CFIUS Proposes to Further Expand 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”) has issued a proposed rule to expand the scope of real estate transactions subject to its review.

CFIUS is currently 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 proposed rule follows a recent DoD comprehensive assessment of its military installations.

The proposed rule seeks to add 59 military installations across 30 states to the list of installations specified in the CFIUS regulations. Upon implementation, 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 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.

Comments on the proposed rule are due within 30 days from publication in the Federal Register, and the proposed rule is expected to be implemented later this year.

Implications

This is the second time in the last 14 months that CFIUS has proposed to expand the scope of U.S. real estate subject to its review (see our prior client alert here) 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 and 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.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. David J. Ribner, an O’Melveny partner licensed to practice law in the District of Columbia and New York; and Greta L. Nightingale, an O’Melveny partner licensed to practice law in the District of Columbia, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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