Adrian Cheng’s Exit and the Structural Risks in Hong Kong’s Family-Run Property Sector

The recent departure of Adrian Cheng from New World Development marks a pivotal moment in Hong Kong’s property sector. As the scion of one of the city’s most iconic family-controlled empires, Cheng’s exit—from both executive and board roles—underscores the fragility of a business model long reliant on dynastic continuity and aggressive debt-fueled expansion. His resignation follows New World’s first annual loss in two decades and a refinancing deal that, while temporarily stabilizing the firm, has done little to address deeper structural vulnerabilities. This case is emblematic of broader challenges facing Hong Kong’s family-run property firms, which now grapple with liquidity stress, governance flaws, and uncertain succession plans.

New World’s Financial Precipice

New World’s financial struggles are stark. By the end of 2024, its net debt had surged to 96% of shareholder equity, making it one of the most leveraged developers in Hong Kong [1]. The company’s share price had fallen over 90% from its 2019 peak, and its dollar bonds traded at distressed levels between 25 and 70 cents [2]. A HK$88.2 billion refinancing package, secured just before Cheng’s board exit, extended loan maturities until 2028 but did not resolve core issues. As Bloomberg notes, the deal “buys time” but leaves New World exposed to further market volatility [3].

The firm’s overreliance on the mainland Chinese property market—where it derived over half its contracted sales in 2024—compounded its risks. This exposure, combined with rigid governance structures, has left New World vulnerable to external shocks. The abrupt leadership transitions, including Cheng’s resignation as CEO in September 2024 and his successor’s brief tenure, highlight the instability inherent in family-controlled firms during crises [4].

Governance and Succession: A Systemic Weakness

The governance model at New World exemplifies systemic flaws in Hong Kong’s family-run property sector. The Nomination Committee, chaired by Henry Cheng, appointed his son Adrian as CEO, raising questions about independence [5]. Similarly, the Audit Committee, though composed of “independent” directors, includes members with deep ties to the Cheng family and multiple corporate roles, potentially diluting oversight [5]. This lack of board independence is not unique to New World. As the ACGA blog observes, family-controlled firms often prioritize dynastic interests over shareholder value, leading to poor strategic decisions and delayed responses to crises [5].

Succession planning further exacerbates these risks. Unlike firms like Henderson Land or Wharf Holdings, which have transitioned to third-generation leadership, New World and Sun Hung Kai Properties remain under second-generation control. At Sun Hung Kai, Raymond Kwok retains central authority, with his sons serving as executive directors but not yet assuming full leadership [6]. This rigidity contrasts with more agile models, such as Hang Lung Group’s early succession planning, which has allowed for smoother transitions and greater adaptability [6].

Liquidity Management: Divergent Strategies

The property downturn has forced family-run firms to adopt varied liquidity strategies. New World’s reliance on refinancing and asset sales—such as its K11 Art Mall and New World Hotel Makati—reflects a desperate bid to reduce debt [7]. However, these measures are short-term fixes. Henderson Land, by contrast, has maintained a robust balance sheet, with a debt-to-equity ratio of 0.45% and a $3.2 billion liquidity buffer [8]. Its diversified revenue streams, including stable cash flows from the Mandarin Oriental Hong Kong, provide a buffer against market volatility [8].

Sun Hung Kai Properties has pursued a disciplined debt reduction strategy, focusing on land spending control and capital expenditure management [9]. While this approach has preserved some resilience, the firm’s property development margins are under pressure, and its office and retail portfolios face weak performance [9]. These divergent strategies highlight the uneven capacity of family-controlled firms to navigate the current crisis.

Long-Term Viability: A Question of Adaptability

The long-term survival of Hong Kong’s family-run property firms hinges on their ability to adapt governance and succession models to modern market realities. For New World, the challenge is twofold: restructuring its debt and rethinking leadership. The Cheng family’s potential capital injection could stabilize the firm, but success will depend on asset sales and strategic partnerships [10]. For broader structural reform, firms must embrace independent oversight, professional management, and transparent succession planning—practices rare in Hong Kong’s family-centric corporate culture [5].

The government’s push to position Hong Kong as a global family office hub offers some hope. Initiatives like the Capital Investment Entrant Scheme and tax incentives aim to attract ultra-high-net-worth individuals, potentially providing new capital and expertise [11]. However, these measures cannot substitute for internal governance reforms. As the property sector consolidates, firms that fail to adapt may face defaults, forced asset sales, or even collapse.

Conclusion

Adrian Cheng’s exit is a cautionary tale for Hong Kong’s family-run property sector. New World’s struggles reflect systemic vulnerabilities—excessive debt, governance flaws, and succession uncertainty—that threaten the long-term viability of these firms. While refinancing and asset sales offer temporary relief, structural reforms are essential. The contrast with firms like Henderson Land underscores the importance of liquidity management and diversified revenue streams. For the sector to endure, family-controlled firms must embrace modern governance practices and prioritize resilience over tradition.

Source:
[1] New World Development Scion Adrian Cheng Resigns [https://www.bloomberg.com/news/articles/2025-06-30/new-world-development-scion-adrian-cheng-resigns-from-board]
[2] Hong Kong Property Woes Persist Despite Banks' Vote of Confidence [https://www.bloomberg.com/news/newsletters/2025-07-01/hong-kong-property-woes-persist-despite-banks-vote-of-confidence]
[3] Why Property Giant New World Isn't Out Of the Woods [https://www.bloomberg.com/news/articles/2025-06-30/how-new-world-s-11-billion-deal-buys-time-for-hong-kong-s-property-market]
[4] New World Development's Debt Crisis: A Canary in the Coalmine [https://www.ainvest.com/news/world-development-debt-crisis-canary-coalmine-hong-kong-family-dynasties-2506/]
[5] Old Style Governance, New World Debacle [https://www.acga-asia.org/blog-detail.php?id=100]
[6] The "Succession Battle" in Hong Kong's Real Estate Industry [https://www.linkedin.com/pulse/succession-battle-hong-kongs-real-estate-industry-can-rosa-chow-dzlsc]
[7] New World Wins $11B Refinancing Deal as Adrian Cheng Exits [https://www.mingtiandi.com/real-estate/finance/new-world-wins-11b-refinancing-deal-as-adrian-cheng-exits/]
[8] Hong Kong's Property Crisis: Why Contrarian Investors Are Pouncing on Henderson Land [https://www.ainvest.com/news/hong-kong-property-crisis-contrarian-investors-pouncing-henderson-land-hongkong-land-2506/]
[9] Sun Hung Kai Properties Debt Reduction Strategy Key to Resilience [https://www.itiger.com/news/2516815966]
[10] New World's Cheng Family Weighs Capital Injection [https://www.scmp.com/business/banking-finance/article/3323918/new-world-cheng-family-weighs-capital-injection-hong-kong-developer-sources-say]
[11] Hong Kong's Initiatives for External Investments and Family Offices [https://www.taylorwessing.com/en/insights-and-events/insights/2025/02/pw-hong-kongs-initiatives-for-external-investments-and-family-offices]