FALL OF A REAL ESTATE GIANT : New York, Toronto Hold Key to Olympia & York’s Future : Outlook: Both cities have a glut of commercial space. The company also has major holdings in California.

The real estate empire of financially troubled Olympia & York Developments Ltd. spans the globe, but the company’s future health hinges on the stability of commercial real estate markets in New York City and Toronto.

Olympia & York, which filed for protection from creditors under U.S. and Canadian laws, is the biggest landlord in both cities and derives substantial revenue from its buildings in those markets, where a glut of office space has spawned a battle among landlords for tenants.

Olympia & York owns nine major office buildings in Toronto and another 12 in New York City, including the World Financial Center and 1 Liberty Plaza.

The firm has a far less critical presence in Los Angeles, where it has a 50% interest in the World Savings Building at 11601 Wilshire Blvd. and about a 45% interest in the 400 S. Hope St. building.

But in the Bay Area, San Francisco officials are concerned about O&Y;’s main California project--the Yerba Buena redevelopment in downtown.

Over the past 18 months, Olympia & York restructured its payment schedule four times with San Francisco. O&Y; must pay the city $17.9 million, plus another $1.14 million in interest, by July 1, 1993. As part of the restructuring, O&Y; lost its option to construct two large office buildings in the Yerba Buena redevelopment area after it failed to make good on its payments.

It still has rights to build a 40-story high-rise on a prime piece of downtown real estate on Market Street--but only if it pays the final $18 million by July, 1993.

Officials have not sought other developers for the parcels that O&Y; relinquished. The market is simply too soft right now, they say.

Although much of the construction has already taken place on the parcels owned by Olympia & York, including a large Marriott hotel, the delay in development of the other parcels means lost construction jobs, tax revenue and revitalization of a weathered part of San Francisco.

“It’s going to get built someday by somebody,” said David Madway, a lawyer for the San Francisco Redevelopment Agency. “It’s too valuable not to get built.”

O&Y;’s California holdings also include a 15% stake in Catellus Development Corp., which owns almost 1 million acres in the state, making it the single largest private landowner in California.

Mary Burczyk, a vice president of Catellus, said the bankruptcy will have no immediate effect on Catellus, although she acknowledged that if O&Y; were to sell its stake, Catellus’ stock price could dip lower.

Many credit and currency markets around the globe had been reacting in recent weeks to rumors that the Canadian-based firm might seek bankruptcy court protection. But the filings in New York and Toronto bankruptcy courts could make lenders more skittish about making real estate loans, cut property tax revenue in cities where Olympia & York has buildings and cause potential tenants to shun its properties.

“What it says is that there was a hell of a lot of undisciplined lending done in the 1980s,” said Madway, who deals often with O&Y; executives. “Until the debris of that period of excess is cleaned up, there’s not going to be a lot of office construction.”

The bankruptcy filings were triggered by O&Y;’s failure on Thursday to make a $14-million payment on the First Canadian Place office tower in downtown Toronto. The failure to pay the money gave the bondholders who helped finance the building’s construction the right to seize the 72-story tower.

The outcome of the filings will largely depend on the stance banks and other creditors take in bankruptcy court toward the Reichmann brothers, who amassed the company’s privately held global real estate empire.

Although Olympia & York will continue to own and operate its buildings while the bankruptcy judges help the company reorganize its financial affairs, Olympia & York will have to work out new loan terms with creditors as well as mollify tenants worried about committing to long-term leases with a troubled landlord.

Shiver reported from Los Angeles and Morain from Sacramento.