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The grandiose K11 Musea in Hong Kong, known as the “Silicon Valley of Culture,” is a symbol of the opulence that defines the city’s big-money lifestyle. It took Adrian Cheng, heir to one of Hong Kong’s most affluent families, a decade and a massive $2.6 billion investment to bring his vision for the luxurious art and retail complex to life on waterfront property passed down through generations. However, after only five years of its opening, Cheng’s ambitious dream for his family’s New World Development Co. has drastically fallen apart.
To the surprise of Hong Kong’s elite community, 44-year-old Cheng has abruptly stepped down as the third-generation leader of New World, a key component of the renowned Cheng family business dynasty. In his place, the company’s chief operating officer, a non-family member, has assumed the role. The news of this change has caused New World’s shares to surge by 17% on Friday.
The sudden shift in leadership has left insiders of New World in shock. Though some colleagues had caught wind of possible changes, it is highly uncommon for established real estate families like the Chengs to hand over leadership to outsiders. Behind the scenes, Cheng’s 77-year-old father, Henry Cheng, has re-entered the picture and taken on a more hands-on role in managing the family’s expansive business empire, including New World, according to sources familiar with the situation. The family patriarch has also assigned various responsibilities to his daughter Sonia, 43, as well as his second and third sons, Brian, 41, and Christopher, 35, respectively.
The unfolding drama highlights the impact of Hong Kong’s weakening real estate market on its economy and even its wealthiest billionaires. As home prices began to plummet, with a 25% drop from their peak in 2021, the Cheng family grew increasingly worried about Adrian’s leadership of their business. They are determined to defy the ancient Chinese saying, “Wealth doesn’t pass three generations.”
During his time as CEO of New World, Adrian Cheng, known as the “it” boy of Hong Kong’s art scene and a Harvard graduate, struggled to prove himself in the business world as his grandfather and father had. His grandfather, Cheng Yu-Tung, who rose from a gold shop apprentice to become one of Hong Kong’s richest individuals, passed on the business to his eldest son Henry. However, Henry’s initial management of New World resulted in significant debt, much like his own eldest son’s actions would cause years later. Fortunately, Cheng Yu-Tung stepped in and helped turn things around. The father-son duo successfully rebuilt the business, making the Cheng family one of the wealthiest in Asia, with a net worth of $22.6 billion according to the Bloomberg Billionaires Index.
But New World has faced challenges since Adrian’s promotion to CEO in 2020, four years after his grandfather’s passing. During his tenure, New World has amassed more debt than any other major Hong Kong property developer, with net debt to equity exceeding 80% at the end of 2023, according to Bloomberg Intelligence. Additionally, the company recorded its first annual net loss in 20 years, equivalent to $2.5 billion.
According to Marlen Dieleman, professor of family business at IMD Business School in Singapore, the third-generation successors of prominent family empires often face immense pressure, especially during times of economic hardship. The high expectations from family members and the constant spotlight from the business community can be challenging to handle.
As New World’s fortunes declined along with the rest of Hong Kong’s property market, members of the Cheng family began to express concerns about Adrian’s focus on cultural ventures, including those at K11 Musea. In a TV interview last year, Henry Cheng mentioned that he was still searching for a successor, despite Adrian’s several years as CEO. Representatives for Chow Tai Fook Enterprises Ltd, the private investment entity of Henry Cheng’s family, as well as Adrian Cheng and New World, did not respond to requests for comment.