Hong Kong Edition
  | In this week’s Hong Kong Edition, we delve into the state of the property market after New World’s refinancing deal, highlight a bumper year | | | | In this week’s Hong Kong Edition, we delve into the state of the property market after New World’s refinancing deal, highlight a bumper year for stock listings at the halfway mark and chat with Pure co-founder Colin Grant. For the Review, we took a tour of the city’s newest cruise offering, so you don’t have to. To subscribe to this weekly newsletter for free, click here. | | | | | Among Hong Kong’s storied property developers, New World Development is one of the most iconic. Its K11 Musea shopping mall has become a symbol of the ambitions of a city moving into a new era. So its struggles with handling a growing debt pile — now around HK$211 billion ($27 billion) — have gripped a city that in many ways was built on the fortunes of its real estate tycoons. The company reached an $11.2 billion refinancing deal to complete a daring last-minute escape. But even if the Cheng clan’s crown jewel lives to fight another day, the company’s ordeal is an uncomfortable reminder to the city’s rich and powerful that even they are not immune from the forces of the global economy. Our documentary on New World explores how China's property crisis was key to its problems. (Click below to watch.) It took months of negotiations to clinch the city’s largest-ever deal of its kind. That gives CEO Echo Huang at least three more years to offload assets, easing the pressure from investors. In a relief rally, shares of New World jumped 9.8% Wednesday, the first trading day after the agreement. Still, New World is far from being out of the woods yet. Huang needs to lead the team to sell assets fast enough and turn the unprofitable company around, or liquidity issues will emerge soon again. In a sign of the ongoing strife, former CEO Adrian Cheng quit all roles in the business for good following the announcement of the successful refinancing. Once the empire’s heir apparent, he left the developer founded by his late grandfather Cheng Yu-tung, after almost two decades. Adrian’s father, Henry Cheng, still chairs the group.  11 Skies. Photographer: Lam Yik/Bloomberg It’s a sobering experience for one of the city’s patrician families, which got its start with a jewelry shop in Guangzhou in 1929 and later flourished in Hong Kong and Macau. Yu-tung made the critical pivot to into real estate in 1970 by setting up New World and tying the family’s fortunes to the city’s the property boom. The Chengs quickly grew proud and powerful: In 1994, they even helped rescue Donald Trump from financial difficulty by buying a swath of land on Manhattan’s Hudson River shore together with other wealthy investors.  K11 Musea. Photographer: Chan Long Hei/Bloomberg Fast forward three decades and it was the Chengs who needed a lifeline. And above all, it was their standing in Hong Kong’s property ecosystem that clinched the agreement. Bankers pitched hard to their bosses on New World’s importance to the city’s economy and the catastrophic ramifications of its failure to make the deal work until the last minute, as uncovered by our dive into how the deal came together. Read it here.
And New World had to include some prized assets, like its headquarters, New World Tower, the glitzy K11 Musea mall and the office tower at its latest mega project, 11 Skies, in the collateral pool.  Some key New World properties included as collateral. While that approach has worked for now, it’s unclear how long and how often the “too big to fail” card might work. There’s already concern of a bigger liquidity crisis possibly brewing, since many developers don’t have properties of the same caliber to use as collateral and might not see a similar rally to their cause. Emperor International last week said it had more than HK$16.6 billion overdue as of March 31, and “the banks may request immediate repayment of these bank borrowings.” The firm’s auditor, Deloitte Touche Tohmatsu, also said the overdue borrowings “may cast significant doubt” on the company’s ability to function. In a sign of the market distress, some wealthy property investors have started selling their own dwellings and explored borrowing against their art collections to raise funds. With residential property prices hovering at a nine-year low and commercial real estate struggling with a record vacancy rate, the pressure on the famed developers is unlikely to subside soon. Whether New World will prove to be a canary in the coal mine, a blueprint for future rescues or just a particularly unlucky outlier is still very much a question. —Venus Feng | | Chart of the Week: Listings Bonanza | | | In what’s been perhaps the most upbeat finance story for the city, listings in Hong Kong hit the highest since December 2022 last month, as a rally drove a rush for share sales. With offerings including CATL, BYD and Xiaomi already in the books, 15 companies made their debut in Hong Kong in June, while another 22 received approvals for listing, according to data compiled by Bloomberg. And the pipeline remains strong, with deals pending for companies like electric carmaker Seres, heavy-machinery maker Sany and pig breeder Muyuan. PwC is already predicting that the city will reclaim its position as the world’s top fundraising venue for IPOs. —Kelly Li and Chongjing Li | | Five Minutes With: Pure’s Co-founder, Colin Grant | | | Blame it on the weather. Colin Grant got the idea of setting up a yoga studio in Hong Kong after he got rained out of his tee time on the golf course while traveling in Canada. That ended up being the precursor to Hong Kong’s ubiquitous Pure gyms and yoga studios. This month, he opened Re:set in Causeway Bay, a new concept studio focused on recovery that offers treatments such as red light therapy, cold-immersion pool and infrared sauna. Born in Nigeria to a British mother and a New Zealander father, Grant, 59, previously founded the movie-rental chain Movieland in Hong Kong when he was 18 and later Mr Bean Coffee in 1991. Hong Kong Edition’s Venus Feng caught up with the entrepreneur (and former semi-professional tennis player) to discuss his journey, the new studio and his workout routine.  Colin Grant. Source: Pure As a serial entrepreneur, what have you learned about making a venture successful? Everything I’ve done I’ve really enjoyed. When I was 18, I started Movieland. As a kid, I loved watching movies and I was passionate about it. For Mr Bean Coffee, it was not just because I like coffee, but it was a social experience, where you could sit down and chat with friends and hang out in a coffee shop. And now that’s a big part of people’s lives. And then on the back of opening Pure Yoga, I basically took a yoga class and I came out and I’m like, “Wow, that felt really good.” It was an emotional experience as well. What would be your advice for people who want to start a new business and are looking for ideas? Start from things that you believe in, that you enjoy, that you love. Because when you’re really going to put your heart into it, you give it 100%. Because some days are tough. The second thing that’s equally important is to surround yourself with really good people. You can’t do it on your own, and we are about building a long-term sustainable business. If you want to go fast, go on your own. But if you want to go a long, long way, go together with a team. And it is much more enjoyable as well to work with like-minded people. What’s your own exercise routine like? I have three young kids. So to be honest, that’s a workout in itself. I get up at 6, then I wake them up half an hour later. After I’ve done a cold shower, gotten ready and done some yoga, I then get them ready and take them to school, then come back home, do a bit more yoga or maybe a walk near a beach. I like getting out to nature as well. For yoga, I start with a bit of breathing, then do some sun salutations. Then do what’s called pigeon, which is for the hips, then open up the knees, the lower back and the shoulders. Each day is slightly different depending on how I feel and what I’ve done the day before. I go to the gym a couple times a week for some strength training. I think as you get older, strength training is important.  Red light therapy at Re:set Source: Pure How is Pure is doing since the rent dispute at one of your gyms in Central last year? That was resolved very quickly. And we’ve got very good relationships with all of our landlords. We’re signing up about 35% more members each month from around September to now. We are investing $7 million that we announced this year — some going into our new studio Re:set, some going into branding, and some going into staff training, equipment, renovations. Where did you get the idea for the new Re:set studio? It’s from my own personal experience. I’m getting older, I’m 59, and you get aches and pains and niggles. As the old saying: Use it or lose it — it is very true. But also I started reading research around some of these methods you could do to basically reset your body, your muscles, your joints, just to basically get over some of the niggles that you have. And in the last few years there’s been a lot more science about the benefit of deliberate cold and hot temperature exposure. There are so many causes of stress. Especially in Hong Kong, there’s a lot of energy, so we thought this would be a perfect place to launch. | | | | | Star Voyager has made Hong Kong its home port for the cruise season. From June 27 to Nov. 14, the StarCruises ship is scheduled to make 45 round-trip voyages from Hong Kong. I went to a preview event for media and travel agents that tried to build up hype after a $50 million retrofit that left me wondering: on what?  The sea and the Star Voyager Source: StarCruises Checking in at Ocean Terminal was relatively easy. But the long wait after really illustrated how underprepared everything seemed. I watched staff load half-empty shelves in duty-free shops, some bathroom stalls were out of order, and cloudy windows were edged with black masking tape. The cruise is making big emphasis on its entertainment offerings, including game nights, salsa night and acrobatic performances. But if you are expecting a luxury experience like Royal Caribbean cruises’ robot bartender or the Genting Dream with spacious private villas, expect less. The top deck features a modest pool that could fit a few dozen people and an “adventure park” that includes a zip line over said pool. The indoor lounge, where most of the nightly entertainment takes place, is a wooden stage in front of an LED screen. There are two casinos, a spa and gym, multiple bars and restaurants serving both Chinese and Western fare, and a kids’ club. But the overall aesthetic — wood-heavy interior, clashing patterns on the floors and sofas, and interesting choice of hallway art including a Renaissance portrait of Leonardo DiCaprio — lands somewhere between outdated and kitsch.  Not kidding. Photographer: Stella Ko/Bloomberg That said, this budget cruise does offer affordable short-haul trips to nearby destinations like Okinawa, Vietnam, Singapore and the Philippines. Interior rooms start at HK$1,200, excluding gratuities, for a two-night trip to Kaohsiung during the low season, and palace suites go up to HK$18,000 for a five-night trip mid season. I toured one of these suites, which had two single beds and a sofa bed. It reminded me of hotel quarantine during Covid, except my quarantine room was bigger.  Zip it! Source: StarCruises Ultimately, it seems the Star Voyager offerings don’t quite hit the mark with partygoers, families with kids or retirees looking to relax. Would I return as a paying passenger? I’d rather book a nice hotel room in Hong Kong or nearby Guangzhou for a proper staycation. —Stella Ko | | Here’s What Else Is In the News | | | | | | | | | The previous edition of this newsletter was corrected because it misspelled Weijian Shan’s last name in a photo caption. Thanks for reading our newsletter. Click here to read earlier editions. Subscribe here if you haven’t, and send any feedback or ideas our way to hkedition@bloomberg.net. | | | | |
