On November 1, 2024, Treasury issued the Final Rule implementing Treasury’s proposed changes to CFIUS’s real estate regulations addressing foreign purchases, leases, or concessions, of real estate in the United States (“CFIUS Real Estate Regulations,” 31 C.F.R. Part 802 (“Part 802”)), as such changes were described in Treasury’s July 19, 2024 notice of proposed rulemaking (the “NPRM”). The Final Rule adds 59 installations to the list of military installations found in the CFIUS Real Estate Regulations, reclassifies certain military installations within appendices to the CFIUS Real Estate Regulations, provides clarification on the applicability of the Final Rule to transactions that may sign or close prior to the effective date of the Final Rule, and incorporates certain technical, conforming amendments to the CFIUS Real Estate Regulations.

Expansion of CFIUS’ real estate jurisdiction under final rule

Under CFIUS’s Real Estate Regulations, CFIUS has the authority to review the purchase, lease, or concession of certain real estate in the United States by foreign persons for reasons relating to national security. Appendix A to Part 802 (“Appendix A”) designates specific U.S. military installations and other government sites the proximity to which may trigger CFIUS jurisdiction, provided certain criteria are met.  Specifically, in relevant part, CFIUS’s jurisdiction applies to foreign purchases or leases of U.S. real estate that afford foreign persons certain property rights if the property is located:

• Within “close proximity” (i.e., 1 mile) of any installation in Parts 1 and 2 of Appendix A; and

• Within the “extended range” (i.e., 100 miles) of any installation in Part 2 of Appendix A.

The installations to be specified in Appendix A are determined by the Department of Defense (“DoD”) based on national security factors, such as risks of intelligence gathering or foreign surveillance near these sites. As noted in the preamble to the Final Rule, DoD will continually evaluate these installations in light of national security considerations.

Consistent with the NPRM, the Final Rule adds 59 military installations to Appendix A: 40 installations to Part 1 (subject to a 1-mile jurisdiction radius) and 19 to Part 2 (subject to a 100-mile radius). These additions span geographic regions across 30 states and two U.S. territories.

The Final Rule also reclassifies eight installations from Part 1 to Part 2 of Appendix A. Subject to Part 802’s conditions and exceptions, foreign real estate purchases or leases within 100 miles of these facilities will be subject to CFIUS’s review under the Final Rule. Although the Final Rule provides no specific rationale, the reclassification likely reflects DoD’s determination of increased national security sensitivity at these sites. 

The Final Rule’s expansion of CFIUS’s jurisdiction over a larger geographic area of the United States reflects a broader trend of heightened scrutiny over foreign real estate investments near sensitive U.S. locations, including the August 2023 CFIUS rule expanding Annex A and the Biden Administration’s May 2024 order requiring a Chinese-majority-owned company to divest property near Warren Air Force Base due to national security concerns. These actions also follow significant calls from members of Congress and state legislatures for more significant scrutiny of foreign purchases or leases of real estate, including purchases or leases near sensitive U.S. Government installations. This regulatory environment signals increased scrutiny and added requirements for foreign investors in U.S. real estate, particularly near sensitive U.S. Government sites.

Clarification on applicability of final rule

The Final Rule also amends and provides clarification on the applicability rule for the CFIUS Real Estate Regulations, a feature that was not addressed in the NPRM. The Final Rule clarifies that transactions in which the parties executed a binding written agreement or other binding document establishing the material terms of the transaction prior to the effective date of the Final Rule would not be subject to the Final Rule.    The Final Rule is effective December 9, 2024. The Final Rule’s commentary also clarifies that this same applicability rule – based on the timing of the signing of a transaction – would also apply to Treasury’s September 2023 amendments to the CFIUS Real Estate Regulations.

Technical amendments to CFIUS real estate regulations

The Final Rule also introduces several technical updates to Part 802 aimed at clarifying CFIUS jurisdiction and assisting the public in identifying relevant sites. These updates include:

• Updating the names of nine installations already in Appendix A to reflect current DoD designations following the establishment of the U.S. Space Force;
 
• Replacing the names of five installations in Appendix A according to the recommendations from the DoD Naming Commission;
 
• Revising the location information for seven installations for easier public identification; and
 
• Making conforming adjustments to the definition of “military installation” in Part 802 to account for new additions to Appendix A.