Olympia & York Faces an Unhappy New Year : Finances: The world’s largest property developer may lose a substantial portion of its empire.

While 1992 saw the dramatic fall of the world’s largest property developer, Olympia & York Developments Ltd., industry analysts predict that the new year may bring the dismemberment of its empire.

“It’s all over. They can file all the restructuring plans they want, but they’ll still wind up with nothing,” said Peter Foster, author of an upcoming book on O&Y; titled “Tower of Debt.”

O&Y;, owned by the secretive Reichmann family of Toronto, in May filed for bankruptcy protection from creditors in Canada and in Britain, admitting that it owed more than $9.4 billion in worldwide debt.

During the second half of the year, the bankruptcy courts were the scene of battles over its restructuring plans.

Now, the developer has virtually lost its Canary Wharf office project in London’s Docklands, plans to sell a portion of its more than 30 office towers across the United States and will likely relinquish the title to many of its real estate holdings in Canada in a restructuring deal with creditors.

Court protection from creditors is scheduled to end in Canada in February, setting off a scramble for O&Y;’s Canadian assets.

“My gut feel on this thing right now is that a majority of the (Canadian) properties will be taken over by creditors,” one lawyer for one of O&Y;’s creditors said.

The dismemberment has already begun. O&Y; agreed in an Ontario court last week to allow Prudential Insurance Co. of America to take over the 28-story Aetna Center office tower in downtown Toronto as soon as possible.

O&Y; will likely end up as the property manager on a fraction of its core of a dozen Canadian properties, collecting a meager 2% to 4% of gross receipts, industry sources predict.

The future of Canary Wharf depends upon a subway link with the center of London. But it will likely be a future without the Reichmann brothers, bankers say.

If the private sector funds the underground Jubilee Line rail link to Canary Wharf, the complex could yet find new life.

“Without the Jubilee Line, you’re looking at grass growing up through the sidewalk,” a corporate banker with one of O&Y;’s major lenders said.

The project swallowed up about $2.8 billion of equity and debt before it went into administration.

The O&Y; drama may shift in 1993 to the future of its U.S. holdings, its only remaining major group of assets that have avoided bankruptcy court protection.

Many of the U.S. buildings are behind on loan payments, and during the last year there were rumors that O&Y; might bow to pressure and file for Chapter 11 protection in the United States.

O&Y; said in an information circular in November: “The objective of the proposed United States plan is by 1995 to own a dozen or more quality office buildings with a combined total of 15 million to 17 million square feet concentrated in New York.”

“I think they’re going to have serious difficulty staying out of bankruptcy in the U.S.,” the corporate banker said.