Jay-Z sues lender over loan for NYC property

13:28, February 04, 2010      

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Jay-Z, the rap music artist, on Wednesday sued an investment firm and a bank, accusing them of trying to "bleed" $3.7 million from him over a loan to help him build a hotel on Manhattan's west side.

The lawsuit was filed in Manhattan federal court against Highland Capital Management LP and NexBank SSB, concerning a property located at 511 West 21st Street in Manhattan, which was to be developed into lodging known as the J Hotel.

Lawyers for Highland and Dallas-based NexBank did not immediately return calls seeking comment. Robert Chan, who represents Jay-Z, declined to comment.

Jay-Z's given name is Shawn Carter, who is the named plaintiff in the lawsuit. The 40-year-old is one of the world's best-known rap artists and entrepreneurs.

According to the complaint, Jay-Z's company bought the property in August 2007, and obtained a $52 million senior loan that was assigned to Highland and serviced by NexBank, and which the rapper guaranteed. The company also obtained an $11.8 million junior loan.

But a declining real estate market caused the property's value to fall, prompting Jay-Z's company to try to give the land back to Highland instead of going into foreclosure.

The complaint, however, said Highland dragged its heels, causing Jay-Z to rack up interest and carrying costs for which he was personally liable.

It also contended that Highland improperly diverted funds that Jay-Z's company had placed into a reserve to cover potential environmental problems.

"This action arises out of the efforts by defendants to bleed additional funds from plaintiff," the complaint said. "Defendants embarked on a bad faith course of conduct."

The complaint seeks $3.7 million of damages, a declaration that would allow the property to be returned, and other remedies.

The case is Carter v. Highland Capital Management LP et al, U.S. District Court, Southern District of New York, No. 10-00854.

Source: China Daily/Agencies
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