<PAGE>   1
                                                                   EXHIBIT 10.7


                                 LEASE AGREEMENT
                                    (HOUSTON)


         THIS LEASE AGREEMENT ("Lease") dated as of the 18th day of July, 1997,
by and between CCA PRISON REALTY TRUST, a Maryland real estate investment trust
("Landlord") and CORRECTIONS CORPORATION OF AMERICA, a Tennessee corporation
("Tenant").

                                    RECITALS

         WHEREAS, Tenant (or one of Tenant's affiliates) has concurrently
conveyed to Landlord the property described in Exhibit A hereto, and Landlord
and Tenant desire that Landlord lease such property back to Tenant; and

         WHEREAS, Landlord and Tenant have entered into a Master Agreement to
Lease of even date herewith (the "Master Agreement") which sets forth certain
agreements of the parties with respect to the lease of various properties
including the property that is the subject of this Lease;

         NOW, THEREFORE, in consideration of the premises and of their
respective agreements and undertakings herein, Landlord and Tenant agree as
follows:

                                    ARTICLE I
                                PREMISES AND TERM

         1.1 Leased Property. Landlord hereby leases to Tenant and Tenant leases
from Landlord the Land located in the City of Houston, Harris County, State of
Texas, described in Exhibit A hereto, and all Improvements, Fixtures, and
Personal Property thereon or thereto (each as defined in the Master Agreement,
and, together with said Land, the "Leased Property"); such Leased Property
collectively known and described at the date hereof as the Houston Processing
Center;

         SUBJECT, HOWEVER, to the lien of the mortgage debt described in Exhibit
B hereto, if any, and to all easements, liens, encumbrances, restrictions,
agreements, and other title matters existing as of the date hereof and listed in
Exhibit C hereto (collectively the "Permitted Exceptions").

         1.2 Term. The initial term (the "Fixed Term") of the Lease shall be for
a fixed term of twelve (12) years commencing on July 18, 1997 (the "Commencement
Date") and expiring on July 17, 2009 (the "Expiration Date"). The Term of this
Lease may be renewed on the mutual agreement of Landlord and Tenant as follows:
(i) provided that Tenant gives Landlord notice on or before the date which is
six (6) months prior to the Expiration Date, upon the mutual agreement of
Landlord and Tenant, the Lease shall be renewed for one (1) additional five (5)
year term (the "Extended Term") on the same terms and provisions (other than
with respect to renewal) as the Fixed Term, as set forth in the Lease; (ii)
provided that Tenant gives Landlord notice on or before the date which is six
(6) months prior to the expiration of the Extended Term, upon the mutual
agreement of Landlord and Tenant, the Lease shall be renewed for one (1)
additional five (5) year term (the "Second Extended Term") on the same terms and
provisions (other than with respect to renewal) as
<PAGE>   2
the Fixed Term, as set forth in the Lease; and (iii) provided that Tenant gives
Landlord notice on or before the date which is six (6) months prior to the
expiration of the Second Extended Term, upon the mutual agreement of Landlord
and Tenant, the Lease shall be renewed for one (1) additional five (5) year term
(the "Third Extended Term") on the same terms and provisions (other than with
respect to renewal) as the Fixed Term, as set forth in the Lease. Tenant's right
to so extend the Term of the Lease is conditioned on Landlord's prior approval
of the Extended Term, Second Extended Term, or Third Extended Term, as the case
may be. The term "Term" used in this Agreement means the Fixed Term, Extended
Term, Second Extended Term and Third Extended Term, as appropriate. The term
"Lease Year" means each twelve (12) month period during the Term commencing on
January 1 and ending on December 31, except the first Lease Year of each Lease
shall be the period from the Commencement Date through the following December
31, and the last Lease Year shall end on the date of termination of the Lease if
a day other than December 31. Landlord may terminate this Lease prior to the
expiration of the Term hereof, at any time following the date which is five (5)
years from the date hereof, upon written notice to Tenant not less than eighteen
(18) months prior to the effective date of such termination.

                                   ARTICLE II
                                      RENT

         2.1 Base Rent. Tenant shall pay Landlord Base Rent for the Term in
advance in consecutive monthly installments payable on the first day of each
month during the Term, the Extended Term, Second Extended Term and the Third
Extended Term, commencing on the Commencement Date, in accordance with the Base
Rent Schedule attached hereto as Exhibit D. If the Commencement Date or the
Expiration Date shall be other than on the first day of a calendar month, the
initial (or final, as appropriate) monthly installment of Base Rent payable
pursuant to the Lease shall be prorated for the number of days until, in the
case of the initial monthly installment, the first day of the calendar month
following the Commencement Date and, in the case of the final monthly
installment, the Expiration Date.

         2.2 Additional Rent. The Base Rent shall be subject to such increases
over the Term as determined pursuant to Section 2.02 of the Master Agreement.

         2.3 Other Additional Rent. Tenant shall also pay all Other Additional
Rent with respect to the Leased Property, as set forth in the Master Agreement.

                                   ARTICLE III
                           OTHER TERMS AND CONDITIONS

         3.1 Master Agreement Incorporated Herein. All provisions of the Master
Agreement (except any provisions expressly therein not to be a part of an
individual lease of leased property) are hereby incorporated in and are a part
of this Lease of the Leased Property.


                                        2
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         3.2 Recordation. At the request of Landlord or Tenant, a short form
memorandum of this Lease may be recorded in the real estate records of any
county which Landlord or Tenant deems appropriate in order to provide legal
notice of the existence hereof.

         IN WITNESS WHEREOF, the Landlord and the Tenant have executed this
Lease or caused the same to be executed by their respective duly authorized
officers as of the date first set forth above.

                                    CCA PRISON REALTY TRUST


                                    By:
                                       -----------------------------------------

                                    Title:
                                          --------------------------------------


                                    CORRECTIONS CORPORATION OF AMERICA


                                    By:
                                       -----------------------------------------

                                    Title:
                                          --------------------------------------








                                        3
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                                    EXHIBIT A

                      Legal Description of Leased Property


                          Metes and Bounds Description
                        5.843 Acres (254,531 Square Feet)
                        Portion of Reserve "C" Block One
             World/Houston Section One International Business Center
                          William Lloyd Survey, A-1407
                              Harris County, Texas

Being a tract or parcel containing 5.843 acres (254,531 square feet) of land
situated in the William Lloyd Survey, Abstract No. 1407, Harris County, Texas,
being out of and a part of Reserve "C" Block One of World/Houston Section One
International Business Center, recorded in Volume 278, Page 25 of the Harris
County Map Records (H.C.M.R.) and being the same called 5.840 acre tract
described in deed recorded under Clerk's File Number J194317 of the Harris
County Official Public Records of Real Property (H.C.O.P.R.R.P.); said 5.843
acre tract being more particularly described by metes and bounds as follows with
all bearings referenced to said subdivision plat:

Beginning at a 5/8-inch iron rod found for the northeast corner of said Reserve
"C" and the herein described tract, being the southeast corner of that certain
called 6.6031 acre tract, described in deed recorded under Clerk's File Number
G291174 of said H.C.O.P.R.R.P. and being in the west line of Lot 10 of Block
One, Greenlee Addition, a subdivision in Harris County of record in Volume 40,
Page 32 of said H.C.M.R.:

THENCE, South 02 degrees 51 minutes 21 seconds East, 485.42 feet along the line
common to said Reserve "C" and said Greenlee Addition to a 3/4-inch galvanized
iron pipe found for the northeast corner of that certain called 5.50 acre tract
described in deed recorded under Clerk's File Number H038206 of said
H.C.O.P.R.R.P., and being the southeast corner of the herein described tract;

THENCE, South 89 degrees 07 minutes 09 seconds West, departing the west line of
said Block 1 of Greenlee Addition and along the north line of said 5.50 acre
tract, 500.50 feet to a 3/4-inch galvanized iron pipe found for the common west
corner of said 5.50 acre tract and the herein described tract, and being in the
existing east right-of-way line of Export Plaza Drive (80 feet wide);

THENCE, North 02 degrees 51 minutes 27 seconds West, 104.37 feet along the
existing east right-of-way line of said Export Plaza Drive to a 3/4-inch
galvanized iron pipe found for the beginning of a tangent curve to the left;

THENCE, Northwesterly, 172.82 feet along the existing east right-of-way line of
said Export Plaza Drive, the existing north right-of-way line of Consulate Plaza
Drive (80 feet wide) and along the arc of said curve to the left (Central Angle
= 70 degrees 43 minutes 34 seconds, Radius = 140.00 feet, Chord Bearing and
Distance = North 38 degrees 13 minutes 14 seconds West, 162.05 feet) to a 5/8-
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inch iron rod found for a common south corner of Reserves "B" and "C" of said
World/Houston Section One International Business Center;

THENCE, North 16 degrees 24 minutes 59 seconds East, 246.82 feet departing the
existing north right-of-way line of said Consulate Plaza Drive and along the
common line between said Reserve "B" and "C" to a 5/8-inch iron rod found for
the common corner of Reserves "A", "B" and "C" of said World/Houston Section One
International Business Center, being the southwest corner of said 6.6031 acre
tract and being the northwest corner of the herein described tract from which a
found 8-inch square cross-tie fence corner post bears South 52 degrees 12
minutes 39 seconds East, 0.74 feet;

THENCE, North 87 degrees 17 minutes 38 seconds East, 512.53 feet along the
common line between the herein described tract, Reserve "C" and said 6.6031 acre
tract to the POINT OF BEGINNING containing 5.843 acres (254,531 square feet) of
land, more or less.

Compiled by:
SURVCON INC.
Job No. 5980-01
April 14, 1997
D-2










                                                       Houston Processing Center
                                                    Houston, Harris County Texas
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                                    EXHIBIT B

                                  Mortgage Debt

                       Property: Houston Processing Center



This property is subject to the following Mortgage Debt:

         That certain deed of trust of First Union National Bank of Tennessee,
as Administrative Agent, dated July 18, 1997.
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                                    EXHIBIT C

                              Permitted Exceptions

                       Property: Houston Processing Center

1.       Standby fees, taxes and assessments by any taxing authority for the
         year 1997, and subsequent years.

2.       The following restrictive covenants of record itemized below: Volume
         278, page 25 of the Map Records of Harris County, Texas and those
         Restrictions filed for record under Clerk's File No. F934983, as
         corrected and refiled under Clerk's File No. F944735, and as amended by
         instrument filed under Clerk's File No. G698447, all of the Official
         Records of Real Property of Harris County, Texas.

3.       A water line easement 10 feet wide along the westerly line of subject
         property, which abuts Consulate Plaza Drive, and/or Export Plaza Drive,
         as reflected on the map or plat thereof, recorded in Volume 278, page
         25 of the Map Records of Harris County, Texas.

4.       An unobstructed easement 16 feet wide, together with an unobstructed
         aerial easement 5 feet, 6 inches wide, beginning at a height of 16 feet
         3 inches above the ground, and extending upwards and outwards on an
         inclined plane, to a height of 18 feet 6 inches above the ground,
         located south and west of and adjoining the heretofore cited 16 feet
         wide easement, all located along the north and east lines of subject
         property, as granted to Houston Lighting and Power Company by
         instrument filed under Clerk's File No. F941406, and as corrected by
         instrument filed under Clerk's File No. G120555, and as further
         ratified by instrument filed under Clerk's File No. G769967, all of the
         Official Records of Real Property of Harris County, Texas.

5.       Blanket easements for ingress and egress, for installation,
         maintenance, repair and removal of public utilities, as set out in the
         Declaration filed under Clerk's File No. F934983, and as refiled under
         Clerk's File No. F944735, and as amended by instrument filed under
         Clerk's File No. G698447, all of the Official Public Records of Real
         Property of Harris County, Texas.

6.       An easement for drainage purposes extending a distance of 15 feet on
         each side of the center line of all natural water courses, as reflected
         by the map or plat thereof, recorded in Volume 278, page 25 of the Map
         Records of Harris County, Texas.

7.       A water line and meter easement, as granted to the City of Houston by
         instrument filed under Clerk's File No. J546727 of the Official Public
         Records of Real Property of Harris County, Texas, and being more
         particularly described by metes and bounds therein.

8.       Agreement by and between Warner Cable Communications, Inc. and
         Corrections Corporation of America for the installation, operation and
         maintenance of a Cable Television
<PAGE>   8
         System as reflected by instrument filed under Clerk's File No. N216013
         of the Official Public Records of Harris County, Texas.

9.       An unobstructed easement 10 feet wide, together with an unobstructed
         aerial easement 10 feet wide, beginning at a plane of 16 feet above the
         ground and extending upwards, located on both sides of and adjoining
         the said 10 feet wide easement, as granted to Houston Lightening and
         Power Company by instrument filed under Clerk's File No. J445703 of the
         Official Public Records of Real Property of Harris County, Texas; said
         easement(s) being further reflected and defined on Sketch No. N84-041
         attached to said instrument.

10.      A 1/16th non-participating royalty interest in and to all the oil, gas
         and other minerals in, on, under or that may be produced from subject
         property is excepted herefrom as the same is set forth in instrument
         recorded in Volume 5812, page 576 of the Deed Records of Harris County,
         Texas.

11.      All oil, gas and other minerals, the royalties, bonuses, rentals and
         all other rights in connection with same are excepted herefrom as set
         forth in instrument filed under Clerk's File No. G296822 of the
         Official Public Records of Harris County, Texas. Waiver of surface
         rights contained therein.

12.      All oil, gas and other minerals, the royalties, bonuses, rentals and
         all other rights in connection with same are excepted herefrom as set
         forth in instrument filed under Clerk's File No. F934983, and as
         refiled under Clerk's File No. F944735, and as amended by instrument
         filed under Clerk's File No. G698447, all of the Official Public
         Records of Harris County, Texas. Waiver of surface rights contained
         therein.

13.      Building set back line of 20 feet along that portion of the west
         property line abutting Consulate Plaza Drive and/or Export Plaza Drive,
         as set out on plat recorded in Volume 278, page 25 of the Map Records
         of Harris County, Texas.

14.      The subject property lies within the area designated and zoned by the
         City of Houston as the "Jetero Airport Hazard Area" (Houston
         Intercontinental Airport) and is subject to the restrictions and
         regulations imposed by Ordinance of the City of Houston, a certified
         copy of which is recorded in Volume 5448, page 421, Deed Records,
         Harris County, Texas, as amended by Ordinance No. 83-861, filed for
         record under Clerk's File No. J040968 of the Official Public Records,
         Harris County, Texas.

15.      Annual Maintenance Charge payable to World/Houston International
         Business Center Improvement Association, as set forth in instrument
         filed under Clerk's File No. F934983, and as refiled under Clerk's File
         No. F944735, and as amended by instrument filed under Clerk's File No.
         G698447, all of the Official Public Records of Real Property of Harris
         County, Texas and additionally secured by a separate, valid and
         subsisting lien, as set forth therein.
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16.      The subject property is located within the City of Houston or within
         its extra territorial jurisdiction (within 5 miles of the city limits
         but outside another municipality). It is subject to the terms,
         conditions, and provisions of City of Houston Ordinance No. 85-1878,
         pertaining to, among other things, the platting and re-platting of real
         property and to the establishment of building lines (25 feet along
         major thoroughfares and 10 feet along other streets). A certified copy
         of said ordinance was filed for record on August 1, 1991, under Harris
         County Clerk's File No. N 253886.

17.      All matters shown on the Plat of Asbuilt Survey, dated April 15, 1997,
         as revised June 17, 1997, prepared by William H. Smith, Jr., R.P.L.S.
         No. 3982, Survcon Inc., 5757 Woodway, Houston, Texas 77057, Job Number
         5980-01.
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                                    EXHIBIT D

                               Base Rent Schedule

                       Property: Houston Processing Center


         Tenant will pay to Landlord annual Base Rent of $1,500,000.00, payable
in equal monthly installments of $125,000.00.

         Base Rent for the Extended Term, Second Extended Term and Third
Extended Term shall be equal to the fair market rental value of the Leased
Property as of the respective commencement dates thereof.