Market rumors suggest Blackstone is eyeing control; is New World Development leaning left or right?

Ask AI · Why is the Zheng family willing to spend heavily to maintain control over New World Development?

As the core asset of Hong Kong’s “Big Four” real estate families, New World Development (00017.HK) stands at a crossroads of destiny.

Once pursuing an aggressive expansion strategy, it not only gained reputation for New World Development but also laid the groundwork for a heavy blow during the industry downturn. From approaching default in 2025 to the contest with Blackstone Group, this veteran Hong Kong enterprise is experiencing unprecedented tests in the capital market wave. Under the pressure of hundreds of billions in debt, it still attempts to hold onto control.

Meanwhile, with the rebound of Hong Kong’s property market, the Zheng family seems to see more possibilities.

The Tug-of-War Between the Zheng Family and Blackstone

The possibility of cooperation between global private equity giant Blackstone Group and the Zheng family was rumored as early as August 2025. At that time, New World Development was in the eye of the storm, first “killing both stock and bonds” due to delaying interest payments on four perpetual bonds, then securing massive refinancing, and rumors of selling part of the Shanghai K11 properties.

Amid waves of public opinion, market reports indicated that New World Development might be privatized, with the Zheng family and Blackstone Group as the main drivers. Industry insiders believed this could help New World escape its debt predicament. The capital market responded positively, with the stock price and some dollar bond prices rising in tandem.

This market rumor was soon clarified by New World Development. On August 7, 2025, the listed company announced, “The company hereby clarifies that no person (including the controlling shareholder and Blackstone Group) has approached the company with an offer to acquire its shares.”

But this was not the end of the potential cooperation. In January, there were reports that Blackstone was negotiating with the Zheng family, possibly becoming the largest single shareholder of New World Development.

On January 29 and 30, New World Development issued two announcements confirming that its controlling shareholder Chow Tai Fook Enterprises was in talks with multiple potential investors, discussing possible investments, but emphasizing that no agreement had been reached and that the potential investors had no intention of making a full takeover offer.

The existence of negotiations fueled market expectations, pushing New World Development’s stock and bonds higher, with the stock reaching over HKD 11, a new high since late 2023.

However, this exciting capital cooperation also faced uncertainties. Reports said that in March, Blackstone planned to inject about USD 2.5 billion into a company to become New World’s largest single shareholder; at the same time, the Zheng family would only need to invest USD 1-1.5 billion, but this would mean losing control of New World Development. The negotiations stalled as they touched the Zheng family’s bottom line of control.

In the tug-of-war, the Zheng family’s attitude gradually shifted, seeking independent financing options, considering injecting about HKD 31.2 billion into New World via rights issue or share offering. If choosing a rights issue, the Zheng family’s approximately 45% stake would require an investment of over HKD 14 billion to avoid dilution.

The Zheng family’s confidence stems from their judgment of Hong Kong’s property market recovery. According to the Hong Kong Government’s Rating and Valuation Department, private residential property prices in Hong Kong rose 3.3% in 2025. Since 2026, institutions like Citibank, Goldman Sachs, and HSBC have raised their forecasts for Hong Kong property price increases, with JPMorgan revising its 2023 forecast from 5-7% up to 10-15%, expecting further rise of about 5% in 2027.

After three years of downturn, Hong Kong’s real estate recovery path is becoming clearer. For the Zheng family, as the market warms, the urgency to bring in strategic investors greatly diminishes, providing more time and space to choose solutions that better serve their interests. This capital tug-of-war may continue.

Regarding negotiations or injections with Blackstone, reporters approached New World for confirmation, but no response was given.

The Rise and Fall of a Real Estate Empire

The Zheng family’s persistence in controlling New World Development is perhaps rooted in it being a core asset within their family portfolio, and also because it is a real estate empire built by the family’s wealth creator, Zheng Yu-tong.

Born in Shunde, Guangdong, in 1925, Zheng Yu-tong went to Macau in the 1940s to apprentice at Chow Tai Fook Jewelry & Gold. Relying on his business talent and diligence, he established himself at Chow Tai Fook, married the daughter of the owner Chow Chi-yuen, and became the core heir. In 1956, he took over Chow Tai Fook.

In the 1970s, seizing Hong Kong’s real estate development opportunities, the “Jewelry King” expanded into real estate, founding New World Development in 1970, and listing it on the stock market two years later. Under Zheng Yu-tong’s leadership, New World Development rapidly rose, building iconic landmarks like the Hong Kong Convention and Exhibition Centre, becoming one of Hong Kong’s “Big Four” real estate families, with a footprint across Hong Kong and Mainland China.

After retiring in 1989 and returning in 1991, Zheng Yu-tong led New World for about 20 more years. Until February 2012, shortly after pushing Chow Tai Fook’s listing, the 87-year-old Zheng Yu-tong retired again, handing over leadership to Zheng Jia-chun.

During this period, Zheng Yu-tong also cultivated the third generation. His beloved eldest grandson Zheng Zhigang was a key focus. A Harvard graduate, he gained experience at Goldman Sachs and UBS, returned to the family business in 2006, helped list New World Department Store in 2007, and expanded the K11 commercial brand…

Zheng Zhigang was seen as the clear successor of the third generation. In 2012, at age 33, he served as co-managing director of New World Development alongside his father Zheng Jia-chun.

In early 2017, after Zheng Jia-chun’s health issues, Zheng Zhigang took on the role of general manager, becoming the de facto leader, and began to expand aggressively: winning large projects like Kai Tak Sports Park and Airport 11 SKIES in Hong Kong, with investments reaching hundreds of billions HKD; acquiring land in Mainland China with over HKD 1B, engaging in numerous redevelopment projects, and accelerating the opening of K11 malls. By 2021, amid the property market turmoil, Zheng Zhigang still planned to spend HKD 20 billion to acquire projects in Mainland China.

This aggressive expansion made New World Development grow rapidly but also changed its previous low-leverage operating model. By June 2020, its net debt ratio reached 41.6%, up 6.8 percentage points from the previous year, with net debt exceeding HKD 101.4 billion.

Zheng Zhigang also attempted to reduce debt by disposing of non-core assets, but it was insufficient to fill the debt gap. By June 2023, the net debt ratio reached 48.9%; by June 2024, it hit 55%.

Worse, New World Development posted its first loss in 20 years in FY2024, with net profit attributable to shareholders nearly HKD 19.7B in the red. Although caused by asset sales, impairments, and fair value adjustments, both the market and the Zheng family were dissatisfied.

In a 2023 interview, New World Development’s chairman Zheng Jia-chun said the family’s successor “is still under observation.”

This marked the beginning of Zheng Zhigang’s gradual retreat from power. In September 2024, he resigned as executive vice chairman and CEO; by June 2025, he also resigned as non-executive director and non-executive vice chairman, fully stepping back from management.

Moreover, Zheng Zhigang also resigned from the board of Chow Tai Fook Enterprises and other family business roles, withdrawing from family affairs.

Debt Crisis and Self-Help

As Zheng Zhigang exited, New World Development’s management underwent multiple changes. Veteran manager Huang Shaomei, who had been with the group for 20 years, was appointed CEO, responsible for Hong Kong and Mainland operations, reporting to Zheng Jia-chun. Zheng Jia-chun’s daughter Zheng Zhiyun also joined the core management team.

Soon after stabilization, the liquidity crisis erupted. On May 30, 2025, New World Development announced it would defer interest payments on four perpetual bonds totaling USD 3.4 billion.

While the delay did not constitute default, the news triggered panic in the capital markets, seen as a direct signal of cash flow tension, leading to a “double kill” of stock and bonds.

Looming liquidity crisis cast a shadow over New World Development. Facing this crisis, the company launched a comprehensive self-rescue plan.

By the end of June 2025, New World Development announced a new refinancing agreement with banks, covering about HKD 88.2 billion of existing offshore unsecured debt, with the earliest maturity extended to June 30, 2028, gaining a valuable three-year respite. It was Hong Kong’s largest such financing deal.

Three months later, it signed a financing agreement with Deutsche Bank, using its flagship asset “Victoria Dockside” and related assets as collateral, securing up to HKD 5.9 billion in term loans, with HKD 3.95 billion already received.

In the same year, it launched a debt restructuring plan, exchanging new perpetual bonds worth USD 1.79 billion and new notes worth USD 300 million for about USD 4.5 billion of existing perpetual bonds and USD 2.27B of notes. According to management, this reduced perpetual bonds by HKD 8.7 billion and dollar notes by HKD 400 million, helping to lower future debt costs.

Since early 2025, New World Development has implemented “seven debt reduction strategies,” including selling development projects, non-core assets, unlocking farmland value, increasing rental income, cutting costs, suspending dividends, and active financial management.

Benefiting from Hong Kong’s property market recovery, in the first half of 2026, the company achieved HKD 10.3 billion in contracted sales, the highest since 2021; in the second half, it planned to launch at least 1,300 units in Hong Kong to generate cash flow.

These measures showed initial success, easing short-term debt pressures.

As of June 2025, New World Development’s total debt was about HKD 146.1 billion, down HKD 5.7 billion from the previous year; net debt was about HKD 120.1 billion, down HKD 3.5 billion; short-term debt was about HKD 6.6 billion, a significant reduction of HKD 35 billion within the year. In the first half of 2026, total debt further decreased by HKD 1.7 billion.

However, it’s clear that the overall leverage remains high, with total debt around HKD 146 billion and net debt about HKD 120 billion; by the end of 2025, the net debt ratio still exceeded 59%, far above other Hong Kong developers.

Faced with such a debt scale, hundreds of millions in sales seem insufficient. Bank of America Securities believes the risk has not yet dissipated and expects another round of debt restructuring in late 2026.

Zheng Jia-chun, in a recent financial report, quoted Confucius’ “The gentleman strives for the root; when the root is established, the Way will follow” to express the approach to change—“Only by strengthening both financial and business foundations can we forge a long-term path of high-quality development.” While focusing on deepening operations, he also emphasizes continuous financial optimization.

For the Zheng family, maintaining control while truly restructuring finances and transforming the business may be the core challenge in the coming years.

(This article is from Yicai)