USA Law and Practice Contributed by: Richard L. Rosen, Leonard S. Salis and Dennison Marzocco, Rosen Karol Salis PLLC
• the Foreign Investment in Real Property Tax Act; • the Agriculture Foreign Investment Disclosure Act of 1978; and • the Tax Equity and Fiscal Responsibility Act of 1982. These laws generally impose reporting or dis - closure requirements in which foreign investors report the real estate transaction to the appro - priate federal agency by submitting information returns. Additionally, some states prohibit for - eign investors from purchasing land, and others limit the amount of certain types of land that can be acquired. The Foreign Investment Risk Review Moderniza - tion Act of 2018 (FIRRMA) expanded the reach of the Committee on Foreign Investment in the United States (CFIUS), which is vested with the authority to prohibit foreign investments that it determines would adversely affect national security. CFIUS now has the authority to review the purchase or lease of controlling and non- controlling interests in real property acquired by foreign persons located in close proximity to sensitive government facilities, such as mili - tary bases and airports. If the parties to a real estate transaction believe that the transaction falls within CFIUS’s purview, they should, but are not required to, file notice with CFIUS to seek its approval.
and encompass traditional lenders, such as large financial institutions, as well as private debt funds and real estate investment trusts (REITs) and other specialised real estate lenders. Private debt funds, which lend short-term capital to potential real estate investors, are backed by private equity. Interest received from the debt is then distributed to the fund’s investors. Private debt funds grew following the 2008 financial cri - sis, during which traditional lenders were strug - gling and more stringent rules were created, to apply to borrowers. REITs are publicly traded companies set up to own and operate large commercial properties. REITs are funded through the sale of securities to investors. 3.2 Typical Security Created by Commercial Investors Lenders typically require commercial property owners and developers to put up the property being acquired or developed as collateral on the loan. The borrower may also be required to provide a personal guarantee, meaning that the borrower, or the borrower’s principal(s) or a third party, will be personally responsible for the debt, if the collateral is insufficient to cover it. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders Foreign lending activity is generally not restricted in the United States; however, foreign lenders may be required to obtain licensure in the states where the lending activity occurs. Depending on the circumstances, national security clearance may also be required.
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
The commercial real estate private lending mar - ket is very large, with about USD4.75 trillion in outstanding commercial and multi-family mort - gage debt. The sources of capital are diverse
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