CITIES

The Reichmanns’ bold new venture

ANDREW PHILLIPS June 27 1988
CITIES

The Reichmanns’ bold new venture

ANDREW PHILLIPS June 27 1988

The Reichmanns’ bold new venture

CITIES

Amid the jarring clank of pile drivers and the low growl of bulldozers, the largest construction project in Europe gradually began to take shape last week. In the wasteland of deserted wharves and abandoned warehouses that forms East London’s famed docklands, several hundred workers started laying the foundations of a futuristic, $6.5-billion complex known as Canary Wharf. Eventually, more than 45,000 people will work there in 24 buildings to be built on what is now just a muddy pier crowded with construction cranes. It is an ambitious undertaking—and those working on the project appeared excited by their task. “It’s mind-boggling,” said Charles Young, the executive director of Olympia & York Canary Wharf Ltd., the company set up by Toronto’s Reichmann family to build the complex. “It’s the new England emerging from the ashes of the old.”

If it succeeds in attracting tenants, Canary Wharf will be a stellar achievement for the Reichmanns, the sole owners of Toronto-based Olympia & York Developments Ltd. (O&Y), which took over the development 11 months ago. At the same time, the Reichmanns purchased a major financial stake in a consortium that, earlier this month, won the rights to another

London megaproject: a $7-billion office and residential complex on 127 acres around two railway stations. With those two developments, the secretive family has taken a key role in changing the face of the British capital at a time when Londoners are hotly debating the future of their city. In the process, the Reichmanns have earned widespread respect for their determination and abilities. But they are also facing skepticism as to whether they will succeed—and growing resentment of their financial might.

Even by the standards of the Reichmanns—whose projects include Toronto’s First Canadian Place and the giant World Financial Centre in New York City—Canary Wharf is an immense undertaking. Paul Reichmann, 57, who runs O&Y along with his brothers Albert, 59, and Ralph, 54, spends about 10 days a month in London overseeing the project—routinely travelling home to Toronto, by commercial jet, to spend weekends with his wife, Leah. When Canary Wharf is completed in 1995, it will include more than 12 million square feet of office and retail space, 250 shops and restaurants, one 400-room hotel and 25 acres of parks and plazas. The first phase, eight buildings that are scheduled to open in 1991, includes an 800-foot office tower.

With a distinctive pyramid-shaped roof, that structure will be the tallest building in Britain—topping its nearest rival by 200 feet. According to Young, the project’s isolation from other shopping and commercial areas—a factor that might discourage potential tenants—helped to dictate its mammoth size. Declared Young: “It is a complete new business district. Rather than do one or two buildings in isolation, we are creating a complete environment.”

The 71-acre complex is the most ambitious element in the redevelopment of London’s docklands, which extend for 10 km along the north side of the Thames River. Dozens of office buildings and thousands of apartments and houses have sprung up since 1981, when Prime Minister Margaret Thatcher’s government selected the decaying docklands as an area for rapid development. Much of the district—including the Isle of Dogs, where Canary Wharf is located—became a so-called enterprise zone, a designation that streamlined planning regulations, provided tax breaks for builders and generated extensive construction. In fact, David Owen, the leader of Britain’s Social Democratic Party and a longtime resident of the east-end Limehouse district, said that the transformation

is London’s biggest restructuring since the one that followed the Great Fire of 1666, which devastated the city.

The Reichmanns took over Canary Wharf last July after two of its original financial supporters, Morgan Stanley International and Crédit Suisse First Boston, pulled out and the project ground to a halt. O&Y gained complete control of Canary Wharf for about $260 million — and Paul Reichmann declared at the time that his company would finance the undertaking on its own. O&Y’s planners then modified the project’s original design—shortening the central office tower by 50 feet, for one thing.

And the firm hired Sir Roy Strong, the former director of the Victoria and Albert Museum, as an adviser—in order to blunt criticism that the North American developers were not taking British planning concerns into account.

Still, O&Y has faced sharp criticism from some British architects, who contend that Canary Wharf will clash with London’s still-predominantly classical architecture. Francis Tibbalds, the president of the 14,000member Royal Town Planning Institute, called the revised design for the complex “simply abysmal” after

O&Y officials unveiled their plan in late March. Said Tibbalds: “The layout is simplistic and banal, the architecture lumpy and mediocre. The whole looks like a chunk of some aging, tired and dreary U.S. downtown dropped from a great height onto the Isle of Dogs.”

The Reichmanns, along with other dockland-district developers, are also the target of resentment for many residents of an area that was once a quiet, working-class backwater. Well-paid Londoners have swiftly purchased the new apartments and houses that are rising along the riverbank, where skyrocketing real estate prices are forcing out poor tenants, many of whom complain that their seedy but familiar neighborhoods are being transformed beyond recognition.

But some real estate experts have said that the Reichmanns must overcome serious obstacles before Canary Wharf becomes successful. Some analysts maintain that the current demand for new office space is insufficient to fill Canary Wharf. Conversely, other experts argue that a light rail line through the docklands— beginning with a 12-km stretch that Queen Elizabeth lí opened last summer-will prove inadequate to handle

the tens of thousands of workers who the Reichmanns say will eventually flood into the area every day. O&Y officials dispute those conclusions—and even their critics acknowledge that the Reichmanns have an unbroken record of success. Said Nick Thomlinson, a partner in the London property consulting firm Knight Frank & Rutley: “They are regarded as people who get things done. If anyone can make this work, they can.”

O&Y’s solid reputation is also a factor in the other major project in which the company is involved—the redevelopment of 120 acres of derelict land that borders the King’s Cross and St. Paneras railway stations in northeast London. Last month, the Reichmanns paid about $315 million to buy one-third of Stanhope Properties, a major British development company. Then, on June 2, British Rail awarded a consortium that includes Stanhope the rights to develop a railway lands project, which will include six million square feet of offices as well as new housing, theatres and stores. That complex—which may eventually be larger than the Canary Wharf project—is not scheduled to be completed before the year 2000, and O&Y has only a financial role in its development. Still, some analysts interpret the Reichmanns’ involvement as a good sign. Said one real estate expert: “Anything they get into seems to turn to gold.”

Despite the skeptics, O&Y officials say that they will see their London projects through to the end. Last month, when Thatcher attended the official launch of construction at Canary Wharf, Paul Reichmann declared that he is committed to building a strong base in Britain—and in a rare interview, with The Times, he praised what he called the country’s new positive attitude toward business. Other O&Y executives say that, if necessary, they are prepared to build Canary Wharf without any other committed tenants. Added Young: “There are always risks—but if there were no risks, there would be no rewards.” For the Reichmanns, London at the moment is a city of great risk—but potentially enormous reward as well.

-ANDREW PHILLIPS in London