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CoreCivic, Inc. (NYSE:CXW)
Q4 2020 Earnings Call
Feb 11, 2021, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is David. And I'll be your conference operator. [Operator Instructions] At this time, I'd like to welcome you to CoreCivic's Q4 2020 and Year-End Results Conference Call. [Operator Instructions] After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]

I would now like to turn the call over to Cameron Hopewell, CoreCivic's Managing Director of Investor Relations. Mr. Hopewell, you may begin your conference.

Cameron Hopewell -- Managing Director of Investor Relations

Thanks, David. Good morning, ladies and gentlemen, and thank you for joining us. Participating on today's call are Damon Hininger, President and Chief Executive Officer and David Garfinkle, Chief Financial Officer. We are also joined here in the room by our Vice President of Finance, Brian Hammonds.

The call today will focus on our financial results for the fourth quarter, provide general business updates and an overview of the evolving impacts of the COVID-19 pandemic. During today's call, our remarks, including our answers to your questions, will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities and Litigation Reform Act.

Our actual results or trends may differ materially as a result of a variety of factors, including those identified in our fourth quarter 2020 earnings release issued after market yesterday and in our SEC filings, including Forms 10-K, 10-Q and 8-K reports. You are also cautioned that any forward-looking statements reflect management's current views only and that the company undertakes no obligation to revise or update such statements in the future.

On this call, we will also discuss certain non-GAAP measures. A reconciliation of the most comparable GAAP measurement is provided in our corresponding earnings release and included in the supplemental financial data disclosure on the Investors page of our website corecivic.com.

With that, it's my pleasure to turn the call over to our President and CEO, Damon Hininger. Damon?

Damon T. Hininger -- President and Chief Executive Officer

Thank you, Cameron. Good morning, everyone, and thank you for joining us today for our fourth quarter 2020 conference call. Today, we will provide you with an overview of our fourth quarter financial performance, update you on our continued response to the COVID-19 pandemic, discuss business develop opportunities, discuss also last month's executive order impacting the Department of Justice use of private facilities, update you on the potential sale of certain non-correctional real estate assets in our property segment, and provide you with an updated strategic overlook for the new year. Following my remarks, I will turn the call over to our CFO, Dave Garfinkle, who will review our financial results in greater detail.

Our fourth quarter revenue of $473.5 million represented a 5% decline over the prior year quarter, due to continued impact of the COVID-19 pandemic on occupancy within our safety and community segments. However, occupancy rates in the fourth quarter appeared to have stabilized versus the more significant declines we experienced in the second and third quarters of 2020.

In the fourth quarter the occupancy rates across our safety and community segment increased by 70 basis points versus the third quarter of 2020. Normalized funds from operations or FFO for the fourth quarter were $0.63 per share, an increase of 7%, compared with the fourth quarter of 2019.

Our earnings growth was driven by a combination of new contract awards that were initiated within the last 12-months, and lower G&A expenses, which helped to offset the reduction in occupancy we experienced as a result of the global pandemic, particularly lower utilization at our facilities under contract with Immigration and Customs Enforcement. Dave will provide you with greater details about our fourth quarter financial results following the remainder of my comments.

I'd like to provide a brief update on our ongoing response to the COVID-19 pandemic and its impact on our day-to-day operations. While it has been nearly a year since the onset of the pandemic, we continue to focus our daily efforts on working collaboratively with our government partners on our operational plans as guidelines from leading health experts have continued to evolve. Throughout the year, we work tirelessly to ensure our operation policies adhere to the latest guidance from health experts. Our facility staff and residents had access to clinically effective personal protective equipment, and everyone in our facilities receive the proper training and advice to help mitigate the risk of contracting and spreading the virus. These efforts continued unabated.

Recently, many of our facilities began receiving shipments of the vaccine from state and local health departments, is that the discretion of these state and local health authorities how to allocate the vaccine they received, and each community where we operate has unique differences in the process of developing their vaccine rollout plan. We've made every effort to evaluate these plans and to collaborate with state and local authorities to ensure our staff and residents are appropriately prioritized.

In many cases, our frontline healthcare personnel were included in the early distribution phase, as were many of our other facility level staff. In most cases, the individuals entrusting our care have also been prioritized by public health officials. The availability of vaccines continues to be inconsistent, and that is where we are -- what we are seeing across our facilities. But it is clear that over the next few months, there will be a significant increase in availability. In every case, as soon as we have access to the vaccine, we have the medical resources in place to quickly administer doses to our facility staff and residents in alignment with the prioritization directives of low 40s [Phonetic]. We are committed to working closely with our government partners and local health officials to ensure everyone in our facilities has access to the vaccine as it comes available.

During the fourth quarter, we continue to see a decline in positive cases within our facilities, similar to the trend we experienced in the third quarter. This trend has been consistent across our facilities, and we believe it is evidence that the operational policies we've put in place in response to COVID-19 are effective. We expect that new challenges in mitigating the risk of virus transmission will arise our facility operations begin to normalize, such as in-person visitation, classroom-based programming, and increased resident movement in and out of facilities, all of which will increase person to person interactions. However, we are working closely with our government partners to thoughtfully enact these changes over time in order to maintain the best possible measures of prevention. And I emphasize these changes will occur over time, we are still operating in a pandemic environment.

I am encouraged by the recent trend of decline in the number of positive cases and hospitalizations across the country. I am even more encouraged by the compassion and commitment our employees have shown to keep each other and individuals in our care, in what has proven to be one of the most challenging years we could have expected to face. While our work related to the pandemic continues, I am confident that our team at CoreCivic is dedicated to meeting the challenge.

While so much of our attention over the last year is focused on responding to COVID-19, correctional systems around the country continue to face many other non-pandemic related challenges that have resulted in new opportunity for CoreCivic to help provide solutions. Just last week, the State of Alabama awarded us two new 30-year lease agreements for the development of two correctional facilities. Construction of both facilities will contain an aggregate of approximately 7,000 beds, and represent two of the largest development projects in our company's history. The pricing of these leases will be finalized upon the close of project specific financing, and the construction timeline facilities will be approximately three years. So it is too early to speak to the financial impact of the leases.

However, we are very grateful to have the opportunity to help the State of Alabama address such a critical challenge. Upon signing the two new lease agreements, the governor of Alabama expressed the serious infrastructure concerns the state faces in their correction system, including dilapidated facilities, significant deferred maintenance cost and a risk of federal court intervention. That conditions not only inhibit the health and safety employees and residents of a facility, but they also create additional roadblocks to receiving critical rehabilitative programming and services to help put people on the road to successful reentry society. We look forward to helping the state address these serious challenges through our innovative real estate solutions.

The solutions we offer continue to resonate with more and more government agencies that are facing serious challenges with their correctional infrastructure. Just two weeks ago, the State of Hawaii issued a request for interest concerning the planned development of a new Oahu Community Correctional Center, the largest jail facility in the State of Hawaii. The existing facility has exceeded its useful life and the state is in need of a new, modern facility to meet its current and future needs. This is only the beginning of the process it typically takes multiple years. However, Hawaii joined Kansas and Alabama in recognizing the value and working with the private sector to deliver a critically needed upgrade to their correctional infrastructure.

We delivered the industry's first solution of this kind to Kansas just last year, and we see growing momentum across the country for these solutions. It presents a promising opportunity for future growth. But we're also helping address serious challenges that will improve the health and safety for employees and inmates within existing facilities, operating beyond their useful life.

As you can see, we clearly have significant opportunities for growth and we believe our ability to deliver flexible solutions to meet the unique needs of our government partners will continue to resonate in the market. Add to that, the historic durability of our cash flows and it is clear that we are well-positioned to continue to respond to the challenge and ease of our government partners and deliver on a capital allocation strategy of reducing leverage.

In the fourth quarter, our total debt declined $297 million, or approximately $128 million net of the change in our cash balance. This was achieved through a mix of cash flow generation throughout the quarter and the sale of a 42 property portfolio of GSA leased assets in December.

Our total leverage ratio for the quarter was 3.5 times, a half turn reduction from the prior year's fourth quarter. We continue to target a total leverage ratio of 2.25 times to 2.75 times. This year, we intend to continue to deliver on our debt reduction strategy through positive cash flow generation, and net proceeds generated by the sale of additional non-core real estate assets within our property segment.

Last month, an executive order signed by President Biden directly the Attorney General not to renew Department of Justice contracts with privately operated criminal detention facilities. Two agencies of Department Justice utilized our services, the Federal Bureau of Prisons or BOP and the United States Marshal Service or USMS. The BOP houses the inmates, who have been convicted for federal crimes. And the USMS is responsible for prisoners, who are awaiting trial in federal courts. The BOP has experienced a significant decline in inmate populations over the last seven years, and simply does not have as much of a need for prison capacity from the private sector. We currently have one prison contract with the BOP, accounting for 2% of our total revenue for the year ended December 31, 2020.

USMS populations have remained relatively consistent in recent years, so their capacity needs remain unchanged. With that we do not believe the USMS currently has sufficient detention capacity that satisfies their need without the private sector. And we do not believe an alternative solution that provides all the benefits of private sector provide exists anywhere else.

We're extremely proud of the critically important services we have provided the BOP during their period of need, which extended more than 20-years. One of the value propositions provided by the private sector is the ability to flexibly manage fluctuations and capacity needs, whether those needs are increasing or decreasing, so our government partners are not saddled with the cost of developing large scale real estate assets that they may or may not need in the future. Our ability to deliver these solutions to our governor partners is why we have successfully worked with both Democrats and Republicans, providing critically important services to address serious challenges for nearly 40-years.

Now before I turn the call over to Dave to review in greater detail our financial results, I wanted to highlight our continued innovative efforts to provide high quality reentry programming to help tackle Americans recidivism crisis. Last month, we announced the creation of a new role, Vice President Re-Entry Partnerships and Innovation. It will be served by Darren Swinson, who previously led course of a community segment, which provides residential and non-residential services to help justice involved individuals attain employment, housing, healthcare, mental health and addiction treatment and family reunification as they successfully reintegrate into their communities.

In his new role, Darren will serve as course of its top advocates and practitioner for Re-Entry. The role will build on our ongoing efforts to cultivate meaningful partnerships with academics, issue experts, policymakers and other organizations dedicated to effective reentry solutions, and recidivism reducing outcomes.

It will also focus on incorporating into our operations, innovative programs and best practices learn from these partnerships, as well as share the lessons learned through course of extensive effort to promote successful reentry programs and policies. We're excited for the potential impact this new role can have on improving outcomes for the government partners we serve and individuals who trusted in our care. This represents yet another step forward in our leadership in the area of reentry and our commitment to advance our profession and offer even more innovative solutions.

One final comment, I noted this earlier, but let me express again my deep appreciation and gratefulness to our CoreCivic team. Their passion and heroic effort supporting the individuals in our care during this pandemic has been inspiring to see, and for that, I remain thankful and honored to work alongside them.

On that note, I'll now turn the call over to Dave to provide more detailed look at our financial results in the fourth quarter and full year of 2020. Dave?

David Garfinkle -- Executive Vice President and Chief Financial Officer

Thank you, Damon, and good morning to everyone.

In the fourth quarter, we recorded a net loss of $0.22 per share or $0.40 of adjusted EPS excluding special items. We generated $0.63 of normalized FFO per share in the fourth quarter of 2020, compared with $0.59 in the prior year fourth quarter, an increase of 7%. We generated AFFO of $0.58 in the fourth quarter of 2020, the same as in the prior year fourth quarter. Adjusted EBITDA was $108.7 million in the fourth quarter 2020, a 5% increase from $103.5 million in the prior year quarter.

Adjusted amounts exclude asset impairments of $47.6 million, consisting mostly of a non-cash impairment of goodwill, $7.1 million of expenses associated with debt repayments incurred in connection with the sale of 42 GSA leased properties, and $2.8 million of expenses associated with COVID-19.

Our goodwill impairment analysis considered numerous factors with the non-cash impairment predominantly driven by our consideration of the broad base declines in the market capitalization of publicly traded companies in our industry, as well as the reduction in cash flows from the COVID-19 pandemic and the anticipated change in our tax structure.

The decline in our equity market cap had to be considered when assessing fair value under the accounting rules for goodwill impairments, and resulted in the impairment of the full balance of goodwill allocated to our community segments amounting to $42.6 million. We believe the cash flows in this segment will improve once effects of the pandemic subside.

And we remain committed to the community segment, which focuses on helping those entrusted to our care, obtain employment and successfully reintegrate into their communities. This segment serves individuals nearing the end of their sentence, or as an alternative to incarceration in critical need of case management services, such as substance abuse counseling, and life skills programs offered by trained professionals.

Adjusted amounts also exclude a $17.9 million loss on the aforementioned sale of 42 real estate assets. Most of this loss is attributable to a tax protection payment that is owed to the partners, who contributed 24 of the properties to a wholly owned subsidiary of ours in January 2020 in exchange for $1.3 million of limited partnership units that were convertible into shares of our common stock after a two-year holding period.

The tax protection payment will be funded to the extent there is cash in the partnership, including proceeds generated from the sale and set aside and restricted cash. As a result of the sale, we intend to dissolve the partnership in 2021, which is expected to result in the extinguishment of the limited partnership units for no additional consideration, and again upon dissolution that will be reflected as an increase to stockholders equity of $15 million to $20 million, essentially offsetting the loss on sale.

The press release includes commentary pertaining to the improvement and financial performance from the prior year quarter, which is notably a comparison to a quarter before the COVID-19 pandemic. Compared with the third quarter of 2020, normalized FFO per share increased 21%, AFFO per share increased 18% and adjusted EBITDA increased 15%. The primary drivers of the improvement included an increase in facility net operating income and our 1,600 bed Cimarron Correctional Facility in Oklahoma and lower G&A expenses.

During the third quarter, we transitioned the Cimarron facility from a state population to the US Marshals, which had stable occupancy during the fourth quarter. The reduction in G&A expenses, excluding special items was largely due to lower incentive compensation in the fourth quarter. We also experienced lower operating expenses, due to more favorable claims in our self-funded employee medical plans, lower COVID related paid time off, property taxes and a seasonal reduction in utilities expense.

We completed the aforementioned sale of 42 non-core real estate assets on December 23rd, 2020. These assets were sold for a gross sales price of $106.5 million, which generated net proceeds of $27.8 million after the repayment of non-recourse mortgage notes associated with some of the properties and other transaction related costs. We use the net proceeds to pay down our revolving credit facility. Including this pay down, during 2020, we repaid $199 million of debt net of the change in cash, which was after the payment of $106 million of dividends during 2020.

As of December 31st, we had $113 million of cash on hand and $566 million of availability on our revolving credit facility, which matures in 2023. Our leverage measured by net debt to EBITDA is 3.7 times using the trailing 12-months, and we have no debt maturities until October 2022, when $250 million or 5% unsecured notes matures. We currently expect to repay these unsecured notes upon maturity with cash on hand and capacity under the revolver.

As of December 31st, we had three additional non-core real estate assets held for sale with a net book value of $279 million. Based on interest expressed to-date, we are hopeful to consummate the sale of these assets during the first half of 2021. If we are successful in consummating the sale of these assets, combined with the sale completed last quarter, we expect the net proceeds from our sale of non-core assets will be consistent with our original estimate of up to $150 million. We also have several smaller assets that we are evaluating for sale, which could result in us exceeding our original estimate.

Earlier this month on February 1st, we were awarded two new 30-year lease agreements with the Alabama Department of Corrections for the development of two correctional facilities. Final lease costs for both properties will become available upon achieving financial close. We expect to finance 10% to 15% of the project costs with existing resources, which we expect to fund upon financial closing. Both facilities will contain an aggregate of approximately 7,000 beds, with construction expected to begin later this year or the beginning of 2022.

The first facility which will specialize in medical and mental health needs, is larger and has a construction timeline of approximately three years. The Alabama Department of Corrections will lease and operate both facilities. We will be responsible for facility maintenance and will retain ownership beyond the terms of the leases.

In addition to the Alabama commitment, our maintenance capital expenditures are forecast to be $65 million to $69 million, which is consistent with the original guidance we provided for 2020, before we reduced it by 15% in response to COVID-19. Although, we continue to generate significant cash flows, and even win new business during the pandemic, at this time, we are not providing 2021 financial guidance, because of uncertainties associated with COVID-19, as well as uncertainties associated with the application of the administration's various executive orders related to immigration and criminal justice.

Because of the pandemic, operations in the criminal justice system have not yet normalized. The southern border remains effectively closed, and many state budgets will have significant holes to fill. The duration of these disruptions and the response to state budget challenges and executive orders are difficult to predict. While we remain focused on the long-term success of the business and on executing our revised capital allocation strategy, we can provide some direction on our financial forecast having gone through three full quarters under COVID-19 and based on what we know today.

Operationally, with the court system functioning normally, I'm sorry without the court system functioning normally, and with the southwest border still effectively closed, we expect to continue to experience declines in populations in our safety and community segments, while rightsizing our expense structure without sacrificing safety or quality. These population reductions are likely to continue until a vaccine is more widely disseminated. Eventually the backlog of court cases will make it through the court system. Our new contracts with the US Marshals and our Cimarron facility and with Idaho at our Solaro facility in Arizona are expected to mitigate these declines.

Further as a reminder, about two thirds of the federal contracts in our safety segment have fixed monthly base payments that help ensure our partners have access to the capacity they need, if and when populations increase, minimizing the impact of further occupancy reductions in such facilities. Conversely, increases from current populations will not result in incremental revenue under these contracts, until populations exceed the first tier fixed payments.

Second, the properties we sold and are holding for sale generated approximately $30 million of EBITDA in 2020, which translates into the elimination of $20 million to $25 million, depending on the timing of the assets held for sale. We expect to use the net proceeds to repay debt, which could include the purchase of some of our outstanding debt securities in open market transactions, privately negotiated transactions or otherwise. Until operations return to normal, we expect to continue to report quarterly expenses with COVID-19 materially in line with the past two quarters.

Lastly, beginning in Q1, we will be subject to federal and state income taxes on our taxable income at applicable tax rates without the dividends paid deduction as REIT, and currently estimate our effective tax rate to be 27.5%, using federal and state tax rates. Once we revoke our reelection in the first quarter of 2021, we will also revalue our net deferred tax liabilities for accounting purposes, resulting in a significant special income tax charge that we estimate to be in the range of $100 million to $135 million. This is not a cash payment, but represents an accounting adjustment similar one-time tax benefit of $138 million we recognized when we converted to a REIT in 2013.

There is no transitional tax payment to revoke our reelection, and we currently expect our cash taxes to approximately 27.5% of our pre-tax income. With respect to the first quarter of 2021, there are a few things to remember when cross-walking the fourth quarter of 2020 to the first quarter of 2021. Compared to the fourth quarter, Q1 is seasonally weaker, because of two fewer days in the quarter, and because we incur approximately 75% of our unemployment taxes during the first quarter, resulting in a collective $0.05 per share decline from Q4 to Q1.

As I previously mentioned, our G&A expenses in Q4 were lower than our expected quarterly run rate, which is expected to translate into a per share decline of $0.04 from Q4 to Q1. While we reached a significant milestone was signing to new agreements to construct and lease two new correctional facilities in Alabama, and will pursue similar opportunities in Hawaii and potentially other states for our property segments. Those opportunities are longer term and would have no impact on earnings in 2021.

In our safety segment, we are pursuing a number of separate non-public opportunities, including a new state contract to utilize the available capacity in our system, the transition of an existing state contract to our property segment with improved and more stable cash flows, and potentially reactivating an idle facility. These opportunities could be consummated in the second half of this year.

Finally, although challenges certainly remain, state budgets thus far have generally outperformed expectations during the pandemic, which could lead to a more favorable environment than expected in our safety and community businesses.

I will now turn the call back to the operator, David, to open up the lines for questions.

Questions and Answers:

Operator

Thank you. The question-and-answer session will be conducted electronically. [Operator Instructions] We'll take our first question from Joe Gomes with Noble Capital.

Joe Gomes -- Noble Capital -- Analyst

Good morning, Damon and David.

Damon T. Hininger -- President and Chief Executive Officer

Good morning, Joe.

David Garfinkle -- Executive Vice President and Chief Financial Officer

Good morning, Joe.

Joe Gomes -- Noble Capital -- Analyst

So, nice, solid quarter it looks like to me. There are some one-time items, but once we get below the surface, it looks pretty solid. It looks a little bit better than what I was expecting. The last three quarters look pretty similar here during the COVID time. Just wondering kind of two part. One, you talked a little bit about and maybe can provide a little more color detail as to what helped drive a little bit better-than-expected results here? And, as we're looking forward, do you kind of see what the last recorded run rate? Is that kind of our new normal as we know things today?

David Garfinkle -- Executive Vice President and Chief Financial Officer

Yes, good question. Joe, I'll take a first stab at that. I'd say, certainly when you're comparing Q4 to Q3, the primary drivers were the transition of the Cimarron facility from the contract with Oklahoma to the US Marshals. So during Q3, we were ramping down the facility for the state and then ramping up the facility for US Marshals. So there was a gap in there in the third quarter that stabilized really in the fourth quarter. So that contributed about $0.03 when you're transitioning from Q3 to Q4.

The other notable item I mentioned in my comments was the lower G&A expenses. That's not a run rate. So, that was probably $0.04 lower in Q4, compared with Q3 that we'd expect to return to the Q3 and prior quarter numbers beginning in Q1. We did see some expense savings that, I think will continue as long as the pandemic continues, just because we're not able to provide the extensive services that we normally provide in a non-pandemic time period, with all the great things that we do to help our inmates and people entrusted to our care, all those services, the GEDs, classrooms, trade certificates. So, we're operating at a lower level of service currently during the pandemic, just to protect them from the safety and dangers of COVID-19.

So, eventually, those expenses will ramp back up as we start to reinstate those levels of services. So, that's probably unique to the period of time in the pandemic.

Also, in the fourth quarter, we did have some favorable claims experience in our self-funded medical plans. We had some property tax troops that were favorable, based on the receipt of property tax bills, and some other things like that, that could be recurring. They're just hard to predict.

Joe Gomes -- Noble Capital -- Analyst

Okay, great. Thank you on that. If we could switch to Alabama for a second. Congratulations on the win there, very significant in my view, but a couple of quick questions. I know you mentioned you can't really talk about the lease impact the financial impact right now. But I saw some estimates out there, Alabama was looking to build three different facilities. And the estimates were that the capital cost would be somewhere than $900 million to $1 billion range, which, again, just doing some average math would suggest somewhere the $600 million to $700 million for two facilities that you want.

A, is that kind of in the ballpark? And then you mentioned about self-financing 10% to 15% of that, and raising the rest through outside financing. Given what we've seen here, when the activist push, I mean, how comfortable are you with your ability to go out and raise the rest of that amount to construct that?

And then, finally, you mentioned Kansas as the kind of a model here. And so, Kansas has been up and running, I think, roughly, let's call it a year. Can you kind of give us a little color on how Kansas is performing over this past year? I know, it's special with the pandemic and everything, but is it running toward your expectations? And any hiccups there? Just kind of give us some detail as we project forward Alabama, potentially Hawaii or some of these other states. Kansas being the first one, how is that performing? Thank you.

David Garfinkle -- Executive Vice President and Chief Financial Officer

Yes. Thanks, Joe. A lot of questions here, so let me try to take a couple of them. On the costs, we don't want to get out in front of Alabama on those. You're right, they did disclose the costs of I think it was somewhere around $800 to $1 billion dollars for all three correctional facilities. We've worked with them on the cost during the design phase and have been working extensively trying to offer opportunities for cost savings and so forth. But we don't want to get out in front of Alabama on disclosing those costs. It will somewhat also depend on their lease costs will depend on the financing.

We feel very comfortable right now with the financing for that project. Both private placement markets, municipal bond markets are very competitive right now for lenders, a lot of dollars, chasing infrastructure funds. So, this would be a great project we think, to execute the financing. So, we feel really good about the financing sitting here today.

Kansas, just I'll touch briefly on Kansas. It was delivered under budget, really on budget to under budget, real close to budget, certainly not over budget. It was delivered in the first quarter of last year and has delivered really as expected work. Just the owner, they operate the facilities very similar to Alabama. Alabama is going to staff it and operate it. So, with respect to our risk, it really is limited to the maintenance services that we perform. So, all that's going as expected and no hiccups there whatsoever.

Damon, do you have anything to add there?

Damon T. Hininger -- President and Chief Executive Officer

Yes, I would say also on Kansas, just kind of connect that little bit to Dave's comments on Alabama. So going back several years, when we were starting that project, we did a private placement on that facility and did 100%. And we needed, about $160 million $170 million for the financing. We got almost $1 billion in interest. And so those type of projects in the financial world are very, very interesting to a lot of investors. And so, again, we got almost 100% money, 100% loan to value on that about $1 billion in interest for 20-year money, and I think 4.3, 4.4 [Phonetic].

So very strong interest been in now on these type of projects that are government leased assets. And again, that was also with all this kind of rhetoric still circling around the country. But also talking about Kansas, as Dave said, we delivered under budget Q1 of last year. And you'd rather be lucky than good that it really was very fortunate timing, because as you know, right at the beginning of the pandemic. And so you've got a population that was coming from a facility that was built in the 1860. So very challenging infrastructure, HVAC units, a lack of kind of negative pressure rooms or infirmary beds.

Moving into a brand new modern facility right at the beginning of pandemic was very, very helpful for them operationally. And that facility that we delivered, it's got the largest infirmary unit in the state of Kansas. So it really gives them a lot of flexibility in normal environments, but especially with a pandemic.

And then finally, I'll just say I had the good fortune to tour the facility, late last year in fourth quarter and it looks really good. I mean, just it's open, it's modern, it's very clean. It's got new technology, and again, it's got the largest infirmary unit in state of Kansas for the Correction system. So it gives them a lot of flexibility to deal with a lot of challenging issues. So we're excited about that project. And we think it's a good model for not only as we finalize the development and designs of Alabama, but also some of these other state opportunities, we think are down the road for us.

Joe Gomes -- Noble Capital -- Analyst

Okay. Thanks for that. One last one for me, and I'll jump back in queue. So more David from really the 10,000 foot level, we've had the executive orders from Biden administration, US Marshal Service question there. There's been some emails, we'll call they've been reported about someone in the Justice Department, I think, with Justice Department but going for ICE and who you can detain who you can't detain anymore. We talked a little bit here about the court system trying to get back to normal there. So trying to -- maybe give us a little bit of a State of the Union address so to speak, as you see now.

I mean, if we look at US Marshal Service, and the populations there that are detained. Are there other available alternatives out there that could soak up the population there that are being currently serviced by the private sector? Just love to hear some of your thoughts. And again, I understand all the complications here. There's a lot of unknowns going forward. But where you think -- what you guys are thinking about today? Thank you.

Damon T. Hininger -- President and Chief Executive Officer

Yes. Thank you for that question, Joe. Really, really good series of questions there. So the couple answers, let me just first just say globally about populations. And so Marshal Service nationwide, based on our research is about 63,000, 64,000 nationwide. And that's pretty consistent where they work in late 2019 early 2020. They did see a significant dip, but it's pretty short lived during the kind of Spring Summer of last year. I think they went as low as 36,000. But they've again gone back up to about 63,000, and again, that's pretty comparable where they were in '19.

And even if you go 10 years ago, I'm looking at my chart here, going back to the kind of the 2012-13 year we're kind of in the low 60s. So their populations historically and recently have been pretty stable. And then you take it to the company, if you look at our numbers we're pretty stable last 24 months. So again, we've seen probably some dips last summer, but overall it's been pretty, pretty stable. So globally, but also company specific population pretty stable.

As we look at kind of the needs of our customers and it's something we're always researching and talking about anticipating, and but also providing maybe new, more flexible and more innovative solutions going forward. Basically, they're changing demands. The BOP, as you and I talked about Joe, it was pretty clear, seven, eight years ago that their needs were going to change in the private sector being a part of their overall, kind of, solutions going forward, especially since they were significant overcrowded the time probably what's going to change.

And so we've adapted to that not only anticipated kind of the demand, maybe changing on the safety side that also provided more solutions on the community side for reentry facilities, and maybe even some home confinement. So we've changed our kind of our service and our offering structure for the BOP based on their changes in demand. But for the Marshal Service, I mean, yes, you touched on this a little bit in your question. And that is, the Marshal Service, their mission is obviously very different. I mean, it's the same population, but there's this in different parts of the journey in the criminal justice system. So the Marshal Service really, really rely on the private sector, but also city and counties for bed space, that's in very close proximity to the federal courts.

And so if you've got someone that's, say, in Phoenix, Arizona, and they're going through the federal courts there in Phoenix, they cannot be housed in a neighboring state. They've got to be easily within 25 to 50 miles of the courthouse just so that they can be active, participate in a legal proceedings, be close proximity with family and friends, and also be in close proximity with legal representation.

So really, really important that they've got space close by to the to the court system. And so in our survey of the landscape, and this is something we do all the time, not just in the current environment, is that we do not see any alternatives that we provide, space that is new, modern with all the appropriate standards has the appropriate government oversight, and auditing on a regular basis, but also provides good access to legal representation. And also, again, good access knowledge of the courts.

But also, in turn allows judges I mean, we have a fair amount of federal judges, actually to our facilities and they didn't want to see the conditions firsthand. And so we just do not see in the markets where we operate any alternatives. And again, not only do we provide detention space, we also provide some services on site for our legal staff, and especially in this environment and actually, I just saw this firsthand a couple of weeks ago, in our facility in Florence, Arizona, its board in the federal courts in both Phoenix and Tucson, were quickly able to adapt in this COVID environment, where we actually put video conferencing systems in place to where they could do some arraignments and other legal proceedings via video conference, since judges maybe don't want to have people in person during the pandemic.

So that's quick, innovative solutions that private sector can provide, especially in a challenging environment that we just don't think there's alternatives or other agencies organizations able to do. But anything you would add to that, Dave?

David Garfinkle -- Executive Vice President and Chief Financial Officer

I don't think so. I mean, it's a little early in the Biden administration, so it's one of the reasons we haven't issued guidance. It's hard to unpack all of the application of the executive order and immigration policy. So there's just a lot of dynamics in the environment right now. And that was really the genesis for us not issuing guidance. We want to take a little bit of a wait and see approach and see how things play out.

Joe Gomes -- Noble Capital -- Analyst

Thanks for those insightful answers, Dam and Dave. I'll get back in queue and let someone else ask a couple questions. Thank you.

David Garfinkle -- Executive Vice President and Chief Financial Officer

Great. Thank you, Joe.

Damon T. Hininger -- President and Chief Executive Officer

Thank you, Joe.

Operator

Next, we'll go to M. Marin with Zacks.

M. Marin -- Zacks Investment Research -- Analyst

[Technical Issues] I have a question about -- hello? The transition to the...

Damon T. Hininger -- President and Chief Executive Officer

Yes. Good morning.

M. Marin -- Zacks Investment Research -- Analyst

So the transition, does that [Indecipherable] post deleveraging action? Does that in any way open the door to potential new revenue streams for company or opportunity for new revenues coming? Thank you.

Damon T. Hininger -- President and Chief Executive Officer

Yes. Thank you for question. This is Damon. So the short answer is yes. As you know with a REIT, there are some restrictions on what you can or cannot do as a publicly traded REIT. So, we do think now being a C Corp, again, we were C Corp once upon a time too before 2013. It could open some opportunities to where we provide not only the real estate and maybe the services for certain solutions. So for example, I mentioned earlier, the new project in Kansas that has a very large infirmary unit again, largest actually unit in the state of Kansas serving their correctional institution or correctional system. There could be a case where we can maybe do a medical, kind of, oriented solution for certain jurisdiction, maybe that's an infirmary, maybe that's a mental health or substance abuse type facility. So, it gives us greater flexibility of providing, kind of, healthcare related services that we weren't able to do as a REIT.

Anything you would add to that David?

David Garfinkle -- Executive Vice President and Chief Financial Officer

There were restrictions under the REIT rules that prohibited certain business activities. Obviously, we were focused on the real estate aspects of the business. But without those limitations, certainly the sky's the limit on non-real estate related businesses, perhaps in adjacencies to the corrections market that could be available to us. So those are things kind of in the R&D stage at this point, but we're starting to identify some opportunities.

M. Marin -- Zacks Investment Research -- Analyst

Thanks. And could you just remind [Technical Issues] timeline is for the transition?

Damon T. Hininger -- President and Chief Executive Officer

I'm sorry, you broke up on me. I didn't hear that question.

M. Marin -- Zacks Investment Research -- Analyst

Could you just remind us of the timeline for transition?

Damon T. Hininger -- President and Chief Executive Officer

Oh, timeline. It's hard to put a timeline now, and so we're just on the other side of just now, going into the New Year with the conversion to a C-Corp. But we're actively looking at and talking with partners. And part of this just, being a little bit of a lifting journey with our partners are kind of emerging issues and needs within their system and how we can be a solution. So no real timeline be able to express today, but it's something we're actively looking at.

M. Marin -- Zacks Investment Research -- Analyst

Okay. Thank you.

Damon T. Hininger -- President and Chief Executive Officer

Thank you.

Operator

Next, we'll go to Jordan Sherman with Ranger Global.

Jordan Sherman -- Ranger Global -- Analyst

Good morning. I just want to talk about the Alabama thing once more from a different angle. I know you will walk into it, you gave too much detail. But the Kansas facility, what was the cost of development per bed?

David Garfinkle -- Executive Vice President and Chief Financial Officer

It's about $65,000 a bed, $160 million project.

Jordan Sherman -- Ranger Global -- Analyst

Right. And is there any reason for us to think at least conceptually not specifically, that there will be major differences one way or the other for the development of the Alabama facility?

Damon T. Hininger -- President and Chief Executive Officer

There could be. I mean Alabama's needs are different. They're certainly larger facilities, different components to it. So, it could be. But again, I really just don't want to get out in front of Alabama.

David Garfinkle -- Executive Vice President and Chief Financial Officer

I guess one thing I would note is that that -- I'm sorry.

Jordan Sherman -- Ranger Global -- Analyst

No, that's fine, I'm sorry.

Damon T. Hininger -- President and Chief Executive Officer

I was just going to mention that...

Jordan Sherman -- Ranger Global -- Analyst

Conceptually, so it could be different.

Damon T. Hininger -- President and Chief Executive Officer

It could be. As I say, one of the units, one of the facilities, it's going to be a kind of a medical focus. So that often that'll drive some unique, kind of, requirements for that physical plan. So it's a different way, there's three facilities anticipated, two of the three are going to be what I call general population, kind of normal facilities. And those are very consistent with Kansas, but one of the three will have a very specific medical focus. And again, those will probably have some pretty unique requirements from a physical plant perspective.

David Garfinkle -- Executive Vice President and Chief Financial Officer

That would be expensive than the other two facilities.

Jordan Sherman -- Ranger Global -- Analyst

Understand. Okay. We'll follow to details about that. Hawaii, what is the size of the facility that they're looking to replace?

Damon T. Hininger -- President and Chief Executive Officer

I think it's about 1,500 or 2,000 beds. And it could be a little bigger or smaller than that, depending on kind of what their needs are. And maybe we've heard also that over the years, they were trying to maybe do some small regional facilities around other parts of the state or other islands, I should say, but that's probably a pretty good ballpark at the moment.

Jordan Sherman -- Ranger Global -- Analyst

Fair enough. Okay. Just wanted a glimpse of the US Marshal. We have no -- I've heard your comments about that not really a lot of capacity outside of your, what's being utilized today. Let's put it that way. Should there be a shift or an attempted shift away from, sort of, progress for the year. But I'm just wondering, if they go down that pathway, one the way they've chosen with the BOP is to eliminate the contracts as a rollover? So I was just wondering, just conceptually, how would indefinite contracts work in that environment?

Damon T. Hininger -- President and Chief Executive Officer

I'm not sure we know, Jordan. We list out explorations in our facility portfolio table and our supplemental disclosure report, but we don't have clarity on that.

Jordan Sherman -- Ranger Global -- Analyst

Okay. So and then just on the immigration side, just like -- I just look in the Southwest border crossings numbers, I guess we just got them for January. And clearly, they're kind of exploding numbers, but I'm just wondering how we think about those -- I'm sorry.

Damon T. Hininger -- President and Chief Executive Officer

We did see those numbers. Yes.

Jordan Sherman -- Ranger Global -- Analyst

Yes. Since highest number, 30% above the highest number we've seen in the last decade. How do those numbers translate into the tensions?

Damon T. Hininger -- President and Chief Executive Officer

Well, the biggest action right now that's affected detention capacity is the title 42, which is the basically turn around right at the border. So they're not detaining and putting them through the process here in the United States. And obviously, we're early days into the new administration, but there has been not any change on the title 42 policy at the moment. I know that you've read news reports out there looking at it closely, and also overlaying that with the challenges with a pandemic, but you're exactly right. The encounters single encounters, I think, yes, like the 200% a year-over-year increase. So, the activity at the border has dramatically impacted, but it's not related to detention at the moment because the title 42.

Jordan Sherman -- Ranger Global -- Analyst

Okay. So they're coming, they're touching the border in some shape, manner or form, and they're being turned back.

Damon T. Hininger -- President and Chief Executive Officer

Right.

Jordan Sherman -- Ranger Global -- Analyst

Okay. Under normal circumstances, how those numbers translate into detentions?

Damon T. Hininger -- President and Chief Executive Officer

It's just a -- I'm sorry. Yes, it's hard to give a ratio if an encounter versus, how many that comparison to a detention capacity. I don't know if that ever been kind of studied. And I'm sure to be honest with you probably it changes based on administration and priorities. But I'd say historically, yes, the encounters are going up on the southwest border that typically, somewhat correlates on to detention capacity and utilization of capacity on the southwest border.

Jordan Sherman -- Ranger Global -- Analyst

I guess, let me ask a little differently, because that wasn't necessarily a ratio. There are certain people, who presented the border, either through a port of entry or not the port of entry, who will be detained, right? And the certain types of people who won't be. I guess, I was going after is, who is detained? And when you talk about priorities, that's what you're referring to is, who is detained out of those people coming across the border may shift as a result of Biden administration and we're not sure exactly yet on those? Is that?

Damon T. Hininger -- President and Chief Executive Officer

Yes. I think the latter is exactly right. It's too early to tell. Historically, I guess what I'd say, and this is regardless of the administration, Republican or Democrat. Historically, the individuals that are detained are typically individuals that you maybe have a violent, either crime history or have -- are in the act of doing a violent crime. So, I'd say more, not only just illegal entry into the country, but also maybe smuggling a firearm or smuggling of children or something like that, those are typically the ones if they're going to kind of triage and determine what's the right individual put in detention, it's ones with a violent history.

I don't know anything to add to that Dave?

David Garfinkle -- Executive Vice President and Chief Financial Officer

The source or where they're coming from the origination, the country from which they are originating, also can have an impact on their detention, and how long they're detained. So, somebody might have a complex deportation order, they might spend more time with detention facility than somebody who's in Mexico comes from Mexico, for example, there's arrangements with Mexico that would deport them more rapidly.

Jordan Sherman -- Ranger Global -- Analyst

So then, I guess, how then conceptually, do you think about changes of interior enforcement versus who's detained at the border? I guess I'm trying to figure out what are all the -- there are a lot of moving parts, I know that. I'm just trying to figure out one of those moving parts apart. And then how, if we go to a more liberal catch and release, how's that going to work? And then, of course, if we have a more liberal policy, we're certainly going to get in the US, we're certainly getting more border crossings, good, bad and indifferent. I'm just trying to put all the elements in place, and I know you'll be able to have an answer on where it goes. But just trying to make sure I have all the pieces of that puzzle?

Damon T. Hininger -- President and Chief Executive Officer

Yes, it's a good question. And the short answer is, too early to tell. I mean, we're getting obviously some signs with some of these executive orders and some of the pronouncement for the administration. So the short answer is, it's too early to tell. And we also have to monitor. But I guess what I would say is that, we have been able to not only change, but also kind of recalibrate not only our services, but also maybe invest in ourselves a little bit. If the priorities changed from administration-to-administration, we can change our solutions based on those priorities. So, it's a different way. There are certain parts of the country where there may be doing more southwest border enforcement and interior enforcement, or there's a maybe a greater need for families versus females versus adult males. And we have changed over the years, some of our facilities are our mission and our services based on kind of those changing needs.

So, as I sit here today looking at 40 years of history with the country, I think we've been able to do a good job, especially with ICE facilities, that primarily as you know around the southwest border, we can change again either our services, make some investments, or maybe adding more not only capex, but maybe courtrooms and other things that help support that mission. And also, again maybe change the makeup. So changing the facility from adult male or female to families or something like that. So we can pivot and navigate through that I think pretty faculty, as we've shown in the past.

Jordan Sherman -- Ranger Global -- Analyst

Okay. And then just one more on that and I'll turn it over. The timeline, how do you think about timeline of changes? I guess we'll get a budget request that will give us some sense of the level of beds at least in the interim. How are you thinking? What is sort of the roadmap timeline that you're looking for at least no timeline?

Damon T. Hininger -- President and Chief Executive Officer

I would say, it's a good question. I'd say probably a couple key things. Yes, the budget you just noted, I read this morning, I don't think I've seen that exact day, but I know the budget is going to be delayed coming out. But there usually is pretty good information, not only on the dollars and cents for each individual agency, but also how that's tied to maybe changes in policy and priority for the administration. So again, I think that'll be a pretty good blueprint to your question.

The other thing I would say is that, we just saw here in last few weeks, the confirmation of the agency heads, with this subject, which is DHS. But I think probably in the coming weeks, as you start to see announcements on department heads and agency heads, then obviously once those individual get in place, and then they can kind of get aligned with their priorities, not only from the secretary, but also the administration, that'll be a key.

But I don't know, if you can add to that David?

David Garfinkle -- Executive Vice President and Chief Financial Officer

Yes. Perhaps as importantly is Title 42. The President is trying to protect the country and eradicate the COVID-19 virus as much as possible. And the timing of reopening the borders, if you will rather than turning them, as we were just discussing, could have an impact on the number of people admitted to the country, and notably those claiming asylum in the United States.

Jordan Sherman -- Ranger Global -- Analyst

And will we glean anything interesting out of the 100 day moratorium, which is now -- there's a federal injunction against that, I guess? Will we glean anything about ability to deport or not deport from that? And sort of final decision on that?

Damon T. Hininger -- President and Chief Executive Officer

Yes, I think that's going to be a probably wait and see. We'll have to just see with it. I know there's been court challenges that they got to Texas, and I haven't heard of any other states that don't we just have to wait and see the what the impact of those actions are.

Jordan Sherman -- Ranger Global -- Analyst

Perfect. Okay. Thank you very much.

Damon T. Hininger -- President and Chief Executive Officer

Thank you.

Operator

Next, we'll go to Dane Bowler with 2nd Market Capital.

Dane Bowler -- 2nd Market Capital -- Analyst

Hi, good morning.

David Garfinkle -- Executive Vice President and Chief Financial Officer

Good morning.

Dane Bowler -- 2nd Market Capital -- Analyst

So I'm wondering on the Alabama new builds. Presumably, the detainees are being moved in from older facilities that maybe weren't as well designed for those exact purposes as the modern purpose-built buildings that you guys are making. So I'm wondering, if you can quantify the benefits of the better facility in terms of say health and safety benefits, both the detainees and the employees, as well as potential cost savings in operating them.

Damon T. Hininger -- President and Chief Executive Officer

Good question. Probably a little hard on the last one, but I'll give a little color to the first part of your question. And that is, it's been reported and I don't think Alabama's had a hard and fast decision on this, but it's been reported that they were talking about 15 to 18 facilities within their states that they are looking to close as a result of these three new modern facilities once are delivered being able to get the efficiency by getting close these older facilities.

Technology's a big one. So I mean, if you think about facilities that are 50 to 100 years old, it just is not cost effective, nor that they have the dollars per se to enhance these older facilities with from a technology perspective. I'd say second the design of facilities today is a lot different than it was 50 or 100 years ago. So a lot cleaner line of sight, a lot more efficient design from a staffing perspective. You don't have the exterior where you use limestone or rock as the perimeter wall. These are now used to fences where you can see through and again use technology from both camera and other detection systems.

And then I'd say finally is that these facilities sometimes are acquired from other agencies within state governments, and sometimes these facilities were maybe vacated mental health or hospitals, that maybe they were initially built for a different mission, but they're just not really conducive to an environment where you're providing a corrections, kind of, housing and services, but also maybe not have adequate space for programs or medical services. So a lot of different benefits that can be provided with a new modern facility, part of which is, again, just being able to design it, kind of, from day one for this mission, versus maybe it being acquired and had a previous mission in another life. Do you have anything to add to that Dave?

David Garfinkle -- Executive Vice President and Chief Financial Officer

Yes, a couple things. One, if they're not incremental beds to Alabama, they're intended to be replacement beds for existing facilities for which Alabama is currently being sued by the Department of Justice for the conditions of confinement. So certainly, this is the governor solution to come up with better capacity. As Damon mentioned, there'll be more high-tech technology, there'll be larger facilities, which I think is also important to note to the latter part of your question. So when you have disparate smaller facilities, it's much more inefficiently run than it can be run, when you have three very large facilities. It just kind of common sense.

And now if there Kansas is case, they were able to save enough cost savings to fund the lease payments that we collect, just through the ownership of the facilities, because of the efficiencies that they gained and not having to have as many staff and as much repairs and maintenance on older facilities. So I think there's dated back to 1850s or something like that. So these facilities similarly are very old and outdated. So they have a lot of deferred maintenance and maintenance to expand every day on them that they will not have to spend on three brand new facilities. In fact, that's our responsibility under the terms of the leases. So a lot of efficiencies to be gained by consolidating the facilities, and again, not incremental capacity for more inmates, but just replacement capacity, that puts them in better conditions, and quite frankly, safer conditions for the staff as well.

Dane Bowler -- 2nd Market Capital -- Analyst

Okay, great. So as those numbers come out from the Kansas facilities and theoretically, in the future from the Alabama one. Are you finding those that are useful in kind of pitching the same case to other states or other entities that would like a similar build sort of thing?

Damon T. Hininger -- President and Chief Executive Officer

Well, absolutely. Yes, great question. But yes, absolutely. We think that the best marketing we could do for new opportunities is previous examples we can point to. So we know that every jurisdiction we've worked with, they do a lot, a lot of homework and research with other jurisdictions that have done kind of similar projects with the private sector. So we think, Kansas helped us get good momentum in Alabama. And we think in turn Alabama will give us good momentum in another state. So that's exactly right.

David Garfinkle -- Executive Vice President and Chief Financial Officer

And this is what we do. So we can provide that value added service to government agencies that haven't constructed facilities in 25, 50 or 100 years, where that's our business. So we know it well, and we know how to design facilities so that they can rebound some efficiencies or rebound inefficiencies out of the older facilities, when you're designing a new one.

Dane Bowler -- 2nd Market Capital -- Analyst

Okay. Thank you. Congrats on a good quarter.

Damon T. Hininger -- President and Chief Executive Officer

Thank you.

David Garfinkle -- Executive Vice President and Chief Financial Officer

Thank you so much.

Operator

[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

Cameron Hopewell -- Managing Director of Investor Relations

Damon T. Hininger -- President and Chief Executive Officer

David Garfinkle -- Executive Vice President and Chief Financial Officer

Joe Gomes -- Noble Capital -- Analyst

M. Marin -- Zacks Investment Research -- Analyst

Jordan Sherman -- Ranger Global -- Analyst

Dane Bowler -- 2nd Market Capital -- Analyst

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