TORONTO -- The bankruptcy filing by Olympia & York might well keep alive the world's largest real estate company, but it represents a once-unthinkable descent for one of the most mysterious and successful business enterprises of modern times.
The Reichmann brothers, Paul, Ralph and Albert, offspring of World War II refugees from Europe who settled here in the 1950s, turned a small family tile-importing business into a huge, privately held empire in real estate, oil and timber once valued at $31 billion.
But recessions in the United States, Canada and Britain, a $6 billion mistake along London's Thames River, unwise diversification moves and bad luck have now triggered what stands to become the largest bankruptcy in history.
In the end, analysts say, a failure to find buyers for Olympia & York's still-thriving assets -- due in part to the retreat of Japanese investors from the West because of their own fiscal woes back home -- caused the Reichmanns to lose control and to duck behind the shields of the Canadian and U.S. bankruptcy laws.
Already, the Reichmann empire has begun to shrink: It has managed to sell a controlling interest in one of North America's biggest oil pipeline companies. And though its executives vow there will be no "fire sales," any surviving entity will necessarily be much smaller.
In Canada, the fall of the Reichmanns has even been a blow to national pride. Orthodox Jews who live unpretentiously in a Toronto neighborhood and spread their wealth as philanthropists, they are admired as a family whose ethics and business skills are unmatched. Their successes abroad during the last two decades helped bolster Canada's world image.
Traditionally conservative Canadian banks are said to be the toughest obstacle to Olympia & York's attempt to restructure its debt. In Toronto, a city that closely follows the Reichmann drama, many cast their sentiments with the Reichmanns and against the banks.
A Canadian Customs agent greeted a visitor of Toronto's airport yesterday by holding up a newspaper headline that screamed of Olympia & York's bankruptcy and said, "This is not bankruptcy. It's just a waiting period so these banks can't come in and take anything. They've got the economy in the palm of their hands. These banks have got to wake up!"
And while it is clear that the Reichmanns made their mistakes -- notably the massive but still unfinished Canary Wharf development in London -- many fault the Canadian government for taking Olympia & York down with the economy.
"This is the Bank of Canada's fault," says Peter Dungan, an economist at the Institute for Policy Research at the University of Toronto, referring to anti-inflationary policy followed by the nation's central bank that is blamed for Canada's recession. "I don't think the Reichmanns took excessive risks or made stupid mistakes."
Starting with some industrial buildings on the outskirts of then-sleepy Toronto in the late 1950s, Olympia & York pioneered virtually every trend in commercial real estate in the last 30 years. Among them was an early awareness of the role played by local governments in regulating office space, experts say.
The Reichmann's also became known as straight shooters who would put up plenty of their own capital -- $300 million in the case of New York's World Trade Center -- before seeking outside financing. It reflected their willingness to take up-front gambles for long-term payoffs.