MONTREAL — IT was not a year Canadian business will remember fondly.
For at least part of 1992, the economy was in recession, real estate values plunged, and the stock market plummeted.
And the Canadian economy for 1993? Many economists are predicting growth as high as 4 percent. Others say getting over the recession will not be that easy.
"Conditions are set to improve, but 1993 will disappoint those who expect a strong snapback, which is traditional in the early stages of a recovery," says Aaron Gempel, vice president and economist at the Bank of Nova Scotia. "But, by and large, the worst is over. Stronger US growth and a lower Canadian dollar is starting to mean corporate profitability is on the rise."
Lower interest rates and the falling dollar have helped the economy. The dollar started 1992 at slightly less than 86 US cents; it ended at about 78 cents, boosting exports from just over $12 billion to almost $14 billion.
But in 1992, the situation was quite different. To make big money on the Toronto Stock Exchange last year, you would have had to pick diamond stocks - Dia Met Minerals, with a speculative find in the Northwest Territories, was up 596 percent.
The best-performing industrial sector was auto parts, with Toronto-based Magna International a star performer: It rose from $19 (Canadian; US$15) to $35.
Real estate stocks were among the worst performers. Central Guaranty Trust Co., equal to a savings and loan, dropped 95 percent because of real estate loans. And Bramlea and Trizec, two large real estate holding firms (related through cross ownership), dropped 92 percent and 74 percent respectively.
Overall, the Toronto Stock Exchange dropped 5 percent for the year. But there was a lot of money made in Canadian markets in 1992, and large investment dealers, such as RBC Dominion Securities, made record profits.
"It was a terrible year if you followed the big stocks, but it was a great year for the smaller shares," says John Thompson, a partner with Gornitzki, Thompson & Little, a Toronto-based group of private investors. "There was opportunity in stocks such as Newbridge [up 490 percent], Magna, and International Semi-Tech and, of course, the diamond plays."
Mr. Thompson points out that with falling interest rates there was also a hot bond market.
But it was perhaps Olympia and York (O&Y), the world's largest private-property manager at the start of 1992, that saw fortunes fall fastest. Olympia and York Developments Ltd., the Reichmann family holding company, lost its first office block to creditors. On the last day of 1992, Toronto's Aetna Centre was transferred to Prudential Insurance Co. of America, which holds a $196 million mortgage on the property. This was a final indignation during a year that saw the slow unraveling of O&Y's commercial-pr operty holdings.
Creditors are eyeing other buildings in the O&Y Canadian empire. Under a plan to be voted on next month, secured creditors could seize company assets. O&Y has filed for bankruptcy protection in Canada and Britain. The firm is trying to save its United States buildings; it has yet to seek bankruptcy protection in the US.
The commercial-property collapse of the 1990s left the company with a problem faced by many homeowners: crushing debt and mortgages that often exceeded the value of the buildings.
Many homeowners saw the value of their properties drop in 1992, especially in southern Ontario. The average price of a Toronto house dropped 8 percent to $215,000; in nearby Hamilton, where the steel industry is cutting back, house prices dropped 6 percent to $151,000.
Only in western Canada was there a significant price increase, with seemingly recession-proof Vancouver leading the pack with an 11 percent rise. The city has the nation's costliest housing, with an average home priced at $247,000.