Driver competition hot as NYC taxi medallions hit $766,000
As Wall Street still wobbles under the pressure of a weak economy, one New York asset class stands firmly on all four wheels. Taxi medallions — required licenses fastened to the hoods of all New York City yellow cabs — have rocketed in value at a time when many investments have plummeted. The average rate in July for a corporate-licensed taxi medallion in the Big Apple was a record $766,000 — up 126% from $339,000 in 2004.
"It is an industry that has always gone up," says Andrew Murstein, president of Medallion Financial. "It has outperformed every index you can think of — the Dow, Nasdaq, gold, you name it."
A leader in the industry for years, Medallion Financial owns and leases several hundred medallions and has financed the purchase of thousands more, in Chicago, Boston and elsewhere — but mainly in New York. Many New York drivers, most of whom are immigrants, take out loans from Medallion Financial when buying a medallion.
Under strict control
In a ratio set by law, 40% of New York's 13,257 medallions — a number strictly controlled by the city — are designated for individual, as opposed to corporate, ownership. Individual owners are required to drive at least part time, while corporate owners have the option of hiring an agent to lease the medallion full time for up to $800 a week.
Since the start of 2008, while the stock market was going through its worst decline since the Great Depression, the price of a corporate medallion has jumped 28%, to $766,000; the price of an individual one has risen 33%, to $572,000.
For Murstein, recent price surges are not surprising; medallions have seen an average 15%-a-year appreciation for 70 years, he says.
"Not only do you get that 15% for your price appreciation, you also get rental income," Murstein says.
With the slogan, "In niches there are riches," the company has lent more than $3 billion to the taxi industry in the past decade and recorded no loan losses because it can repossess the medallion if the client doesn't pay. But Murstein says the medallion loans, on which the company currently charges about 6.25% interest a year, give ambitious drivers a legitimate opportunity for ownership.
http://abcnews.go.com/Business/story?id=8263961&page=1
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