Legendary developer Paul Reichmann dies
October 29, 2013 By Canadian Press
Oct. 29, 2013 – Few Canadian business executives ever achieved the
legendary status Paul Reichmann did in the years before his
family-controlled real estate empire collapsed. Reichmann, who died Oct.
25 at the age of 83, built Olympia and York Developments into a
$25-billion empire that was once the world's largest private real estate
company, and whose key buildings remain prominent fixtures in their
Oct. 29, 2013 – Few Canadian business executives ever achieved the legendary status Paul Reichmann did in the years before his family-controlled real estate empire collapsed. Reichmann, who died Oct. 25 at the age of 83, built Olympia and York Developments into a $25-billion empire that was once the world's largest private real estate company, and whose key buildings remain prominent fixtures in their communities.
Reichmann, with his brothers Albert and Ralph, turned a Toronto tile company into a major international property developer that became the name behind some of the best-known projects in the world before eventually going bankrupt in the early 1990s. Among the major financial complexes it built were Canary Wharf in London, the World Financial Center in New York City and First Canadian Place, the tallest skyscraper in Toronto.
Part of the Reichmann mystique was an uncanny shrewdness revealed over and over until it lost its currency with Olympia and York's disintegration in the commercial real estate bust of the early 1990s. Unmistakable in appearance with his full beard, piercing brown eyes and ever-present dark business suit and yarmulke, Reichmann was a business tycoon with a soul. He had a reputation for integrity, an aversion to publicity and a deep commitment to the Orthodox Jewish faith. He preferred to seal his business deals with a handshake instead of corporate lawyers.
Paul Reichmann was born in 1931, the son of a Vienna egg exporter. His family fled the Nazis during the 1940s and ended up in the Moroccan port of Tangier for several years before arriving in Canada in 1956. The family opened a tile importing venture that led to real estate when the brothers realized it would be cheaper to construct a new warehouse themselves than hire a builder.
The Reichmanns first became a force in Canadian real estate in the 1970s, as they expanded their presence from Toronto to Ottawa and the West. What became O and Y's flagship property in Canada, the 72-storey marble-covered First Canadian Place in downtown Toronto, was finished in 1975. Two years later, Reichmann made a deal that has since been celebrated as the quintessence of his business acumen. In the midst of an economic slump in which New York City flirted with bankruptcy, he bought eight Manhattan skyscrapers for US$320 million. The value of the buildings soon tripled to more than $1 billion. In the ensuing years, O and Y built the World Financial Centre in New York and acquired enough properties in Canada and the United States to rank as the world's largest private landlord. To diversify, Reichmann also engineered a string of costly investments in the newsprint maker then known as Abitibi-Price and Gulf Canada Resources. For years, the brothers appeared in lists of the world's Top 10 richest families. Their fortune was estimated as high as $12.8 billion U.S. in 1991 and, although they lived well, the Reichmanns
were not ostentatious. He and his brothers closed their offices on the Sabbath and other holy days and were active philanthropists who gave away millions of dollars in donations.
Above all, Paul Reichmann seemed to crave privacy for himself, his financial affairs and his family, dispensing occasional interviews only to selected publications. However, he preferred to downplay suggestions that he and his family were publicity shy. "The fact is that we've always been open, except that, as far as the business community or the public is concerned, there is no interest in knowing exactly where this fellow was born or where he comes from,'' he said in an interview with the Canadian Press in late 1985. "There are certain types of activity which are totally within the private realm and don't concern anyone.'' With that in mind, O and Y was a private company, which means that its size and ownership was never certain, and the family dismissed questions about how much money they had. "If someone says 'What is your net worth or your family's net worth or your private company's net worth?' It is nobody's business basically,'' Reichmann said. When a journalist wrote an in-depth profile of the family for Toronto Life magazine in 1987, Reichmann launched a $102-million libel suit that was settled out of court years later. He could also be dismissive of those who raised questions about his business empire. In a December 1990 interview with the New York Times, for example, he said people speculating that O and Y was pressed for cash were "children who don't know what they are talking about.''
In a sense, Reichmann's vision made O and Y great, and that same vision was the company's downfall. When O and Y took over the Canary Wharf project in London's east end docklands in 1987, Reichmann believed London was on its way to an new era of prosperity under then prime minister Margaret Thatcher. But Britain slumped and its commercial real estate market withered. The $7-billion, 28.5-hectare Canary Wharf monopolized Reichmann's time and money when a recession in North America was relentlessly shrinking property values and slashing rental revenues. With his once-cordial relationship with bankers deteriorating by the minute, Reichmann tried to turn things around by hiring a respected New York banking executive to be president of O and Y. The banker soon quit amid rumours that Reichmann was unwilling to hand over control. O and Y filed for court protection from creditors in May 1992 with a debt of $8.6 billion. Canary Wharf was taken over by a liquidator shortly after. By the time O and Y was emerging from the court proceedings in January 1993 it was little more than a manager of the properties it once owned. But in less than a week, Reichmann announced plans to form a new real estate investment partnership with New York-based financier George Soros. Later, he returned as chairman of Canary Wharf and held the position until 2004 when he resigned under an ownership change that also saw the value of his stake in the project climb higher.
His final years were mostly spent in retirement, though he dabbled in business with a new $4-billion fund called PR Capital. One of the fund's first moves was to submit a conditional bid for the Retirement Residences REIT, in which he already owned a 12-per cent stake. His offer was rebuffed for another bid, but despite the perceived failure, some in the business community saw it as a strategic move intended to entice other buyers and drive up the bidding price. Reichmann after all was a man of calculated strategy and one who rarely acted simply on intuition.
"Any businessman who makes decisions under pressure will make more mistakes than right ones,'' he once said. "That's one of the first lessons an executive has to learn.''
Photo courtesy of The Telegraph.
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