After a tough day of deal-making, it is only right that the king of Wall Street should retire home to a palace. Stephen Schwarzman does just that — his Manhattan apartment boasts 35 rooms including a foyer the size of a ballroom, his-and-hers saunas, a pine-panelled library and 13 bathrooms.
Works by Claude Monet adorn the walls of the two-floor Park Avenue residence. In pride of place, according to visitors, is a silver-framed photograph of Schwarzman arm in arm with President George Bush.
Brash, well-connected and fabulously wealthy, Schwarzman (60) is New York’s man of the moment. The Pennsylvania-born boss of the Blackstone private equity empire has been at the forefront of a rush of multibillion-dollar deals to snatch public companies away from the prying eyes of the stock market.
Blackstone’s investments have included $12,7-billion for the market research firm Nielsen, $3,2-billion for United Biscuits, $2,3-billion for Orangina and $3,6-billion for Merlin Entertainment. In November, the firm smashed records by paying $38-billion for US property firm Equity Office Properties.
The son of a curtain-store owner, Schwarzman is not blessed with deep reserves of patience, and to describe him as competitive would be a reckless understatement. “I want war, not a series of skirmishes,” he told one interviewer this week. “I always think about what will kill off the other bidder.”
The business channel CNBC has dubbed him the premier capitalist in the US. In a March cover story, Fortune magazine crowned him as Wall Street’s monarch.
This week, Blackstone was compelled to disclose the extent of his riches in a prospectus for a stock market flotation, and revealed that Schwarzman took home $398-million in cash last year. When the firm goes public, he will scoop at least $449-million and his ongoing 23% stake in the business will be worth $7,7-billion.
Blackstone points out that these sums reflect the fact that Schwarzman invested his own money to start the firm in 1985. But to some, he has become a poster boy for financial excess.
Richard Ferlauto, director of investment policy at the American Federation of State, County and Municipal Employees, says Schwarzman beneÂfits from favourable tax breaks and is setting a benchmark bound to drag up boardroom pay elsewhere: “How much incentive does he need, given his direct ownership of the company, to get him to produce more for his limited partners?”
Another union, the SEIU, is more measured. It says private equity has an opportunity to shape companies in a beneficial way for both workers and employers. But spokesperson Andy McDonald adds: “Right now, the economy’s doing very, very well for a small number of people, but there’s a much larger group for whom wages are stagnant and healthcare is hard to come by.”
By definition, private equity is low-profile. Its logic is to take companies with long-term challenges out of the public gaze and to restructure them without day-to-day scrutiny from investors. Blackstone’s rivals — KKR, Texas Pacific and Carlyle Group — shun the limelight. Schwarzman, though, is different.
Short, grey-haired and softly-Âspoken, he is renowned for his exotic parties. His Christmas event was themed on 007, with Bond girls sashaying around with trays of nibbles. Then in February, he spent an estimated $3-million on a birthday bash featuring private performances by Rod Stewart and Patti LaBelle at a regimental armoury on Manhattan’s upper east side. The venue was decorated to look like Schwarzman’s own living room, complete with a huge portrait of the host himself. Guests included Colin Powell, Donald Trump and mayor Michael Bloomberg.
Typical of Schwarzman’s prestige is his choice of living space. He paid $30-million in 2000 for his apartment, which was previously the home of the Mayflower descendant George Brewster, John D Rockefeller and computer leasing magnate Saul Steinberg. “Each one of them, in their way, was the ultimate capitalist of their age,” says Michael Gross, author of 740 Park, a book about the building. “Not only is it the best building in New York — but it is the best apartment in the best building.”
Schwarzman is married to Christine Hearst, an intellectual property lawyer who, unusually, has kept the name of her first husband, Austin Hearst, grandson of the legendary newspaper tycoon Randolph Hearst. Nomenclature is important to the couple, suggests Gross: “This is a man who is an expert in branding himself — and he has done so brilliantly. He’s gone from being a very rich nonentity to being the poster child for capitalist success. Stephen Schwarzman is now known as the epitome of American capitalism.”
Educated at a suburban Philadelphia school, Schwarzman attended Yale University at the same time as George W Bush and both were members of the elite Skull and Bones society. He worked at the investment bank Lehman Brothers before quitting to set up Blackstone with a colleague, Peter Peterson. The firm is a play on their names — “schwarz” is the German for black and “Peter” is derived from the Greek word petrus, meaning stone.
Schwarzman remains close to Bush, who attended a Republican fundraiser at the private equity tycoon’s apartment in April. — Â