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Corrections Corporation of America Message Board

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  • newMK newMK Apr 20, 1999 8:59 PM Flag


    Yes, PZN was formed as a captive REIT for CCA.
    However, upon the merger completion, CCA became PZN. So,
    the captive becomes the captor. OPCO is the captive
    of PZN. Some would argue that the market value of
    the stock has suffered because the market perceives
    PZN to be the captive of the privately held OPCO.
    Such a perception is wrong, IMO. OPCO is totally
    dependent on PZN. PZN can make OPCO disappear at any time,
    simply by merging with it.

    Old CCA (and new PZN)
    always pursued a bricks and mortar strategy (WHC is
    still trying to catch up). As you of all people should
    be most aware (by your postings), the management
    side is frought with problems. What is unchanging is
    the acute shortage of beds for prisoners. If OPCO
    loses a mgmt contract in a PZN owned facility, where do
    you think the prisoners will go? Chances are they
    will stay in the PZN faility and be managed by either
    another private entity or by the government. I suspect
    the government would not balk at a lease value based
    on $75,000 per bed.

    Remember, CCA got to
    where it was for a reason: there was a shortage of
    prison beds. There still is. That doesn't change
    wheteher or not you like CCA or PZN or REITs or Doc or
    Doc is telling us that as the "market" for beds
    evolves, the capital intensive strategy is the way to go.
    I believe he can read this better than his
    competitors, and that he can continue providing a
    product/service that appeals to governments.

    Saying PZN is
    dependent on OPCO to make lease payments is too
    superficial. PZN is dependent on governments needing beds.
    OPCO is a conduit, and will be less important as such
    in the future as PZN leases directly to the
    government. OPCO's just there to meet REIT requirements.

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