In the depressed real-estate world, the sight of yet another large developer filing for bankruptcy wasn’t a shocker. But it was still unnerving to see a company considered as prestigious and brilliantly run as O and Y scurrying for bankruptcy protection. Real-estate experts worried that the filing would make banks and other lenders even more cautious about backing new projects. After all, O & Y built such showpieces as New York’s World Financial Center and Toronto’s First Canadian Place. If anyone thought only “garbage real estate” was suffering, said economist Paul Isaac, the O & Y filing put an end to that notion.
Like Trump, the Reichmanns built their empire on the premise of an ever-expanding real-estate market. Led by Paul Reichmann, O & Y presciently bought New York real estate in 1977 for a song and realized a bonanza when the city bounced back during the 1980s. The company grew into New York’s biggest landlord and developed a reputation for a Midas touch. But like real-estate developers everywhere, O & Y heavily leveraged its buildings to do still more deals-and bankers were all too willing to turn over millions with little more than a handshake. The backbreaker may have been its Canary Wharf project in London, a $6.5 billion office development that hit the market during a glut–and was too distant from the heart of London. “Olympia and York took what were very good assets and put too much debt on them,” said Steven R. Fenster, a Harvard professor.
Olympia and York said the bankruptcy would allow it time to work out a restructuring. The key issue will be what portion of O & Y’s assets the Reichmanns will have to turn over to their lenders. Even if they keep a big chunk, the saga of the Reichmann empire is another metaphor for the rise and fall of the 1980s.
