The Canadians Come Calling

By Janice Castro.

For sale: five huge American shopping centers, from New Jersey to Washington State, and 691 stores spread all over the country, including the famed Brooks Brothers and Bonwit Teller chains. No retailing experience necessary. Foreigners welcome.

Giant Allied Stores never ran such an ad and never planned to sell itself off -- certainly not to a Canadian real estate company. But last week, after resisting for two months, New York City-based Allied (1985 sales: $4.1 billion) agreed to become a subsidiary of Toronto's comparatively tiny Campeau Corp. (1985 revenues: $155 million). The price tag of $3.6 billion made it the biggest Canadian takeover of a U.S. corporation in history. While Allied executives were a bit stunned, Campeau's chairman, Robert Campeau, was unabashedly delighted. "It's the best deal I've ever made in my life!" he said. "It's a terrific company, everything I want."

Once unknown in the U.S., Campeau is the latest in a long line of Canadians who are streaming across the border with bundles of cash and a sharp eye for lucrative opportunities. The invaders range from hit-and-run investors mainly interested in fast profits to empire builders who have put down deep roots in the U.S. As the money pours into stores, skyscrapers and factories, capital has suddenly become the most visible Canadian export to the States since ice hockey.

Department of Commerce figures show that Canada's direct investment in the U.S. surged from $11.4 billion in 1983 to $16.7 billion in 1985. That total places Canada fourth among foreign investors in the U.S., behind Britain, the Netherlands and Japan. The current value of American companies and other assets in which Canadians hold at least a 10% stake is even more impressive: $105.6 billion. Toronto's Reichmann brothers, for example, now own 8% of all the office space in Manhattan. Last March a subsidiary of Vancouver-based B.C.E. Development bought $1 billion worth of real estate in five U.S. cities, including 13% of the office space in downtown Minneapolis. Other Canadian investors have purchased gold mines, chains of movie theaters and California wineries.

Canadians put money into the U.S. for many of the same reasons that other foreign investors are drawn to the dynamic $4 trillion American economy: high return on capital, low taxes and skilled labor. What is more, the targets in America are tantalizingly close across the 5,526-mile border. Although Canada is larger than the U.S., its economy is smaller than California's, and its population, at 25 million, is roughly the size of the Golden State's. Furthermore, 24% of the relatively small pool of Canadian assets is already owned by foreign investors. Americans alone own 45% of Canada's oil and gas industry and 29% of its manufacturing sector. Says Ted Zahavich, director of research for Investment Canada, a federal agency in Ottawa that fosters foreign investment: "The U.S. is attractive to Canadian investors because there are limited opportunities in Canada for the big players. They've outgrown the playpen."

Partly because Canada does not have many statutes limiting the concentration of capital, much of its wealth is held by a few fabulously rich families. While most Canadian tycoons are neither required by law nor inclined by nature to disclose the details of their holdings, a new book titled Controlling Interest: Who Owns Canada? by Toronto Star Financial Writer Diane Francis < asserts that just 32 families own more than one-third of the country's nonfinancial assets. Many of those families have built up sizable stakes in the U.S.

Some of the most prominent investors from the North:

ROBERT CAMPEAU. In Ottawa it is said that Campeau owns the skyline. He made his first real estate investment in 1942 as a 19-year-old machinist. Campeau built a house, sold it for a 50% profit and started another. Within ten years he was building apartments and office towers, and now owns Canadian real estate worth $1 billion. Allied rejected his first offer of $58 a share last August, when the stock was trading at 48. But Campeau eventually won Allied's consent with an offer of $69 a share, helped by a $1.8 billion loan from First Boston. Said Allied Chairman Thomas Macioce last week: "We got our shareholders the best price possible."

THE REICHMANNS. Robert Campeau is little more than middle class when compared with the Reichmann family of Toronto. As reclusive as they are shrewd, the three Reichmann brothers -- Albert, 56, Paul, 54, and Ralph, 52 -- have quietly built a dominion estimated to be worth $18 billion since they fled Austria with their parents during World War II. With the savings they were able to bring out, the family bankrolled construction and steel ventures in Toronto, eventually moving into real estate speculation. In 1977 Wall Street hardly noticed when Olympia & York, the development firm founded by the brothers, picked up eight Manhattan skyscrapers at a distress-sale package price of $400 million during New York City's fiscal crisis. Today those buildings are valued at some $3 billion.

Now the world's largest owners of office space, the Reichmanns control about 30 million sq. ft. of U.S. real estate, worth an estimated $10 billion. The glittering centerpiece: their new $1.5 billion Battery Park City project, part of a vast new chunk of Wall Street waterfront created on 92 acres of landfill in Manhattan. Among the companies ensconced in Olympia & York's elegant copper-and-granite towers there: Merrill Lynch, American Express and Dow Jones.

THE BELZBERGS. The most aggressive corporate raiders to sweep down from Canada, the Vancouver-based Belzbergs have made profitable runs on the stock of a dozen or so major U.S. corporations during the past few years. In 1984 they teamed up with T. Boone Pickens in an attempt to take over Gulf Oil. The bid failed, but seven months later the Belzbergs sold their $87 million stake in the company for $157 million. Last March the family threatened a takeover of Ashland Oil (1985 sales and revenues: $8.2 billion), collecting a $16 million "green-mail" profit when management bought back its shares.

The sons of Polish immigrants, Sam, William and Hyman Belzberg have invested the proceeds of their real estate and oil and gas investments in a complex tangle of public and private firms said to be worth some $8 billion. U.S. holdings include Manhattan-based First City Capital, a subsidiary of Vancouver's First City Financial (assets: $2.9 billion); Far West Financial, a large California savings and loan; Connecticut-based Scovill, an industrial firm that makes Yale locks and other consumer products; and substantial stakes in about 20 other major U.S. firms.

THE BRONFMANS. As the undisputed kings of the North American liquor business following America's Prohibition era, the Bronfmans were among the pioneers of cross-border investment. Their main company, Seagram (1985 sales: $2.9 billion), is now the world's largest distillery. Chief Executive Edgar Bronfman Sr. shuttles regularly between the firm's Montreal headquarters and the New York offices of its U.S. subsidiary. An American citizen since 1959, Bronfman has engineered Seagram's purchase of 22.5% of the outstanding shares of Du Pont, the huge oil-and-chemicals company (1985 sales: $29.5 billion). Seagram now owns more of that firm's stock than the Du Pont family does. Says Bronfman: "It's the size of the U.S. market that lures Canadian investors here."

Edgar's first cousins, Edward and Peter Bronfman, known in Canada as the "poor Bronfmans," have not changed their citizenship, but they have invested in the U.S. By selling half their Seagram stock during the 1960s, Edward and Peter multiplied their assets into controlling interests in more than 100 companies with an estimated total value of more than $30 billion. In the U.S., those holdings include the Maryland-based Rouse Co. (1985 revenues: $247 million) and California's Ernest Hahn real estate.

In the wake of the impressive successes that Canada's richest families have scored in the U.S., growing numbers of smaller investors are expected to look southward as well. Last week the U.S. Government encouraged that trend by sponsoring three "Invest in the U.S.A." seminars in Canada, at which lawyers and accountants dispensed tips on how to get started in business in the U.S. Twenty-five states participated, hoping to lure Canadian investment. In a new version of the old wintertime travel advertisements for Florida aimed at shivering Northerners, the U.S. is telling Canada, "Come on down!" More and more Canadians are accepting the invitation, with pleasure.

With reporting by Peter Stoler/Toronto and Frederick Ungeheuer/New York