Key Takeaways
Hong Kong’s New World Development is negotiating to pay an exit fee to terminate its US$9 billion long-term lease obligation for the 11 Skies retail and entertainment project, a move that highlights the developer's financial strain amid a broader property slump.
A representative for the Airport Authority said it has been maintaining close communication with New World regarding 11 Skies, adding that the project plans to lean more heavily on entertainment and dining.
The developer’s current agreement requires annual rent payments of at least HK$1.8 billion (US$230 million) from 2028 through 2066, a total commitment valued at around US$9 billion, according to UBS Group data. The proposed exit payment is unlikely to be in cash and may instead involve land parcels or other assets.
An exit is seen as a critical step for New World to alleviate a cash crunch, particularly after a proposed US$4 billion deal with Blackstone fell through. The negotiations cast uncertainty over the future of what was once billed as Hong Kong’s largest hub for shopping and entertainment, which now sits largely vacant.
The discussions are the latest chapter in the saga of the 11 Skies project, which has become a significant hurdle for the Cheng family-controlled developer. Several payment options are reportedly on the table, including the Airport Authority taking over land owned by New World, acquiring an equity stake in the developer, or New World providing free services.
The Airport Authority is now reportedly seeking new partners among major Hong Kong developers and global leisure operators to run the mall following New World's potential departure. The project's opening has already been pushed back, with the authority now considering a phased launch starting in 2028, a delay from the previous mid-2026 target.
While terminating the lease could help restore investor confidence in New World by removing a large future liability, the cost of the exit fee could add to its immediate financial pressures. The company is also seeking to sell other assets, including the Grand Hyatt and Rosewood hotels in Hong Kong, according to previous reports.
This article is for informational purposes only and does not constitute investment advice.
