Paul Reichmann, real estate magnate, dies at 83

Once the head of the largest real estate development company in the world, which went bankrupt in 1992, Paul Reichmann died Friday in Toronto. He was 83.

The reclusive Reichmann brothers built Olympia & York into a major international development firm after starting out as a small company marketing flooring and tile in Toronto.

The five Reichmann brothers were the sons of Orthodox Hungarian Jews who fled central Europe during the Second World War.

Older brother Edward started Olympia Flooring and Tile in Montreal and was joined in Canada by Paul, Albert, Louis and Ralph. After the brothers began a small company in Toronto, Paul Reichmann was the force who parlayed it into a global real estate empire.  

Their developments included First Canadian Place in Toronto, the World Financial Center (right next to the World Trade Center in New York), and Canary Wharf in London.

Paul Reichmann was born in Vienna in 1930, where his father, Samuel, had his business at the time. His mother's name was RenĂ©e.

Paul Reichmann 19890313 Paul Reichmann is shown in London in 1989. He was the driving force behind the huge Canary Wharf development in the British capital. (Canadian Press)

By sheer luck, in 1938, the family was visiting Paul's grandfather in Hungary when the Nazis occupied Austria and annexed it with Germany.

They settled in Paris for a time, but by 1940, the Nazis were there too. Late in life, Reichmann could still remember the Nazi bombing of refugees south of Paris.

The family moved to Tangier in Morocco, where they prospered, as his father became a successful currency trader.

When the war ended, Paul studied religion in Britain and Israel, and became a rabbi. In 1953, he went back to Morocco and became a shirt retailer. That same year he married Lea Feldman.

In 1956, Paul joined his brother Edward in Montreal. Then, joined by brothers Albert and Ralph, they started a development business in Toronto.

Initially, they built warehouses and commercial buildings. Their first major project was the development of Flemingdon Park in Toronto's Don Mills neighbourhood.

In 1971, they advanced right into the heart of Toronto's financial district and won the contract to build what was then Canada's tallest building, First Canadian Place, at King and Bay streets.

By the 1980s, Olympia & York was the largest property development firm in the world, having bought a portfolio of skyscrapers in New York.

"He seemed to have this extraordinary knack of being able to see value where other people couldn't see it, and also extracting value from the buildings he built by financing them in creative ways and raising money to go on to bigger and better things," said Peter Foster, the author of the 1993 book, Towers of Debt: The Rise and Fall of the Reichmanns.

In 1980, they got 50-per-cent control of Brinco Ltd., a natural resources development company in Newfoundland and Labrador. The next year they bought an 82-per-cent controlling interest in Abitibi-Price Inc., and they held a significant share of Royal Trust Company. In 1985, they bought Gulf Canada Resources Ltd.

Along the way, they had acquired English Property Corp., one of the largest developers in Britain. That was the company that enabled them to build Canary Wharf in east London, at once their greatest achievement and their greatest failure.

The largest real estate development in the world at the time, it boasted Britain's tallest building, One Canada Square.

It was Reichmann's vision (only now coming to fruition) that it would be a kind of Wall Street of London and successfully compete with the city's historic financial district known as the City.

But by the time it was finished in 1992, the London commercial property market had collapsed, bringing down Olympia & York.  In March of that year, Reichmann was forced to resign as president.

When it filed for bankruptcy in May 1992, Olympia & York owed more than $20 billion US to various banks and investors. It was closed down in 1993, and the Reichmanns were left with a small firm, Olympia & York Properties Corp.

There are several theories about what went wrong with Paul Reichmann's judgment when he embarked on the Canary Wharf enterprise.

His reliance on his own business instincts may have led him astray, claims Foster.

According to the president of Canary Wharf, George Iacobescu, the Iron Lady herself, Margaret Thatcher, had personally called to ask Olympia & York to take on the development, and she promised that the Jubilee Line of the London Underground would be extended to speed up the trip to Canary Wharf from central London.

That promise was key to the development's success. But the line was not extended in her time. It opened only in 2000, long after the demise of Olympia & York.

Paul Reichmann was famous for sealing deals with a handshake and not bothering with corporate lawyers, and he always kept his word. He may have thought Thatcher would do the same thing.

The Olympia & York bankruptcy did not leave Reichmann poor by any means. In 2011 he was still listed among the richest Canadians. At number 30 on the list, his net worth was given as $1.83 billion, and that was up slightly from the year before.

In his usual secretive manner, Paul had continued with canny investments. For instance, he owned 70 per cent of Central Park Lodges, which in 1999 operated 74 retirement homes, 63 in Canada, the rest in the U.S., according to the National Post.

He was also involved in a $107-million project in Israel, according to the Jerusalem Post newspaper.

His company, IPC Jerusalem Ltd., built a five-star hotel and luxury condominium, called The Palace Jerusalem — The Waldorf Astoria Collection.

In 2004, he again bought a controlling stake in Canary Wharf, a development that by then was considered essential to the fabric of London. He gave it up in 2009.

Reichmann always lived humbly and austerely, in keeping with his ultra-Orthodox Jewish beliefs, even to the point of closing down his many development projects, and allowing no work there on the Sabbath.

"His accomplishments were titanic, just look at the Bank of Montreal building for example," said Tom Caldwell of Caldwell Securities. "Yes, he got bushwacked in Canary Wharf in England, but he came from a small business to play in the big leagues and he played it well. And he played it with dignity."


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Mackenzie Valley pipeline facing possible revival

There are growing signs that the stalled Mackenzie Valley pipeline project could get a new lease on life.

The federal government has quietly dusted off a $500-million socio-economic fund that would kick in if the project goes ahead. The Mackenzie Gas Projects Impact Fund was set up in 2006 but has remained dormant. It was included and updated in this week's budget implementation act.

The fund is not operational yet, but the timing means it's ready to go if construction starts on the pipeline.

Development of northern resources has been priority for Prime Minister Stephen Harper since he was elected in 2006. His government in 2009 set up the Canadian Northern Economic Development Agency (CanNor), for which Environment Minister Leona Aglukkaq is responsible.

The government "is committed to fostering a strong, prosperous and dynamic northern economy," Aglukkaq's office said in a written response to questions from CBC News.

"Should the CanNor minister be named responsible at some point for the fund, as the regional economic development agency for the North, the agency is well-positioned to deliver this fund on behalf of northern communities."

At the same time, there are signs the project may be commercially viable.

Imperial Oil and its partners are looking at options to turn the 1,200-kilometre northern gas pipeline into an liquefied natural gas project. LNG, as it is often called, is natural gas that's cooled to -162 C. This shrinks the volume of the gas by 600 times, making it easier to store and ship.

"As we look at strategic options for the Mackenzie resource one of the things we are looking at is … could gas from the Mackenzie potentially play a role in an LNG development scenario?" said Imperial spokesman Pius Rolheiser.

Imperial and its partners, Royal Dutch Shell, ConocoPhillips, Exxon Mobil and the Aboriginal Pipeline Group, received final approval from the National Energy Board in 2011 for the $16.2 billion project after more than six years of regulatory review. The pipeline was originally designed to carry natural gas down the Mackenzie Valley to Alberta and the U.S.

A glut in natural gas and slumping prices put the project on hold.

But earlier this year, Imperial and its majority partner Exxon Mobil Corp. applied for an LNG export permit from a future terminal in either Kitimat or Prince Rupert, B.C. The companies would draw from the gas fields they own in Canada, like those in the Mackenzie Delta.

"So in our assessment of a potential LNG project, one of the things we are looking at is, could gas from the Mackenzie Delta play a role in an LNG scenario?" said Rolheiser in an interview from Calgary. "But at this point we are in the early stages and we have not made any decisions on that."

Map: MacKenzie Valley (CBC)

The main forces behind this burst of activity are price and timing. Imperial has to report to the NEB on its decision to construct the pipeline by the end of this year and must provide an updated cost estimate. It has to start construction by the end of 2015.

And there is a growing market in Asia for liquid natural gas. While Rolheiser emphasizes that a decision has not been made, a source close to the project says the LNG option is very much in play.

"We are looking at all options here and there is more than one option for this pipeline," said the source.

Natural Resources Minister Joe Oliver just got back from a trip to China and South Korea, where he spent a lot of time talking about LNG. He says Canada's natural gas resources are an "immense economy opportunity that can benefit all Canadians."

And the pipeline would help tap that potential.

"That is why we are supportive of this important resource development opportunity, with a focus on supporting jobs, economic growth, environmental protection and constructive relationships with First Nations communities," Oliver wrote in an email to CBC News Thursday.

All this is very good news for the Northwest Territories that has been holding out hope for the on-again, off-again pipeline since the 1970s.

"We are hearing that the proponents are interested in seeing the Mackenzie gas get to market, which is a very positive sign for us, with a resource that has been stranded in the Mackenzie delta for forty years," said N.W.T. Industry Minister David Ramsay.

Ramsay said he has not officially heard that the project is definitely going ahead, but he's optimistic.

"Any talk of us getting a resource like to that to market is something we are encouraged to hear," he said in an interview from Yellowknife.

Ramsay said he hopes to get more details in early November.

The majority of people in the territory support the project because of the economic development it would bring. Aboriginal groups own one-third of it as part of the Aboriginal Pipeline Group.

While Imperial won't speculate on chances of the pipeline carrying LNG, Rolheiser notes the company has spent considerable time and money on this project and doesn't want to squander it.

"We made a significant investment in terms of our relationship with the people of the North as represented by the Aboriginal pipeline group and that is a terribly important asset to us," he said. 


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Harper to reveal Canada-EU trade deal details Tuesday

Prime Minister Stephen Harper will table the tentative free trade agreement with the European Union in the House of Commons on Tuesday — the same day his government hopes to cut off debate in the Senate on the motion to suspend Senators Mike Duffy, Pamela Wallin and Patrick Brazeau without pay.

Harper’s office is sending out invitations to industry groups and business executives to witness the tabling of the agreement on principle on the Comprehensive Economic and Trade Agreement.

A reception with Trade Minister Ed Fast will follow question period.

The timing is no coincidence. It dovetails with a vote on the procedural move to cut off the debate over suspending the three former Conservative senators embroiled in the scandal over living and travel expenses.

That debate continues to drag on in the Senate, and cracks are beginning to appear in the Conservative caucus over the fairness of depriving the three of their livelihood before they have had a public hearing, or criminal charges have been laid.


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