In the fast-paced world of Hong Kong, known for its big-money and opulence, K11 Musea stands out as a true marvel. Aptly named the “Silicon Valley of Culture,” this grandiose art and luxury retail galleria was brought to life by Adrian Cheng, scion of one of the city’s wealthiest families. It took him 10 years and a whopping $2.6 billion to turn his vision into reality on the prime harbour-front property that had been passed down within his family for generations.
But just five years after its completion, Cheng’s ambitious dream for his family’s business, New World Development Co, and for himself, has come crashing down. Shocking the elite circle of Hong Kong, the 44-year-old Cheng has suddenly stepped down as the third-generation leader of the company, leaving the reins in the hands of a non-family member who is currently the chief operating officer. This unexpected move caused shares of New World to soar by 17% following the announcement.
The news has left insiders at New World in disbelief. Although there were whispers of a possible shift in leadership, the real estate families of Hong Kong, known for their wealth and influence, rarely pass on the reins to outsiders. Behind the scenes, Adrian’s 77-year-old father, Henry Cheng, has stepped back into a more active role in the family’s vast empire, including New World. He has also delegated key responsibilities to his daughter, Sonia, and sons Brian and Christopher.
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This turn of events highlights the impact of the weakening real estate market in Hong Kong, which is causing ripples throughout the city’s economy and affecting even its wealthiest billionaires. As the market continues to decline, the Cheng family grew increasingly concerned about Adrian’s management of their business, determined to defy the old Chinese saying that “wealth does not pass three generations.”
While Adrian Cheng, a Harvard-educated art enthusiast, enjoyed a successful career in the Hong Kong art scene, he struggled to prove himself in the business world, unlike his late grandfather and father. His grandfather, Cheng Yu-Tung, a former gold shop apprentice, built New World into one of the richest companies in Hong Kong and passed it on to his eldest son, Henry. However, Henry initially plunged the company into debt, just like his eldest son would do years later. But with the help of his father, Henry managed to turn things around, and today, the Cheng family is worth an estimated $22.6 billion, making them one of the wealthiest families in Asia.
Despite New World’s success, the company has faced some challenges since Adrian took over as CEO in 2020, four years after his grandfather’s passing. The company’s net debt to equity ratio has surpassed that of any other major Hong Kong property developer, currently standing at over 80% as of 2023, according to Bloomberg Intelligence. Additionally, New World reported its first annual net loss in 20 years, equivalent to $2.5 billion.
Marlen Dieleman, a professor of family business at IMD Business School in Singapore, explains that third-generation successors in family empires often face immense pressure, especially during economic downturns, with high expectations from family members and visibility in the business community.
As New World’s fortunes took a turn for the worse, and the Hong Kong property market declined, members of the Cheng family became concerned that Adrian was too focused on his cultural pursuits, including K11 Musea. In a television interview last year, Henry Cheng revealed that he was still looking for a successor, even though his son had been CEO for several years.
Representatives of Chow Tai Fook Enterprises Ltd, the private investment vehicle of the Cheng family, as well as Adrian Cheng and New World, did not respond to requests for comment.