I can’t believe that Ford is still our mayor. In fact, I still can’t believe we elected him in the first place.

In case you missed it, Toronto’s Police Chief announced today that they are in possession of a video depicting Rob Ford smoking crack cocaine. Outside of Canada, it was reported in the Huffington Post, the Guardian, as well as many other places.

It’s an embarrassment for Toronto. It’s an embarrassment for Canada. 

But even after all of this, Ford came forward today and said that he will not resign:

“I have no reason to resign. I’m going to go back and return my phone calls. I’m going to be out doing what the people elected me to do and that’s save taxpayers’ money and run a great government that we’ve been running.”

Toronto is a global city. And yet we have this profound leadership deficit. Today our successes are in spite of our governance. I know that there is a lot talent in this city so, please, somebody step forward.

We need a new mayor.

This past Friday, Paul Reichmann passed away in Toronto. He was 83. For those in the real estate business, Paul was a legend. He was the developer behind landmark office projects such as First Canadian Place in Toronto, World Financial Center in New York and Canary Wharf in London.

He was the man behind Olympia & York, which by the late 80s was one of the largest real estate development firms in the world, making the Reichmann family the 7th richest family in the world. Their net worth reached $12.8 billion at its peak. In 1990 they owned 8% of New York’s commercial office space. This was more than twice as much as the Rockefellers.

But what makes the Reichmann story so fascinating is the beginning and end of it.

Paul was born in Vienna, but his family fled the Nazis and came to Toronto like many others at the time. He and his brothers setup a tiling company called Olympia Tile and its this business that eventually led them into real estate. 

Paul became known for taking on huge risks. He believed firmly in the principles of risk and reward.

I remember when I was at Penn hearing stories about Olympia & York from the Dean at the time, Gary Hack (a Canadian). He used to tell us about the phenomenal amounts of leverage that O&Y used to take on in order to scale.

But ultimately it was this leverage that brought them down. In 1992, Olympia & York went bankrupt and the family was left with a net worth of less than $100 million. Still a great sum of money, but nowhere near the $12.8 billion they once had. The New York Times called it “one of the most astonishing financial collapses in history.”

But in many ways, this is not an uncommon developer story. Real estate development is risky. And Paul did eventually rebuild. Not to where he was before, but he did come back. He became Chairman of Canary Wharf in London and went on to develop the tallest tower in Latin America.

Last week Toronto lost one of its most prolific real estate minds. Paul was also largely part of an era that no longer exists. The real estate business in the 80s wasn’t as institutionalized as it is today. It was filled with larger than life individuals, such as Paul, taking on huge personal risks. It must have been an exciting time to be in real estate.

Thanks for everything you’ve done for Toronto, Paul.

Atlantic Cities just posted an article on the world’s 5 largest housing bubbles. In descending order of real growth, they are:

1. Israel

2. Norway

3. Switzerland

4. Canada

5. Germany

Not surprisingly, Canada is on the list. There is, of course, lots of talk both locally and abroad about the stability and sustainability of our housing market. Here’s what the article had to say about Canada:

"With real home price appreciation near 20 percent, Canada’s home price growth has been raising eyebrows. Bank of Canada governor Stephen Poloz doesn’t see a bubble, but others aren’t so sure. Climbing alongside housing prices have been levels of household debt, which surmounted 165 percent of income in the second quarter of 2013. (That’s not too far from where they were in the U.S. before it suffered its housing crisis.) And the Bank of Canada itself has even warned about risks posed by frothy condo sectors in big cities like Toronto. A few hedge funds, such as San Francisco-based Hyphen Partners, have even made high-profile bets on a Canadian housing bust. They haven’t paid off, yet.”

And here’s the full list of countries:

Overall, it’s not surprising to see that Canadian home prices have risen so dramatically since Q1-2009. As the US sank into deep recession (2008-2009), Canadian credit became cheap in order to stave off a recession of our own. This fuelled the housing market, which is an asset class that’s inextricably linked to financing costs.

The same thing happened in Ireland, which today sits at the bottom of the above list. It has seen real prices drop roughly 40% since Q1-2009. By adopting the euro currency, Ireland no longer had control over its own monetary policy (this is one of the downfalls of a centralized currency). So when the economies of the larger continental countries stuttered, interest rates were dropped. For the strong Irish economy, it ended up creating a housing bubble.

I worked in Ireland in the summer of 2007 and I remember people telling me about this. Already at this point there was concern that the market had become overheated. There are obvious parallels to what has happened in Canada, even though we don’t share a common currency. The Canadian and US economies are inextricably linked.

So will the same thing that happened to Ireland happen here in Canada? Nobody knows for sure, but I think we can take comfort in the actions taken by the feds to tighten up lending. They’re acutely aware of what easy credit has done to the housing market and they’re trying to temper it. And it’s certainly had an impact.

Early this week when I was on the panel about investing in condominiums, I asked a lot of the realtors about what they were seeing in the residential marketplace. A great number of them told me that their clients were struggling to obtain financing. A lot of deals were falling through because of it.

If you’re worried about our housing market, this should be taken as great news. Choke off credit and you choke off real estate.