Heroes Page 13

  GREG WILKINS, a former racing-car driver who was named company president, insists that he’s not trying to collect marquee properties for publicity or ego reasons. No question, the Munk company’s marquee building in Canada is Place Ville Marie, architect I.M. Pei’s famous crucifix-shaped skyscraper in downtown Montreal. Built in 1962 on a vacant lot owned by the CNR, the forty-three-storey building, which comprises three million square feet of prime office space, became the head office of the Royal Bank and many other firms. Built on top of the city’s main commuter railways, it pioneered the construction of the underground shopping malls that now spread below most of the downtowns of North America. Trizec floated a $250 million debenture to refinance the debt of Place Ville Marie and upgraded the building, including construction of Pei’s original lobby ceiling, which was specified but never completed.

  In 1994, when Munk had just closed his bid for Trizec, he flew into Montreal with some of his senior executives to do a presentation on behalf of Barrick for his intended takeover of Lac Minerals, then in play. The group was driven from the airport to the Ritz-Carlton Hotel in an airport limousine, Munk riding shotgun in the front seat.

  “Hey, how is Montreal doing?” he asked the driver.

  “Nothing’s doing,” was the glum reply.

  “Any exceptions?”

  “Yeah, Place Ville Marie. It’s rented.”

  At that point, Munk wasn’t quite sure what he owned in Montreal as part of his new Trizec acquisition, but he knew that Place Ville Marie was top prize of his local portfolio, so he asked the driver why it was the exception. Why was it rented when every other building was in trouble?

  “Look,” the driver pointed, “it’s right there. You can see it sticking up. It’s the biggest building in Montreal.”

  “But why is it full?” Munk repeated.

  “Well,” the driver confided, “it’s the ownership. You see, Place Ville Marie is owned half by the pope and half by Paul Desmarais.

  So what would you expect?” Montreal’s two popes. You couldn’t do much better than that.

  I was Maclean’s business editor when Place Ville Marie was first proposed, and I interviewed Bill Zeckendorf, the legendary New York developer who won the building contract. Zeckendorf worked in a huge, round office on the top of one of his downtown skyscrapers, and while we were talking, he was carrying on two telephone conversations simultaneously and giving his secretary instructions about a future lunch date. At the end of my visit, I couldn’t resist asking the harried tycoon if he got ulcers working at such a frantic pace.

  “No,” Zeckendorf replied. “I give them.” But the New York developer met his match in James Muir, the no-nonsense Scotsman, then chairman of the Royal Bank, which was financing the Montreal project. “Jim keeps things simple,” Zeckendorf told me. “If you’re his friend, you can do no wrong; if you’re his enemy, you can do no right. And if you’re worth considering at all, you’re in one category or the other. “

  The many differences between the two titans were resolved only when Muir agreed to become Place Ville Marie’s lead tenant for a then-unheard-of annual rental of $2.6 million. The bank chairman was persuaded to move in partly because Zeckendorf assured him that by using a telescope from his top-floor office, he would be able to peer into the private dining room of the rival Bank of Montreal headquarters, so he could identify the clients its chairman, Arnold Hart, was wooing by entertaining them for lunch. And that’s how Place Ville Marie was born.

  IN 1996, BEFORE BRE-X was discovered to be a fraud, Munk felt that Barrick was the obvious company to go after the so-called world’s greatest gold deposit and did his best to negotiate a deal.

  “I had a handshake with David Walsh and J.P. Morgan [the Bre-X advisers], who recommended our deal,” Munk said. “All the controversy would not have happened because their [Bre- X’s] investment bankers gave them the full go-ahead, and this would have been a beautifully done, smooth deal.” But, for once, Munk somehow couldn’t make it stick.

  “I wasted months and months of time, and I was very disappointed, heartbroken, because it just didn’t make sense that we couldn’t make a deal. Our field engineers, our drilling rigs were on the ground in December, because J.P. Morgan and the government had agreed. But Felderhof shut the door on us, sent our people back and abused Bob Smith, our president.

  “It wasn’t until that morning when it was announced on BBC radio that it was a fraud that I jumped for joy. Suddenly, the whole thing became crystal clear.” He couldn’t buy a gold mine because there was no gold mine to buy. “I had been in bed with depression when I lost the deal in February. I had never tried so hard, and I just couldn’t understand it. Nothing worked, and suddenly, the moment it was announced as a fraud, I went from a deep depression and a psychosomatically induced flu to great good health in fifteen minutes. It was like someone opening up a window on a totally dark tunnel. Everything—all the meetings, all the delays, all the incompatible little details—everything totally made sense. “ Thus the sad ending of the Bre-X saga.

  MUNK IS NOT in retirement mode. “I feel more energized,” he says, “more enthusiastic. This is not a time to worry about biological age or chronological age. It’s a time to enjoy life and do things better than you have before. I’ve got the experience and the ability—the best of both worlds.” Except for his son Anthony, who has been a director of Horsham, none of his children are involved in his business, and they will not inherit his companies. His fortune will be left mostly to the foundation he has set up to encourage the spread of “liberty, freedom and free enterprise.”

  Munk won the acceptance he so treasured long ago, but somehow it’s never enough. In the spring of 1993, he was appointed an officer of the Order of Canada [in 2009 he was promoted to Companion] and cried through most of the ceremony. “Peter Munk is well respected because of the super jobs he did with Barrick and Trizec, and nobody can take that away from him,” says Bill Wilder, the former head of Wood Gundy and one of Bay Street’s High Establishment figures. “But he’s never going to be one of the boys playing poker at the Toronto Club. He’s a cold-blooded, tough Hungarian who is going to paddle his own canoe.” Munk has since not only joined the Toronto Club, but was also the first Jew to become its president, though he still doesn’t linger for the afternoon poker jousts.

  What separates Peter Munk from the usual run of successful tycoons is his hard-won self-knowledge. “Whenever we complete a large deal,” he once told me, “I always tell my people not to get too euphoric and remind them not to get caught up in the deadly sin of hubris. I keep drumming into them—and make them repeat it back to me, so I’m sure they’ve got it—that we’re still the same human beings we were fifteen years ago when we were struggling. Balance sheets may change, but people don’t. We’ll never get too big for our britches.”

  — 1998

  For the Love of Andy (Sarlos): Of Casinos and Markets

  DURING THE THREE decades Andy Sarlos dominated Canada’s financial markets—as the leading Canadian financial guru of his generation—he operated according to his own rules and his own priorities. There was no one remotely like him. He paid more attention to the long arc of history than to the spurts and pulse of the Dow and valued friendship above profit.

  “His contacts were phenomenal,” recalls Max Yamada, who worked for him. “Before joining his firm, I had run the largest U.S. dollar account in Canada for fourteen years and always got the first call from Wall Street. But after a week in Andy’s office, I realized how business was really done. He could call literally anybody, and they’d always call back. Fast.”

  Sarlos was not the richest investor in the country because he was a born gambler and enjoyed losing as much as winning. “If I was right all the time,” he once told me, “it wouldn’t be any fun. It’s the risk that makes the market an exciting place to be.” But he knew how to play the odds, and in 1977 alone, the value of stock in his investment trust, HCI Holdings Ltd., more than tripled. At one point so many
people wanted to buy shares in his firm that trading on the TSE had to be halted for four hours. During much of the 1980s, his trades accounted for 10 percent of the TSE’s daily totals. By then he was spending $8 million annually in brokerage fees, which made him the largest individual source of commissions on the Street. He seemed to be in on every important deal. In one transaction involving the Hiram Walker-Consumers Gas merger, he and his partners walked away with a $19 million profit.

  He hypnotized his peers. “What’s Andy up to?” everybody wanted to know. In the wine bars and private clubs that ring Toronto’s brokerage houses, where the senior analysts go to trade lies and fables, the talk was often about the source of his market magic. Why was this diminutive Hungarian, whose Establishment credentials were zilch, consulted by just about every big player in the country? Why did the likes of Peter Munk, Peter Bronfman, the Reichmanns in their day, Trevor Eyton and many others of equal rank scarcely make a major move without seeking his input?

  The answer was simple. He gave advice the way a priest grants absolution—freely, and with no hidden agenda. That was unheard of on Bay Street, where contacts at his level usually mean leverage that can yield fat fees. Sarlos never marketed his friendships or his wisdom. “He was a giant of a man,” Munk said of him, after his death in 1997. “A real prince who never said an evil word about anybody and was more interested in making money for others than for himself. He was also very shrewd—on a human level, twice as shrewd as George Soros. I can’t even say how much I’ll miss him, personally and in business.”

  To know him was to trust him. “Andy is Numero Uno with me,” declared Gus Van Wielingen, one of Calgary’s oil millionaires. “I don’t mind giving Andy my chequebook any time. I’ll even show him how to sign my name.” As his network widened, Sarlos became an active philanthropist, and after the fall of Hungary’s Communist regime in 1956, he contributed much time and money to help revive the economy of his former homeland, including the financing of a bank, a department store, a newspaper and the country’s first modern shopping centre.

  Playing the market, he always went to the source, whether it meant visiting rigs in the field and talking to the roughnecks actually drilling for oil or studying the sulphur market, because its supply-demand curve determined steel-manufacturing schedules six months in advance.

  He was a student of power and knew, for example, that CEOs of companies under threat of takeovers often act on the basis not of their disposable power, but of their disposable psychic energies. That trait made them vulnerable at pivotal moments, and despite his gentle manner, Sarlos knew when to move in for the kill. “Good traders,” he maintained, “rely on what they hear; great traders assimilate the available facts, then act on the basis of their gut instincts and sheer nerve. Balls are as important as brains.”

  A Hungarian by birth and persuasion, Sarlos shared the national trait of being impossible to stop, once moving in a desired direction. (It’s a well-documented fact that Hungarians will follow you into a revolving door, yet emerge ahead of you.)

  The son of a Budapest grain trader, he was drafted into the Hungarian air force and arrested by the occupying Communists for plotting to defect to Yugoslavia. His subsequent imprisonment changed his life. “Death seemed a better alternative than life,” he recalled, “because for a year, the guards always made you believe you’d be executed the next morning, and many of us were.”

  Sarlos later fought with distinction in the 1956 Hungarian Revolution, fled to Austria and eventually landed in Canada. After taking an accounting degree, he spent ten years in Labrador with the Canadian branch of Bechtel, the giant U.S. engineering and construction firm then building the Churchill Falls power project. On Bay Street his first venture was to buy out the failing Hand Chemical Industries, a small Milton, Ontario, firm which was going broke making fireworks, but had the advantage of a TSE listing and $1 million in its treasury. In the next five years, he parlayed that seed money into $200 million.

  But it wasn’t uphill all the way. In the 1982 market crash, his company’s stock fell from a high of $45 to 47 cents. He ended up with debts of $150 million. It was Sarlos’s proud boast that he paid back every cent, instead of escaping, like most firms in his positions, into a “restructuring” mode, which would have saved him millions. He believed in the stock market, but when I once railed at him that it was just a goddamn casino, he gently corrected me. “No,” he chided. “Never compare the stock market to gambling. Casinos have rules.”

  During the past decade or so, Sarlos continued to trade, but his role was more advisory. “Check it out with Andy,” became the Street’s war cry whenever a big deal was coming down. He never let up, though he suffered from increasingly serious heart trouble, undergoing three major operations, and was twice declared clinically dead.

  The dignified and superbly organized way he died was typical of the man. On April 24, 1997, as he was leaving his office, he asked his chief assistant, Hal Jones, to close all his future positions. He was so weak he could hardly stand but insisted on taking part that evening in a conference-call board meeting of Peter Munk’s TrizecHahn real estate company via his bedside telephone. Two days later he lapsed into a coma from which he never emerged.

  The previous week Andy Sarlos had dined out one last time with Peter Munk at the Toronto Club and told him, “I am totally at peace with myself. I have had more lives than I deserved.”

  Perhaps, but Bay Street without Andy Sarlos will be an infinitely less interesting and much less compassionate place.

  — 1997

  “Young Ken “ Thomson: The World’s Shyest Multi-Billionaire

  HE MOVES THROUGH life with studied gracelessness, doing few of the things one would expect from a man of his means and opportunities to venture and enjoy. Deferential to the point of absurdity—and parsimonious to a point far beyond that—Ken Thomson has turned self-effacement into an art form. Yet he is the leading philanthropist of his day, and if being gentle, generous and family oriented is a crime, he is guilty as charged.

  His astonishing communications empire swirls about him, throwing off $4.4 million a week into his personal dividend account, employing 105,000 on four continents—on the way to becoming the world’s largest multimedia oligarchy. It already ranks fourth—after Germany’s Bertelsmann, Capital Cities/ABC and Time Warner Inc.—and has circulated or sold an incredible forty thousand editorial products. Thomson owns a real estate arm (Markborough, with assets of $2.3 billion) and an overseas travel subsidiary that operates 40 percent of England’s package tour business and five hundred Lunn Poly “holiday shops.” “Young Ken,” as everyone calls him, is also the sole proprietor of Britannia Airways, the United Kingdom’s second-largest airline, which carries six million passengers aboard fifty-six jumbo jets. Because the Thomson companies’ debt ratios were unusually low and their credit lines were virtually unlimited, Thomson was in the enviable position of being able to buy any $5 billion property that came along. And did.

  By mid-1991 Thomson’s personal equity holdings were worth $7.7 billion, which, according to Forbes, ranked him as the world’s eighth-richest individual. The listing placed Thomson well ahead of Gerald Grosvenor, sixth Duke of Westminster, who was England’s richest man, and such celebrated moneybags as Italy’s Giovanni Agnelli, Hong Kong’s Li Ka-Shing, the Gettys, the Rothschilds and the Bronfmans. He also happened to be— by quite a wide margin—the wealthiest Canadian.

  Unlike these and other worldly figures who have qualified as rich and famous—and behaved as if they were—Thomson acts as if he were ordinary enough not to be noticed. There are few public clues to his private thoughts or personal motivations. Compulsively shy of personal publicity and seldom interviewed except about his art, he would much prefer to be invisible, and in fact almost is. “The lowest profile,” he contends, “is the very best to have.”

  Although he seems scarcely aware of it, Thomson is caught in a time warp between the high-tech world of his communications conglomerate and the
unbending Baptist ethic of rural Ontario, where he simmered up. “We were raised on the principle that you kept yourself to yourself and that only the members of your close family were your true friends,” recalls his niece Sherry Brydson, who grew up with Ken. “You played it close to your chest and believed that only with family could you let your hair down. Ken has taken it a step further. He’s got to the point where he doesn’t let his hair down with anybody.”

  Even in his dealings with long-time business colleagues, Thomson demonstrates an air of impenetrable reserve. It is entirely in character that his office, on the top floor of the Thomson Building at the corner of Queen and Bay streets in downtown Toronto, has a vertical moat. Public elevators run to the twenty-fourth floor, but only prescreened and thoroughly vouched-for visitors are allowed into the private lift that ascends to the twenty-fifth level shared by Thomson and John Tory, his chief corporate strategist.

  THOMSON’S OFFICE HOUSES part of his art collection, including most of the 204 canvases by the Dutch-Canadian artist Cornelius Krieghoff that he owns—hanging there, looking as uncomfortable as nuns in a discotheque. Gathering Krieghoffs has been Young Ken’s most visible passion, but his real cultural hero is a somewhat less exalted artist in a very different art form: It is Clarence Eugene “Hank” Snow, the Nova Scotia-born country singer. Thomson regularly visited Hank at the Grand Ole Opry in Nashville, owns all his records, has been to Snow’s house in Tennessee and presented him with a gold Hamilton pocket watch that was a family heirloom.

  KEN THOMSON’S PSYCHE is so difficult to penetrate because he behaves like a superb actor, able to detach himself from whatever crisis might be occupying his mind. Occasionally, very occasionally, an emotion will flicker across his shuttered face, only to be withdrawn quickly, like a turtle’s head popping back into its protective shell. Exceptions to such closed-end reticence come unexpectedly.