Geo Group moves forward with REIT conversion plans

The Geo Group moves forward with plans to convert into an REIT, issuing special dividend

Associated Press

BOCA RATON, Fla. (AP) -- The Geo Group Inc. said Thursday that it is moving forward with plans to convert into a real estate investment trust and said it will issue a special dividend.

The private-prisons operator said its board unanimously authorized Geo to take all necessary steps, including the sale of some health care assets, that would set the business up to operate under the IRS's real estate investment trust rules.

Geo said the decision comes after a thorough analysis of ways to maximize shareholder value, including alternative financing, capital and other strategies. While Geo has not received a ruling from the IRS as to its REIT status, it is taking the necessary steps to qualify as one in 2013.

Real estate investment trusts receive special tax consideration. GEO must make several organizational changes and sell its health care assets to qualify, as federal rules prohibit REITs from operating health care businesses.

"We believe these actions will enable our shareholders to begin enjoying the benefits of REIT status as soon as possible," George Zoley, GEO's chairman, founder and CEO said in a statement.

The company said at the end of November that it may issue a special dividend payment before the end of the year but that decision was pending board approval tied to the REIT decision.

Geo said Thursday that it will issue a special dividend of $5.68 per share that will be paid on Dec. 31 to shareholders of record as of Dec. 12. Shareholder may elect to receive payment of the special dividend either in cash or in shares of Geo common stock. However, the company will limit the total cash payments to shareholders.

A number of companies are issuing special dividends or moving up payment dates for quarterly dividends ahead of expected increases in taxes for dividend income next year.

Geo will hold a lottery for those who elect to receive cash and cap its cash payments from the lottery pool at approximately $7.35 million. The remaining shareholders opting for cash will receive stock and a portion of the available cash.

Geo expects to incur $15 million to $20 million in one-time REIT conversion costs and charges, the bulk of which will be incurred in the fourth quarter of 2012.

The company said if it takes the steps approved by the board, it will be able to operate in compliance with 2013 REIT rules and does not need to receive a final private letter ruling from the IRS before that time to do so. Geo said it will continue to pursue a private letter ruling from the IRS affirming its ability to operate as a REIT.

Geo must get shareholder approval of some of its steps and will hold a special meeting of shareholders in the first half of 2013.

Shares jumped more than 6 percent to $31.30 in after-hours trading. Its stock gained 30 cents to close regular trading at $29.44.

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