The Canadian trio who turned flooring into a real estate empire
Toronto — They are behind some of the biggest real estate developments in North America -- including lower Manhattan's new World Financial Center. Within a single generation, the Reichmanns of Toronto have built the largest private enterprise of its kind in the world, with more than $12 billion in corporate assets -- including a large chunk of New York City bought at rock-bottom prices in the mid-'70s.
The Reichmanns' Olympia & York Enterprises Ltd. controls more than 50 million square feet of office, retail, and residential space in major urban markets in Canada and the United States. The company is also a major shareholder in public real estate development companies, based in Toronto and, like O&Y, busier in the United States than in Canada.
The family's holdings include a 36.6 percent interest in Trizec Corporation and 22.8 percent of Cadillac Fairview, the two largest Canadian real estate developers after O&Y.
Other investments include 11.6 percent of Trilon Financial Corporation, proprietors of Canada's largest trust company and real estate enterprise and one of the largest life insurance companies, and 10 percent of Hiram Walker Resources, an energy, pipeline, and distillery operation.
The Reichmanns controlled Abitibi-Price Inc., the world's largest newsprint producer, until a few months ago, when they sold it to Gulf Canada as part of a purchase deal. O&Y bought 60.2 percent of Gulf Canada from Chevron for $2.8 billion.
Last month, a newly reorganized Gulf Canada began trading on the Toronto Stock Exchange and the American Stock Exchange. When the closing bells rang on that first day, the share of Reichmann family ownership had risen to 80 percent.
Gulf Canada is the star in the galaxy of public companies recently gathered under the corporate banner of Olympia & York and presided over by Marshall Cohen, a former Canadian deputy minister of finance.
Superlatives are difficult to avoid. O&Y Enterprises holds an investment portfolio of some $3.5 billion in public companies and will issue $1 billion in preferred shares, the largest such financing in Canadian history.
Three Reichmann brothers, Albert, Paul, and Ralph, run the international enterprise from their 72-story First Canadian Place tower in downtown Toronto.
They are an intensely religious family, and their enterprises around the world close for the Jewish Sabbath. Company affairs are discussed on Sundays at their homes just a few miles from the floor-covering and wall-tile business that indirectly took them into real estate development.
The Reichmanns are reluctant to talk with the news media, but in a series of interviews over the years they have indicated that their success as developers comes from tight scheduling of workers and construction materials. Cutting two months off a two-year project, they say, can save nearly 8 percent on financing costs. They note, too, that they use the overall funds of the corporation rather than finance every project individually.
Regarding their financial power, the family contends that at this point, no individual or families or groups of companies exert an excessive influence on the Canadian economy.
The family emigrated to Toronto in the mid-1950s from Tangier, where they found a haven after leaving Hungary, then Austria, France, and Spain, ahead of advancing German armies early in World War II.
They started the building materials business in Toronto and decided they would build a warehouse on their own after seeing a contractor's estimate for the job. That led them into other developments.
In the mid-1960s the Reichmanns bought 500 acres of land in a Toronto suburb and built an apartment and office-building community on 300 acres of it. By the time the first phase of First Canadian Place opened in 1975, the Reichmanns had built more than 120 office and industrial buildings, most of them low-rise.
First Canadian Place remains the family's flagship in Canada. The 5 million-square-foot office, banking, and retail development covers most of a city block and opened in two phases -- the final one was the tower housing the Toronto Stock Exchange in 1983.
There was a good deal of skepticism about O&Y's being able to lease that volume of space in what was then a sluggish market. But in 1977, Paul Reichmann contended that ``tenants will pay a premium to be in a good location and in a quality building.''
It was an observation he was to paraphrase a few years later when the Reichmanns took on the 8 million-square-foot World Financial Center in lower Manhattan (see related story). There was general apprehension about a glut of office space in New York at the time.
``There are more quality-seekers than bargain-hunters,'' he said. ``Office space is a small portion of a company's overhead, but it has a tremendous impact on its image and working atmosphere.''
It was the Reichmanns' purchase of eight office buildings in Manhattan for $320 million nearly 10 years ago that brought them into the US market.
New York's real estate community was baffled by O&Y's Manhattan purchase, consummated as it was at the depths of a depressed real estate market. The Reichmanns, however, were confident about New York's place as a world financial capital.
When O&Y was selected as the developer of the $1.5 billion World Financial Center in 1980, the prospect of leasing more than 6 million square feet of office space again raised eyebrows. Today virtually all of the space is leased and being occupied by American Express, Oppenheimer & Co., Dow Jones & Co., and Merrill Lynch.