CoreCivic (CXW) approved plan to revoke its REIT election

CoreCivic, Inc. (NYSE: CXW) (the Company) announced today that its Board of Directors has unanimously approved a plan to revoke its Real Estate Investment Trust (REIT) election and become a taxable C corporation, effective January 1, 2021. The decision is the result of an evaluation of corporate structure and capital allocation alternatives announced on June 17, 2020.

Additionally, the Board voted unanimously to discontinue the Company's quarterly dividend and prioritize allocating the Company's substantial free cash flow to debt reduction, with a target total leverage ratio of 2.25x to 2.75x, excluding project specific non-recourse debt. Following our first priority of debt reduction, we expect to allocate a substantial portion of our free cash flow to returning capital to shareholders, which could include share repurchases and future payments of dividends. We will also pursue attractive growth opportunities, including new development opportunities in our Properties segment to meet the need to modernize outdated correctional infrastructure across the country, focus efforts on optimizing utilization of existing bed capacity in our Safety segment, and evaluate additional opportunities to provide services in our Community segment that have not been available under the REIT structure. We also intend to capitalize on opportunities to increase our investment in programs and services that expand the leadership role we play in addressing the most pressing issues facing America's criminal justice system. Beyond the operating cash flow we generate from our business, we also plan to evaluate the sale of up to $150 million in net proceeds of lower yielding non-core real estate assets in our Properties segment, which would allow us to accelerate the implementation of our revised capital allocation strategy.

“CoreCivic will have much greater flexibility to allocate our substantial free cash flow in a manner that serves the best interests of our shareholders, our business, our government partners, and the people and communities we together serve,” said Damon T. Hininger, CoreCivic's President and Chief Executive Officer. “We believe our revised structure and strategy, combined with a resilient core business, will result in significantly more liquidity, a stronger balance sheet and lower cost of capital, which will enable us to reduce our reliance on the capital markets. Each day our employees work tirelessly to implement life-changing programs for the people entrusted to our care. We’re excited about the opportunity to create value for our shareholders while growing in even more ways that help those in our care succeed with the next step in their lives.”

The Company will continue to operate as a REIT for the remainder of the 2020 tax year, and existing REIT requirements and limitations, including those established by the Company’s organizational documents, will remain in place until January 1, 2021.

CoreCivic engaged Moelis & Company as financial advisor and Bass, Berry & Sims PLC and Latham & Watkins, LLP as legal advisors to assist in the process.

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