<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                  FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
           SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(MARK ONE)

[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934

                  For the fiscal year ended December 31, 2001

                                       OR

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

                   For the transition period from ____ to ____
                         Commission file number 1-14031

                          CORRECTIONAL PROPERTIES TRUST
             (Exact Name of Registrant as Specified in Its Charter)

MARYLAND                                                         65-0823232
(State or Other Jurisdiction                                  (I.R.S. Employer
of Incorporation or Organization)                            Identification No.)

3300 PGA BOULEVARD, SUITE 750
PALM BEACH GARDENS, FLORIDA                                         33410
(Address of Principal Executive Offices)                          (Zip Code)

                                 (561) 630-6336
               (Registrant telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

        Title of each class            Name of each exchange on which registered

COMMON SHARES OF BENEFICIAL INTEREST,                NEW YORK STOCK
$.001 PAR VALUE PER SHARE                               EXCHANGE

           Securities registered pursuant to Section 12(g) of the Act:

                                      NONE
           -----------------------------------------------------------
                                (Title of Class)

         Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

<PAGE>
         As of March 25, 2002, the aggregate market value of the voting shares
held by non-affiliates of the registrant was approximately $127,847,000 based on
the closing price on that date of $18.08 per share. As of that date, there were
7,173,250 of the registrant's Common Shares outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

The information required by Items 10, 11, 12 and 13 of Part III of this Form
10-K is incorporated by reference to the definitive Proxy Statement of the
Company relating to the 2002 Annual Meeting of Shareholders.

Certain exhibits listed in Part IV of this Annual Report on Form 10-K are
incorporated by reference from prior filings made by the registrant under the
Securities Exchange Act of 1934, as amended.


<PAGE>


                          CORRECTIONAL PROPERTIES TRUST
                           ANNUAL REPORT ON FORM 10-K

                                      INDEX
<TABLE>
<CAPTION>

                                                                                                                    PAGE
                                                                                                                   NUMBER
                                                                                                                   ------
                                                              PART I
<S>            <C>                                                                                                  <C>
Item 1.        Business....................................................................................            1
Item 2.        Properties..................................................................................           23
Item 3.        Legal Proceedings...........................................................................           24
Item 4.        Submission of Matters to a Vote of Security Holders.........................................           24

                                                              PART II

Item 5.        Market for Registrant's Common Equity and Related Stockholder Matters.......................           25
Item 6.        Selected Financial Data.....................................................................           26
Item 7.        Management's Discussion and Analysis of Financial Condition and Results
               of Operations...............................................................................           27
Item 7A.       Quantitative and Qualitative Disclosures About Market Risk .................................           31
Item 8.        Financial Statements and Supplementary Data.................................................           31
Item 9.        Changes in and Disagreements with Accountants on Accounting and
               Financial Disclosure........................................................................           31

                                                             PART III

Item 10.       Directors and Executive Officers of the Registrant..........................................           48
Item 11.       Executive Compensation......................................................................           48
Item 12.       Security Ownership of Certain Beneficial Owners and Management..............................           48
Item 13.       Certain Relationships and Related Transactions..............................................           48

                                                             PART IV

Item 14.       Exhibits, Financial Statement Schedules and Reports on Form 8-K.............................           49
</TABLE>


<PAGE>


                                     PART I

FORWARD-LOOKING STATEMENTS:

         This report contains forward-looking statements that are based on
current expectations, estimates and projections about the business marketplace
in which Correctional Properties Trust (the "Company") operates. This report
also includes management's beliefs and assumptions. Words such as "expects",
"anticipates", "intends", "plans", "believes", "seeks", "estimates", and
variations of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions ("Future
Factors") which are difficult to predict. Therefore, actual outcomes and results
may differ materially from what is expressed or forecasted in such
forward-looking statements. The Company undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise.

         Future Factors include, without limitation, increasing competition,
including new entrants in the marketplace; the mix of tenants as it relates to
other private operators and governmental entities; governmental and public
policy changes; reliance on a single tenant for a significant portion of
revenue; interest rate risk; continued availability of financing; rental rates
sufficient to make acquisitions feasible; continued ability to pay a dividend;
and financial instruments and financial resources in the amounts, at the times
and on the terms required to support the Company's future business. These are
representative of the Future Factors that could affect the outcome of the
forward-looking statements. In addition, such statements could be affected by
general industry and market conditions and growth rates, general domestic
economic conditions including interest rate fluctuations and other Future
Factors. The Company discusses such risks in the Company's various reports filed
with the Securities and Exchange Commission.

                                       ii
<PAGE>

ITEM 1. BUSINESS.

GENERAL

         Correctional Properties Trust (the "Company") was formed in February
1998 as a Maryland real estate investment trust (a "REIT") to capitalize on the
growing trend toward privatization in the corrections industry. The principal
business strategy of the Company is to acquire correctional and detention
facilities from both private prison operators and governmental entities and to
lease such facilities to experienced correctional and detention facility
operators, including private and governmental entities under long-term,
non-cancelable, triple-net leases (leases where the tenant is required to pay
all operating expenses, taxes, insurance, structural and non-structural repairs
and other costs). The Company is the only publicly-traded REIT which focuses
exclusively on the acquisition and ownership of correctional and detention
facilities.

         On April 28, 1998, the Company completed its initial public offering
(the "IPO") of 6,200,000 common shares of beneficial interest, par value $.001
per share (the "Common Shares"). On May 13, 1998, pursuant to the underwriters'
exercise of their over-allotment option, the Company sold an additional 930,000
Common Shares, resulting in a total of 7,130,000 Common Shares outstanding. The
Company's IPO generated gross proceeds of $142.6 million and aggregate net
proceeds, after deducting the underwriting discounts and commissions and
offering expenses, of approximately $130.7 million.

         Management believes that the privatized corrections industry has the
potential for substantial growth in the United States due to increases in the
inmate population, decreases in the availability of capital for new correctional
and detention facilities and a growing acceptance of the trend toward
privatization in the corrections industry. According to the United States Bureau
of Justice Statistics ("Bureau of Justice Statistics"), the inmate population in
federal, state and local facilities in the United States has grown from 501,886
in 1980 to 2,071,686 at December 31, 2000. In addition, according to the Bureau
of Justice Statistics, as of December 31, 2000, state prison systems reported
operating at between full capacity to 15% above capacity and the federal
corrections system reported operating at approximately 31% above capacity. The
privatized corrections industry has capitalized on these favorable supply/demand
fundamentals, resulting in a substantial increase in the number of privatized
beds.

         The Company owns and leases thirteen correctional properties in nine
states with an aggregate design capacity of 7,282 beds as of December 31, 2001.

         The location and mailing address of the Company's principal executive
offices is Gardens Plaza, Suite 750, 3300 PGA Boulevard, Palm Beach Gardens,
Florida 33410. The Company's telephone number is (561) 630-6336.

2001 ACQUISITIONS

         On March 16, 2001, the Company acquired the Mountain View Correctional
Facility (the "Mountain View Facility") in Spruce Pine, North Carolina, for
approximately $25,200,000, including transaction costs, from an unrelated third
party. The 576-cell, medium security prison is leased to the State of North
Carolina, and is subject to the terms of an existing long-term, triple-net
lease, which was assigned by the previous facility owner to the Company. The
North Carolina Department of Correction operates the facility. The initial lease
on this facility, which became effective December 1998, included cash rental of
$2,768,700 during the first year of the lease, payable monthly in arrears. On
each anniversary date, the rental payment escalates in accordance with increases
in the Consumer Price Index (CPI), with a minimum increase of 3.5%, and a
maximum of 4%. The initial term of the lease is ten years, with two ten-year
renewals at the State of North Carolina's option. The lessee has the option to
acquire the facility in December 2004, for approximately $26,200,000 and for
predetermined declining amounts at the end of each subsequent lease year. The
annual lease payment is subject to appropriation by the North Carolina General
Assembly. The acquisition has been accounted for under the purchase method of
accounting. The results of operations of the Mountain View Facility have been
included in the Company's consolidated financial statements from the date of
acquisition. The Company acquired the Mountain View Facility using the proceeds
under the Bank Credit Facility, which was amended to a total capacity of
$110,000,000.

         On June 28, 2001, the Company transferred the Mountain View Facility,
subject to its mortgage, to Correctional Properties North Carolina Prison
Finance LLC ("CP North Carolina"), a wholly owned subsidiary of the Company.
Concurrently, the Mountain View Facility was refinanced using a portion of the
proceeds from the issuance of $57,535,000 of

                                       1
<PAGE>

Taxable Mortgage Revenue Bonds, Series 2001 (the "Bonds"). This refinancing
included repayment of the proceeds drawn under the Bank Credit Facility to
purchase the Mountain View Facility.

         On June 28, 2001, CP North Carolina acquired the Pamlico Correctional
Facility (the "Pamlico Facility") in Bayboro, North Carolina for approximately
$24,300,000, including transaction costs, from an unrelated third party. This
576-cell, medium-security prison is leased to the State of North Carolina, and
is subject to the terms of an existing long-term, triple-net lease, which was
assigned by the previous facility owner to the Company. The North Carolina
Department of Correction operates the facility. The initial lease on the Pamlico
Facility, which became effective in August of 1998, included annual cash rental
payments of $2,664,300 during the first year of the lease, payable monthly in
arrears. On each anniversary date of the lease, the rental payment escalates in
accordance with increases in the CPI, with a minimum increase of 3.5%, and a
maximum of 4%. The initial term of the lease is ten years, with two ten-year
renewals at the State of North Carolina's option. The State of North Carolina
has an option to acquire the facility in August 2004, for approximately
$25,230,000. At the end of each lease year thereafter, it has an option to
purchase the facility for a predetermined declining amount. The annual lease
payment is subject to appropriation by the North Carolina General Assembly. The
acquisition has been accounted for under the purchase method of accounting. The
Company acquired the Pamlico Facility using a portion of the proceeds from the
issuance of the Bonds.

         CP North Carolina, which is a fully consolidated entity of the Company
for financial reporting purposes, is a Delaware limited liability company formed
solely to issue the Bonds and acquire and own the Mountain View and Pamlico
Facilities. CP North Carolina's assets and credit are not available to pay the
debts or obligations of any other entity. The Bonds are non-recourse to CP North
Carolina and its sole member, CPT Operating Partnership L.P. Therefore, CP North
Carolina and its sole member, CPT Operating Partnership L.P., are not liable on
account of any deficiency in the event that the Trust Estate created under the
Trust Indenture for the Bonds is insufficient to repay the Bonds or the other
obligations of CP North Carolina under the Bond Documents. As the sole member of
CP North Carolina, CPT Operating Partnership L.P. will have availability on a
quarterly basis of distributions of remaining revenue proceeds of CP North
Carolina, after payment of principal and interest on the bonds, and funding of
any deficiencies in the various funds required under the Trust Indenture.

THE FORMATION TRANSACTIONS

         In connection with the consummation of the IPO on April 28, 1998, the
Company and Wackenhut Corrections Corporation ("Wackenhut Corrections" or "WCC")
engaged in a series of transactions (the "Formation Transactions") which were
designed to consolidate ownership in the Company of eight correctional and
detention facilities operated by Wackenhut Corrections (the "Initial
Facilities"), to provide a vehicle for possible future acquisitions of other
facilities which Wackenhut Corrections owns or has a right to acquire (in
addition to other facilities the Company may acquire) and to enable the Company
to qualify as a REIT for federal income tax purposes. These transactions
included the following:

         ISSUANCE OF COMMON SHARES AND REDEMPTION OF FOUNDER'S SHARES. The
Company sold 7,130,000 Common Shares in the IPO, resulting in net proceeds to
the Company of approximately $130.7 million after deduction of the underwriting
discounts and commissions and offering expenses. All of the net proceeds to the
Company from the IPO were contributed by the Company directly to CPT Operating
Partnership L.P., a Delaware limited partnership (the "Operating Partnership")
to fund the Company's investment in the Operating Partnership, in exchange for a
combined 100% interest in the Operating Partnership. The Company owns a 98%
limited partnership interest and a 1% general partnership interest in the
Operating Partnership. CPT Limited Partner, Inc. ("CPT LP"), a wholly owned
subsidiary of the Company, owns a 1% limited partnership interest in the
Operating Partnership. The Company also redeemed at cost the 1,000 founder's
shares which were issued in connection with the formation of the Company.

         PURCHASE AGREEMENT. The Company entered into and closed upon an
Agreement of Sale and Purchase (the "Purchase Agreement") with Wackenhut
Corrections, pursuant to which the Company acquired, directly or as assignee of
Wackenhut Corrections contract rights, the Initial Facilities having an
aggregate design capacity of 3,154 beds for an aggregate cash purchase price of
approximately $113.0 million.

         OPTION AGREEMENTS. The Company entered into Option Agreements with
Wackenhut Corrections, pursuant to which Wackenhut Corrections granted the
Company the option to acquire three additional correctional facilities (the
"Option Facilities") having an aggregate design capacity of 2,256 beds at any
time prior to the earlier of (i) four years from receipt of a

                                       2
<PAGE>

certificate of occupancy for the subject facility, or (ii) six months after such
facility achieves an occupancy level of 75% of the number of beds authorized
under the certificate of occupancy for the facility (the "Option Facility Option
Period"). The purchase price (the "Option Facility Purchase Price") of an Option
Facility will equal 105% (or such lower percentage as may be agreed to by
Wackenhut Corrections) of the aggregate costs related to the acquisition,
development, design, construction, equipment and start-up of such Option
Facility (which in the case of goods or services provided by Wackenhut
Corrections will not exceed the costs which would be paid therefor if purchased
from a third party in an arm's length transaction) (the "Total Facility Cost").
Two of the three Option Facilities have been purchased by the Company. As of
January 31, 2001, the Company's option has expired with respect to the third
Option Facility without the Company exercising such option.

         LEASES. Concurrent with the Company's acquisition of the Initial
Facilities, the Company leased such facilities to Wackenhut Corrections or its
affiliate -- See "Structure of the Company" -- (and Wackenhut Corrections will
continue to operate such facilities) pursuant to leases for an initial term of
10 years. Subject to certain limited exceptions, the term of each of these
leases may be extended by Wackenhut Corrections for three additional five-year
terms at a fair market rental rate as mutually agreed upon by the Company and
Wackenhut Corrections or, in the absence of such an agreement, as determined by
binding arbitration. In addition, the term of any of these leases will be
automatically extended upon expiration thereof on the same terms (including the
then applicable base rent and Base Rent Escalation (as hereinafter defined) as
reflected in the applicable lease if there is at such time an unexpired sublease
with respect to such facility. The two Option Facilities, which were acquired
were leased by the Company to Wackenhut Corrections under the same terms
(although with the Jena Facility at a different lease rate) as the Initial
Facilities. Under the terms of the leases with Wackenhut Corrections, Wackenhut
Corrections has a 30-day right of first refusal on the proposed sale by the
Company of any of the facilities leased to it.

         RIGHT TO PURCHASE AGREEMENT. The Company entered into a Right to
Purchase Agreement with Wackenhut Corrections, pursuant to which the Company has
the right, during the 15 years following the consummation of the IPO (so long as
there are any leases in force between the Company and Wackenhut Corrections), to
acquire and lease back to Wackenhut Corrections any correctional or detention
facilities which Wackenhut Corrections acquires or has the right to acquire (the
"Future Facilities"), subject to certain limited exceptions where the sale or
transfer of ownership of a facility is restricted under a facility operating
agreement or governmentally assisted financing arrangement. Under the terms of
the Right to Purchase Agreement, the Company may purchase a particular Future
Facility at any time until the earlier of (i)(a) in the case of a newly
developed Future Facility, four years from the receipt of a certificate of
occupancy for such Future Facility or (b) in the case of an already operating
Future Facility, four years from the date such Future Facility is acquired by
Wackenhut Corrections or the party from which Wackenhut Corrections has the
right to acquire such Future Facility or (ii) six months after the Future
Facility attains an occupancy level of 75% of the number of beds authorized
under the certificate of occupancy for such Future Facility, subject to certain
limited exceptions. The purchase price for each Future Facility (the "Future
Facility Purchase Price") will equal 105% (or such lower percentage as may be
agreed to by Wackenhut Corrections) of the Total Facility Cost of such Future
Facility, which may differ from the fair market value of such facility at such
time. In the case of any Future Facility acquired during the first five years
following the consummation of the IPO, the initial annual rental rate will be
the greater of (i) the fair market rental rate as mutually agreed upon by the
Company and Wackenhut Corrections, and in the absence of such an agreement, as
determined by binding arbitration, or (ii) 9.5% of the applicable Future
Facility Purchase Price. In the case of any Future Facility acquired thereafter,
the initial annual rental rate will be the fair market rental rate as mutually
agreed upon by the Company and Wackenhut Corrections or, in the absence of such
an agreement, as determined by binding arbitration. Under the terms of any lease
between the Company and Wackenhut Corrections relating to a Future Facility,
Wackenhut Corrections has a thirty-day right of first refusal on the proposed
sale by the Company of any such Future Facility.

                                       3
<PAGE>

BUSINESS AND GROWTH STRATEGIES

         The Company's general business objectives are to maximize both current
returns to shareholders through increases in revenue and net income, and
long-term total returns to shareholders through appreciation in the value of the
Common Shares. As a REIT, the Company's specific business objective is to
maximize funds from operations and cash available for distribution to
shareholders. The Company strives to achieve these objectives by (i) pursuing
investment opportunities with private prison operators and governmental entities
for the acquisition of correctional and detention facilities, (ii) working with
tenants to identify opportunities to expand existing and newly acquired
facilities and (iii) structuring facility leases to include rent escalation
provisions which provide for annual increases in rent.

         ACQUISITION OPPORTUNITIES. The Company believes that, because of the
increasing demand for additional prison beds and the lack of capital available
to finance new facilities, opportunities exist to acquire or develop
correctional and detention facilities from or on behalf of private prison owners
and operators and various government entities.

         The Company may acquire from both private prison owners and operators
and governmental entities additional correctional and detention facilities that
meet its investment guidelines, as described herein. The Company has the right
to acquire and lease back to Wackenhut Corrections each of the Future Facilities
during the applicable Future Facility option period. However, notwithstanding
Wackenhut Corrections' significant presence in the correctional and detention
industry, less than 8% of all adult prison beds in the United States are
privately managed. Management believes that as Wackenhut Corrections and the
private prison management industry continue to grow, opportunities may exist to
acquire additional private correctional facilities from Wackenhut Corrections on
attractive terms.

         The Company believes that opportunities may exist to acquire or develop
correctional facilities from or on behalf of other private prison owners and
operators and various governmental entities. Historically, government entities
have used various methods of construction financing to develop new correctional
and detention facilities, including but not limited to the following: (i)
one-time general revenue appropriations by the government agency for the cost of
the new facility, (ii) general obligation bonds that are secured by either a
limited or unlimited tax levied by the issuing government entity or (iii) lease
revenue bonds secured by an annual lease payment that is subject to annual or
bi-annual legislative appropriation of funds. Many jurisdictions are operating
their correctional and detention facilities at well above their rated
capacities, and as a result are under a federal court order to alleviate prison
overcrowding within a certain time period. These jurisdictions are often not in
a position to appropriate funds or obtain financing to construct a new
correctional or detention facility because of other fiscal demands or
requirements for public approval. Accordingly, the Company believes that, in an
attempt to address fiscal pressures of matching revenue collections with
projected expenses, such government entities may consider private ownership with
respect to the development of new correctional and detention facilities and
sale-leaseback transactions or other financing alternatives with respect to
existing correctional and detention facilities. Management believes that such
situations may enable the Company to acquire and develop correctional or
detention facilities from and on behalf of governmental agencies at all levels,
including those which might not be the subject of a private management contract.

         EXPANSION OPPORTUNITIES. The Company believes that there may be
opportunities for expansion of its existing correctional facilities which could
result in increased cash flows and property values. The Company may use its
capital to provide expansion space as requested by its tenants and expects that
any such expansion of its facilities would result in correspondingly higher
rental payments. Alternatively, a tenant may provide the capital for expansion,
which should result in enhanced property values.

         RENT ESCALATIONS. All of the Company's leases provide for a source of
cash flow with opportunities for future growth in revenues. The base rent for
the first year for each facility purchased from Wackenhut Corrections before
January 1, 2000 is equal to 9.5% of the facility purchase price. Thereafter,
minimum rent escalates by a fixed three percent at the first two annual lease
anniversaries and by an amount equal to increases in the CPI at each successive
annual anniversary for the remaining term of each lease, subject to a maximum
increase of four percent per annum throughout the term of the leases (the "Base
Rent Escalation"). However, there can be no assurance that such contractual
escalations will be realized based on the CPI index or other factors.

                                       4
<PAGE>

THE OPERATING PARTNERSHIP

         FORMATION OF THE OPERATING PARTNERSHIP. Upon completion of the IPO, the
Company acquired a 100% interest in the Operating Partnership. The Company holds
a 1% general partnership interest and a 98% limited partnership interest in the
Operating Partnership. Through CPT LP (a wholly owned subsidiary), the Company
owns a 1% limited partnership interest in the Operating Partnership. Following
the completion of the IPO and the Formation Transactions, substantially all of
the Company's assets (other than the Mountain View and Pamlico Facilities) are
held by, and its operations conducted through, the Operating Partnership, which
leases them to Wackenhut Corrections. The Company is the sole general partner of
the Operating Partnership and has the exclusive power under the Partnership
Agreement to manage and conduct the business of the Operating Partnership. The
Board of Trustees manages the affairs of the Company by directing the affairs of
the Operating Partnership. The Company's direct and, through CPT LP, indirect
percentage interest in the Operating Partnership, is 100%. The Operating
Partnership makes regular quarterly cash distributions to its partners,
including the Company and CPT LP, in proportion to their percentage interests in
the Operating Partnership. The Company, in turn, pays cash distributions to its
shareholders in an amount per Common Share equal to the amount distributed by
the Operating Partnership.

         The Operating Partnership was organized to facilitate the
tax-advantaged acquisition of additional correctional and detention facilities
from private owners. In the event the Company undertakes such an acquisition, it
is contemplated that the owner of such a facility would become a Limited Partner
in the Operating Partnership and would be issued units of limited partnership
interests in the Operating Partnership, representing an equal undivided
fractional share of each item of the Operating Partnership's income, gain, and
loss and in distribution of the Operating Partnership's assets (the "Units," and
the holder thereof, a "Unitholder") as the consideration, in whole or in part,
for the Unitholder's transfer of the facility to the Operating Partnership. It
is also contemplated that the Unitholder would be given the right after a period
of time to exchange Units in the Operating Partnership for cash based upon their
fair market value or, at the Company's option, for Common Shares on a
one-for-one basis. It is also contemplated that substantially all the Company's
assets may be owned indirectly through the Operating Partnership so that one
Unit in the Operating Partnership would generally correspond economically to one
Common Share. In order to accomplish such objective, the current structure using
the Operating Partnership is being utilized, rather than the Company taking
title to the Initial Facilities or subsequently acquired facilities, in order to
avoid in the future a re-transfer of such facilities to such a partnership, and
the incurrence at that time of associated transfer and other costs, which would
likely be necessary or advisable in order to offer a private owner a
tax-advantaged acquisition vehicle. Currently, the Company and CPT LP are the
only partners in the Operating Partnership and possess the power unilaterally to
amend and restate the Partnership Agreement (as hereinafter defined). While
there are no present plans to issue Units to a private prison owner, the Company
is pursuing potential acquisitions which, if successful, may involve the
issuance of Units as a component of the consideration for such acquisitions. The
Company does not intend to use the Operating Partnership (or any partnership
which is owned by the Operating Partnership) (the "Subsidiary Partnership") as a
vehicle for tax-advantaged acquisitions unless it receives an opinion of tax
counsel to the Company that such use would not result in the disqualification of
the Company as a REIT, including an opinion that the Operating Partnership (or
any Subsidiary Partnership) would not be treated for federal income tax purposes
as an association taxable as a corporation or a publicly-traded partnership.

         OPERATING PARTNERSHIP AGREEMENT. The Operating Partnership is organized
as a Delaware limited partnership pursuant to the terms of the partnership
agreement which includes the Company, as general partner, and both the Company
and CPT LP as the initial limited partners (the "Partnership Agreement").
Pursuant to the Partnership Agreement, the Company, as the sole general partner
of the Operating Partnership (the "General Partner"), has full, exclusive and
complete responsibility and discretion in the management and control of the
Operating Partnership, and the Company and CPT LP, in their capacity as the
Limited Partners, have no authority to transact business for, or participate in
the management activities or decisions of, the Operating Partnership. Generally,
any amendment to the Partnership Agreement may be made by the General Partner,
including, without limitation, amendments that (i) add to the obligations of the
General Partner, (ii) reflect the admission, substitution or withdrawal of
partners, (iii) reflect the issuance of additional partnership interests issued
by the Operating Partnership, (iv) reflect a change that does not adversely
affect Limited Partners and (v) are necessary to satisfy legal requirements. The
consent of each adversely affected partner is required for any amendment that
would require any partner to make additional capital contributions or restore
any negative balance in its capital account, or which amendment would convert a
limited partnership interest into a general partnership interest, affect a
Limited Partner's liability or right to receive distributions or that would
dissolve the Operating Partnership prior to December 31, 2048 (other than as a
result of certain mergers or consolidations). The Partnership Agreement requires
that the Operating Partnership be operated in a manner that will enable the
Company to satisfy the requirements for being classified as a REIT.

                                       5
<PAGE>

STRUCTURE OF THE COMPANY

         The following diagram sets forth the structure of the Company:
<TABLE>
<CAPTION>

                     CORRECTIONAL PROPERTIES TRUST
                            (THE "COMPANY")

                                                      100%
          <S>                   <C>                  <C>             <C>          <C>
            98%                   1%
          LIMITED               GENERAL                CPT
          PARTNER               PARTNER       LIMITED PARTNER INC.                WACKENHUT CORRECTIONS CORPORATION
                                                   ("CPT LP")                      ("WACKENHUT CORRECTIONS")(2)
                                                                     RENTS

                                                            1%
                                                          LIMITED               LEASES
                                                          PARTNER

                                                                                    SUBLEASES                   RENTS

                                  CPT                                  RENTS                 WCC RE HOLDINGS LLC
                      OPERATING PARTNERSHIP L.P.                                           (SUCCESSOR BY MERGER TO
                                                                      LEASES               WCC RE HOLDINGS, INC.)
                                                                                          ("WCCRE LLC")(1),(3),(4)

                                  100%

                      CORRECTIONAL PROPERTIES NORTH
                     CAROLINA PRISON FINANCE LLC (5)
</TABLE>

(1)      Following the consummation of the IPO, WCC RE Holdings, Inc., a
         wholly-owned subsidiary of Wackenhut Corrections, was merged with and
         into WCC RE Holdings LLC ("WCCRE LLC"), which was formed as a
         wholly-owned subsidiary of Wackenhut Corrections, with WCCRE LLC being
         the surviving entity.

(2)      The Operating Partnership leases the Queens Facility, the Aurora
         Facility, the Hobbs Facility, the Karnes Facility, the Lawton Facility
         and the Jena Facility to Wackenhut Corrections.

(3)      The Operating Partnership leases the following facilities to WCCRE LLC,
         each of which were in turn subleased to Wackenhut Corrections: the
         Broward Facility, the Central Valley Facility, the Golden State
         Facility, the Desert View Facility and the McFarland Facility.

(4)      The provisions of certain existing facility operating agreements
         between Wackenhut Corrections and the respective contracting
         governmental entities afford the governmental entity the right to
         assume a lease of such facility (or designate another facility operator
         to assume the lease of such facility) at a fixed rental rate in the
         event of the early termination of the facility operating agreement upon
         the occurrence of certain events. In such instances, Wackenhut
         Corrections has entered into a sublease for the subject facility with
         WCCRE LLC, with WCCRE LLC as the sublessor and Wackenhut Corrections as
         the sublessee. The contracting governmental entity has the right to
         assume the rights of Wackenhut Corrections under such sublease on early
         termination of the operating agreement for the relevant facility.
         However, even if a government entity elects to exercise its right to
         assume a sublease relating to a facility, Wackenhut Corrections is
         nevertheless liable to the Company under the master lease relating to
         such facility. See "Subleases."

(5)      Correctional Properties North Carolina Prison Finance LLC ("CP North
         Carolina") is a wholly owned subsidiary of the Company. CP North
         Carolina is a Delaware limited liability company formed solely to issue
         the Bonds and acquire and own the Mountain View and Pamlico Facilities.
         CP North Carolina's assets and credit are not available to pay the
         debts or obligations of any other entity. The Bonds are non-recourse to
         CP North Carolina and its sole member, CPT Operating Partnership L.P.
         Therefore, CP North Carolina and its sole member, CPT Operating
         Partnership L.P., are not liable on account of any deficiency in the
         event that the Trust Estate created under the Trust Indenture for the
         Bonds is insufficient to repay the Bonds or the other obligations of CP
         North Carolina under the Bond Documents.

                                       6
<PAGE>

THE OWNED FACILITIES, THE OPTION FACILITIES AND THE FUTURE FACILITIES.

THE OWNED FACILITIES

         The thirteen facilities owned by the Company at December 31, 2001 (the
eight Initial Facilities acquired by the Company in connection with the IPO, the
Lea County Correctional Facility and the Lawton Correctional Facility purchased
in January 1999 and the Jena Juvenile Correctional Facility purchased in January
2000, the Mountain View and Pamlico Facilities purchased in 2001, together the
thirteen "Owned Facilities") were purchased for an aggregate cash purchase price
of approximately $272 million. The Company leases eleven of the Owned Facilities
to Wackenhut Corrections or its subsidiary, (the "WCC Facilities") and two of
the Owned Facilities to the state of North Carolina (the "North Carolina
Facilities"). The thirteen Owned Facilities are located in nine states and have
an aggregate design capacity of 7,282 beds. The following table sets forth
certain information with respect to the Owned Facilities as of December 31,
2001:

<TABLE>
<CAPTION>
                                                                                        DESIGN             EXPIRATION
                                                                                       CAPACITY                OF      OPERATING
                                                                                          AND     FACILITY  FACILITY   AGREEMENT
                                                      TYPE OF   CONTRACTING  SECURITY  OCCUPANCY   OPENING  OPERATING   RENEWAL
FACILITY AND LOCATION                                FACILITY     ENTITY     LEVEL(1)   RATE(2)     DATE    AGREEMENT   OPTIONS
---------------------                                --------     ------     --------   -------     ----    ---------   -------
<S>                                                  <C>          <C>        <C>        <C>         <C>     <C>         <C>
WCC FACILITIES:

Aurora INS Processing
  Center.........................................    INS            INS(3)    Minimum/  300/91%    May      September    Four
  (the "Aurora...................................    Processing               Medium               1997     2002         One-
  Facility").....................................    Center                                                              Year
  Aurora, CO

McFarland Community
  Correctional Facility..........................    Pre-Release    CDOC(4)   Minimum/  224/96%   February  June         --
  (the "McFarland................................    Center                   Medium               1988     2002
  Facility")
  McFarland, CA

Queens Private
  Correctional
  Facility.......................................    INS            INS(5)    Minimum/  200/86%   March     September    --
  (the "Queens...................................    Detention                Medium              1997      2002
  Facility").....................................    Facility
  New York, NY

Central Valley Community
  Correctional Facility..........................    Adult          CDOC      Minimum/  550/96%   December  December     --
  (the "Central Valley...........................    Correctional             Medium              1997      2007
  Facility").....................................    Facility
  McFarland, CA

Golden State Community
  Correctional Facility..........................    Adult          CDOC      Minimum/  550/97%   December  December     --
  (the "Golden State.............................    Correctional             Medium              1997      2007
  Facility").....................................    Facility
  McFarland, CA
</TABLE>


                                       7
<PAGE>

<TABLE>
<CAPTION>
                                                                                        DESIGN             EXPIRATION
                                                                                       CAPACITY                OF      OPERATING
                                                                                          AND     FACILITY  FACILITY   AGREEMENT
                                                      TYPE OF   CONTRACTING  SECURITY  OCCUPANCY   OPENING  OPERATING   RENEWAL
FACILITY AND LOCATION                                FACILITY     ENTITY     LEVEL(1)   RATE(2)     DATE    AGREEMENT   OPTIONS
---------------------                                --------     ------     --------   -------     ----    ---------   -------
<S>                                                  <C>          <C>        <C>        <C>         <C>     <C>         <C>
Desert View Community

  Correctional Facility..........................    Adult         CDOC       Minimum/  550/86%   December  December      --
  (the "Desert View..............................    Correctional             Medium              1997      2007
  Facility" and..................................    Facility
  together with the
  Golden State
  Facility and the
  Central Valley
  Facility, the
  "California
  Facilities")
  Adelanto, CA

Broward County Work
  Release Center.................................    Work Release   Broward   Non-      300/79%(6)  February  February  Unlimited
  (the "Broward County...........................    Center         County    Secured               1998      2003      Two-
  Facility").....................................                   and                                                 Year
  Broward County, FL.............................                   BSO(6)

Karnes County
  Correctional
  Center.........................................    Adult          Karnes    Multi-    480/99%     January     2026    Varies
  (the "Karnes...................................    Correctional   County    Security              1996
  Facility").....................................    Facility
  Karnes County, TX

Lawton Correctional
  Facility (the "Lawton
  Facility").....................................    Prison         ODOC(7)   Medium    1,500/102%  December    June    Three
                                                                                                    1999        2002    One-
                                                                                                                        Year
Lea County Correctional
  Facility (the "Hobbs
  Facility")
  Hobbs, NM......................................    State          Lea       Multi-    1,200/96%   May         June    Annual
                                                     Prison         County    Security              1998        2002
Jena Juvenile Justice Center
  (the "Jena
  Facility")
  Jena, LA.......................................    Juvenile       None      Multi-    276/0%      June        N/A     N/A
                                                     Correctional             Security              1999
                                                     Facility

NORTH CAROLINA FACILITIES:

Mountain View Correctional Facility
  (the "Mountain View
  Facility")
  Spruce Pine, NC................................    State          (8)       Medium    576         December    N/A     N/A
                                                     Prison                                         1998

Pamlico Correctional Facility
  (the "Pamlico
  Facility")
  Bayboro, NC....................................    State          (8)       Medium    576         August     N/A      N/A
                                                     Prison                             --------    1998

Total Owned Facilities...........................                                       7,282
                                                                                      ==========
</TABLE>

                                       8
<PAGE>


(1)      Each facility is identified according to the level of security
         maintained as follows: non-secured facilities are facilities which are
         access controlled residential facilities; minimum security facilities
         are facilities having open-housing within an appropriate designated and
         patrolled institutional perimeter; medium security facilities are
         facilities having either cells, rooms or dormitories, a secure
         perimeter, and some form of external patrol; maximum security
         facilities are facilities having single occupancy cells, a secure
         perimeter and external patrol or devices; and multi-security facilities
         are facilities with various components of the previously described
         security levels.

(2)      Design capacity measures the number of beds, and accordingly the number
         of inmates each facility is designed to accommodate. Occupancy rate
         measures the percentage of the number of beds which a facility is
         designed to accommodate which are occupied at any given time or for
         which payment has been guaranteed by the contracting governmental
         entity. The facility operating agreement with respect to any facility
         may provide for occupancy less than the facility design capacity. While
         the design capacity of each of the Central Valley Community
         Correctional Facility, the Golden State Community Correctional Facility
         and the Desert View Community Correctional Facility is 550, the
         facility operating agreement for each such facility provides for the
         use and occupancy of only 500 beds per facility. The occupancy rates
         presented are as of December 31, 2001. The Company believes design
         capacity and occupancy rate are appropriate measures for evaluating
         prison operations because the revenues generated by each facility are
         generally based on a per diem or monthly rate per inmate housed at the
         facility paid by the corresponding contracting governmental entities.
         The ability of Wackenhut Corrections or another private prison operator
         to satisfy its financial obligations under its leases with the Company
         is based in part on the revenues generated by their facilities, which
         in turn depends on the design capacity and occupancy rate of each
         facility. The State of North Carolina is not obligated to report
         occupancy percentages to the Company.

(3)      The United States Immigration and Naturalization Service.

(4)      The State of California Department of Corrections.

(5)      The facility operating agreement for the Queens Private Correctional
         Facility includes a minimum guarantee of 150 beds (75% occupancy)

(6)      The Broward County Sheriff's Office. While the actual occupancy rate
         was 79% as of December 31, 2001, the Broward County Sheriff's office
         has guaranteed payment under the operating agreement based on a 100%
         occupancy rate.

(7)      State of Oklahoma Department of Corrections.

(8)      The facility is leased to the State of North Carolina and operated by
         the North Carolina Department of Correction.

         ADULT CORRECTIONAL FACILITIES. Adult correctional facilities are used
to house adult inmates on a permanent basis for the duration of their sentences.
The adult correctional facilities acquired by the Company include the Karnes
Facility, the Central Valley Facility, the Golden State Facility, the Desert
View Facility, the Hobbs Facility, the Lawton Facility, the Mountain View
Facility and the Pamlico Facility.

         The Karnes Facility is a medium security correctional facility located
in Karnes City, Texas with a design capacity of 480 beds. The facility is
situated on approximately 12 acres and contains approximately 77,000 square
feet. Wackenhut Corrections owns an adjacent parcel of unimproved land
containing approximately 30 acres acquired at a total cost of $60,000. Wackenhut
Corrections began operating this facility in January 1998 under an interim
operating agreement with Karnes County and has subsequently negotiated a
long-term operating agreement with Karnes County that expires in 2026.

         The Central Valley Facility and the Golden State Facility are medium
security facilities located on adjacent properties in McFarland, California. The
Central Valley Facility is situated on approximately 19 acres, and the Golden
State Facility is situated on approximately 33 acres. Each facility contains an
approximately 95,901 square foot structure with a design capacity of 550 beds.
Construction of each of the Central Valley Facility and Golden State Facility
was completed in December 1997. Wackenhut Corrections has contracted with the
CDOC to operate each such Facility, which contracts expire in December 2007.

                                       9
<PAGE>

         The Desert View Facility is located in Adelanto, California and is a
medium security facility. The facility is situated on approximately 16 acres and
contains approximately 95,901 square feet with a design capacity of 550 beds.
Construction of the facility was completed in December 1997. Wackenhut
Corrections has contracted with the CDOC to operate this facility, which
contract expires in December 2007.

         The Hobbs Facility is a new high-security facility located on
approximately 80 acres and contains approximately 360,000 square feet with a
design capacity of 1200 beds. Construction was completed in May 1998. Wackenhut
Corrections has contracted with Lea County to operate the facility, which
contract expires in June 2002.

         The 1200-bed Hobbs Facility was purchased by the Company in two parts.
The first 600 beds were acquired in October 1998, while the remaining 600 beds
(the "Hobbs Expansion") were bought by the Company in January 1999.

         The Lawton Facility is located in Lawton, Oklahoma and is used as a
medium security prison. The facility is situated on 160 acres. The approximately
406,000 square foot structure contains a design capacity for 1,500 beds.
Oklahoma state law requires that the operating agreement contain a provision
granting the Oklahoma Department of Corrections the option at the beginning of
each fiscal year to purchase the facility at a predetermined price, which must
be negotiated and included in a schedule or formula to be contained in the
operating agreement. Wackenhut Corrections has agreed in the lease for the
Lawton Facility to pay any shortfall to the Company in the event the purchase
option is exercised by the State of Oklahoma and the purchase price paid by the
State of Oklahoma is less than the net book value of the Lawton Facility as
shown on the Company's books and records at the time the purchase option is
exercised.

         The Mountain View Correctional Facility, located in Spruce Pine, North
Carolina, is a 576-cell, medium security prison and is leased to the State of
North Carolina. The North Carolina Department of Correction operates the
facility. The facility, which was built in 1998, is situated on 93 acres and
contains approximately 197,000 square feet.

         The Pamlico Correctional Facility, located in Bayboro, North Carolina,
is a 576-cell, medium-security prison and is leased to the State of North
Carolina. The North Carolina Department of Correction operates the facility. The
facility, which was built in 1998, is situated on 146 acres and contains
approximately 197,000 square feet.

         PRE-RELEASE CENTER. A pre-release center is a minimum to medium
security facility for inmates nearing parole, offering inmates basic education
and pre-employment training as well as alcohol and drug abuse treatment and
counseling. The pre-release center acquired by the Company is the McFarland
Facility.

         The McFarland Facility is located in McFarland, California. The
facility is situated on approximately 5 acres, and contains approximately 35,000
square feet. The facility currently has a design capacity of 224 beds. Wackenhut
Corrections has contracted with the CDOC to operate the facility, which contract
expires in June 2002. Wackenhut Corrections has notified the Company that it
believes the CDOC may not renew its operating contract due to budgetary
constraints. Wackenhut Corrections is continuing its efforts to extend the
current operating contract with CDOC as well as offering the McFarland Facility
to incarcerate inmates from other interested government agencies. The
non-cancelable lease between the Company and Wackenhut Corrections, which
expires in April 2008, requires fixed rental payments to the Company regardless
of whether or not Wackenhut Corrections has an operating contract for the leased
facility. The current annual rent on the McFarland Facility is approximately
$731,000.

         DETENTION FACILITIES. Detention facilities are used to house
undocumented aliens for the INS and are classified as minimum to medium security
facilities. The detention facilities acquired by the Company include the Aurora
Facility and the Queens Facility.

         The Queens Facility is located on approximately 1.34 acres in New York,
New York. The facility has a design capacity of 200 beds and contains
approximately 61,400 square feet. Wackenhut Corrections began operating the
facility in June 1997, and is presently operating the facility under a
management contract with the INS which has been extended until September 2002.

         The Aurora Facility is located on approximately 46 acres in Aurora,
Colorado. Originally designed to accommodate 150 beds, the facility was expanded
in 1992 to contain a design capacity of 300 beds. The approximately 66,000

                                       10
<PAGE>

square foot medium security facility is operated under a management agreement
entered into between the INS and Wackenhut Corrections which expires in May
2003.

         WORK RELEASE CENTERS. A work release center is an access-controlled
community residential center which houses court-ordered residents who work in
the community and participate in programs and residential services at the
center. The work release center acquired by the Company is the Broward Facility.

         The Broward Facility is located in Pompano Beach, Florida and is used
to house residents participating in the Broward County Work Release Program. The
facility is located on approximately ten acres and is designed to accommodate
300 beds. The approximately 86,500 square foot structure is operated under a
management agreement between Broward County, the Sheriff of Broward County and
Wackenhut Corrections, which expires in February 2003, but which provides for
options in favor of the Sheriff of Broward County to extend the management
contract for successive two year terms.

         JUVENILE CORRECTIONAL FACILITIES. Juvenile correctional facilities are
used to house juvenile offenders under standards which differ from those used to
house adult offenders. On January 7, 2000, the Company exercised its option to
purchase the Jena Facility for approximately $15,300,000. The Jena Facility is
located in Jena, Louisiana and was used to house juvenile inmates. The facility
is situated on approximately 100 acres, consists of an approximately 62,400
square foot structure and has a capacity for 276 beds. At the same time as the
Company acquired the Jena Facility, the Company entered into a lease with WCC
for such facility at an initial cap rate of 11% with 4% annual escalators for an
initial term of ten years, with three additional renewal options for terms of
five years each in length. The lease provides for fixed rental payments to the
Company without regard to occupancy. The Jena Facility was operated by Wackenhut
Corrections under an operating agreement with the State of Louisiana, which has
been terminated. Wackenhut Corrections does not presently have an operating
contract with a client for the Jena Facility. However, Wackenhut Corrections is
obligated under the terms of the lease to continue to make rental payments to
the Company.

         As a result of the termination of Wackenhut Correction's operating
contract, the Jena Facility no longer is included in the Company's pledge pool
Borrowing Base described in the Bank Credit Facility.

         With the exceptions of the Aurora INS Processing Center, the McFarland
Community Correctional Facility and the Jena Facility, all of the Company's
facilities are deemed "significant" because they each account for 10% or more of
the Company's total assets as of December 31, 2001. For federal income tax
purposes, the Company's tax basis in each facility is generally the purchase
price by the Company. The real property associated with these properties (other
than land) generally will be depreciated for federal income tax purposes over 40
years using the straight line method, which equates to a rate of 2.5%. Other
assets associated with the facilities may be depreciated by the Company using
applicable useful lifes.

THE OPTION FACILITIES. The Lawton Facility and the Jena Facility were acquired
by the Company. The option to purchase the remaining Option Facility, the
Michigan Youth Correctional Facility, expired on January 31, 2001.

THE FUTURE FACILITIES. The terms of the Right to Purchase Agreement between the
Company and Wackenhut Corrections include the exclusive option to purchase
facilities from Wackenhut Corrections for six months after the Future Facility
attains an occupancy level of 75% of the number of beds authorized under the
Certificate of Occupancy. The following facilities have attained 75% occupancy
levels and notice of such has been provided to the Company. The following table
sets forth certain information with respect to these Future Facilities,
including the date upon which the exclusive option to purchase expired, under
the six-month occupancy provision.

                                       11
<PAGE>

<TABLE>
<CAPTION>

                                                                        DATE EXCLUSIVE                 DESIGN
                                                                        OPTION EXPIRED             (BED) CAPACITY
                                                                        --------------             --------------
     <S>                                                                <C>                        <C>
                        FACILITY AND LOCATION
                        ---------------------

     Guadalupe County Correctional Facility,                                1/31/01                     600
     Santa Rosa, N.M.

     Val Verde County Detention Center,                                     8/20/01                     600
     Del Rio, TX

     Western Regional Detention Facility,                                   7/24/01                     900
     San Diego, CA

     Rivers Correctional Institution                                        2/28/02                    1,200
     Winton, NC
</TABLE>

LEASES AND SUBLEASES WITH WACKENHUT CORRECTIONS

         Simultaneous with the Company's acquisition of the WCC Facilities, the
Company leased such facilities either directly to Wackenhut Corrections or to
WCCRE LLC, which in turn subleases such facilities to Wackenhut Corrections. The
sublease structure is used in those instances where Wackenhut Corrections is
required by a contracting governmental entity in connection with the award of a
facility operating agreement to afford the governmental entity the right to
assume a lease of such facility (or designate another facility operator to
assume the lease of such facility) at a fixed rental rate in the event of the
early termination of the operating agreement upon the occurrence of certain
events. Generally, in those instances where a sublease is created for the
contracting governmental entity (or its designated replacement operator) to
assume, the term of the sublease is commensurate with the term of the operating
agreement originally entered into between Wackenhut Corrections and the
governmental entity, thereby affording the governmental entity the ability to
plan and effectuate an orderly relocation of its inmates to another facility in
the event of early termination of its operating agreement with Wackenhut
Corrections. However, regardless of whether the sublease structure is created
for an individual facility, Wackenhut Corrections, at all times, remains
primarily liable to the Company under the leases.

         Because the leases on the WCC Facilities are triple-net leases, which
impose significant burdens upon the tenant and provide for an escalating annual
base rent, the leases do not satisfy the requirements of such governmental
entities or allow Wackenhut Corrections the flexibility to tailor the lease
provisions to the terms of a particular Request for Proposals ("RFP").
Therefore, in such instances Wackenhut Corrections requests that the Company
enter into the lease with WCCRE LLC., which in turn enters into a more basic
fixed rental rate sublease with Wackenhut Corrections, which sublease meets the
requirements of the contracting governmental entity, and permits the contracting
governmental entity to assume such sublease in the event of early termination of
the operating agreement for the relevant facility. The provisions of all
subleases are subject to the Company's review and approval. The Company has
leased the following WCC Facilities to WCCRE LLC., each of which in turn is
subleased to Wackenhut Corrections: the Broward Facility, the Central Valley
Facility, the Golden State Facility, the Desert View Facility and the McFarland
Facility. The Company has leased the following WCC Facilities, directly to
Wackenhut Corrections: the Queens Facility, the Aurora Facility, the Hobbs
Facility, the Lawton Facility and the Karnes Facility.

         LEASES

         The Company leases each of the WCC Facilities to Wackenhut Corrections
or to WCCRE LLC. Each such facility is the subject of a separate lease that
incorporates the provisions of a master lease (the "Master Lease") between the
Company and Wackenhut Corrections. The lease of each such facility includes the
land, the buildings and structures and other improvements thereon, easements,
rights and similar appurtenances to such land and improvements, and permanently
affixed equipment, machinery, and other specified fixtures relating to the
operation of the facility. The lease of each such facility provides for an
initial term of 10 years (the "Fixed Term") and may be extended by Wackenhut
Corrections for three additional five-year terms beyond the Fixed Term (the
"Extended Terms") at a fair market rental rate as mutually agreed upon by the
Company and Wackenhut Corrections or, in the absence of such an agreement, as
determined by binding arbitration. In addition, an individual lease will be

                                       12
<PAGE>

automatically extended on the same terms (including the then applicable base
rent and Base Rent Escalation) as reflected in the applicable lease if there is
at such time an unexpired sublease with respect to such facility. The Fixed Term
and Extended Terms under each lease shall be subject to earlier termination upon
the occurrence of certain contingencies described in the lease. Any additional
Future Facilities will be leased upon terms and conditions substantially similar
to the above-described leases except that the rental rate in the case of any
Future Facility acquired during the first five years following the IPO will be
the greater of (i) the fair market rental rate as mutually agreed upon by the
Company and Wackenhut Corrections or, in the absence of such agreement, by
binding arbitration or (ii) 9.5% of the applicable Future Facility Purchase
Price. In the case of any Future Facility acquired thereafter, the initial
annual rental rate will be the fair market rental rate as mutually agreed upon
by the Company and Wackenhut Corrections or in the absence of such an agreement,
as determined by binding arbitration.

         USE OF THE FACILITIES. Each lease on the WCC Facilities permits
Wackenhut Corrections to operate the leased property solely as a correctional or
detention facility, unless otherwise mutually agreed upon by the Company and
Wackenhut Corrections. Wackenhut Corrections has the responsibility under each
lease to obtain and maintain all licenses, certificates and permits in order to
use and operate the respective facility and to provide the Company with evidence
of compliance with this obligation.

         Each lease of a WCC Facility is what is commonly known as a triple-net
lease or absolute net lease, under which Wackenhut Corrections is required to
pay Annual Base Rent and any additional charges related to the leased property,
including every fine, penalty, interest expense and cost which may be added for
nonpayment or late payment thereof, all taxes, assessments and levies, excises,
fees, and all other government charges with respect to each leased property, and
all charges for utilities and services, including, without limitation,
electricity, telephone, trash disposal, gas, oil, water, sewer, communication
and all other utilities used in each leased property.

         MAINTENANCE, MODIFICATION AND CAPITAL ADDITIONS. Under each lease of
the WCC Facilities as of December 31, 2001, Wackenhut Corrections is required,
at its sole cost and expense, to maintain each leased property in good order,
repair and appearance and will make structural and non-structural, interior and
exterior, foreseen and unforeseen, and ordinary and extraordinary repairs which
may be necessary and appropriate to keep such leased property in good order and
repair. The Company is not required to build or rebuild any improvements to any
property leased to Wackenhut Corrections, or to make any repairs, replacements,
alterations, restorations or renewals to any leased property.

         Wackenhut Corrections, at its sole cost and expense, may make
alterations, additions, changes and/or improvements to each leased property,
provided that with respect to an improvement which has a cost of more than
$500,000 or which, when aggregated with the cost of all such improvements for
any individual leased property in the same lease year, would cause the total
cost of all such improvements to exceed $1,000,000 (each such threshold amount
increasing 4% per year, cumulatively) the value and primary intended use of such
leased property (determined in the Company's reasonable judgment) is not
impaired and the prior written consent of the Company is obtained. All
machinery, equipment, furniture, furnishings, and other personal property
(except certain excluded proprietary property) installed at the expense of
Wackenhut Corrections on any leased property, is required to remain the property
of Wackenhut Corrections until the expiration or earlier termination of the
lease, at which time the Company will have an option to purchase such property
at appraised fair market value, as determined pursuant to terms of the master
lease, upon such expiration or termination. However, the Company's option in
certain cases may be subject to a contracting governmental entity's superior
right to acquire all or a portion of such removable personal property under the
terms of its operating contract with Wackenhut Corrections.

         Each lease on the WCC Facilities provides that, at the request of
Wackenhut Corrections, the Company may construct one or more new buildings or
other improvements to a particular leased property which are not normal or
recurring to the maintenance of such leased property (a "Capital Addition"). A
Capital Addition to a leased property may necessitate an amendment to an
existing lease or new lease agreement setting forth any changes in the premises,
rent, or other similar terms of the lease as a result of the Capital Addition.
In certain situations, a Capital Addition to a leased property may be made
directly by Wackenhut Corrections and financed by third parties with the prior
written consent of the Company. In the case of a Capital Addition not undertaken
or financed by the Company, the Company has an option to acquire and lease back
to Wackenhut Corrections such Capital Addition for a period of one year
following the date Wackenhut Corrections first receives inmates or detainees in
such Capital Addition. The purchase price of such Capital Addition is required
to be 105% (or such lower percentage as may be agreed to by Wackenhut
Corrections) of the Total Facility Cost of such Capital Addition. Fair market

                                       13
<PAGE>

rental rates for a Capital Addition acquired or undertaken by the Company is
required to be as mutually agreed upon by the Company and Wackenhut Corrections,
or in the absence of such an agreement, as determined by binding arbitration.

         INSURANCE. Each WCC Facility lease provides that Wackenhut Corrections
is required to maintain insurance on each leased property under Wackenhut
Corrections' insurance policies providing for the following coverages: (i) fire,
vandalism, earthquake and malicious mischief, extended coverage perils, and all
physical loss perils, (ii) comprehensive general public liability (including
personal injury and property damage), (iii) loss of rental value or business
interruption and (iv) workers' compensation. Under each lease, the Company has
the right to periodically review Wackenhut Corrections' insurance coverage and
provide input with respect thereto. Wackenhut Corrections also certifies to the
Company on a quarterly basis, among other things, that the insurance coverage
required under each lease to be maintained by Wackenhut Corrections on each WCC
Facility is being maintained by Wackenhut Corrections. The Company is required
to be named on such policies as an additional insured or loss payee, as the case
may be.

         ENVIRONMENTAL MATTERS. Each WCC Facility lease provides that Wackenhut
Corrections makes various representations and warranties relating to
environmental matters with respect to each leased property. Each WCC Facility
lease also requires Wackenhut Corrections to indemnify and hold harmless the
Company and any holder of a mortgage, deed of trust or other security agreement
on a leased property (a "Company Mortgagee") from and against all liabilities,
costs and expenses imposed upon or asserted against the Company or the leased
property on account of, among other things, any federal, state or local law,
ordinance, regulation, order or decree relating to the protection of human
health or the environment in respect of the leased property. The leases on the
WCC Facilities provide, however, that Wackenhut Corrections shall not be liable
with respect to matters or events that arise after the commencement date of the
applicable lease as a result of the gross negligence or intentional misconduct
of the Company.

         ASSIGNMENT AND SUBLETTING. The leases on the WCC Facilities provide
that with certain exceptions for service agreements for portions of the leased
property in favor of various licensees providing incidental services customarily
associated with or incidental to the operations of the leased property,
Wackenhut Corrections may not, without the prior written consent of the Company,
assign, sublease, mortgage, pledge, hypothecate, encumber or otherwise transfer
(except to an affiliate of Wackenhut Corrections) any lease or any interest
therein, or all or any part of the leased property. The leases on the WCC
Facilities further state that except as provided in connection with governmental
subleases meeting certain requirements such consent may be granted or withheld
by the Company in its sole discretion. An assignment of a lease will be deemed
to include any change of control (a "Change of Control") of Wackenhut
Corrections, as if such Change of Control were an assignment of the lease. A
"Change of Control" of Wackenhut Corrections means, for purposes of the leases
on the WCC Facilities, the sale by Wackenhut Corrections of a controlling
interest in Wackenhut Corrections, or the sale or other transfer of all or
substantially all of the assets of Wackenhut Corrections. A Change of Control
also means any transaction pursuant to which Wackenhut Corrections is merged
with or consolidated into another entity, and Wackenhut Corrections is not the
surviving entity. The leases on the WCC Facilities further provide that no
assignment or sublease will in any way impair the continuing primary liability
of Wackenhut Corrections under the leases. The Company will not unreasonably
withhold its consent to subleases in favor of governmental entities which are
required in connection with an award of an operating contract to Wackenhut
Corrections, provided that, among other requirements, any such subleases are
inferior and subordinate to the Company's interest in the facility.

         In addition, if requested by Wackenhut Corrections in order to respond
to a RFP for an operating agreement, the Company may agree to provide
nondisturbance agreements in favor of governmental entities pursuant to which
the Company will agree to recognize and leave the rights of any such
governmental sub-tenant undisturbed in the event of a termination of the lease,
but only upon a determination by the Company that the provisions of any such
governmental subleases are acceptable in the Company's sole and absolute
discretion.

         DAMAGE TO, OR CONDEMNATION OF, A LEASED PROPERTY. In the event of any
damage or destruction to any WCC Facility, Wackenhut Corrections has the
obligation to fully repair or restore the same at Wackenhut Corrections'
expense, with the Annual Base Rent proportionately abated during the time of
restoration, but only to the extent of any rental interruption insurance
proceeds actually received by the Company. If any facility is damaged to such an
extent that 50% of the inmate beds at the leased facility are rendered unusable,
and if Wackenhut Corrections has fully complied with the insurance obligations
with respect to such facility (including maintaining insurance against loss of
rents), Wackenhut Corrections may terminate the lease of that facility upon
turning over all insurance proceeds and payment of any deductible or uninsured
loss with respect to such facility to the Company. Additionally, if the facility
is damaged within the last 24 months of the lease term and cannot be

                                       14
<PAGE>

restored within six months of the date of the damage, either the Company or
Wackenhut Corrections may terminate the lease. However, if Wackenhut Corrections
exercises an option to extend the lease term, the Company may not terminate upon
such casualty damage or destruction.

         In the event of a condemnation or taking of any leased property neither
party shall be obligated to compensate the other for any damage or loss suffered
as a consequence of such a taking. In the event of a partial taking, Wackenhut
Corrections is obligated to repair the portion not taken, if the same does not
render the leased property unsuitable for Wackenhut Corrections' then use and
occupancy, but only to the extent of the condemnation award. Each lease has an
apportionment clause which provides generally that the total condemnation award
shall be payable to the Company and to Wackenhut Corrections based upon their
respective interests.

         INDEMNIFICATION GENERALLY. Under each WCC Facility lease, Wackenhut
Corrections indemnifies, and is obligated to save harmless, the Company from and
against any and all demands, claims, causes of action, fines, penalties, damages
(including consequential damages), losses, liabilities (including strict
liability), judgments, and expenses (including, without limitation, reasonable
attorneys' fees, court costs, and related expenses) incurred in connection with
or arising from: (i) the use, condition, operation or occupancy of each leased
property; (ii) any activity, work, or thing done, or permitted or suffered by
Wackenhut Corrections in or about the leased property; (iii) any acts,
omissions, or negligence of Wackenhut Corrections or any person claiming under
Wackenhut Corrections, or the contractors, agents, employees, invitees, or
visitors of Wackenhut Corrections or any such person; (iv) any claim of any
person incarcerated, held or detained in the leased property, including claims
alleging breach or violation of such person's civil or legal rights; (v) any
breach, violation, or nonperformance by Wackenhut Corrections or the employees,
agents, contractors, invitees, or visitors of Wackenhut Corrections, of any
term, covenant, or provision of any lease or any law, ordinance, or governmental
requirement of any kind; (vi) any injury or damage to the person, property or
business of Wackenhut Corrections, its employees, agents, contractors, invitees,
visitors, or any other person entering upon the leased property under the
express or implied invitation of Wackenhut Corrections; (vii) any accident,
injury to or death of persons or loss of damage to any item of property
occurring at the leased property; and (viii) any improvements to the leased
property in order to comply with the requirements of the Americans with
Disabilities Act of 1990, as amended (the "ADA").

         Under each WCC Facility lease, the Company indemnifies, and is
obligated to save harmless, Wackenhut Corrections from and against all
liabilities, costs and expenses (including reasonable attorneys' fees) imposed
upon or asserted against Wackenhut Corrections as a result of the Company's
gross negligence or intentional misconduct.

         EVENTS OF DEFAULT. An event of default will be deemed to have occurred
under the Master Lease and any individual Lease if Wackenhut Corrections fails
to perform any covenant and does not diligently undertake to cure the same after
30 days' notice from the Company; if the interest of Wackenhut Corrections in
any leased property is levied upon or attached and is not discharged in a
specified period of time; or if any representation or warranty of Wackenhut
Corrections is incorrect. An event of default will be deemed to have occurred
under the Master Lease and all of the leases on the WCC Facilities, if, among
other things, Wackenhut Corrections fails to pay any rent within 15 days after
notice of non-payment from Company; if any bankruptcy proceedings are instituted
by or against Wackenhut Corrections and, if against Wackenhut Corrections, such
bankruptcy proceedings are not dismissed within 90 days; if any material part of
the property of Wackenhut Corrections is levied upon or attached in any
proceeding and not discharged within a specified period of time; if Wackenhut
Corrections defaults in any payment of any obligations for borrowed money having
a principal balance in excess of $25.0 million; or if Wackenhut Corrections is
the subject of a non-appealable final judgment in an amount greater than $10.0
million, which is not covered by insurance or discharged by Wackenhut
Corrections within a specified period of time.

         In the event of any event of default referable to a specific WCC
Facility lease, the Company may evict Wackenhut Corrections from such leased
property and either terminate the lease or re-let the leased property. However,
the Company will have certain duties to mitigate its losses in the exercise of
such remedies. In either event, Wackenhut Corrections shall remain responsible
for the rent provided in the lease for such leased property for the remaining
period of the term in excess of rents received by the Company from any successor
occupant. Alternatively, at the Company's option, the Company will be entitled
to recover all unpaid Rent then due plus the present value of the Rent for the
unexpired term at the time of the award, subject to the Company's obligation to
deliver and pay-over to Wackenhut Correction any net rentals or proceeds
actually received from the lease, sale or other disposition of the leased
property thereafter, up to the amount paid by Wackenhut Corrections. In
addition, the Company may exercise any other rights that it may have under law.
In the event the Company evicts Wackenhut Corrections from a leased property,
the Master Lease will remain in full force and effect for all other leased

                                       15
<PAGE>

properties. With respect to Wackenhut Correction's failure to timely pay Rent
and with respect to certain nonmonetary events of default under the master
lease, the Company shall have all of the foregoing rights, remedies and
obligations with respect to all of the leased facilities.

         The leases on the WCC Facilities will be governed by and construed in
accordance with Florida law (but not including Florida's conflict of laws rules)
except for certain procedural laws which must be governed by the laws of the
location of each leased property. Because the facilities are located in various
states, the leases on the WCC Facilities may be subject to restrictions imposed
by applicable local law. Neither the Master Lease nor any of the other
agreements entered into by Wackenhut Corrections in connection with the
Formation Transactions prohibits or otherwise restricts the Company's ability to
lease properties to parties (domestic or foreign) other than Wackenhut
Corrections.

         SUBLEASES

         The provisions of certain existing operating agreements awarded to
Wackenhut Corrections for the WCC Facilities afford the governmental entity a
right to assume an existing sublease of the subject facility created between
WCCRE LLC and Wackenhut Corrections (or to designate another facility operator
to assume such sublease) at a fixed rental rate in the event of early
termination of the operating agreement upon the occurrence of certain events.
The rental payments and other material terms of these existing subleases differ
from comparable provisions of the leases, and there is no requirement that the
governmental entity or its designee comply with the provisions of the leases. In
such cases, Wackenhut Corrections will, nevertheless, remain primarily liable to
the Company under the leases on the WCC Facilities.

         Concurrently with the conveyance of certain of the WCC Facilities, the
Company has agreed, and in connection with the conveyance of certain of the
Option and Future Facilities and the execution of the leases with respect
thereto, the Company will agree, to recognize and leave undisturbed such rights
of the governmental entities. Such subleases are presently in effect with
respect to the Broward Facility, the McFarland Facility, the Central Valley
Facility, the Desert View Facility, and the Golden State Facility. Wackenhut
Corrections has agreed that the term of the individual leases between Wackenhut
Corrections and the Company for these facilities will be automatically extended,
if necessary, in order to insure that the lease between the Company and
Wackenhut Corrections will be commensurate with the term of any such subleases.
Some of the material differences between the terms and provisions of the
existing subleases and the leases are discussed below.

         THE BROWARD FACILITY SUBLEASE. WCCRE LLC has entered into a sublease
(the "Broward Sublease") with Wackenhut Corrections for the use of the Broward
Facility. In connection with the IPO, the Company entered into a lease with
WCCRE LLC pursuant to which it will recognize and agree to leave undisturbed the
Broward Sublease. While the Broward Sublease is a triple-net lease, the annual
rent payable under the Broward Sublease is below the annual rent payable under
the relevant lease and the provisions of the sublease are generally not as
favorable to the lessor as the comparable provisions of the relevant lease. If
the operating agreement between Wackenhut Corrections and Broward County is
terminated for a reason other than a default by Wackenhut Corrections during the
initial five-year term expiring in February 2003, the Broward County Sheriff is
required under the operating agreement to assume the obligations of Wackenhut
Corrections under the Broward Sublease through February, 2003, and in the event
of such assumption, may exercise the three consecutive five year renewal options
contained in the Broward Sublease. Wackenhut Corrections will nevertheless
remain obligated to the Company for performance under the lease for the entire
term of the Broward Sublease. If Wackenhut Corrections defaults on its
obligations under the lease, the Company will be required to permit the Broward
County Sheriff to occupy the Broward Facility under the terms of the Broward
Sublease at a rental rate and upon terms which are not as favorable to the
Company as those of the lease.

         THE CALIFORNIA FACILITIES SUBLEASES. WCCRE LLC has entered into a
series of subleases (collectively the "California Subleases") with Wackenhut
Corrections for the use of the California Facilities. In connection with the
IPO, the Company entered into a series of leases with WCCRE LLC pursuant to
which the Company will recognize and agree to leave undisturbed the California
Subleases. Except for the base rent, the terms and provisions of each of the
California Subleases are identical. With the exception of the sublease of the
McFarland Facility which expired in January 1999, the term of each of the
California Subleases is 120 months expiring December 16, 2007 and is coterminous
with a ten year facility operating agreement entered into between Wackenhut
Corrections and the State of California for each such facility. Each of the
California Subleases provides for certain "termination rights" in favor of the
State of California under which the State of California has the option, in the
event of early termination of the operating agreement between the State of
California and Wackenhut Corrections, to cause Wackenhut Corrections' interest
under each of the California Subleases to be assigned to the State of California
or to a replacement operator approved by the State. The California Subleases may
not be modified without the prior written approval of the State of California.

                                       16
<PAGE>

While the California Subleases are triple-net leases, the provisions of such
subleases are generally not as favorable to the lessor as the comparable
provisions of the relevant leases. If Wackenhut Corrections defaults on its
obligations under the leases, the Company will be required to permit the
contracting government entity to occupy the California Facilities under the
provisions of the sublease. The annual base rent under the sublease is not
subject to adjustment for cost of living increases or any other reason. As a
result, the annual rent payable under the California Subleases may, during some
portion of the term of the applicable master leases, fall below the annual rent
payable under such leases. Wackenhut Corrections will nevertheless remain
obligated to the Company for performance under such leases for the entire term
of the California Subleases.

         THE JENA FACILITY. In March 1997, Wackenhut Corrections acquired, by
assignment, all of the right, title and interest of the LaSalle Parish Hospital
District No. 2 (the "Hospital District") under a Cooperative Endeavor Agreement
dated January 30, 1995 (the "Louisiana Operating Agreement") entered into
between the LDOC and the Hospital District. The Louisiana Operating Agreement
contemplates the construction of a 276-bed juvenile correctional facility
through the issuance of bonds secured by a mortgage on the Jena Facility (the
"Mortgage Debt"). The contemplated Mortgage Debt for the facility was not
obtained and Wackenhut Corrections, upon its acquisition of the interest of the
Hospital District under the Louisiana Operating Agreement, privately financed
the cost of construction of the facility. On January 7, 2000 the Company
acquired the Jena Facility from Wackenhut Corrections. The Louisiana Operating
Agreement, was terminated as of July 1, 2000. Wackenhut Corrections does not
presently have an operating contract with a client for the Jena Facility.
However, Wackenhut Corrections continues to make rental payments to the Company
and maintain the facility.

RELATIONSHIP WITH WACKENHUT CORRECTIONS CORPORATION

         Wackenhut Corrections is a leading developer and manager of privatized
correctional and detention facilities in the United States and abroad. Wackenhut
Corrections was founded in 1984 as a division of The Wackenhut Corporation, a
leading provider of professional security services, to capitalize on emerging
opportunities in the private correctional services market. According to industry
reports, Wackenhut Corrections is the second largest provider of privatized
correctional and detention services in the United States and the largest
provider of such services abroad, based upon the number of beds under
management. As of December 30, 2001, Wackenhut Corrections had 61 correctional
and detention facilities under contract or award, with an aggregate design
capacity of 39,965 beds (with many of such facilities being leased by Wackenhut
Corrections from the contracting government entity).

         Wackenhut Corrections offers governmental entities a comprehensive
range of correctional and detention facility management services, ranging from
individual consulting projects to the integrated design, development and
management of such facilities. In addition to providing the fundamental
residential services relating to the security of facilities and the detention
and care of inmates, Wackenhut Corrections has built a reputation as an
effective provider of a wide array of in-facility rehabilitative and educational
programs, such as chemical dependency counseling and treatment, basic education
and job and life skills training. Additionally, Wackenhut Corrections is
continuously seeking to expand into complementary services such as work release
programs, youth detention services and prisoner transport services. Wackenhut
Corrections believes that its experience in delivering a full range of
high-quality correctional and detention facility management services on a
cost-effective basis to government agencies provides such agencies strong
incentives to choose Wackenhut Corrections when awarding new contracts or
renewing existing contracts.

         Wackenhut Corrections, or a subsidiary thereof, is the lessee of, and
will continue to operate, each of the WCC Facilities. Wackenhut Corrections may
sell additional correctional and detention facilities to the Company in the
future and enter into long-term, non-cancelable, triple-net leases with the
Company with respect to those facilities.

         See "Item 1. Recent Developments" in connection with the March 8, 2002
announcement by The Wackenhut Corporation, which is the parent company and 57%
owner of Wackenhut Corrections Corporation, that it signed a definitive merger
agreement with Group 4 Falck, a multinational security and corrective services
company.

                                       17
<PAGE>

LEASES ON NORTH CAROLINA FACILITIES

The Mountain View Lease Agreement

         The Mountain View Facility is leased to the State of North Carolina
(the "State") pursuant to a lease agreement dated June 19, 1997. The Mountain
View Facility lease term commenced on December 1, 1998. The lease agreement is
for an initial term of ten years, with two automatic extensions of ten years
each, for a total term of thirty years. The State can terminate the lease at the
end of any term or renewal term by giving the lessor at least 180 days advance
written notice.

         Equal monthly lease payments are due in arrears on the last day of each
month during the term of the Mountain View lease agreement. A one percent (1%)
late fee is assessable in the event that a lease payment is not made on or
before the last day of the month.

         The Mountain View lease agreement is a triple-net lease and rental
payments are due without deduction, offset or abatement and are due without
demand or notice. The State is responsible for all costs of maintenance,
insurance, taxes, and preservation and protection of the premises. Beginning on
the first anniversary of the first rental payment date and on each anniversary
date thereafter during the initial term of the Mountain View lease agreement and
any renewal term, the rent is increased by the greater of (a) three and one-half
percent (3.5%), or (b) the percentage of increase in the Consumer Price Index
for All Urban Consumers U.S. City Average, All Items, but not to exceed four
percent (4%).

         The continuation of the Mountain View lease agreement is dependent upon
and subject to the appropriation of funds for lease payments by the General
Assembly of North Carolina. Failure to appropriate sufficient funds for the
payment of the lease rental terminates the lease effective the end of the
immediately preceding fiscal period of the lessee without further liability on
the part of the State. The State has agreed in the Mountain View lease agreement
to seek authorization and appropriation of funds for the required rental
payments from the North Carolina General Assembly by including in its annual
budget a request for adequate funds to satisfy its obligations under the
Mountain View lease agreement.

         The State, commencing at the end of the sixth year of the Mountain View
Lease Agreement, and at the end of each lease year thereafter, has the option to
purchase the Mountain View Facility. The State's purchase price under the option
to purchase in year six (December 2004) is approximately $26,200,000, and the
option purchase price at the end of each subsequent lease year, as specified in
the lease agreement, is at predetermined declining amounts.

The Pamlico Lease Agreement

         The Pamlico Facility is leased to the State pursuant to a lease
agreement dated June 19, 1997. The Pamlico Facility lease term commenced on
August 19, 1998. The Pamlico lease agreement is for an initial term of ten
years, with two automatic extensions of ten years each for a total term of
thirty years. The State can terminate the lease at the end of any term or
renewal term by giving the lessor at least 180 days advance written notice.

         Equal monthly lease payments are due in arrears on the last day of each
month during the term of the Pamlico lease agreement. A one percent (1%) late
fee is assessable in the event that a lease payment is not made on or before the
last day of the month.

         The Pamlico lease agreement is a triple-net lease and rental payments
are due without deduction, offset or abatement and are due without demand or
notice. The State is responsible for all costs of maintenance, insurance, taxes,
and preservation and protection of the premises. Beginning on the first
anniversary of the first rental payment date and on each anniversary date
thereafter during the initial term of the lease and any renewal term, the rent
is increased by the greater of (a) three and one-half percent (3.5%), or (b) the
percentage of increase in the Consumer Price Index for All Urban Consumers U.S.
City Average, All Items, but not to exceed four percent (4%).

         The continuation of the Pamlico lease agreement is dependent upon and
subject to the appropriation of funds for lease payments by the General Assembly
of North Carolina. Failure to appropriate sufficient funds for the payment of
the lease rental terminates the lease effective the end of the immediately
preceding fiscal period of the lessee without further liability on the part of
the State. The State has agreed in the lease agreement to seek authorization and
appropriation of funds for the required rental

                                       18
<PAGE>

payments from the North Carolina General Assembly by including in its annual
budget a request for adequate funds to satisfy its obligations under the Pamlico
lease agreement.

         The State, commencing at the end of the sixth year of the Pamlico lease
agreement, and at the end of each lease year thereafter, has the option to
purchase the Pamlico Facility. The State's purchase price under the option to
purchase in year six (August 2004) is approximately $25,230,000, and the option
purchase price at the end of each subsequent lease year, as specified in the
lease agreement, is at predetermined declining amounts.

The Bank Credit Facility

         On October 2, 1998, the Company obtained from Bank of America, as
successor by merger to NationsBank, N.A., a $100 million bank credit facility
(the "Bank Credit Facility"), which matures on October 1, 2003. The Bank Credit
Facility may be used to finance the acquisition of correctional and detention
facilities, the expansion of existing facilities and for working capital
requirements. On March 16, 2001, concurrent with the acquisition of the Mountain
View Facility, the Company amended its Bank Credit Facility from a total of $100
million, to $110 million. Various covenants were also amended and the interest
rate grid applicable to all borrowings was increased by 50 basis points.
Additionally, on June 28, 2001, concurrent with the issuance of the Bonds, the
Company further amended its Bank Credit Facility. These amendments include an
increase in the allowable ratio of total indebtedness to liabilities plus
shareholders' equity, an increase in the allowable ratio of non-recourse
indebtedness to consolidated total value, and a modification reducing interest
rate swap requirements.

         The Bank Credit Facility is secured by the Company's facilities other
than the North Carolina Facilities, and permits aggregate borrowings of up to
50% of the lesser of the aggregate of the historical cost of the Company's
facilities or the aggregate of the appraised value of such facilities (the
"Total Value"). Under the terms of the Bank Credit Facility, the Company is
restricted from paying dividends in excess of the lesser of 95% of net income
(subject to certain adjustments) in any calendar year or 100% of funds available
for distribution in any calendar quarter. Borrowings under the Bank Credit
Facility bear interest on Eurodollar loans at a variable rate equal to: (I)
LIBOR plus 175 basis points if the ratio of Consolidated Total Indebtedness to
Consolidated Adjusted EBITDA is less than or equal to 3.00 to 1.00 (II) LIBOR
plus 200 basis points if the ratio of Consolidated Total Indebtedness to
Consolidated Adjusted EBITDA is less than or equal to 3.50 to 1.00 but greater
than 3.00 to 1.00 (III) LIBOR plus 225 basis points if the ratio of Consolidated
Total Indebtedness to Consolidated Adjusted EBITDA is less than or equal to 4.00
to 1.00 but greater than 3.50 to 1.00 (IV)LIBOR plus 250 basis points if the
ratio of Consolidated Total Indebtedness to Consolidated Adjusted EBITDA is less
than or equal to 4.50 to 1.00 but greater than 4.00 to 1.00; in each case,
calculated based on interest periods of one, two, three, six or nine months at
the option of the Company. Economic conditions could result in higher interest
rates, which could increase debt service requirements on borrowings under the
Bank Credit Facility and which could, in turn, reduce the amount of cash
available for distribution. Upon the closing of the Bank Credit Facility, the
Company paid fees of approximately $2.2 million. In addition, the Company paid
fees and expenses of approximately $0.8 million in connection with the
amendments to the Bank Credit Facility in 2001. As of December 31, 2001, the
amount of outstanding indebtedness under the Bank Credit Facility was $80.0
million.

         As of December 31, 2001, the Company had $30 million available under
its Bank Credit Facility, including $5 million available to be drawn on the
swing line component of the Bank Credit Facility for general working capital
requirements. All amounts available under the Bank Credit Facility are subject
to the Company's compliance with several restrictive covenants prior to any such
amounts being drawn to finance the acquisition of correctional and detention
facilities and/or to expand the Facilities and for general working capital
requirements. In order to fully utilize the total capacity available under the
Bank Credit Facility, it may be necessary for the Company to issue additional
equity.

         The Company has a total of $66 million of notional amount cash flow
interest rate swaps outstanding. The swap agreements provide that floating rate
LIBOR payments on $45 million of indebtedness will be exchanged for fixed
payments at a rate of 7.035% per annum and floating rate LIBOR payments on $21
million of indebtedness will be exchanged for fixed payments at a rate of 4.995%
per annum. In addition, the Company will be obligated for the EuroDollar Rate
Margin described in the amended Bank Credit Facility which was 2.25% at December
31, 2001. The fair value of the interest rate swaps at December 31, 2001 is a
liability of $3,737,000.

         WCC's correctional facility operating contract with the California
Department of Corrections (the "CDOC") on the McFarland Facility is set to
expire on June 30, 2002. WCC has notified the Company that it believes the CDOC

                                       19
<PAGE>

may not renew its operating contract due to budgetary constraints. WCC is
continuing its efforts to extend the current operating contract with CDOC as
well as offering the McFarland Facility to incarcerate inmates from other
interested government agencies. The non-cancelable lease between the Company and
WCC, which expires in April 2008, requires fixed rental payments to the Company
regardless of whether or not WCC has an operating contract for the leased
facility. The current annual rent on the McFarland Facility is approximately
$731,000.

         The absence of a correctional service operating or management contract
between a governmental agency and a qualified operator may cause the McFarland
Facility, or any other facility securing the Bank Credit Facility, to become
ineligible for inclusion in the Pledge Pool Borrowing Base under the Bank Credit
Facility. If after June 30, 2002, the McFarland facility were removed from the
Pledge Pool Borrowing Base, the value of the facilities remaining would support
the $80 million outstanding at December 31, 2001, and the Company would continue
to be in compliance with the covenants of the Bank Credit Facility.

         WCC does not presently have a correctional facility operating or
management contract with a governmental agency for the Jena Facility. However,
WCC continues to make rental payments to the Company as required under the terms
of the non-cancelable lease. As a result of the termination of the operating
contract in effect when the Company acquired the Jena Facility, the Jena
Facility is no longer included in the Company's pledge pool Borrowing Base
described in the Bank Credit Facility.

COMPETITION

         The facilities are, and any additional correctional and detention
facilities acquired by the Company will be, subject to competition for inmates
from private prison managers and possibly governmental entities. In addition,
operating revenues of the Company's correctional and detention facilities will
be affected by a number of factors, including the demand for inmate beds and
general economic conditions. The Company is subject to competition for the
acquisition of correctional and detention facilities with other purchasers of
correctional and detention facilities.

GOVERNMENT REGULATION

         CORRECTIONS INDUSTRY REGULATIONS. The corrections industry is subject
to federal, state and local regulations in the United States which are
administered by a variety of regulatory authorities. Generally, prospective
providers of corrections services must be able to detail their readiness to, and
must comply with, a variety of applicable state and local regulations, including
education, health care and safety regulations. Correctional and detention
management contracts frequently include extensive reporting requirements and
require supervision and on-site monitoring by representatives of contracting
governmental agencies. State law also typically requires corrections officers to
meet certain training standards. In addition, many state and local governments
are required to enter into a competitive bidding procedure before awarding
contracts for products or services. The laws of certain jurisdictions may also
require the Company to award subcontracts on a competitive basis or to
subcontract with businesses owned by women or members of minority groups.

         ENVIRONMENTAL MATTERS. Under various federal, state and local laws,
ordinances and regulations, an owner or operator of real property may become
liable for the costs of removal or remediation of certain hazardous substances
released on or in its property. Such laws often impose such liability without
regard to whether the owner or operator knew of, or was responsible for, the
release of such hazardous substances. The presence of such substances, or the
failure to remediate such substances properly when released, may adversely
affect the owner's ability to sell such real estate or to borrow funds if the
borrower is using such real estate as collateral. Neither the Company, Wackenhut
Corrections nor any of their affiliates has been notified by any government
authority of any material non-compliance, liability or other claim in connection
with any of the WCC Facilities and neither the Company, Wackenhut Corrections
nor any of their affiliates is aware of any other environmental condition with
respect to any of the WCC Facilities that is likely to be material to the
Company. Phase I environmental assessments have been obtained for all of the WCC
Facilities. No assurance can be given that such investigation would reveal all
potential environmental liabilities, that no prior or adjacent owner created any
material environmental condition not known to the Company or that future uses or
conditions (including, without limitation, changes in applicable environmental
laws and regulations) will not result in imposition of environmental liability
or limitation on use of properties. The leases provide that Wackenhut
Corrections will indemnify the Company for certain potential environmental
liabilities at the WCC Facilities. See "Item 1. Business-Leases-Environmental
Matters."

                                       20
<PAGE>

         AMERICANS WITH DISABILITIES ACT. The facilities are subject to the ADA.
The ADA has separate compliance requirements for "public accommodations" and
"commercial facilities" but generally requires that public facilities, such as
correctional facilities, be made accessible to people with disabilities. These
requirements became effective in 1992. Compliance with the ADA requirements
could require removal of access barriers and other capital improvements at the
facilities. Noncompliance could result in imposition of fines or an award of
damages to private litigants. Receipt of a satisfactory ADA compliance report is
required prior to the Company's acquisition of each facility. Nonetheless, under
the Master Lease, Wackenhut Corrections is required to make any necessary
modifications or improvements to comply with the ADA and to indemnify the
Company from any liabilities in connection therewith.

TAX CONSIDERATIONS AND TAX STATUS OF THE COMPANY

         The Company has elected to be taxed as a REIT under sections 856
through 860 of the Internal Revenue Code of 1986, as amended (the "Code"),
commencing with its taxable year ending December 31, 1998. If the Company
qualifies for taxation as a REIT, with certain exceptions, the Company will not
be subject to federal income tax at the corporate level on its taxable income. A
REIT is subject to a number of organizational and operational requirements,
including a requirement that it distribute at least 90% of its annual real
estate investment trust taxable income. Although the Company believes it
operates in a manner designed to qualify as a REIT, it is possible that future
economic, market, legal or tax considerations may cause the Company to fail to
qualify as a REIT or may cause the Board of Trustees to revoke the REIT election
if the Board of Trustees and the holders of two-thirds of all outstanding shares
of beneficial interest of the Company determine that such factors make it no
longer beneficial to qualify as a REIT.

POLICIES AND OBJECTIVES WITH RESPECT TO CERTAIN ACTIVITIES

         The following is a discussion of the Company's investment objectives
and policies, financing policies and policies with respect to certain other
activities. These policies are determined by the Board of Trustees and may be
amended or revised from time to time at the discretion of the Board of Trustees
without a vote of the Company's shareholders.

         INVESTMENT POLICIES. The Company focuses its investments on the
acquisition or development of facilities directly from, or on behalf of,
Wackenhut Corrections or its affiliates or other private prison managers or
government entities in the United States. Additionally, the Company may, but has
no present plans to, pursue other opportunities in facilities unrelated to the
correctional and detention industry. The Company may also invest in other
facilities or excess land to the extent necessary to acquire a facility. The
Company applies the following general guidelines in evaluating potential
investments in correctional and detention facilities: (i) completion of the
construction of the facility, (ii) execution of a government contract for the
operation of the facility, and (iii) documentation of adequate inmate occupancy
levels. Although these investment guidelines are not compulsory but merely
advisory, management of the Company has no present intent to acquire any
facility until construction is completed.

         Subject to the general investment guidelines referenced above, the
Company considers a variety of specific factors in evaluating potential
investments in correctional or detention facilities, including: (i) the
reputation and creditworthiness of the current owner, manager or developer of
the facility, (ii) the proposed terms for purchasing the facility, (iii) the
proposed terms for leasing the facility, including rental payments and lease
term, (iv) the quality of construction of the facility, (v) the quality of
operations at an existing facility or the quality of other operations of a
prison manager for a new facility, (vi) the relationship between the prison
manager and the contracting government entity, and (vii) the status of existing
facilities as facilities accredited by the American Correctional Association
(the "ACA"). The ACA is a multi-disciplinary organization of professionals
representing all levels and facets of the corrections and criminal justice
industry, including federal, state and military correctional facilities in
prisons, county jails and detention centers, probation and parole agencies, and
community corrections/half-way houses. Comprised of 70 chapters and affiliated
organizations, as well as individual members numbering more than 20,000, the ACA
serves as the umbrella organization for all areas of corrections, and provides a
broad base of expertise in this industry.

         The Company may purchase or lease properties for long-term investment,
expand and improve the facilities presently owned or sell such properties, in
whole or in part, when circumstances warrant. The Company may also participate
with other entities in property ownership, through joint ventures or other types
of co-ownership. Equity investments may be subject to existing mortgage
financing and other indebtedness which have priority over the equity interest of
the Company.

                                       21
<PAGE>

         While the Company emphasizes equity real estate investments, it may, in
its discretion, invest in mortgages, equity or debt securities of other REITs or
partnerships and other real estate interests. Mortgage investments may include
participating in convertible mortgages.

         There are no limitations on the percentage of the Company's assets that
may be invested in any one property, venture or type of security. The Board of
Trustees may establish limitations as it deems appropriate from time to time,
including limitations necessary to maintain the Company's qualification as a
REIT. No limitations have been set on the number of properties in which the
Company will seek to invest or on the concentration of investments in any one
geographic region.

         DISPOSITION POLICIES; WACKENHUT CORRECTIONS' RIGHT OF FIRST REFUSAL.
The Company has no current intention to dispose of any of the Facilities,
although it reserves the right to do so if the Board of Trustees determines that
such action would be in the best interests of the Company. Wackenhut Corrections
has a right of first refusal with respect to any sale of Facilities acquired
from Wackenhut Corrections. See "The Formation Transactions" and "Leases" for a
more detailed discussion of the terms and conditions of Wackenhut Corrections'
right of first refusal.

         FINANCING POLICIES. The Company's capital structure at December 31,
2001 consisted of 47% equity and 53% debt. As of December 31, 2001, the debt of
the Company was comprised of $80.0 million outstanding under the Bank Credit
Facility and $57.5 million of Bonds outstanding, which are non-recourse to CP
North Carolina and its sole member, CPT Operating Partnership L.P. The Company
determines its financing policies in light of then current economic conditions,
relative costs of debt and equity capital, market values of properties, growth
and acquisition opportunities and other factors. The Company has established the
Bank Credit Facility which may be used to finance the acquisition of additional
correctional and detention facilities (including the Option Facilities and the
Future Facilities), the expansion of existing facilities and for working capital
requirements. If the Board of Trustees determines that additional funding is
desirable, the Company may raise such funds through additional equity offerings,
debt financing or retention of cash flow (subject to provisions in the Code
concerning taxability of undistributed REIT income and REIT qualification), or a
combination of these methods.

         Indebtedness incurred by the Company may be in the form of publicly or
privately placed debt instruments or financings from banks, institutional
investors or other lenders, any of which indebtedness may be unsecured or may be
secured by mortgages or other interests in the facilities owned by the Company.
There are no limits on the number or amounts of mortgages or other interests
which may be placed on any one faciliy. In addition, such indebtedness may be
with or without recourse to all or any part of the facilities of the Company or
may be limited to the particular facility to which the indebtedness relates.

         The proceeds from any borrowings may be used for the payment of
distributions and working capital or to refinance indebtedness or to finance
acquisitions, expansions or developments of new facilities.

         In the event that the Board of Trustees determines to raise additional
equity capital, the Board of Trustees has the authority, without shareholder
approval, to issue additional Common Shares or Preferred Shares of the Company.
The Bylaws require the approval of at least two-thirds of the members of the
Board of Trustees for the Company to issue equity securities, other than Common
Shares issued (a) for at least the fair market value thereof at the time of
issuance as determined in good faith by a majority of the Board of Trustees, (b)
pursuant to any share incentive or option plans of the Company, or (c) in a bona
fide underwritten public offering managed by one or more nationally recognized
investment banking firms. Existing shareholders have no preemptive right to
purchase shares issued in any offering, and any such offering could cause a
dilution of a shareholder's investment in the Company.

         WORKING CAPITAL RESERVE POLICIES. The Company maintains working capital
reserves (and when not sufficient, access to borrowings) in amounts that the
Board of Trustees determines to be adequate to meet normal contingencies in
connection with the operation of the Company's business and the management of
its investments.

         CONFLICTS OF INTEREST POLICIES. The Company has adopted certain
policies designed to minimize potential conflicts of interest. However, there
can be no assurance that these policies always have been or will be successful
in eliminating the influence of such conflicts. The Declaration of Trust
requires that at least a majority of the members of the Board of Trustees be
comprised of "Independent Trustees," defined therein as individuals who qualify
as trustees but who are neither an officer nor an employee of the Company or its

                                       22
<PAGE>

affiliates, nor a director, trustee, officer or employee of, or other person who
has a material financial interest in, any of (i) The Wackenhut Corporation or
Wackenhut Corrections, or (ii) any lessee or tenant of a facility owned by the
Company or by the Company's affiliates, or (iii) any owner, lessee or tenant of
any facility financed by the Company or by the Company's affiliates, other than
any such owner, lessee or tenant which is an affiliate of the Company, or (iv)
any management company operating any facility owned or financed by the Company
or by the Company's affiliates, or (v) an affiliate of any of the foregoing. The
Declaration of Trust provides that such provisions relating to Independent
Trustees may be amended with the approval by the shareholders by the affirmative
vote of two-thirds of all of the votes entitled to be cast on such matters. In
addition, the Bylaws provide that the selection of operators for the Company's
facilities and the entering into and consummation of any agreement or
transactions with Wackenhut Corrections or its affiliates, including, but not
limited to, the negotiation, enforcement and renegotiation of the terms of any
lease of any of the Company's facilities with such parties, be approved by the
Company Independent Committee which must consist solely of Independent Trustees.

         OTHER POLICIES. The Company operates in a manner that will not subject
it to regulation under the Investment Company Act of 1940. The Company does not
(i) invest in the securities of other issuers for the purpose of exercising
control over such issuer, (ii) underwrite securities of other issuers or (iii)
trade actively in loans or other investments.

         Although it does not currently intend to do so, the Company may make
investments other than as previously described, provided that such investments
do not disqualify the Company from its REIT status. The Company may repurchase
or otherwise reacquire Common Shares or any other securities it may issue and
may engage in such activities in the future. The Board of Trustees has no
present intention of causing the Company to repurchase any of the Common Shares,
and any such action would be taken only in conformity with applicable federal
and state laws and the requirements for qualifying as a REIT under the Code and
the Treasury Regulations. Although it may do so in the future, the Company has
not issued Common Shares or any other securities in exchange for property, nor
has it reacquired (other than the 1,000 founder's shares) any of its Common
Shares or any other securities. The Company may make loans to third parties,
including, without limitation, to its officers and to joint ventures in which it
decides to participate. Such loans generally require the approval of the Board
of Trustees, and loans to Wackenhut Corrections and its affiliates or to a joint
venture in which Wackenhut Corrections participates require the approval of the
Company's Independent Committee.

         At all times, the Company intends to make investments in such a manner
as to be consistent with the requirements of the Code to qualify as a REIT, and
the Board of Trustees shall endeavor to take no action which disqualifies the
Company as a REIT or otherwise causes the revocation of the Company's election
to be taxed as a REIT without the affirmative vote of the holders of not less
than two-thirds of the shares of the Company entitled to vote on such matter.

RECENT DEVELOPMENTS

         On March 8, 2002, The Wackenhut Corporation, which is the parent
company and 57% owner of Wackenhut Corrections Corporation, announced that it
had signed a definitive merger agreement with Group 4 Falck, a multinational
security and corrective services company, headquartered in Copenhagen, Denmark,
which is publicly traded on the Copenhagen Exchange. The Wackenhut Corporation
and Wackenhut Corrections Corporation are each traded individually on the New
York Stock Exchange under the symbols "WAK" and "WHC", respectively.

         The Company currently leases eleven correctional facilities to
Wackenhut Corrections Corporation under long-term, triple-net leases. The terms
and conditions of these non-cancelable leases will remain unchanged as a result
of the merger. The average remaining life on these eleven leases is
approximately 6.5 years.

ITEM 2. PROPERTIES.

         For a description of the facilities owned and leased by the Company,
see "Item 1. Business." The Company also leases 2,600 square feet of office
space at an annual rent of approximately $42,000. The term of such lease expires
on May 31, 2005.

                                       23
<PAGE>

ITEM 3. LEGAL PROCEEDINGS.

         Owners and operators of privatized correctional and detention
facilities are subject to a variety of legal proceedings arising in the ordinary
course of operating such facilities, including proceedings relating to personal
injury and property damage. Such proceedings are generally brought against the
operator of a correctional or detention facility, but may also be brought
against the owner. Although the Company is not currently a party to any legal
proceeding, it is possible that in the future the Company could become a party
to such proceedings. Wackenhut Corrections is a party to certain litigation
relating to the Company's facilities arising in the ordinary course of
operations, as well as other litigation. . The Company does not believe that
such litigation, if resolved against Wackenhut Corrections, would have a
material adverse effect upon the Company's business, financial position or
results of operations, unless the ability of Wackenhut Corrections to perform
under the Company's leases was impaired. All of the leases between Wackenhut
Corrections and the Company provide that Wackenhut Corrections is responsible
for claims based on personal injury and property damage at the Company's
facilities and require Wackenhut Corrections to maintain insurance for such
purposes.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         None.

                                       24
<PAGE>


                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.

         Since April 23, 1998, the Company's Common Shares have been listed on
the New York Stock Exchange ("NYSE") under the symbol "CPV." The following table
sets forth the range of high and low sales prices for the Common Shares for the
period from January 1, 2000 to December 31, 2001, as reported by NYSE.

<TABLE>
<CAPTION>

                                                         2001                                  2000
                                                         ----                                  ----
                                                HIGH            LOW                    HIGH            LOW
                                                ----            ---                    ----            ---
<S>                                             <C>             <C>                   <C>            <C>
First Quarter...............................   $11.94           $9.63                 $12.88         $10.19
Second Quarter..............................    14.25           11.95                  11.94           9.88
Third Quarter...............................    16.00           11.95                  11.75           9.50
Fourth Quarter..............................    17.34           13.75                  10.31           9.00
</TABLE>

         As of March 25, 2002, there were 7,173,250 shares of Common Shares
outstanding, held by 122 shareholders of record. The Company believes that
certain holders of record hold a substantial number of Common Shares as nominees
for a significant number of beneficial owners.

RECENT SALES OF UNREGISTERED SECURITIES

         None.

DISTRIBUTIONS

         Subsequent to the IPO, the Company has paid regular quarterly
distributions to its shareholders. The Board of Trustees, in its sole
discretion, has determined the actual distribution rate based on the Company's
actual results of operations, economic conditions, tax considerations (including
those related to REITs) and other factors. In 2001, the Company paid four cash
dividend distributions (three in the amount of $.365 per common share and one in
the amount of $.375 per common share) totaling $1.47 per common share. In 2000,
the Company paid four cash dividend distributions (each in the amount of $.365
per common share) totaling $1.46 per common share.

         The Company believes that in order to facilitate a clear understanding
of the operating results of the Company, funds from operations should be
examined in conjunction with the Company's consolidated financial statements and
information included elsewhere in this report. Funds from operations does not
represent cash generated from operating activities in accordance with generally
accepted accounting principles ("GAAP") consistently applied and should not be
considered an alternative to net income as an indication of the Company's
performance or to cash flows as a measure of liquidity or ability to make
distributions. The Company's funds from operations are not comparable to funds
from operations reported by other REITs that do not define the term using the
current National Association of Real Estate Investment Trusts ("NAREIT")
definition or that interpret the current NAREIT definition differently than does
the Company.

                                       25
<PAGE>


ITEM 6. SELECTED FINANCIAL DATA.

         The selected consolidated financial data set forth below are derived
from the Company's consolidated financial statements which appear elsewhere in
this report. The following data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Result of Operations," and
the Consolidated Financial Statements and Notes thereto, included elsewhere in
this report.

<TABLE>
<CAPTION>

                                                                                                                   FOR THE
                                                                                                                  PERIOD FROM
                                                                              YEAR          YEAR         YEAR       2/18/98
                                                                              ENDED         ENDED        ENDED    (INCEPTION)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                                    12/31/01       12/31/00     12/31/99  TO 12/31/98
                                                                            --------       --------     --------  -----------
<S>                                                                        <C>            <C>         <C>         <C>
OPERATING RESULTS
Revenue.......................................................             $  27,431      $  22,711   $  20,329   $   8,628
Net income....................................................                 8,950          8,444       8,728       5,386
Weighted average shares outstanding, diluted..................                 7,164          7,130       7,130       5,546
Net income per share, diluted.................................                  1.25           1.18        1.22        0.97
Funds from operations.........................................                15,462         13,786      13,612       7,276
Funds from operations per share, diluted......................                  2.16           1.93        1.91        1.31

DIVIDENDS
Cash distribution per share...................................            $     1.47      $    1.46   $    1.43   $     .60

BALANCE SHEET DATA (DECEMBER 31, 2001, 2000, 1999 and 1998)
Real estate properties, net...................................            $  253,362      $ 210,324   $ 200,415   $ 137,597
Total assets..................................................               266,847        213,775     203,548     142,764
Revolving line of credit......................................                80,000         81,400      69,200       9,000
Bonds payable.................................................                57,475             --          --          --
Total liabilities.............................................               142,978         84,832      72,788      10,765
Total shareholders' equity....................................               123,869        128,943     130,760     131,999
</TABLE>

                                       26
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

         THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO INCLUDED
ELSEWHERE HEREIN.

FORWARD-LOOKING STATEMENTS

         Management's discussion and analysis of financial condition and results
of operations contains forward-looking statements that are based on current
expectations, estimates and projections about the business marketplace in which
Correctional Properties Trust (the "Company") operates. This section of the
annual report also includes management's beliefs and assumptions. Words such as
"expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates",
and variations of such words and similar expressions are intended to identify
such forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions ("Future
Factors") which are difficult to predict. Therefore, actual outcomes and results
may differ materially from what is expressed or forecasted in such
forward-looking statements. The Company undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise.

         Future Factors include, without limitation, increasing competition,
including new entrants in the marketplace; the mix of tenants as it relates to
other private operators and governmental entities; governmental and public
policy changes; reliance on a single tenant for a significant portion of its
revenue; interest rate risk; continued availability of financing; rental rates
sufficient to make acquisitions feasible; continued ability to pay a dividend;
and financial instruments and financial resources in the amounts, at the times
and on the terms required to support the Company's future business. These are
representative of the Future Factors that could affect the outcome of the
forward-looking statements. In addition, such statements could be affected by
general industry and market conditions and growth rates, general domestic
economic conditions including interest rate fluctuations and other Future
Factors. The Company discusses such risks in the Company's various reports filed
with the Securities and Exchange Commission.

         The following discussion should be read in conjunction with the
Company's consolidated financial statements and notes thereto.

OVERVIEW

         The Company was formed in February 1998 as a Maryland real estate
investment trust to capitalize on the growing trend toward privatization in the
corrections industry by acquiring correctional and detention facilities from
both private prison operators and governmental entities and leasing such
facilities to experienced correctional and detention facility operators under
long-term, non-cancelable, triple-net leases (leases where the tenant is
required to pay all operating expenses, taxes, insurance, structural and
non-structural repairs and other costs).

         The principal business strategy of the Company is to acquire
correctional and detention facilities that meet the Company's investment
criteria, from both private prison managers, developers and government entities,
to expand its existing facilities, and to lease all such facilities under
long-term leases to qualified third-party operators. On March 16, 2001 and June
28, 2001, the Company acquired the Mountain View Facility and Pamlico Facility,
respectively, which are both leased to the State of North Carolina, and operated
by the North Carolina Department of Correction. With the exception of the
Mountain View Facility and Pamlico Facility, the Company's remaining facilities
are privately managed facilities that are leased to and operated by Wackenhut
Corrections Corporation ("WCC").

         Substantially all of the Company's revenues are derived from: (i) rents
received under triple-net leases of correctional and detention facilities; and
(ii) interest earned from the temporary investment of funds in short-term
investments.

         The Company incurs operating and administrative expenses, including
compensation expense for its executive officers and other employees, office
rental and related occupancy costs and various expenses incurred in the process
of acquiring additional properties. The Company is self-administered and managed
by its executive officers and staff, and does not engage a separate advisor or
pay an advisory fee for administrative or investment services, although the
Company does engage legal,

                                       27
<PAGE>

accounting, tax and financial advisors from time to time. The primary non-cash
expense of the Company is depreciation of its correctional and detention
facilities.

         The Company has leveraged and anticipates having to continue to
leverage its portfolio of real estate equity investments, and expects to
continue to incur short-term indebtedness and related interest expense. The
Company may also incur long-term indebtedness to make acquisitions, and/or
refinance correctional facilities currently owned.

         The Company intends to make distributions to its shareholders in
amounts not less than the amounts required to maintain REIT status under the
Internal Revenue Code.

FINANCIAL CONDITION

RESULTS OF OPERATIONS

2001 COMPARED WITH 2000

         For the twelve months ended December 31, 2001, rental revenues
increased to $27,320,000 from $22,690,000 for the twelve months ended December
31, 2000. The 20% increase in rental revenues resulted primarily from revenue
associated with the Mountain View Facility, purchased on March 16, 2001, and the
Pamlico Facility, purchased on June 28, 2001. The balance of the increase is
primarily due to rent escalations, based on the Consumer Price Index ("CPI"), on
the initial facilities acquired at the IPO.

         Depreciation for the twelve months ended December 31, 2001 increased to
$6,512,000 from $5,342,000 for the twelve months ended December 31, 2000.
Depreciation associated with the Mountain View Facility and Pamlico Facility
resulted in a 22% increase in depreciation from 2000 to 2001.

         General and administrative expenses for the twelve months ended
December 31, 2001 increased 15% to $1,673,000 from $1,450,000 for the twelve
months ended December 31, 2000. The increase in general and administrative
expense is primarily due to an increase in pension expense associated with the
Company's Senior Executive Retirement Plan along with an increase in directors'
and officers' insurance.

         Interest expense increased to $10,296,000 for the twelve months ended
December 31, 2001 from $7,475,000 for the twelve months ended December 31, 2000.
The increase is primarily due to the draw on the Credit Facility in connection
with the acquisition of the Mountain View Facility on March 16, 2001 and
interest on the Bonds issued by a wholly-owned subsidiary of the Company on June
28, 2001 in connection with the refinancing of the Mountain View Facility and
the acquisition of the Pamlico Facility.

         Net income for the twelve months ended December 31, 2001 increased to
$8,950,000 from $8,444,000 for the twelve months ended December 31, 2000.

2000 COMPARED WITH 1999

         For the twelve months ended December 31, 2000, rental revenues
increased to $22,690,000 from $20,293,000 for the twelve months ended December
31, 1999. This increase resulted primarily from the acquisition of the Jena
Facility in January 2000.

         Depreciation for the twelve months ended December 31, 2000 increased to
$5,342,000 from $4,884,000 for the twelve months ended December 31, 1999. This
increase resulted primarily from the additional depreciation incurred after the
Company's acquisition of the Jena Facility.

         General and administrative expenses for the twelve months ended
December 31, 2000 decreased to $1,450,000 from $1,491,000 for the twelve months
ended December 31, 1999.

                                       28
<PAGE>

         Interest expense increased to $7,475,000 for the twelve months ended
December 31, 2000 from $5,226,000 for the twelve months ended December 31, 1999.
This increase resulted primarily from additional borrowings of approximately
$12,200,000 associated with the acquisition of the Jena Facility and higher
borrowing rates on all outstanding floating rate LIBOR debt associated with the
Bank Credit Facility.

         Net income for the twelve months ended December 31, 2000 decreased to
$8,444,000 from $8,728,000 for the twelve months ended December 31, 1999.

LIQUIDITY AND CAPITAL RESOURCES

         The Company expects to meet its short-term liquidity requirements
generally through its working capital and net cash provided by operations. The
Company believes that its net cash provided by operations will be sufficient to
allow the Company to make distributions necessary to enable the Company to
continue to qualify as a REIT. All facilities owned by the Company are leased
under triple-net leases, which require the lessees to pay substantially all
expenses associated with the operation of such facilities. As a result of these
arrangements, the Company does not believe it will be responsible for any major
expenses in connection with the facilities during the terms of the leases.

         The Company has a $110 million secured line of credit (the "Bank Credit
Facility"), which matures on October 1, 2003. On March 16, 2001, concurrent with
the acquisition of the Mountain View Facility, the Company amended its Bank
Credit Facility from a total of $100 million, to $110 million. Various covenants
were also amended and the interest rate grid applicable to all borrowings was
increased by 50 basis points. Additionally, on June 28, 2001, concurrent with
the issuance of the Bonds, the Company further amended its Bank Credit Facility.
These amendments include an increase in the allowable ratio of total
indebtedness to liabilities plus shareholders' equity, an increase in the
allowable ratio of non-recourse indebtedness to consolidated total value, and a
modification reducing interest rate swap requirements.

         The Bank Credit Facility enables the Company to borrow generally at
floating rates based on LIBOR plus the applicable interest rate margin under the
Bank Credit Facility; however, it includes a requirement that the Company enter
into certain interest rate swap agreements for a portion of the amounts drawn
under the Bank Credit Facility, which effectively fixes the interest rate on a
significant portion of the borrowings. The Company's ability to borrow under the
secured line of credit is subject to the Company's compliance with a number of
restrictive covenants and other requirements.

         As of December 31, 2001, the Company had interest rate swap agreements
for a total notional amount of $66 million, effectively fixing the rate on a
like amount of variable rate borrowings. The fair value of the interest rate
swaps at December 31, 2001 is a liability of $3,737,000.

         As of December 31, 2001, $80 million was drawn on the $110 million Bank
Credit Facility. As of December 31, 2001, the Company had $30 million available
under its Bank Credit Facility, including $5 million available to be drawn on
the swing line component of the Bank Credit Facility for general working capital
requirements. All amounts available under the Bank Credit Facility are subject
to the Company's compliance with several restrictive covenants prior to any such
amounts being drawn to finance the acquisition of correctional and detention
facilities and/or to expand the Facilities and for general working capital
requirements. In order to fully utilize the total capacity available under the
Bank Credit Facility, it may be necessary for the Company to issue additional
equity.

         The Company has no commitments with respect to other capital
expenditures. The Company has an option to acquire, at a price of up to 105% of
cost, and lease back to WCC, any correctional or detention facility acquired or
developed and owned by WCC, subject to certain limited exceptions, and subject
to purchase option time constraints on each specific property.

         WCC's correctional facility operating contract with the California
Department of Corrections (the "CDOC") on the McFarland Facility is set to
expire on June 30, 2002. WCC has notified the Company that it believes the CDOC
may not renew its operating contract due to budgetary constraints. WCC is
continuing its efforts to extend the current operating contract with CDOC as
well as offering the McFarland Facility to incarcerate inmates from other
interested government agencies. The non-cancelable lease between the Company and
WCC, which expires in April 2008, requires fixed rental payments to the Company

                                       29
<PAGE>

regardless of whether or not WCC has an operating contract for the leased
facility. The current annual rent on the McFarland Facility is approximately
$731,000.

         The absence of a correctional service operating or management contract
between a governmental agency and a qualified operator may cause the McFarland
Facility, or any other facility securing the Bank Credit Facility, to become
ineligible for inclusion in the Pledge Pool Borrowing Base under the Bank Credit
Facility. If after June 30, 2002, the McFarland facility were removed from the
Pledge Pool Borrowing Base, the value of the facilities remaining would support
the $80 million outstanding, at December 31, 2001, and the Company would
continue to be in compliance with the covenants of the Bank Credit Facility.

         In connection with four other facilities leased to WCC which have
management contracts between WCC and various governmental agencies expiring in
2002, the Company has been informed by WCC that they expect these contracts will
either be renewed or extended prior to their expiration dates.

         The Company expects to meet its long-term liquidity requirements for
the funding of real property development and acquisitions by borrowing under the
Bank Credit Facility and by issuing equity or debt securities in public or
private transactions. The Company anticipates that it will be able to obtain
financing for its long-term capital needs. However, there can be no assurance
that such additional financing or capital will be available on terms acceptable
to the Company. The Company may, under certain circumstances, borrow additional
amounts in connection with the renovation or expansion of facilities, the
acquisition of additional properties, or as necessary, to meet certain
distribution requirements imposed on REITs under the Internal Revenue Code.

FUNDS FROM OPERATIONS

         Management believes Funds From Operations ("FFO") is helpful to
investors as a measure of the performance of an equity REIT. Along with cash
flows from operating activities, financing activities and investing activities,
FFO provides investors with an understanding of the ability of the Company to
incur and service debt and make capital expenditures.

         The Company computes FFO in accordance with standards established by
the White Paper on Funds from Operations (the "White Paper") approved by the
Board of Governors of the National Association of Real Estate Investment Trusts
("NAREIT") in 1995, which may differ from the methodology for calculating Funds
from Operations utilized by other equity REITs, and accordingly, may not be
comparable to such other REITs. The White Paper defines FFO as net income
(loss), computed in accordance with generally accepted accounting principles
("GAAP"), excluding gains (or losses) from debt restructuring and sales of
property, plus real estate related depreciation and amortization and after
adjustments for unconsolidated partnerships and joint ventures. Further, FFO
does not represent amounts available for management's discretionary use because
of needed capital replacement or expansion, debt service obligations, or other
commitments and uncertainties.

         FFO should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indication of the Company's financial
performance or to cash flows from operating activities (determined in accordance
with GAAP) as a measure of the Company's liquidity, nor is it indicative of
funds available to fund the Company's cash needs, including its ability to make
distributions.

         The Company believes that in order to facilitate a clear understanding
of the consolidated operating results of the Company, FFO should be examined in
conjunction with net income as presented in the consolidated financial
statements.

         The following table presents the Company's FFO for the years ended
December 31, 2001, 2000 and 1999:
<TABLE>
<CAPTION>

(AMOUNTS IN THOUSANDS)                                                              2001          2000        1999
----------------------                                                              ----          ----        ----
<S>                                                                             <C>            <C>          <C>
Net Income.................................................................     $   8,950      $   8,444    $   8,728
Real estate depreciation...................................................         6,512          5,342        4,884
                                                                                ---------      ---------    ---------
Funds from operations......................................................     $  15,462      $  13,786    $  13,612
                                                                                ---------      ---------    ---------
Common shares outstanding

    Basic..................................................................         7,140          7,130        7,130
    Diluted................................................................         7,164          7,130        7,130
</TABLE>

                                       30
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         The Company is exposed to market risks inherent in the Company's
financial instruments. These instruments arise from transactions entered into in
the normal course of business and relate to the Company's acquisitions of
correctional and detention facilities. The Company is subject to interest rate
risk on its existing Bank Credit Facility and any future financing requirements.
The Company does not use financial instruments for trading or speculative
purposes and all financial instruments are entered into in accordance with Board
approved policies.

         The Company's interest rate risk is related primarily to the variable
rate Bank Credit Facility, which the Company has sought to reduce by entering
into the Interest Rate Swaps. The Company is also exposed to market risk from
(i) the interest rate risk on short-term borrowings, (ii) the possibility of
non-performance by the counter parties to the Interest Rate Swaps (which the
Company does not anticipate), (iii) its ability to refinance its Bank Credit
Facility at maturity at market rates and (iv) the impact of interest rate
movements on its ability to obtain and maintain adequate financing to fund
future acquisitions. While the Company cannot predict or manage its ability to
refinance existing debt or the impact interest rate movements will have on its
existing debt, management continues to evaluate its financial position on an
ongoing basis and may in the future seek to minimize interest rate exposure. The
Company's interest rate risk management objective is to limit the impact of
interest rate changes on earnings and cash flows. To achieve this objective, the
Company has entered into the Interest Rate Swaps.

         As of December 31, 2001, $80,000,000 had been drawn on the Bank Credit
Facility at an average rate of 7.96% based upon LIBOR plus an applicable margin
through January 22, 2002, taking into account the swap agreements described
below. No indebtedness under the Bank Credit Facility greater than 90 days in
duration existed as of December 31, 2001. Holding the variable rate outstanding
debt balance constant, each one percentage point increase in interest rates
occurring on the first day of 2002 would result in an increase in interest
expense for fiscal year 2002 of approximately $140,000.

         The Company's total interest rate swaps of $66 million provide that
floating rate LIBOR payments on $45 million of indebtedness will be exchanged
for fixed payments at a rate of 7.035% per annum and floating rate LIBOR
payments on $21 million of indebtedness will be exchanged for fixed payments at
a rate of 4.995% per annum. In addition, the Company is obligated for the
EuroRate Margin described in the Bank Credit Facility, which was 2.25% at
December 31, 2001. The fair value of the interest rate swaps at December 31,
2001 is a liability of $3,737,000.

         The Bonds outstanding at December 31, 2001 of $57,475,000 under the
Trust Indenture are non-recourse to CP North Carolina and its sole member, CPT
Operating Partnership L.P. and bear interest at a fixed rate of 7.15%.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The Company's consolidated financial statements for the year ended
December 31, 2001 and the respective notes thereto, are set forth elsewhere in
this report. An index of these financial statements appears in Item 14.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

         None.

                                       31
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To Correctional Properties Trust:

We have audited the accompanying consolidated balance sheets of Correctional
Properties Trust (a Maryland real estate investment trust) and subsidiaries as
of December 31, 2001 and 2000, and the related consolidated statements of
income, shareholders' equity and cash flows for each of the three years in the
period ended December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Correctional
Properties Trust and subsidiaries as of December 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States.

As explained in Note 2 to the consolidated financial statements, effective
January 1, 2001, the Company changed its method of accounting for derivative
instruments.

ARTHUR ANDERSEN LLP

West Palm Beach, Florida,
     January 14, 2002 (except with respect to the matter discussed in Note 10,
     as to which the date is January 23, 2002).

                                       32
<PAGE>

CORRECTIONAL PROPERTIES TRUST

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND DECEMBER 31, 2000
<TABLE>
<CAPTION>


(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)                                     2001             2000
----------------------------------------------------------                                     ----             ----
<S>                                                                                     <C>               <C>
Assets
Real estate properties, at cost
   Correctional and detention facilities............................................    $     271,990     $      222,440
   Less--accumulated depreciation...................................................          (18,628)           (12,116)
                                                                                        -------------     --------------
      Net real estate properties....................................................          253,362            210,324
Cash and cash equivalents...........................................................            1,429                466
Restricted cash.....................................................................            7,122                 --
Deferred financing costs............................................................            2,355              1,214
Other assets........................................................................            2,579              1,771
                                                                                        -------------     --------------
      Total assets..................................................................    $     266,847     $      213,775
                                                                                        =============     ==============
Liabilities and shareholders' equity
Liabilities
Accounts payable and accrued expenses...............................................    $       5,503     $        1,555
Deferred revenue....................................................................               --              1,877
Bonds payable.......................................................................           57,475                 --
Revolving line of credit............................................................           80,000             81,400
                                                                                        -------------     --------------
      Total liabilities.............................................................          142,978             84,832
                                                                                        -------------     --------------
Commitments and contingencies (note 7)
Shareholders' equity

   Preferred shares, $.001 par value; 50,000,000 shares authorized;
      none outstanding..............................................................               --                --
   Common shares, $.001 par value; 150,000,000 shares
      authorized; 7,145,000 and 7,130,000 shares issued and outstanding.............                7                  7
Capital in excess of par value......................................................          131,470            131,259
Distributions in excess of income...................................................           (3,871)            (2,323)
Accumulated other comprehensive loss................................................           (3,737)                --
                                                                                        -------------     --------------
      Total shareholders' equity....................................................          123,869            128,943
                                                                                        -------------     --------------
   Total liabilities and shareholders' equity.......................................    $     266,847     $      213,775
                                                                                        =============     ==============
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of these statements.

                                       33
<PAGE>

CORRECTIONAL PROPERTIES TRUST

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<TABLE>
<CAPTION>

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                                2001               2000            1999
------------------------------------------------                                ----               ----            ----
<S>                                                                        <C>                  <C>           <C>
Revenues
   Rental..............................................................    $      27,320        $   22,690    $    20,293
   Interest............................................................              111                21             36
                                                                           -------------        ----------    -----------
                                                                                  27,431            22,711         20,329
                                                                           -------------        ----------    -----------

Expenses

   Depreciation........................................................            6,512             5,342          4,884
   General and administrative..........................................            1,673             1,450          1,491
   Interest............................................................           10,296             7,475          5,226
                                                                           -------------        ----------     ----------
                                                                                  18,481            14,267         11,601
                                                                           -------------        ----------     ----------
Net income.............................................................    $       8,950        $    8,444     $    8,728
                                                                           =============        ==========     ==========
Net income per common share:
   Basic ..............................................................    $        1.25        $     1.18     $     1.22
   Diluted.............................................................    $        1.25        $     1.18     $     1.22
Weighted average number of shares outstanding:

   Basic ..............................................................            7,140             7,130          7,130
   Diluted.............................................................            7,164             7,130          7,130
</TABLE>


The accompanying notes to consolidated financial statements are an integral part
of these statements.

                                       34
<PAGE>

CORRECTIONAL PROPERTIES TRUST

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<TABLE>
<CAPTION>

(AMOUNTS IN THOUSANDS)

                                                                                       (DISTRIBUTIONS
                                                                                          IN EXCESS
                                                                                         OF INCOME)    ACCUMULATED
                                                     COMMON SHARES         CAPITAL IN    BALANCE OF       OTHER
                                                     -------------          EXCESS OF   UNDISTRIBUTED  COMPREHENSIVE
                                                 SHARES       AMOUNT        PAR VALUE      INCOME          LOSS         TOTAL
                                                 ------       ------        ---------      ------          ----         -----

<S>                                                <C>        <C>          <C>          <C>             <C>         <C>
Balance, December 31, 1998................         7,130      $     7      $130,884     $    1,108          --      $ 131,999
Non-cash compensation charge..............            --           --           228             --          --            228
Net income................................            --           --            --          8,728          --          8,728
Distributions to shareholders.............            --           --            --        (10,195)         --        (10,195)
                                             -----------      -------      --------     ----------      ------      ---------
Balance, December 31, 1999................         7,130            7       131,112           (359)         --        130,760
Non-cash compensation charge..............            --           --           147             --          --            147
Net income................................            --           --            --          8,444          --          8,444
Distributions to shareholders.............            --           --            --        (10,408)         --        (10,408)
                                             -----------      -------      --------     ----------      ------      ---------
Balance, December 31, 2000................         7,130            7       131,259         (2,323)         --        128,943
Exercise of stock options.................            15           --           167             --          --            167
Non-cash compensation charge..............            --           --            44             --          --             44
Cumulative effect of change in
 accounting principle.....................            --           --            --             --      (1,500)        (1,500)
Unrealized loss on derivative instruments.            --           --            --             --      (2,237)        (2,237)
Net income................................            --           --            --          8,950          --          8,950
Distributions to shareholders.............            --           --            --        (10,498)         --        (10,498)
                                             -----------      -------      --------     ----------      ------      ---------
Balance, December 31, 2001................         7,145      $     7      $131,470     $   (3,871)    $(3,737)     $ 123,869
                                             ===========      =======      ========     ==========     ========     =========
</TABLE>




The accompanying notes to consolidated financial statements are an integral part
of these statements.

                                       35
<PAGE>

CORRECTIONAL PROPERTIES TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<TABLE>
<CAPTION>

(AMOUNTS IN THOUSANDS)                                                          2001           2000             1999
----------------------                                                          ----           ----             ----
<S>                                                                        <C>            <C>             <C>
Cash flows from operating activities
   Net income..........................................................    $   8,950      $    8,444      $     8,728
   Adjustments to reconcile net income to net cash
      provided by operating activities:
      Depreciation of real estate properties...........................        6,512           5,342            4,884
      Other amortization...............................................        1,026             587              668
      Changes in assets and liabilities:
       Other assets....................................................       (1,091)          (413)            (610)
       Accounts payable and accrued expenses...........................          211           (344)            1,238
       Deferred revenue................................................       (1,877)            188              585
                                                                           ----------     ----------      -----------
         Net cash provided by operating activities.....................       13,731          13,804           15,493
                                                                           ---------      ----------      -----------
Net cash used in investing activities
   Acquisition of real estate properties...............................      (49,550)       (15,251)         (67,702)
                                                                           ---------      ---------       ----------
Cash flows from financing activities
   Distributions to shareholders.......................................      (10,498)       (10,408)         (10,195)
   Proceeds from exercise of stock options.............................          167              --               --
   (Repayments) borrowings under revolving line of credit..............       (1,400)         12,200           60,200
   Proceeds from issuance of bonds.....................................       57,535              --               --
   Repayments on bonds.................................................          (60)             --               --
   Restricted cash.....................................................       (7,122)             --               --
   Deferred financing costs............................................       (1,840)             --               --
                                                                           ----------     ----------      -----------
       Net cash provided by financing activities.......................       36,782           1,792           50,005
                                                                           ---------      ----------      -----------
       Net increase (decrease) in cash and cash equivalents............          963             345          (2,204)
Cash and cash equivalents, beginning of period.........................          466             121            2,325
                                                                           ---------      ----------      -----------
Cash and cash equivalents, end of period...............................    $   1,429      $      466       $      121
                                                                           =========      ==========      ===========
   Supplemental disclosure:
      Cash paid for interest...........................................    $   8,531      $    6,920       $    1,279
                                                                           =========      ==========       ==========
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of these statements.

                                       36
<PAGE>

CORRECTIONAL PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001

1. ORGANIZATION AND OPERATIONS

         Correctional Properties Trust (the "Company") was formed in February
1998 as a Maryland real estate investment trust to capitalize on the growing
trend toward privatization in the corrections industry by acquiring correctional
and detention facilities from both private prison operators and governmental
entities. At December 31, 2001, the Company owned thirteen facilities of which
eleven were leased to Wackenhut Corrections Corporation (together with its
subsidiaries, "WCC") and two were leased to the state of North Carolina. The
Company operates in only one segment.

         On April 28, 1998, the Company commenced operations after completing
its initial public offering (the "IPO"). Simultaneous with the completion of the
IPO, the Company acquired the following eight correctional and detention
facilities (the "Initial Facilities"), located in five states with an aggregate
design capacity of 3,154 beds, from WCC for an aggregate purchase price of
$113,000,000 (collectively, the "Formation Transactions"):

         (i)     Aurora INS Processing Center (Aurora, Colorado);
        (ii)     McFarland Community Correctional Facility (McFarland,
                 California);
       (iii)     Queens Private Correctional Facility (New York, New York);
        (iv)     Central Valley Community Correctional Facility (McFarland,
                 California);
         (v)     Golden State Community Correctional Facility (McFarland,
                 California);
        (vi)     Desert View Community Correctional Facility (Adelanto,
                 California);
       (vii)     Broward County Work Release Center (Broward County, Florida);
                 and
      (viii)     Karnes County Correctional Center (Karnes County, Texas).

         As part of the Formation Transactions, the Company also entered into
agreements with WCC to lease the Initial Facilities back to WCC pursuant to
long-term, non-cancelable triple-net leases (the "Leases") which require WCC to
pay all operating expenses, taxes, insurance and other costs. The Leases provide
for an initial term of 10 years that may generally be extended by WCC for three
five-year terms at fair market rental rates. The Leases provide for a base rent
equal to 9.5% of the total purchase price of each Initial Facility and annual
rent escalations equal to the annual increase in the Consumer Price Index--All
Urban Consumers, as published by the Bureau of Statistics of the United States
Department of Labor (the "CPI"), subject to a minimum annual increase of 3% at
the end of years one and two and a maximum annual increase of 4% throughout the
term of the Leases.

         Further, the Company has entered into a Right to Purchase Agreement
with WCC, pursuant to which the Company will have the right, during the 15 years
following the consummation of the IPO (so long as there are any leases in force
between the Company and WCC), to acquire and leaseback to WCC any future
facilities, subject to exception where the sale or transfer of ownership of a
facility is previously restricted and subject to purchase option time
constraints on each specific property.

         On October 30, 1998, Correctional Properties Trust completed the
acquisition of the 600-bed medium security Lea County Correctional Facility in
Hobbs, New Mexico (the "Hobbs Facility") for approximately $26,500,000.

         On January 15, 1999, the Company completed the acquisition of the
600-bed expansion of the Hobbs Facility for approximately $20,000,000 and the
Lawton Correctional Facility (the "Lawton Facility") for approximately
$46,000,000. WCC leased the Lawton Facility and the Hobbs Facility from the
Company for the same base rent and escalation percentage as the Initial
Facilities for an initial term of ten years, with three additional renewal
options for terms of five years each. The renewal terms are to be determined by
fair market rental rates.

         On January 7, 2000, the Company purchased the Jena Juvenile Justice
Center (the "Jena Facility") from WCC for approximately $15,300,000 using
proceeds available under the Bank Credit Facility. WCC has leased the 276-bed
facility located in Jena, Louisiana at an initial lease rate of 11% with 4%
annual escalators for an initial term of ten years, with three additional
renewal options for terms of five years each in length. The lease provides for
fixed rental payments to the Company without regard for occupancy. WCC does not
presently have a correctional facility operating or management contract with a



                                       37
<PAGE>

governmental agency for the Jena Facility. However, WCC continues to make rental
payments to the Company as required under the terms of the lease. As a result of
the termination of the operating contract in effect when the Company acquired
the Jena Facility, the Jena Facility is no longer included in the Company's
pledge pool Borrowing Base described in the Bank Credit Facility.

         On March 16, 2001, the Company acquired the Mountain View Correctional
Facility (the "Mountain View Facility") in Spruce Pine, North Carolina, for
approximately $25,200,000, including transaction costs, from an unrelated third
party. The 576-cell, medium security prison is leased to the State of North
Carolina, and is subject to the terms of an existing long-term, triple-net
lease, which was assigned by the previous facility owner to the Company. The
North Carolina Department of Correction operates the facility. The initial lease
on this facility, which became effective December 1998, included cash rental of
$2,768,700 during the first year of the lease, payable monthly in arrears. On
each anniversary date, the rental payment escalates in accordance with increases
in the Consumer Price Index (CPI), with a minimum increase of 3.5%, and a
maximum of 4%. The current annual rent is approximately $3,069,700. The initial
term of the lease is ten years, with two, ten-year renewals at the State of
North Carolina's option. The lessee has the option to acquire the facility in
December 2004, for approximately $26,200,000 and for predetermined declining
amounts at the end of each subsequent lease year. The annual lease payment is
subject to appropriation by the North Carolina General Assembly. The acquisition
has been accounted for under the purchase method of accounting. The results of
operations of the Mountain View Facility have been included in the Company's
consolidated financial statements from the date of acquisition. The Company
acquired the Mountain View Facility using the proceeds under the Bank Credit
Facility, which was amended to a total capacity of $110,000,000.

         On June 28, 2001, the Company transferred the Mountain View Facility,
subject to its mortgage, to Correctional Properties North Carolina Prison
Finance LLC ("CP North Carolina"), a newly formed and wholly owned subsidiary of
the Company. Concurrently, the Company refinanced the Mountain View Facility
using a portion of the proceeds from the issuance of $57,535,000 of Taxable
Mortgage Revenue Bonds, Series 2001 (the "Bonds")(See Note 4. Bonds). This
refinancing included repayment of the proceeds drawn under the Bank Credit
Facility to purchase the Mountain View Facility.

         On June 28, 2001, CP North Carolina acquired the Pamlico Correctional
Facility (the "Pamlico Facility") in Bayboro, North Carolina for approximately
$24,300,000, including transaction costs, from an unrelated third party. This
576-cell, medium-security prison is leased to the State of North Carolina, and
is subject to the terms of an existing long-term, triple-net lease, which was
assigned by the previous facility owner to the Company. The North Carolina
Department of Correction operates the facility. The initial lease on the Pamlico
Facility, which became effective in August of 1998, included annual cash rental
payments of $2,664,300 during the first year of the lease, payable monthly in
arrears. On each anniversary date of the lease, the rental payment escalates in
accordance with increases in the CPI, with a minimum increase of 3.5%, and a
maximum of 4%. The current annual rent is approximately $2,958,800. The initial
term of the lease is ten years, with two, ten-year renewals at the State of
North Carolina's option. The State of North Carolina has an option to acquire
the facility in August 2004, for approximately $25,230,000. At the end of each
lease year thereafter, it has an option to purchase the facility for a
predetermined declining amount. The annual lease payment is subject to
appropriation by the North Carolina General Assembly. The acquisition has been
accounted for under the purchase method of accounting. The Company acquired the
Pamlico Facility using a portion of the proceeds from the issuance of the Bonds
(See Note 4. Bonds).

         CP North Carolina, which is a fully consolidated entity of the Company
for financial reporting purposes, is a Delaware limited liability company formed
solely to issue the Bonds and acquire and own the Mountain View and Pamlico
Facilities. CP North Carolina's assets and credit are not available to pay the
debts or obligations of any other entity. The Bonds are non-recourse to CP North
Carolina and its sole member, CPT Operating Partnership L.P. Therefore, CP North
Carolina and its sole member, CPT Operating Partnership L.P., are not liable on
account of any deficiency in the event that the Trust Estate created under the
Trust Indenture for the Bonds is insufficient to repay the Bonds or the other
obligations of CP North Carolina under the Bond Documents. As the sole member of
CP North Carolina, CPT Operating Partnership L.P. will have availability on a
quarterly basis of distributions of remaining revenue proceeds of CP North
Carolina, after payment of principal and interest on the bonds, and funding of
any deficiencies in the various funds required under the Trust Indenture.

                                       38
<PAGE>

         The following unaudited pro forma summary presents the consolidated
statements of income as if the Mountain View and Pamlico acquisitions and the
issuance of the Bonds had occurred at the beginning of the periods presented and
does not purport to be indicative of what would have occurred had the
acquisition been made as of those dates or of results that may occur in the
future. The pro forma amounts give effect to adjustments for the rental income,
depreciation, interest expense, and amortization of deferred finance costs.

<TABLE>
<CAPTION>
                                                                                              YEAR ENDED
                                                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                               DECEMBER 31, 2001      DECEMBER 31, 2000
                                                                               -----------------      -----------------
<S>                                                                               <C>                    <C>
Revenues...................................................................       $      29,708          $     29,217
Net Income.................................................................               9,063                 8,876
Net Income Per Common Share....
   Basic...................................................................       $        1.27          $       1.24
                                                                                  =============          ============
   Diluted.................................................................       $        1.27          $       1.24
                                                                                  =============          ============
</TABLE>

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The consolidated financial statements of the Company include all the
accounts of the Company and its subsidiaries. All significant intercompany
balances and transactions have been eliminated.

CASH AND CASH EQUIVALENTS

         The Company considers all short-term, highly liquid investments that
are readily convertible to cash and have an original maturity of three months or
less at the time of purchase to be cash equivalents.

RESTRICTED CASH

         Restricted cash consists of restrictive funds held by the Trustee under
the indenture agreement in connection with the Bonds. Included in restricted
cash is a debt service reserve fund requirement equal to $5,753,500, which
represents 10% of the initial principal amounts of the Bonds. The debt service
reserve fund may be used to pay principal of and interest on the Bonds in the
event there should be insufficient funds to pay the principal and interest. The
debt service reserve fund requirement must be maintained throughout the life of
the Bonds and was required in order to obtain the bond insurance policy and
credit rating on the Bonds.

DEFERRED FINANCING COSTS

         Deferred financing costs, which include costs of the Bank Credit
Facility and the Bonds, are being amortized on a straight-line basis over the
respective term of the debt. This method approximates the effective interest
rate method.

REAL ESTATE PROPERTIES

         Real estate properties are recorded at cost. Acquisition costs and
transaction fees directly related to each property are capitalized as a cost of
the respective property. The cost of real estate properties acquired is
allocated between land, buildings and improvements, and machinery and equipment
based upon cost at time of acquisition. Depreciation is provided for on a
straight-line basis over an estimated useful life ranging from 27-40 years for
buildings and improvements.

         As of December 31, 2001 and 2000, the Company had investments in
thirteen and eleven leased real estate properties, respectively. Components of
these real estate investments at cost are as follows (in thousands):

<TABLE>
<CAPTION>

                                                                               DECEMBER 31, 2001      DECEMBER 31, 2000
                                                                               -----------------      -----------------
<S>                                                                               <C>                    <C>
Land and land improvements.................................................       $       9,157          $      8,550
Buildings and improvements.................................................             262,833               213,890
                                                                                  -------------          ------------
                                                                                  $     271,990          $    222,440
                                                                                  =============          ============
</TABLE>

                                       39
<PAGE>


LONG-LIVED ASSETS

         Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of" requires that long-lived assets, including certain identifiable
intangibles and the goodwill related to those assets, be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
the asset in question may not be recoverable. Management has reviewed the
Company's long-lived assets and has determined that there are no events
requiring impairment loss recognition. The method used to determine impairment
would be undiscounted operating cash flows over the remaining amortization
period for the related long-lived assets. The Company would measure impairment
as the difference between fair value and the net book value of the related
asset.

LEASES AND RENTAL INCOME

         All leases are accounted for as operating leases. Lease revenue is
recognized on a straight-line basis over the lease term including the impact of
the scheduled rent increases for any leases which are determinable in amount at
the inception of the lease. Deferred revenue represents monthly rent received in
advance from WCC. Any increases in the lease revenue due to scheduled rent
increases which were not determinable at the inception of the lease will be
recognized when determinable. The annual minimum rent to be received for
correctional and detention facilities under non-cancelable operating leases as
of December 31, 2001 is as follows (in thousands):
<TABLE>
<CAPTION>

FISCAL YEAR                                                                                        ANNUAL RENT
-----------                                                                                        -----------

<C>                                                                                           <C>
2002....................................................................................      $         29,207
2003....................................................................................                29,493
2004....................................................................................                29,789
2005....................................................................................                30,095
2006....................................................................................                30,413
Thereafter..............................................................................                54,487
                                                                                              ----------------
                                                                                              $        203,484
                                                                                              ================
</TABLE>

FEDERAL INCOME TAXES

         The Company sought qualification as a Real Estate Investment Trust
("REIT") under the Internal Revenue Code commencing with its taxable period
ended December 31, 1998 and each subsequent year. The Company intends to
continue to seek to qualify as a REIT in future years. As a result, management
believes the Company will generally not be subject to federal income tax on its
taxable income at corporate rates to the extent it distributes annually at least
90% of its taxable income to its shareholders and complies with certain other
requirements. Accordingly, no provision has been made for federal income taxes
in the accompanying consolidated financial statements.

         If the Company fails to qualify as a REIT in any taxable year, it would
be subject to federal income tax on its taxable income. Such an event could
materially affect the Company's net income. However, the Company believes that
it is organized and operates in such a manner as to qualify for treatment as a
REIT for the years ended December 31, 2001, 2000 and 1999.

FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying value of cash and cash equivalents, accounts payable and
accrued expenses, and the revolving line of credit approximate fair value. The
fair value of the Company's interest rate swaps at December 31, 2001 is a
liability of approximately $3,737,000 and is included in Accounts Payable and
Accrued Expenses in the accompanying Consolidated Balance Sheet.

INTEREST RATE SWAPS

         The Company adopted Statement of Financial Accounting Standards No. 133
("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities," as
amended by SFAS No. 137 and 138, on January 1, 2001. This statement establishes
accounting and reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or a liability measured at its
fair value. SFAS 133 requires that changes in the derivative's fair value be

                                       40
<PAGE>

recognized currently in earnings unless specific hedge accounting criteria are
met. The Company utilizes interest rate swap derivative instruments to manage
changes in market conditions related to interest rate payments on certain of its
variable rate debt obligations. As of December 31, 2001, the Company had
interest rate swap agreements for a total notional amount of $66 million,
effectively fixing the rate on a like amount of variable rate borrowings.
Management of the Company determined the interest rate swaps to be effective
cash flow hedges. SFAS 133 requires the transition adjustment resulting from
adoption of SFAS 133 to be reported in net income or other comprehensive income,
as appropriate, as the cumulative effect of a change in accounting principle. In
accordance with the transition provisions of SFAS 133, the Company recorded a
cumulative transition adjustment upon adoption of approximately $1.5 million to
increase Accumulated Other Comprehensive Loss to recognize the fair value of its
interest rate swap derivative instrument as of the date of adoption.

         The Company recognizes its derivatives on the balance sheet at fair
value, representing a liability of approximately $3,737,000 at December 31, 2001
which is included in Accounts Payable and Accrued Expenses in the accompanying
Consolidated Balance Sheet. Changes in the fair value for the effective portion
of the gain or loss on a derivative that is designated as and meets all the
required criteria for a cash flow hedge are recorded in Accumulated Other
Comprehensive Loss.

CONCENTRATION OF CREDIT RISK

         The Company is exposed to credit related losses in the event of
non-performance by counterparties to certain derivative financial instruments.
The Company monitors the credit worthiness of the counterparties and presently
does not expect default by any of the counterparties. The Company does not
obtain collateral in connection with its derivative financial instruments.

         The credit exposure that results from the Company's interest rate swaps
is represented by the fair value of the swaps as of the reporting date.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

         The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could vary from those
estimates. Significant estimates include the useful lives of real estate
properties.

COMPREHENSIVE INCOME

The components of the Company's comprehensive income are as follows (dollars in
thousands):
<TABLE>
<CAPTION>

                                                                     YEAR ENDED         YEAR ENDED              YEAR ENDED
                                                                    DECEMBER 31,       DECEMBER 31,            DECEMBER 31,
                                                                        2001               2000                    1999
                                                                        ----               ----                    ----

<S>                                                                  <C>                <C>                    <C>
    Net income................................................       $  8,950           $   8,444              $  8,728
    Cumulative effect of change in accounting principle.......        (1,500)                  --                    --
    Unrealized loss on derivative instruments.................        (2,237)                  --                    --
                                                                     --------           ---------              --------
    Comprehensive income......................................       $  5,213           $   8,444              $  8,728
                                                                     ========           =========              ========
</TABLE>


RECENT ACCOUNTING PRONOUNCEMENTS

         In June 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS 142 addresses
financial accounting and reporting for intangible assets acquired individually
or with a group of other assets (but not those acquired in a business
combination) at acquisition. SFAS No. 142 also addresses financial accounting
and reporting for goodwill and other intangible assets subsequent to their
acquisition. With the adoption of SFAS 142, goodwill is no longer subject to
amortization. Rather, goodwill will be subject to at least an annual assessment
for impairment by applying a fair value based test. The impairment loss is the
amount, if any, by which the implied fair value of goodwill is less than the

                                       41
<PAGE>

carrying or book value. SFAS No. 142 is effective for fiscal years beginning
after December 15, 2001. Impairment loss for goodwill arising from the initial
application of SFAS No. 142 is to be reported as resulting from a change in
accounting principle. The Company does not believe there will be an impact to
its financial position, results of operations or cash flows upon adoption.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS 144 is effective for fiscal
years beginning after December 15, 2001. For long-lived assets to be held and
used, SFAS 144 retains the existing requirements to (a) recognize an impairment
loss only if the carrying amount of a long-lived asset is not recoverable from
its undiscounted cash flows and (b) measure an impairment loss as the difference
between the carrying amount and fair value of the asset. SFAS 144 establishes
one accounting model to be used for long-lived assets to be disposed of by sale
and revises guidance for assets to be disposed of other than by sale. The
Company does not expect there will be an impact to its financial position,
results of operations or cash flows upon adoption.

3. BANK CREDIT FACILITY

         The Company currently has a $110 million secured line of credit (the
"Bank Credit Facility") which may be used to finance the acquisition of
correctional and detention facilities from WCC and others, to expand current
facilities and for general working capital requirements.

         The Company's ability to borrow under the Bank Credit Facility, which
matures on October 1, 2003, is subject to the Company's ongoing compliance with
several covenants including a cash flow covenant restricting collateralized
borrowings to not greater than 4.5 times Adjusted EBITDA (as defined in the Bank
Credit Facility). Additionally, the Bank Credit Facility is secured by eleven of
the Company's thirteen facilities at December 31, 2001. As of December 31, 2001,
$80,000,000 had been drawn on the Bank Credit Facility at an overall average
rate of 7.96% based upon LIBOR plus an applicable margin taking into account the
swap agreements.

         As of December 31, 2001, the Company had $30 million available under
its Bank Credit Facility, including $5 million available to be drawn on the
swing line component of the Bank Credit Facility for general working capital
requirements. All amounts available under the Bank Credit Facility are subject
to the Company's compliance with several restrictive covenants prior to any such
amounts being drawn to finance the acquisition of correctional and detention
facilities and/or to expand the Facilities and for general working capital
requirements. In order to fully utilize the total capacity available under the
Bank Credit Facility, it may be necessary for the Company to issue additional
equity.

         The Company has a total of $66 million of notional amount cash flow
interest rate swaps outstanding. The swap agreements provide that floating rate
LIBOR payments on $45 million of indebtedness will be exchanged for fixed
payments at a rate of 7.035% per annum and floating rate LIBOR payments on $21
million of indebtedness will be exchanged for fixed payments at a rate of 4.995%
per annum. In addition, the Company will be obligated for the EuroDollar Rate
Margin described in the amended Bank Credit Facility which was 2.25% at December
31, 2001. The Eurodollar Rate Margin is determined based upon the ratio of
Consolidated Total Indebtedness to Consolidated Adjusted EBITDA and ranges from
1.75% to 2.50%. The fair value of the interest rate swaps at December 31, 2001
is a liability of $3,737,000.

         WCC's correctional facility operating contract with the California
Department of Corrections (the "CDOC") on the McFarland Facility is set to
expire on June 30, 2002. WCC has notified the Company that it believes the CDOC
may not renew its operating contract due to budgetary constraints. WCC is
continuing its efforts to extend the current operating contract with CDOC as
well as offering the McFarland Facility to incarcerate inmates from other
interested government agencies. The non-cancelable lease between the Company and
WCC, which expires in April 2008, requires fixed rental payments to the Company
regardless of whether or not WCC has an operating contract for the leased
facility. The current annual rent on the McFarland Facility is approximately
$731,000.

         The absence of a correctional service operating or management contract
between a governmental agency and a qualified operator may cause the McFarland
Facility, or any other facility securing the Bank Credit Facility, to become
ineligible for inclusion in the Pledge Pool Borrowing Base under the Bank Credit
Facility. If after June 30, 2002, the McFarland facility were removed from the
Pledge Pool Borrowing Base, the value of the facilities remaining would support
the $80 million outstanding, at December 31, 2001, and the Company would
continue to be in compliance with the covenants of the Bank Credit Facility.

                                       42
<PAGE>

         WCC does not presently have a correctional facility operating or
management contract with a governmental agency for the Jena Facility. However,
WCC continues to make rental payments to the Company as required under the terms
of the non-cancelable lease. As a result of the termination of the operating
contract in effect when the Company acquired the Jena Facility, the Jena
Facility is no longer included in the Company's pledge pool Borrowing Base
described in the Bank Credit Facility.

4. BONDS

         On June 28, 2001, CP North Carolina, which is a fully consolidated
entity of the Company for financial reporting purposes, issued $57,535,000 in
Taxable Mortgage Revenue Bonds, Series 2001. The proceeds from the Bonds were
used to complete the acquisition of the Pamlico Facility, to refinance the
Mountain View Correctional Facility, provide a debt service reserve fund of
approximately $5,754,000, establish a working capital fund of $750,000, and pay
the costs of the transaction, including the one time premium for a bond
insurance policy. The Bonds, which have a fixed-rate coupon of 7.15%, were
privately placed at par value on a negotiated basis to qualified institutional
buyers as defined under Rule 144A of the Securities Act of 1933.

         Quarterly payments of principal and interest on the Bonds began in
October 2001, with the final payment due in January 2017. The Bonds are
non-recourse obligations and are secured by a deed of trust and a security
agreement on the Mountain View Facility and Pamlico Facility, as well as an
assignment to a trustee of the lease payments to be made by the State of North
Carolina under each of the facility leases. The scheduled annual principal
payments due on the bonds as of December 31, 2001 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                                    SCHEDULED
FISCAL YEAR                                                                                    PRINCIPAL PAYMENTS
-----------                                                                                    ------------------

<C>                                                                                           <C>
2002....................................................................................      $            695
2003....................................................................................                   925
2004....................................................................................                 1,185
2005....................................................................................                 1,490
2006....................................................................................                 1,840
Thereafter..............................................................................                51,340
                                                                                              ----------------
                                                                                              $         57,475
                                                                                              ================
</TABLE>

         In the event of the exercise of the purchase option on the Mountain
View Facility, and/or the Pamlico Facility by the State of North Carolina prior
to January of 2017 as provided in the respective leases, CP North Carolina is
obligated to redeem all or a portion of the Bonds at a redemption price equal to
100% of the principal amount of the Bonds to be redeemed, plus accrued interest
to the redemption date. If both of the Mountain View and Pamlico Facilities are
purchased, CP North Carolina is obligated to redeem all of the Bonds. If only
one of the Mountain View or Pamlico Facilities is purchased, CP North Carolina
is obligated to redeem a principal amount of Bonds equal to the purchase price
of the facility purchased, net of closing costs, pro rations and adjustments.

5. SHARE OPTION AND INCENTIVE PLANS

         The Company has established share option and incentive plans for the
purpose of attracting and retaining qualified executive officers and key
employees, as well as trustees.

         In conjunction with the IPO, the Company granted options with respect
to an aggregate of 590,000 common shares to officers, employees and trustees.
The exercise price for such options is the IPO price of $20.00. The term of such
options is ten years from the date of grant. In general, one-fourth of the
aggregate of 565,000 options granted to executive officers and employees vested
immediately and the remaining shares vested ratably on the first, second, and
third anniversary of the date of grant, respectively. The options granted to the
non-employee trustees in the aggregate of 25,000 shares vested in full at the
date of grant. The value of options granted to non-employees in the aggregate of
240,000 shares is being charged to compensation expense over the life of the

                                       43
<PAGE>

options. The amount of related compensation expense recognized during the year
ended December 31, 2001, 2000 and 1999, respectively, was approximately $44,000,
$147,000 and $228,000.

         On January 21, 1999, the Company granted 51,000 options for common
shares to officers and employees and 10,000 options for common shares to
non-employee trustees. Such options were granted at an exercise price of $17.31
per share, the fair market value at date of grant. The term of these options is
ten years from the date of grant. The options granted to officers vest
immediately as to one-fourth of the shares subject thereto, and vest as to the
remaining shares ratably on the first, second and third anniversary of the grant
date. The options granted to the trustees vested in full at the date of grant.

         On April 25, 2000, the Company granted 96,000 options for common shares
to officers and employees and 10,000 options for common shares to non-employee
trustees. Such options were granted at an exercise price of $11.19 per share,
the fair market value of a share at the date of the grant. The term of these
options is ten years from the date of grant. The options granted to officers
vest immediately as to one-fourth of the shares subject thereto and vest ratably
as to the remaining shares on the first, second and third anniversaries of the
grant date. The options granted to the trustees vested in full on the date of
the grant.

         On January 17, 2001, the Company granted 50,000 options for common
shares to officers and employees and 16,000 options for common shares to
non-employee trustees. Such options were granted at an exercise price of $11.00
per share, the fair market value of a share at the date of the grant. In
addition, on May 29, 2001, the Company granted 5,000 options at an exercise
price of $12.62 per share, which was the fair market value of a share at the
date of grant, to an officer of the Company. The term of these options is ten
years from the date of grant. The options granted to officers vest immediately
as to one-fourth of the shares subject thereto and vest ratably as to the
remaining shares on the first, second and third anniversaries of the grant date.
The options granted to the trustees vested in full on the date of the grant.

         A summary of the status of the Company's stock option plans, including
their weighted average option exercise price, as of December 31, 2001, 2000 and
1999, respectively, is presented below:
<TABLE>
<CAPTION>

                                                    2001                      2000                         1999
                                           -----------------------   ------------------------   --------------------------
                                                         WEIGHTED-                  WEIGHTED-                     WEIGHTED-
                                                         AVERAGE                    AVERAGE                       AVERAGE
                                                         EXERCISE                   EXERCISE                      EXERCISE
                                           SHARES         PRICE      SHARES          PRICE      SHARES             PRICE
                                           ------        --------    ------         --------    ------            --------
<S>                                        <C>            <C>       <C>             <C>          <C>              <C>
Outstanding at beginning of year.......... 757,000        $18.55    651,000         $19.75       590,000          $20.00
Options granted...........................  71,000        $11.11    106,000         $11.19        61,000          $17.31
Options exercised......................... (15,000)       $11.13         --             --            --              --
Options forfeited......................... (51,250)       $12.01         --             --            --              --
                                           -------        ------    -------         ------       -------         -------
Outstanding at end of year................ 761,750        $18.44    757,000         $18.55       651,000          $19.75
                                           =======        ======    =======         ======       =======          ======
Exercisable at end of year................ 703,000        $18.98    525,750         $19.16       334,750          $19.78
</TABLE>

         Significant option groups outstanding at December 31, 2001, and related
weighted average price and life information, are as follows:
<TABLE>
<CAPTION>

                                                      EXERCISE PRICE/                    EXERCISE PRICE/
                                                     WEIGHTED AVERAGE                   WEIGHTED AVERAGE    REMAINING LIFE
                 GRANT DATE          OUTSTANDING      EXERCISE PRICE     EXERCISABLE     EXERCISE PRICE       OUTSTANDING
                 ----------          -----------     ----------------    -----------    ----------------    --------------

                  <S>                <C>              <C>                 <C>                <C>              <C>
                   4/28/98             587,500            $20.00           587,500           $20.00            6.3 years
                   1/21/99              57,250            $17.31            49,750           $17.31            5.7 years
                   4/25/00              66,000            $11.19            41,000           $11.19            8.3 years
                   1/17/01              46,000            $11.00            23,500           $11.00            9.1 years
                   5/29/01               5,000            $12.62             1,250           $12.62            9.4 years
                                       -------                            --------
                                       761,750            $18.44           703,000           $18.98
                                       =======                            ========
</TABLE>

                                       44
<PAGE>

         As of December 31, 2001, the Company had options with respect to an
aggregate of 68,250 common shares available for grant. The Company applies APB
Opinion No. 25 and related interpretations in accounting for its employee
stock-based compensation plans. Accordingly, no compensation cost has been
recognized for its employee stock plans. Had compensation for the Company's
stock-based compensation plans been determined pursuant to SFAS No. 123,
"Accounting for Stock-Based Compensation", the Company's net income and earnings
per share would have decreased accordingly. Using the Black-Scholes
option-pricing model, the Company's pro forma net income, pro forma net income
per share and weighted average fair value of options granted, with related
assumptions, are as follows:

<TABLE>
<CAPTION>

                                                                         2001                2000                1999
                                                                         ----                ----                ----
<S>                                                                  <C>              <C>               <C>
Pro forma net income (in thousands)...........................        $   8,871       $     8,239       $       8,512
Pro forma basic earnings per share............................             1.24              1.16                1.19
Pro forma diluted earnings per share..........................             1.24              1.16                1.19
Weighted average fair value of options granted................             0.17              0.04                0.51
Risk-free interest rate.......................................             5.00%             6.50%               4.69%
Expected life (years).........................................               10                10                  10
Expected volatility...........................................             21.3%             11.8%               13.9%
Quarterly dividend rate.......................................             13.2%            12.51%                8.1%
</TABLE>

6. EARNINGS PER SHARE

         Basic earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding during the year. Diluted
earnings per share is computed by dividing net income by the weighted average
number of common shares after considering additional dilution. The following
data show the amounts used in computing earnings per share and the effects on
income and the weighted average number of shares of potential dilutive common
stock (in thousands, except per share data):
<TABLE>
<CAPTION>

                                                                     YEAR ENDED         YEAR ENDED              YEAR ENDED
                                                                    DECEMBER 31,       DECEMBER 31,            DECEMBER 31,
                                                                        2001               2000                    1999
                                                                        ----               ----                    ----
<S>                                                                  <C>                <C>                    <C>
    Net income................................................       $  8,950           $   8,444              $  8,728
    Weighted average shares--basic............................          7,140               7,130                 7,130
    Per share--basic..........................................       $   1.25           $    1.18             $    1.22
    Effect of dilutive stock options..........................             24                  --                    --
    Weighted average shares--diluted..........................          7,164               7,130                 7,130
    Per share--diluted........................................       $   1.25           $    1.18              $   1.22
</TABLE>


         As of December 31, 2001, outstanding options to purchase 644,750 shares
of the Company's stock, with exercise prices ranging from $17.31 to $20.00 per
share and expiration dates between 2008 and 2009, were not included in the
computation of diluted EPS because their effect would be anti-dilutive.

         As of December 31, 2000, outstanding options to purchase 757,000 shares
of the Company's stock, with exercise prices ranging from $11.19 to $20.00 per
share and expiration dates between 2008 and 2010, were not included in the
computation of diluted EPS because their effect would be anti-dilutive.

         As of December 31, 1999, outstanding options to purchase 651,000 shares
of the Company's stock, with exercise prices ranging from $17.31 to $20.00 per
share and expiration dates between 2008 and 2009, were not included in the
computation of diluted EPS because their effect would be anti-dilutive.

                                       45
<PAGE>

7. COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

         The nature of the Company's business results in claims for damages
arising from the conduct of its employees or others. In the opinion of
management, there are no known pending legal proceedings that would have a
material effect on the consolidated financial statements of the Company.

LEASE COMMITMENTS

         The Company leases office space and data processing equipment under
non-cancelable operating leases expiring through 2005. Rent expense for the
years ended December 31, 2001, 2000 and 1999 was $42,000, $42,000, and $43,000
respectively.

         The minimum commitments under these obligations are as follows:
<TABLE>
<CAPTION>

YEAR                                                                           MINIMUM COMMITMENT
----                                                                           ------------------

<C>                                                                                <C>
2002............................................................................   $      43,000
2003............................................................................          45,000
2004............................................................................          47,000
2005............................................................................          20,000
2006 and thereafter.............................................................              --
                                                                                   -------------
Total...........................................................................   $     155,000
                                                                                   =============
</TABLE>

8. SAVINGS AND RETIREMENT PLANS

         The Company has a 401(k) retirement plan (the "401(k) Plan") covering
all of the officers and employees of the Company. The 401(k) Plan permits
participants to contribute, until termination of employment with the Company, up
to a maximum of 15% of their compensation to the 401(k) Plan. Contributions of
participants are not matched by the Company. For the years ended December 31,
2001, 2000 and 1999, the Company incurred costs of approximately $1,000, $1,200
and $1,200 respectively, in connection with the 401(k) Plan.

         The Board of Trustees approved and adopted a Senior Executive
Retirement Plan. The Chief Executive Officer of the Company is currently the
only eligible participant. For the years ended December 31, 2001, 2000 and 1999,
the Company recorded pension expense of approximately $100,000, $0 and $0,
respectively.

                                       46
<PAGE>

9. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE
   DATA)
<TABLE>
<CAPTION>

                                                                               AS OF OR FOR THE PERIOD ENDED:
                                                                --------------------------------------------------------
                                                                  1ST               2ND             3RD            4TH
                                                                QUARTER           QUARTER         QUARTER        QUARTER
                                                                -------           -------         -------        -------
<S>                                                            <C>               <C>             <C>              <C>
2001
----

Real estate properties, net..........................          $234,167          $256,929        $255,146         $253,362
Total assets.........................................           237,911           268,981         269,196          266,847
Revenue..............................................             5,824             6,622           7,489            7,496
Net income...........................................             2,112             2,214           2,305            2,319
Net income per share, diluted........................              0.30              0.31            0.32             0.32
Funds from operation.................................             3,487             3,784           4,088            4,103
Cash distribution per share..........................             0.365             0.365           0.365            0.375

2000
----

Real estate properties, net..........................          $214,396          $213,059        $211,722         $210,324
Total assets.........................................           217,530           216,178         216,873          213,775
Revenue..............................................             5,649             5,685           5,684            5,693
Net income...........................................             2,231             2,147           2,035            2,031
Net income per share, diluted........................              0.31              0.30            0.29             0.28
Funds from operation.................................             3,562             3,484           3,372            3,368
Cash distribution per share..........................             0.365             0.365           0.365            0.365
</TABLE>


10. SUBSEQUENT EVENTS

         On January 23, 2002, the Board of Trustees declared a distribution of
$0.40 per share for the quarter ended December 31, 2001, to shareholders of
record on February 15, 2002. The distribution will be paid on March 5, 2002 and
represents a distribution for the period from October 1, 2001 through December
31, 2001.

                                       47
<PAGE>

                                    PART III

         The information required by Items 10, 11, 12 and 13 of Part III of Form
10-K is set forth in the definitive Proxy Statement of the Company relating to
the 2002 Annual Meeting of Shareholders and is incorporated herein by reference.

                                       48
<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)(1) The following consolidated financial statements are filed as part of this
Form 10-K:

         Correctional Properties Trust Consolidated Financial Statements:

         Report of Independent Certified Public Accountants

         Consolidated Balance Sheets at December 31, 2001 and  December 31, 2000

         Consolidated Statement of Income for the years ended December 31, 2001
         and December 31, 2000 and December 31, 1999

         Consolidated Statement of Shareholders Equity for years ended December
         31, 2001 and December 31, 2000 and December 31, 1999

         Consolidated Statement of Cash Flows for the years ended December 31,
         2001 and December 31, 2000 and December 31, 1999

         Notes to Consolidated Financial Statements.

    (2) The following financial statement schedules are filed as part of this
Form 10-K:

         None.

    (3)  See Exhibit Index included elsewhere herein.

(b)      Reports on Form 8-K:

         None.

                                       49
<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

Date:  March 26, 2002                     CORRECTIONAL PROPERTIES TRUST
                                          (Registrant)

                                          By: /s/ Charles R. Jones
                                             ---------------------------------
                                                  Charles R. Jones
                                                  Chief Executive Officer,
                                                  President and Trustee


         KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Charles R. Jones as his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Annual Report on Form 10-K, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf by the Registrant
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

                SIGNATURE                                        TITLE                                        DATE
                ---------                                        -----                                        ----
<S>                                                  <C>                                                  <C>
/s/ DR. GEORGE C. ZOLEY                              Chairman of the Board                                March 26, 2002
--------------------------------------------
Dr. George C. Zoley

/s/ RICHARD R. WACKENHUT                             Vice-Chairman of the Board                           March 26, 2002
--------------------------------------------
Richard R. Wackenhut

/s/ GEORGE R. WACKENHUT                              Trustee                                              March 23, 2002
--------------------------------------------
George R. Wackenhut

/s/ ANTHONY P. TRAVISONO                             Trustee                                              March 25, 2002
--------------------------------------------
Anthony P. Travisono

                                                     Trustee                                              March   , 2002
--------------------------------------------
Clarence E. Anthony

/s/ ROBERT R. VEACH, JR.                             Trustee                                              March 24, 2002
--------------------------------------------
Robert R. Veach, Jr.

/s/ JAMES D. MOTTA                                   Trustee                                              March 25, 2002
--------------------------------------------
James D. Motta

/s/ WILLIAM M. MURPHY                                Trustee                                              March 26, 2002
--------------------------------------------
William M. Murphy

/s/ DAVID J. OBERNESSER                              Vice President, Chief Financial Officer,             March 26, 2002
--------------------------------------------         Secretary, Treasurer and Chief Accounting Officer
David J. Obernesser
</TABLE>

                                       50
<PAGE>

                                INDEX TO EXHIBITS

NUMBER                       DESCRIPTION OF EXHIBITS
------                       -----------------------

3.1               Articles of Amendment and Restatement of Declaration of Trust
                  of Correctional Properties Trust (1)

3.2               Amended and Restated Bylaws of Correctional Properties Trust
                  (2)

3.3               Specimen of certificate representing the Common Shares (3)

4.1               Provisions defining the rights of shareholders are found in
                  the Articles of Amendment and Restatement of the Declaration
                  of Trust and the Amended and Restated Bylaws, respectively, of
                  Correctional Properties Trust (included as Exhibits 3.1 and
                  3.2 hereof)

10.1              Agreement of Limited Partnership of Correctional Properties
                  Trust Operating Limited Partnership L.P. (3)

10.2              Master Agreement to Lease between CPT Operating Partnership
                  L.P. and Wackenhut Corrections Corporation (3)

10.3              Form of Lease Agreement between CPT Operating Partnership L.P.
                  and Wackenhut Corrections

10.4              Form of Right to Purchase Agreement between Wackenhut
                  Corrections Corporation and CPT Operating Partnership L.P. (3)

10.5              Form of Option Agreement between Wackenhut Corrections
                  Corporation and CPT Operating Partnership L.P. (3)

10.6              Form of Trustee and Officer Indemnification Agreement between
                  Correctional Properties Trust and its trustees and officers
                  (3)

10.7              Correctional Properties Trust 1998 Employee Share Incentive
                  Plan (4)+

10.8              Correctional Properties Trust 1998 Non-Employee Trustees'
                  Share Option Plan (4)+

10.9              Correctional Properties Trust 2000 Stock Option Plan (6)+

10.10             Agreement of Sale and Purchase dated October 30, 1998 between
                  Wackenhut Corrections Corporation and CPT Operating
                  Partnership L.P. (3)

10.11             Credit Agreement dated October 2, 1998 by and among CPT
                  Operating Partnership, L.P., Correctional Properties Trust,
                  NationsBank, N.A., NationsBanc Montgomery Securities LLC, the
                  Bank of Nova Scotia and the Lenders parties thereto from time
                  to time (5)

10.11(a)          Amendment Agreement No. 1 to Credit Agreement, dated March 10,
                  2000, by and among CPT Operating Partnership, L.P.,
                  Correctional Properties Trust, Bank of America, N.A.
                  (successor by merger to NationsBank, N.A), as Agent for the
                  Lenders party to the Credit Agreement (8)

10.11(b)          Amendment Agreement No. 2 to Credit Agreement, dated March 16,
                  2001, by and among CPT Operating Partnership, L.P.,
                  Correctional Properties Trust, Bank of America, N.A.
                  (successor by merger to NationsBank, N.A), as Agent for the
                  Lenders party to the Credit Agreement (9)

<PAGE>


NUMBER                       DESCRIPTION OF EXHIBITS
------                       -----------------------

10.11(c)          Amendment Agreement No. 3 to Credit Agreement, dated March 16,
                  2001, by and among CPT Operating Partnership, L.P.,
                  Correctional Properties Trust, Bank of America, N.A.
                  (successor by merger to NationsBank, N.A), as Agent for the
                  Lenders party to the Credit Agreement (9)

10.11(d)          Amendment Agreement No. 4 to Credit Agreement, dated June 28,
                  2001, by and among CPT Operating Partnership, L.P.,
                  Correctional Properties Trust, Bank of America, N.A.
                  (successor by merger to NationsBank, N.A), as Agent for the
                  Lenders party to the Credit Agreement (10)

10.12             Agreement of Sale and Purchase dated January 15, 1999 between
                  Wackenhut Corrections Corporation and CPT Operating
                  Partnership LP (7)

10.13             Agreement of Sale and Purchase dated January 7, 2000 between
                  Wackenhut Corrections Corporation and CPT Operating
                  Partnership LP (7)

10.14             The Agreement of Sale dated March 1, 2001 (Mountain View
                  Correctional Facility), by and between Corrections Corporation
                  of America, a Maryland corporation, and CPT Operating
                  Partnership, L.P., a Delaware limited partnership (9)

10.15             The Agreement of Sale dated March 10, 2001 (Pamlico
                  Correctional Facility), by and between Corrections Corporation
                  of America, a Maryland corporation, and CPT Operating
                  Partnership, L.P., a Delaware limited partnership (10)

21.1              List of Subsidiaries of Correctional Properties Trust (4)

23.1              Consent of Arthur Andersen LLP*

99.1              Press Release dated March 11, 2002*

99.2              Letter regarding representations from Arthur Andersen LLP*

*        Filed herewith.

+        Management contract or compensatory plan or arrangement.

(1)      Incorporated by reference to exhibit 3.2 to Amendment No. 1 to the
         Registrant's Form S-11 (File No. 333-46681) filed with the Commission
         on March 20, 1998.

(2)      Incorporated by reference to exhibit 3.4 to Amendment No. 1 to the
         Registrant's Form S-11 (File No. 333-46681) filed with the Commission
         on March 20, 1998.

(3)      Incorporated by reference to Amendment No. 1 to the Registrant's Form
         S-11 (File No. 333-46681) filed with the Commission on March 20, 1998.

(4)      Incorporated by reference to Amendment No. 2 to the Registrant's Form
         S-11 (File No. 333-46681) filed with the Commission on April 8, 1998.

(5)      Incorporated by reference to exhibit 4.1 of the Registrant's Form 10-Q
         for the quarter ended September 30, 1998 filed with the Commission on
         November 16, 1998.


<PAGE>
NUMBER                       DESCRIPTION OF EXHIBITS
------                       -----------------------

(6)      Incorporated by reference to Appendix A to Registrant's Definitive
         Proxy Statement filed with the Commission on March 30, 2000.

(7)      Incorporated by reference to Registrant's Form 10-K for the year ended
         December 31, 1999 filed with the Commission on March 31, 2000.

(8)      Incorporated by reference to Registrant's Form 10-K for the year ended
         December 31, 2000 filed with the Commission on April 2, 2001.

(9)      Incorporated by reference to Registrant's Form 8-K filed with the
         Commission on April 2, 2001.

(10)     Incorporated by reference to Registrant's Form 8-K filed with the
         Commission on July 13, 2001.