October 23, 2018

National Security: CFIUS Now Covers Real Estate

Deal lawyers have devoted a lot of attention to the Treasury’s new¬†FIRRMA Pilot Program regs, but some less noticed aspects of the new legislation may also have a big impact on deals.¬† For example, here’s a recent memo from Seyfarth Shaw pointing out that with the enactment of FIRRMA, CFIUS’ jurisdiction now extends to transactions involving certain real estate.

Under FIRRMA, transactions open to CFIUS review now include now include foreign purchases or leases of real estate in an airport or martime port, or that is in close proximity to sensitive military or government faciltiies – in either case, if such transaction could provide foreign persons with the ability to collect intelligence or expose national security activities. This excerpt from the memo provides some key takeaways for parties dealing with CFIUS’s new jurisdiction over real estate:

– If you are selling or leasing property to (i) a non-U.S. entity, or (ii) an entity owned or controlled by a foreign entity or government, check to see if the property falls into one of the categories set forth above. If so, a filing with CFIUS may be required.
– If you are a landlord or property manager owned or controlled by a non-U.S. entity, does the rental application you receive contain sensitive personal information that might be used to threaten national security (for example, is the applicant is a government entity or a government contractor)? If so, a filing with CFIUS may be required.
– If a filing is required, you need to determine whether a full CFIUS filing or merely a declaration is required.
– If a CFIUS submission is required, this could delay the timing of your transaction by up to 90 days (in rare cases more).

The memo also points out that regulations under the new regime have yet to be promulgated – so stay tuned.

John Jenkins