The GEO Group, Inc. (NYSE: GEO)
("GEO") today announced that on December 31, 2012, it completed all the necessary restructuring steps, including the previously announced divestiture of its health care assets, enabling GEO to operate in compliance with the real estate investment trust ("REIT") rules of the Internal Revenue Code (the "REIT rules") beginning January 1, 2013.
George C. Zoley, GEO's Chairman, CEO and Founder, said, “We are very pleased with the completion of all the necessary restructuring steps for GEO to operate as a REIT effective January 1, 2013. We were able to complete our corporate restructuring and the divestiture of our health care facility management contracts within our previously guided timelines, so that our shareholders can begin enjoying the benefits of REIT status as soon as possible. Our Board and our management team strongly believe that these important steps will maximize our company's ability to create shareholder value given the nature of our assets, help lower our cost of capital, draw a larger base of potential shareholders, provide greater flexibility to pursue growth opportunities, and create a more efficient operating structure.”
GEO reorganized its operations into separate legal wholly-owned operating business units through a taxable REIT subsidiary (“TRS”). Through the TRS structure, a small portion of GEO’s businesses, which are non-real estate related, such as GEO’s managed-only contracts, international operations, electronic monitoring services, and other non-residential facilities, are part of wholly-owned taxable subsidiaries of the REIT, while most of GEO’s business segments, which are real estate related and involve company-owned and company-leased facilities, are part of the REIT. The TRS structure allows GEO to maintain the strategic alignment of almost all of its diversified business segments under one entity.
Applicable REIT rules substantially restrict the ability of REITs to directly or indirectly operate or manage health care facilities. As a result, in order to achieve and preserve REIT status effective January 1, 2013, GEO completed the divestiture of all of its health care facility management contracts. Under its previously wholly-owned subsidiary, GEO Care, Inc., GEO held six managed-only health care facility contracts, totaling 1,970 beds, and provided correctional mental health services for the Palm Beach County, Florida jail system as well as correctional health care services in publicly-operated prisons in the State of Victoria, Australia. These contracts and services (collectively, the "GEO Care Business") generated approximately $165 million in annualized revenues.