Amid concerns over market manipulation, watchdog places stricter conditions on firms seeking to tap demand for trusts
The Securities and Futures Commission has tightened the application procedures for real estate investment trusts to prevent market manipulation.
A source close to the SFC said the regulator had told all investment banks that a formal reit application could be submitted only after various conditions had been met.
These include ensuring that the company involved has employed at least two 'responsible officers' with a minimum of five years' experience in managing property portfolios; that a preliminary draft of the listing prospectus has been prepared; that the assets to be put into the reit comply with the listing rules for spin-offs and that the spin-off plan has been approved by the stock exchange.
The move has been prompted by the regulator's concerns over investors rushing to buy stocks of companies rumoured to be about to launch a reit. 'Tightening the application procedures may help prevent some companies from misleading investors by saying they are about to launch a reit when in fact the plans are only in the very early stages,' the source said.
Following the success of the Link Reit, Hong Kong's first, late last year, some property companies have been queueing up to jump on the bandwagon. They include Great Eagle Holdings, Henderson Land Development, Sun Hung Kai Properties, Chinese Estates Holdings, Regal Hotels International Holdings and Wharf Holdings.