Adrian Cheng Calls Bottom of China Meltdown, Says New World Will Buy $1.5B in New Sites

New World Development’s Adrian Cheng has called the bottom of the real estate market in China, telling the Financial Times that the Hong Kong-based property giant plans to spend RMB 10 billion ($1.5 billion) to buy land in top-tier mainland cities like Shanghai, Guangzhou, Hangzhou and Shenzhen over the next 12 months.

“Now is the bottom, and it’s going to slowly recover,” Cheng said in an FT interview published Sunday. “See, I’m very optimistic that in the next one or two years, it will be recovering very, very well. It’s a good opportunity to start acquiring our war chest, in land and assets.”

Before he starts identifying those targets, however, the New World CEO and grandson of company founder Cheng Yu-tung is revealing bullish bets in the more intangible sphere of non-fungible tokens. Last week, the 42-year-old tycoon unmasked himself as the buyer of 101 Azukis, a set of anime-inspired avatars whose procurement has become a point of intrigue in the NFT community.

“After acquiring 101 Azukis in secret and making moves behind the scenes, we’re ecstatic to reveal that @LastKnightEth is @AdrianCheng, an early web3 advocate and pioneer of culture and the arts,” Cheng’s alter ego tweeted on Thursday. The value of the deal was not disclosed.

Faith in the Mainland

Back in the realm of land and buildings, New World has shown a continued willingness to make big investments in mainland China during the COVID-19 era and the country’s real estate crisis.

Last August, the company announced the start of work on its second K11 commercial project in Shanghai, breaking ground on a 17,171 square metre (184,827 square foot) site in the heart of the Middle Huaihai Road shopping district.

In an uncontested land auction in 2020, the top-10 Hong Kong developer purchased the site bordering Huaihai Park for RMB 4.1 billion (then $590 million), adding to the company portfolio another project in Shanghai’s Huaihai Zhong Lu after its launch of the K11 Art Mall in 2013.

Down the coast in Guangzhou, New World acquired the rights last year for a $732 million urban renewal project with a gross floor area of 650,000 square metres. More recently, the developer’s infrastructure unit agreed to buy six mainland logistics properties from Australia’s Goodman Group for $337 million in a deal announced in May.

Contrarian Forecast

Cheng told the FT that China’s property crisis had become an opportunity for New World because many local developers were financially strained, removing much of the Hong Kong group’s competition.

Even so, Cheng’s buoyant outlook on the market struck a discordant note with economists polled by Bloomberg, as they cut their forecast for China’s GDP growth to 3.5 percent this year, down from a previous view of 3.9 percent, and lowered their calculation by 0.1-0.4 percentage points for the first three quarters of 2023.

David Llewellyn-Smith, chief strategist at Australian asset management firm Nucleus Wealth, told Britain’s Guardian newspaper that falling external demand was the “next shoe to drop” for China and that a recession in the country was “in the frame” for 2023.

“The private sector is being hammered by Omicron, the external sector hammered by global weakness, and public sector doing what it can to pick up the slack but it faces various inhibitions on fiscal policy,” Llewellyn-Smith said. “It’s a very toxic combo for China. Very difficult to manage.”

Token Proposition

Cheng’s interest in the Azuki NFTs by mysterious creator Zagabond demonstrates the Hong Kong princeling’s penchant for unconventional investment plays.

In March, Cheng announced plans to launch a Hong Kong-listed special-purpose acquisition company (SPAC) after his NASDAQ-quoted Artisan Acquisition Corp reached an agreement last year to merge with health diagnostics firm Prenetics.

An application proof for the new blank-cheque company, A SPAC (HK) Acquisition Corp, was released, but no listing has taken place yet.