic shift for the DHS. Earlier this year, according to CoStar News, the DHS had spent more than US$1 billion to acquire approximately 7.6 million square feet of warehouse space to convert into detention facilities in eight states, rather than purchasing existing detention facilities.
Audits and Potential Further Sales
The DHS's initial industrial real estate deals attracted increased scrutiny: the DHS Office of Inspector General initiated an audit in May to assess whether the acquisitions represented a cost-effective use of taxpayer money. The New York Times reported the previous month that ICE was considering selling some of these warehouse properties.
- —CoreCivic signalled that further sales might be possible after the recent deals in California.
- —The company is in discussions with ICE regarding the potential sale of additional detention facilities from its national portfolio.
- —CoreCivic's portfolio includes 45 correctional facilities and management contracts for nine additional facilities.
- —However, CoreCivic emphasised that the conclusion of further deals is not guaranteed.
