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Bloomberg property reporter Shauna Kwan already knew that one of Hong Kong's biggest real estate developers, New World Development, was in real trouble when she got a tip that she wasn't expecting.
When I first heard it, I was super super surprised because it seemed to me impossible.
Even amid a dramatic wipeout of the Hong Kong property market, New World stood out. It was deeper in debt than any other major developer in the territory, and last month it was expected to announce its first annual loss in two decades. But the tip Shauna got wasn't about the company's financials.
I got a tip that Adrian Chang would step down as CEO.
Adrian Chang is a third generation scion of New World, a grandson of the company's main founder. He had been named CEO of the family's flagship property business in twenty twenty. It had been expected that he was going to take over his family's entire conglomerate, which spans beyond property development into hotels and jewelry and other ventures. The family's empire is valued at around twenty billion US dollars and the forty four year old Cheng seemed poised to run it all.
But now this tip that Shawna had received cast doubt on all of that. Shawna and Bloomberg consumer reporter Shirley Jow reached out to their sources, got confirmation that Chang's departure was eminent, and published their story.
It was just really the biggest news in Hong Kong's business world in the past year or so. Everyone was talking about it. Everyone was very surprised, and even when I talked to people who are in the property industry, they were equally surprised because everyone saw adrians new world.
And then yes today. After Bloomberg broke the news, Chang himself confirmed.
It her Tamzo So Adrian said that after much consideration, he decided to devote more time to public service, so that's why he submitted his resignation.
The whole speech lasted just a few minutes, and then Chang handed over the mic to the company's new CEO, Eric mass Yu Chunk, the company's chief operating officer. For the first time in the Property Group's history, it would be run by someone who wasn't a member of the Chang family.
When you look at all the other proper developers in Hong Kong, they are still being led by the offspring of the founder, someone with the same surname. But then now we have a maa leading New World that is a Chang business, so that is very unusual.
Welcome to the Big Take Asia from Bloomberg News. I'm wanh. Every week we take you inside some of the world's biggest and most powerful economies and the markets, tycoons and businesses that drive this ever shifting region. Today on the show, the succession drama of one of the richest families in Hong Kong, and while other family dynasties follow suit, hiring non relatives to run their companies. When Adrian Cheng stepped into leadership at New World, he embarked on a number
of mega projects. His most famous one was K eleven Musea.
A decade ago. My team and I had the honor of working with one hundred creative powers from all around the world to revitalize this cultural gem.
K eleven Musea is an ornate art and luxury retail galleria on Prime harborfront in Hong Kong. It was part of a two point six billion dollar project a decade in the making, and it was a cornerstone of Cheng's vision for New World.
What he wanted to do is to incorporate art and cultural elements into these commercial property projects like shopping malls, residential buildings, and offices.
Seana says this approach of melding art with commercial property projects was seen as unnecessary by other real estate developers in the.
City because land and properly have been so valuable in the city. As a developer, you literally just have to build something, provide a space, and you can make money. You don't really have to add anything artsy or cultural. So I think he was really taking a step further.
And there were other signs that Chang intended to be a different type of leader for New World.
He would wear sneakers quite early in his career, and then over time his attire would diverge more and more from the usual business type. And in the past few years he also grew a beard that was that have been the talk of a town.
Just a beard.
Yeah, I mean, Kala is just a beard. But then in Hong Kong's very old money world, it's very unusual. I think it also reflects how different Adrian tries to portray himself, as he's not just another boring executive. He is someone who has taste, who has connection in the art world, who doesn't just care about money. So I think that really differentiates him from the other tycoons in Hong Kong.
Chang also became known for being one of the most aggressive property investors in town. Under his leadership, New World poured billions into a number of major real estate projects, from a sports center that Hong Kong hopes will one day attract the likes of Taylor Swift to a sprawling
shopping and entertainment complex at the airport. On top of that, New World was also snapping up land in mainland China, particularly the Greater Bay Area, an economic hub inter grading Hong Kong with Shanzen and other cities in southern China. Here's Chang speaking to Bloomberg TV in twenty twenty one about the company's China ambitions.
A NWA is actually the earliest dominant player in Greater Bay Area. Since twenty and sixteen, we have spent over thirty billion in acquiring one point five million square meter of land.
But this building spree in Hong Kong and the company's expansion into mainland China started to look like risky bets for New World as the Hong Kong property market hit a major slump starting in twenty nineteen.
When the antiq government protests starts to take place in Hong Kong and then followed by the pandemic. So overall, the marqueat hasn't been doing so great.
Two hundred and seventy billion dollars have been wiped out from the real estate market in the city since twenty nineteen. That's according to an analysis by Bloomberg Intelligence. But even among its struggling peers, New World stood out taken on a lot of debt to fund its new projects, and its dead load was getting worrisome.
It's by twenty twenty two when the share prices of Newer started to underperform its peers, because it's when New World's debt level had raised more and more concerns among investors and as well as analysts.
That's also right about the time that China's property market also started to unwind as well and collapse.
Yeah, exactly.
On top of this, rising interest rates were also hurting the company. The City's base rate had been at its highest level since two thousand and seven before the Hong Kong Monetary Authority lowered it last month, and Chang says a rate that high was especially problematic for New World.
The increasing interest rate on the one hand, for the exacerbated the downturn, and on they had a hand would add interest expanse for the company who had the most debt among its majored peers.
And that was partly because they were expanding so.
Much exactly and in all the projects that I just shared needed a lot of money.
By the end of June this year, Bloomberg Intelligence said New World's net debt to equity was ninety two percent. That's an important metric of a company's financial leverage, and the company's competitors have posted smaller ratios as low as eighteen percent. After the break, a shock announcement by Adrian's father, Henry Chang, and could other wealthy Asian families follow New World's lead and put non family members at the helm
of their companies. Under Adrian Chang, New World had expanded aggressively in China and was working on two of the biggest retail developments in Hong Kong, But by twenty twenty three, Chang's strategy came into question as a company's debt load grew while interest rates soared. By last November, New World stock had hit a twenty year low. That same month, Adrian's father, Henry Chang made an announcement on television that shook Hong Kong.
No nigo yatna you want you go one dollar? What a face you're going. Henry, who had been very low key in the past few years, went on TV out of sudden, out of the blue, saying that he hadn't found a successor and he was still looking for a successor. And then the whole of Hong Kong was very confused, like what hasn't it been Adrian the whole time?
When I asked about the remarks, Adrian's sister Sonya Cheng, who manages the Rosewood hotel chain as well as the family's jewelry group, said that all family members worked together for the benefit of the company, and a cousin denied family infighting. New World declined to comment to Bloomberg about Henry Chang's remarks at the time, but now less than a year later, Adrian's resignation as CEO, appears to confirm that the successor role that one seemed promised to him
is no longer on the table. Although Adrian Cheng said he resigned on his own accord, Shanna told us she heard a different explanation for his departure, that his father and other family members weren't happy with his leadership.
Basically like he got pushed out by the family, and our sources say that Henry himself hasn't been very satisfied with Adrian's spending habits and also the fact that he got the company into a lot of debt.
Sources told Bloomberg that as New World's performance floundered, the Cheng family began to express concern that Adrian was spending too much time on cultural pursuits, including those involving K eleven Museia. After stepping down, Chang remains as a non executive vice chairman at New World and said he'll continue to contribute to the commercial strategy of the K eleven brand. Meanwhile, Shanna said she expects to see more of Henry Chang, who had taken a back seat to his son in recent years.
Henry, for the safe of the past decade, had been quite low key. He didn't have a lot of public appearance. Meanwhile, Adrian had become the face of the Chang family and also New World, and then obviously we see him being more focal about the family's operation. And what we heard is that Henry has taken a more hands on role in managing the family's conglomerate. So I wouldn't be surprised if we see Henry more often in public.
As for the rest of the family, Henry Chang's other children run different parts of the family business, So I asked Shauna if one of them could potentially take over as successor.
Honestly, we don't know, and from what we see so far, a New World looks like it will be controlled or it would be led by someone external of the family.
In that same TV interview last year, when the Chang patriarch said he was still looking for a successor, he'd also said that if there were no suitable candidates among the Changs, he would consider hiring outside the family. For now, New World is being led by Eric Mah, who was the company's chief operating officer, So could Ma's appointment be a model for other families in the future.
Broadly speaking, in terms of family secession. I think if, say, when Eric Maher takes over and then he does a very good job with managing the company, I think it may raise the question to other families that maybe you don't really have to pass your company to your offspring. Maybe it's even better to let someone professional outside family to take care of it. So I think it may open doors to more innovative or different session plans in Hong Kong and maybe in the region.
This is The Big Take Asia from Bloomberg News. I'm Wanha. This episode was produced by Naming Jessica Beck and Young Young. It was mixed by Alex Sugera and fact checked by Eddie Dwan. It was edited by Caitlin Kenny and Lulu Chen. There was additional reporting by Shirley Joe. Nicole Beemster Bower is our executive producer, Elizabeth Wonso is our senior editor, and Saif Bauman is Bloomberg's head of Podcasts. Please follow and review The Big Take Asia wherever you listen to podcasts.
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