CFIUS Alert™ snapshot
Disclaimer: Global Policy Advisors® LLC services, including the sample reports provided here, are for informational purposes only and do not constitute financial, investment, or legal advice, nor create an attorney-client relationship. To learn more, please contact GPA.
Presidential Prohibition of Wyoming Real Estate Acquisition: Lessons and Implications for Foreign Investment
CFIUS Alert™
By Global Policy Advisors® LLC
President Biden recently took an unusual step by prohibiting the purchase of Wyoming real estate and a cryptocurrency facility by foreign acquirers, based on a referral from the Committee on Foreign Investment in the United States (CFIUS). This decision highlights the U.S. government's ongoing scrutiny of foreign investments, particularly those involving real estate near strategic locations and technologically sensitive facilities. This case underscores the importance of considering voluntary disclosures to CFIUS before finalizing cross-border transactions to mitigate potential national security risks and avoid costly post-closing complications.
Key Points:
The Order: President Biden ordered the divestment of a real estate parcel near Francis E. Warren Air Force Base, Wyoming, two years post-closing.
National Security Concerns
Lessons for Transaction Parties
CFIUS Non-Notified Transactions
Feasibility of Mitigation Measures
Disclaimer: Global Policy Advisors® LLC services, including the sample reports provided here, are for informational purposes only and do not constitute financial, investment, or legal advice, nor create an attorney-client relationship. To learn more, please contact GPA.
Presidential Prohibition of Wyoming Real Estate Acquisition: Lessons and Implications for Foreign Investment
CFIUS Alert™
By Global Policy Advisors® LLC
President Biden recently took an unusual step by prohibiting the purchase of Wyoming real estate and a cryptocurrency facility by foreign acquirers, based on a referral from the Committee on Foreign Investment in the United States (CFIUS). This decision highlights the U.S. government's ongoing scrutiny of foreign investments, particularly those involving real estate near strategic locations and technologically sensitive facilities. This case underscores the importance of considering voluntary disclosures to CFIUS before finalizing cross-border transactions to mitigate potential national security risks and avoid costly post-closing complications.
Key Points:
The Order: President Biden ordered the divestment of a real estate parcel near Francis E. Warren Air Force Base, Wyoming, two years post-closing.
- Requirements:
- Rapid sale of the land to a third party.
- Removal of all equipment and improvements within 90 days.
- CFIUS approval for the divestment transaction.
- Enhanced monitoring measures exceeding typical CFIUS mitigation requirements.
National Security Concerns
- Proximity to Military Base: The land's proximity to a strategic missile base was a significant factor.
- Cryptocurrency Facility: Addition of cryptocurrency mining equipment post-close raised further national security risks.
- Department Statements:
- Treasury and Defense cited the land's strategic location and new equipment as critical concerns.
Lessons for Transaction Parties
- Voluntary CFIUS Filings:
- FIRRMA Provisions: The Foreign Investment Risk Review Modernization Act of 2018 extended voluntary CFIUS filings to certain real estate acquisitions.
- Risks of Non-Filing: The absence of a voluntary filing led to interim mitigation measures, potential financial losses, and unwanted publicity.
- Benefits of Filing: Voluntary disclosures can provide regulatory certainty and highlight potential CFIUS concerns pre-closing.
CFIUS Non-Notified Transactions
- Identification and Inquiry: CFIUS focuses on transactions with higher national security risks, often identified through public tips.
- Information Requests: CFIUS can request transaction information and filings for non-disclosed transactions.
- Complex Transactions: CFIUS's annual report indicates that non-notified inquiries often involve complex transactions requiring mitigation.
Feasibility of Mitigation Measures
- Challenges: Proximity to government facilities presents significant mitigation challenges.
- Economic Impact: Mitigation measures may be costly and impact the deal's economic rationale, potentially making mitigation infeasible.
- Pre- vs. Post-Closing:
- Pre-closing: Deal failure due to infeasible mitigation has limited consequences.
- Post-closing: Forced divestments and rapid sales, as seen in this case, have higher stakes.
- Consider Voluntary CFIUS Filings: Weigh the benefits of pre-closing regulatory certainty against the risks of post-closing interventions.
- Evaluate National Security Risks: Assess the sensitivity of U.S. assets and potential CFIUS concerns early in the transaction process.
- Prepare for Potential Mitigation: Be ready for extended reviews and mitigation measures that could significantly affect business operations and transaction viability.