Fugitive tycoon tops FinanceAsia's Rich List

Joseph Lau, the former chairman of Chinese Estates Holdings, is the new number one on our Rich List, with over $1.5 billion in dividend payouts. The ailing property tycoon, who was convicted of bribery and money laundering in Macau in 2014 but has not returned to serve his sentence, benefited from a series of special dividends paid by Chinese Estates after asset disposals.

Chinese Estates issued three special dividends between August 2016 and May 2017 according to company filings, after selling a shopping mall and residential tower in Hong Kong, retail outlets in Shenzhen, as well as its holdings in a Chinese bank. The assets were sold to Lau, his 37-year-old wife, Chan Hoi-wan, and his eldest son by an earlier marriage, Lau Ming-wai.

This continues the trend seen over recent years whereby Lau, commonly known as “Big Lau”, has sought to allocate company assets directly to himself and his family members as health and succession issues have come to the fore. He is one of many Hong Kong property tycoons looking to unlock value in his empire.

Chinese Estates has issued 14 special dividends since 2009, again many of them after disposals of property assets such as sales of the Silvercord properties in Hong Kong,  La Scala development in Macau in 2014 and of The ONE shopping mall and MassMutual Tower in Hong Kong in 2015.

In a surprise filing in March the property tycoon also revealed that he was restructuring his holdings in Chinese Estates, citing his deteriorating health. Lau redistributed his 74.99% ownership stake, held under a share trust and worth an estimated $2.17 billion, to his wife and eldest son.

However, the shedding of retail and office properties has had a negative impact on Chinese Estates’ bottom line. Despite a 142.8% increase in revenues, mostly due to property sales, net profit at the property developer fell by 17.7% in 2016, partly due to the loss of rental income, the company’s annual report shows. Retail rental revenue fell by half and overall rental income dropped by over a third.

Chinese Estates’s structure may explain its high dividends and slumping profits. “[Family businesses controlled by trusts] tend to be overpaying dividends, underinvested long term,” said Joseph Fan, a finance professor at Chinese University of Hong Kong and a leading expert on family wealth and succession. “[Shareholders] are not true owners of their family business,” he explained, “so their incentive will be cashing out quickly.”

Lau announced his resignation as chief executive and chairman of Chinese Estates in March 2014 after his bribery and money laundering conviction in Macau. He appealed the decision, but Macau’s Court of Final Appeal upheld the initial sentence of 5 years and 3 months in prison, according to Macau court documents. Lau has avoided jail time due to the lack of an extradition treaty between Macau and Hong Kong.

The Hong Kong native is known for his lavish spending, reportedly spending over $100 million on diamonds as a gift to his-then 7-year-old daughter with Chan, Josephine. Lau has also accumulated an extensive art collection, including pieces by Andy Warhol and Paul Gauguin.

His relationships have made headlines too, starting with his divorce in 1992 from his first wife and mother to Lau Ming-wai, Bo Wing-kam. Bo also had a daughter with Lau and passed away in 2003.

Lau, 66 years old, also has two children, a son and a daughter, with former Miss Hong Kong contestant Yvonne Lui, though that relationship ended in 2014, according to a full-page announcement issued by Lau and printed in several Hong Kong newspapers last November.

A week after the breakup was announced, Lau and his then-girlfriend Chan registered for marriage in Hong Kong. Chan, a former entertainment reporter for local paper Apple Daily, was subsequently handed ownership of 50.02% of Chinese Estates as the trustee for their two children, making her the richest woman in Hong Kong.

FinanceAsia compiles an annual list of Asia ex-Japan’s richest business families according to the dividends paid to them through their shareholdings in publicly listed assets. Check back on Monday for the full Rich List.