Not so long ago, Harry Macklowe was perhaps best known for his long-running feud with billionaire homemaker Martha Stewart.

Throughout the mid-1990s, the two East Hampton, New York, neighbors engaged in a thorny battle over the size of Macklowe’s hedges, his lighting fixtures, and a fence that Stewart complained blocked her view of a pond. The feud cost hundreds of thousands of dollars in legal fees and became juicy tabloid fodder when Macklowe’s 23-year-old handyman accused Stewart of pinning him against a gate control box with her Chevy Suburban.

That fight has long since passed, but Stewart should have known better than to argue with Harry Macklowe, 69, about real estate. A mogul of Midtown Manhattan, Macklowe, and his son Billy, 38, doubled the commercial real estate holdings of Macklowe Properties in 2007 to control more than 12 million square feet of commercial office space spread out over 13 New York City skyscrapers. The father and son pair can now practically set prices in the elite commercial corridor called the Plaza district (around the Plaza Hotel), which contains Hedge Fund Alley, home to the largest concentration of hedge funds in the world.

In January, the elder Macklowe, with his bushy, black eyebrows and immaculately cut suits, surprised competitors when he agreed to buy Equity Office Properties’ New York City buildings from the Blackstone Group for $7 billion. Before that, Macklowe won renown for his record-setting purchase of the famed General Motors Building, home to F.A.O. Schwartz, which is perhaps the most-sought-after address for today’s Masters of the Universe. It’s also home to the highest office-rental rates in the city, with space on the penthouse floor going for as much as $175 per square foot. In February 2007, Macklowe Properties also bought Worldwide Plaza for $1.73 billion, the second-most expensive sale price of a single building in U.S. history. The Macklowes’ long list of tenants at their various properties include Icahn Partners, Perry Capital, Thomas H. Lee Partners, and SAC Capital Advisors, the $12 billion hedge fund behemoth headed by Steve Cohen.

Like another onetime owner of the G.M. Building—Donald Trump—Macklowe soared high in the 1980s, then faced some setbacks during the recession of the 1990s and is now building big. By riding the current bull market, Macklowe has leveraged a midlevel real estate profile into an unparalleled collection of properties that places him near the top of the heap. “He’s had a very interesting career. He’s been very successful, then very unsuccessful, and then come back and been very successful [again],” says rival New York City real estate developer Douglas Durst.

THE FOUNDATION
Neither Macklowe nor his son Billy would speak on the record for this article. But the outlines of Harry Macklowe’s résumé are well known. The son of a garment executive, he started off in the real estate industry’s version of the mailroom in 1960 as just another anonymous broker at Julian Studley Inc.

By the mid-1960s, he was doing deals of his own, trading up to increasingly ambitious residential projects throughout the 1970s. Michael Cohen, chairman of GVA Williams, one of New York’s largest commercial-property management companies, pegs Harry Macklowe’s coming out party as a commercial developer to the early 1980s, when he acquired an old nine-story warehouse, converted it into office space, and signed New York Telephone to a 10-year, $50 million lease. Then he built Grand Central Tower, on 45th Street between Lexington and Third Avenues.

Macklowe defied common wisdom by building on a side street in an area that was questionable at the time. But to the surprise of many real estate industry insiders, he inked a deal with what was then Hanover Trust to take half the floors.

“He scored big,” says Cohen. “That transaction solidified his stature as an office-tower developer in Midtown and it moved him into the big leagues.”

To his admirers, what sets Macklowe apart is his broker’s ear for bargains and his developer’s eye for possibilities. “Harry is one of the most creative individuals you’ll ever meet,” says Mitchell Konsker, vice chairman at Cushman & Wakefield, who has worked with Macklowe on several projects. “He sees possibilities where others don’t.”

CRACKS IN THE FACADE
Yet Macklowe’s success has also been uncommonly controversial. In 1985, at the height of New York City’s homelessness crisis, the city enacted a moratorium on the demolition of single-resident-occupancy hotels. Late one night before the policy went into effect, Macklowe’s contractors demolished two S.R.O.’s. They had no building permits to do so, and didn’t even turn off the gas.

The event was dubbed “midnight demolition” by the media, but Macklowe was eventually exonerated by the district attorney for the actions of his contractors. He ended up paying $2 million in fines and penalties to the city, and his reputation in New York was dragged through tabloid headlines. The name Macklowe, the New York Daily News opined at the time, is “a watchword for everything furtive and underhanded in the real estate business.”

Things got worse in 1994, when Macklowe fell into default over $100 million in loans and was forced to sell some of his signature properties. But two years later, Macklowe was able to bounce back with a residential project and a new office project on Madison Avenue. He’s been building ever since.

RECONSTRUCTION EFFORTS
In August 2003, Macklowe decided to wager all he had in an audacious play for a true trophy property. He won the rights to the 50-story G.M. Building, which had carried oversize gold letters spelling Trump just a few months before he made his $1.4 billion bid—an amount that, at the time, was more than anyone had ever paid for a building in the United States.

“That took a lot of courage,” Durst says. “We were bidding on it too, and he paid considerably more than what we thought it worth. He put up all his other assets. If it turned against him he would have lost everything.”

Says Bob Knakal, chairman of Massay Knakal Real Estate Services: “Most people thought that he paid too high a price.” Macklowe rehabbed the building, creating more retail space on a side street, transforming the plaza out front, and renting space to Apple, which installed a 32-foot-tall, glass cube entryway that has become iconic. All those moves increased income. But it was the hedge funds moving in upstairs and the city’s soaring real estate market that turned Macklowe’s risk-taking into genius. “He saw the ability to do those things where others did not,” Knakal says. “And the way the market has performed has turned that deal into a grand slam.”

The G.M. buy was just a warm-up for what was to come. In the weeks leading up to Blackstone’s recordbreaking $39 billion buyout of Equity Office Properties in January, Macklowe got Blackstone’s John Gray on the phone and offered to relieve him of E.O.P.’s New York City office holdings.

The $7 billion deal—sealed with a handshake—allowed Blackstone to secure the bridge loans it needed to beat out rival bidder Vornado Trust for what would become the largest leveraged buyout in the history of the world.

The deal gave the Macklowes eight class-A office buildings, and in one fell swoop doubled their portfolio to more than 10 million square feet of office space. The $1.73 billion price tag on just one of those properties, Worldwide Plaza (whose tenants include advertising behemoth Ogilvy & Mather and the law firm Cravath Swaine & Moore), represents the second-largest sale price for an office building in U.S. history.

Whether that play will pay off has yet to be seen. If New York’s real estate market goes south, so will the Macklowes’ fortunes. But so far, things look pretty good. In the first quarter of this year alone, rents for class-A office space in Manhattan rose 29 percent vs. the same period in 2006.

“Supply and demand is creating the upward pressure on pricing,” says Mary Ann Tighe, C.E.O. of the New York Tri-State Region for CB Richard Ellis, the world’s largest commercial real estate services firm. “That’s not likely to change soon.”