New World Scion%E2%80%99S Fall Upends Succession 23 Billion Dynasty
K11 Musea, a luxurious galleria dubbed the “Silicon Valley of Culture”, has become a symbol of opulence even in comparison to the extravagant standards of Hong Kong. The mastermind behind its creation is Adrian Cheng, a member of one of the city’s wealthiest families, who poured 10 years and $2.6 billion into bringing his vision to life on the prime harbor-front property that was passed down to him from his grandfather.
However, Cheng’s dream has come crashing down after only half a decade. The 44-year-old, who was once considered the third-generation leader of New World Development Co, the flagship company of his family’s business empire, has suddenly stepped aside. This has shocked the upper-crust of Hong Kong, as the city’s real estate dynasties are known for rarely handing over the reins to outsiders.
The news of Cheng’s departure has left New World insiders in a state of disbelief. While some had heard rumors of changes within the company, it is highly unusual for a member of one of Hong Kong’s wealthiest and most influential families to relinquish control to a non-family member. Behind the scenes, Cheng’s 77-year-old father, Henry Cheng, has taken on a more active role in the family’s sprawling business empire, including New World.
But the Cheng family’s concerns go beyond just the recent performance of their business. As the Hong Kong real estate market began to soften, with home prices falling by 25% since their peak in 2021, they started to worry about Adrian’s leadership skills. The family is determined to prove wrong the ancient Chinese proverb that “wealth does not pass three generations.”
Adrian Cheng, a Harvard-educated art enthusiast, has had a challenging time in proving his business acumen, unlike his grandfather and father, who were both successful in building the family’s wealth. The family patriarch, Cheng Yu-Tung, who started out as a gold shop apprentice, went on to become one of the richest people in Hong Kong. He passed on the reins of his business to his eldest son Henry, who initially struggled and accumulated a huge debt, much like his own eldest son would do decades later. However, Cheng Yu-Tung stepped in and, together with his son, managed to turn things around. Today, the Cheng family is worth $22.6 billion, making them one of the wealthiest families in Asia, according to the Bloomberg Billionaires Index.
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However, under Adrian Cheng’s leadership, New World has faced significant challenges, with the company’s net debt to equity ratio crossing 80%, making it the most indebted major property developer in Hong Kong, according to Bloomberg Intelligence. In 2020, the company also reported its first annual net loss in 20 years, amounting to $2.5 billion.
The pressure on third-generation successors of large family empires is immense, according to Marlen Dieleman, a professor of family business at IMD Business School in Singapore. They face high expectations from family members, economic headwinds, and a significant level of visibility in the business community.
As New World’s fortunes declined, the Cheng family became increasingly concerned about Adrian’s focus on cultural pursuits, including K11 Musea. In an interview last year, Henry Cheng mentioned that he was still looking for a successor, despite Adrian being the CEO for several years.
When contacted, representatives for Chow Tai Fook Enterprises Ltd, the private investment vehicle of Henry Cheng’s family, as well as for Adrian Cheng and New World, did not respond to requests for comment.