CFIUS Final Rule Expands Scope of Reviewable Real Estate Transactions

Latest Rule reflects growing concerns about national security implications of foreign-funded real estate acquisitions.

On November 7, 2024, the Committee on Foreign Investment in the United States (CFIUS) issued a Final Rule¹ expanding its authority to review transactions by foreign persons in U.S. real estate located in specified proximities to certain listed military installations and national security facilities, adding 59 sites to those listed in the regulations at 31 CFR 802 (Appendix A).

CFIUS’ jurisdiction to review foreign investment in geographic areas posing potential risks to national security interests was established pursuant to the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). Under FIRRMA, CFIUS is authorized to review any purchase or lease by, or concession to, a foreign person of real estate within established distances of a U.S. government installation or facility that:

• Is sensitive for reasons of national security.
• Might provide the foreign person the ability to collect intelligence regarding its activities.
• Otherwise expose its activities to foreign surveillance.

This latest Rule is the most recent product of the ongoing coordinated assessment by the Department of Defense (DoD) and CFIUS, reflecting broadening concerns about the national security implications of certain foreign-funded real estate acquisitions. (See previous alert May 11, 2023²).

Appendix A, which already lists 219 locations, is divided into several parts: the first lists sites within one mile of which CFIUS has jurisdiction to review real estate transactions; the second lists sites for which such jurisdiction extends up to 100 miles. A third part, not affected by the Rule, sets out certain townships, ranges and other locations within which all foreign real estate transactions are subject to review.

The Rule adds:

• 40 installations to Part One (reviewable within a one-mile radius).
• 19 installations to Part Two (reviewable within a 100-mile radius.)
• Moves eight installations from Part One to Part Two.

The Rule also revises text and several definitions, in the regulations to include Space Force bases and facilities as “military installations,” and to cover U.S. Army and Marine Corps depots and support facilities.

The Rule becomes effective December 9, 2024. Note that it is not retroactive — it does not apply to transactions completed, or for which there is an executed binding agreement on material terms, prior to the effective date.

While notifying CFIUS of foreign real estate investments is not in itself mandatory, the Committee has recently reiterated its increased commitment to pursuing non-noticed transactions.³ As a practical matter, parties to prospective foreign or foreign-funded investment in real estate within one of these designated areas and are not exempted under Section 802 (such as “excepted real estate foreign state” or “excepted real estate investor”), would be well advised to include an assessment of possible exposure to CFIUS review as part of their transaction checklist. Additionally, those parties should consider building in an allowance for the possible submission and review of an appropriate filing(s) into their deal timelines.

Such submissions may be prudent in any transaction where CFIUS jurisdiction is applicable, as clearance from the Committee provides the best assurance against subsequent CFIUS review – and potential required changes or mitigation measures (or even possible divestiture) – post closing.