Towers of Debt: The Rise and Fall of the Reichmanns

Duncan McDowall is a professor of history at Carleton University and the
author of Quick to the Frontier: Canada’s Royal Bank.

In 1986, prizewinning journalist Peter Foster published The Master
Builders, a chronicle of the Reichmanns’ rise from the tile business
they purchased in the 1950s soon after arriving in Toronto to their
pre-eminence in the 1970s as owners of Olympia & York. The Reichmann
debacle of 1992 sent Foster back to his desk. The result is a solid but
ultimately superficial chronological narrative of the Reichmann
“story,” a tale that in passing tells us something about the fickle
cycles and psychology of the financial and real-estate industries.

Foster builds his analysis around the personality of Paul Reichmann,
whose “apparently relentlessly acquisitive, driven, business
persona” explained O&Y’s initial success and its subsequent
mystique. Paul had mapped out the family’s “geometric progression”
from tiles to low-rise office buildings to multistorey office complexes.
Cash flow from previous frontiers fueled advances to the next frontier,
culminating in the 1970s with the daring Battery Park project in New
York. Paul came to believe that he could counteract the notorious swings
of the real-estate cycle by buying cheap, diversifying globally, and
thereby beating the odds.

In the 1980s, the Reichmann style changed. They became hostile,
litigious takeover artists; they found themselves subject to alien
business cycles; debt load began to outstrip cash flow. Foster evokes
the “Paul Principle”—“Canadian companies in a prevailing climate
of mega-loans and economic nationalism tended to expand to the point of
self-destruction”—to set the stage for the dénouement. The flawed
conception behind the daring Canary Wharf project in London, bankers’
and politicians’ blind faith in the Reichmanns’ dreams, and the
global collapse of real estate spelled the end in 1992.

Walter Stewart’s Too Big to Fail offers a broader and more reflective
version of these same events. Towers never really penetrates the
secretiveness of Paul Reichmann; it is created almost exclusively out of
newspaper coverage of the O&Y fiasco. The book bears little evidence of
primary documents or probing interviews. Denied such material,
historians will perhaps never get closer to the truth about this
cloistered family.