Jay-Z, After Becoming Latest Casualty Of New York CRE Collapse, Sues Highland Capital
The latest casualty of New York's resurgent (not) commercial real estate market is rap mogul Jay-Z, who had previously guaranteed a $52 million loan for a Chelsea hotel, which subsequently has defaulted and is holding the artist as the responsible party for accrued interest. As a result, Jay-Z is lashing out, and in turn is suing defunct hedge fund Highland Capital (maybe he should have at least picked an adversary that can pay him), which last time we checked was still trying to offload second-lien debt at par plus. Bloomberg reports: "Carter, in his complaint filed yesterday in federal court
in New York, claims Highland and co-defendant NexBank SSB are
attempting to “bleed” from him funds in excess of those he and
two other men pledged to pay when they guaranteed the non-
principal obligations of a company planning to build a hotel in
Manhattan’s west side neighborhood of Chelsea."
In a nutshell, this appears to a be a case about who the end-guarantor on a loan is. To wit:
“In August 2007, a company controlled by Mr. Carter
borrowed $52 million as a loan to purchase Manhattan property
for a future boutique hotel,” Nina Devlin, a Highland
spokeswoman, said in an e-mailed statement yesterday.
The loan, held by funds managed by Highland, matured in
August and is in default, Devlin said.
“Highland Capital Management believes the claims asserted
by Mr. Carter are meritless and will vigorously defend itself
and intends to pursue the obligations owed to Highland’s
investors,” she said.
Jay-Z does not see things quite this way:
Highland and NexBank acted in bad faith when they declined
to clear Carter and his fellow guarantors of their obligations
after receiving a deed in lieu of foreclosure on the property,
according to the complaint.
The rap star is seeking a declaratory judgment that he has
met those obligations. He’s also seeking damages of more than
$3.7 million for the additional interest and other costs
incurred while still being held liable under the agreements.
As this is hardly an isolated incident, with numerous celebrities trying to pimp themselves out even more at the peak of the NY housing market, and likely acquiring now worthless clubs and hotels, with hedge funds all too eager to strip these naive ladies and gentlemen of their money, we are likely to soon ee numerous other such lawsuits. And when Hollywood's celebs start squealing against the Wall Street creme of the New York market top crop, you know that the NY Mags and NY Posts of the world are going to have a field day when going through the various discovery motions. Never too far behind in the mudslining department, we will present some of the filings associated with this case as soon as we uncover anything extra juicy on either Dondero or Carter.