Good day, and welcome to the CoreCivic's Third Quarter 2018 Earnings Conference Call. Today's conference is being recorded. [Operator Instructions] At this time I would like to turn the conference over to Mr. Cameron Hopewell, Managing Director of Investor Relation. Please go ahead sir.

Thank you Ryan. 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. During today's call, all 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 third quarter 2018 earnings release and in our Securities and Exchange Commission filings, including forms 10-K, 10-Q and 8-K reports. You are also cautioned that any forward-looking statements reflect management's current view 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 that we have on our Investors page at www.corecivic.com. With that, it's my pleasure to turn the call over to our President and CEO, Damon Hininger.

Thank you, Cameron. And good morning and thank you to everyone for joining our third quarter 2018 conference call today. We're also joined here in the room by our Vice President, Finance, Bryan Hammonds. CoreCivic is a diversified real-estate investment trust specialized in delivering government real-estate solutions to serve the public good. We are the country's largest private owner of government lease real-estate assets with a 104 facilities totally in over 17 million square feet of real-estate in a 35-year history of delivering a broad range of solutions to help solve tough government challenges in flexible cost-effective ways. Our assets generate a consistent cash flow stream underwritten by investment grade government tenants. We have three complementary business segments each of which is anchored in providing specialized real-estate to government tenants. Our safety segment focuses on corrections and detention facility ownership and management and includes 51 correctional and detention facilities with a design capacity of nearly 73,000 beds. Our community segment is a growing network of residential reentry centers that helps address America's recidivism crisis and includes 26 residential reentry facilities with a design capacity of 5,214 beds. Finally our property segment is a quickly growing portfolio of mission critical government leased properties that as of the end of the third quarter includes 27 properties representing nearly 2.3 million square feet of real-estate. Across all of our segments we have active agreements with over a 125 government agencies that have a variety of core missions. This provides meaningful diversification not only in our real-estate assets but also in our customer base. Each of our business segments leverage core competencies we have developed in delivering real-estate solutions and each has a significant runway for continued growth. As we continue to execute on our strategies for growth in each business segment, we expect…

Thank you Damon and good morning everyone. In the third quarter we generated a normalized FFO of $0.58 per share compared to our guidance range of $0.57 to $0.59 and AFFO total $0.54 per share compared to our guidance range of $0.55 to $0.57. Adjusted EBITDA of $99.7 million came in at the midpoint of our guidance for the third quarter. Although FFO per share was in line with our guidance, our third quarter results were negatively impacted by higher salary expenses than forecasted due to retention of staff at our Tallahatchie facility in Mississippi and at our La Palma facility in Arizona. We retained higher staffing levels to ensure a smooth transition for two proposals, Vermont and Puerto Rico, that could potentially utilize approximately 1,700 beds in the aggregate that became available due to declines in California populations of these facilities or to be ready for opportunities to utilize the available capacity under existing contracts. While this decision created some inefficiencies and negatively impacted operating margins during the quarter, retention of experienced staff is important to ensuring an expedited, efficient and high-quality transition when we are able to secure new opportunities for existing capacity. We have successfully secured new contracts in the past when we have retained staff like this to position us for growth prospects. On September 19th, we announced we did win the contract award from Vermont to care for up to 350 inmates at our Tallahatchie facility. We were also able to accept U.S. Marshals prisoners quickly at our Tallahatchie facility following a new contract award in June and ICE detainees quickly at our La Palma facility following a new contract award in July where we retained staff despite reductions in California populations. We remain optimistic about the additional contract award from the government of Puerto…

Thank you, Dave. Before we move to Q&A, I want to take a moment to recognize our employees who are teachers, chaplains, nurses, mothers, veterans and many others. These are really good people doing great work for our government partners and the individuals entrusted in our care. You know over the last five years here at CoreCivic, we have held more than 38,000 individuals in our care further their educations by earning GED and industry recognized certifications that prepares them to restart their lives but also as studies have shown they are 40% less likely to come back to prison. So, it's not last on me that to have this type of success of helping people get their lives back on track, it takes a talented and passionate team making reentry at Day one priority. So, to the CoreCivic's team, I'm sincerely honored to serve alongside you all and I'm grateful for all of your efforts. So, Ryan, we'll turn it over you now for Q&A.

Thank you. [Operator Instructions] It looks like our first question will come from Kevin McClure with Wells Fargo Securities.

Hey, great. Thanks, good morning. Thanks for taking the question. I'm on a pocket, so I apologize if I missed a couple of things. But Dave, you said on toward at the end of your script that you are looking to finance some of the new office acquisitions on encumber basis with the balance sheet capacity, is that correct?

That is correct, yes, for the most part. And we're finding attractive acquisitions like the 12 property portfolio that we bought in July, was a 10% cap rate. The national archives and records administration property was a 15% cap rate. So, to the extent, we continue to identify properties like these, I think that narrow buildings a little bit of an outsized cap rate. But to the extent we're able to find opportunities like these where the cap rates exceed our cost of capital, we will find at the mark of our corporate balance sheet.

Yes. And I will just add to it. This is Damon, that we have been pleasantly surprised by the opportunities for these type of properties that have these really nice cap rates. We've mentioned the two that we saw in here recently the 10% for the portfolio and the 15% for the property up in Ohio. And Dave and I actually just said this together yesterday when we did our build review on potential transactions. We've been really pleased by the amount of inbound interest we're seeing for these properties that are kind of unique, maybe have some complexity, maybe have some CapEx and these kind of Day one. We can quickly and efficiently go in with our real-estate team, take a look at these properties and be now efficient buyer but also kind of do whatever the needs are, is it renovation or expansion or improvement very quickly for the tenants. So, can't put a complete number to it but I think we've been pleasantly surprised in kind of this M&A market that we've got these opportunities for some nice returns for these transactions.

Got it. And how many people would you say you're bidding against for some of these properties as there's some fairly high cap rates for office assets -- keeping the market.

Yes. That's a great question. And I think that's I think that's kind of the opportunity there is there really is much competition. I think you got some of these properties where kind of these typical owners who maybe just looking at just the return but don’t have any kind of expertise to evaluate not only the real-estate but also have the kind of deep government relations expertise we got both at the federate state and local level where we can quickly pick up the phone and talk to some of these tenants. We're seeing not a lot of competition. So, that allows us to getting to be pretty thoughtful on the price and get some of these good returns. Have anything to add to that?

And I guess, Kevin, mean to say expectations at every asset we're going to buy between 10% or 15% cap rates as I mentioned in my script. What we're evaluating properties with cap rates typically around 7%, maybe to 10% except the narrow buildings are little outsized that and we don’t expect to see many of those. But to the extent we're able to find cap rates between 7% and 10%, a good number of those or perhaps a majority in that rate, in that cap rate, we would be able to find this out of our corporate balance sheet.

Got it, okay. And then, I know it's too early and haven’t released 2019 guidance. But could you maybe give us a preliminary view on how much you're willing to spend on acquisitions in the next year in CapEx?

Yes, cap -- we're going to the budget process right. See, right it's a little bit premature to talk about 2019 guidance or capital expenditures. We do have an active pipeline, I think Damon said in his script you're evaluating a couple of $100 million. Obviously that might kind of close on a couple of $100 million. But what's interesting to me is the pipeline turns over relatively quickly. So, we're seeing new deals coming online every week. There's some number of attractive opportunity, so not quite ready to disclose what we'd expect for an acquisition pipeline. We actually haven’t done that in the past but I think as we go into 2019 that might be something we'll be willing to do. We really haven’t matured the M&A pipeline in this market. And I think it's getting there to the point where we may be able to do that and provide some guidance in February.

Got it, okay. And then, last one from me just kind of switching gears talking about integration, integration side of your business. Obviously today's the Election Day. Do you anticipate any movement from Congress in the lame duck session to address integration? And then also I mean it clearly has a need that a caravan on the way, apprehensions have been elevated, the Congress has traditionally been the bottleneck and reluctance to find additional detention capacity or a meaningful expansion and tension capacity. Do you expect that to change in the lame duck or the next Congress?

Yes, this is Damon. Let me give you a couple of observations. I think one just to highlight we are an active conversations with ICE really going back 35 years but here more notably here last 24 months. It's almost a daily conversation kind of what their needs are with the Southwest border, as I think you know also we've always there if they've got a kind of natural disaster or a hurricane they're preparing for where they need to make a facility. So we're constantly talking about an emerging needs either on the southwest border or something else unique happening within their system. So I see that continuing even after today's election. I think, that's going to continue going into the lame duck session. The second part of your question, I think is a little bit about the kind of funding and the bottleneck potentially on funding from the Congress on increased needs. As you know, the current funding bill expires on December 7th. It's our view that probably after today there will be probably some activity from now till the end of this year, into this calendar year, I should say on a funding bill. And we think there’s probably a pretty good chance that the funding bill is for the full fiscal year, so they complete a fiscal funding bill through September 30th next year. And I think during that deliberation with the House and Senate and administration, there is probably a likely discussion about kind of immigration needs and what’s going to happen ourself with border, and is there increased funding that needed during this coming year or this current fiscal year. Anything to add to that, David?

Not really.

Okay. And then A final question for me. Has your thoughts around family detention changed? Do you guys have more appetite to expand family detention purpose built capacity, or are you content with the South Texas facility as the sole location?

Let me -- let me first say that our South Texas facility that's now been operational about four years, we've been really pleased with the operations. And I think if you talk to ICE leadership and folks within the field office, they've been very pleased also. We think it's really no other facility like it in the United States that is built in day one for this mission. It's a very safe and humane way to house these families that are coming across the southwest border. And with that, that if there is increased needs from ICE for that type solution, we think, we've got potentially some expansion capacity at that facility to kind of meet their needs. Nothing to report on that today, again, it’s an overarching kind of conversation with ICE on kind of overall needs that they've got potentially now or forecasted at any point or time, so we're always talking about you know solutions we could do it daily, but also at other facilities that we've got within the other portfolio. So I'm very pleased with our operation and if there was an increased need for him from ICE potentially you can you add [Indiscernible] we think we're well equipped to do that and happy to do that.

I mean, you have seen the news articles and presumably you've seen the September numbers on family apprehensions. And they are off the charts. So there is certainly a high demand for that facility at this point.

Got it. Thank you for the time.

Thanks, Kevin.

Thank you. [Operator Instructions] We will pause momentarily. This concludes the Q&A session as there are no more questions at this time. I will turn the conference back over to Damon Hininger.

Thank you, Ryan. I would like to thank everyone for joining us on today's call and we look forward to reporting to you our full year results in February and provide an initial outlook for 2019. Thanks again.

Thank you. Ladies and gentlemen, thank you for joining today's conference call. The call is now concluded. Please disconnect your phones and have a great day.