May 08, 2023
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On Friday, the Treasury Department’s Office of Investment Security proposed expanding the authority of the Committee on Foreign Investment in the United States (CFIUS) to block real estate transactions involving foreign persons within 100 miles of sensitive military installations. The proposal would add eight new military bases to the list of military installations around which CFIUS, chaired by Treasury, has jurisdiction to review real estate transactions involving foreign persons for national security concerns. The eight new Air Force sites, which primarily relate to sensitive development and training programs, are:
Treasury’s proposal comes roughly five months after CFIUS concluded it had no jurisdiction to review what became a controversial plan by Fufeng Group Limited, a Chinese company, to purchase land for a corn milling plant about 12 miles from Grand Forks Air Force Base. CFIUS did not publicly explain its reasoning for its decision. The Committee may have concluded it lacked jurisdiction because the CFIUS regulations provide an exception for “greenfield” investments such as Fufeng’s. And the Grand Forks Air Force Base was not included on the list of sensitive military sites published by CFIUS, so the Committee may have concluded it could not apply its real estate-related authority to the transaction. The addition of eight Air Force bases in Treasury’s proposal (including Grand Forks Air Force Base) should help address this second gap in CFIUS jurisdiction. Written public comments on the proposal are due by June 5, 2023 and can be made at Proposed Rule: Provisions Pertaining to Certain Transactions by Foreign Persons Involving Real Estate in the United States. Treasury will review the comments and either withdraw the proposed rule, issue a revised proposed rule, or issue notice of a final rule that could take effect as soon as 30 days after notice.
CFIUS filings for U.S. real estate transactions involving foreign persons are currently voluntary, unlike the mandatory CFIUS filing regime for some types of foreign investment in U.S. businesses with access to U.S. critical technology, critical infrastructure, or sensitive personal data. But CFIUS has the authority to initiate its own review of real estate transactions involving foreign persons, including post-closing, and may impose mitigation measures or require that the transaction be unwound. Foreign persons engaging in U.S. real estate transactions involving certain kinds of property, including property near sensitive U.S. government sites such as military installations, should ensure CFIUS considerations are a part of their due diligence process and carefully weigh whether to make a voluntary filing with CFIUS.