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CFIUS Proposes to Expand Scope of U.S. Real Estate Subject to Review

May 11, 2023


Recent federal and state measures signal an expanding national security concern about foreign ownership of real estate, particularly agricultural land and land in proximity to military facilities. The Committee on Foreign Investment in the United States (“CFIUS”) has issued a proposed rule to amend its regulations related to real estate transactions. 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 from 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 and can be updated as warranted to address national security risks.

The proposed rule seeks to add eight military installations in Arizona, California, Iowa, North Dakota, South Dakota, and Texas to the current list in the regulations. The eight military installations are:

  • Air Force Plant 42 – Palmdale, California
  • Dyess AFB – Abilene, Texas
  • Ellsworth AFB – Box Elder, South Dakota
  • Grand Forks AFB – Grand Forks, North Dakota
  • Iowa National Guard Joint Force Headquarters – Des Moines, Iowa
  • Lackland AFB – San Antonio, Texas
  • Loughlin AFB – Del Rio, Texas
  • Luke AFB – Glendale, Arizona

Following the implementation of the new rule, CFIUS will be able to review real estate transactions subject to its jurisdiction within 99 miles from the outer boundary of the eight military installations.

The proposed rule updating the list of military installations comes in the wake of a real estate purchase by a Chinese agricultural company, Fufeng Group, to build a corn milling processing plant in Grand Forks, North Dakota near the Grand Forks AFB. CFIUS reportedly reviewed the transaction and determined it did not have jurisdiction, as the Grand Forks AFB was not identified in the regulations at the time of the purchase. In a rare move, the Air Force issued a letter stating its “unambiguous” view that the project presented a “a significant threat to national security.” Ultimately, the Grand Forks City Council voted unanimously to end the project

In various U.S. states, including Iowa, Missouri, Texas, and Utah, state legislators have also introduced bills that would impose restrictions on foreign ownership of real estate. Certain of the proposed legislation is limited to agricultural land, while other bills would apply more broadly to all real estate. As well, certain of the bills restrict Chinese ownership specifically, while others would apply more broadly (either to a wider group of countries or all foreign ownership). 

These actions at both the federal and state level reflect growing concern about foreign acquisitions of real estate in the United States, in particular agricultural land and land in proximity to U.S. military facilities. Foreign buyers of U.S. real estate, in particular, Chinese and Chinese-owned U.S. 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. Greta Lichtenbaum, an O’Melveny partner licensed to practice law in the District of Columbia, David J. Ribner, an O'Melveny counsel licensed to practice law in the District of Columbia and New York, and Shruti Kannan, an O'Melveny associate licensed to practice law in the District of Columbia and New York, 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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