Experience has shown that newly listed property companies cannot guarantee vendors who sell properties into a fund in exchange for units that the unit price will not drop substantially in future.

Alternatively, the property company itself should build in a mechanism allowing for reasonable risk, beyond which the fund should adequately cater for an "unacceptable loss" so investors can recover their capital, says Daryl Ducasse, CEO of property traders and brokers Stratgro Capital.

Newly listed funds can also decide to delist and sell properties piecemeal in the open market to recover investors' capital, Ducasse says. The other alternative is to merge with a company which has a higher market profile.

Explaining what he means by a reasonable risk, Ducasse says that such a risk would be when a unit in a newly listed property company sells for R2 but settles at R1,80.

"There should be a benchmark beyond which the company has to be responsible for the investors' capital."

Ducasse says what is alarming is that sometimes promoters say they can guarantee, for instance, that the unit price will not drop dramatically, in order to lure vendors into selling their properties into a fund.

"One cannot guarantee that the unit price won't drop by half," Ducasse says.

Ducasse says that property is one of the few investment classes that has tangible net asset value.

He believes that the promoters of new listings should also be stopped from making disclosures of listing dates to vendors without having first received a listing date from the JSE Securities Exchange SA.

"I've been in the property industry for a good 13 years and intimately involved in listed property for that period. My experience with promoters has been that those disclosures are by the representatives, brokers and promoters themselves. It influences the thinking of the vendor," Ducasse says.

He says a vendor can be influenced or persuaded to enter into a transaction immediately based on the representation that the listing is imminent.

"For whatever reason there are bound to be delays, and these delays often stretch the actual listing as much as 12 months. These can be unexpected delays or delays in terms of complying with the JSE's requirements," Ducasse says.

"The representation made to the vendor is imminent when in fact they haven't received any approval for the listing date from the JSE, and therefore the representation should not be allowed to be made."

Ducasse says vendors often suffer an "opportunity cost" because the "imminent listing" fails to materialise.

"There is an opportunity cost for the vendors, where they may have been able to dispose of their property for cash in the open market.

"The interest rate environment is on a downward trend and further cuts are expected which makes cash deals more attainable," Ducasse says.

He says that before the interest rate cuts property listings were an efficient means for an investor to realise his assets in the absence of cash deals.

However, Douglas Doel, listings GM at the JSE Securities Exchange SA, says that the JSE grants a listing on whether the disclosure in the prelisting statement and prospectus meets their listing requirements.

"What they do six months before the listing is not under our jurisdiction. If vendors decide to sell their properties into a company and they do so on the promise of the purchaser that the company is going to be listed, we don't have anything to do with that," says Doel.

He says the JSE cannot guarantee the commercial success of a new listing.

"We do guarantee that the disclosure has met with our listing requirements."