When it comes to Hip-Hop success stories, few — if any — are as impactful as Shawn “Jay-Z” Carter.
From his early beginnings as a street hustler from Marcy Projects in Brooklyn, NY, to becoming a billionaire mogul with his own Marcy Venture investment firm, Hov has proven time and again that it’s not where you come from, but where you’re going that counts.
Plus, he’s married to Beyoncé!
The rapper-turned-mogul is such a success, in fact, that the hypothetical question, “dinner with Jay-Z or $500k” has become a part of the pop culture zeitgeist, to the point that Tidal had to put out a statement on Twitter about the phenomenon.
Take the $500K.
— TIDAL (@TIDAL) September 9, 2021
But contrary to popular belief, not everything Jay-Z touches turns to gold. Before he became a billionaire, the man born Shawn Corey Carter lost his proverbial shirt on a bad real estate deal. The deal was so bad, in fact, that it ultimately cost him more than $50 million to get out of. And while he’s not the first businessman to have a deal that went sour — and he certainly won’t be the last — it’s important to recount this story to understand, fully, that business isn’t just about the “wins” you take. Rather, it’s also about the losses — and how you bounce back from them.
Let’s take a look at how Jay-Z lost more than $50 million in a bad real estate investment deal.
Back in 2007, Jay-Z had ambitions of becoming a hotel mogul. So, in August of that year, he took out a $52 million loan — which he personally guaranteed — to invest in a hotel project, which was located in the heart of New York City’s Chelsea district, and which The New York Post simply dubbed “J Hotels.”
The outlet further reports that Hova had a series of partners in the project, too, including real estate developers Abram Shnay, Scott Shnay, and Charles Blaichman. The proposed hotel was due to be located at 510 West 22nd Street, which — according to YIMBY — is still a “skeleton” of a structure as of this writing.
With such ambitious plans underway, what could possibly go wrong?
What Went Wrong?
Simply put: the subprime mortgage crisis.
According to Investopedia, in 2007, the real estate market — including the commercial real estate market — began to shift dramatically. Residential and corporate real estate began to lose its value after the “housing bubble” burst, and this caused a sharp increase in payment delinquencies, foreclosures, and real estate being “underwater” (that is, when a property is worth less than what is owed on the mortgage).
New York City real estate wasn’t exempt from this crisis, which meant that Jay-Z’s hotel project was quickly losing money — and, ultimately, he defaulted on the loan.
But according to Reuters, Jay-Z didn’t want to go into foreclosure. Instead, when the housing crisis hit, he attempted to give the property back to Highland Capital Management LP and NexBank SSB — the lenders who held the senior and the junior loans on the property, respectively — in a process known as a deed in lieu of foreclosure (in which ownership of the property is transferred to the lender to prevent a foreclosure action).
When the lenders failed to take back the property, Jay-Z racked up additional fees and interest — which prompted him to sue them.
How Jay-Z Recovered
As The New York Post pointed out, 2007 was a rough year for Jay-Z overall. In addition to the failed hotel deal, Hova pulled out of his investment in the Aqueduct Entertainment Group — with their plans to build a “racino” at the Aqueduct Racetrack — and he also lost a lot of money in his investment in the Broadway play, “Fela!”
However, no one stays “down” in business forever, and Jay-Z is no exception. In addition to winning big with his investment in Carol’s Daughter, Jay-Z continues to diversify his investment portfolio with investments in companies like Savage X Fenty, HUNGRY, and Marcy Ventures.