IGR - Prison REITs: The End Is Here

• Get Woke, Go Broke? Prison REITs - arguably the "darkest corner" of the REIT sector - have been punished by ever-intensifying political hostilities and declining prison populations across the country.
• Last week, GEO Group joined CoreCivic in eliminating its dividend and "evaluating its structure as a REIT." Having been effectively "canceled" by public capital markets, privatization appears increasingly likely.
• Consistent with his campaign platform, President Biden signed an Executive Order prohibiting the renewal of federal contracts with private detention facilities. Federal contracts account for roughly half of industry revenues.
• Political hostilities aside, demand for private facilities - which have always been a "supplier of last resort" - has declined materially as incarceration rates in the U.S. revert towards the developed market average.
• While many federal facilities will be vacated, most state facilities will remain "essential" infrastructure. There's a price for everything, and we suspect that a private acquirer will see value and eventually hit the bid.

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