COVER

THE EMPIRE BUILDERS

THE REICHMANNS BUILT BY TAKING RISKS

TOM FENNELL April 6 1992
COVER

THE EMPIRE BUILDERS

THE REICHMANNS BUILT BY TAKING RISKS

TOM FENNELL April 6 1992

THE EMPIRE BUILDERS

THE REICHMANNS BUILT BY TAKING RISKS

On Bay Street, older brother Albert Reichmann, family strategist Paul and youngest brother Ralph are called, behind their backs, “the Hats.” The nickname is a reference to the oldfashioned black fedoras that once were a part of their sternly conservative business attire. The fedoras have been retired for the most part, although the brothers customarily wear the Jewish yarmulke, or skullcap. But the formal manner remains.

So too does an audacity that is sharply at odds with the brothers’ reserved Old World bearing. The extent of their daring was seldom more evident than in the spring of 1990, when, in a rare interview, Paul Reichmann sketched his vision of the future. The centrepiece of that vision was Canary Wharf, the vast development that the family was building in east London, anchored by what would become Britain’s tallest building. The project, Reichmann said, would soon house the financial heart of a united Europe. Said Reichmann: “I saw it as an opportunity to create a new business centre for London, the dominant city of the new single Europe.”

Last week, however, as Paul Reichmann turned his title as president of Olympia & York Developments Ltd.

(O&Y), the family’s holding company, over to U.S. banker Thomas Johnson, it was clear that Canary Wharf had stretched even his audacity to the limit. The installation of a non-family member in such a senior post was a startling acknowledgment of vulnerability on the part of a family that has relied largely on its own counsels for survival through a long, dramatic and highly successful lifetime.

Survival: The Reichmanns developed their self-reliance early in the century. In the prosperity that followed the First World War, their father, Samuel, operated a thriving egg exporting business in Vienna. But when Adolf Hitler began threatening to annex Austria and Jews feared for their survival, the senior Reichmann moved his family to Paris. The move was the first of many. In 1940, when Hitler’s armies swept into France, the Reichmanns and their young children fled again, to the relative security of Tangier, in North Africa. Using money that he had presciently saved beyond reach of the Nazis in a British bank, Samuel Reichmann set up shop in the Moroc-

can port city as a currency exchanger. And it was in Tangier that the Reichmann children came into contact with the survivors of the Nazi death camps, many of whom were being cared for by their mother, Renée Reichmann.

After the war, the younger Reichmanns travelled to London and North America, and looked for a new home that seemed to offer

more security than the Europe they had left behind. By the late 1950s, the three brothers were living in Toronto. Their first venture was a tile-and-marble importing business—now one of the largest in North America. As that company prospered, the Reichmann brothers expanded into real estate development, quickly earning reputations as honest, conservative businessmen who had built a number of highquality projects in Toronto. In the mid-1960s, they established O&Y as their principal corporate vehicle, taking the name from earlier companies that they had founded in Canada.

The deliberately low-profile Reichmanns

abruptly rose to international prominence in 1977, when they completed what would turn out to be one of their most successful purchases. In that year, O&Y purchased several older buildings, which included two giant towers on Manhattan’s celebrated Park Avenue, for $350 million and redeveloped them. Prime commercial property rents soon sky-

rocketed, and later the purchase would become known as the “deal of the century” in investment circles.

As O&Y grew from a small tile-and-marble importing company into a real estate empire spanning the continent, Paul Reichmann’s reputation as a consummate deal-maker and businessman of integrity grew along with it. And some of his most lucrative arrangements were with governments. Indeed, when O&Y paid $2.8 billion for 60.2 per cent of Gulf Canada Resources Ltd. in a diversification campaign in 1985, Reichmann was granted a $500-million federal tax break on the transaction, and also

managed to finance part of the purchase by selling some of Gulf’s assets to Petro-Canada, a Crown corporation. Two years later, he was able to make use of tax incentives that Britain’s Conservative government had offered to investors willing to develop disused industrial land in London.

And he assembled the massive financing for his most ambitious and most spectacular project of all—Canary Wharf.

Risk: Among close observers of the Reichmanns’ success, Paul Reichmann’s appetite for ever larger and more complex undertakings has long been evident. Bay Street financier Andrew Sarlos, for one, a close friend of the Reichmanns, describes the family’s chief strategist as a “gambler” who enjoys the thrill of making ever bigger and more spectacular deals.

For his part, Marshall (Mickey) Cohen, a former federal deputy minister of finance who now is head of the Toronto-based Molson Cos.

Ltd., and who managed equity investments for O&Y, described the company in 1988 as highly aggressive. “We are risk takers,” said Cohen. He added: “We are not intimidated by size.”

At the same time, among Orthodox Jews in Canada and around the world, the Reichmanns were celebrated less for their financial genius than for their unshakable reputation for integrity and probity—and their generosity to their

religious community. All three Reichmanns are married, and five modestly in a predominantly Jewish Toronto neighborhood. In addition to leading resolutely Orthodox lifestyles, the three have contributed large sums to primarily Orthodox Jewish causes in many countries.

Said Michael Brown, an associate professor of Hebrew Studies at Toronto’s York University: “People in the Orthodox community take great pride in the Reichmanns. More so than for their wealth, they are seen as honest and upright.”

As they near what for many men would be retirement age (the oldest, Albert Reichmann, is 62, Paul is 61 and Ralph is 57), the three brothers have worked to install the next generation of Reichmanns in positions to take over the family’s extensive affairs. Together, the brothers have a large number of children, but only a few have taken senior positions in the family’s enterprises. The oldest and most advanced of the rising generation is Albert’s son Philip, who is in his mid-30s and a senior vice-president at O&Y in charge of leasing many of the family’s vast holdings. He brings some highly unorthodox—in business terms—qualifications to that post: the younger Reichmann has completed a postgraduate degree in rabbinical studies in Montreal and Israel. Like g his father and uncles, Philip Reich“ü mann also customarily wears a yar| mulke, although many of his suits are less sombre than theirs.

Still, it is clear that the younger Reichmanns share the conservative lifestyles and deep family loyalties that mark their fathers, ensuring that they will become responsible custodians of the family fortune. But first, the older Reichmanns will have to manage to satisfy their creditors and prove themselves once again to be the undisputed masters of the big deals.

TOM FENNELL