On May 4, 2023, the Committee on Foreign Investment in the United States (“CFIUS”) published a proposed rule that would update CFIUS’s current real estate-specific regulations to add eight military installations. Broadly, this proposed rule emphasizes the Biden administration’s appetite for additional national security-related capabilities and increasing role of political considerations in the CFIUS process.
CFIUS’s real estate jurisdiction is focused on real estate that is in or in proximity to specific airports, maritime ports, or military installations. The relevant military installations are listed by name and location in Appendix A to the regulations, and the regulations cover certain real estate within one mile of facilities listed on Part 1 and within 100 miles of facilities listed on Part 2.
The proposed rule adds the following eight facilities to the regulations, notably all under the expanded geographic coverage of Part 2:
- Air Force Plant 42, located in Palmdale, California
- Dyess Air Force Base, located in Abilene, Texas
- Ellsworth Air Force Base, located in Box Elder, South Dakota
- Grand Forks Air Force Base, located in Grand Forks, North Dakota
- Iowa National Guard Joint Force Headquarters, located in Des Moines, Iowa
- Lackland Air Force Base, located in San Antonio, Texas
- Laughlin Air Force Base, located in Del Rio, Texas
- Luke Air Force Base, located in Glendale, Arizona
Though many practitioners had long thought that the CFIUS real estate regulations were structured in a way to allow additional U.S. government facilities to be listed, and Treasury’s comments accompanying publication of the final real estate regulations indicated that the Department of Defense would continue on an ongoing basis to assess its military installations, these are the first additions to the regulations since they became effective on February 13, 2020. Filing pursuant to CFIUS’s real estate regulations has been voluntary, and this proposed rule does not change that construct.
Notably, Grand Forks Air Force Base is listed. Grand Forks was the subject of much publicity preceding and following CFIUS’s determination that it did not have jurisdiction over a Chinese company’s acquisition of land and proposed development of a corn milling facility near the base. Listing the base highlights this administration’s willingness to address perceived national security risks through updates to existing regulations, but also its apparent sensitivity to political pressure on this issue.
In addition to federal scrutiny of real estate transactions, numerous states have passed or introduced laws restricting or prohibiting acquisitions of land by parties owned or controlled by foreign persons, often with heightened focus on parties from certain countries like China, Russia, and embargoed nations. An effect, intended or unintended, of the addition of the military installations under the 100-mile proximity coverage of Part 2 of the regulations is to bring substantially more land under coverage of the regulations.
For parties to transactions in the United States that may result in foreign ownership or control of land, this development is a reminder that regulatory burdens and political opposition can interfere. Parties must: (i) continue to run the jurisdictional CFIUS analysis based on the land’s proximity to certain ports and military installations, (ii) stay abreast of existing and new state laws that can affect the transaction, and (iii) even if you are outside of CFIUS’s or the state law’s jurisdictional boundaries, evaluate the totality of the circumstances—including the profile of the acquiror—to consider what type of political headwinds you may be walking into. Parties should also be aware and evaluate the possibility that a transaction involving real estate may be covered under Part 800 of the regulations—i.e., transactions resulting in foreign control of, and certain investments in, a U.S. business.
[View source.]
