New World Selling Sports Complex Stake to Cheng Family for $53M as CEO Exits

Hong Kong’s New World Development has agreed to sell its entire interest in a sports complex at the former Kai Tak Airport site to Chow Tai Fook Enterprises, the private holding firm of New World’s controlling Cheng family, for HK$416.7 million ($53.5 million).

CTFE will buy out New World’s 75 percent stake in the operating company of Kai Tak Sports Park and assume responsibility for a HK$679.9 million loan payable to the HKEX-listed builder, according to a Thursday stock filing. The remaining 25 percent is owned by NWS Holdings, the infrastructure and construction arm privatised last year by the Cheng clan.

The disposal of the 28 hectare (69 acre) Kai Tak Sports Park, which broke ground in April 2019 and is nearing completion, comes two months after New World posted its first full-year loss in two decades and announced the resignation of third-generation scion Adrian Cheng as chief executive.

“Given that Kai Tak Sports Park is expected to commence operation in January 2025, it is estimated that additional external financing may be needed to support the initial operations of Kai Tak Sports Park, which is not in line with the current deleverage policy of the group,” New World said.

The New World saga took a further twist late Friday as the group announced the resignation of Cheng’s successor as CEO, Eric Ma, with immediate effect. Ma, who had served in the role since 26 September, also stepped down from the New World board “in order to pursue his other personal commitments”.

After joining New World in 2018, Ma had served as COO from 2022 until taking on the chief executive role. He is succeeded by Echo Huang, the boss of mainland unit New World China Land, as she takes the CEO job and a board seat as executive director.

Deleveraging Drive

New World reported a loss of HK$17.1 billion ($2.2 billion) for the fiscal year to the end of June, with the group attributing the shortfall to lack of revenue recognition on completed projects, losses from revaluations and impairments, and a one-time loss on the sale of its majority stake in NWS Holdings, as well as to higher interest rates and renminbi depreciation.

The divestment of the sports complex and its associated loan is part of New World’s multi-year leverage reduction effort, with the developer having committed to slashing its net gearing ratio to the “mid to high” 30 percent range by June 2027. The group saw its net gearing increase to 55 percent as of 30 June from 49.9 percent at the end of 2023, making it the most leveraged among major Hong Kong-listed builders.

The agreed consideration for the 75 percent stake in Kai Tak Sports Park represents a 4.4 percent premium to the appraised value of HK$399 million as of June, New World said. The loan amount of HK$679.9 million is higher than the consideration because of accumulated attributable losses on the investment of HK$263.3 million, according to the group.

New World expects the transaction to close “as soon as practicable”, after which the group will cease to own any direct or indirect interest in Kai Tak Sports Park.

Fields of Dreams

In December 2018, New World and NWS won the 25-year contract to design, construct and operate the sports complex, which features a 50,000-seat main stadium with retractable roof, an indoor sports centre with 10,000 seats and a public sports ground with 5,000 seats.

The HK$30 billion project had been expected to conclude by June 2023, but the COVID-19 pandemic and related materials shortages caused delays.

New World has offloaded HK$68 billion in assets in the last four fiscal years and is targeting HK$13 billion in additional disposals in the current fiscal year.

Completed divestments include a 30 percent stake in a Shenzhen office tower, the D-Park Mall in Tsuen Wan, the 695-key Pentahotel in Kowloon and a 51 percent stake in a Cheung Sha Wan office project. The company is also said to be in talks to sell its K11 Art Mall in Tsim Sha Tsui to China Resources.