Kerry Properties Limited

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Kerry Properties Limited

34th Floor, Bank of China Tower
1 Garden Road
Central
Hong Kong
(852) 296-72373

Public Company
incorporated: 1996
Employees: 1,209
Sales: US$388.61 million (1996)
Stock Exchanges: Hong Kong
SICs: 6552 Subdividers & Developers, Not Elsewhere Classified; 6531 Real Estate Agents & Managerys

Kerry Properties Limited is one of the most prominent companies in the enormous network of companies owned or controlled by Robert Kuok. Kerry Properties principally buys and develops real estate in Asia. It owns both residential and commercial property in Hong Kong as well as office buildings, car parks, and apartment buildings in China. It has a large stake in several major construction projects such as the Western Harbor Crossing Tunnel and a new airfreight terminal in Hong Kong, and the Shanghai expressway in China. It also owns millions of square feet of godown (warehouse) space in Hong Kong. Kerry Properties works closely with the Shangri-La chain of luxury hotels, which is also owned and operated by Robert Kuok companies. Kerry often buys the land that the hotels are later built on, and develops commercial and residential buildings in neighborhoods surrounding a Shangri-La hotel.

Robert Kuok is one of the most powerful businessmen in Asia, a figure comparable to Rupert Murdoch in the vastness of his holdings. Kuok’s businesses include sugar plantations and refineries; shipping companies; edible oil refineries and distributorships; chemical plants; construction projects including prominent new office buildings in China, Malaysia, the Philippines, and elsewhere; the Shangri-La hotel chain; Coca-Cola bottling franchises in Australia and China; the largest English-language daily newspaper in Hong Kong; and a controlling stake in a Hong Kong television network, which is the world’s largest producer of Chinese-language programming. These businesses are densely interconnected. Most are private companies. Some, like Kerry Properties, are publicly owned, and others, such as the Coca-Cola bottling franchise in China, are joint ventures. Many are operated by members of the Kuok family. Robert Kuok himself, aged 74 in 1997, is actively involved to varying degrees in the management of his many companies.

The 1960s—The Sugar King

Robert Kuok was born in Malaysia in 1923, the son of emigrants from Fujian, China. His father was a trader in various commodities, and was a successful and moderately wealthy man. The family lived in the city of Johore Bahru, which is immediately across the strait from the island of Singapore. Kuok’s father understood the benefits of the English language to businessmen, and the three Kuok sons attended the finest English schools in Malaysia. Robert Kuok’s classmates or contemporaries at college included Lee Kuan Yew, later prime minister of Singapore, Tun Hussein Onn, later prime minister of Malaysia, and many others who rose to political or entrepreneurial prominence. Kuok’s close ties to the wealthy and powerful in several Asian countries were often a prime factor in his ability to do business, and many of these ties were cemented when he was in his teens.

When the Japanese invaded Singapore in 1942, Kuok found work with Mitsubishi, and became fluent in Japanese. Then Kuok’s father died in 1949, leaving his fortune to his three sons, Robert, Phillip, and William. William Kuok became a guerilla working for Malaysian independence. He was ambushed and killed by British forces in 1952. Robert and Phillip used their inheritance to found a company they named Kuok Brothers, and they began buying and selling rice and sugar. The business expanded when Malaysia won its independence from Britain in 1957. Many British traders left, and the Kuoks were able to work on a much larger scale. The sugar business in particular was volatile, and Robert Kuok had a great knack for dangerous speculating. It was apparently Robert Kuok and not his brother who had the direct day-to-day control of sugar trading. Years later Kuok recalled his sugar speculating with a shudder, because as a young man he had taken such enormous risks. But the risks paid off. By the 1970s, Robert Kuok was known as the Sugar King. At times he controlled up to 10 percent of the world sugar market. During the build-up of the sugar business, Kuok diversified into several other areas. Kuok Brothers became a major sugar distributor in and around Malaysia, as well as the country’s largest sugar refiner in the 1960s. The company chartered ships for moving its sugar, and soon bought shipping lines. The company diversified as well into banking, insurance, and real estate development. Kuok diversified geographically also. His first business was centered in Kuala Lampur, though he also operated for a time from London, after his brother William was killed. In the early 1970s, he shifted his base to Singapore, and in the late 1970s moved to Hong Kong. Kuok ran his Hong Kong sugar trading business principally through a private company he named Kerry Trading.

Expansion into Hotels in the 1970s

The Sugar King’s profits can only be guessed at. Hong Kong law did not require disclosure of profits from private companies, so all Kerry Trading brought in was known only to Kuok and his trusted managers. But even before world sugar prices soared in 1973, Kuok clearly had money to spend. He began investing in a hotel in Singapore in 1971. At the time, there was a shortage of hotel space in the island nation. Kuok had stayed in some of Europe’s most luxurious hotels, and he concluded that as Singapore attracted an ever larger international business and tourist population, a fine hotel would prosper. Kuok built a hotel in partnership with other local rice traders, on land he owned. The Shangri-La was open for business years before competitors set about building similar luxury hotels, and so Kuok’s hotel was immensely profitable. Kuok moved to Hong Kong in 1979, and built a second Shangri-La there in 1981. The hotels were run at first by the prominent U.S. hotel company Westin. Then in 1983 Kuok formed his own company to manage his hotels, Shangri-La Hotels & Resorts. The ownership of the hotel chain was given to a separate Kuok company, Shangri-La Asia Ltd.

Next Kuok formed a joint venture with the state-owned Urban Development Authority in Malaysia, and built another Shangri-La hotel and an office complex on land Kuok owned in downtown Kuala Lampur. This project was planned at a time when Kuala Lampur badly needed office space as well as international hotels. In Singapore, Kuok had been ahead of the trend, and got his hotel operating well before the peak of the Singapore building boom. The Kuala Lampur Shangri-La unfortunately was not completed until 1985, just when the Kuala Lampur building boom was cooling down. So this hotel was not a money-maker right away. Nevertheless, Kuok seemed sure the hotel chain as a whole would be profitable in the future. He built a fourth Shangri-La in Bangkok, which opened in 1986, and began building another in Beijing.

Kuok also began building two hotels in the Philippines in 1986, even though that was the year longtime dictator Ferdinand Marcos fled the country, and the political stability of the country was in doubt. His expansion into the Philippines at such a time was a typical Kuok move. Where other business people might have stayed away, to wait and see what would happen, Kuok started building. No matter the crisis, he always proved himself capable of remaining in the good graces of governments. For instance, he had traded with China even during the Cultural Revolution, and had continued to work with the Malaysian government in the 1970s during a time when many ethnic Chinese were being forced to sell out in favor of Malaysians. Kuok had excellent relations with both the prime ministers of Singapore and Malaysia, and was in one case even an intermediary between them in a potentially explosive case of a Malaysian businessman jailed in Singapore. Kuok also cultivated a close relationship with President Suharto in Indonesia, and was a friend and business partner of Liem Sioe Liong, Indonesia’s wealthiest man. Kuok’s extensive personal ties smoothed his business dealings, and he was able to invest and build across Asia despite troubling shifts in regimes.

Company Perspectives:

Kerry Properties Limited has been formed to hold the Hong Kong and China property and infrastructure investments of the Kuok Group —an international, multi-faceted conglomerate with interests ranging from commodities trading and media to the renowned Shangri-La hotel chain. Kerry Properties builds its success on its commitment to quality and an entrepreneurial flair for selecting prime sites in quality locations. With the depth of management expertise of the Kuok Group behind it, Kerry Properties is poised for further growth following the reunification of Hong Kong and China.

Investments in China in the 1980s

Kuok began investing in China well before it became fashionable to do so. He had traded there for a long time in sugar, rice, and edible oils. In the early 1980s he bought property and built hotels in Beijing and in Shanghai and Shenzhen. He made a huge investment in 1984, committing to build the World Trade Centre in Beijing. The project was initially estimated to cost US$300 million, and probably cost $530 million to complete. Kuok planned to build the hotel, office, and convention center complex in a joint venture between Kerry Trading and China Foreign Economic and Trade Consultants. Kerry had a 49 percent stake, the Chinese company, 51 percent. The World Trade Centre was still not completed at the time of the Tiananmen massacre in June 1989. The brutal squelching of the pro-democracy movement led to the decay of many joint ventures in China. Kuok’s Shangri-La hotels in China went empty in the aftermath of the crackdown. In spite of his own monetary loss, Kuok shovelled more money into the World Trade Centre, and conveyed his loyalty to the Chinese government. Perhaps because of this, Kuok enjoyed almost unprecedented ease in getting large projects okayed in China. He had built six hotels by 1993, invested in an oil refinery, and was buying up choice downtown acreage in a dozen Chinese cities. Kuok’s companies, mostly in partnership with local Chinese companies, built apartment buildings, offices, and car parks, often clustered around a Shangri-La hotel. In 1995 Kuok entered a joint venture with an Australian company, CSR, which had a growing business in building materials in China.

Other Investments in the 1990s

The number of companies owned or controlled by Robert Kuok was estimated at more than 250 in 1986, and 10 years later there were even more. Many were owned by Kuok family members, and there were many joint ventures between separate Kuok companies. There was not a clear structure or hierarchy within the network of companies. Even the hotel chain, Shangri-La, was not all under a single ownership. Therefore it is easiest to explain the Kuok group’s growth geographically and by industry, rather than by company. The Kuok empire grew even more geographically diverse by the 1990s. There were two Shangri-La hotels in Fiji, several more in Indonesia, a total of six across Malaysia by 1997, and now two in Singapore. In addition there was a Shangri-La hotel in Seoul, South Korea, and in Bangkok, Thailand. Kuok also began building a more modest chain of hotels, called Traders, that catered to business travelers rather than tourists. Kuok built Traders hotels in the Philippines, Singapore, and in Myanmar (Burma). His Shangri-La Hotels & Resorts, the hotel management company, also ran a hotel in Vancouver, Canada. Kuok’s sugar, rice, and edible oil trading and manufacturing ventures sprawled across Malaysia, Indonesia, Vietnam, China, Hong Kong, Singapore, and Thailand by the late 1990s. There were many other diverse, smaller lines of business, for example a chain of cinemas in Singapore and a cigar manufacturer in the Philippines.

Kuok also invested significantly in media in Hong Kong in the 1990s. In 1993 he bought 35 percent of the South China Morning Post, Hong Kong’s largest English-language daily newspaper. The paper was highly profitable, though sources quoted in a 1997 Euromoney profile of Kuok suggested that there may have been a motive beyond money. Kuok had close ties to the mainland Chinese government, and the Euromoney article surmised that Kuok made his investment in the influential newspaper in part in order to put the paper “in safe hands” (i.e., favorable to China) as the turnover of Hong Kong to China approached. Whatever the reason, Kuok also went on to invest in Hong Kong film, music, magazines, and television by purchasing large stakes in two media companies, Television Broadcasts (TVB) and TVE Holdings. TVE, a media conglomerate, and TVB, the largest producer of Chinese-language television programming in the world, were both controlled by a renowned Hong Kong film director, Sir Run Run Shaw. Kuok wrested control of TVE from Shaw in 1996 in an unprecedented hostile takeover.

Kuok’s Kerry Group, the private Hong Kong company that later became Kerry Properties, took a step in a new direction in 1993 by winning the Coca-Cola franchise for much of mainland China. The company seems to have been chosen in large part for Robert Kuok’s extensive business contacts in China, and Kerry Group’s known ability to get large projects approved and built. Kerry Group took 87.5 percent and Coke the remaining 12.5 percent in the joint venture that was estimated to be worth billions. Then Kerry Group made a striking acquisition in 1996. It paid US$518 million for a 9.275 percent stake in Coca-Cola Amatil, an Australian company that was one of Coca-Cola’s anchor bottlers and its most important bottler serving Asia. The investment gave a Kuok executive a seat on the Coca-Cola Amatil board, and consolidated Kerry Group’s position as a major Coke distributor.

Recent Developments

Kerry Group went public in July 1996, and was listed on the Hang Seng index in Hong Kong. It changed its name to Kerry Properties, and it is now the leading public company in the Kuok group. Kerry Properties owned much of the land under and around the Chinese Shangri-La hotels, as well as many warehouses in Hong Kong and commercial and residential buildings and property in both Hong Kong and China. Kerry Properties was also involved in large construction projects such as the Western Harbour tunnel, which links Hong Kong Island to the West Kowloon expressway on the mainland. Kerry Properties also won a contract estimated at HK$12 billion to develop housing, offices, and shops on the rail corridor leading to a new airport. The newly public company retained Robert Kuok’s two eldest sons on the board, as well as top executives from other Asian and Western companies. By going public and seeking foreign investors, Kerry Properties seemed to be readying itself to carry on even without the direct management of its founder, Robert Kuok, who turned 74 in 1997.

Kerry Properties announced in its initial public offering that it was explicitly interested in attracting foreign investors, and the company seemed to be stepping away from the close family control of many of Robert Kuok’s companies. It seemed a lucrative investment for people looking to get in on the expanding China market, as the company had bought property years earlier and was now selling or developing it at high prices. Kerry’s first announced six-month results were double that of the same period a year earlier, before its reorganization, and the company cheerfully expected record profits. It had many ongoing construction projects by 1997, including a 70 percent stake in a hydroelectric dam it was building in Benxi, China. The company also had an enviable portfolio of property. In 1997 Kerry derived considerable income from the sale and rental of units in office towers in Hong Kong and in mainland China, and from the sale of luxury townhouses. The company built two new godowns (warehouses) in 1997, giving the company a total of 4.4 million square feet of godown space in Hong Kong. The company had many projects in the works as well, such as a scheme to build three 50-story apartment towers in the city of Sham Tseng, and the expansion of facilities Kerry had a 25 percent interest in at the Shenzhen Kaifeng Terminal in mainland China. In August 1997 the company listed its profits for the six-month period ending June 30: up 189 percent from the same period a year earlier. With its valuable real estate portfolio and proven ability to carry out ambitious construction plans, Kerry seemed ready to bring in ever greater profits as long as China was growing and building.