Joey Kaempfer closed his eyes and breathed the aroma of the Cuban cigar, but he denied himself the luxury of lighting it.

It was late one night in early May, a few weeks before his 43rd birthday, and the Washington developer was celebrating the richest deal of his rich young career. The triumph might have been intoxicating, but the broader business outlook had a sobering effect.

Kaempfer, a creative, mercurial entrepreneur with an aggressive attitude toward risk, had just sealed an agreement to build a $360 million downtown headquarters for Arnold & Porter, one of the District's largest law firms. Lawyers from Arnold & Porter and executives from the Kaempfer Co. had gathered to toast their partnership at the Grand Hotel, a Kaempfer creation modeled after a famous Paris hotel.

This was a deal that had to come together, Kaempfer said, savoring the relief if not the cigar. "If it hadn't, for some bizarre reason, what a disaster." It was one of those efforts, he said, where "if you don't get the golden ring, you in fact fall into the pit."

The developer in the double-breasted Italian suit epitomized the success that an upstart could achieve in Washington real estate during the boom years of the 1980s. He went from building small town house projects to developing some of the city's most expensive commercial real estate -- ultimately landing the Arnold & Porter deal, one of the two biggest private office leases ever signed in the District of Columbia.

He traveled in the transatlantic fast lane, often by supersonic Concorde, and he joined the inner circle of Democratic Party contributors. Along the way, he built a fortune estimated at $35 million to $45 million, according to a source familiar with his finances. He also collected trophies, such as a bright red Ferrari Testarossa and his own small piece of the Old World, a 17th-century British barn that he is transplanting from Buckinghamshire to East Hampton, N.Y., where he plans to turn it into a beach house.

Over the past six months, Kaempfer agreed to be interviewed for dozens of hours and to be observed at work, offering a close-up look at one developer's rise and his quest to sustain success.

Even as he marked his greatest victory, the Arnold & Porter deal, Kaempfer was struggling to adapt to a changed business climate.

Years of overbuilding, an increasingly crowded field of competitors, new government-imposed limits on development and new-found caution on the part of real estate lenders have overtaken the Washington area building industry, leaving many developers in a battle for survival.

While Kaempfer's extraordinary ambition has been tempered by the challenges, his swashbuckling image has remained intact.

"Joey is a risk-taker," said consultant Robert E. Pickeral, the recently retired head of commercial real estate lending for Riggs Bank. "He thinks big. He's either going to be a billionaire or bankrupt, and I don't know which."

Young and Restless One of the keys to Kaempfer's success through the years has been his unorthodox style.

When Stanley Heckman visited the Harvard Graduate School of Business Administration to interview students for summer jobs in the spring of 1970, the neatly pressed candidates seemed almost indistinguishable. Then 22-year-old Joey Kaempfer appeared in a sweaty T-shirt and shorts.

Kaempfer's plan to start his own business leading a teen tour of Europe that summer had collapsed, leaving him jobless, just as the traditional corporate recruitment season was winding to a close. Belatedly, Kaempfer learned that Heckman, a representative of ITT-Levitt and Sons, a giant residential developer, was on campus. There was a sudden opening in Heckman's prearranged schedule. There was no time to change clothes.

Kaempfer apologized for his breach of protocol. Heckman wondered if the performance was a joke, but Kaempfer's audacity appealed to him. "I came away feeling that here was a very energetic, very smart entrepreneurial guy, which overcame all other reluctance I may have had," Heckman recalled.

Kaempfer spent the summer at Levitt, the company that pioneered tract housing at Levittown, N.Y. When he finished business school a year later, the company hired him. Within a short time, he was managing apartment projects for Levitt in New England -- and dreaming of bigger things.

The job at Levitt led to another with Washington developer Alan Glen and a third with developer Wallace F. Holladay. Holladay put Kaempfer in charge of a retirement home project in New York. But Kaempfer, who had grown up in Westport, Conn., surrounded by wealth but not possessing it, was restless working for someone else.

'Long-Term Greed' In 1977, on his 30th birthday, Kaempfer started his own company. He persuaded John Nicolosi, who oversaw construction of the retirement home project, to leave a secure job and join him in Washington.

At first, it was just Kaempfer, Nicolosi and a secretary. The company built town houses in Alexandria and the District. Then, with backing from his three former employers, Kaempfer made a leap to commercial development and put up a 12-story office building in Rosslyn.

Since the Rosslyn building was completed in 1983, Kaempfer has built seven buildings in Rosslyn and the District. He has at least another eight projects in progress or on his agenda, including the redevelopment of the landmark Warner Theatre at the corner of 13th and E streets NW. The list makes Kaempfer one of the most active downtown developers, although some of his projects face major obstacles.

"I've always believed that there are almost no limits, and I think that the people here {at the Kaempfer Co.} agree with that," Kaempfer said. "Sinking your teeth in and not letting go," he added, is "the single hallmark of this organization."

Said Warren Dahlstrom, director of investment brokerage for the real estate firm Grubb & Ellis: "He's the fighter pilot, as opposed to all the rest of us who are slogging it out on the ground. He's got his silk scarf flying out of the cockpit and he's blasting on to new deals."

The two-man Kaempfer team has grown into a staff of more than 50, including a cadre of thirtysomething executives minted at Harvard and other exclusive schools. The company has been experiencing growing pains, which Harvard Business School Prof. Jay W. Lorsch, an adviser to Kaempfer, calls "the classic entrepreneurial problem."

The expansion of the company has imposed an added managerial burden on Kaempfer. He has tried to delegate more responsibility, but the increased demands on Kaempfer's time threaten to distract him from the creative work he does best. The expansion also has increased the pressure to find new deals.

Kaempfer likes to say that he is driven by "long-term greed rather than short-term greed," indicating he must patiently wait for real estate projects to pay off. Yet, if he wants to keep his large staff together, he can scarcely afford to slow down: To meet his payroll, he looks toward the fees that each new venture generates for the company long before the real estate itself becomes profitable.

Kaempfer's company has built a reputation for tackling difficult projects. In the process, it has stumbled into some money pits.

In early 1983, the Archdiocese of Washington chose Kaempfer to build an office building next to St. Matthew's Cathedral at 1717 Rhode Island Ave. NW, behind the facades of several church-owned town houses. Litigious neighbors tied up the project for years. Kaempfer persevered, but now that the roadblocks have been removed, the project is stalled for want of a tenant.

"This thing has been a disaster for us financially," said Lee Narrow, a lawyer who has worked on the project for Kaempfer. "It was a good deal seven years ago, and it's only gotten worse."

Kaempfer's most expensive miscalculation -- and a measure of his resolve -- was his effort to create the finest hotel in Washington. He toured great hotels of the world for inspiration, and the result was the Grand Hotel at the corner of 24th and M streets NW, originally called the Regent. When Kaempfer said he wanted the best, the management company he had hired took him literally. Soon he was paying for uncompromising details like freshly cut flowers -- in unoccupied rooms.

The hotel hemorrhaged money, about twice the $12 million it was expected to lose before breaking even, Kaempfer said. Although Kaempfer's personal liability was limited, he voluntarily poured millions of dollars into the project to keep it out of bankruptcy and protect his investors. Some of his advisers urged him to cut his losses; Kaempfer decided to guard his reputation.

"Our view was, we'd gone out and told people we would do this remarkable hotel and it would be an outstanding investment, and we put our money where our mouth was," Kaempfer said. "It wasn't pleasant." Eventually, the Grand began to earn a profit.

Kaempfer said the experience taught him that running an operating business like a hotel required specialized expertise that he lacked. Since then, his company has stuck to developing real estate.

Red Handkerchiefs In an industry increasingly homogenized by large organizations and bureaucratic decision-making, J.W. Kaempfer Jr. has clung to the tradition of a more individualistic era, when powerful egos drove development.

Fiercely independent and accustomed to dominating his business down to the details, he has resisted pressure to sell or merge the company. He immerses himself in the architecture of his projects and appears to relish the design process more than the financial side of the business.

Kaempfer's office is an eclectic cockpit of power on the third floor of his building at 1250 24th St. NW, furnished in black leather and chrome. Clausewitz's treatise "On War" and Plato's "The Republic" vie for prominence on the bookshelf, and a unicycle leans against the wall, a metaphor for weightier balancing acts.

Friends, competitors and close associates say the developer's twin strengths are a creative mind and a magnetic personality.

The Kaempfer charisma "is a corporate strength and a corporate competitive advantage," said J. Byrne Murphy, 31, a Kaempfer vice president and project manager.

"They're masters at romancing the financial institutions," said one D.C. developer. "When someone's that charismatic, you want to deal with them."

The charm is reflected in small personal gestures, which reinforce Kaempfer's business relationships. One subtle gesture made a warm impression on investment banker Simon Milde' of Jones Lang Wootton, who introduces Kaempfer to potential financial partners. Milde' always wears a red handkerchief in his breast pocket. One day, Milde' said, he arrived at Kaempfer's office to find every member of the staff sporting a red handkerchief -- and Kaempfer smiling conspiratorially.

Behind the engaging Kaempfer persona, a shrewd tactician is at work. One morning in April, Kaempfer called one of his vice presidents to his office to scold him for revealing too much of the Kaempfer hand in a lease negotiation. "Big mistake," Kaempfer said. "They now know more than they need to know. ... I want you never to do that again."

He's also known for extreme mood swings. Small setbacks or annoyances can send him into a fury, testing the resilience of the people around him. " 'Difficult' is a very generous way of describing how I can be," Kaempfer said. He said the temper goes along with his demanding, driven nature.

"It's like steel going across his eyes, a cold sort of piercing steel look," said Mary Mottershead, formerly a top executive at the Kaempfer Co.

Kaempfer's tact gap sometimes gets in the way, as it did during a meeting earlier this year with Fred L. Greene, the D.C. planning director. Several developers had gone to talk to Greene in the hope of influencing his position on a D.C. government zoning proposal that could hurt their business. Kaempfer's blunt criticism of the proposal alienated Greene, derailing the diplomatic overture.

Kaempfer tries to overcome his lapses and foster a healthy atmosphere at his company. A New York psychologist visits the Kaempfer offices regularly to provide a sort of organizational therapy.

Comic relief has its place too. Once, while a Kaempfer executive was on vacation, Kaempfer removed the door from the man's office, patched the opening in the wall where the door had been and painted the surface. The executive returned to find his office sealed seamlessly, as if he and it had never existed.

The Ferrari The way Kaempfer spends spends his money and gives it away testifies to his wealth.

He has given about $100,000 annually to various charities and causes in recent years and often has extended aid to the homeless. When advocate for the homeless Mitch Snyder was looking for help last year, Kaempfer donated 800 winter coats.

In 1988, he gave $100,000 to a Democratic fund to elect Massachusetts Gov. Michael S. Dukakis president, and he raised another $700,000, he said. Dukakis attended a fundraiser at Kaempfer's Georgetown home.

The developer's elegant home on 34th Street NW was assessed at $1.3 million this year. He is planning to sell it and move to another Georgetown residence on R Street NW, which he and his wife are remodeling. He paid $1,650,000 for the R Street home last year, all of it borrowed.

For fun, Kaempfer enjoys scuba diving and fast driving. His stable of vehicles includes a 1000-cc Harley-Davidson and a 1953 Norton Interceptor motorcycle with a sidecar.

But Kaempfer has grown self-conscious about his fastest set of wheels, one of the more conspicuous symbols of his consumption. The Ferrari Testarossa, which he said is worth 20 times the $59,000 he paid for it in 1985, sits under a tarp in a garage. A Kaempfer employee occasionally takes it for a short ride to keep the battery from dying.

Kaempfer said he keeps the car because it is a good investment. In other respects, it clashes with his self-image. "The fact that I went through a phase where I thought having a bright red Ferrari was a wonderful idea ... it smells all wrong," he said. "My child doesn't know about that ... I don't want my bankers to know. I don't carry it on my financial statement.

"And maybe part of it is that I'm not even proud of that, but it's part of me."

Salvaging a Deal In a simpler era, developers like Kaempfer could build real estate fortunes almost entirely with borrowed money. But in more recent times, it has become almost impossible for a developer to finance a project without putting some hard cash into it at the outset.

The institutions that bankroll projects, and the law firms and other businesses that rent office space, also have held out for increasing ownership stakes in the real estate, further chipping away at the developers' rewards.

Like a shark that never stops moving, Kaempfer is always looking for cash. The search takes him across the continent and overseas. Not knowing where the next loan or capital infusion is coming from has become a source of strain, perhaps the greatest challenge Kaempfer faces.

Kaempfer's first warning of impending trouble came last November. An investor had second thoughts about Washington real estate and reneged on a pledge to pour funds into an office building Kaempfer developed at 2300 M St. NW. Then, a month later, a local bank broke a commitment to help him buy a building in Rosslyn.

Kaempfer salvaged the deal by pledging his current and future Georgetown homes as security for a loan.

The financial climate became even less hospitable this year, as regulators appeared to hold real estate lenders to stricter standards, and as foreign investors became increasingly bearish on American real estate.

All of this added to the tension as the Kaempfer Co. worked to complete the Arnold & Porter deal. Conceived in calmer times, the law firm's headquarters has become a symbol not only of Kaempfer's ascent, but also of the challenges to his continued success.

The Arnold & Porter Sweepstakes One evening in 1987, long before he knew anything about Arnold & Porter's need for new office space, Kaempfer assembled his top managers to debate a $2 million gamble.

He was considering risking a deposit on the Investment Building at the corner of 15th and K streets NW, an anachronistic 1920s office building a few blocks from the White House.

"There were three people around the table who just thought it was a bad idea," Kaempfer recalled. "It was too big, it was too risky, we didn't have the financing. We were going to risk our present for some glorious future."

The building's heritage made its redevelopment a doubly troublesome proposition. Any developer who proposed demolishing it risked a protracted battle with preservationists. And any developer who tried to preserve the historic facade would have to solve a basic architectural problem: the building's design left too little space between the floors and ceilings for air-conditioning ducts and other modern necessities.

Other developers had studied the property closely and declined to buy it. The price came down. Confident he could make the project work, Kaempfer overruled the naysayers sitting around his conference table and bought the building for about $38 million. He put up about $2.5 million toward the purchase; the family of Arnold Lee, who rebuilt parts of London after World War II, became an equal partner in the deal for a little more than twice that amount. Together, they borrowed another $32 million to buy the building.

The Investment Building took its place low on Kaempfer's list of future developments, and the company turned its attention to other deals.

A year later, in 1988, Arnold & Porter stepped up its search for a new headquarters. The legal profession had emerged as one of the District's leading growth industries, and Arnold & Porter was leading the pack. Its Washington office, which employs about 280 lawyers, more than doubled in size during the 1980s. The firm grossed $110.5 million last year, more than all but 37 of the Washington area's largest publicly traded companies.

Arnold & Porter had outgrown its offices at 1200 New Hampshire Ave. NW, and it wanted enough office space to double in size again over the next 20 years. So when the firm issued a formal request for lease proposals as dense as a government procurement order, it created a sweepstakes atmosphere in the development business.

Mitchell N. Schear, Kaempfer's vice president for marketing and leasing and a newcomer to the company, saw opportunity. Kaempfer had handshake agreements to buy two sites adjacent to the Investment Building. The potential to combine the sites made Kaempfer a contender for the giant lease, although Kaempfer himself was initially unimpressed with the possibility.

Schear arranged a breakfast meeting at Kaempfer's offices between the developer and the two lawyers heading the search for Arnold & Porter, Daniel M. Lewis and Managing Partner James W. Jones. Determined to make a good impression, he had the Park Hyatt send over a waiter and a catered meal of smoked salmon and fresh berries.

Kaempfer, who had been ill, arrived almost a half-hour late and then surprised the lawyers with an outpouring of skepticism. The recent breakup of a law firm in one of his buildings had shaken Kaempfer's confidence in the stability of law firms. He told Jones and Lewis that he was reluctant to pin the success of an entire project on one big tenant.

Uncharacteristically, Kaempfer seemed to doubt that the company could win the Arnold & Porter lease, Kaempfer associates said. "I was not believing that it was really a deal that we were going to do," Kaempfer said much later.

The Arnold & Porter lawyers recognized that Kaempfer's site was one of a relative few large enough to accommodate their firm in downtown Washington. After more encouragement from his staff and Arnold & Porter, Kaempfer made the competition for the lease a priority. Last spring, the Kaempfer Co. was named one of four finalists.

The other finalists were:

The Farr Cos., developer of Lafayette Centre, where Arnold & Porter had leased overflow space.

James and Theodore Pedas, who built the Circle Theatre movie chain, sold it to Cineplex Odeon and began producing movies. The Pedas brothers were undertaking their first real estate development at 2101 Pennsylvania Ave. NW, site of the original Circle Theatre.

The Oliver Carr Co., one of the Washington area's biggest developers, which had developed Arnold & Porter's New Hampshire Avenue building and was pitching a site in the East End of downtown.

Arnold & Porter invited Kaempfer, Carr and the Pedases to present their proposals in person in June 1989.

The Pedas brothers underwhelmed the lawyers by sending a subordinate in their place.

Oliver T. Carr, one of the patriarchs of the D.C. development business, appeared with elaborate architectural models and a slide show to illustrate his presentation. Carr discussed his company's many past accomplishments and his long relationship with Arnold & Porter. He offered the law firm the odd combination of a building that was already designed and a site he didn't even control.

The site was Gallery Place, a tract of District-owned land that Carr has been negotiating to buy since 1986.

Kaempfer had no detailed drawings. Instead, he offered Arnold & Porter the chance to participate in the creation. He spoke with feeling, impressing the lawyers as "someone who is young and dynamic like the new kid on the block ... who brought a sense of enthusiasm and excitement to the possibilities," Arnold & Porter's Lewis said. Kaempfer also offered the law firm a larger ownership stake in his project than any of his rivals offered.

A few weeks after the presentation, Kaempfer was dining with Democratic Party Treasurer Robert Farmer at the 21 Federal restaurant when he got a call from his office. The men from Arnold & Porter wanted a meeting; the reluctant competitor had won the prize.

Relentless Pressure The Kaempfer company jubilantly announced its victory, but the heavy lifting was still ahead of it. All it had won was the right to negotiate a deal with Arnold & Porter.

Through the second half of 1989 and the early months of 1990, teams from Arnold & Porter and the Kaempfer Co. worked toward agreement on financial terms and a general design of the building. The pressure to succeed mounted in proportion to the time, money and prestige invested in the deal.

Meanwhile, Kaempfer concentrated on raising funds. He needed about $40 million to buy the Executive Building at 1030 15th St. NW, the second of three properties to be included in the Arnold & Porter development.

Kaempfer had concluded that financing his many projects bit by bit could become an unpleasant if not daunting chore. He was prepared to sacrifice some of his cherished independence for greater financial stability, and in January, he appeared to be on the verge of a crucial breakthrough.A European company had just signed a tentative agreement to become Kaempfer's partner in his eight future projects, including the Investment Building. Under the agreement, Kaempfer would give up a chunk of his ownership in the ventures, and the European company, controlled by a group of wealthy families, would provide tens of millions of dollars to help finance them.

Kaempfer, his partners and his lenders already had invested as much as $400 million in the eight projects. Seeing them to completion over the next seven years might require $1.25 billion, Kaempfer said.

The European investment group could provide enough cash and borrowing power to insulate Kaempfer from the vagaries of the financial markets as he moved the projects forward. The group's first contribution would be several million dollars toward the land purchase for the Arnold & Porter headquarters.

"It takes away the relentless pressure of always looking for fresh sources of capital," Kaempfer said at the time. "I think it makes us bulletproof."

That pronouncement proved premature. As the financial chill swept through the local development business, the heads of the European company were rethinking their options. Ultimately, the Europeans aborted their partnership with Kaempfer, casting him adrift at the height of the financial storm and jeopardizing the Arnold & Porter project.

"One might have thought that their view was they were going to steal the project when I fell over," Kaempfer said.

After some anxious weeks, Kaempfer found others to supply the missing money. Closing the transaction as the April deadline loomed was an exhausting ordeal; Kaempfer executives and lawyers hardly slept during five days of marathon meetings.

Then the chase began anew.

The funding he secured was merely a temporary fix. Kaempfer still needs another $360 million to buy a third piece of land, replace the current loans and complete the project.

Kaempfer hopes to find a major institution to provide hundreds of millions of dollars in return for a 50 percent interest in the Arnold & Porter headquarters, leaving 27 percent of the venture for his company, about 15 percent for Arnold & Porter and 8 percent for the Lee family and other British partners. Kaempfer's lenders and investors already have contributed about $88 million to the venture, and the developer himself has spent about $14 million.

At a time when lenders have little patience for purely speculative development, Arnold & Porter's contract to lease more than half of the project keeps Kaempfer in the running for more funds. The unleased portion is still larger than many downtown office buildings, though, giving lenders possible cause to pause.

Kaempfer recently returned from a round of meetings with Tokyo financiers, four of whom are considering investing in the project. The next stop is Europe.

A Local Businessman The Arnold & Porter headquarters, which Kaempfer plans to begin building in about 18 months, might carry the developer through lean times for the industry, but the rest of his business appears less predictable.

Since early this year, Kaempfer has been considering diversifying to generate new or more stable sources of income. That could mean becoming a developer for hire, putting up buildings for other owners, he said. That also could mean developing apartments and warehouses and managing parking garages.

Some of those steps would reflect a change in Kaempfer's thinking. Late last year, the man who lost millions of dollars operating a luxury hotel told a gathering of real estate brokers that he would do better to stick to office development, the business he knows best, than to plunge into a new arena like parking.

Leaning back in his black leather chair one recent afternoon, flanked by pictures of his wife and daughter, Kaempfer said he was not sure how much longer he would remain content as "a local businessman doing real estate."

"I do not believe that I will be sitting here in 20 years. I might be ashamed of myself if I'm still here," Kaempfer said. "There are other things out there and I need to focus on those."

Friends and associates of Kaempfer said he seems interested in one day holding a government appointment; Kaempfer said he has thought about it but is not sure he's temperamentally cut out for politics or diplomacy.

Kaempfer said he's confident he can survive in real estate development, but he wonders whether it will be worth the struggle.

"I don't feel anxious about our ability to do it, but I'm not sure it's going to be as much fun. If it's no fun, I won't be doing it," he said.

"It becomes like the effort of pulling a behemoth single-handed out of the sea. I mean, at some point you get good and tired of it. If it is as tough ... or tougher three or four years from now to do deals as it is right this minute, that isn't going to be enough fun for me. I mean it really isn't."