For years, Adrian Cheng had all the trappings of a third-generation scion preparing to lead one of Hong Kong’s wealthiest clans into a new era. He infused his property projects with art, burnished Tsim Sha Tsui’s waterfront as a cultural district and invested in digital tokens.
“I’m still observing, but I think it’s not so easy to identify such a person,” the elder Cheng said in a television interview, adding that the family has a wide range of operations and that qualified members "can be in charge of each business sector. If there’s no family member suitable, we can hire from the outside.”
The revelation from Hong Kong’s third-richest man raised eyebrows in a city all too familiar with succession battles that often erupt into public view and occasionally wind up in court. Former casino baron Stanley Ho and property tycoon Lo Ying Shek are just two examples.
Henry’s comments could mean that he hopes to have each family member lead a particular segment but not necessarily pick one leader for the entire businesses, said Winnie Peng, director of the Roger King Center for Asian Family Business and Family Office at Hong Kong University of Science and Technology. It’s often a process of evolving from a family business into a business family, she said.
“When families are planning for succession, there could be potential sibling rivalry,” Peng said. “This is something that they have to be really careful about.” But if the family members are harmonious and share the same values, then this problem can be avoided, she said.
Adding to the intrigue, Henry’s close associates didn’t share details of the interview on the family-backed HOY TV with his children before it aired, said people familiar with the matter who requested not to be identified because the matter is private. Adrian was aware of the interview and its contents before it was broadcast, a spokesperson said, without providing further details.
It had been widely expected that Adrian, a 44-year-old graduate of Harvard University, would take over leadership of the family empire from his father.
Adrian is currently CEO of New World Development Co., the family’s flagship property business. Sonia Cheng, Henry’s 43-year-old daughter, manages the Rosewood hotel and Chow Tai Fook Jewellery Group Ltd. And Henry, 76, controls Chow Tai Fook Enterprises Ltd., the Chengs’ unlisted family investment vehicle, with other relatives. Chow Tai Fook Enterprises holds major stakes in the clan’s main businesses, controlling New World and the Rosewood.
As recently as 2020, Adrian’s representatives were distributing a bio that described him as “the heir to New World Development and Chow Tai Fook Enterprises and the third-generation leader of the $20.7 billion empire.” Around the same period, Sonia identified herself as CEO of Rosewood.
When asked about her father’s remarks during an earnings briefing, Sonia — also a Harvard grad — said her role at the jeweler provides a clear division of work within the company, and all family members work together for the benefit of the firm. Conroy Cheng, Sonia’s cousin and vice chairman of the jeweler, said “there’s no such thing” when asked about the possibility of family infighting. New World declined to comment. Chow Tai Fook Enterprises didn’t respond to a request for comment.
The patriarch’s words matter in a succession process that may soon get underway, especially in a society that traditionally favors the eldest son.
Henry took over the business from his father, Cheng Yu-tung, who built the conglomerate spanning shopping malls, casinos, hotels and jewelry stores across Hong Kong and mainland China. The group’s holdings are among the signature properties in Hong Kong, from the New World Tower to the Victoria Dockside complex.
The sprawling empire has generated a fortune for Henry, whose net worth is almost $21 billion, according to the Bloomberg Billionaires Index.
Under Adrian, New World has expanded aggressively in China and is working on two of the biggest retail developments in Hong Kong, including a $2.6 billion mall-office complex next to the airport.
The strategy has come at a cost for New World, driving its debt load higher just as interest rates are soaring. The company’s net debt to equity was 94% at the end of June, according to Bloomberg Intelligence. That compares with 42% at rival Henderson Land Development Co. and Sun Hung Kai Properties Ltd.’s 18%.
“New World’s leverage is particularly high, so there are more concerns for the company,” said Patrick Wong, an analyst at Bloomberg Intelligence. “When the market sentiment is not good,” companies like New World are especially vulnerable, he said.
New World’s stock has tumbled 47% this year to a 20-year low, compared with a 14% drop in the benchmark Hang Seng Index. The developer’s $1.3 billion perpetual bonds, sold in 2019, traded at just 51 cents on the dollar.
That’s even after the Cheng family investment vehicle stepped in to alleviate the builder’s debt burden. Chow Tai Fook Enterprises Ltd. recently bought the majority shares of NWS Holdings Ltd., a subsidiary, generating $2.8 billion for New World.
China’s property meltdown represents another headwind for New World — and for Adrian. Its contracted sales from homes in the mainland accounted for almost two-thirds of total sales in the 12 months through June. By contrast, billionaire Li Ka-shing’s CK Asset Holdings Ltd. has trimmed its revenue from mainland China to just 11%.
“Weathering the challenging macro business environment is very important for both New World and Adrian Cheng,” said Vincent Lam, chief investment officer at Hong Kong-based VL Asset Management. “If he can resolve the difficulties, it will solidify his position and future as a business leader.”