New World Development Company Limited History

Company Perspectives:

It is important that all of us, however old or young, have a mindset that enables us to capture all the opportunities that changes in the world are bringing to us. A mindset that is characterized by creativity and initiative, harnessed by focus and discipline. In our company, this mindset is requisite and indelible. As economic cycles come and go, we have conquered the challenges and maximised the opportunities. Our solid foundations, and the mindset that we possess, will firmly position our company for growth. Key Dates:

Key Dates:

1970:

New World Development Company Limited is founded.

1972:

Company goes public through a listing on the Hong Kong Stock Exchange.

1976:

Company acquires Kai Tak Land Investment Company Limited, which is later renamed New World Hotels (Holdings) Limited.

1978:

The first phase of the New World Centre is completed.

1988:

The Hong Kong Convention and Exhibition Centre, developed by the company, opens.

1989:

The company begins taking on infrastructure projects in China; Ramada International Hotels is acquired.

1990:

New World Hotels is taken public.

1991:

Company enters the Chinese property development sector.

1993:

Company is awarded a license to operate a fixed telecommunications network in Hong Kong, marking its entrance into the telecom field.

1995:

Hotel management operations are consolidated into a new entity, Renaissance Hotel Group N.V., which is taken public; company forms New World Infrastructure (NWI) to consolidate all its infrastructure projects in Hong Kong and China; NWI is taken public.

1997:

New World Telephone launches its PCS cellular service in Hong Kong; New World Services Limited is created as an umbrella organization for all of New World's services businesses; New World sells its stake in Renaissance Hotel Group as well as its interest in all hotel properties located outside Hong Kong, China, and Southeast Asia.

1998:

New World Services begins operating bus routes in Hong Kong, soon followed by ferry services.

1999:

The company's China property arm, New World China Land Limited, is taken public.

Company History:

Since its founding in 1970, New World Development Company Limited has been a leader in Hong Kong's bustling commercial and residential development market. The company also has become the largest private property developer in mainland China since its entrance into that market in 1991. Among the company's properties are 17 hotels in Hong Kong, China, and Southeast Asia, most of which operate under the Renaissance or Courtyard brand. As a conglomerate, however, New World Development is much more than just a property company. It owns a 60 percent stake in New World Infrastructure Limited (NWI), which has its own listing on the Hong Kong Stock Exchange. NWI is involved in infrastructure projects in Hong Kong, Macau, and China, helping to build roads, bridges, water treatment and power plants, cargo handling facilities, and communications networks. New World Services Limited, 51 percent owned by New World Development, provides construction and engineering services, manages facilities and other properties, offers security services, operates bus lines and ferry services, and provides environmental, waste disposal, cleaning, pest control, laundry, information technology, and elder-care services. New World Development also is involved in telecommunications and information technology through 88 percent stakes in New World Telephone Limited, which operates a fixed, fiber-optic-based telephone network with more than 900,000 subscribers in Hong Kong; and New World PCS Limited, operator of a mobile phone service in Hong Kong with 620,000 subscribers. The company also operates department stores in Hong Kong and China. As of 2000, about eight percent of net sales was generated from rental income, nine percent from property sales, 36 percent from construction and engineering, 11 percent from hotel and restaurant operations, four percent from infrastructure operations, 14 percent from telecommunications services, and the remaining 18 percent from other operations.

Founded in 1970

The founders of New World Development were Dr. Cheng Yu-tung, the current company chairman, and the late Young Chi-wan. In 1970 they joined up to merge their holdings in the colony's commercial and residential property market.

Both men started their careers in Hong Kong's jewelry trade. Cheng Yu-tung, who proceeded during the 1960s to become managing director of the Chow Tai Fook Jewellery Company, had already by the 1950s begun investing in Hong Kong's real estate market. As chairman of many commercial property firms, and as vice-chairman of Hang Lung Bank from 1970, Cheng was well placed in the Hong Kong business community. So was Young Chi-wan. As principal founder and, eventually, general manager of Miramar Hotel & Investment Company, the worldwide hotels group, Young had amassed among his other positions the chairmanship of Yeung Chi Shing Estates and King Fook Gold and Jewellery Company.

In 1970, the two men linked their vast commercial and residential property holdings. Their aim was to acquire first-class rental properties with the development for sale and rental of prime commercial and residential sites in mind. The steadily increasing population of Hong Kong, and the shortage of land on which it might live and work, made the development of such commercial and residential sites potentially lucrative. In addition, Cheng and Young recognized Hong Kong's mounting importance as an international financial center, with increasing inflows of foreign investment to the colony providing for different residential and commercial property needs.

New World Development was incorporated in Hong Kong on May 29, 1970, as a private limited company. The company's first chairman was Dr. Ho Sin-hang, the former chairman of Hang Seng Bank, one of the colony's leading financial institutions. Ho, who served as chairman of the company until 1981, brought a number of his business associates to the new property concern. Cheong Liang-yuen, then vice-chairman of the newly created New World Development, had been a director of Hang Seng Bank, as well as of the Hong Kong and Shanghai Hotels Company. He brought with him considerable expertise in Hong Kong's property development and management market. Lee Quo-wei, appointed managing director of New World Development, had served as the general manager of Hang Seng Bank. In 1972, he was appointed a fellow of the Institute of Bankers in London. Among the other executives who joined New World Development as directors from the Hang Seng board were Tang Shiu-kin, Dr. Ho Tim, and Michael Sandberg, who was later knighted for his contribution to Hong Kong's business life.

It was not long before the company's board elected to float the property concern on the Hong Kong stock market. In June 1972, New World Development became a quoted company when the board issued 96.75 million shares at HK$2 each. With the funds raised, New World Development financed the building of the New World Centre in central Hong Kong, complete with a shopping mall and commercial and residential properties. The first phase of the project, which included the New World Hotel, was completed in 1978, with phase two reaching completion two years later with the opening of the Regent Hotel.

To facilitate construction work of its real estate projects, the company acquired in 1972 a 51 percent equity stake in Shun Fung Ironworks, for around HK$7.6 million. This was followed in 1973 by the purchase of a controlling interest in Hip Hing Construction Company Limited and, the following year, by the acquisition of a 55 percent equity stake in Young's Engineering Company Limited.

Adverse market conditions in 1974, precipitated by poor market conditions worldwide, prompted New World Development to increase its interests in the hotel trade. The company already had a stake in Miramar Hotel & Investment Company through the involvement of Chi Wan Young. In 1976, the company acquired the Kai Tak Land Investment Company Limited, which, under the name it adopted in 1985, New World Hotels (Holdings) Limited, became the subsidiary that handled all hotel operations, both directly owned hotels and managed hotels.

Another 1976 acquisition was that of Timely Enterprises Corporation Limited, which owned the American International Tower at 18 Queen's Road Central. New World Development subsequently moved its headquarters into this building, which in 1980 was renamed New World Tower.

Diversifying Further in the 1980s

Also in 1980, New World Development purchased a 75 percent stake in Mei Foo Investments. This gave the company access to extensive residential properties in Hong Kong, 48,000 square feet of retail commercial space, and 16,000 square feet of space for use by schools.

Infrastructure servicing contracts from the Hong Kong government were included in the range of business New World Development was completing at this time. In 1982, the company was awarded a contract to develop three massive projects under the colony's Home Ownership and Private Sector Participation Scheme. A year earlier, the company won a contract from the U.S. government to redevelop six prime sites in exchange for a lease to rent key properties for development by New World Development.

In 1983, the continuing effects of worldwide recession, and the resulting dampening effect on Hong Kong's property market, led the company to diversify into shipping. New World Development purchased a 60 percent interest in the Hong Kong Islands Line Company, which operated cargo services across the Atlantic. This business was sold subsequently, in February 1989. Even so, by 1985, New World Development had purchased a 39 percent stake in the Hong Kong-based Asia Terminals Limited, the largest container freight station and cargo distribution center in southeast Asia. Phases one and two of the terminal site were opened in 1987. Increased business by the cargo handling operation led to the construction of phases three and four as well. The second airport planned for Hong Kong, in the colony's port vicinity, convinced New World Development to plan a phase five addition to the terminal, a 13-story container complex, with a total of 5.2 million square feet of space (it opened in 1994).

The year 1984 saw the start of New World Development's most ambitious project yet: the construction of the Hong Kong Convention and Exhibition Centre, with its ultramodern facilities providing space for international gatherings on a waterfront site in Wanchai. Commissioned by the Trade Development Council, the complex was opened in November 1988. More than 853 events of varying size, involving both international and local Hong Kong participants, were held at the convention center in 1989 alone. Finding occupants for the residential properties in the luxurious convention center was, however, a slow process. A 70 percent occupancy rate was attained by the end of 1990, with about 310 units let. In the meantime, a new hotel opened at the complex in July 1989. Called New World Harbour View Hotel, it offered a commanding view of Victoria Harbour.

New World Development began in 1986 to develop more than 1,100 residential units on Lantau Island. Construction was carried out in partnership with the Hong Kong Resort Company, with whom New World Development had established a joint venture. In the same year, New World Development entered another partnership with Caltex Petroleum Corporation of the United States to redevelop the oil company's depot in Tsuen Wan. This turned the site into Riveria Gardens, a residential estate of 6,200 flats with commercial facilities.

A further joint venture agreement was signed at the time with the Canton Railway Corporation of Kowloon. This called for more than 1,400 residential units to be developed, with commercial facilities, in the vicinity of the Light Rail Transit System in Tuen Mun, which came to be known as Pierhead Garden.

In 1987, the success of the Lantau Island development convinced New World Development to construct additional residential properties, in conjunction with the Hong Kong Resort Company. On the infrastructure side, the company entered a joint venture agreement with the colony's Mass Transit Railway to develop the Sai Wan Ho site situated above the Sai Wan Ho station on Hong Kong Island.

In 1988, New World Development took a 24 percent interest in the Gammon/Nishimatsu consortium behind the building of the four-kilometer Tate's Cairn Tunnel, to run from Siu Lek Yuen in Shatin to Diamond Hill. The consortium gained a 30-year franchise to run the first private sector tunnel in Hong Kong. Opened in May 1991 in a bid to ease traffic congestion in East Kowloon, initial traffic estimates for the tunnel began at 100,000 vehicles daily. In 1988, New World Development purchased a one-third interest in Asia Television, one of the two television license holders in the colony. The television station subsequently underwent an extensive restructuring, complete with job cuts and capital investment programs. Satisfied with progress on this front, New World Development in 1989 raised its stake in Asia Television to 50 percent. In January 1989, meanwhile, Henry Cheng, son of the cofounder Cheng Yu-tung, was named managing director.

In late 1989, New World Development increased its presence in the hotel trade by acquiring Ramada International Hotels & Resorts, the world's third largest hotel chain, for US$540 million. In a separate agreement, an affiliate of Prime Motor Inns agreed to operate Ramada hotels in the United States, while the Hong Kong company retained control of all Ramada Renaissance properties in the United States and all Ramada properties outside that important market. In July 1990, Prime Motors Inns sold its rights to operate the U.S. Ramada hotels to the Blackstone Group of New York. In early 1990 New World Development sold 14 Ramada properties in the United States to reduce the bank financing necessary for the original acquisition.

Restructuring, Telecommunications, Focusing on China: 1990s and Beyond

Also in 1990, New World Hotels was taken public, with New World Development maintaining a controlling, majority stake. New World Hotels owned and/or managed a number of hotels in Hong Kong, including the Regent of Hong Kong, New World Hotel, Hotel Victoria, the Grand Hyatt Hong Kong, and New World Harbour View Hotel. Aside from its interests in Hong Kong, the company managed six hotels in China, including the Jing Guang New World Hotel in Beijing and the Yangtze New World Hotel in Shanghai, opened in 1990.

The company had been active in China since it developed its first hotel there in 1980. The June 4, 1989 Tiananmen Square massacre, in which Chinese soldiers fired on pro-democracy activists in Beijing, scared off most foreign investors. New World ventured, however, that China's economic reform program would continue and that the bloodshed presented a buying opportunity. In June 1990 New World Development signed two investment contracts with the Guangzhou municipal government to develop the 26.5-kilometer Guangzhou ring road and the 600,000-kilowatt Zhujiang thermal power station. The company also moved into the property development field in China for the first time in 1991 when it entered into a joint venture with the Guangzhou municipal government to develop a project called Fortune Garden. New World Development continued to take on new projects in southern China in 1992, including the Shenzhen-Huizhou Expressway and a portion of the Beijing-Zhuhai Expressway. The company was steadily increasing its investment in China and did not redomicile itself like other Hong Kong-based firms had in advance of the fast approaching 1997 handover of Hong Kong to China; tying the company's future to China, New World's leaders did not fear the Chinese takeover, but were instead focusing on the opportunities that were arising from the increasing standard of living in the giant mainland nation. Whereas the company had a relatively small, by Hong Kong standards, land bank of six million square feet at home, it had quickly, by the early 1990s, become the largest private landowner in China, with more than 25 million square feet.

New World Development entered 1993 with interests in property development and investment, hotels, facilities management, container terminals, infrastructure projects, and television. The company began laying the groundwork for another diversification, this time into telecommunications services. With the monopoly status of Hong Kong Telecom slated to end in mid-1995, New World Development in 1993 was awarded a license to operate a fixed telecommunications network in Hong Kong once the market was opened to competition. A new subsidiary was formed called New World Telephone Limited, which began offering international direct dialing services during the 1996 fiscal year. New World Telephone next moved to enter the burgeoning cellular telephone market, gaining a Personal Communications Service (PCS) license in Hong Kong in 1996. The following year, the company launched its PCS service and quickly became the leading PCS cellular operator in Hong Kong.

Another 1993 development was the establishment of New World Department Store Limited to create a department store chain that could complement the company's shopping facilities in Hong Kong and China. By 2000, there were New World Department Stores in Hong Kong and in eight mainland cities. On the hotel front, three new hotels bearing the New World name were opened in Manila, Ho Chi Minh City, and Shenyang, China, during 1994. The following year, the hotel management operations of New World Development, including those of Ramada and New World International, were consolidated into a new entity, Renaissance Hotel Group N.V. New World then conducted an IPO of Renaissance stock with a listing on the New York Stock Exchange, emerging from the transaction with a 34.8 percent stake in Renaissance. New World completed restructuring moves in other areas as well in 1995. The company formed New World Infrastructure Limited to consolidate all of its infrastructure projects in Hong Kong and China. In October 1995 New World Infrastructure also was taken public, on the Hong Kong Stock Exchange. New World Development retained a 66.5 percent stake. The company also created an investment fund called New World China Homeowner Development Company Limited, which took over responsibility for the company's interests in public housing developments on the mainland. New World held a 57 percent interest in the US$500 million fund, with the remainder sold to private investors. Through these moves, New World hoped to take on a more modern management structure, to make its various activities be more transparent to outsiders, and to bring in additional partners and investors to take on some of the burdens of the massive capital expenditures that were required.

During 1997, the year of the handover of Hong Kong to China, New World Development created a new subsidiary, which was initially 72 percent owned by the company, called New World Services Limited. Included within this new umbrella organization were all of New World's services businesses, including construction, electrical and mechanical engineering, property and facility management (including the management of the Hong Kong Convention and Exhibition Centre), and security services. Also in 1997 came the formation of New World Enterprise Holdings Limited, a US$1 billion fund that New World planned to use to invest in companies in China, notably unprofitable state-run enterprises, with the intention of helping them reform and modernize themselves. Initial major investments included a drugstore chain in Kunming, China; the largest maker of ceramic glass panels in China; and Beijing AutoTech Service Company Limited, a player in the auto after-sales service market in China. New World divested itself of its non-Asian hotel holdings in yet another 1997 development. It sold its stake in Renaissance Hotel Group to Marriott International Inc. for US$491 million, as well as its interest in all hotel properties located outside Hong Kong, China, and Southeast Asia for US$80 million. Around this same time, New World Infrastructure expanded into water treatment plants in China and Macau through the establishment of a joint venture with Suez Lyonnaise des Eaux S.A., one of the largest water companies in France.

In 1998 New World Services (NWS) formed a joint venture with U.K.-based FirstGroup plc called New World First Bus Services Limited, which was 74 percent owned by NWS. The venture was awarded the franchise to operate 88 Hong Kong bus routes formerly operated by China Motor Bus Co. NWS soon bought out its joint venture partner. In 1999 NWS established New World First Ferry Services to operate ferry services in the inner harbor of Hong Kong and beyond, including a ferry service to Macau. New World Infrastructure, meantime, expanded into the development of telecommunications networks.

In July 1999 the company's China property arm, New World China Land Limited, was taken public with a listing on the Hong Kong Stock Exchange. New World retained a 70 percent stake. By that time, the company's Chinese development activities included 68 projects with a total floor area of 246.4 million square feet. The bulk of these projects involved building low-cost residential housing in major Chinese cities--including Wuhan, Shenyang, Tianjin, and Huizhou, a sector in which the company had been involved since 1994.

For the fiscal year ending in June 2000, New World Development reported that revenues had increased by 17 percent over the previous year but that net profits had fallen by 84 percent. The profit drop was attributed in large part to interest payments that stemmed from the heavy debt load the company had incurred through its expansion activities of the 1990s. Even with the company's heavy investments in China, about 90 percent of its earnings were being generated from property, hotel, and construction operations in Hong Kong. While waiting for a payoff from its early commitment to the mainland, New World Development in the early 1990s was likely to focus on debt reduction strategies, including the sale of New World Telephone and the divestment of New World Development's stake in Hong Kong's Regent Hotel, as well as completion of an initial public offering of a stake in New World Services.

Principal Subsidiaries: Addlight Investments Limited (56%); Billionoble Investment Limited (60%); Billion Huge (International) Limited (70%); Billion Park Investment Limited (57%); Birkenshaw Limited; Blanca Limited; Broadway-Nassau Investments Limited (51%); Care & Services Company Limited (51%); Cheong Sing Company Limited; City Team Development Limited (81%); Extensive Trading Company Limited (51%); Far East Engineering Services Limited (51%); Fook Hong Enterprises Company Limited; General Security (H.K.) Limited (51%); Gold Queen Limited; Grand Hyatt Hong Kong Company Limited (64%); Hang Bong Company Limited; Hip Hing Construction Company Limited (51%); Hong Kong Island Development Limited; Hong Kong Island Landscape Company Limited (51%); Hong Kong New World Department Store Company Limited; International Property Management Limited (51%); Island Sauna Company Limited; Kin Kiu Enterprises Limited; King Lee Investment Company Limited; Kleaners Limited (51%); New China Steam Laundry Company Limited (51%); New World Finance Company Limited; New World Hotel Company Limited (64%); New World Telephone Limited (88%); NWD (Hotels Investments) Limited (64%); New World PCS Limited (88%); Paterson Plaza Properties Limited; Peterson Investment Company Limited; Pollution & Protection Consultant Limited (51%); Pollution & Protection Services Limited (51%); Polytown Company Limited (51%); Pontiff Company Limited; Tai Yieh Construction & Engineering Company Limited (51%); Tridant Engineering Company Limited (51%); True Hope Investment Limited (60%); Try Force Limited (60%); Urban Parking Limited (51%); Urban Property Management Limited (51%); Vibro (HK) Limited (50%); Wai Hong Cleaning & Pest Control Company Limited (51%); Waking Builders Limited (51%); Young's Engineering Company Limited (51%); Bianchi Holdings Limited (Jersey); New World China Land Limited (Cayman Islands; 70%); NW China Homeowner Development Limited (Cayman Islands; 70%); New World Infrastructure Limited (Cayman Islands; 60%); New World Services Limited (Cayman Islands; 51%); Dalian New World Plaza International Co., Ltd. (China; 62%); Fung Seng Real Estate Development (Shanghai) Co., Ltd. (China; 56%); Guangzhou Metropolitan Properties Co., Ltd. (China); Guangzhou New World Properties Development Co., Ltd. (China); Guangzhou Xin Yi Development Limited (China; 64%); New World (Shenyang) Property Development Limited (China; 63%); New World (Tianjin) Development Co., Limited (China); Ningbo New World Department Store Limited (China; 98%); Ningbo Firm Success Consulting Development Company Limited (China); Shanghai Juyi Real Estate Development Co., Ltd. (China; 56%); Shenyang New World Development Store Limited (China; 90%); Sichuan New World Danshen Base Industrial Co., Ltd. (China; 51%); Tianjin New World Department Store Limited (China); Wuhan New Eagle Development Co., Limited (China; 67%); Wuxi New World Department Store Limited (China); Pacific Ports Company Limited (Bermuda; 60%); New World Enterprise Holdings Limited (British Virgin Islands); New World First Bus Services Limited (British Virgin Islands; 51%); New World First Holdings Limited (British Virgin Islands; 51%).

Principal Divisions: Property; Telecommunications and Technology; Services; Infrastructure.

Principal Competitors: Cheung Kong (Holdings) Limited; Cheung Kong Infrastructure Holdings Limited; China Resources Enterprise, Limited; CITIC Pacific Ltd.; Guangdong Investment Limited; Hang Lung Development Company, Limited; Henderson Land Development Company Limited; Hysan Development Company Limited; Jardine Matheson Holdings Limited; Shanghai Industrial Holdings Limited; Shangri-La Asia Limited; Sun Hung Kai Properties Limited; The Wharf (Holdings) Limited.

Further Reading:

• 'Blueprint for a Brave New World,' Financial Times, August 14, 1995, p. 15.
• Chan, Biddy, and Teo Chian Wei, 'Spinoffs Buoy New World Development,' Asian Wall Street Journal, November 8, 1996, p. 5.
• Condon, Bernard, 'Capitalist Roader: Cheng Yu-tung Goes West,' Forbes, October 20, 1997, pp. 228--29+.
• Davies, Simon, 'Making a Long Term Bet,' Asian Business, July 1993, p. 16.
• Guyot, Erik, and Chow, Lotte, 'New World Development to Invest More Than $400 Million in China,' Wall Street Journal, October 13, 1995.
• Hock, Tan Lee, 'New World Seeks Growth Abroad,' Asian Finance, March 15, 1991, pp. 46, 48--50.
• 'Land in the Bank,' Far Eastern Economic Review, March 9, 1989, p. 90.
• Levander, Michelle, 'New World Development Is Still Struggling to Recover,' Asian Wall Street Journal, October 31, 2000, p. 15.
• Marchand, Christopher, 'Brave New World,' Far Eastern Economic Review, May 4, 1989, p. 85.
• Sender, Henny, 'China Savvy,' Far Eastern Economic Review, April 22, 1993, pp. 64--67.
• Murphy, Kevin, 'New World Patiently Profits in China,' International Herald Tribune, January 11, 1996, p. 11.
• Prystay, Cris, 'New World Develops Potential by Focusing on Housing in China,' Asian Wall Street Journal, April 27, 1998, p. 3.
• Rabano, Belinda, 'New World Unit Applies to List in Hong Kong,' Asian Wall Street Journal, June 17, 1999, p. 11.
• Stein, Peter, 'The New Game: Hong Kong's Tycoons Now Bet Their Future on China's Big Market,' Wall Street Journal, July 1, 1997, pp. A1+.
• Taylor, Michael, 'Boom with a Queue,' Far Eastern Economic Review, August 22, 1991, pp. 48--49.
• ------, 'Four Pillars,' Far Eastern Economic Review, August 22, 1991, pp. 49--51.
• Wong, Jesse, 'For Chengs, Ramada Deal Is Gutsy Move,' Wall Street Journal, July 20, 1989.
• Yoshihashi, Pauline, and Lebow, Joan, 'Ramada to Sell Hotels for $540 Million to Hong Kong Firm and Prime Motor,' Wall Street Journal, April 19, 1989.

Source: International Directory of Company Histories, Vol. 38. St. James Press, 2001.

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