A Prison REIT That’s Poised To Profit

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Summary

  • The push to expand detention space shows how the Trump administration is not solely focused on undocumented immigrants crossing the southwest border with Mexico.
  • The most likely candidates to land any new contracts are the two prison REITs that have dominated the market and donated heavily to Trump.
  • We are maintaining a BUY and of course, we believe that investors can profit from this prison REIT.

“Abolish ICE” has become the new rallying cry of the left, which is trying to turn the fury Americans are feeling about the horrors at the Mexican border on the little-understood agency known as U.S. Immigration and Customs Enforcement.

ICE was created in 2003 as part of a government reorganization that took place in the wake of 9/11 and part of its role in the new Department of Homeland Security was to run enforcement of immigration law in the interior, combining some of the functions of the old Immigration and Naturalization Service and the U.S. Customs Service. Washington Post columnist, Karen Tumulty explains

“There are fair criticisms that ICE has become unwieldy and that its reputation sometimes interferes with its ability to do its job. Detention and deportation, which grew sharply under President Barack Obama, have also become more common since ICE’s creation.

But ICE is not responsible for what we’ve seen at the border in the past few months, particularly the heinous practice of separating parents from their children.”

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It’s the U.S. Customs and Border Protection agency that manages access to the U.S. borders and ICE is responsible for enforcing immigration laws within the country. ICE also engages in anti-smuggling efforts, money laundering investigations and arresting criminal illegal aliens.

Jason Nichols writes this opinion on Fox:

“While abolition of ICE has been the recent rallying cry for some, the better description of what’s needed for ICE is restructuring. We want ICE or whatever comes after it to protect us from cyber criminals, human traffickers, gunrunners, and international drug cartels – not farm workers, day laborers, college students and children.”

According to Carl Takei, a staff attorney with the ACLU’s National Prison Project:

“The Obama administration focused heavily on apprehending people on the border, but the Trump administration is targeting people in U.S. communities very far from the border. And because they are targeting cities far from the border, they are looking for detention space in areas where historically they haven’t had as much detention space.”

He went on to say:

“To me, this is a signal that ICE wants to be ready, pen in hand, to sign new detention contracts as soon as Congress appropriates more money for detention.”

The push to expand detention space shows how the Trump administration is not solely focused on undocumented immigrants crossing the southwest border with Mexico. Last Fall ICE conducted a nationwide sweep dubbed “Operation Safe City” that resulted in more than 450 arrests of people living in Baltimore, Chicago, Denver, New York, Philadelphia, Seattle, Washington, D.C. and Massachusetts.

The most likely candidates to land any new contracts are the two prison REITs that have dominated the market and donated heavily to Trump. According to USA Today:

“Florida-based GEO Group donated at least $475,000 to Trump’s inauguration festivities and a Super PAC that supported Trump’s presidential campaign. Tennessee-based CoreCivic, the other major private prison contractor in the U.S., gave $250,000 to support Trump’s inauguration.”

The federal government announced that it had awarded a $457 million contract to GEO Group (GEO) to build and operate the 1,000-bed immigration detention center outside of Houston. According to this Seeking Alpha article:

“GEO expects to aggregate everything under a 10-year contract with ICE, inclusive of renewal option periods. The project is expected to generate around $44 million in annual revenues, a return on investment consistent with GEO’s other company-owned facilities. Over the ten-year length of this contract, GEO will be booking $440 million of additional revenue.”

During 2017, GEO continued to expand its portfolio of diversified correctional, detention, and community reentry facilities and services by activating a company-owned, 780-bed Folkston ICE Processing Center during the first quarter under a five-year intergovernmental service agreement between Charlton County, Georgia and U.S. Immigration and ICE.

This facility activation was followed by a ten-year contract award from ICE for the development and operation of a new 1,000-bed ICE Processing Center in Montgomery County, Texas. The new company-owned center is scheduled for activation in Q3-18. As George C. Zoley, CEO of GEO explains:

“We are proud of our extensive record of helping meet ICE’s needs with facilities that are highly rated and provide high-quality, cost effective services in safe, secure, and humane residential environments.”

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