Retail investors stand to receive higher returns of at least 5.83pc in first year Institutional investors in the long-awaited government-backed Link Reit may get a lower than expected annualised yield of 5.53 per cent in the first year, according to listing documents. Investment bankers yesterday launched the roadshow for the sale by the Housing Authority of 151 shopping centres and 79,000 car parking spaces valued at $33.8 billion. Riding on the reception is not just the final size of the offer, but the outlook for several reit issues in the pipeline, including Cheung Kong's Prosperity Reit and Guangzhou Investment's. Link Reit, derailed in December last year by a legal challenge, says it will distribute dividends of not less than 19.83 cents per unit in the period from its listing due on November 25 to March 31 next year, irrespective of the profit achieved. This equates to a net profit of not less than $424 million in the period, as forecast by the management. At a price between $9.70 and $10.30 per unit, the $18.61 billion to $19.76 billion offering has an annualised yield of between 5.53 per cent to 5.88 per cent for this year to March, or 6 per cent to 6.37 per cent in 2007. Retail investors, who receive a 5 per cent discount, will get higher dividend yields of 5.83 per cent to 6.18 per cent next year and 6.3 per cent to 6.7 per cent in 2007. The transaction will have a base deal size of 1.92 billion units, of which 70 per cent will be offered to institutional investors and 30 per cent to retail investors. The discount was extended from 3 per cent as a sweetener to an unattractive yield based on the Link's proposed price range. A fund manager said the pricing was too aggressive and feared an exodus of retail investors from the units in the first few days of trading, to benefit from the discount. 'Were I a retail investor, I would take profit first,' she said. A banker close to the deal said the syndication team had aimed at depicting a catch-up story for the Link Reit as the management would work hard to revamp the tenants' portfolio, enhance asset quality and cut costs in the coming years. The sponsors will receive an underwriting commission of 1.75 per cent, higher than ordinary government privatisation deals, and this is seen as compensation for additional work done in the past year. Institutional investors such as investment funds under property leaders Lee Shau-kee and Cheng Yu-tung, which were said to have subscribed to the units last year, will be allowed to buy into the retail pool for a 5 per cent incentive. However, the allocation procedure will favour small rather than big investors, similar to the government privatisation of MTR Corp in 2000. The MTR's offer attracted subscriptions from more than 180,000 retail investors. Lead managed by Goldman Sachs, HSBC and UBS, the subscription list will open on November 14 and close at noon on November 17, before the offering is priced over the weekend. Applications can be filed at banks including Bank of China, HSBC, Hang Seng Bank, Standard Chartered and Bank East of Asia. Brokers at the roadshow yesterday were told that the Link's listing might be postponed to December 23 - but no later - under a withdrawal rights mechanism, if a legal challenge was mounted. If the legal conflict were not cleared by December 23, the listing would be relaunched.