The conversion of taxi medallions from a coveted license into a distressed asset accelerated Thursday as a hedge fund paid $170,000 apiece for 131 medallions at an auction in Flushing, Queens, writes Crain’s Matthew Flamm. The winning bid came to $22,270,000. A separate pool of eight medallions sold for $2 million, or $250,000 apiece.
All 139 of the metal placards were once the property of Evgeny “Gene” Freidman, a taxi operator known as the Taxi King, who was famous for pumping up the value of the assets before Uber’s rise in late 2014 sent their values plunging. Though he has been in financial trouble since 2015, he filed for bankruptcy protection for these medallions last year and lost control of them in January.
Court filings last week described a stalking-horse bid—a practice used in foreclosure auctions to set a floor—for the 131 medallions by an entity called Nardo Acquisitions, Inc. Insiders identified Nardo as Marblegate Asset Management, the same Greenwich, Conn.–based hedge fund that bought 46 Freidman medallions last September. At that auction, Marblegate paid $186,000 apiece. Marblegate did not return a phone call seeking comment.
Financial investors bidding on medallions is a new phenomenon in the industry and could reflect their belief that the value of the asset has hit bottom. The expectation in the industry is that the hedge fund will lease the medallions to drivers, a practice which can bring in $1,000 to $1,200 a month—an approximately 7% annual return on the $182,000 that each medallion cost once taxes and fees are included. It’s a tax-free return because the buyer can write off the medallion’s purchase price over 15 years, according to Andrew Murstein, president of taxi lender Medallion Financial.
The price of medallions is a sensitive topic in the taxi industry, which has seen the value of the small metal plaques plunge by 80% since their high point around the $1 million mark four years ago. The rapid devaluation has been especially punishing for owner-drivers, many of whom have been forced into personal bankruptcy by lenders who refused to refinance loans. Two medallion owners have been among the five suicides of drivers that have rocked the industry in recent months.
Taxi industry veterans are hoping the tide will turn against Uber and the other e-hail operators. Bills that would restrict their growth are under discussion in the City Council. And Uber and Lyft’s role in increasing traffic congestion, along with sympathy for the plight of owner-drivers, has made passage of some kind of restrictions seem more likely. Murstein argues that a hedge fund diving into the market is another good sign.
- Former ‘Taxi King’ Evgeny Freidman’s medallions go for $170,000 apiece—and some for $250,000.