In addition to its authority to review certain investments in U.S. businesses, CFIUS has authority to review "real estate" investments in sites (even greenfield projects where there is no existing U.S. business) that are within a defined proximity of specified military bases, ports, and other government installations. The proposed rule, which comes amid calls for greater government scrutiny of foreign real estate investments, would significantly expand the list of sites that can trigger CFIUS's real estate jurisdiction. It underscores the importance of pre-closing diligence for projects involving foreign ownership or access rights. 

The move follows the Biden administration's imposition of the first real estate-related CFIUS divestment order earlier this year. In that case, the Biden administration determined that Chinese-led acquisition of property within one mile of Warren Air Force Base in Wyoming, for claimed use in specialized cryptocurrency mining operations, threatened to impair U.S. national security interests.

Citing a comprehensive assessment by the Department of Defense ("DoD"), the proposed rule would add 40 new military installations to the list of sites that would subject U.S. real estate within "close proximity" (i.e., one mile) to CFIUS jurisdiction. The proposed rule would also add 19 new military installations to the list of sites that would subject U.S. real estate within the "extended range" (i.e., 100 miles) to CFIUS jurisdiction, migrate eight "close proximity" installations to the "extended range" list, and update name and location information for certain sites. In total, CFIUS would have the authority to review covered real estate transactions near approximately 200 sites following implementation of the proposed rule.

The rule is expected to go into effect this year, following a 30-day comment period. Investors should examine these changes to assess whether target assets or projects may be implicated in projects involving foreign investment in, or access to, U.S. real estate.