Hong Kong’s New World Development denies withdrawing from China
New World Development has reiterated its recent asset disposals in inland cities do not mean it is withdrawing from China, saying its controlling shareholder Chow Tai Fook Enterprises has in fact committed about 50 billion yuan to three commercial projects on the mainland.
“We have absolutely no plans to withdraw from China. The sale of projects in tier three and four cities was aimed at optimising our investment,” said New World Development chairman Henry Cheng Kar-shun as he and his son and executive vice-chairman Adrian Cheng Chi-kong reaffirmed their confidence in China’s market on Monday.
“We have invested in China for more than 30 years, being one of the earliest Hong Kong firms to enter the market,” he said.
New World China Land last month sold three projects – one each in Hubei, Guangdong and Hainan provinces – to Evergrande Real Estate for HK$16.36 billion. This month New World Development and controlling shareholder Chow Tai Fook Enterprises announced the sale of five more projects in mainland China to Evergrande for HK$24.4 billion.
The average selling price in tier three to four cities is 7,000 yuan to 10,000 yuan per square metre, lower than in tier one cities, Cheng said.
For Hong Kong companies, Cheng said, development cost in inland cities could be higher than it is for local players. “Profit margins will be squeezed significantly once home prices fall 10 per cent,” he said. “By cashing out of these projects, we will increase our investment in tier 1 and tier 1.5 cities, which provide higher profitability.”
The mainland’s tier one cities are Shenzhen, Guangzhou, Shanghai and Beijing . According to Cheng, the “tier 1.5” cities are Wuhan, Hangzhou and Ningbo.
He said Chow Tai Fook Enterprises, privately owned by the Cheng family, is building three 500 metre commercial towers, one each in Guangzhou, Wuhan and Tianjin.
He also said the group has strong confidence in China given its continuing open-door policy, rich resources and the enormous market.
But David Hong, head of research at China Real Estate Information’s Hong Kong office, said: “It is not easy for Hong Kong developers to just focus on first tier cities. Land costs are very high, eating up a large part of the profit margin.”
Cheng said the yuan’s depreciation against the US dollar has had limited impact on the group.
“Long-term investors like us are indifferent to short-term volatility in business environment,” he said.
Both New World Development and Chow Tai Fook Enterprises would continue investing in big projects in China, he said.
The group would also consider acquiring land in Hong Kong for the development of elderly homes with medical care through Chow Tai Fook’s charity fund to cater for low-income groups, he said, without elaborating.
Adrian Cheng said the group would launch a new concept of integrating the “theme park” concept into its Discovery Park Shopping Mall in Tsuen Wan as early as March.
Asked about the succession plan for the Cheng family’s third generation, including Adrian Cheng, the senior Cheng said: “I’m not that old and I have no plans to retire at the moment.”
Separately, property tycoon Lee Shau-kee is de-registering Shau Kee Financial Holdings, a subsidiary of his private investment firm Shau Kee Financial Enterprise that has an investment portfolio of HK$200 billion. The news sparked speculation that Lee may be preparing a succession plan of his own.
A spokesman for Lee said Shau Kee Financial was originally set up to provide lending and investment business in Hong Kong. “But it remains dormant and therefore it was decided to apply for deregistration in Hong Kong.”