Paul Reichmann, Who Helped Develop the World Financial Center, Dies at 83
Peter Redman/Financial Post
By JONATHAN KANDELL
Published: October 25, 2013
Paul Reichmann, the Canadian real estate developer who made and lost billions of dollars while transforming the skylines of Toronto, New York and London, died on Friday in Toronto. He was 83.
His death was announced by a spokeswoman for ReichmannHauer Capital Partners, an investment firm.
Mr. Reichmann and his brothers, Albert and Ralph, led Olympia & York, their family’s real estate development firm, which counted among its greatest projects the World Financial Center in Lower Manhattan and Canary Wharf in London’s East End. At their apex in 1990, the Reichmanns held about 8 percent of New York City’s commercial office space, more than twice as much as their closest rival, the Rockefellers.
In all, Olympia & York owned 40 major office towers in a dozen cities on both sides of the Atlantic and controlled $20 billion in assets. The net personal worth of the Reichmanns reached $10 billion, making them at one point among the 10 wealthiest families in the world. But in 1992, they ran out of cash while building Canary Wharf, and their real estate business quickly collapsed.
Paul Reichmann, a tall, soft-spoken man who dressed in black suits, white shirts and dark ties, was clearly the family business strategist and chief decision-maker. He and his family were lavish contributors, mostly to Orthodox Jewish causes; they donated up to $50 million a year to yeshivas, synagogues and hospitals around the world.
Despite his austere demeanor, Mr. Reichmann took enormous business risks. He bet that each new development project could exceed the size of the previous one and still attract enough tenants to produce a windfall.
“For Paul, it is like being a gambler, like being a heroin addict — he cannot stop,” Andrew Sarlos, a prominent Toronto investment banker and Reichmann family friend, said in a 1988 article in Maclean’s, the Canadian weekly.
Mr. Reichmann scoffed at that sort of criticism. “You don’t get the returns if you don’t take the risk,” he said in an interview with Institutional Investor magazine in 2000.
For years, Mr. Reichmann’s track record was so impressive that his creditors did not seem to mind his high-roller approach. His sense of timing in the notoriously cyclical real estate market seemed infallible, and he was viewed as a master negotiator with an uncanny understanding of financing techniques.
But the Reichmann empire crumbled in 1992. The immediate cause was the Canary Wharf project in London. With real estate prices plunging around the world, other major Reichmann properties were also in the red, and the family’s stock market investments soured.
Crushed under debts of more than $20 billion, Olympia & York went bankrupt. The Reichmanns were left with a net worth of less than $100 million — one of the most astonishing financial collapses in history.
Paul Reichmann blamed his own overconfidence. “The fact that I had never been wrong created character flaws that caused me to make mistakes,” he said in 1997.
Mr. Reichmann and his family partly rebuilt their fortune. In a personal triumph, he recovered control of Canary Wharf in 1995, as a minority partner and chairman of an investment group that included George Soros and Laurence Tisch, and then pushed ahead with the completion of the project. He retired in 2005 after an alliance of developers led by Morgan Stanley acquired Canary Wharf.
The strains of commerce and religious orthodoxy were often inseparable in the family’s ventures. For example, Olympia & York closed its construction sites on the Jewish Sabbath, paying overtime for Sunday labor, and during the Jewish religious holidays, as well as Christian ones.
At the height of his business career, Mr. Reichmann sometimes spoke wistfully of the Talmudic studies and religious school building projects he undertook as a young man.
“I think that what I did in those years was a greater achievement than what I’ve done since,” he was quoted as saying in a 1996 biography of his family, “The Reichmanns,” by Anthony Bianco. Paul Reichmann was born in Vienna on Sept. 27, 1930, the fifth of six siblings. His parents, Samuel and Rene, were Orthodox Jews who had moved from rural Hungary to Vienna, where they owned a prosperous egg export business. But Nazi Germany’s annexation of Austria in 1938 forced the family to flee to Paris.
Two years later, when the Nazis overran France, the Reichmanns fled to Tangier, Morocco, where Samuel Reichmann became a successful currency trader.
Paul Reichmann, Who Helped Develop the World Financial Center, Dies at 83
Published: October 25, 2013
When anti-Jewish riots broke out across the Middle East after the 1956 Arab-Israeli War, the Reichmanns uprooted themselves again, this time going to Canada. The family settled in North York, a suburb of Toronto, where Samuel and his sons, Paul, Albert and Ralph, started a small company producing tiles and other building material, which they called Olympia Tile. In 1958, it became the springboard for Olympia & York, which would erect close to 100 buildings in the Toronto area over the next 15 years.
The most notable of these projects was First Canadian Place, a 72-story office tower in downtown Toronto that was the country’s tallest building. Completed in 1973 after only 16 months and using vast quantities of magnificent white marble, the tower gained the Reichmanns a reputation for quality projects delivered at an accelerated pace.
The success of First Canadian Place also encouraged Paul Reichmann to venture into the United States real estate market. His first foray involved the purchase of eight prime Manhattan office buildings from the Uris Corporation in 1977 for $325 million. At the time, New York City seemed on the verge of bankruptcy, and its office vacancy rates were soaring. But a decade later, the same properties were valued around $3 billion.
By then, Mr. Reichmann and his brothers were heavily involved in their most heralded project, the World Financial Center. In 1980, the still relatively unknown Olympia & York won out over a dozen other developers, most of them local firms, to build six million square feet of office and retail space near Battery Park on land reclaimed from the Hudson River.
The project’s design, by the Argentine-born architect Cesar Pelli, featured four office towers ranging up to 51 stories, on top of a huge base devoted to luxury stores. The centerpiece of the complex, the Winter Garden, was a 130-foot-high, glass-vaulted pavilion landscaped with palms. When the design for the World Financial Center was unveiled in 1981, it was hailed as “the finest group of skyscrapers since Rockefeller Center,” by Paul Goldberger, The New York Times’s architecture critic.
By the end of the 1980s, the Reichmanns were the seventh-richest family in the world, according to Fortune magazine. But they still lived relatively modestly in the same upper-middle-class homes they had built for themselves in their Toronto suburb a generation before.
Paul Reichmann’s wife, Lea, occasionally complained that her husband was too involved in his business and not spending enough time with his children, Barry, Henry, Vivian, Rachel and Libby. But he was home every Sabbath and holiday, joining his family and neighbors as they walked to the nearby temple for services.
In 1988, Mr. Reichmann took the greatest gamble of his life by committing Olympia & York to build Canary Wharf. The completed project was supposed to have 24 buildings and 12.5 million square feet of office space at an estimated construction cost of $8 billion.
Despite generous subsidies and rent cutbacks, only a fraction of the commercial space was occupied. By late 1991, Canary Wharf was paralyzed by a lack of further financing. And early the next year, Olympia & York announced that it had run out of cash.
Many of the family’s other real estate holdings were also in trouble because of high office vacancy rates in a number of North American cities. The Reichmanns filed for bankruptcy protection in London, Toronto and New York simultaneously.
Only three years later, Mr. Reichmann regained the helm at Canary Wharf, which finally gained nearly full occupancy in 2000 thanks to a booming real estate market in London. By 2000, the Reichmann family’s net worth reached $1 billion. But in an interview with Institutional Investor that year, Mr. Reichmann said his business accomplishments had never given him the sense of fulfillment he experienced as a youthful religious social worker and teacher in North Africa. But “what could have been is a silly way to look at things,” he said. “You are what you are.”
From Wikipedia, the free encyclopedia
|Born||(1930-09-27)27 September 1930|
|Died||25 October 2013(2013-10-25) (aged 83)|
Toronto, Ontario, Canada
|Known for||founder of Olympia & York|
Formative yearsReichmann was born in Vienna in 1930 to Samuel Reichmann, a wealthy egg merchant and his wife René. His parents were Orthodox Jews from a small town in Hungary, but his father had risen to prominence in Vienna as a successful merchant.
The family escaped the Nazi occupation of Austria by sheer chance, as they happened to leave the country on the day of Anschluss, to visit Paul's grandfather in Hungary who had suffered a stroke. Abandoning their lives in Vienna, they made their way from Hungary to Paris, where they settled. The Reichmann family fled when France fell to the Germans, eventually making their way to the neutral city of Tangier.
In Tangier, the family prospered as Samuel became a major currency trader. After the war Paul left home to study religion first in Britain and then in Israel, and became a Rabbi. In 1953 he returned to Morocco to become a shirt retailer, and that same year he married Lea Feldman.
Rising successThree years later Paul left Morocco to join his elder brother Edward in Canada. Edward had established Olympia Flooring and Tile, a successful flooring and tile company in Montreal. Paul, along with his brothers Albert and Ralph, moved to Toronto to set up a branch of the flooring and tile company in that city.
Unsatisfied with the local builders, Paul Reichmann decided the company would construct its own warehouses and offices. Soon the company was building such facilities for others. In 1964, Olympia and York was founded as a separate building and property development firm.
The firm was soon profitable, and expanded rapidly. It also accepted difficult projects, including the construction of First Canadian Place, Canada's tallest building, in 1976. The company expanded to New York and Tokyo and by the mid-1980s it was the largest developer in the world, and the Reichmanns were one of the world's richest families.
His success had little impact on Paul Reichmann's lifestyle. He remained very private and unwilling to talk to the press. He retained his strong religious views, and used much of his fortune to support his religion. In Toronto he built a number of schools and synagogues which became the centre of a thriving Orthodox community. Shunning most luxuries, his one personal indulgence was collecting rare and valuable Jewish texts. Pursuant to Jewish law, all of Olympia and York's construction projects halted on the Jewish Sabbath and all holy days.
TroublesThe company ran into severe trouble in the early 1990s. It was due in part to a general decline in the world economy, but the company was truly brought low by the Canary Wharf project. It was the world's largest property development, but remained half empty. Reichmann had taken the project as a major gamble. He had been impressed by Margaret Thatcher's reforms and obtained a personal promise from her that she would help the project, most importantly by extending the London Underground to reach it.
In Canada, Reichmann's once sterling reputation also began to suffer. In 1985 the company had bought Gulf Canada in a deal that included some $300 million in tax breaks. Many Canadians were infuriated that a massive corporation had been given such a lucrative deal. Toronto Life magazine also published a highly critical article on the Reichmanns. The family took offence at allegations that Samuel Reichmann had aided the Nazis with illegal smuggling operations during the Second World War. The family sued the magazine for an unprecedented $109 million. They were successful, and Toronto Life published a full retraction, but their heavy fisted response soured Toronto Life magazine to the Reichmanns.
In 1992, as Olympia and York collapsed under some $20 billion in debt, Paul Reichmann lost most of his family fortune.
Recovery and retirementDespite these setbacks, Reichmann successfully rebuilt a small portion of his empire. This included setting up a partnership with George Soros, Lawrence Tisch and Michael Price along with investors such as Saudi Prince Al-Waleed to purchase a controlling stake in the Canary Wharf from the banks that made the original construction loans to Reichmann and which had taken control of the development. Reichmann became Chairman of Canary Wharf again and remained so until 2004.
During 2004 a takeover battle began for the Canary Wharf Group in which Reichmann eventually sided with Canadian developer Brascan to attempt a purchase of the company. During this process he resigned his position on the Board. In March, 2005 a consortium of investors led by Morgan Stanley under the banner of Songbird Estates purchased Canary Wharf Group, and Reichmann was therefore no longer involved with Canary Wharf on a day to day basis. Reichmann, at the time 75, announced that he intended to retire from business and sold many of his property holdings.