CoreCivic Inc., a diversified real estate investment trust and the country’s largest private owner of real estate used by U.S. government agencies, recently acquired a 540,566-square-foot Social Security Administration office building in Baltimore, MD. The total purchase price was $242 million, excluding transaction costs and certain closing credits.
Located at 6100 Wabash Avenue, SSA–Baltimore was purpose built to SSA specifications in 2014 under a 20-year firm term lease expiring in January 2034, which is backed by the full faith and credit of the U.S. government through the General Services Administration (GSA). SSA–Baltimore serves approximately 2,000 SSA employees, is located less than five miles from SSA’s federally owned headquarters in Woodlawn, and is the newest of several other properties occupied by the SSA in Baltimore, which we believe further strengthens the durability of the lease.
In connection with the acquisition, CoreCivic has assumed $157.3 million of in-place financing that was used to fund the initial construction of the property in 2014. The assumed debt carries a fixed interest rate of 4.50% and requires monthly principal and interest payments, with a balloon payment of $40 million due at maturity in February 2034. The remaining purchase price was funded utilizing liquidity available from the company’s revolving credit facility. The REIT expects this acquisition to contribute $0.01 to $0.02 of Funds From Operations per share in 2018.
The SSA–Baltimore property, which was constructed to attain both LEED Silver and Energy Star certifications and has a Level IV U.S. federal building security classification, consists of a main office building made up of two arcing segments with a central arcing atrium. The taller of the two segments is seven levels and the shorter is five levels. The site also contains a seven-level precast concrete parking structure, administrative court space and a single level stand-alone SSA field office facility. On-site amenities include a fitness center, a cafeteria and a convenience store.
“We are excited to announce this acquisition as we continue to execute our acquisition strategy to expand our portfolio of government-leased real estate assets,” said Damon Hininger, CoreCivic’s President and Chief Executive Officer. “SSA–Baltimore is a critical component of SSA’s Central Office operations, and provides us with accretive growth and diversification.”
Hininger continued, “The acquisition of SSA–Baltimore expands our CoreCivic Properties portfolio by approximately 36% on a rentable square foot basis. CoreCivic Properties is a rapidly growing business segment that leverages our 35 years of expertise in developing and maintaining real estate solutions for all levels of government, and following this acquisition, this business segment is expected to generate approximately 10% of the Company’s facility net operating income on an annualized basis. The leases in the CoreCivic Properties segment produce predictable cash flows from high credit quality government tenants, while generating attractive risk adjusted returns. We believe our current government leased real estate portfolio, coupled with our ongoing acquisitions strategy, will continue to create long term value for our shareholders.”
The SSA is a cabinet-level federal agency responsible for administering social security, the largest social welfare program in the United States, providing support to more than 60 million beneficiaries. The SSA employs approximately 60,000 people and has an annual operating budget exceeding $1.0 trillion.
Including the acquisition announced today, the company owns 26 properties representing nearly 2.1 million square feet of real estate within its CoreCivic Properties portfolio, all used by government agencies. This portfolio complements the Company’s portfolio of 44 correctional and detention facilities within its CoreCivic Safety segment and 26 residential reentry centers within its CoreCivic Community segment, with an aggregate design capacity of approximately 69,000 beds and 13.6 million square feet of real estate. The company also manages seven correctional facilities it does not own, with a design capacity of approximately 9,000 beds and 1.7 million square feet of real estate.