Wealth In Asia 2011

Still in Control, Hong Kong Property Tycoons Face a Younger Generation

Alex Frew McMillan|CNBC Contributor

Hong Kong’s property tycoons are the wealthiest men in the city. Many of them are well into their 80s: Li Ka-shing of Cheung Kong, Lee Shau-kee of Henderson Land, and Cheng Yu-tung of New World Development. But all of them are still involved in running the businesses they helped found.

Raymond and Thomas Kwok of Sun Hung Kai Properties
ChinaFotopress| Getty Images

Wealth experts say Hong Kong is unusual, in that its many self-made billionaires often struggle to turn over the reins of their companies to their heirs. For investors, who like a clear succession plan, the uncertainty is an added risk.

“Once in a while I see an enlightened Joe who opens up the conversation about planning and continuity. But it is rare,” Thelma Kwan, the head of wealth advisory for Asia Pacific at Barclays Wealth, says. “The inability to let go is always there. The reluctance to talk about mortality is always there.”

But increasingly, a younger generation of scions, educated abroad, are getting involved and shaking things up. Take, for example, 32-year-old Adrian Cheng Chi-kong. He’s set to inherit part of the empire carved out by his grandfather, Cheng Yu-tung, whose holdings are worth an estimated $9 billion, according to Forbes magazine. They include the privately held Chow Tai Fook jewelry chain and the Hong Kong-listed New World group, active in property and infrastructure.

After graduating from Harvard and then spending time at Goldman Sachs and Credit Suisse, the younger Cheng turned his attention to the family business, particularly to the company’s retail holdings.

Cheng, who reportedly called the traditional retailing business “boring,” introduced the concept of “art malls” with the opening of the K11 shopping center in Hong Kong in December 2009. The art malls display works from well-known local artists in each city, and put on exhibitions of emerging talents.

He has also been rebranding some of the company’s New World department stores in China with more of a focus on design and fashion, which he believes will boom as the Chinese begin to travel and bring back influences from overseas.

Cheng is one of the most hands-on among the descendants of Hong Kong’s aging generation of tycoons. “Adrian is involved directly,” says one analyst. “He is one of the more visible third generation who is quite heavily involved in the business.”

Property analysts interviewed for this story requested anonymity because succession is a sensitive issue in Hong Kong.

Adrian Cheng’s sister, Sonia Cheng Chi-man, another Harvard graduate, is also taking a prominent role. She became CEO of New World Hospitality at the start of 2011, the company’s hotel management arm, at age 29, having joined the company three years ago. She’s already overseeing aggressive expansion.

“Since she has taken over they’ve been acquisitive,” one analyst says, who adds that she bought the 20-property Rosewood Hotels & Resorts in the United States for $229.5 million.

When it comes to public companies, the transition from one generation to another becomes easier, as there is more room in a big corporation for inheritors to find their own way. “Big-name tycoons will have businesses where the children are bound either morally or out of filial piety to be part of it because their father has built an empire,” Kwan says.

At Hong Kong-listed property company Sino Land , for example, 33-year-old Daryl Ng Win-kong started as a project manager in the company and is now executive director. The eldest son of patriarch Robert Ng Chee-siong, Daryl is a Columbia graduate, and has been interacting with investors, says an analyst.

His eldest sister Nikki Ng Mien-hua, who studied at Yale, has also joined the company as a general manager. While the children are getting involved in the company they are likely to inherit, the analyst noted that “most of the major decisions are still being taken by the old man,” with the elder Ng only 59, having himself succeeded the founder of the empire, Ng Teng Fong, who died early last year.

Once in a while I see an enlightened Joe who opens up the conversation about planning and continuity. But it is rare.
Head, Wealth Advisory Asia Pacific, Barclays Wealth
Thelma Kwan

Though Hong Kong’s scions are often given posts at the companies their father or grandfather started, it’s not always clear if they’re really active in the business. “When you go around and ask, you get told one thing — that they’re very involved,” one property analyst says. “When you ask what have they done, it’s difficult to determine.”

The Most Well-Planned Handover?

Ironically, the most commonly cited example of a well-planned succession is taking shape at Cheung Kong within an older generation. Li Ka-shing, Asia’s richest man, has anointed elder son Victor Li Tzar-kuoi, 47, as successor to an empire estimated at $26 billion by Forbes.

After dabbling in private equity with Trinity Time Investments, which attempted an unsuccessful takeover of Air Canada in the middle of the last decade, he’s now concentrating  on the property development business.

“On a day-to-day basis he is certainly running Cheung Kong,” one analyst says, “though I’m not sure whether the big strategic acquisition decisions still don’t lie at the chairman level.”

So far, the son has pursued the same strategy as his father, emphasizing high-volume sales instead of waiting to sell only once prices are high, as some other Hong Kong developers do.

But successions from founders to the next generation haven’t gone that well at other companies. At Hong Kong's largest developer, Sun Hung Kai Properties , the three controlling brothers have made headlines with their own power struggle. Younger brothers Thomas and Raymond were said to have edged out Walter Kwok, who left the company in 2010. But the brothers are just now turning 60, and the role of the younger generation still in their 20s is unclear. Market watchers say there is no sign yet whether they will get involved in the business.

“To be honest, as outside analysts or bankers, what we see is actually quite superficial,” one analyst says. “Offspring of tycoons are on the company books and are rolled out at press conferences. But the real sign that they are deemed ready to succeed is normally when they start meeting investors.”