DHS Buys Two California Detention Centers for $1.5 Billion

The Department of Homeland Security purchased the Otay Mesa Detention Center and the California City Detention Facility from CoreCivic for a total of $1.5 billion. The transaction closed on July 2. DHS paid $739.2 million for the 1,994-bed Otay Mesa facility in San Diego County and $732.6 million for the 2,560-bed California City facility in Kern County.

The company expects to receive about $1.1 billion in net proceeds from the sale.

CoreCivic will continue to operate both facilities under contracts with U.S. Immigration and Customs Enforcement. The California City contract runs through August 2027 and the Otay Mesa contract runs through December 2029. The company said the contracts could be renegotiated now that the federal government owns the properties.

CoreCivic is also in preliminary talks with ICE about selling additional facilities.

The 2025 federal budget allocates about $170 billion for immigration enforcement and detention, including $45 billion to expand detention capacity through 2029. The purchases are part of a broader federal effort to increase detention capacity while reducing reliance on privately owned facilities.

Local officials in several states said they learned about the purchases only after the deals had closed. In California, both facilities have faced scrutiny from Democratic officials over detention conditions.

County sued DHS and CoreCivic, alleging county health inspectors were denied access under a 2024 state law. A federal judge later ordered the facility to allow inspections. CoreCivic and GEO Group are separately challenging California's inspection law.

The California City facility is also the subject of a lawsuit alleging it opened without required local permits. Attorney Grisel Ruiz said the sale does not resolve those concerns. "The sale to DHS doesn't change the fact that CoreCivic must still lawfully operate the facility," Ruiz said.

CoreCivic said both facilities were independently appraised under federal standards before the sale. The company plans to use the $1.1 billion in net proceeds to reduce debt, including retiring $238.5 million in senior notes due in 2027.