PROTECT Act Mandates Review of Foreign Real Estate Deals: 5% Stake Triggers National Security Scrutiny

The PROTECT Act of 2025 (Providing Rigorous Oversight Through Evaluation of Concerning Transactions Act) is all about tightening the leash on certain foreign investments in U.S. real estate. Essentially, this bill expands the mandatory oversight powers of the Committee on Foreign Investment in the United States (CFIUS), the federal group that reviews foreign deals for national security risks. Under this new legislation, if an entity from a designated “foreign country of concern” buys or leases U.S. land specifically to build a new factory or facility—known as a greenfield or brownfield investment—it automatically triggers a mandatory review. The parties involved can’t wait to be asked; they must proactively file a declaration with CFIUS about the purchase or lease of the real estate and the establishment of the business.

Who’s the Boss? The New 5% Rule

This bill dramatically changes the definition of “control” when it comes to these foreign investments. Previously, CFIUS focused on transactions where a foreign entity gained actual control over a U.S. business. Now, for these specific real estate deals, the definition of control is broadened to include situations where the foreign government of concern has a 5% or greater direct or indirect stake in the U.S. business. It also covers situations where that government has the power to appoint key board members or officers of the entity holding that 5% stake. Think about it: a 5% stake is often just a passive investment, but under the PROTECT Act, it’s enough to pull the entire transaction into the national security spotlight. This means many standard, minority investment deals, which usually fly under the radar, will now require mandatory, potentially lengthy, federal review.

The Real-World Friction for Development

While the goal here is to safeguard national security by monitoring physical assets—like factories or data centers—built by adversarial nations, the practical impact is increased friction for industrial development. Imagine a U.S. developer planning a massive new manufacturing plant (a greenfield investment) in a struggling area, relying on capital from a global investment fund. If just 5% of that fund’s capital can be traced back to a government designated as a “country of concern,” the entire project—the land purchase, the facility construction, the whole nine yards—is now subject to mandatory CFIUS review. This process is time-consuming and costly, imposing a significant new compliance burden on developers and investors who were previously focused on zoning and environmental permits. For businesses looking to invest in U.S. industrial property, this adds a major layer of uncertainty and delay, potentially chilling foreign direct investment even when the project itself might create hundreds of local jobs.

The Regulatory Catch-22

The bill’s reliance on the term “foreign country of concern” is a significant factor. This designation is defined in separate legislation and can change based on evolving geopolitical tensions. This means that an investment deal that was perfectly clean when it started could suddenly become a mandatory national security review target if the political designation of the investing country changes. For businesses, this creates a moving target for compliance. The PROTECT Act grants CFIUS significant new mandatory authority over a segment of the U.S. real estate market, forcing disclosure and potentially blocking deals based on a relatively low 5% ownership threshold. While the stated benefit is enhanced security, the cost is increased regulatory complexity and a potential slowdown in industrial investment from targeted countries, even if the projects themselves are economically beneficial.