The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Ka Sing Chan

HONG KONG, Feb 5 (Reuters Breakingviews) - On paper, it looks straightforward. Blackstone BX.N would need to spend some $1 billion to replace the Cheng family as New World Development's 0017.HK top shareholder. That could give the U.S. investor led by Stephen Schwarzman a free hand to lead a partial break‑up of a Hong Kong property group trading at a whopping 86% discount to its HK$207 billion ($27 billion) net asset value. It's an enormous prize even if real estate prices correct further.

Blackstone, the world's largest property investor, has been circling the distressed $3.4 billion developer since at least August, Bloomberg reported, and it is now in advanced talks to become the single largest shareholder. New World narrowly avoided a default after it agreed to a major refinancing of bank loans in June. But that only bought it some time. It still needs to fund $3.7 billion of debt maturing over the next 24 months.

A cash injection from Blackstone would help. It could also accelerate asset sales by packaging some of New World’s HK$205 billion investment‑property portfolio, which generated HK$6 billion in rental income last year, into a real estate investment trust: China is trying to develop its REIT market, and Blackstone has already helped to make a market in India.

New World's stalling flagship projects would also benefit from fresh owners and a strategic reset. Chief among them is its $2.6 billion 11 Skies retail airport complex near Hong Kong's international airport. It's the largest shopping mall in the city by floor area, but tenants are pulling out amid a retail slump.

Yet taking a minority stake in a publicly listed company would be risky for the U.S. investor if the Cheng family, which owns a 45% stake, retains too much influence. New World’s steep discount partly reflects investor unease with its family‑run model. A debt‑fuelled expansion pushed it into crisis in the early 2000s. Only a sweeping restructuring, helped by Beijing’s subsequent policies to open Hong Kong further to mainland investment and tourism, set it back on a growth track. Schwarzman has deep ties in Beijing. He could beat Hong Kong property tycoons at their own game.

CONTEXT NEWS

Blackstone is in advanced talks to become the single largest shareholder of New World Development, Bloomberg reported on January 29, citing people familiar with the matter.

The family of Hong Kong tycoon Henry Cheng holds about a 45% stake in New World. The developer said in a stock exchange circular on January 30 that it has received proposals from several investors regarding potential investment, but none of such proposals would result in a general offer.

(Editing by Una Galani; Production by Ujjaini Dutta)

((For previous columns by the author, Reuters customers can click on CHAN/ KaSing.Chan@thomsonreuters.com))