PETER FOSTER's not-to-be-missed saga of Canada's most famous real-estate developers is a lesson in the pitfalls of guruhood. Simply put, Paul Reichmann became the guru of mega building projects, his judgement all but unquestioned by bankers who failed to insist on financial disclosure, pliant media co-opted into a mythologizing role, a public eager to see a capitalist of piety eclipsing the vulgarian breed and, ultimately, himself. Reichmann, like any guru, cultivated a mystique that legitimated an impenetrable secrecy. The key Reichmann money secret was that an enormous debt pretty well cancelled out the magnificence of Olympia,& York's assets. Had this been known earlier, the Canary Wharf project that bankrupted the company would never have got off the ground. The other key secret concealed by guruhood was Paul Reichmann's limited competence outside a few zones of impressive expertise -i.e. North American real-estate development and the intricate financing thereof.
Foster's account - clear, incisive, and often humorous - becomes an exercise in gentlemanly debunking. Despite the author's restraint, by the final bell Paul Reichmann does not look very good at all. In fact, once you factor out his many stylistic quirks, there is little to distinguish him from mega-deal-obsessed, kamikaze greed and-status mongers such as Donald Trump and Robert Campeau. The guru we once took to be wise turns out to be merely very smart, but rather unwise.
It wasn't until 1974, as Foster tells us, that the Reichmanns gave notice that Olympia & York wasn't going to be just another sizeable real-estate developer. That was when they began to erect First Canadian Place in Toronto. Flush with that innovative success, they boldly bit into a wormy Big Apple on the verge of bankruptcy and gobbled up eight skyscrapers for a ($320million) song. This "deal of the century" made the Reichmanns icons of financial acumen. The Midas touch henceforth attributed to them was to be their most important collateral. By 1982, their World Financial Centre complex in Lower Manhattan's Battery Park was nearing completion. It was the largest commercial development in the world. Many acquisitions and projects followed during the subsequent decade, but the true glory days were over.
There you have it: three lucky guesses confer guruhood and provide enough momentum to coast for a decade. Takeovers of Abitibi-Price, Gulf Canada, Hiram Walker, and so on grabbed headlines but proved far less lucky, sometimes even deleterious to their targets. A harbinger of disaster was Reichmann's very expensive dalliance with, of all people, Robert Campeau, which cost Reichmann $600 million, about equal to the amount that the Gulf takeover bilked from Canadian taxpayers. Then came Canary Wharf, the stupendous and entirely avoidable blunder that brother Albert couldn't talk Paul out of.
No decent transportation to Canary Wharf existed, or could possibly exist until years after the complex would be finished. The City of London, anticipating competition from some eventual Docklands development, eased up on bylaws to allow new buildings to go up - thereby meeting most of the demand for modem office space that Canary Wharf was to supply. A recession inevitably followed the 1980s frenzied boom, producing an out-and-out depression in real-estate values, especially in Britain, but in Canada and the United States as well. Reichmann's obsessive workaholic deal-making and grandiosity outweighed sound judgement. just as Hitler senselessly replayed Napoleon's disastrous assault on Russia, so the Reichmanns sensely replayed the debt-laden overexpansion of the famed developer Bill Zeckendorf, met the Russian winter of recession, and were utterly undone by it.
Foster spends only a few pages on the Toronto Life debacle, mainly to blast Elaine Dewar and company. He accurately describes her story as "so long and convoluted as to be almost impregnable." But surely the
Reichmanns would have done them, selves and the rest of us a big favour by writing a two-page letter to the magazine refuting Dewar's handful of insinuations/allegations. This would have exonerated the main subject of the articles - not the Reichmann brothers, but their mom.
Instead, a three-year lawyer-fest produced an almost meaningless blanket retraction that Renee Reichmann would never see, having died in the interim. "...all negative insinuations ... in the article about the Reichmann family and Olympia & York are totally false," it read. Wrong. Dewar's insinuation that 0 & Y's excessive debt-load might one day sink the company proved to be totally true. A year after the retraction, Paul Reichmann proclaimed 0 & Y's net worth to be $8.5 billion when in actual fact his company, the world's biggest private borrower, carrying a debt of more than $18.3 billion, had a net worth of less than zero. Compared with the billions that the Reichmarms will end up stiffing their creditors for - not to mention the resulting higher interest rates for all of us - and with the libel chill they thoughtlessly bequeathed their home province, the sins of Toronto Life pale to insignificance.
The publication of this updating of Foster's The Master Builders (1986) couldn't have been better timed. It appeared just as a Canadian bankruptcy court approved the plan to dismantle the Reichmann empire, and just as Paul Reichmann got a new job advising a real-estate development investment fund on snapping up empty Reichmann buildings and other bargains.
Read Towers of Debt and weep. Or, if you're a victim of the Reichmann juggernaut to oblivion, read it and chuckle. One bonus chuckle is that the diehard Reichmann booster and fellow libel litigator Conrad Black got stuck with new digs for his Daily Telegraph at Lemon Wharf.
