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MASTER (IMAGE) BUILDERS

TOWERS OF DEBT: THE RISE AND FALL OF THE REICHMANNS

By Peter Foster

Key Porter x 312pp x $24.95

For years, the mere mention of Paul Reichmann was enough to bring a hush over gatherings of bankers. It wasn't just that he and his brothers, Albert and Ralph, had built Olympia & York Developments Ltd. into the world's largest real-estate developer, changing the faces of New York, London, and Toronto. Reichmann had also become one of Canada's dominant takeover artists, acquiring a multibillion-dollar empire that included Gulf Canada Resources Ltd. and newsprint giant Abitibi-Price Inc. Perhaps most impressive, he had cultivated a mystique without parallel in world business.

Reichmann, the legend went, was a financial genius who could do no wrong and whose word was his bond. As Peter Foster, a financial writer based in Canada, shows in Towers of Debt: The Rise and Fall of the Reichmanns, the developer brilliantly exploited this image to hide any problems as he built his empire.

During the debt-crazed '80s, few corporate borrowers rivaled O&Y in its appetite for funds. When O&Y filed for bankruptcy protection last year, it owed well over $10 billion to almost 100 lenders, including virtually all of the world's top banks. Yet, incredibly, few if any of these bankers had ever gotten a thorough look at O&Y's books.

These bankers, Foster argues, were all but blinded by the Reichmann mystique. They had convinced themselves that Reichmann was a "philosopher king" who "had to have an exceptional character and supernormal standards of integrity," he writes. "Otherwise, why were the banks lending so much money to a man who wouldn't open his books?"

Bankers weren't the only ones dazzled. Journalists didn't get access to O&Y's books, either--but that didn't stop them from propagating the notion that Reichmann was so rich he hardly needed to borrow. As late as the fall of 1991, Fortune ranked the Reichmanns as the world's fourth-richest family, worth $12.8 billion. Less than a year later, bankruptcy filings revealed that O&Y had no real net worth. Now, much of the company is in the hands of creditors, and Reichmann is trying to mount a comeback with a real estate investment venture, Reichmann International LP.

Towers of Debt comes remarkably soon after O&Y's collapse. But Foster had a head start, having published an earlier book on the Reichmanns, The Master Builders, in 1986. Towers of Debt incorporates some of that earlier work while bringing the story up to date.

For readers who have followed O&Y's recent travails in the press, the book will hold more interest as the saga of the Reichmanns' incredible rise. Paul, Albert, and Ralph--the three youngest of six children--were born in Vienna, but the family fled to Morocco to escape Hitler. While their father prospered among the Jewish money dealers in Tangier, the children were steeped in the Talmud. They also helped their mother pack huge parcels of food and clothing to ship to Nazi concentration camps. Years later, Paul would become one of the world's leading benefactors of Jewish charities, and his devout Orthodox Judaism would become a key part of his mystique.

In the 1950s, the family emigrated to North America, eventually settling in Toronto. There, the brothers built a tile-importing business. When it grew, they asked contractors to submit bids for a building. Paul found them all too high, and the brothers constructed the building themselves, for about half the lowest bid. Reichmann had found his calling. He would go on to become New York City's biggest landlord and launch Europe's largest real estate project, London's Canary Wharf. Among his most famous moves was his 1977 decision to buy some 10 million square feet of Manhattan office space just when many thought New York was all but dead. When the market roared back in the '80s, that purchase became known as real estate's "deal of the century."

Foster does a credible job of laying out this tale. But even though he interviewed both Paul and Albert before O&Y's collapse, this is far from an insider's account. Worse, Foster doesn't invest the space--or research--to endow the story of the Reichmanns' childhood with the color and detail it merits.

Moreover, Foster's assessment of Paul Reichmann is unduly harsh. True, he made some colossal blunders, especially in trying to diversify. And his timing of Canary Wharf was terrible: The first phase opened during London's worst real estate downturn in decades. Still, Reichmann has had a lasting impact in setting the standard for high-quality office buildings in North America. Even in London, his vision of Canary Wharf as an alternative to the crowded City may yet be realized. The project is moving ahead, albeit slowly, with support from its bankers, but without the Reichmanns' involvement.

Thanks to its remarkable subject, Towers of Debt moves swiftly. But it fails to answer all the questions readers might have about Paul Reichmann--not surprising, given how hard the book follows on the headlines. Foster amply documents the Reichmann mystique, but he never penetrates it. The man who so awed financiers remains an enigma.WILLIAM C. SYMONDS


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