Before He Became a Billionaire, Jay-Z Lost More Than $50M On A Bad Real Estate Investment

Shareif Ziyadat/Getty Images

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.