New World’s airport mall faces fresh test as tenants pull out
New World is eager to offload the showcase-turned-troubled asset, even at a loss
[HONG KONG] Cash-strapped builder New World Development is facing fresh turmoil at its HK$20 billion (S$3.29 billion) mall near Hong Kong’s international airport, as a slew of tenants terminate leases, according to people familiar with the matter.
In a striking sign of waning confidence, even a store of Chow Tai Fook Jewellery Group, tied to New World’s founding Cheng family, has withdrawn from the 11 Skies mall, the people said, asking not to be identified discussing private matters. Chow Tai Fook Jewellery is co-led by Sonia Cheng, daughter of family patriarch Henry Cheng.
Other tenants that have exited include Japan’s Uniqlo, premium sportswear label Y-3 and Lukfook, one of China’s biggest jewellers, they said.
Once envisioned as Hong Kong’s largest shopping and entertainment hub for mainland Chinese tourists, the 3.8 million-square-foot 11 Skies mall-and-office complex now sits largely vacant amid a retail slump. New World is eager to offload the showcase-turned-troubled asset, even at a loss, as vacancies mount and rent obligations loom. The developer is already racing to sell at least one asset by June in a quest for positive cash flow, separate people familiar with the matter said.
The mall’s outlook is further dented by delays to the airport’s terminal 2 development, originally slated to open in March, which was expected to be a primary driver of visitor traffic. The terminal 2 is expected to be delayed by another two to three months, people familiar with the matter said.
Hopes that the Cheng family might step in have faded, with Chow Tai Fook’s retreat underscoring not just the mall’s faltering prospects but the broader financial strains facing one of Hong Kong’s most indebted developers.
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New World didn’t immediately respond to a request from Bloomberg for comments. Airport Authority Hong Kong (AAHK) reiterated its plan was to open the new terminal in the second quarter. Chow Tai Fook Jewellery, Uniqlo and Y-3 didn’t immediately respond to requests for comment, while Lukfook declined to comment.
Tenant losses have added to the urgency for New World to seek a revised deal with AAHK, which awarded the tender for 11 Skies in 2018. The developer is required to pay a guaranteed rent of HK$1.8 billion a year – or up to 30% of gross revenue, whichever is higher – from 2028 through 2066, according to stock exchange filings and a note from UBS Group.
AAHK is now weighing a split from New World and has approached rival developers about taking over operations, the people said.
Options under review include waiving at least some of the guaranteed rent in exchange for control of the project, people familiar with the matter have previously said.
Uncertainty over the project has also become an obstacle for New World to raise fresh funds. The Cheng family’s talks with third-party investors on jointly injecting capital into the company have stalled, partly because potential partners saw no clarity on the outcome of the discussions involving 11 Skies.
Some work remains unfinished and is scheduled for completion in phases by 2026 and 2027, New World said in its financial report released in September. BLOOMBERG
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