Paul Reichmann, real estate magnate, dies at 83
Once the head of the largest real estate development company in the world, which went bankrupt in 1992, Paul Reichmann died Friday in Toronto. He was 83.
The reclusive Reichmann brothers built Olympia & York into a major international development firm after starting out as a small company marketing flooring and tile in Toronto.
The five Reichmann brothers were the sons of Orthodox Hungarian Jews who fled central Europe during the Second World War.
Older brother Edward started Olympia Flooring and Tile in Montreal and was joined in Canada by Paul, Albert, Louis and Ralph. After the brothers began a small company in Toronto, Paul Reichmann was the force who parlayed it into a global real estate empire.
Their developments included First Canadian Place in Toronto, the World Financial Center (right next to the World Trade Center in New York), and Canary Wharf in London.
Escaped the Nazis
Paul Reichmann was born in Vienna in 1930, where his father, Samuel, had his business at the time. His mother's name was Renée.
By sheer luck, in 1938, the family was visiting Paul's grandfather in Hungary when the Nazis occupied Austria and annexed it with Germany.
They settled in Paris for a time, but by 1940, the Nazis were there too. Late in life, Reichmann could still remember the Nazi bombing of refugees south of Paris.
The family moved to Tangier in Morocco, where they prospered, as his father became a successful currency trader.
When the war ended, Paul studied religion in Britain and Israel, and became a rabbi. In 1953, he went back to Morocco and became a shirt retailer. That same year he married Lea Feldman.
In 1956, Paul joined his brother Edward in Montreal. Then, joined by brothers Albert and Ralph, they started a development business in Toronto.
Flemingdon Park in Toronto
Initially, they built warehouses and commercial buildings. Their first major project was the development of Flemingdon Park in Toronto's Don Mills neighbourhood.
In 1971, they advanced right into the heart of Toronto's financial district and won the contract to build what was then Canada's tallest building, First Canadian Place, at King and Bay streets.
By the 1980s, Olympia & York was the largest property development firm in the world, having bought a portfolio of skyscrapers in New York.
"He seemed to have this extraordinary knack of being able to see value where other people couldn't see it, and also extracting value from the buildings he built by financing them in creative ways and raising money to go on to bigger and better things," said Peter Foster, the author of the 1993 book, Towers of Debt: The Rise and Fall of the Reichmanns.
In 1980, they got 50-per-cent control of Brinco Ltd., a natural resources development company in Newfoundland and Labrador. The next year they bought an 82-per-cent controlling interest in Abitibi-Price Inc., and they held a significant share of Royal Trust Company. In 1985, they bought Gulf Canada Resources Ltd.
Along the way, they had acquired English Property Corp., one of the largest developers in Britain. That was the company that enabled them to build Canary Wharf in east London, at once their greatest achievement and their greatest failure.
The crucible of Canary Wharf
The largest real estate development in the world at the time, it boasted Britain's tallest building, One Canada Square.
It was Reichmann's vision (only now coming to fruition) that it would be a kind of Wall Street of London and successfully compete with the city's historic financial district known as the City.
But by the time it was finished in 1992, the London commercial property market had collapsed, bringing down Olympia & York. In March of that year, Reichmann was forced to resign as president.
When it filed for bankruptcy in May 1992, Olympia & York owed more than $20 billion US to various banks and investors. It was closed down in 1993, and the Reichmanns were left with a small firm, Olympia & York Properties Corp.
What went wrong?
There are several theories about what went wrong with Paul Reichmann's judgment when he embarked on the Canary Wharf enterprise.
His reliance on his own business instincts may have led him astray, claims Foster.
According to the president of Canary Wharf, George Iacobescu, the Iron Lady herself, Margaret Thatcher, had personally called to ask Olympia & York to take on the development, and she promised that the Jubilee Line of the London Underground would be extended to speed up the trip to Canary Wharf from central London.
That promise was key to the development's success. But the line was not extended in her time. It opened only in 2000, long after the demise of Olympia & York.
Paul Reichmann was famous for sealing deals with a handshake and not bothering with corporate lawyers, and he always kept his word. He may have thought Thatcher would do the same thing.
Remained a wealthy man
The Olympia & York bankruptcy did not leave Reichmann poor by any means. In 2011 he was still listed among the richest Canadians. At number 30 on the list, his net worth was given as $1.83 billion, and that was up slightly from the year before.
In his usual secretive manner, Paul had continued with canny investments. For instance, he owned 70 per cent of Central Park Lodges, which in 1999 operated 74 retirement homes, 63 in Canada, the rest in the U.S., according to the National Post.
He was also involved in a $107-million project in Israel, according to the Jerusalem Post newspaper.
His company, IPC Jerusalem Ltd., built a five-star hotel and luxury condominium, called The Palace Jerusalem — The Waldorf Astoria Collection.
In 2004, he again bought a controlling stake in Canary Wharf, a development that by then was considered essential to the fabric of London. He gave it up in 2009.
Reichmann always lived humbly and austerely, in keeping with his ultra-Orthodox Jewish beliefs, even to the point of closing down his many development projects, and allowing no work there on the Sabbath.
"His accomplishments were titanic, just look at the Bank of Montreal building for example," said Tom Caldwell of Caldwell Securities. "Yes, he got bushwacked in Canary Wharf in England, but he came from a small business to play in the big leagues and he played it well. And he played it with dignity."