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.

Of these, only Great Eagle's Champion Reit has received the nod from the stock exchange and conditional approval from the SFC for its $4.68 billion to $5.46 billion spin-off.

'Investors should not rush to buy shares in a company that has only said it intends to launch a reit and not given any details of the assets to go into it,' the source said, adding that even if a formal application were submitted there was no guarantee that it would be approved by the commission.

The regulator was closely monitoring all companies linked to reits, the source said. 'The companies must tell the investors if they only have an idea for launching a reit, or if they have everything ready to submit a formal application to the SFC.'

In February, shares of Chinese Estates shot up 25 per cent following market speculation that the company might launch a $5 billion reit, prompting the SFC to issue a warning about market manipulation.

Sources said that at the time of the rumour, Chinese Estates had informed the SFC about the reit plan but had not made a formal application.

Brokers said that the most difficult condition of the application procedures would be to hire two officers with at least five years' experience in property portfolio management.

'There simply are not many of these kinds of experts and the ones who do exist are usually very highly paid,' one broker said.

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