The Department of Homeland Security's Office of Inspector General has launched an audit to look into if the U.S. Immigration and Customs Enforcement's recent purchases of large-scale warehouses were done in a cost-effective manner.
The purchases were part of the federal government's $38 billion plan to reform its national network of detention centers and expand capacity.
Over the past few months, ICE has closed 11 deals for 7.6 million square feet of industrial space in eight states for more than $1.074 billion from private sellers that include Goldman Sachs and Carlyle Group, with plans to convert the vacant warehouses into detention centers, according to CoStar's analysis.
On average, ICE paid a premium ranging between 12% and 13% for the 11 deals, with some properties trading at double-digit increases at over 30%, according to the latest analysis from Juan Arias, CoStar's national director for U.S. industrial analytics.
CoStar News reported in early March that ICE was paying more per square foot for the warehouses in their respective markets than comparable deals at a time of sluggish demand by industrial tenants. ICE's reform of its detention network also included investing millions of dollars to convert the warehouses initially expected to move thousands of packages into housing for thousands of people instead. The expansion by ICE differs from its historic use of purpose-built facilities designed specifically for the agency's needs, according to the government.
The audit, launched Wednesday, is expected to "determine to what extent" ICE "purchased and converted facilities for detention space that meets its operational need in a cost-effective manner," the agency outlined. The Office of the Inspector General declined further comment to CoStar News.
The audit comes after DHS temporarily paused plans to acquire more warehouses to hold detained immigrants more than a month ago. The agency told CoStar News in early April it was reviewing its policies and proposals under the new DHS secretary, Markwayne Mullin.
A spokesperson for DHS told CoStar News in an email: "we are committed to full transparency and will not interfere with the ongoing investigation. Under Secretary Mullin, ICE law enforcement is focused on delivering the President’s mandate to the American people to remove murderers, pedophiles, rapists, gang members, and terrorists from American communities," the spokesperson said.
The 11 deals that have closed are less than half of the 24 large-scale properties ICE said it intends to buy and renovate, including eight for use as detention centers and 16 for regional processing sites, using funds from the One Big Beautiful Bill Act.
Before DHS temporarily paused its warehouse purchases, the agency bought an 833,280-square-foot warehouse at 6020 W. 300 S. in Salt Lake City in mid-March for $145.4 million from DWS Group, a subsidiary of Deutsche Bank. The purchase price represented a double-digit premium for price per square foot compared with recent market trades. DWS did not immediately respond to an email request for comment on the deal to CoStar News.
The pricing premium comes at a time when CoStar is clocking the highest level of completely vacant for-sale large logistics property listings above 200,000 square feet on market in the United States. This is a "complete outlier from normal market conditions," Arias previously told CoStar News.