Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Bloomberg property reporter Shauna Kwan already knew that one of
Speaker 2: Hong Kong's biggest real estate developers, New World Development, was
Speaker 2: in real trouble when she got a tip that she
Speaker 2: wasn't expecting.
Speaker 3: When I first heard it, I was super super surprised
Speaker 3: because it seemed to me impossible.
Speaker 2: Even amid a dramatic wipeout of the Hong Kong property market,
Speaker 2: New World stood out. It was deeper in debt than
Speaker 2: any other major developer in the territory, and last month
Speaker 2: it was expected to announce its first annual loss in
Speaker 2: two decades. But the tip Shauna got wasn't about the
Speaker 2: company's financials.
Speaker 3: I got a tip that Adrian Chang would step down
Speaker 3: as CEO.
Speaker 2: Adrian Chang is a third generation scion of New World,
Speaker 2: a grandson of the company's main founder. He had been
Speaker 2: named CEO of the family's flagship property business in twenty twenty.
Speaker 2: It had been expected that he was going to take
Speaker 2: over his family's entire conglomerate, which spans beyond property development
Speaker 2: into hotels and jewelry and other ventures. The family's empire
Speaker 2: is valued at around twenty billion US dollars and the
Speaker 2: forty four year old Cheng seemed poised to run it all.
Speaker 2: But now this tip that Shawna had received cast doubt
Speaker 2: on all of that. Shawna and Bloomberg consumer reporter Shirley
Speaker 2: Jow reached out to their sources, got confirmation that Chang's
Speaker 2: departure was eminent, and published their story.
Speaker 3: It was just really the biggest news in Hong Kong's
Speaker 3: business world in the past year or so. Everyone was
Speaker 3: talking about it. Everyone was very surprised, and even when
Speaker 3: I talked to people who are in the property industry,
Speaker 3: they were equally surprised because everyone saw adrians new world.
Speaker 2: And then yes today. After Bloomberg broke the news, Chang
Speaker 2: himself confirmed.
Speaker 3: It her Tamzo So Adrian said that after much consideration,
Speaker 3: he decided to devote more time to public service, so
Speaker 3: that's why he submitted his resignation.
Speaker 2: The whole speech lasted just a few minutes, and then
Speaker 2: Chang handed over the mic to the company's new CEO,
Speaker 2: Eric mass Yu Chunk, the company's chief operating officer. For
Speaker 2: the first time in the Property Group's history, it would
Speaker 2: be run by someone who wasn't a member of the
Speaker 2: Chang family.
Speaker 3: When you look at all the other proper developers in
Speaker 3: Hong Kong, they are still being led by the offspring
Speaker 3: of the founder, someone with the same surname. But then
Speaker 3: now we have a maa leading New World that is
Speaker 3: a Chang business, so that is very unusual.
Speaker 2: Welcome to the Big Take Asia from Bloomberg News. I'm wanh.
Speaker 2: Every week we take you inside some of the world's
Speaker 2: biggest and most powerful economies and the markets, tycoons and
Speaker 2: businesses that drive this ever shifting region. Today on the show,
Speaker 2: the succession drama of one of the richest families in
Speaker 2: Hong Kong, and while other family dynasties follow suit, hiring
Speaker 2: non relatives to run their companies. When Adrian Cheng stepped
Speaker 2: into leadership at New World, he embarked on a number
Speaker 2: of mega projects. His most famous one was K eleven Musea.
Speaker 1: A decade ago. My team and I had the honor
Speaker 1: of working with one hundred creative powers from all around
Speaker 1: the world to revitalize this cultural gym.
Speaker 2: K eleven Musea is an ornate art and luxury retail
Speaker 2: galleria on Prime harborfront in Hong Kong. It was part
Speaker 2: of a two point six billion dollar project a decade
Speaker 2: in the making, and it was a cornerstone of Cheng's
Speaker 2: vision for New World.
Speaker 3: What he wanted to do is to incorporate art and
Speaker 3: cultural elements into these commercial property projects like shopping malls,
Speaker 3: residential buildings, and offices.
Speaker 2: Seana says this approach of melding art with commercial property
Speaker 2: projects was seen as unnecessary by other real estate developers
Speaker 2: in the city.
Speaker 3: Because land and properly have been so valuable in the city.
Speaker 3: As a developer, you literally just have to build something,
Speaker 3: provide a space, and you can make money. You don't
Speaker 3: really have to add anything artsy or cultural. So I
Speaker 3: think he was really taking a step further.
Speaker 2: And there were other signs that Chang intended to be
Speaker 2: a different type of leader for New World.
Speaker 3: He would wear sneakers quite early in his career, and
Speaker 3: then over time his attire would diverge more and more
Speaker 3: from the usual business type. And in the past few
Speaker 3: years he also grew a beard that was that have
Speaker 3: been the talk of a town.
Speaker 2: Just a beard.
Speaker 3: Yeah, I mean, Kala is just a beard. But then
Speaker 3: in Hong Kong's very old money world, it's very unusual
Speaker 3: I think it also reflects how different Adrian tries to
Speaker 3: portray himself, as he's not just another boring executive. He
Speaker 3: is someone who has tayste who has connection in the
Speaker 3: art world, who doesn't just care about money. So I
Speaker 3: think that really differentiates him from the other tycoons in.
Speaker 2: Hong Kong, Chang also became known for being one of
Speaker 2: the most aggressive property investors in town. Under his leadership,
Speaker 2: New World poured billions into a number of major real
Speaker 2: estate projects, from a sports center that Hong Kong hopes
Speaker 2: will one day attract the likes of Taylor Swift to
Speaker 2: a sprawling shopping and entertainment complex at the airport. On
Speaker 2: top of that, New World was also snapping up land
Speaker 2: in mainland China, particularly the Greater Bay Area, an economic
Speaker 2: hub inter grading Hong Kong with Shanzen and other cities
Speaker 2: in southern China. Here's Chang speaking to Bloomberg TV in
Speaker 2: twenty twenty one about the company's China ambitions.
Speaker 1: Anwa is actually the earliest dominant player in Greater Bay Area.
Speaker 1: Since twenty and sixteen, we have spent over thirty billion
Speaker 1: in acquiring one point five million square meter of land.
Speaker 2: But this buildings free in Hong Kong and the company's
Speaker 2: expansion into mainland China started to look like risky bets
Speaker 2: for New World as the Hong Kong property market hit
Speaker 2: a major slump starting in twenty nineteen.
Speaker 3: When the antiq government protests starts to take place in
Speaker 3: Hong Kong and then followed by the pandemic. So overall,
Speaker 3: the marqueat hasn't been doing so great.
Speaker 2: Two hundred and seventy billion dollars have been wiped out
Speaker 2: from the real estate market in the city since twenty nineteen.
Speaker 2: That's according to an analysis by Bloomberg Intelligence. But even
Speaker 2: among its struggling peers, New World stood out taken on
Speaker 2: a lot of debt to fund its new projects, and
Speaker 2: its dead load was getting worrisome.
Speaker 3: It's by twenty twenty two when the share prices of
Speaker 3: Newer started to underperform its peers, because it's when New
Speaker 3: World's debt level had raised more and more concerns among
Speaker 3: investors and as well as analysts.
Speaker 2: That's also right about the time that China's property market
Speaker 2: also started to unwind as well and collapse.
Speaker 3: Yeah, exactly.
Speaker 2: On top of this, rising interest rates were also hurting
Speaker 2: the company. The city's base rate had been at its
Speaker 2: highest level since two thousand and seven before the Hong
Speaker 2: Kong Monetary Authority lowered it last month, and Chang says
Speaker 2: a rate that high was especially problematic for New World.
Speaker 3: The increasing interest rate on the one hand, for the
Speaker 3: exacerbated the downturn, and on they had a hand would
Speaker 3: add interest expanse for the company who had the most
Speaker 3: debt among its majored peers.
Speaker 2: And that was partly because they were expanding so.
Speaker 3: Much exactly and in all the projects that I just shared,
Speaker 3: needed a lot of money.
Speaker 2: By the end of June this year, Bloomberg Intelligence said
Speaker 2: New World's net debt to equity was ninety two percent.
Speaker 2: That's an important metric of a company's financial leverage, and
Speaker 2: the company's competitors have posted smaller ratios as low as
Speaker 2: eighteen percent. After the break, a shock announcement by Adrian's father,
Speaker 2: Henry Chang, and could other wealthy Asian families follow New
Speaker 2: World's lead and put non family members at the helm
Speaker 2: of their companies. Under Adrian Chang, New World had expanded
Speaker 2: aggressively in China and was working on two of the
Speaker 2: biggest retail developments in Hong Kong, But by twenty twenty three,
Speaker 2: Chang's strategy came into question as a company's debt load
Speaker 2: grew while interest rates soared. By last November, New World
Speaker 2: stock had hit a twenty year low. That same month,
Speaker 2: Adrian's father, Henry Chang made an announcement on television that
Speaker 2: shook Hong Kong.
Speaker 3: No nigo yatna you want you go one dollar? What
Speaker 3: a face you're going. Henry, who had been very low
Speaker 3: key in the past few years, went on TV out
Speaker 3: of sudden, out of the blue, saying that he hadn't
Speaker 3: found a successor and he was still looking for a successor,
Speaker 3: and then the whole of Hong Kong was very confused,
Speaker 3: like what hasn't it been Adrian the whole time?
Speaker 2: When I asked about the remarks, Adrian's sister Sonya Cheng,
Speaker 2: who manages the Rosewood hotel chain as well as the
Speaker 2: family's jewelry group, said that all family members worked together
Speaker 2: for the benefit of the company, and a cousin denied
Speaker 2: family infighting. New World declined to comment to Bloomberg about
Speaker 2: Henry Chang's remarks at the time, but now less than
Speaker 2: a year later, Adrian's resignation as CEO appears to confirm
Speaker 2: that the successor role that one seemed promised to him
Speaker 2: is no longer on the table. Although Adrian Cheng said
Speaker 2: he resigned on his own accord, Shanna told us she
Speaker 2: heard a different explanation for his departure, that his father
Speaker 2: and other family members weren't happy with his leadership.
Speaker 3: Basically like he got pushed out by the family, and
Speaker 3: our sources say that Henry himself hasn't been very satisfied
Speaker 3: with Adrian's spending habits and also the fact that he
Speaker 3: got the company into a lot of debt.
Speaker 2: Sources told Bloomberg that as New World's performance floundered, the
Speaker 2: Cheng family began to express concern that Adrian was spending
Speaker 2: too much time on cultural pursuits, including those involving K
Speaker 2: eleven Museia. After stepping down, Chang remains as a non
Speaker 2: executive vice chairman at New World and said he'll continue
Speaker 2: to contribute to the commercial strategy of the K eleven brand. Meanwhile,
Speaker 2: Shanna said she expects to see more of Henry Chang,
Speaker 2: who had taken a back seat to his son in
Speaker 2: recent years.
Speaker 3: Henry for the safe of the past decade had been
Speaker 3: quite low key. He didn't have a lot of public appearance. Meanwhile,
Speaker 3: Adrian had become the face of the Chang family and
Speaker 3: also New World, and then obviously we see him being
Speaker 3: more focal about the family's operation. And what we heard
Speaker 3: is that Henry has taken a more hands on role
Speaker 3: in managing the family's conglomerate. So I wouldn't be surprised
Speaker 3: if we see Henry more often in public.
Speaker 2: As for the rest of the family, Henry Chang's other
Speaker 2: children run different parts of the family business, So I
Speaker 2: asked Shauna if one of them could potentially take over
Speaker 2: as successor.
Speaker 3: Honestly, we don't know, and from what we see so far,
Speaker 3: a New World looks like it will be controlled or
Speaker 3: it would be led by someone external of the family.
Speaker 2: In that same TV interview last year, when the Chang
Speaker 2: patriarch said he was still looking for a successor, he'd
Speaker 2: also said that if there were no suitable candidates among
Speaker 2: the Changs, he would consider hiring outside the family. For now,
Speaker 2: New World is being led by Eric Mah, who was
Speaker 2: the company's chief operating officer. So could Ma's appointment be
Speaker 2: a model for other families in the future.
Speaker 3: Broadly speaking, in terms of family succession, I think if say,
Speaker 3: when Eric Maher takes over and then he does a
Speaker 3: very good job with managing the company, I think it
Speaker 3: may raise the question to other families that maybe you
Speaker 3: don't really have to pass your company to your offspring.
Speaker 3: Maybe it's even better to let someone professional outside family
Speaker 3: to take care of it. So I think it may
Speaker 3: open doors to more innovative or different session plans. In
Speaker 3: Hong Kong and maybe in the region.
Speaker 2: A smooth succession is paramount for dynasties like New Worlds
Speaker 2: in Hong Kong and around the region. Asia's richest clans,
Speaker 2: whose businesses span everything from real estate to airports to
Speaker 2: the biggest consumer brands, will hand down five point eight
Speaker 2: trillion dollars to the next generation by twenty thirty. That's
Speaker 2: according to a McKenzie report. Yet there's sometimes divide between
Speaker 2: the generations over how businesses should be managed and the
Speaker 2: well spent. Shanna says Chang's fall highlights the problems many
Speaker 2: third generation airs face as more of them take over
Speaker 2: the reigns of family businesses and fortunes.
Speaker 3: I think in Asia we see more and more of
Speaker 3: the third generation really taking control of the family. But
Speaker 3: then they are the third generation who would very naturally
Speaker 3: want to do something different instead of really taking the
Speaker 3: same routine or taking the same strategy as their fathers
Speaker 3: of their grandfathers. So I think that's when problems may arise,
Speaker 3: because if they want to do something ambitious and they
Speaker 3: say the external environment doesn't allow it, then they may
Speaker 3: end up having a lot of trouble like what we
Speaker 3: see in New World.
Speaker 2: This is The Big Take Asia from Bloomberg News. I'm wanha.
Speaker 2: This episode was produced by Naming Jessica Beck and Young Young.
Speaker 2: It was mixed by Alex Sugera in fact checked by
Speaker 2: Eddie Dwan. It was edited by Caitlin Kenny and Lulu Chen.
Speaker 2: There was additional reporting by Shirley Jowell. Nicole Beemster Bower
Speaker 2: is our executive producer, Elizabeth Konso is our senior editor,
Speaker 2: and Safe Bauman is Bloomberg's head of Podcasts. Please follow
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Speaker 2: It really helps new listeners find the show. See you
Speaker 2: next time.