You can spend hours at 172 Duane Street, in Tribeca, and still have no clue what’s going on here. People come and go at all hours. A thick cloud of pot smoke makes you think you’ve wandered into a building on fire with a stereo cranked at full blast. Sometimes the four-story warehouse is a sprawling art gallery; at other times, it’s a photo studio, or an indie band’s rehearsal space. Most of the time, it’s all of these things at once.

On a recent blustery December night, rapper Mos Def was in the house. Dressed in brown slacks, shiny dress shoes, jean jacket and a cabby hat tilted to the side, he sipped a bottle of Rolling Rock, taking in the vibe. “It’s like a cross between early Hitsville, Andy Warhol’s Factory and a little bit of the Algonquin roundtable,” he told me. “But it’s something completely different.”

As it happens, this shape-shifting space has a name—DD172—a business plan and a onetime mogul making it all happen. DD is for Damon Dash, the 38–year–old fallen hip-hop impresario who thought it would be cool to start a hippie art collective right smack in the middle of one of the wealthiest neighborhoods in Manhattan. It is, in short, the kind of scene you hoped still existed in Manhattan, but feared might have gone away.

“Everybody’s welcome here,” a beautiful Edie Sedgwick blonde named McEnzie Eddy told me. “You have to, um, have a certain spirit in order to feel welcome here.”

McEnzie is tall and slender as a ski pole, in her early 20s. Doesn’t walk so much as she floats. This is her space as much as anyone’s. She’s at the very top of the food chain here, a member of a select group of three people that has at times been referred to as “The Loop”—the inner circle that runs the place.

As the night heated up, McEnzie made the rounds—to a waifish girl who looks a lot like Cindy Lauper, at work on a wall painting, to a bearded guy mixing a recently recorded track with Mr. Dash.

McEnzie moved here from South Carolina, started working for Mr. Dash right out of college as his “assistant’s assistant,” and has moved up the ranks since. When she talks, she uses words like “wack and “ill” (as in so-and-so “is the illest dude I’ve ever met”), which indicates she’s spent a lot of time around her boss.

“This space has a certain type of feeling. … You can thrive here, you know?” She leaned back in her seat and half-closed her eyes, continuing a bit dreamily. “If you have that spirit, you recognize it right away when you walk in. And you don’t want to leave. And everyone in here recognizes it in you. … You feel it, you know? There’s just like a—you feel it.”

DOWN THE HALL I found Mr. Dash, in tight jeans and chunky black-framed glasses, smoking a joint, a group of followers huddled around him like a football scrum. “Damn, my payroll just keeps getting bigger and bigger,” he said, to no one in particular. He’d just hired a new graphic designer—a young 20-something who’d shown Dash his portfolio and gotten himself on the payroll in the course of about three minutes. Then he grabbed me by the shoulder. “Come with me while I get a haircut.”

He headed into a private back room and slumped into a leather desk chair while a barber gave him a trim. “I’m a businessman,” he told me. And this new space, which he opened just a few months back, he said, is a “branding company.”

The idea is that this hippie experiment might give him a new life in New York, the city that made him and then the city that beat him down.

It’s been a depressing few years. In 2009, Mr. Dash’s marriage to his wife, fashion designer Rachel Roy, fell apart. Before that, in 2005, Mr. Dash had a famous falling out with Jay-Z that resulted in his leaving Roc-A-Fella Records. “I always looked at him like my brother, so I was just surprised that business came before personal friendship” he told me. There have been reports that he owes the State of New York around $2 million in back taxes, and that two Tribeca homes he owns are in foreclosure. “There’s truth to everything you read, a little bit. But it’s a recession,” he said.

But Google him, and you’ll stumble across the once flashier Dash —the Dash in Jay-Z’s music video for the song “Big Pimpin’,” aboard an oversize yacht somewhere off the tropical coast of wherever—a bottle of Cristal in each hand, voluptuous models all around. At the height of his power, he estimated his empire to be worth upward of $50 million (and others estimated it as high as $100 million). He had been dating singer Aaliyah when she died, tragically, in a plane crash. He co-founded Rocawear, a hugely successful clothing line, and executive-produced movies including The Woodsman, starring Kevin Bacon.

This mix of people and crafts is part of Mr. Dash’s shot at reinvention, and, he hopes, even financial redemption. “I’m a pretentious hippie,” he told me on more than one occasion. “This is what I should be doing. … Regardless of how I got here, I’m exactly where I want to be.” Mr. Dash said that in his days of Rocawear, Cristal and yachts, he was “compromising my brand—Ralph Lauren, that’s what I wanted to be.”

That could be the reason he’s doing all this now, and there’s probably truth to it. But what Mr. Dash has succeeded in creating here at 172 Duane Street is, above all else, his own hermetic world—far from the world that’s shunned him.