When grandiose vision collided with vicious real estate downturn five years ago, the $10 billion real estate empire built by Paul Reichmann and his brothers collapsed in a humiliating bankruptcy. The family held on to only the shreds of a Toronto-based empire, Olympia & York Developments Ltd., that once had stretched to New York and London. Massive projects, most notably London's Canary Wharf complex, were all but lost as creditors took over.
Now, a new generation of Reichmanns is attempting to resuscitate the family name while building fortunes of their own. Determined to avoid the sins of their fathers, they collectively bring the same peculiar mix of methodical, hardheaded business sense and bold vision. As one young Reichmann focuses on the management of commercial office towers and another fashions a nursing- home empire, a third plans huge sports-entertainment complexes that would rival such attractions as Universal Studios Florida. Others are venturing further afield, into sporting-goods retailing and computer consulting.
Abraham, the 34-year-old son of Ralph Reichmann, is laying claim to the visionary mantle for the family. He is attempting to build mammoth theme parks, first in Toronto and then in New York. His "Destination: Technodome" project in Toronto would house such operations as an indoor, 500-foot-high ski hill, facilities for whitewater rafting and rock climbing, a 30-screen multiplex cinema, virtual-reality rides, and 300,000 square feet of shops. "I do think big. It's part of my nature," he says.
ALL WINNERS. Abraham declines to say where he'll get the money for the projects, though he plans to break ground in Toronto in April. The bill for the Toronto spot would top $536 million. While Canadian authorities have awarded him the right to build the project--he had to put a nonrefundable $714,000 down--he has yet to make arrangements for leasing or buying the 70 or so government-owned acres near the city.
But with billions of dollars being poured into entertainment complexes worldwide, the idea may be viable. Industry consultants say the individual pieces are all proven winners. "It's all about repackaging good ideas and putting them together," says Gordon E. Dorrett, executive vice-president of Forrec Ltd., a design consultant for projects such as Universal Studios Florida who is advising Reichmann. And Abraham's plan for a New York dome is generating interest from Governor George E. Pataki, who has directed state authorities to help in any way they can to develop a dome on a 304-acre urban renewal site in Rockaway, N.Y.
Despite the hurdles, Abraham is confident that the Toronto project will fly. He says he has studied the economics of entertainment for years and knows what will work. While he is chief operating officer of Heathmount Arts & Entertainment Corp., his 68-year-old uncle Albert is the company's no-nonsense CEO. Albert's experience in real estate development may keep the project on solid ground--something he ultimately failed to do when he worked with his brother Paul on Canary Wharf.
Other second-generation Reichmanns are investing in what the family knows best. While his uncle Paul is venturing back into the U.S. market by bidding on such properties as New York City's Chrysler Building and is managing Canary Wharf, which is finally leasing up, Philip, the 39-year-old son of Albert, is building a new Canadian real estate management company. In late July, he and Paul's son-in-law, Frank Hauer, merged their own small property management company and publicly traded Camdev Corp., a commercial office-building outfit, to create O&Y Properties Corp., which has a market capitalization of $163 million. The company manages some 24 million square feet of commercial office space and owns buildings housing another 3 million square feet across Canada, putting it among the top half-dozen management companies in the country.
By naming the company O&Y Properties, Reichmann wants to trade on the cachet of the old family firm, Olympia & York Developments Ltd. "It definitely opens doors for us," he says. "To create the franchise value and name recognition that O&Y has would cost millions of dollars and many years. It's a name that reflects quality management and quality service." Philip, Frank, and other family members own 60.9% of the company.
Philip admits that the O&Y name may be a negative among bankers who lost billions betting on the elder Reichmanns. Indeed, the backers who have helped O&Y build its capital base for such deals as its midsummer $58 million purchase of three Toronto towers are life insurance companies and other nonbank financial institutions. "The banks are less willing generally," Philip says, noting that bankers are only slowly reentering real estate as memories of the last crash fade. But he contends that younger bankers may be more inclined to deal. And there are always the public markets: In May, through Camdev, he raised $36 million to fund the merger of Camdev and O&Y and acquire a 550,000-square-foot office complex in suburban Toronto.
Some analysts fault Philip for moving too slowly. The handful of midrange Canadian office towers he owns don't compare to the trophy properties being bid for by the likes of Oxford Properties Group and GE Capital Corp. Reichmann recently passed on a $285 million package of properties owned by Prudential Insurance Co. of America as overpriced and ill-suited to O&Y's office orientation.
Reichmann does have a toehold in some trophy properties, such as the management contract at 72-story First Canadian Place, the first landmark development for the elder Reichmanns in the 1970s and a tower that Paul Reichmann is slowly repurchasing. Philip and an as-yet-unnamed financial backer are now bidding on an estimated $360 million worth of Canadian buildings owned by Confederation Life Insurance Co.
While building skyscrapers was the elder Reichmanns' forte, the younger Reichmann is loath to even talk about development, though when pressed he admits development will likely be on the company's agenda over the next few years. For now, he's limiting his interests to Canada but expects to move into the U.S. and elsewhere eventually. Noting that he visited New York on Sept. 8 to talk with investment bankers about Canadian investments, he says: "If something extremely attractive comes up south of the border, we would probably take a look at it."
Paul Reichmann, the driving force in the older generation, seems to be taking a more direct role in guiding his son, Barry. While Paul is chairman of Central Park Lodges Ltd., a company that manages nursing homes across Canada, he has set up Barry, 31, as president of the CPL Long Term Care REIT, a firm that owns such homes. The real estate investment trust, with a market cap of $90.5 million, is in the midst of purchasing a Canadian health care company, Versa-Care Ltd., that will make it the second-largest nursing-home operation in the country. After a $61 million IPO last May, the REIT is now making a secondary offering to finance the Versa-Care deal. The Reichmanns own 70% of Central Park Lodges, which in turn has a 13.7% stake in the REIT.
VIRTUAL REAL ESTATE? Real estate doesn't excite all the second-generation Reichmanns. After working for the Reichmann-controlled Trizec Corp. development company and for his father, Ralph, at Olympia Floor & Wall Tile, 36-year-old Steven Reichmann now heads computer consulting company Bridge Technologies Inc. It operates the Canada affiliate of an Internet membership marketing service called International Commerce Exchange Systems. Jokes Reichmann: "Isn't the Internet virtual real estate?" Perhaps the biggest maverick among the cousins is Philip's 33-year-old brother David, who runs a chain of in-line skate shops.
It's hard to imagine that the younger Reichmann generation will come close to building an empire on the scale of their fathers. But the history of the family shows that it can be folly to underestimate a Reichmann.