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the first generation took advantage of the dividends of the times to lay the foundation for the industry and made a lot of money. although the second generation has higher education and a broader vision, the environment they live in is far more complicated than that of the past. it is not realistic to learn from their ancestors to eat the big fat meat of real estate.

text丨special author of financial gossip girl: fang fang in armor

“i am greedy when others are fearful” no longer seems to work in the face of the “gone” real estate trend.

in february this year, the hong kong government announced the cancellation of the strong restrictions that had been implemented for 14 years to prevent overheating of the property market. after a few months of "greed" recovery, the market quickly returned to "fear" again.

according to data from the hong kong land registry, the total property registration volume in hong kong in august was 4,729, down about 10.1% from 5,262 in july, hitting a new low in the past six months.

▲image source: public online channels

according to centaline property's monitoring data, the centaline city leading index (ccl) has recently traced back to mid-october 2016. the index fell 3.67% in the first half of 2024. compared with its historical high, the ccl index has fallen 25.89% from its historical peak of 191.34 points in august 2021, and has fallen 15.79% from its recent high of 168.40 points in april 2023.

▲image source: public online channels

as the "barometer" of hong kong's real estate, the three major giants (cheung kong group, hang lung properties, and sun hung kai properties) are naturally not "sustainable" and have recently suffered a "waterloo" in performance. currently, the three major real estate developers are in the "n-generation succession" state. the same thing happened when "one generation was in power", but they relied on the strategy of "buy low and sell high" to repeatedly escape danger.

in the current environment, can they still rely on the business wisdom left by their ancestors to stand on the top again?

1.

/ "buy low and sell high" simple operation to make a lot of money,

the "real estate generation" enjoyed great success for decades /

the three big families have one thing in common, that is, they all started hoarding properties when hong kong's real estate market plummeted in the early years, and earned the first pot of gold for their 100 billion empire. in most of the past few decades, the logic of the real estate industry was simple. as long as you follow the right trend, "buy a house and you get a house" and "buy a house and the house will go up", the business of the three big families can always cross the cycle, get along well, and be safe and sound. however, with the complexity of the business environment and the downturn in the real estate industry, their performance has also "collapsed".

according to the data recently released by the three major giants, cheung kong group's revenue in the first half of this year was hk$22.008 billion, a decrease of 10.55% compared with the same period, and its net profit was hk$8.63 billion, a year-on-year decrease of 16.47%. hang lung properties' operating income was hk$6.114 billion, although it increased by 17% year-on-year, but its net profit was only about hk$1.061 billion, a year-on-year plunge of about 55.72%. sun hung kai properties achieved revenue of hk$71.506 billion, a slight increase of 0.44% year-on-year, and was the only one of the three giants to achieve positive growth.

it is extremely rare that the performance of several giants has "fallen" at the same time, and the decline is so great. it seems that with the "end of a generation", the opportunity to make money in the hong kong real estate industry by "waiting" is gradually disappearing, leaving only the entrepreneurial history of the "generation" with its stories.

li ka-shing, the controller of cheung kong group, is known as "superman" in hong kong because of his extraordinary strategic vision.

in 1950, when he was only 22 years old, he founded the cheung kong plastic factory with about 7,000 us dollars. by introducing advanced technology and continuous improvement, he became the leader of hong kong's plastic flower industry and won the title of "king of plastic flowers". in 1958, the hong kong plastic flower market was saturated, and hong kong real estate fell sharply due to unrest and other reasons. li ka-shing realized the huge business opportunities in the real estate industry and began to move into the real estate field, hoarding a large number of properties and land.

after that, the real estate industry boomed, and li ka-shing made a fortune. in 1971, he founded cheung kong properties, which was renamed cheung kong holdings limited the following year and successfully listed, becoming one of the "five tigers of chinese real estate" and establishing his status as a real estate tycoon. however, if the li family relied solely on real estate, it would not be the top family in hong kong, because most of hong kong's properties were under the sun hung kai properties led by kwok tak-seng.

the reason why the li family was able to "dominate" the hong kong family was due to li ka-shing's hutchison whampoa. in the mid-1970s, he began to acquire british companies such as the wharf group, becoming the first chinese entrepreneur to take over a british consortium, and packaged these operations into a diversified group.

in the 1990s, li ka-shing expanded his investment portfolio to the world, involving telecommunications, energy, infrastructure and retail. after that, li ka-shing's real estate business was assigned to cheung kong group, while non-real estate businesses were all under the later-established hutchison whampoa.

since 2000, li ka-shing has expanded cheung kong's international business through hutchison whampoa, especially in the infrastructure, energy and telecommunications sectors.

in 2015, li ka-shing reorganized the cheung kong group before his retirement. the new company was called cheung kong hutchison holdings limited, and its registered address was moved to the cayman islands. it is the parent company of cheung kong enterprise holdings limited and hutchison whampoa. currently, the assets actually controlled by cheung kong hutchison holdings have reached hundreds of billions of hong kong dollars. despite the successful transformation, real estate still occupies a pivotal position in the li family's business empire.

what is li ka-shing's logic for making money in the real estate industry? simply put, it is to hoard at low prices and wait for opportunities. take the royal jade garden plot that he managed as an example. the plot was acquired by hutchison whampoa for 700 million yuan in 2001. at that time, the floor price was only 1,750 yuan per square meter. after more than 20 years, the average price rose to 90,672.35 yuan per square meter. in other words, li ka-shing made tens of billions of yuan without doing anything, and this is just a microcosm of the many properties he managed.

hang lung properties was founded by chen zengxi. in 1948, chen zengxi came to hong kong from guangzhou and worked as an ordinary clerk in wing lung bank. in the early 1950s, chen zengxi, lin ruheng, chen detai and kang youwei's two nephews embarked on the road of entrepreneurship and established "dalong construction company". at first, they had a common goal. however, soon, they had differences in business philosophy. chen detai chose to withdraw, and lin ruheng suddenly passed away, so chen zengxi started his own business.

on september 13, 1960, hang lung group came into being. hang lung was born in yu to sang building in central, an inconspicuous office. after several important relocations, from the old hang seng bank head office building to hang lung house in sheung wan, to hang lung center in causeway bay, and finally settled in the standard chartered bank building in central. hang lung gradually grew stronger with each relocation.

chen zengxi's success is inseparable from his forward-looking layout of diversified operations. on the one hand, he "cultivated" the real estate industry, and on the other hand, he got involved in non-real estate industries. many of his businesses pioneered hong kong, such as introducing brands such as hello kitty and mcdonald's to hong kong.

in 1991, his son ronnie chan took over from chan tseng-hei as chairman of the hang lung group. under his leadership, hang lung keenly captured the huge potential of the mainland market in the early 1990s, successfully expanded into shanghai and other places, and created a number of landmark projects including plaza 66 and grand gateway 66. subsequently, hang lung's territory was expanded to cities such as shenyang, jinan, wuxi, tianjin, dalian, kunming, wuhan and hangzhou, achieving a leapfrog development from hong kong to the mainland, and gradually building hang lung properties into one of the giants in the hong kong and mainland real estate markets.

guo desheng, founder of hong kong real estate "big brother" sun hung kai, had a similar experience to li ka-shing. he also fled to hong kong from guangdong with his family during the anti-japanese war. he started out by running department store wholesale, and quickly accumulated wealth through the clothing industry after the war. he was hailed as the "hong kong king of foreign miscellaneous goods."

by 1963, hong kong's economy was booming after the war, the population was increasing rapidly, and real estate was skyrocketing. kwok tak-sing, lee shau-kee and fung king-hey jointly founded sun hung kai properties and were hailed as the "three musketeers of real estate".

▲from left to right: fung king hei, kwok tak sing, lee shau kee

in the 1960s, due to the special situation in the mainland affecting hong kong, a large number of foreign capitals withdrew, and sun hung kai took the opportunity to acquire real estate at a low price. after the situation stabilized the following year, sun hung kai properties became rich overnight.

in 1972, sun hung kai properties went public, marking the separation of the "three musketeers of real estate". with his keen judgment of the hong kong real estate market, kwok tak-seng quickly expanded the business and gradually built the company into one of the leaders in the hong kong real estate industry. as of the end of june 2024, sun hung kai properties has an office property portfolio of 1.02 million square meters in hong kong alone, and a total land reserve area of ​​11.57 million square meters in the mainland and hong kong.

looking at the history of the three major families, we can find that they all took advantage of the "east wind" of industry development. at that time, hong kong was in a real estate trough, and the economy had just begun to recover, with a bright future. therefore, as long as there was capital, it seemed that buying a house "with eyes closed" would increase the value. the same logic applies to entering the mainland market. however, making money requires "the right time, the right place, and the right people". if the overall environment is in a downward space, making money will become extremely difficult.

2.

/ it fell just after it came to power,

why is it difficult for the “second generation” to do business?

compared with the "amateur" backgrounds of the "first generation", the "second generation" who took over have mostly received a good education in prestigious overseas universities and have an international perspective, but they still seem unable to cope with the complex and ever-changing real estate market.

in march 2018, li ka-shing announced his resignation as chairman of cheung kong hutchison holdings, and his eldest son, li zeju, took over. in august 2018, less than three months after officially taking over his father's business empire, the 54-year-old li zeju handed in his first report card. according to the disclosed financial report data, in the first half of 2018, cheung kong holdings' revenue was hk$24.118 billion, a year-on-year decrease of 19%, including hk$16.788 billion in group revenue and hk$7.33 billion in group revenue from joint ventures.

at the same time, since he took office, he has been targeted by short-selling institutions. in more than a year, cheung kong's share price has fallen by nearly 25%, and its market value has evaporated by more than hk$100 billion. to this day, cheung kong's share price remains sluggish, hovering around hk$30, unable to return to its historical high of around hk$60.

unlike his father who was full of "ambition" and tried his hand at new industries, li zeju is more conservative. people commented that he is more like a "business keeper" rather than an "entrepreneur." he has repeatedly stated at performance meetings that he is more concerned about the after-tax return on investment.

before the hong kong real estate industry began to decline, the li family shifted its business focus from hong kong and the mainland to overseas. after taking office, li zeju continued his father's strategy.

however, although li zeju has ambitious investments in europe and the united states, he has failed many times, which was simply unimaginable during li ka-shing's tenure.

for example, in 2018, cheung kong holdings announced that the implementation agreement for the a$13 billion (approximately hk$76 billion) acquisition of australian natural gas pipeline company apa group had been terminated and that cheung kong-related companies would not proceed with the acquisition. on may 8, 2019, vodafone hutchison australia (vha), a subsidiary of cheung kong holdings, announced that it would join hands with tpg telecom to take legal action and appeal to the federal court after their merger application was rejected by the australian competition and consumer commission.

after selling off properties in china and moving to europe and the united states, the li family's "warm face" may have been put on a "cold butt". in recent years, li zeju's pressure has not decreased at all. in the past year, cheung kong earned hk$47.2 billion in revenue, a year-on-year decrease of 16.1%, and a net profit of hk$17.3 billion, a year-on-year decrease of 18.7%. among them, property sales only contributed hk$13.15 billion, accounting for less than 30%.

this also includes a huge "deposit" income. as a company that started out in real estate, cheung kong did not buy a single piece of land in 2023, but instead acquired all the shares of civitas for hk$4.8 billion in cash. this is a "second landlord" company that looks for suitable houses everywhere, signs leases, renovates and repairs them, and then rents them to vulnerable adults, provides nursing services, and earns service fees from government agencies. compared with the previous way of buying properties and operating transactions, this job is much easier. it is no wonder that the industry's evaluation of li zeju is that he is far inferior to sun hung kai properties in terms of sales ability.

hang lung properties welcomed its third-generation chairman, ronnie chan's son, in january this year. he faced severe challenges just six months after taking charge of the group, with declining net profits and falling stock prices.

shanghai henglong plaza, which has always been regarded as a "cash cow", saw its rental income and tenant sales fall by 8% and 23% year-on-year in the first half of the year. in terms of office buildings, the income of the two grade a office buildings of shanghai henglong plaza fell by 7% year-on-year, and the occupancy rate also fell by 10 percentage points to 88%.

chen wenbo gave an explanation for this. simply put, the overall environment is not good, and the previous strategy of only focusing on high-end real estate and properties is no longer feasible.

in the face of reality, chen wenbo had to bow his head and adjust his strategy to no longer be limited to the field of high-end commercial real estate, but to gradually develop in a diversified direction, optimize the tenant mix, and enhance the attractiveness and customer flow of shopping malls. at the same time, hang lung continued to promote the development and operation of new projects in the mainland and hong kong, such as the expansion projects of hangzhou hang lung plaza and shanghai hang lung plaza, in order to occupy a favorable position when the market picks up in the future.

however, judging from the data this year, chen wenbo's strategy does not seem to have worked. currently, chen wenbo is shrinking his investment and taking a more cautious attitude towards real estate investment. perhaps the test of chen wenbo's ability to maintain his business has just begun.

sun hung kai properties is different from cheung kong and hang lung. in terms of business, sun hung kai has maintained steady development because the three sons are very motivated. its family risk comes from family fighting.

as the saying goes, "success and failure are both due to xiao he", it was precisely because the three sons had equal abilities that none of them would submit to the other. after their father's death, the battle for the throne among the three sons began. after ten years, after the eldest son, guo binsheng, passed away, this farce came to an end, and was eventually succeeded by the third son, guo binglian.

perhaps guo binglian inherited his father's vision and brains. in the sluggish environment in the first half of the year, its revenue continued to grow, especially in the mainland market, where sun hung kai's performance was particularly outstanding. the company's projects such as shanghai riverside arc de triomphe and hangzhou international financial center have achieved impressive sales results. in addition, sun hung kai has maintained the company's financial stability by optimizing its property investment portfolio and strengthening rental income.

but it is just maintaining the status quo. it is still difficult to regain the feeling of "rapid progress" of our ancestors.

the "first generation" are "going smoothly" and taking advantage of the "east wind", while the "second generation" are either radical or conservative, some can "hard control" the future, and some are waiting for opportunities. for the future, the three major families have different strategies, but the difficulty of maintaining the business remains the same.

3.

/ exploration? decline?

where will the next round of glory for the three major families go?

the market is changing. it is no longer a simple logic that you can make money by hoarding properties when the market is down and selling them when the market is up. in the face of changes in the real estate market environment in mainland china and hong kong, the three major family-owned enterprises, cheung kong group, hang lung properties and sun hung kai properties, are also actively seeking a path to transformation.

they began to adjust their business structure, reduce their reliance on traditional residential development, and increase investment in infrastructure, commercial real estate, hotels, retail, etc. at the same time, they are also actively exploring new growth points, such as cutting-edge fields such as technology, environmental protection, and health, hoping to achieve sustainable development of the company through technological innovation and cross-border cooperation.

the retired li ka-shing has not been idle, and has started to "play" with ai. it is worth mentioning that as early as 2012, li ka-shing invested in deepmind, a star company in the large model track. with the rise of a new wave of ai technology, his ai investment has gradually expanded. in 2022, more than 70% of his investment projects are related to ai. among the three major families, it can be said that the li family is the "most playful" and the least afraid of the future.

in addition to this, the li family also controls 40% of the uk's telecommunications market, 7% of the water supply market, electricity supply to more than 8.3 million households, as well as a large number of natural gas, real estate, shopping malls, docks and other industries. through the layout of these areas, the intention is to diversify the risks of real estate investment in hong kong and the mainland.

hang lung properties, apart from "updating and iterating" its main business, does not seem to have any other cross-border moves. in a letter to shareholders, the new head, chen wenbo, said: although the mainland consumer market has slowed down recently, the management believes that the trend of consumers pursuing high-quality life has not changed, and the demand for luxury goods and high-quality services still exists, which is hang lung's business advantage. the management will actively respond to market changes and mitigate their impact.

sun hung kai properties is not only focused on real estate development, but also actively expands its diversified business layout, covering ports and related services, retail, infrastructure, energy, technology, healthcare, telecommunications, finance and investment and other sectors. for it, whose business itself is relatively stable, expansion into other areas is just a "double insurance".

in terms of internationalization, the "second generation" has not stopped. for example, they continue to expand overseas markets, especially emerging markets such as southeast asia and europe, to diversify risks and find new development opportunities. at the same time, they have also increased their attention to the mainland market, taking advantage of the development opportunities of the guangdong-hong kong-macao greater bay area and other regions to strengthen cooperation and exchanges with the mainland.

although the old hong kong real estate developers and the "second generation" are facing declining profits and market challenges, they are all working hard to create opportunities and waiting for the opportunity of "recovery".

the first generation took advantage of the dividends of the times to lay the foundation for the industry and made a lot of money. although the second generation has higher education and a broader vision, the environment they live in is far more complicated than it was then. it is not realistic to learn from their ancestors to eat the big fat meat of real estate. although they are still optimistic about the future, how to overcome the current difficulties and how to reverse the decline in revenue are the top priorities.

starting a business is not easy, and maintaining a business is even harder. the three major real estate tycoons in hong kong, china, should understand the meaning of this sentence more deeply than ordinary people at this moment.