New World Group Collapse: Has the Real Estate Faith in Hong Kong Been Completely Destroyed?

Hong Kong, one of the top five cities in the world with the most expensive real estate prices, is witnessing the most representative real estate dynasty "New World Development Group" falling into an unprecedented crisis. From its glorious days to being trapped in a quagmire of debt, the group has recently completed a refinancing of 88.2 billion. However, the corporate crisis still exists. New World is facing not just the plight of a single enterprise, but it may also symbolize the complete collapse of the general "real estate faith" held by Hong Kong people. The following is a comprehensive summary report.

From aggressive expansion to continuous losses, New World capsized under the hands of the third-generation leader.

In the past decade, under the leadership of the third generation head Zheng Zhigang, New World has undergone a major transformation. He has introduced art and cultural creativity into commercial real estate development projects, founded the K11 brand, and invested in virtual assets such as Azuki NFT, metaverse games, retail department stores, insurance, healthcare, and even fragrance development. He has ventured into various businesses, and his luxurious vision once garnered market favor, driving up New World's stock prices. However, good times did not last long. Since the Hong Kong protests against the national security law began in 2019, coupled with the pandemic lockdowns and the slowdown of the mainland economy, New World's operating environment has sharply deteriorated. The high-leverage debt strategy quickly turned into corporate risk. By the end of 2024, New World's debt-to-equity ratio reached 95%, far exceeding its peers. ( Source: Bloomberg )

In the fiscal year 2024, New World Financial Report shows the largest loss in history, with a loss of nearly 20 billion Hong Kong dollars (source: Ta Kung Pao). This marks the first annual loss for the group since its establishment in 1970, symbolizing the official decline of the real estate dynasty.

New World is selling assets and starting refinancing to save itself.

To save itself, the new world has initiated multiple rounds of deleveraging plans. In terms of asset sales, the company has successively sold the Joy City Mall, 75% equity in Kai Tak Sports Park, and several industrial building projects, realizing over HKD 7.7 billion in total, which has injected some cash flow into the group.

In terms of refinancing, at the beginning of 2025, New World successfully refinanced approximately HKD 17.8 billion in loans, temporarily stabilizing short-term debt repayment pressure. ( Source: Ming Pao and Ta Kung Pao); the group recently completed another HKD 88.2 billion refinancing ( Source: Hong Kong Economic Journal), however, analysts point out that if the property market continues to be sluggish, the difficulty of asset sales will further increase, and the speed and amount of realization may not meet expectations.

Corporate Inheritance Crisis

In addition to the financial crisis, the New World also faces the dilemma of not being able to find a successor. Zheng Zhigang, who was originally regarded as the third-generation successor, will step down as CEO in 2024, with his father Zheng Jiachun regaining power. This move breaks the expectations of a smooth family succession from the outside and also reflects internal differences over Zheng Zhigang's expansion strategy.

At the same time, her younger sister Zheng Zhiwen is in charge of the family's jewelry and hotel business, including the New York Carlyle Hotel and the Paris Crillon Hotel, and is viewed by outsiders as a potential successor. In a situation where the company is still under debt pressure and operational risks, it is still uncertain who will ultimately take over New World.

The Collapse of Real Estate Beliefs? Warnings from Hong Kong's Real Estate Industry

The crisis of the new world may just be the tip of the iceberg. Over the past few decades, Hong Kong's economy has been highly dependent on real estate, forming a strong market structure dominated by wealthy families. Real estate developers have created immense wealth through land reserves and policy relationships, further strengthening industrial concentration. However, the current reality is that population growth has stagnated, a wave of immigrants from mainland China has emerged, capital outflows are occurring, and interest rates are high, making real estate no longer the myth of guaranteed profit.

According to UBS's 2024 report, nearly 50% of family businesses in Asia will undergo generational transitions within five years, involving over $1 trillion in assets. The predicament of New World has become a typical example, prompting other wealthy families in Asia to reflect on how to preserve their family fortune while allowing successors to lead the family business.

Does the new world open the prologue to the twilight of Hong Kong real estate?

The crisis of the new world is not only a warning for businesses but may also be a wake-up call for the imminent collapse of Hong Kong's real estate market. The traditional Chinese economic thinking that land ownership equates to private wealth is being tested, and the inheritance model of traditional Chinese family businesses is also entering a period of transformation.

This article The Collapse of New World Group: Has Hong Kong's Real Estate Faith Been Completely Destroyed? first appeared in Chain News ABMedia.