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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Bloomberg property reporter Shauna Kwan already knew that one of

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Speaker 2: Hong Kong's biggest real estate developers, New World Development, was

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Speaker 2: in real trouble when she got a tip that she

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Speaker 2: wasn't expecting.

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Speaker 3: When I first heard it, I was super super surprised

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Speaker 3: because it seemed to me impossible.

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Speaker 2: Even amid a dramatic wipeout of the Hong Kong property market,

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Speaker 2: New World stood out. It was deeper in debt than

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Speaker 2: any other major developer in the territory, and last month

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Speaker 2: it was expected to announce its first annual loss in

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Speaker 2: two decades. But the tip Shauna got wasn't about the

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Speaker 2: company's financials.

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Speaker 3: I got a tip that Adrian Chang would step down

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Speaker 3: as CEO.

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Speaker 2: Adrian Chang is a third generation scion of New World,

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Speaker 2: a grandson of the company's main founder. He had been

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Speaker 2: named CEO of the family's flagship property business in twenty twenty.

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Speaker 2: It had been expected that he was going to take

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Speaker 2: over his family's entire conglomerate, which spans beyond property development

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Speaker 2: into hotels and jewelry and other ventures. The family's empire

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Speaker 2: is valued at around twenty billion US dollars and the

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Speaker 2: forty four year old Cheng seemed poised to run it all.

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Speaker 2: But now this tip that Shawna had received cast doubt

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Speaker 2: on all of that. Shawna and Bloomberg consumer reporter Shirley

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Speaker 2: Jow reached out to their sources, got confirmation that Chang's

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Speaker 2: departure was eminent, and published their story.

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Speaker 3: It was just really the biggest news in Hong Kong's

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Speaker 3: business world in the past year or so. Everyone was

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Speaker 3: talking about it. Everyone was very surprised, and even when

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Speaker 3: I talked to people who are in the property industry,

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Speaker 3: they were equally surprised because everyone saw adrians new world.

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Speaker 2: And then yes today. After Bloomberg broke the news, Chang

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Speaker 2: himself confirmed.

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Speaker 3: It her Tamzo So Adrian said that after much consideration,

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Speaker 3: he decided to devote more time to public service, so

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Speaker 3: that's why he submitted his resignation.

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Speaker 2: The whole speech lasted just a few minutes, and then

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Speaker 2: Chang handed over the mic to the company's new CEO,

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Speaker 2: Eric mass Yu Chunk, the company's chief operating officer. For

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Speaker 2: the first time in the Property Group's history, it would

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Speaker 2: be run by someone who wasn't a member of the

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Speaker 2: Chang family.

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Speaker 3: When you look at all the other proper developers in

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Speaker 3: Hong Kong, they are still being led by the offspring

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Speaker 3: of the founder, someone with the same surname. But then

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Speaker 3: now we have a maa leading New World that is

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Speaker 3: a Chang business, so that is very unusual.

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Speaker 2: Welcome to the Big Take Asia from Bloomberg News. I'm wanh.

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Speaker 2: Every week we take you inside some of the world's

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Speaker 2: biggest and most powerful economies and the markets, tycoons and

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Speaker 2: businesses that drive this ever shifting region. Today on the show,

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Speaker 2: the succession drama of one of the richest families in

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Speaker 2: Hong Kong, and while other family dynasties follow suit, hiring

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Speaker 2: non relatives to run their companies. When Adrian Cheng stepped

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Speaker 2: into leadership at New World, he embarked on a number

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Speaker 2: of mega projects. His most famous one was K eleven Musea.

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Speaker 1: A decade ago. My team and I had the honor

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Speaker 1: of working with one hundred creative powers from all around

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Speaker 1: the world to revitalize this cultural gem.

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Speaker 2: K eleven Musea is an ornate art and luxury retail

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Speaker 2: galleria on Prime harborfront in Hong Kong. It was part

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Speaker 2: of a two point six billion dollar project a decade

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Speaker 2: in the making, and it was a cornerstone of Cheng's

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Speaker 2: vision for New World.

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Speaker 3: What he wanted to do is to incorporate art and

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Speaker 3: cultural elements into these commercial property projects like shopping malls,

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Speaker 3: residential buildings, and offices.

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Speaker 2: Seana says this approach of melding art with commercial property

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Speaker 2: projects was seen as unnecessary by other real estate developers

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Speaker 2: in the.

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Speaker 3: City because land and properly have been so valuable in

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Speaker 3: the city. As a developer, you literally just have to

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Speaker 3: build something, provide a space, and you can make money.

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Speaker 3: You don't really have to add anything artsy or cultural.

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Speaker 3: So I think he was really taking a step further.

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Speaker 2: And there were other signs that Chang intended to be

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Speaker 2: a different type of leader for New World.

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Speaker 3: He would wear sneakers quite early in his career, and

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Speaker 3: then over time his attire would diverge more and more

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Speaker 3: from the usual business type. And in the past few

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Speaker 3: years he also grew a beard that was that have

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Speaker 3: been the talk of a town.

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Speaker 2: Just a beard.

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Speaker 3: Yeah, I mean, Kala is just a beard. But then

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Speaker 3: in Hong Kong's very old money world, it's very unusual.

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Speaker 3: I think it also reflects how different Adrian tries to

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Speaker 3: portray himself, as he's not just another boring executive. He

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Speaker 3: is someone who has taste, who has connection in the

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Speaker 3: art world, who doesn't just care about money. So I

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Speaker 3: think that really differentiates him from the other tycoons in

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Speaker 3: Hong Kong.

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Speaker 2: Chang also became known for being one of the most

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Speaker 2: aggressive property investors in town. Under his leadership, New World

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Speaker 2: poured billions into a number of major real estate projects,

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Speaker 2: from a sports center that Hong Kong hopes will one

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Speaker 2: day attract the likes of Taylor Swift to a sprawling

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Speaker 2: shopping and entertainment complex at the airport. On top of that,

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Speaker 2: New World was also snapping up land in mainland China,

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Speaker 2: particularly the Greater Bay Area, an economic hub inter grading

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Speaker 2: Hong Kong with Shanzen and other cities in southern China.

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Speaker 2: Here's Chang speaking to Bloomberg TV in twenty twenty one

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Speaker 2: about the company's China ambitions.

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Speaker 1: A NWA is actually the earliest dominant player in Greater

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Speaker 1: Bay Area. Since twenty and sixteen, we have spent over

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Speaker 1: thirty billion in acquiring one point five million square meter

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Speaker 1: of land.

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Speaker 2: But this building spree in Hong Kong and the company's

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Speaker 2: expansion into mainland China started to look like risky bets

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Speaker 2: for New World as the Hong Kong property market hit

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Speaker 2: a major slump starting in twenty nineteen.

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Speaker 3: When the antiq government protests starts to take place in

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Speaker 3: Hong Kong and then followed by the pandemic. So overall,

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Speaker 3: the marqueat hasn't been doing so great.

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Speaker 2: Two hundred and seventy billion dollars have been wiped out

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Speaker 2: from the real estate market in the city since twenty nineteen.

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Speaker 2: That's according to an analysis by Bloomberg Intelligence. But even

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Speaker 2: among its struggling peers, New World stood out taken on

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Speaker 2: a lot of debt to fund its new projects, and

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Speaker 2: its dead load was getting worrisome.

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Speaker 3: It's by twenty twenty two when the share prices of

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Speaker 3: Newer started to underperform its peers, because it's when New

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Speaker 3: World's debt level had raised more and more concerns among

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Speaker 3: investors and as well as analysts.

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Speaker 2: That's also right about the time that China's property market

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Speaker 2: also started to unwind as well and collapse.

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Speaker 3: Yeah, exactly.

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Speaker 2: On top of this, rising interest rates were also hurting

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Speaker 2: the company. The City's base rate had been at its

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Speaker 2: highest level since two thousand and seven before the Hong

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Speaker 2: Kong Monetary Authority lowered it last month, and Chang says

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Speaker 2: a rate that high was especially problematic for New World.

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Speaker 3: The increasing interest rate on the one hand, for the

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Speaker 3: exacerbated the downturn, and on they had a hand would

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Speaker 3: add interest expanse for the company who had the most

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Speaker 3: debt among its majored peers.

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Speaker 2: And that was partly because they were expanding so.

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Speaker 3: Much exactly and in all the projects that I just

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Speaker 3: shared needed a lot of money.

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Speaker 2: By the end of June this year, Bloomberg Intelligence said

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Speaker 2: New World's net debt to equity was ninety two percent.

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Speaker 2: That's an important metric of a company's financial leverage, and

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Speaker 2: the company's competitors have posted smaller ratios as low as

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Speaker 2: eighteen percent. After the break, a shock announcement by Adrian's father,

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Speaker 2: Henry Chang, and could other wealthy Asian families follow New

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Speaker 2: World's lead and put non family members at the helm

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Speaker 2: of their companies. Under Adrian Chang, New World had expanded

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Speaker 2: aggressively in China and was working on two of the

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Speaker 2: biggest retail developments in Hong Kong, But by twenty twenty three,

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Speaker 2: Chang's strategy came into question as a company's debt load

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Speaker 2: grew while interest rates soared. By last November, New World

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Speaker 2: stock had hit a twenty year low. That same month,

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Speaker 2: Adrian's father, Henry Chang made an announcement on television that

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Speaker 2: shook Hong Kong.

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Speaker 3: No nigo yatna you want you go one dollar? What

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Speaker 3: a face you're going. Henry, who had been very low

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Speaker 3: key in the past few years, went on TV out

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Speaker 3: of sudden, out of the blue, saying that he hadn't

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Speaker 3: found a successor and he was still looking for a successor.

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Speaker 3: And then the whole of Hong Kong was very confused,

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Speaker 3: like what hasn't it been Adrian the whole time?

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Speaker 2: When I asked about the remarks, Adrian's sister Sonya Cheng,

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Speaker 2: who manages the Rosewood hotel chain as well as the

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Speaker 2: family's jewelry group, said that all family members worked together

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Speaker 2: for the benefit of the company, and a cousin denied

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Speaker 2: family infighting. New World declined to comment to Bloomberg about

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Speaker 2: Henry Chang's remarks at the time, but now less than

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Speaker 2: a year later, Adrian's resignation as CEO, appears to confirm

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Speaker 2: that the successor role that one seemed promised to him

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Speaker 2: is no longer on the table. Although Adrian Cheng said

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Speaker 2: he resigned on his own accord, Shanna told us she

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Speaker 2: heard a different explanation for his departure, that his father

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Speaker 2: and other family members weren't happy with his leadership.

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Speaker 3: Basically like he got pushed out by the family, and

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Speaker 3: our sources say that Henry himself hasn't been very satisfied

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Speaker 3: with Adrian's spending habits and also the fact that he

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Speaker 3: got the company into a lot of debt.

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Speaker 2: Sources told Bloomberg that as New World's performance floundered, the

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Speaker 2: Cheng family began to express concern that Adrian was spending

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Speaker 2: too much time on cultural pursuits, including those involving K

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Speaker 2: eleven Museia. After stepping down, Chang remains as a non

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Speaker 2: executive vice chairman at New World and said he'll continue

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Speaker 2: to contribute to the commercial strategy of the K eleven brand. Meanwhile,

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Speaker 2: Shanna said she expects to see more of Henry Chang,

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Speaker 2: who had taken a back seat to his son in

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Speaker 2: recent years.

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Speaker 3: Henry, for the safe of the past decade, had been

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Speaker 3: quite low key. He didn't have a lot of public appearance. Meanwhile,

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Speaker 3: Adrian had become the face of the Chang family and

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Speaker 3: also New World, and then obviously we see him being

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Speaker 3: more focal about the family's operation. And what we heard

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Speaker 3: is that Henry has taken a more hands on role

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Speaker 3: in managing the family's conglomerate. So I wouldn't be surprised

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Speaker 3: if we see Henry more often in public.

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Speaker 2: As for the rest of the family, Henry Chang's other

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Speaker 2: children run different parts of the family business, So I

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Speaker 2: asked Shauna if one of them could potentially take over

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Speaker 2: as successor.

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Speaker 3: Honestly, we don't know, and from what we see so far,

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Speaker 3: a New World looks like it will be controlled or

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Speaker 3: it would be led by someone external of the family.

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Speaker 2: In that same TV interview last year, when the Chang

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Speaker 2: patriarch said he was still looking for a successor, he'd

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Speaker 2: also said that if there were no suitable candidates among

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Speaker 2: the Changs, he would consider hiring outside the family. For now,

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Speaker 2: New World is being led by Eric Mah, who was

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Speaker 2: the company's chief operating officer, So could Ma's appointment be

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Speaker 2: a model for other families in the future.

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Speaker 3: Broadly speaking, in terms of family secession. I think if, say,

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Speaker 3: when Eric Maher takes over and then he does a

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Speaker 3: very good job with managing the company, I think it

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Speaker 3: may raise the question to other families that maybe you

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Speaker 3: don't really have to pass your company to your offspring.

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Speaker 3: Maybe it's even better to let someone professional outside family

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Speaker 3: to take care of it. So I think it may

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Speaker 3: open doors to more innovative or different session plans in

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Speaker 3: Hong Kong and maybe in the region.

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Speaker 2: This is The Big Take Asia from Bloomberg News. I'm Wanha.

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Speaker 2: This episode was produced by Naming Jessica Beck and Young Young.

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Speaker 2: It was mixed by Alex Sugera and fact checked by

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Speaker 2: Eddie Dwan. It was edited by Caitlin Kenny and Lulu Chen.

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Speaker 2: There was additional reporting by Shirley Joe. Nicole Beemster Bower

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Speaker 2: is our executive producer, Elizabeth Wonso is our senior editor,

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Speaker 2: and Saif Bauman is Bloomberg's head of Podcasts. Please follow

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Speaker 2: and review The Big Take Asia wherever you listen to podcasts.

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Speaker 2: It really helps new listeners find the show. See you

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Speaker 2: next time.