Embattled property developer New World has reached a $430mn agreement with Hong Kong’s airport authority to extricate itself almost four decades early from a megamall project. The company will pay a HK$2.3bn early termination fee to the government authority in a deal that involves handing over the 11 Skies project, including three office towers and an entertainment complex, according to statements from both parties. New World Development is controlled by the Cheng family, one of Hong Kong’s biggest business owners, whose empire includes the Rosewood Hotel Group, Victoria Dockside and jeweller Chow Tai Fook.
The announcement came after New World reported a record HK$28.1bn ($3.6bn) loss attributable to shareholders, mostly from impairments related to 11 Skies. Its total borrowings came to HK$149bn while its net debt-to-equity ratio rose 10 percentage points to 68 per cent. 11 Skies was billed as Hong Kong’s answer to Singapore’s success in turning Changi Airport into a retail destination. The 3.8mn sq ft complex next to Hong Kong airport’s Terminal 2, which includes a mall and offices, was meant to attract locals as well as travellers.
However, the shopping centre has been hampered by a delay in completing the new terminal and a fall in Chinese tourism to Hong Kong as consumers in the mainland cut back on spending in recent years. Adrian Cheng, a grandson of New World’s founder Cheng Yu-tung, stepped down as chief executive in September 2024 on the same day the company reported its first annual loss in two decades of nearly HK$20bn. The annual rent on 11 Skies was HK$1.8bn until 2066, according to Citi analysts.
They said the results heralded “positive breakthroughs” including an additional bank credit line on New World’s Victoria Dockside project and its average interest cost falling to 4 per cent. In a sign of support, the Cheng family holding company, Chow Tai Fook Enterprises, said in a stock exchange filing on Wednesday that it was prepared to continue backing New World in its refinancing and operating activities. “We are fully confident in the prospect of the project. It will not be another traditional shopping complex,” said Hong Kong’s airport authority chair Fred Lam. “The scale of the project is well suited for large-scale entertainment facilities and experience-driven offerings that would not be possible in other indoor venues in Hong Kong.” New World Development shares have fallen 18 per cent this year and are down 81 per cent over the past five years.
The Hong Kong market was closed on Thursday for a public holiday.
Source: Financial Times Companies · Summarized by HeadlinesBriefing