That's a 20 per cent discount - an arguable value of $40.4 billion that has been beaten down by the reit's pricing structure to $32.34 billion (assuming maximum proceeds from the sale) - that the Housing Authority may now pocket. And all for the sake, it seems, of a quick sale and a cast-iron guarantee of a tidy oversubscription from grateful investors.

The full extent of the discount could be debated. But if there were any doubt about bargain-basement pricing of some sort going on here, Henderson Land chairman Lee Shau-kee put his money where Long Hair's mouth was and decided the matter.

The tycoon, who one expects should know a thing or two about a property bargain when he sees one, says he will personally invest $1 billion in the reit because of its handsome returns.

That billion-dollar bid provides compelling anecdotal evidence that the properties have been underpriced, while additional evidence comes from other anchor investors lining up, such as CapitaLand and AIG. If AIG is buying, say those who should know, it must be cheap.

Then there's the arithmetic of the deal. At its present price to new investors, the properties have been valued to yield a forecast recurring return of 7 per cent, and in the context of rising property values and a benign outlook for interest-rate increases that is a hugely over-generous yield.

Investment bankers responsible for selling the deal virtually admit as much when making their pitch to buyers. That yield, they point out, compares with just 3.3 per cent on a retail reit in Japan and dividend yields from investing in Hong Kong corporates that range from just 2.3 per cent for property investment companies to 4.9 per cent for utilities.

What's more, it compares with yield spreads for global reits over their respective local 10-year government bonds ranging from 70 basis points for US retail reits, to 270 basis points for CapitalMall Trust (the first reit launched by Singapore in July 2002).

By comparison, the Housing Authority's 7 per cent yield is pitched at a spread of 340 basis points to the rate at which Hong Kong government 10-year paper is currently trading. (That gap, incidentally, begs the additional question whether it might not have been better to borrow against the properties rather than sell them.)

Based on all of that evidence, it could reasonably be argued that the properties might have been priced to yield, say, 5 per cent without sacrificing their attraction to investors.

Working backwards from that yield would put a price on the portfolio of $40.4 billion, and not $32.34 billion.

On this basis, Hong Kong taxpayers are being short-changed to the tune of $8.06 billion and Long Hair's instincts about bad haircuts seem to be spot on.

Under the alternative scenario begged by that comparison with the yield on government paper, the assets that would produce recurring yields for the grateful Mr Lee and his fellow shareholders of about 7 per cent - massively outperforming just about every available investment alternative on the horizon right now - might instead have been pledged by the Housing Authority as collateral security on a 10-year bond issue.

This could have been raised comfortably at a cost to the authority of, say, 4 per cent, or 40 basis points above 10-year Exchange Fund notes and roughly where the MTR Corp, KCRC and Airport Authority's borrowing costs have been in the Hong Kong syndicated bank loan market.

A shorter-dated loan syndication might have been raised at even lower rates, of perhaps 3 per cent.

In cash-flow terms over the life of a 10-year bond on which a coupon rate of interest of 4 per cent was payable, the Housing Authority would have saved $6.9 billion over 10 years (calculated at $23 billion by 3 per cent differential - 7 per cent minus 4 per cent - or $690 million per annum).

In other words, the Housing Authority would reap a huge annual cost-savings and still retain the property assets.

And assuming those properties increased in value at about 5 per cent a year, they would have risen in value based on our original valuation over the intervening 10 years to about $66 billion.

Some bankers to the present deal argue that such a debt-raising alternative was not available to the authority because the reit was supposed to help the government cut its budget deficit.

Not true. Firstly, Housing Authority finances do not even figure in the government's consolidated budget; secondly, it was a policy decision suspending the authority's sale of subsidised apartments that forced it to go in search of alternative revenues - not a bid to help bail out the government; and thirdly, the government is already on track to eliminate its deficit without the reit proceeds.

So, we are left with the $40.4 billion question: why is the Housing Authority proceeding with such a questionable deal?

First, because it can - opposition in the Legislative Council and on the streets being as ineffective as it is; and second, it is using the opportunity to grab some headlines, including 'First and biggest reit of its kind in the world'.

But here's the clincher: achieving those 7 per cent yields will require some active, ingenious, and unpopular management decisions (such as ditching superfluous staff and overturning rental holidays) to extract full value from the assets.

Which begs the question: why does the Housing Authority need to raise so much money at one go? Yes, it is running at a deficit because of changes in housing policy, but it has substantial investment reserves (about $20 billion) with several external fund managers.

Also, these properties are currently owned by 6.8 million Hong Kong residents, yet their sale will benefit only very wealthy institutions, tycoons and the few thousand retail investors who may also get a slice of the action.

Surely something for the fearless critic Long Hair to consider deeply.