GEO Group sells Adelanto ICE detention complex to DHS for $950 million

GEO Group has sold its three-property immigration detention complex in Adelanto, California, to the Department of Homeland Security for $950 million, according to Commercial Observer, and under its existing contract with U.S. Immigration and Customs Enforcement it will keep providing support services at all three facilities. The sale leaves GEO operating what it used to own.

Across the complex, 2,644 beds change hands at roughly $359,000 apiece, as DHS acquired the 1,280-bed and 660-bed ICE processing centers plus the 704-bed Desert View Annex in San Bernardino County. GEO, based in Boca Raton, expects to net about $705 million after taxes, transaction fees and other expenses, leaving roughly $245 million of the $950 million price behind. Proceeds, along with operating cash flow, will go to debt reduction, share repurchases and general corporate purposes, and the board raised the buyback authorization by $750 million, to $1.25 billion through the end of 2029, from $500 million previously.

The support-services contract is what GEO kept. It runs through December 2029, with a five-year option to December 2034, and the company says it is in discussions to sell multiple other company-owned facilities to ICE on the same model, with GEO managing the properties under long-term contracts. It is a trade of owned real estate for contracted services, the direction health systems have already taken with their own infrastructure, which moved onto the operating line once they stopped treating the spending as an investment.

DHS and ICE have been expanding their real estate footprint, and Commercial Observer reported earlier this year that the agencies were negotiating office leases alongside acquisitions and leases of large detention uses. GEO owns or provides services at 97 facilities totaling about 76,000 beds worldwide, so the company has a substantial pool of properties to which the same model could be extended.

After closing, the same government is both landlord and customer: the buildings on its ledger, the labor on GEO's. What remains of GEO's revenue at Adelanto rests on a contract expiring in December 2029 and an option reaching to December 2034, five years past the point where the real estate stopped being the company's problem. The facilities GEO says it is discussing will show whether this is a one-off or a program; each one would trade more of the balance sheet for more of the contract.