CFIUS Further Expands Real Estate Transactions Subject to National Security Reviews

In response to ongoing national security concerns regarding foreign ownership of real estate in proximity to U.S. military installations, the Committee on Foreign Investment in the United States (“CFIUS”) issued a new rule to expand the scope of real estate transactions subject to its review. The new rule will become effective 30 days after publication in the Federal Register.

CFIUS is authorized to review the purchase or lease of certain real estate in the United States by foreign persons that is located in specific airports and seaports, as well as within certain distances of military installations identified in the CFIUS regulations. (Generally, real estate in urban areas or single-housing units are outside the scope of CFIUS jurisdiction.) The list of military installations is determined by the Department of Defense (“DoD”) and can be updated as warranted to address national security risks. The new rule follows a recent DoD comprehensive assessment of its military installations.

In July 2024, CFIUS issued a proposed rule to expand the scope of transactions subject to its review related to real estate within certain distances of 59 military installations across 30 states. See our prior client alert here. The new rule made no changes to the list of 59 military installations.

Upon the effective date, CFIUS’s jurisdiction will expand to include real estate within a one-mile radius of 40 additional military installations (including the Detroit Arsenal in Warren, Michigan; Joint Base Myer-Henderson Hall in Arlington, Virginia; Naval Air Station Corpus Christi in Texas; and Scott Air Force Base in St. Clair County, Illinois) and real estate within a 100-mile radius of 19 additional military installations (including Barksdale Air Force Base in Bossier City, Louisiana; Joint Base Cape Cod in Sandwich, Massachusetts; Dover Air Force Base in Delmarva, Delaware; and Little Rock Air Force Base in Arkansas). The new rule also changes the applicable distance from one mile to 100 miles for eight military installations already listed in the CFIUS regulations, including Joint Base San Antonio in Texas and Wright-Patterson Air Force Base in Dayton, Ohio.

Implications

This is the second time in the last 15 months that CFIUS has expanded the scope of U.S. real estate subject to its review and comes in the wake of the Biden Administration’s May 2024 Presidential Order requiring a company majority-owned by Chinese nationals to divest real estate intended for cryptocurrency mining operations in close proximity to Warren Air Force Base in Wyoming.

Various U.S. states, including Florida and Arkansas, have also enacted legislation imposing restrictions on foreign ownership of real estate. Certain laws are limited to agricultural land, while other laws apply more broadly to all real estate. Additionally, certain of the laws restrict Chinese ownership specifically, while others apply more broadly (either to a wider group of countries or all foreign ownership).

These actions at both the federal and state level reflect ongoing concern about foreign acquisitions of real estate in the United States in proximity to U.S. military facilities as well as agricultural land. Foreign buyers of U.S. real estate—in particular, Chinese nationals and Chinese-owned companies—should be mindful of the changing legal landscape related to real estate ownership when considering real estate investments in the United States.