New World Weighs Replacing Billionaire Heir Cheng as CEO
(Bloomberg) -- New World Development Co., the Hong Kong property developer owned by the billionaire Cheng family, is considering replacing third-generation scion Adrian Cheng as chief executive officer after writedowns that led to the company’s first annual loss in two decades, according to people familiar with the matter.
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Cheng is poised to be replaced by current Chief Operating Officer Ma Siu-Cheung, one of the people said, asking not to be identified discussing private deliberations. The company, owned by the family of billionaire Henry Cheng, is due to report financial results on Thursday. New World didn’t immediately reply to a request for comment and Brian Cheng, Adrian’s brother and co-CEO of New World’s sister company NWS Holdings, declined to comment.
Such a move would be rare in Hong Kong’s property industry, where the biggest players are all controlled by families that carefully plan their succession. Long assumed to be a favorite of the late patriarch Cheng Yu-Tung, Adrian had until recently been seen as the heir apparent of the family’s conglomerate, which spans industries from property to jewelry and logistics.
The junior Cheng joined the family’s flagship developer in 2007 as an executive director and soon helped lead the company before cementing his position as CEO in 2020.
A Harvard graduate with a stint at Goldman Sachs Group Inc. as an investment banker, Cheng has transformed the traditional property company into a brand with artsy apartment blocks and ambitious projects while accumulating heavy debt.
New World earlier warned that it expects to post a loss of as much as HK$20 billion ($2.6 billion) for the financial year ended in June, citing asset impairment, losses on investments and higher interest rates.
Shares of the company have underperformed its peers, tanking more than 30% since the beginning of the year, compared with the 12.8% decline in the Hang Seng Properties Index.
New World’s debt level — the highest among its rivals in the past few years — has become a concern for investors amid high borrowing costs and a weak property market. Its net debt to equity was 82.7% at the end of last year, compared with 41.4% at peer Henderson Land Development Co. and 21.2% at Sun Hung Kai Properties Ltd., according to Bloomberg Intelligence.
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The 44-year-old has overseen large-scale commercial projects at New World. He created the K11 brand that incorporates art elements into shopping malls and offices. However, some of the projects began operating during inopportune periods. The flagship shopping mall K11 MUSEA, now a top retail destination for locals and tourists, opened in 2019 during the city’s anti-government protests before the pandemic shut borders.
Another mega project, a HK$20 billion shopping-and-entertainment complex at the airport, started opening in phases since last year. Its office space and shopping mall — set to be the largest in Hong Kong — may prove hard to fill as the city’s office and retail sectors experience a prolonged downturn.
In 2021, the company found defects in the structure of two residential towers and had to demolish the buildings while compensating buyers, further straining New World’s finances.
Adrian’s potential departure is reminiscent of an earlier piece of history at the company. Back in 1989, when his father Henry was new to the top job, he undertook an aggressive expansion of New World that left the company mired in debt. Cheng Yu-Tung had to step in to carry out a series of asset sales to generate much needed capital.
The younger Cheng’s reputation spans beyond his position at New World. Arguably the most high-profile tycoon in Hong Kong, he’s active on social media with more than 130,000 followers on Instagram. His profile often shows him socializing with celebrities including Pharrell Williams and Korean girl band Blackpink.
He has also taken up more public service roles recently. He leads the government’s Mega Arts and Cultural Events Fund — which aims to attract large-scale events to the financial hub — as well as the Hong Kong Academy for Wealth Legacy that helps develop and promote Hong Kong as a global hub for the ultra-wealthy.
The Cheng family’s succession plan was thrown under the spotlight last year after Henry said he was still looking for a successor for the family’s conglomerate, shattering the previous assumption in the business world that Adrian would pick up the baton. The Chengs, valued at $23.6 billion, are among Asia’s wealthiest clans.
--With assistance from Spe Chen.
(Adds details of profit warning and shares in sixth and seventh paragraphs.)
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