Sour economy gives Jay-Z's investments a bad spin

[Elano]

 Even the world's most successful hip-hop star isn't immune to the Great Recession.

While his music and apparel businesses appear to be humming along, ringing up mega-profits, Brooklyn's Jay-Z -- not just a businessman but a business, man -- has suffered a few financial bumps of late.

For example:

* Two Manhattan hotel development projects, one in Chelsea and the other in the Meatpacking District, fizzled out this year, costing Jay-Z and a company he controls about $50 million.

* His almost 7-year-old 40/40 Club franchise, while still successful overall, has taken a few lumps as the 80,000-square-foot Las Vegas edition, with its 80-plus plasma TVs, was closed in late 2008 after just eight months in business -- a victim of low attendance. Plus, a Chicago club, first expected to debut in 2009, is still not open.

 * In March, he walked away from a reported $2 million investment in the Aqueduct Entertainment Group, an entity selected to develop a "racino" at Aqueduct Racetrack. He bailed after federal and state authorities started to investigate potential corruption in the selection process.

* An investment alongside Will Smith and Jada Pinkett Smith in "Fela!", the critically acclaimed Broadway musical, has yet to turn a profit -- but it could, theater-watchers say, especially if Jay-Z starts getting out in front of it and markets it the way Elton John is always promoting his 2008 hit "Billy Elliott."

The trio invested a total of about $1 million in "Fela!," which garnered 11 Tony award nominations.

* Plus, there is his 1.5 percent stake in the New Jersey Nets which has performed as poorly as the team since he bought it in 2004. Jay-Z was among the group that purchased the team for $300 million -- but it's now worth $269 million, a drop of 10 percent. Jay-Z could have done better putting the cash into a mutual fund that tracked the sickly S&P 500 Index -- which is up 7.6 percent, not counting dividends, over the same period.

"The first thing about Jay-Z is, he's got a lot of breadth to his holdings," says Dan Charnas, author of "The Big Payback: the History of the Business of Hip Hop," due out in September from New American Library/Penguin. "He has that combination of vision, ability, fame and the power to execute working with the right people."

That execution has worked a lot better in his core music and apparel businesses than when he strays outside his safety zone. But despite the recent investment failures, Jay-Z is still a $1 billion empire -- that is, retail sales of products under his extensive corporate umbrella reach an estimated 10 figures a year.

 JAY-Z, born Shawn Carter, co-founded the uber-successful Rocawear business in 1999 and, through his hands-on management style, grew it into a $700 million juggernaut. After he bought out partner Damon Dash's 25 percent stake in the company for $30 million in 2005, he sold it for $204 million in 2007 to publicly traded Iconix Brands. JAY-Z remains the CEO of the brand and is in line to pocket an additional $35 million in stock if sales hit certain plateaus.

Sources say the brand is a top seller this spring, thanks to Jay-Z's decision two years ago to minimize the logos on the clothes and streamline the baggy pants that once defined hip-hop fashion -- but that are now passé.

 "He knew that would be a trend before everyone else did," Iconix chief executive Neil Cole tells The Post.

"Jay-Z has earned street cred and business cred," says Tim Bess, men's and children's fashion analyst at Doneger Group. "He's one of the very few involved in hip-hop able to cross that line."

IN 2009, Jay-Z, who has more No. 1 albums than any artist except the Beatles and Elvis and has sold about 26.3 million CDs over his career, inked a $150 million deal with Live Nation -- and then put together one of the most successful tours of the 2009-10 season. The tour came on the heels of his earning $35 million in 2008-09 and $82 million the previous year, according to Forbes.

Just last week, Jay-Z, showing his masterful marketer touch, sent fans into a frenzy by announcing he and fellow rapper Eminem will perform the first concert in the new Yankee Stadium -- after joining together for a concert in Comerica Park in Detroit, Eminem's adopted hometown.

Jay-Z can market just about everything but a breakfast cereal because he's got huge talent and a savvy business manager, John Meneilly, a former Provident Financial executive.

Some smaller investments in Jay-Z's portfolio have also come up winners. In 2005, in his first investment alongside Will Smith and his wife, Jay-Z bought a piece of a small cosmetics company, called Carol's Daughter. He has helped the privately held company grow sales to about $35 million, an eight-fold increase, co-CEO Steve Stoute told The Post.

Stoute said Jay-Z and the ownership team are looking at other beauty acquisitions.

The rap star is also sitting pretty with his investment in the Greenwich Village building that houses the popular eatery, The Spotted Pig. He's an investor in the restaurant, too, and has often been seen there with his wife Beyonce.

 AT age 40, he's an elder statesman in the young man's game of rap -- and he has said many times it may be tough to keep viable in the music game as he gets older.

Perhaps that is why he has been looking to beef up his real estate holdings and launch J Hotels, his luxury hotel brand. But it hasn't been easy.

In August 2007, a company he controlled borrowed $52M to purchase a piece of real estate between 21st and 22d streets in order to develop a luxury J Hotel. He walked away from the project and loan during the recession and has recently filed suit against the lender, Highland Capital, for "bleeding" him of interest payments.

 In another failed real estate project, Jay-Z and a group of partners spent $30 million for 345 W. 14th St. in 2007 with plans to turn it into a hotel. Then the recession hit, and Jay-Z and his partners defaulted on the $24 million mortgage and tried to stick their lender with the property.

The lender didn't want it, either, and legal wrangling was resolved only last month when a third company bought the debt at a discount.

A spokesperson for Jay-Z did not return requests for comment.

This is no time for Jay-Z to get on a losing streak.

His close friend, NBA superstar LeBron James, is to become a free agent this summer and Jay-Z would love nothing better than to woo him to sign with the Nets.

Jay-Z Inc.’s winners

* Live Nation deal
Cuts deal with concert-promotion company valued at roughly $150 million over 5 years, which includes funding for Roc Nation — a music development, promotion company for Jay-Z. Roc Nation and Live Nation will split profits on album and concert revenue. The deal includes funding for Jay-Z music, acquisitions and investments.

* Rocawear
Co-founded the apparel company in 1999 with Damon Dash. Bought out Dash’s 25% stake for $30M in 2005. Grew sales to roughly $700M by March 2007, when he sold it to Iconix for $204M.

* Real Estate
314 West 11th St.: Owns the building that houses The Spotted Pig.

TriBeCa Penthouse: Paid $6.85M for 8,000-square-foot home in 2004. Patio where Jay-Z married Beyonce.

Jay-Z inc.'s mixed bag

* 40/40 Club:
• Clubs in NYC, Atlantic City. The Las Vegas club, at 24,000 square feet, opened in the hotel-casino Palazzo in January 2008, with more than 80 plasma TVs. It closed eight months later when, after disappointing traffic, Jay-Z sold the lease back to the hotel. It was tuned into a race and sports book, with a specialty restaurant.

• Plan to open clubs in Chicago, Tokyo and Macau. Chicago location is 15,000 square feet and was first expected to open in 2009. The club’s Web site now says a 2010 opening is in the works.

Jay-Z Inc.’s losers

* NJ Nets:
• Paid $4.5M in December 2004 for a minority stake in the team. Sale price of $300M means he owns 1.5%. Forbes valued the team at $269M this season, down 9% from the previous season. Operating deficit of 13.9M. In 2004, Team owner Bruce Ratner said he wanted to have team in Brooklyn for the 2006-07 season but 2012 looks more promising.

* Gain Global Investments Networks:
Company owns a 7 percent stake in the group that was chosen and then lost a deal to develop a Racino at Aqueduct Racetrack. Jay-Z owns a 28.6 percent stake in AEG.

* NYC Real estate:

• 345 West 14th St.: part of a group that borrowed $30M to buy Meatpacking District building for development. Plans went south during recession. Sold loan for $19.5M.

• 510 West 22nd St.: In August 2007, a company he controlled borrowed $52M to purchase the land in order to develop a luxury J Hotel. Walked away from the project and loan during the recession. Sued lender, Highland Capital, for “bleeding” him of interest payments.

(nypost)

[Action!]

some of it seems embellished

[Citizen-Y]

Whatever, that fool ain't eating Ramen anytime soon.

[OG Hack Wilson]

man ppl make too much of a big deal out of this over rated pop artist who used to rap

[Elano]

Whatever, that fool ain't eating Ramen anytime soon.

 

[MrJas]

Even the world's most successful hip-hop star isn't immune to the Great Recession.

While his music and apparel businesses appear to be humming along, ringing up mega-profits, Brooklyn's Jay-Z -- not just a businessman but a business, man -- has suffered a few financial bumps of late.