A century-old wealthy family that rose from Shanghai

A New Year Comes (1971).

On the first day after New Year's Day, Chen Guangliang, as usual, came to Cheung Kong Holdings.

Although the assets of the Global Group exceed those of the Cheung Kong Group, in Chen Guangliang's mind, the Cheung Kong Group will always be the 'leader' of the family business.

The reason is quite simple: CK Asset Holdings is divided into five major business categories – real estate development, commercial real estate, hotel management, retail manufacturing, and food and beverage. Among them, real estate and hotels are the "stabilizing force" and the enduring "commercial hegemony".

In fact, even during periods of real estate downturn in later years, a company with extremely low debt levels could still reap considerable profits in commercial real estate. 'Real estate hegemony' is not a joke, but a real phenomenon that exists in every country, except in truly socialist countries.

The annual CK Asset Holdings Limited senior management meeting began at 9:30 a.m., with all core senior executives from the five major business units in attendance.

The meeting was chaired by General Manager Chen Wenjie, while Chen Guangliang simply sat in the head seat and listened from the sidelines.

Lu Xiaoqing, the person in charge of developing the real estate business, was the first to report to his superiors:
Last year, Cheung Kong Property sold 1650 residential units, an increase of 10% over the previous year, accounting for less than 15% of Hong Kong's residential supply.
In commercial real estate development: First, the tropical-themed Garden Wing of the Shangri-La Hotel in Singapore has already broken ground and is expected to open in 1973. The prestigious Valley Wing will begin construction this year and is expected to open in 1975. The design sketches for the new Shangri-La Hotel tower in Hong Kong are complete, and construction is expected to begin in the second half of the year. Finally, HKR's Discovery Bay project will see its golf club and yacht marina open in the first half of the year; simultaneously, we will invest HK$2 million in infrastructure, including an artificial beach, a pond, regional roads, and electricity.
Currently, CK Asset Holdings has 16 sites under construction (of varying sizes). Among them, the 'Grand Garden' luxury residential project at 1-3 MacLehose Road, Mid-Levels, will be completed this year, with 120 luxury homes of over 3000 square feet each to be handed over to commercial real estate projects. We expect our total sales for this year to exceed 2000 residential units.”

Later.

Lin Gaoming, head of commercial real estate, reported: "After seventy years, our Cheung Kong Plaza and Paterson Street integrated projects have become a core force in Hong Kong Island's retail sector, with a occupancy rate consistently at 99%. Star House on Kowloon Island has also maintained a 98% occupancy rate since 1969, with rents on the second floor and above now exceeding HK$5 per square foot, and the first floor renting for HK$100 per square foot. This building is valued at over HK$1.2 million. (Also mentioned are Lane Crawford Centre in Singapore and Lane Crawford Centre on Queen's Road.)"

Commercial real estate is substantial in scale and generates stable returns, forming a cornerstone of CK Asset Holdings.

Later, Bruce, head of Lane Crawford Group, Li Guojie, head of Shangri-La Hotels and Resorts, and Chen Zhixing, head of the Food and Beverage Group, all gave work reports.

Chen Wenjie began by saying, "Hong Kong Development Bank is undoubtedly a capital-intensive business. We will invest more than 3 million in infrastructure and projects. So next year we will consider selling the first phase of low-density villas to recoup some funds. Of course, on the other hand, we will consider listing Hong Kong Development Bank at the right time to reduce the burden."

Last year, Cheung Kong Holdings' profit only exceeded HK$120 million. Now, investing in several commercial projects has indeed cost a lot of money – a new Shangri-La hotel tower totaling HK$600 million, the Discovery Bay project with an initial investment of more than HK$300 million for infrastructure, golf club, yacht marina, etc., and the second phase of the Shangri-La Hotel in Singapore.
Of course, with the Hong Kong property market booming, Cheung Kong Holdings' profits have been soaring every year, so it's not too worried about funding issues.

When Chen Wenjie mentioned "spin-off listing", everyone started discussing it.

Some have suggested that Shangri-La Hotels could list its three hotels in Hong Kong together, which would raise a large amount of capital.

Chen Wenjie said with a smile, "Ladies and gentlemen, our Cheung Kong Group is not short of funds. We will spin off Hong Kong Resorts International for listing later. However, this project has the characteristics of long development cycle, large investment, and slow return on investment. On the other hand, Shangri-La Hotels and Resorts' three hotels in Hong Kong (Shangri-La Central, Furama Causeway Bay, and Miramar Tsim Sha Tsui) have stable profits and fast growth rate. They are high-quality assets and we are not considering spinning them off for listing at the moment. So, overall, only Hong Kong Resorts International is suitable for listing in our group."

This statement was met with approval from most senior management.

Lu Xiaoqing said, "Among Hong Kong-listed companies, Cheung Kong Holdings' profitability is second only to HSBC, and higher than Jardine Matheson and Hongkong Land. With the property market booming and other businesses growing rapidly, we need to carefully consider spinning off a separate listing."

If CK Asset Holdings wanted to spin off any of its assets for a separate listing, any one of them would be remarkable. For example, let alone listing the three Shangri-La hotels in Hong Kong, even listing the Miramar Hotel in Tsim Sha Tsui could raise hundreds of millions of dollars.

In other words, a Miramar Hotel is roughly equivalent to a Sun Hung Kai Properties property in Hong Kong.

A Shangri-La hotel in Central is larger than those owned by Sun Hung Kai Properties, Hopewell Holdings, Hang Lung Properties, and New World Development.

Throughout the meeting, Chen Guangliang did not express any opinions; he simply listened.

After the meeting ended, Chen Wenjie went to the chairman's office.

With only two people present, Chen Guangliang said, "The stock market is expected to reach a suitable listing time in the second half of next year, and Hong Kong Development Bank can be spun off and listed. In addition, although Cheung Kong Group is not short of funds, it cannot be without a sense of crisis. Therefore, if everyone goes public in the second half of next year, which means that the stock market has reached its peak, Cheung Kong Group can also consider a rights issue, issuing one new share for every ten existing shares to raise a large amount of funds."

Chen Wenjie listened attentively, and then asked after a while, "So, should our family participate in the rights issue, or should we dilute our own shares first and then increase our holdings to 75% when the time is right?"

My father had mentioned that this wave was cyclical, which is why he asked that question.

Chen Guangliang replied without hesitation, "Naturally, we won't do a rights issue. We'll buy more shares at a lower price when the opportunity arises. It's like buying high and selling low, except we're not selling directly at a high price."

"Ok"

This round of fundraising is estimated to raise HK$4 million, which is not a small amount. After all, companies like Hopewell Holdings, Sun Hung Kai Properties, New World Development, and Hang Lung Properties only raised HK$1 million each, which are already considered large sums of money for listed real estate companies.

The funds raised were used to buy at the bottom of the market in 1974-1975.

The next day, Chen Guangliang attended another meeting of the Global Group.

The Global Group has two major subsidiaries: Global Shipping and Global Trading.

As for Hong Kong Airlines, it is now a subsidiary of Worldwide Shipping. Hong Kong International Container Terminals (Pier 4) is also a subsidiary.

However, Global Group is nominally a 'holding company', so its subsidiaries are actually large-scale subsidiaries.

At the meeting, more than a dozen core executives gathered together, but the Chen family accounted for four of them.

With the support of his uncle Chen Guangcong, Chen Wenming began to report on his shipping work:

"By the end of last year, all the cargo ships we ordered had been launched and long-term contracts signed. Currently, we have signed five-year contracts for 50 of our 55 VCLL tankers, and the other five are under short-term transportation contracts. Non-VCLL oil tankers are all under medium- to short-term contracts. Aside from increasing our container ship fleet, we have no plans to build oil tankers or three more cargo ships." "Our multiple lending banks have given us prompt evaluations, and our debts are being gradually repaid."

"By the way, I've been in contact with Yamaguchi Lines of Japan, and they're interested in selling Container Terminal 2."

The Hong Kong Container Terminals were initiated in the early 1960s under the impetus of Chan Kwong-leung and officially began operation in 1962.

Therefore, in the development of container terminals, Worldwide Shipping naturally had a head start, holding a 20% stake in Terminal 1 and winning the bid for Terminal 4 in 1968.

Chen Guangliang immediately said, "Talk to Yamaguchi Steamship Company and try to buy Container Terminal No. 2."

"it is good"

Next, it was Fang Runzhang, General Manager of Global Trade, who gave his report:

Currently, Global Trading has departments for rice, grains and oils, food, cosmetics, monosodium glutamate and seasonings, building materials, mechanical engineering, eight automobile companies, four repair and service centers, and electrical appliances, acting as an agent for Italian, German, American, and Japanese household appliances and audio equipment. Its export department introduces and represents Hong Kong products to global buyers, including fashion apparel, sportswear, electronics, and novelty items. Global Trading currently employs over 3800 people.

Wow, Chen Guangliang has rarely been involved in the work of this company, only providing a lot of support at the beginning. Now, unexpectedly, its size ranks among the top 20 companies in Hong Kong, and it can easily be included in Hong Kong's blue-chip stocks.

No wonder outsiders say that the Chan family is synonymous with Hong Kong. In later generations, their status would be even higher than Samsung's in South Korea.

Fang Runzhang continued his report: "Next, we plan to open three branches in Vancouver, Canada, Singapore, and Sydney, Australia. We will also set up offices in Melbourne, Australia, Toronto, Canada, and Los Angeles, USA, forming a global business sales network to fully develop international trade in imports, exports, and entrepot trade."

Branch offices are the highest level of overseas branches, followed by representative offices, and then agent offices.

Chen Guangliang immediately said, "I strongly support this kind of development. Global trade belongs to everyone, and the better it develops, the more everyone will benefit."

After years of development, the Chen family now owns 70% of Global Trading's shares, with the remaining 30% held by management and employees. Global Trading distributes substantial dividends annually, benefiting at least a thousand people.

Furthermore, the shares of Global Trading are not allowed to be bought and sold privately. If someone wants to sell them, Global Trading will pay for them and then sell them to its own employees.

Later, Chan Man-po, who was appointed as an executive director of Hong Kong Airlines, also reported on the situation on behalf of Hong Kong Airlines: "Hong Kong Airlines currently operates six routes: Tokyo, Osaka, and Okinawa in Japan; Seoul in South Korea; Taipei in Taiwan; and Manila in the Philippines. Hong Kong Airlines has a relatively advantageous position on these routes, mainly due to the service and management we have built up over the years. Of course, if we take reinvestment into account, we have not actually made a profit on these routes to date. However, according to our analysis, the late 1970s may be a period of profit growth."

The statement that the airline has never been profitable does not mean it has suffered losses, but rather that the money invested in the past has never been returned as dividends. However, Hong Kong Airlines' asset size has indeed grown year by year, meaning that all the money earned has been used to purchase aircraft.

"Yes, the aviation industry is not in a hurry to make a profit; what's important is assets."

When Chen Wenming of Global Shipping reported to Chen Guangliang that "Yamaguchi Shipping of Japan intends to sell Container Terminal No. 2", a commercial contest surrounding the Kwai Chung Container Terminal in Hong Kong had already quietly begun in secret - Hutchison Whampoa's helmsman, Qi Dezun, also set his sights on this "shipping hub".

By then, Hutchison Whampoa was no longer the second-rate British trading company it once was. Under the leadership of Sir John C. K., the company made a series of precise acquisitions: it acquired Watsons, Tak Wai Po, and Tai Wo, three trading and retail companies, thus controlling Hong Kong's consumer channels and import and export trade; it acquired Whampoa Dockyard and Kwan Yik Warehouse, holding a large tract of land in Hung Hom, and built a container terminal there, thus becoming a first-rate British trading company with the status of a "major landowner" in Hong Kong.

Ambitious, Qi Dezun knew that container terminals were the core of Hong Kong's future shipping industry—whoever controlled more terminals would gain the upper hand in global trade. Upon learning that Yamaguchi Shipping intended to sell Container Terminal 2, he immediately put aside his current affairs and personally led a team to Japan to negotiate, determined to acquire this lucrative prize.

However, just as Qi Dezun made initial contact with Yamaguchi Steamship, he learned that "Global Shipping had already started negotiations."

As a "giant" in Hong Kong's shipping industry, Worldwide Shipping has long been involved in container terminals with its fleet of 55 VLCC tankers and global shipping network. It holds a 20% stake in Terminal 1 and successfully acquired Terminal 4 in 1968. If it were to acquire Terminal 2, it would form a "semi-monopoly" in the Kwai Chung Container Terminals.

Qi Dezun was unwilling to miss the opportunity and immediately decided to "bid higher" in an attempt to overwhelm his opponent with his strong capital: "Tell Yamaguchi Steamship that Hutchison Whampoa is willing to raise their bid by 10% and, as long as the deal can be finalized, long-term cooperation can be carried out in the future."

In his view, the capital strength and industry status of the British trading company were enough to tempt Yamaguchi Steamship.

When the news reached Global Shipping, Chen Wenming, who was in charge of the negotiations, remained completely calm.

Chen Wenming has cultivated deep connections in the Japanese business community for many years, and has established strong relationships with companies such as Nippon Shipping, Yamaguchi Steamship, and Mitsubishi Heavy Industries through his shipping business.

"Qi Dezun's attempt to win by raising prices is a gross underestimation of our relationship with the Japanese business community."

Chen Wenming visited again to negotiate with Yamaguchi Steamship Company. His offer was the same as Qi Dezun's, but he played the emotional card with Yamaguchi Steamship Company, promising to deepen cooperation in the future, such as allowing them to dock at Global's container terminal and enjoy preferential treatment and other benefits.

This move precisely hits Yamaguchi Steamship's "sweet spot." Compared to the short-term allure of Qi Dezun's "one-time price increase," Global Shipping's "long-term cooperation commitment" is more attractive.

More importantly, the reputation and resources that the Chen family has accumulated in Japan over the years make Yamaguchi Steamship Company more inclined to choose a "reliable partner".

Just as Qi Dezun was preparing to raise his bid again and lock in the deal, he received news that "Yamaguchi Steamship has signed a contract with Global Shipping".

He held the fax, his face ashen—he clearly had the advantage of capital, yet he lost because of "connections and resources."

This seemingly "highest bidder wins" battle ultimately ended with Global Shipping winning with a combination of "equal price + long-term cooperation." Qi Dezun, despite his ambition, failed to shake the Chen family's foundation in the Japanese business world and could only watch helplessly as Container Terminal No. 2 fell into the hands of his rival, suffering a major setback.

At the signing ceremony, Chen Wenming shook hands with the representative of Yamaguchi Steamship Company and remarked, "This is not just a transaction for a port, but also the beginning of trust between the two companies."

Meanwhile, Chen Guangliang, far away in Hong Kong, merely smiled faintly upon learning the result. For him, acquiring Container Terminal 2 was not only a crucial step in Global Shipping's "terminal + fleet" closed loop, but also a signal to British trading companies: in Hong Kong's shipping and real estate sectors, the Chen family already possessed the power to suppress established British firms. (End of Chapter)