CFIUS Proposes Rule To Expand Its Real Estate Transaction Purview

CFIUS Proposes Rule To Expand Its Real Estate Transaction Purview

By Timothy J. Keeler1, Mickey Leibner2, Jennifer L. Parry3,, Nicholas T. Jackson4

This article highlights CFIUS’ latest efforts to expand the scope of covered real estate transactions subject to its review.

On July 8, 2024, the US Department of the Treasury, in its capacity as chair of the Committee on Foreign Investment in the United States (CFIUS), published a proposed rule that would expand the list of national security sensitive designated “military installation” sites. Based on CFIUS’s authority to review “covered real estate transactions” involving foreign persons in proximity to designated sites, the expanded list would substantially increase the scope of real estate transactions subject to the Committee’s review. We highlight some of the new inclusions here.

The proposed rule is the latest in a string of recent Executive Branch actions taken to address the increasing concern about risks presented by foreign ownership of real estate near sensitive national security sites. Specifically, the list of “military installations” was previously expanded via a final rule published on September 22, 2023 and, in May 2024, President Joseph Biden issued an Order blocking the purchase and requiring the divestment of foreign-owned real estate located near F.E. Warren Air Force Base (Read our related reports from May 2023 and May 2024). In a Treasury press release announcing the proposed rule, Assistant Secretary for Investment Security Paul Rosen acknowledged the increased focus and stated, “Today’s proposed rule is another example of CFIUS’s continuing commitment to hone our tools to protect U.S. national security, and is a significant milestone in safeguarding critical US military installations. Working closely with the US Department of Defense and other CFIUS members, we will remain responsive to the evolving nature of the risks we face to ensure we are protecting our military installations and related defense assets.”

The proposed rule includes the following key updates:

• Expand CFIUS’s jurisdiction over real estate transactions to include those within a one-mile radius around 40 additional military installations, including:

o Naval Air Station Corpus Christi, TX

o Military Ocean Terminal Concord, CA

o Joint Base Myer-Henderson Hall, VA

o Detroit Arsenal, MI

o Naval Support Facility Aguada, PR

• Expand CFIUS’s jurisdiction over real estate transactions to include those within a 100-mile radius around 19 additional military installations, including:

o Camp Grayling, MI

o Dover Air Force Base, DE

o Whiteman Air Force Base, MO

• Expand CFIUS’s jurisdiction over real estate transactions between 1 mile and 100 miles around eight military installations already listed in the regulations, including:

o Malmstrom Air Force Base, MT

o Joint Base San Antonio, TX

o Redstone Arsenal, AL

• Update the names of 14 military installations already listed in the regulations to better assist the public in identifying the relevant sites, including:

o Buckley Space Force Base (formerly Buckley Air Force Base)

o Cape Canaveral Space Force Station (formerly Cape Canaveral Air Force Station)

Parties considering a future covered real estate transaction, or an investment in or acquisition of an existing US business that holds property interests in covered real estate, are encouraged to look out for details included in the anticipated final rule and consider a filing with CFIUS. Although it is voluntary to file for most transactions subject to CFIUS jurisdiction (and all covered real estate acquisitions are voluntary), a filing followed by CFIUS approval is the only way for parties to be certain that CFIUS will not alter or roll back the transaction after closing. Written comments in response to the proposed rule are due to Treasury’s Office of Investment Security 30 days after the proposed rule is published in the Federal Register.

Endnotes

1. Tim Keeler joined Mayer Brown after a varied career in the US Government, serving at the Office of the US Trade Representative (USTR), the US Treasury Department (which chairs CFIUS), and the US Senate Finance Committee. He advises clients on all aspects of CFIUS work

2. Mickey Leibner helps clients navigate the intersection of regulatory and political matters. Mickey has significant experience before the Committee on Foreign Investment in the United States (CFIUS) and has advised on hundreds of transactions involving companies ranging from multinational Fortune 500 corporations to small startups

3. Jennifer Parry routinely advises clients ranging from small businesses to multinational corporations on US forced labor law requirements and compliance with US import laws and regulations, including tariff classifications, country of origin determinations, preferential duty treatment, and application of Section 301 duties.

4. Clients leverage Nic Jackson’s extensive national security experience to help them tackle complex export control, sanctions, and CFIUS matters.