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  • goprivate_2000 goprivate_2000 Sep 8, 2000 12:13 PM Flag

    Good News for Investors (Part 2)

    Part 2
    By Brian Edwards and Jill Ward

    Chicago Tribune
    Sept. 6, 2000

    One of the
    industry's biggest hurdles has been its need for capital.
    Offender management companies historically need $2 in
    capital for each $1 in revenue for privately owned
    prisons, and capital has been very hard to find lately,
    says analyst James Macdonald of Chicago-based

    First Analysis Securities.

    That's compounded by
    the fact that while 80 percent of new prison projects
    require private money,only 20 percent succeeded in
    that funding. Prison Realty Trust, along with its
    parent company, Corrections Corp. of America(CCA),
    controls 50 percent of the market share, but the company
    is troubled.

    The fiasco began in 1997,when
    CCA got rid of its real estate assets through an
    initial public offering of a real estate investment trust
    (REIT), naming the new company CCA Prison Realty Trust.
    Investors loved the business structure of REITs, and the
    stock did very well. But CCA stock plummeted, and
    management decided to buy back the new company. Activist
    investor groups cried conflict of interest, turning the
    situation into the corporate equivalent of a prison

    Restructuring is ongoing at Prison Realty. In
    June, the company announced it plans to merge CCA into
    a wholly owned subsidiary of Prison Realty Trust
    and drop its REIT status. Macdonald rates the stock
    as a "hold," noting that lingering questions have
    cast a shadow
    over Prison Realty Trust's
    > The outlook for Wackenhut is
    better, according to Macdonald, but the company's
    long-standing clean record was recently marred due to bad press
    over several inmate killings and other problems in New
    Mexico. To neutralize these problems, Wackenhut has been
    spending to improve operations. This, combined with higher
    insurance costs, has reduced earnings, which are expected
    to be flat in 2000. Still, Macdonald rates it as a
    "strong buy."

    "Wackenhut has very good management
    and the most financial flexibility," Macdonald said.
    "It's a very conservatively run facility, and I expect
    very good growth."

    Cornell Companies, which
    seemed to have weathered 1999 better than the rest of
    the companies, still faces problems. The company is
    fully leveraged with debt, and the shortage of capital
    has slowed its acquisition strategy.

    Macdonald noted Cornell holds a $200 million portfolio of
    real estate that may support a sale-leaseback
    transaction, where it
    could raise capital by selling its
    owned property to other buyers who would then lease the
    property back to Cornell. Cornell also recently signed a
    three-year management contract in New Mexico.

    Macdonald says that Cornell has good management and is
    smaller, so it can grow faster. He likes the fact that the
    company operates in several different sectors -- adult,
    juvenile and halfway houses -- so it can grow without
    heavy capital investment. He currently rates the
    company as a "strong buy."

    "On the downside, it
    is very highly leveraged," he said. "On the good
    side, Cornell owns its own real estate and is selling
    at less than the value of its properties."

    Other companies involved in the corrections industry
    include Correctional Properties Trust (NYSE: CPV),
    Res-Care, Inc. (Nasdaq:RSCR) and Children's Comprehensive
    Services, Inc. (Nasdaq: KIDS).

    Properties Trust acquires correctional and detention
    facilities from both private prisons and governmental
    forming a REIT. Res-Care, Inc. has two divisions:
    one that serves the disabled and one that works with
    at-risk and troubled youths. Children's Comprehensive
    Services and its subsidiaries work with government
    organizations to provide a variety of services to troubled

    Of the three, Macdonald believes the outlook for
    Correctional Properties Trust is the most

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    • Dear Goprivate_2000:

      Thanks for news
      post. Everything looks good for WHC right now. The
      fundamentals, the news,
      the financials, and the chart. The
      technical analysts would report the following:

      Moving Average Convergence/Divergence (MACD) indicates a
      Bullish Trend.
      2. Chart pattern indicates a Strong
      Upward Trend.
      3. Relative Strength (77%) is
      4. Up/Down volume pattern indicates that the stock
      is under Accumulation.
      5. The 50 day Moving
      Average is rising which is Bullish.
      6. The 200 day
      Moving Average is flat, but if it starts to rise, look
      out above!
      7. Look for Support at


      Look at the 200-day avg. Flattening out and ready to
      slowly take off!

      Best ... Lisa

    • W-(ell) H-(olly) C-(ow)!

      Very nice
      article you found and posted GOPRIVATE 2000 (hmmm, what a
      name like that, I`m wondering how you really feel
      about this company?). The problem is I`m sure this
      "strong buy" rating will cause a plunge in price
      tomorrow. WHC aka P.O.S. doesn`t like good news, us
      oldtimers (longs) know that. Last weeks BUSINESS WEEKS
      article (as sucky as it was), actually caused a slight
      increase in price. This weeks CHICAGO TRIBUNE article (as
      pleasant as it was), will sure cause a crash.

      MANBO - Nice to see you are still the guru of the board
      after all these years. I envy your patience and wonder
      who is supplying you with your endless supply of

      EASILYCONFUSED - I`m sure you still jump in and our of here to
      read these posts, so a quick "hello" to you. YES, I`m
      still in, and I`m still chanting ...... just get me to
      14 ..... just get me to 14 .... just get me to 14.

      • 1 Reply to StkrePETER
      • Peter, good to hear from you, those days are
        over, this company has survived a great deal of
        adversity. Since June 13th. has started on a long term
        upwards move good to have you on board. Yes Peter was not
        eassy to sit back and watch the events and troubles
        unfold, as my losses mounted. As a matter of fact at
        times felt a little disturbed. This no longer Infant
        industry, now seat back and watch the pendulum swing back
        the other way double your position, and make you some
        eassy money.....(smiles).

24.28+0.66(+2.79%)Oct 21 4:03 PMEDT