Another '80s Emblem Bites the Dust as Largest Real-Estate Empire Collapses : Economy: Olympia & York was the bluest of blue-chip land developers worldwide. But now its assets won't cover its billions and billions of debt.

Walter Russell Mead, a contributing editor to Opinion, is the author of "Mortal Splendor: The American Empire in Transition" (Houghton Mifflin)

The '80s aren't just over; they're finished. Donald Trump, Leona Helmsley, Michael Milken; one by one, the icons of the Age of Greed have trooped offstage: broke, dis credited, jailed.

Now the buildings are going bankrupt. The Canadian bankruptcy filing of Olympia & York, the world's largest and, until recently, supposedly its richest property developer, is plunging an already troubled commercial real-estate market into chaos. Olympia & York was the bluest of blue chips and it owns and manages some of the most prestigious addresses in the world.

Olympia & York's Canary Wharf project in London is the largest office development in Europe. It was the apple of Margaret Thatcher's eye, her proof that private enterprise could revitalize inner cities where governments failed. It was planned as a temple of Britain's dreams of glory: Aggressive deregulation of the financial-services industry was going to make London, along with Tokyo and New York, one of the three principal players in the new capital markets. Canary Wharf was to be the yuppie mecca of the '90s--the place where Gordon Gekko would want to put his London office.

But something happened. London's financial-services boom never quite created enough jobs to fill the glittery towers that rose around the old city. Rents and property values fell, and Canary Wharf can't attract tenants at economic rates.

Now, in a humiliating reversal, the builder is looking for--state aid. No more talk about private funds and depressed cities; the project managers have approached John Major, Thatcher's successor, hat in hand, asking for help in keeping the project afloat. Thatcher's temple of capitalism is prospecting for a new kind of tenant: government bureaucrats.

In the United States, the Olympia & York bankruptcy is affecting another monument of the '80s. The World Financial Center in Lower Manhattan, one of those vulgarly ostentatious temples to Mammon that transformed American skylines in recent years, is chiefly noted because it is the home of the Wall Street Journal, whose editorial page was head cheerleader for the New Greed. It is somehow appropriate that the Journal should now be housed in the building of a bankrupt--even as it continues to defend Ronald Reagan's supply-side plan to balance the budget by 1984.

The Olympia & York meltdown is, however, more than matter of symbols. The Toronto-based company controls 2% of New York's office space and contributes $175 million a year in taxes. New York has enough troubles already; it doesn't need its largest taxpayer to go bankrupt.

There is also bad news for the banks. Citicorp--which has lost more money under its president, John S. Reed, than most banks see in a lifetime of service--has $500 million at risk; other leading banks across North America and Europe stand to lose hundreds of millions more.

The bankers are not entirely to blame for this. Olympia & York, for all its problems today, was never regarded as a typical '80s conglomerate. While Rupert Murdoch and others cobbled together rickety superstructures with baling wire and glitz, Olympia & York had a solid reputation for conservative management and sound business judgment.

That makes its current difficulties all the more alarming. The company's portfolio of blue-chip properties in Toronto, London and New York lost value as rents and values fell throughout the English-speaking world. Now these properties aren't worth as much as the mortgages with which they were bought, and Olympia & York can't make its payments as they come due.

Company spokesmen argue the problems are temporary. Commercial real estate, they say, may have been overvalued five years ago, but it is undervalued today. If the company can just hold on long enough, business will revive, rents will pick up and Olympia & York's assets will once more be worth as much as its debts.

Maybe--but banks have heard this story before, and many bankers have come to believe it is best to cut their losses. Banks have lost so much money to so many debtors--in developing countries, in property markets around the world and in the bankruptcies of the recent recession--that they are losing their taste for risk.

The fear that bankers might pull the plug on Olympia & York now haunts the already gloomy commercial real-estate community. If Olympia & York is forced to dump some or all of its properties on a depressed market, prices and rents will sink further, and more builders, and more banks, will face more bankruptcies.

Nobody knows how far this can go; it has already gone much farther than anybody expected. Real-estate values are down 50% in some markets; thousands of investors who believed real estate was a safe bet have lost their shirts.

Real estate is, by its nature, a high-risk, high-reward industry. In the United States, real estate has been one of the ways the middle class could become financially independent, even wealthy. Real-estate speculation is as American as apple pie--George Washington was a land speculator. For 200 years, the American banking system has always done its best to accommodate real-estate investors and their dreams of quick money.

The bankruptcy of Olympia & York is bad news for the dreamers and the dreams. It means, first of all, that the period of tight credit for real estate will be longer than anyone expected. Not even bankers--not even Citicorp bankers--are stupid enough to make real-estate loans in this market.

But it is one more sign, too, that the American Dream is becoming harder to realize. Hundreds of billions of dollars in capital that once sloshed through world markets have simply disappeared. Japan's stock market is worth less than half the value it reached at its peak; the same is true of much of its real estate. The billions lost by developers and banks in the United States and Britain are also gone. It means new developers and new entrepreneurs are going to have to look harder for money--and pay more interest when the find it.

Losses in the Japanese stock market and the London commercial-property market may seem remote from the concerns of ordinary Americans, but the effects of these crashes will linger long after the headlines. The vast pools of capital in the stock and real-estate markets are like mountain snowpack; the runoff provides the capital liquidity that the rest of us need to water lawns and wash cars.

The snowpack is shrinking--quicker and more drastically than even the pessimists predicted. There is less capital around now--to finance the budget deficit, rebuild our cities, upgrade our industries and educate our children.

It is tempting to gloat at the problems of arrogant builders and bankers, but we all depend on that mountain snowpack to get us through what looks to be a hot and dry summer.

Bankers and builders had a wild time in the '80; they put lampshades on their heads and danced on the tabletops. The party is over now, but the hangover is here to stay. The hangover, unfortunately, is contagious; even those of us who missed the party can expect to suffer the consequences.

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