From the construction of Hong Kong’s largest shopping mall to the construction of an extensive $3. 9 billion sports center, Adrian Cheng has been one of the city’s most competitive genuine real estate investors. This is an estimated expansion strategy that is now about to become one of the oldest genuine real estate empires in the city. The city.
Cheng, 40, became CEO of New World Development Co. in May, strengthening his position after succeeding his father Henry a few years ago. But even as he ascended to the top, Cheng defended ambitious genuine real estate advances in the monetary and tourism environment. Designed for visitors from mainland China to continue to go en masse to Hong Kong, they now mean that the circle of relatives is exposed to some of the city’s most important projects at a time when the coronavirus pandemic and political unrest are paralyzing its economy.
Adrian Cheng
Photographer: Giulia Marchi / Bloomberg
Few names are more synonymous with Hong Kong than Cheng. New World built and operates the conference center where Prince Charles moved Hong Kong to China in 1997, and the family circle also controls Chow Tai Fook Jewellery Group Ltd. , which owns jewelry. Unlike the family circle of Li Ka-shing, Hong Kong’s richest man, who has reduced his exposure to the city over the past decade, New World still receives two-thirds of its 76. 8 billion Hong Kong dollars (9. 9 billion) of Hong Kong’s annual profits, and is expected to anchor them more.
A Harvard graduate and former investment banker for Goldman Sachs Group Inc. , Cheng is now looking to rotate the New World beyond the Hong Kong coast, establishing his attractions across the border at Guangdong, where the Chinese government is selling his vision of a “Great Bay” integrating the city with Shenzhen, Guangzhou and other Pearl River Delta metropolises. But the New World’s continental plans, which add more than 17 billion yuan ($2. 5 billion) in spending on various projects, as well as its frantic structure in Hong Kong, have left it with a debt-to-equity ratio of 42%, the highest among the city’s largest developers. This bet will have to pay off, especially as Beijing’s tighter control over Hong Kong limits investment characteristics elsewhere for its tycoons. be Hong Kong’s first and largest developer in the Great Bay region,” Edward, New World. Lau’s deputy chief financial officer, said in an email. We have an important investment and expansion plan. “
To finance his strategy in China, Cheng borrows cash and sells assets. His replacement shows the demanding situations facing Hong Kong’s new generation of tycoons, from Li Ka-shing’s son and successor, Victor Li, to the Lee brothers who now run Henderson Land. Development Co. , the city’s third-largest real estate empire in terms of the market, as China’s developing weight in the former British territory, alters the business landscape on which its parents built their fortunes.
While his gaze would possibly shift to the continent, New World’s long history in Hong Kong has meant that some of its estimated top-structure projects are taking shape at a time when broader political uncertainty is putting a question mark in the long run of the city. Resident in 2018, Cheng helped win an offer to build and operate a 28-hectare sports complex on the site of hong Kong’s former airport, adding a 50,000-seat stadium and a 10,000-seat stadium. It is expected to be completed in 2023 While local government will finance the HH30 billion structure position, New World will cover all long-term operating prices and pay the government 3% of the complex’s gross revenue.
An interpretation of Skycity.
Source: New World Development
Cheng also spearheaded New World’s successful bid in May 2018 for a $20 billion Hong Kong entertainment and grocery complex at the airport. The 3. 77 million-square-foot Skytown, scheduled to open in stages between 2023 and 2027, will come with the largest in Hong Kong. grocery shopping in the mall, however, is under structure as retail sales in the city continue to fall for a year and tourism is almost non-existent given the limits of the virus.
Patron of the arts that is a member of the museum committees in New York, London and Paris, Cheng also led the remodeling of the New World Center, a boring 1970s building organization in Hong Kong’s Kowloon district, Victoria Dockside, a $2. 6 billion advertising workplace” It’s impressive that New World has won many contracts. Array basically similar to Adrian Cheng’s lifestyle and competitive style, said Simon Lee, co-director of the International Affairs and Chinese Business Program at The Chinese University of Hong Kong. a lot of cash to get those contracts and we don’t know if the tourism market will recover. “
This uncertainty is likely to be reflected in New World revenue, to be published next week. As the pandemic hits operations, the adjusted net source of revenue for the year ending June is expected to fall by about 12% in 2019 to H. 7. 9 billion, the biggest drop since 2011, based on an average of 12 analysts compiled through Bloomberg. New World refused to make Adrian Cheng available for an interview. The Hong Kong where Cheng operates is a different position from the burgeoning city where his grandfather Cheng Yu-tung made his debut, the company’s patriarch, apprenticed at Macau’s Gold Shop from a circle of friend relatives, Chow Chi Yeun, who founded Chow Tai Fook, then married Chow’s daughter and eventually used the proceeds from selling gold to enter the genuine real estate market , founding New World in 1970. These days, his son Henry, still president of New World, is the richest man of the moment in Hong Kong with a fortune of $20 billion.
Henry Cheng
Photo: Brent Lewin / Bloomberg
The Cheng have made efforts over the years to diversify outdoors in Hong Kong, but with combined success. A partnership with Donald Trump to build Riverside South buildings on Manhattan’s West Side ruined it, and Trump filed a demand without success. investors eventually sold the project. The Chengs bought an Irish aircraft rental company, an Australian app and a beach hotel in the Bahamas.
From now on, any outdoor expansion of Greater China will probably be even more complicated for Adrian Cheng. The national security law brought through Beijing this year, which gives the Hong Kong government new powers to attack the opposition, has even greater tensions. between China and the West, countries like the United States, the United Kingdom and Australia are strengthening controls on agreements involving Corporations linked to China. Henry Cheng was one of many tycoons who favored the new law before it was passed by the National Congress of People.
“In the past, other people thought diversification was good, but now there are dangers in foreign markets,” said Raymond Cheng, analyst at CGS-CIMB Securities, who has an additional score for New World stock. corporations need to invest abroad, they will be conceived as Chinese corporations and it will be more difficult for them to do business. “This means that expansion in mainland China is likely to provide the New World with one of the few new avenues of growth. New World has invested in six urban remodeling projects in Guangdong, according to the company, and plans to open 36 of its K11s. -Branded advertising and retail projects in nine cities on the continent and Hong Kong until 2025. Lately it has 12. the company’s Chinese subsidiary praises the new boss’s “extraordinary assertiveness, acumen and cutting-edge business thinking. “
Shoppers enter the K11 Musea grocery mall in Hong Kong.
Photograph: Paul Yeung / Bloomberg
Funding for such an expansion allowed New World to sell $1. 45 billion in bonds in 2020, approximately 7% of the $20 billion record in offshore corporate bonds that analysts say were issued through borrowers in Hong Kong and Macau this year. generates returns above the debt charge, said Lau, deputy monetary director.
However, he borrows much more than his peers. During the same period, Hong Kong’s top indebted developers raised a total of $ 2. 2 billion, according to knowledge compiled via Bloomberg.
“There are many U. S. dollar bonds that investors have to digest because they are also vulnerable to bad news,” said Owen Gallimore, Australia’s head of credit strategy.
In fiscal year through June 2020, New World sold more than HONG Kong$10 billion in assets, adding interest at a giant grocery shopping center adjacent to Macau Ferry Terminal. The sale of what the corporation calls non-strategic activities aims to finance Cheng’s commitment to a new future, but it is also a scenario that is more uncertain, so far, investors seem to be waiting. New World shares dropped by 12% in 2020 compared to a 22% drop in Hang Seng’s property index. % and largely in line with the wider Asian bond market, according to knowledge compiled through Bloomberg.
“This is an era of testing for Cheng’s circle of family businesses, especially Adrian Cheng,” said Jackie Yan, a professor specializing in business control and strategy at the University of Hong Kong. “There has to be some tension for the new business style to be working. “
– With Rebecca Choong Wilkins and Chloe Whiteaker