Inbound US Real Estate Investments To Face New Oversight

Heather Finstuen is quoted in Law360 regarding CFIUS’s decision to extend its regulatory purview across a broad portion of U.S.-targeted real estate transactions.

The new regulations go a step further by clearly defining sensitive locations and the proximity to those locations that could cause national security concerns, which will now be divided by The Treasury Department into two distances. The Treasury is expected to release a tool that will help better determine proximity, clarifying inconsistencies in how the parties and CFIUS are measuring the distances. Ms. Finstuen says, “While the regulations offer some geographic certainty by identifying locations in the appendix and distance ranges through the close proximity and extended proximity definitions, it appears that measuring distance ranges from the outer perimeter of identified locations requires a level of precision that will be difficult for transaction parties to achieve if there are close calls.”

CFIUS has the ability to mitigate real estate transactions that present certain national security concerns, but will not necessarily block the deal outright. Ms. Finstuen adds, “A big unknown is how the CFIUS threat analysis and CFIUS' mitigation powers will play out as CFIUS reviews a real estate transaction under its new authorities. In my mind a big question is whether CFIUS will have a full range of mitigation tools as it does for covered transactions or will its options really in practice be limited to blocking transactions.” In addition, “While the potential for capturing transactions is high, it remains to be seen how many will actually be captured and how many filings will be made. I think it will be interesting to see how that develops.”