Third-gen scion charts the course ahead for HK’s New World Development
By Timothy Tay
/ EdgeProp Singapore |
SINGAPORE (EDGEPROP) - It has been a bracing year for Hong Kong-listed property developer New World Development. The property conglomerate is juggling mega-sized project launches, the impact of a global pandemic, and a strategic refocusing.
New World Development is also celebrating its 50th year since its founding in 1970 by the late property magnate Cheng Yu-tung. Today, the company is helmed by his grandson, Adrian Cheng, who as CEO of New World Development, has laid down a new design direction for residential projects that places wellness and sustainability at the forefront.
The first residential development to incorporate this design direction is The Pavilia Farm, a new mega-sized integrated development in Hong Kong’s Tai Wai district. The development has recorded five sell-out weekends this year, with the project raking in at least HK$20 billion ($3.45 billion) from the sale of all 1,800 residential units launched since October this year.
Cheng: "Live Beyond Well is the slogan for The Pavilia Farm, and this is part of the company's vision to create shared value in the communities we live and work in
New World Development says last month saw 17,000 applicants for the 343 units available, making this sales phase 43 times oversubscribed. Based on the most recent sales round, the average price at The Pavilia Farm is about HK$22,037 ($3,802) psf, which reflects a 16% increase in prices from two months ago.
The entire The Pavilia Farm comprises seven high-rise residential towers with 3,090 units, and the development will also sit on top of a new 650,000 sq ft shopping mall and a pedestrian connection to the expanded Tai Wai Mass Transit Railway Interchange Station.
‘Wellness’ generation
“The Pavilia Farm is the first residential development to introduce the concept of Urban-Pastoral Living, where its strong appeal lies in its carefully considered design process that places wellness and sustainability at its very core,” Cheng tells The Edge Singapore in an email interview. The project is also the embodiment of his vision of a new chapter of healthy living called “Live Beyond Well”.
According to Cheng, this design concept emphasises innovative urban architecture that encompasses green spaces, minimalist design, and nature-inspired design. Wellness and sustainability is another key pillar. The Pavilia Farm features a landscape-integrated aquaponic system and an urban farm. Home innovation comes from the smart-home features included in each unit of the development.
The Pavilia Farm has had five sold-out weekends this year, raking in HK$20 billion ($3.45 billion) from 1,800 residential units sold. (Picture: New World Development)
Other green features include thermal-performance glass walls, energy-regeneration elevator systems and vertical greening. The developer says that these features will reduce the carbon footprint of the residential development by 30% each year.
“It is a vision — one that the company introduced this year to reinvent New World Development’s family empire — that creates shared value in the communities we live and work in, by building a business and cultural ecosystem that has a positive impact on society,” says Cheng.
This new design direction has resonated well among younger home buyers. Half of the total number of buyers at The Pavilia Farm are under 40 years old, and Cheng says that this so-called “wellness generation” comprises young, health-conscious millennials making their own purchasing decisions. “They are placing more importance on a sustainable way of living and taking a stand on climate change and energy issues, while also re-examining their way of life and taking steps to improve their wellness,” he says.
While these are not new trends among home buyers around the world, the Covid-19 pandemic has accelerated the importance of sustainability and health, says Cheng.
Pavilia Farm is the first residential project to incorporate Cheng’s “urban pastoral-living” design ethos. (Picture: New World Development)
Demand for units in The Pavilia Farm from foreign buyers has also been high, with the majority purchasing two- or three-bedroom units.
“The project is also attractive to foreign buyers not just due to its exceptional accessibility of being connected by two railways and four tunnels, but the allure of its eco-friendly elements and nature-inspired design,” says Cheng. He describes the Pavilia Farm as “a lush sanctuary amidst Hong Kong’s concrete surroundings which, we have found, appeals greatly to locals and foreigners alike”.
According to the developer, 80% of all the units sold have been purchased by owner-occupiers, with the other 20% snapped up by investors.
Mega projects
New World Development has also unveiled plans for a HK$20 billion mixed-use development project at Hong Kong International Airport. The mega project, called 11 SKIES, is set to be Hong Kong’s largest retail, dining and entertainment hub. The new mixed-use development will be operated by K11, a high-end lifestyle brand operator under the New World Group.
The landmark development will have a total gross floor area (GFA) of 3.8 million sq ft, including 2.66 million sq ft dedicated to dining and retail outlets. Another 570,000 sq ft will be set aside for entertainment facilities, while three office towers will accommodate 570,000 sq ft of Grade-A office space.
11 SKIES is a HK$20 billion mixed-use project beside Hong Kong International Airport that will feature Grade-A offices, dining, retail and entertainment components. (Picture: New World Development)
Five major anchor tenants have already been secured for the office space, namely, Bank of China (Hong Kong), Citibank, Standard Chartered, FTLife Insurance, and Trinity Health Enterprises.
“11 SKIES will be a game-changer for Hong Kong and the Greater Bay Area. It is the first project that comprehensively combines retail, dining, entertainment, together with wellness and wealth management, in one complete ecosystem for people in Hong Kong, Greater Bay Area and the rest of the world,” says Cheng.
This major development project is also in line with New World Development’s strategic positioning to strengthen its market presence in the Greater Bay Area (GBA), the Chinese urban megalopolis that includes key cities such as Hong Kong, Macao and Guangdong. 11 SKIES is close to regional gateways such as the Hong Kong-Zhuhai-Macau Bridge and the Tuen Mun-Chek Lap Kok Link which leads to Prince Bay in Shenzhen, where New World Development is developing another key project.
“We’re investing over HK$10 billion to develop Prince Bay as the largest harbourfront cultural-retail destination in Shenzhen, which is situated next to the brand-new cruise terminal in Shekou,” says Cheng. “It is modelled after Victoria Dockside, our flagship project in Hong Kong, turning it into ‘Victoria Dockside 2.0’ and bringing in our new circular economy model and cultural-retail experience.”
New World Development plans to make its Prince Bay project the first circular economy hub and the largest harbourfront cultural-retail destination in Shenzhen, China. (Picture: New World Development)
The Prince Bay project is scheduled for completion in stages from 2024, and will feature a five-star hotel, a 380m-tall office tower, a hospital and educational facilities. New World Development aims to attract more than 500 high-end retail tenants to Prince Bay and wants to curate the mix to include brands that are focused on sustainability and wellness. The group expects this will play well in a post-pandemic market, and it foresees lucrative annual returns as the area develops over time.
Strengthening dominance in the Greater Bay Area
Under Cheng, New World Development is focused on strengthening its market position in the GBA. The group has also stated its intention to become the most active Hong Kong developer in the area.
The group’s annual report for the fiscal year ended June 2020 shows that the developer has acquired several redevelopment sites in the GBA over the past four years. The land bank it controls totals about 30 million sq ft, and some recently acquired land parcels will be gradually included in the land bank next year.
“Our interest and investment in the Greater Bay Area began a decade ago, as we foresaw the huge potential of the area and strove to make it a part of our core business. We were the first among our Hong Kong peers to enter GBA, and we are now seeing the fruit of our decision to invest in the area,” says Cheng.
He adds that the group’s sizeable land bank in the area makes it the dominant development player in that market in terms of developable GFA. New World Development plans to develop and invest in a total of 38 projects in 10 cities in China by 2025, with a total GFA of about three billion sq ft.
“The opportunities for us are huge. In line with our brand DNA, we see great potential to bring artistic and cultural elements to GBA in an unconventional way, enriching people’s lives, and promoting business development through disruptive innovations,” says Cheng.
Singapore projects
New World Development’s footprint in Singapore is not expected to grow anytime soon, given the developer’s focus in entrenching its market position in Hong Kong and mainland China. In Singapore, the developer has kept to joint-venture partnerships with other international and local property developers.
“We are currently focusing on our growth in the GBA, which is part of our core business. However, we are always on the lookout for new opportunities that can showcase our commitment to creating shared value in communities around the world and will continue to partner with international and local talents in our future developments,” says Cheng.
The group was in a joint venture with Hong Kong-listed Far East Consortium international to develop the 99-year leasehold ARTRA on Alexandra View. The 400-unit development was first launched for sale in April 2018 and had been fully sold by July this year.
ARTRA was jointly developed by New World Development and Hong Kong-listed Far East Consortium international. (Picture: Samuel Isaac Chua/The Edge Singapore)
Its only outstanding property development project in Singapore is the 192-unit Cuscaden Reserve, which is jointly developed with Singapore developer SC Global and Far East Consortium. The ultra-luxury development will be manged in collaboration with K11 ARTUS from K11 Group, a company under the New World Group. Based on URA Realis data, the project has sold seven units to date. Prices of units sold range from $2.33 million ($3,327 psf) for a 700 sq ft, one-bedroom apartment to $4.24 million ($3,644 psf) for a 1,163 sq ft, three-bedroom-plus-study.
Read more: Artra: Redhill’s newest addition
Disposal of non-core assets
The group is also trimming some of its non-core property holdings as it “continues to improve its operation efficiency. Through disposal of non-core assets, [the group] will invest resources more efficiently into core business development and optimise assets and its business portfolio”, the company says.
During its fiscal year 2020, the group had targeted to realise HK$9.0 billion through non-core disposals, but the group exceeded its target to eventually complete HK$10.6 billion of non-core disposals during the period.
The largest disposal exercise was the sale of two Hong Kong property assets in June for HK$3.6 billion. The group disposed of its entire 45% interest in companies that own Shun Tak Center in Sheng Wan for HK$2.36 billion; and sold Eight Kwai Fong, a serviced apartment, for HK$1.21 billion. In a press statement at the time, the group said this move “further strengthens [its] cash position with ample resources for growth in the GBA”. Cheng adds: “Disposing non-core assets and businesses, realising value and improving efficiency will continue to be a part of our growth plans.”
Reflecting on the rapidly closing year, Cheng says “it has been a challenging year, and the challenges may continue in 2021, depending on the vaccine and Covid-19 situation”. He expects the overall residential market price index in Hong Kong to fall slightly next year, but the developer’s new projects have recorded strong sales momentum this year.
“The success of The Pavilia Farm’s launch is a testament to our standing as a price-setter in the market. It broke Hong Kong records in housing subscriptions, where we sold out for five weekends and have seen very healthy price increases since launch,” says Cheng.
He adds that this type of sales performance shows that demand for good-quality and well-
located residential projects is still significant in Hong Kong, despite the difficult social and market environment, and property investors will be more demanding in their purchasing decisions, says Cheng.
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