Dead to REITs: An Examination of the Rise and Fall of Private Prisons Financed Through REITs

November 3, 2022 by Rebecca Richard

Real estate investment trusts (REITs) were heralded in the 1960s as a promising low-stakes investment option for individuals to bridge the wealth gap produced by unequal access to the stock market. Private prisons, often funded through private investments in the form of REITs, were a dazzling investment opportunity for many until recently. CoreCivic is the largest private prison operator in the U.S. that uses the REITs investment model, with the Geo Group (GEO) following closely behind. Since their inception in the 1980s, CoreCivic and GEO have grown to enjoy over $1 billion in revenue each per year. However, the Biden Administration announced in 2021 through an Executive Order that the Bureau of Prisons (BOP) would no longer utilize contracts with private prisons for federal correctional facilities. This sent prison REITs into a financial tailspin. Nevertheless, the future of private prisons in the wake of this Order is perhaps more a story about financial resilience than ruin, as diversification has potentially insulated these REITs from market volatility and public opinion. This blog post is a historical analysis of prison REITs that explores  the impetus behind private prison operators, prison REITs’ financial structure, and the recent changes to its operating landscape.

In the 1980s, a spike in crime rates across the country led to a wave of legislation resulting in a “tough on crime” attitude in each branch of government, coupled with a punitive narrative advanced by political figures of that time. This attitude found its home particularly in the War on Drugs.[1] There has been much ink spilled on the War on Drugs and its impact on our legal system today, but it is sufficient for the purposes of this post just to note that increasing the severity of the penalties for drug crimes, namely the number of years in prison, had an enormous impact on the number of inmates in jail and the length of time for which they were to be imprisoned.[2] Indeed, the prison population quadrupled in the U.S. from roughly 300,000 inmates in 1970 to 3 million in 2017.[3] This landmark shift in the federal statutory landscape was a massive undertaking that required the immediate expansion of prison facilities — both public and private. However, facilities could not keep up. Therefore, to accommodate the onset of inmates who were now expected to be housed for much longer periods of time, the government began contracting with private companies. These operators promised to either (1) run and operate a government facility, (2) lease an existing facility to the government, or (3) some combination thereof. Underpinning these offers was the promise of making inmate care more affordable to the federal, state, and local community who ultimately funded these projects.

Central, then, to this undertaking were the REITs through which such private companies were funded. Real estate investment trusts (hereinafter REIT or REITs) are an attractive way for average people to invest in real estate in the way that one can invest in the stock market. Fundamentally, a group of people or companies purchase land, office buildings, and other commercial spaces and are able to collect rents from tenants, and distribute profits in the form of dividends, all while avoiding particular taxes.[4] The idea behind REITs was to make investing more accessible to the everyday person by capitalizing on the increasing value of land, businesses, and real estate. Today, REITs are most often divided into two categories: equity REITs (REITs) and the traditional mortgage REITS (mREITs).[5] mREITs earn profit from interest on mortgages or mortgage-backed securities as opposed to collecting rent from retailers and other businesses like equity REITs, which are the focus of this blog post.[6] Equity REITs are divided into several categories, leading with apartments (13.88%), healthcare (12.58%), industrial (12.06%), and more.[7] One of the smallest categories of equity REITs, by RegentAtlantic metrics, are Specialty REITs (5.31%).[8] Within this subcategory of Specialty REITs are corporations that invest in private prisons.[9] Although private prison owners and operators represent a small fraction of equity REITs, their impact in the prison system is quite large. In the 1980s, REITs grew in popularity and the market for REITs became inflated.[10] The increase of REITs caused many to “compete for capital” since they were limited to real estate purchases.[11] In this way, a REIT that was able to be more creative and branch out would have less competition and higher opportunity for profit.

At the same time, in order to reduce costs and overpopulation, the government began contracting out corrections services to private operators. In 1984, CoreCivic (formerly and alternately Corrections Corporation of America [CCA]) saw the confluence of the need for land and business management on one hand with the increasing inmate population on the other and established itself as the company to meet those needs. GEO Group, too, came into being in 1984.[12] On October 15, 1984, CoreCivic, then CCA, began operating Silverdale Detention Center in Chattanooga, Tennessee.[13]

Though private contracts for correctional needs had transpired long before the 1980s, that era made companies extremely wealthy, and the prison complex more lucrative than before. Indeed, such a business model greatly increased the scale of privatization contracts with the government by sheer number of inmates in federal custody as a result of the changing drug and felony landscape. In 2013, CoreCivic[14] and GEO[15] both became a REIT to take advantage of the tax benefits provided by REIT status. They have both maintained steady contracts with the Bureau of Prisons, U.S. Marshals, and U.S. Immigration and Customs and Enforcement.

The primary way a private operator purports to save state or federal government money is by purchasing an existing facility and leasing it to the government. It then implements its own personnel and policies, promising to provide the same level of care for a lesser amount per capita than that which the government previously paid. In return, governments get the assurance that inmate constitutional rights are being protected and, in many instances, get a guarantee of the number of inmates a facility will house at any given time.[16] However, in order to provide the same care at a decreased cost, facilities need to cut expenses or raise revenue to make up the difference. GEO and CoreCivic often pocket the multimillion-dollar government contracts, reduce the inmate standard of care to save costs, and return the profits back to investors. In this way, the success of any given prison is contingent upon minimum possible expenditures on the population and staff and maximum number of inmates in order to fulfill the quota provided to the state and federal decisionmakers. This is a set of incentives that rewards overcrowding, which private prisons were created to mitigate, and nearly necessitates subpar living conditions, which was not the purpose of privatization contracts. CoreCivic is the largest owner and operator of private prison facilities in the United States. It was the first company to secure a government contract in modern history and continues to dominate the sector.

CoreCivic also gets a large number of investments from hedge funds, mutual funds, and other money management strategies. In 2015, Vanguard controlled $447 million, or 14%, of CoreCivic stock.[17] In fact, average people without conscious knowledge thereof, through retirement and other mutual funds accounts, help fund GEO, CoreCivic, and others.[18] For example, in 2019 many educators part of the American Federation of Teachers (AFT) learned that their retirement accounts were investing in GEO and CoreCivic either “directly or through an index,” which led to a wave of activism that led to their divestment as well as the divestment of other similarly situated retirement funds.[19] However, CoreCivic and GEO owe 51% and 53% of their profits, respectively, to federal government contracts, such that some taxpayers doubly fund these endeavors.[20]

In January 2021, President Biden signed an executive order[21] announcing that no Bureau of Prisons contracts would be renewed, but also that privately run jails that house pretrial populations would also be closed.[22] This potentially had a large impact since many BOP contracts were and are set to expire within Biden’s first term.[23] Biden’s order was based on findings that incarceration is at an alarming level, particularly impacting people of color, and “reduc[ing] profit-based incentives to incarcerate” is critical in reforming the criminal justice system.[24] Moreover, Pres. Biden found that private facilities “consistently underperform” in comparison to resources and services provided by government facilities.[25] In the hours after his Order, stock prices fell to a new low of $2.14 a share for CoreCivic and $2.09 for GEO.[26]

However, the market impact of changing the legal landscape is not limited to the stock market. Many major banks have pulled funding from CoreCivic and GEO. JP Morgan and Wells Fargo, two of the largest underwriters of CoreCivic’s ventures, recently announced plans to cease relations with the companies citing public disfavor with their business model.[27] CoreCivic had to pull out of a bid for a prison after multiple banks lost trust in the deal since CoreCivic failed to garner enough investors. [28] Financiers dropped out of the deal “less than three weeks” after it was announced to the public after it was revealed that CoreCivic intentionally misrepresented its ability to provide high quality services for less.[29] This type of financial loss is really troubling for a REIT, since 90% of profits must be returned to investors. Losing hundreds of millions of dollars-worth of contracts is not only direct income loss for the operator and therefore dividends for investors, but it also diminishes the amount of potential capital gains from future operation of that facility.

In response, CoreCivic recently announced its plans to revert back from a publicly traded company to a privately held entity, thereby insulating it from some of the volatility of the market.[30] Further research indicates that in response to volatile market conditions and declining favorably public perception, CoreCivic, GEO, and other private providers underwent several key strategic changes, namely (a) subverting the spirit of the executive order of no contracts with BOP by following the letter, (b) changing nomenclature and diversifying its investments, and (c) shifting from a public back to a privately held company.

On October 28, 2016, Corrections Corporation of America officially rebranded as CoreCivic.[31] Similarly, GEO Group is the derivative name of Wackenhut Corrections Corporation, made effective in June 2004.[32] This seemingly minor shift represented a major shift in the foci of the respective groups, as evidenced by the removal of “corrections” from their very name. As explained in the CoreCivic press release at the time of the name change, the idea was that “CoreCivic,” would reflect their “multi-year strategy to transform [their] business from largely corrections and detention services to a wider range of government solutions.”[33] Indeed, the purchase and management of federal correctional facilities shrunk in comparison to other “comprehensive real estate solutions,” including immigration detention facilities, residential reentry services and “community corrections facilities.”[34] Even more innocuous, CoreCivic and GEO increased purchases of garden-variety office buildings for the purpose of leasing them to government agencies like the Social Security Administration, for example.[35] The combination of public outcry and potential legislative criminal justice reform has also led CoreCivic to invest in the rehabilitation sector. To that end, CoreCivic is actively investing in the reentry business. Investing into electronic monitoring, which surveilles inmates released on parole or probation, is the next frontier for CoreCivic. Not only does it promise similarly lengthy government contracts as with traditional incarceration, but it also is more cost effective for CoreCivic by reducing the cost of litigation, public scrutiny, and volatility resulting from changes in the executive branch. However, this system of “e-carceration,” as Michelle Alexander calls it, is still a part of the larger industry that profits off of incarceration: from the healthcare contracts to the safety equipment manufacturers to the food service providers.[36] In this way, privatization is the candle that burns on both ends: it either incarcerates with poor conditions, or it monitors nearly entire communities in the real world.

Moreover, to the effect that the purpose of the executive order was a step in minimizing subpar conditions as part of an effort to address mass incarceration, it is not clear that the executive order has fulfilled those goals since many REITs have turned to immigration detention facilities, rehabilitative reentry services, and other carceral investments. In response to market turmoil, GEO and CoreCivic took several drastic steps to offset financial losses brought about by executive orders and declining investor confidence in the idea of investing in a private prison itself. The latest changes, converting from publicly traded REITs to ones privately held and abandonment of REIT status altogether, show the desperate lengths to which leading private prison operators will go in order to preserve investor confidence.

As a potential financial recommendation to end inmate exploitation, Congress could revisit its goals in the Cigar Excise Tax Act and find prison REITs to be excluded from the tax evasion provision of other REITs. This would eliminate much of the appeal of REITs without upsetting the other industries. Both on the financial side as well as with public perception as seen through legislation and other legal changes, prison REITs are a risky investment for investors. Although GEO and CoreCivic have taken many steps to insulate themselves from declining popularity with the general public and the loss of multimillion dollar contracts, their rebranding and refocusing efforts may still come up short if they are unable to respond to the calls for the betterment of patient and inmate care. As a result, though the results of the 2024 presidential election are yet unknown, it seems that even if a future presidential administration were to reverse the sweeping Biden-era executive order, judicial reprimand and public displeasure for private prisons may still bring about the end of private prisons as we know them today.


[1] Notably, at least one scholar challenges this framework and criticizes the over-emphasis of the War on Drugs on inmate population growth. See generally, Bill Keller, Everything You Think You Know about Mass Incarceration is Wrong, The Marshall Project (Feb. 9, 2017),

[2] Although this paper references these ideas in the past tense, its contemporary application is inescapable and yet a bit outside the scope of this analysis.

[3] War on Drugs, (May 31, 2017),

[4] “Investor Bulletin: Real Estate Investment Trusts,” December 2011, Office of Investor Education and Advocacy, U.S. Securities and Exchange Commission. Accessible at

[5] Matthew Bechard, How Do REITs Work? Nareit, (Sept. 21, 2017),

[6] Id.

[7] Matt Holden, Real Estate REITs in your Portfolio: The Investor vs the Landlord, Regent Atlantic (March 3, 2020),

[8] Id.

[9] Id.

[10] REIT Industry Timeline, Nareit,

[11] Id.

[12] GEO Group, Inc. History. Accessible at

[13] Martin Tolchin, Privately Operated Prison in Tennessee Reports $200,000 in Cost Overruns, New York Times (May 21, 1985),

[14] CoreCivic Change in Structure and Capital Strategy Opens New Opportunities, CoreCivic Press Release (Aug. 6, 2020, 11:36 AM),

[15] Jeff Ostrowski, Prison Operator GEO Group to End REIT Status, Commercial Observer (Dec. 3, 2021, 8:00 AM),

[16] The Corrections Corporation of America, By the Numbers, Mother Jones (July 2016),

[17] Id.

[18] The website “As You Sow” can track one’s investments and flag them for investing in prisons, deforestation, gender inequity, and other potential concerns.

[19] Brian Lehrer Show, Who Invests in Private Prisons? We All Do, wNYC (May 4, 2021),

[20] Rich Duprey, Did President Biden Just Kill Off CoreCivic and GEO Group? The Motley Fool (Feb. 3, 2021),

[21] Exec. Order No. 14,006, 86 Fed. Reg. 7483 (2021).

[22] Max Rivlin-Nadler, Private Prison Companies Pursue Creative Workarounds to Biden Executive Order, The Intercept (Oct. 22, 2021),

[23] Rich Duprey, Did President Biden Just Kill Off CoreCivic and GEO Group? The Motley Fool (Feb. 3, 2021),

[24] Supra, n. 51.

[25] Id.

[26] U.S. Reverses Obama-Era Move to Phase Out Private Prisons, Reuters (Feb. 23, 2017),

[27] Renae Merle, Wall Street Pulled its Financing. Stocks have Plummeted. But Private Prisons Still Thrive, The Washington Post (Oct. 3, 2019),

[28] Id.

[29] Id.

[30] 2021 Press Release,

[31] Corrections Corporation of America Rebrands as CoreCivic, Press Release: Oct. 28, 2016 at 12:53 PM, Accessible at

[32] Michael Rigby, Wackenhut Changes Name to Geo Group, Politics Remains the Same, Prison Legal News (June 15, 2004),

[33] Supra, n. 54.

[34] Id.

[35] CoreCivic Announces Acquisition of 540,566 SF Social Security Administration Facility in Baltimore, MD, Press Release: Aug. 23, 2018. Accessible at

[36] David Remnick, Ten Years After ‘The New Jim Crow, The New Yorker (Jan. 17, 2020),