Man of the moment (cont.)

In an interview with Fortune a few hours before the gala, Schwarzman played down his personal fame, always bringing the conversation back to the business he and partner Pete Peterson established after quitting Lehman Brothers two decades ago. "I really enjoy it," he says, folding his arms and lying back in his chair with a contented grin. "I'm in it because I like to be excellent and to win."

And win he has. "This guy is a home run with the bases loaded," says Bear Stearns CEO James Cayne. "He's got one negative - he's made expectations so high, the best he can do now is break even."

Schwarzman's timing has indeed been spot-on recently: Blackstone bought chemical company Celanese when the industry was out of favor in 2004, and then quickly took it public when old-economy names got hot again. The Celanese deal was especially adroit - Blackstone took it private in Germany but did the IPO in the U.S., where multiples for chemical firms were considerably higher. "They made a big cyclical bet on the chemical sector and it really paid off," says Rosen. Overall, industry sources estimate Blackstone's real estate and private equity funds have returned at least 30% annually over the past five years.

New investors are clearly hoping for more of that - the firm is now raising $20 billion for its newest buyout fund and $10 billion for its real estate unit. Layer on the leverage typically provided by lenders like Bank of America, which can equal more than four times fund assets, and you've got about $125 billion worth of dry powder.

It's a long way from the $400,000 in capital that he and Peterson kicked in when they launched the firm. But Schwarzman's ambition goes back much further, long before he attended Harvard Business School. Lazard's Rosen met Schwarzman when they were at a summer program in Maine for student council presidents between junior and senior year of high school. They reconnected at Yale and later roomed together at Harvard. "What you could see back then was enormous drive, self-confidence, ambition, integrity, and a desire to create things," he says. "He had a determination not just to succeed, which a lot of people have, but to succeed and be above the crowd."

He's certainly done that, but Wall Street being what it is, longtime colleagues and rivals speculate that all the signs of Schwarzman's success are what's known as a contrary indicator, a sign that Blackstone and the entire private-equity game are peaking. "When I heard about the party, I said to my guys, 'Never be the poster boy,'" a former colleague says. "The era changes, and the poster boy gets ripped off the wall."

Will Blackstone, too, succumb to Wall Street's eternal cycle of boom and bust? Bankers cite one worry in particular: a rise in interest rates that would simultaneously make it more expensive to borrow while compressing the generous multiples that investors are willing to pay for the companies Blackstone is buying now but needs ultimately to sell. "With cheap money, it's like shooting fish in a barrel," says one skeptic. "Move interest rates to 8% and it's goodbye, Columbus."

Blackstone hopes its renowned esprit de corps will protect it if the market goes bad. Schwarzman says that within the firm, employees across different businesses share their expertise, which makes the whole place smarter. "If anybody calls you from a different part of the firm, you must be helpful," he says. "This isn't an elective course; it's core curriculum."

Early in the decade, the private-equity group was considering investing in movie theaters, only to be warned by the real estate team that theater attendance wasn't going up, and there wasn't much you could do with an old movie theater. "We avoided some horrible deals with big capital losses," says Schwarzman.

Right now, Blackstone real estate prodigy Jonathan Gray is hustling to unload dozens of the roughly 540 office buildings that came with the EOP deal in order to lighten the burden of the colossal debt Blackstone took on to win the bidding war. Meanwhile, the Justice Department has begun looking into whether buyout deals involving multiple private-equity firms are anticompetitive. Blackstone has been involved in plenty of club transactions, but Justice declines to name any that it might be scrutinizing.

Several weeks before his birthday extravaganza, and in the thick of the bidding for Equity Office, Steve Schwarzman attended a different kind of party at the World Economic Forum in Davos, one where the guest of honor was Claudia Schiffer. While the leaders of European business genuflected before the German supermodel and posed for pictures, Schwarzman was demonstrating his legendary discipline as he told this reporter about the advantages that private buyers like Blackstone bring when they acquire public companies, such as bulk purchasing to gain economies of scale.

The ability to ignore a supermodel in order to talk shop is typical of Schwarzman's single-mindedness. It's also the kind of focus he'll need to keep Blackstone out of harm's way as the stakes get higher and higher.

Reporter associates Katie Benner and Telis Demos contributed to this article. 

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