The Real Deal New York

Jay-Z’s Chelsea hotel site goes back to lenders

By Sarabeth Sanders | December 15, 2010 05:18PM

511 West 21st Street (source: PropertyShark) and Jay-Z

Jay-Z has reached a settlement with his lenders over the site of a planned boutique hotel near the High Line and has deeded the property back to them for the value of the senior mortgage, according to recently-filed public documents.

The hip-hop mogul, whose given name is Shawn Carter, had partnered with real estate investors Charles Blaichman and Abram Shnay to purchase the site, a former Time Warner Cable warehouse at 511 West 21st Street, in 2007. The property was to become the first of many J Hotels, but the plan was foiled when the partners defaulted on their $52 million senior loan in August 2009, prompting a legal battle over their interest payments.

In February, Jay-Z filed a lawsuit in federal court in Manhattan, claiming that Dallas, Texas-based investment firm Highland Capital Management and special servicer Nexbank SSB were trying to “bleed” an additional $3.7 million in funds from his company instead of taking the property back in a deed-in-lieu of foreclosure in a timely manner.

The defendants filed a counterclaim in June, and the case was settled out of court and dismissed in October, court documents show. The terms of the settlement were not available, but sources close to the situation confirmed that the matter had been resolved.

According to a deed filed today with the city, Jay-Z transferred the title of the property to West 22nd Street Luxury Resort LLC, an entity controlled by his lenders.

A Highland spokesperson declined to comment, and representatives for Jay-Z and Nexbank did not immediately respond to requests for comment.

It’s not the only failed High Line project for the trio. Also in 2007, they had teamed up with hotelier Andre Balazs for a new 11-story luxury hotel at 345 West 14th Street that never came to fruition. They defaulted on their $24 million loan there after the real estate market tanked, and a legal battle over control of the site ensued. Earlier this year, a third-party, DDG Partners, bought that loan at a discount.


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