Real Estate The $20 Billion Question

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But that did not stave off the restructuring that followed soon after. The announcement of debt negotiations sparked an immediate response from Ottawa. Government representatives and the Bank of Canada quickly arranged talks with O&Y and its lenders last week. The aim, said Finance Minister Don Mazankowski, was "to stabilize the situation." Ottawa could help O&Y dispose of its assets, which will probably include some Toronto office towers, but Mazankowski insists that no government "bailout" is in the offing.

Once the restructuring takes shape, the banks will probably trade some debt for equity positions in O&Y properties. Debt-repayment schedules will likely be extended as well. The negotiations cast serious doubts on the firm's promise to the British government to contribute some $690 million to help finance a subway connection to Canary Wharf. The link could prove crucial to the ultimate success of the development, but the banks may well balk at spending scarce cash.

The Reichmanns contend they will stay the course. Paul Reichmann reaffirmed his faith in Canary Wharf last week, declaring that his company is "confident that the development will be a success." Such is their reputation for intelligent long-term investment that many experts still give them respectable odds. Says John Robbins, a partner at Kenneth Leventhal & Co., an accounting firm that specializes in real estate: "If anyone is going to make it, the Reichmanns are. These guys did not come into town on a load of wood. They're smart." Considering the load of problems they are lumbered with, however, they will also need to be a little lucky.