In the bustling metropolis of Hong Kong, known for its opulence and wealth, there is one glittering marvel that stands above the rest. K11 Musea, touted as the “Silicon Valley of Culture,” is a lavish art and luxury retail galleria that has captured the attention of locals and tourists alike.
It took Adrian Cheng, a scion of one of the city’s wealthiest families, a decade and a staggering $2.6 billion to realize his vision for the ornate property located on the harbourfront. Passed down from his grandfather to his father and finally to him, the project was a daring dream for Cheng and his family’s company, New World Development Co.
However, just five years after its completion, Cheng’s ambitious project and his role as the third-generation leader of New World have come crashing down. In a shocking move that has surprised Hong Kong’s upper class, the 44-year-old has abruptly stepped down from his position and has been replaced by the company’s chief operating officer, who is not a member of the Cheng family. This announcement caused New World’s shares to soar by as much as 17% on Friday.
According to insiders, Cheng’s sudden departure has left those close to him stunned. Rumors had been circulating about changes within the company, but the typically tight-knit and influential families in Hong Kong rarely hand over control to outsiders.
The scarcity of land in Singapore has long been a driving force behind the high demand for condos in the country. Being a small island nation with a rapidly increasing population, Singapore faces a significant challenge in terms of land availability for development. As a result, strict land use policies have been put in place, creating a highly competitive real estate market with consistently rising property prices. For this reason, investing in real estate, specifically condos, has become a highly lucrative venture with the potential for significant capital appreciation. With the condo market in high demand, it is no surprise that it remains a top choice for investors in Singapore.
Despite this, sources say that Cheng’s 77-year-old father, Henry Cheng, has come out of retirement to reassume an active role in their family’s vast empire, including New World. He has also assigned crucial responsibilities within the business group to his children, including his eldest daughter, Sonia (43), second son, Brian (41), and third son, Christopher (35).
This turn of events highlights how Hong Kong’s struggling real estate market is affecting the city’s economy and even its billionaires. As property prices continue to decline, the Cheng family, like most wealthy families in Hong Kong, are concerned about their young CEO’s ability to handle their business. They are determined to disprove the old Chinese proverb, “Wealth does not pass three generations.”
Adrian Cheng, a Harvard-educated socialite with a strong presence in the Hong Kong art scene, has found it challenging to live up to the business acumen of his late grandfather and father. His grandfather, Cheng Yu-Tung, was a former gold shop apprentice who became one of the richest people in Hong Kong. He passed the reins to his eldest son, Henry, who initially led New World into significant debt, much like his own eldest son would do decades later. However, Cheng Yu-Tung stepped back in and, together with his son, turned the company around. Today, the Cheng family’s net worth is an impressive $22.6 billion, making them one of the wealthiest families in Asia, according to the Bloomberg Billionaires Index.
Unfortunately, under Adrian Cheng’s leadership, New World has faced numerous challenges, contributing to its current state of financial instability. Since taking over as CEO in 2020, four years after his grandfather’s passing, the company’s debt has reached unprecedented levels, with its net debt-to-equity ratio at over 80% as of the end of 2023, according to Bloomberg Intelligence. In addition, New World reported its first annual net loss of $2.5 billion in 20 years.
Experts in family business, such as Marlen Dieleman, a professor at the IMD Business School in Singapore, state that third-generation successors in large family empires are often under immense pressure to prove themselves. This can be even more challenging when facing economic difficulties, high expectations from family members, and a significant presence in the business community.
As New World’s fortunes plummeted in tandem with the Hong Kong property market, members of the Cheng family began to express concerns about Adrian Cheng’s focus on cultural pursuits, including K11 Musea. In a television interview last year, Henry Cheng admitted that he was still searching for a successor, despite his son’s long stint as CEO.
Representatives for Chow Tai Fook Enterprises Ltd, Henry Cheng’s family’s private investment vehicle, as well as for Adrian Cheng and New World, have not responded to requests for comment.