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Thursday, March 28, 2024

The Dramatic Fall of The Taxi King

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It’s not easy being the king, especially because the fall from the throne is so far. Ride-sharing companies like Uber and Lyft’s shakeup of the way people think about transit is becoming even more apparent now that the former taxi king lost all his medallions.

 

In what could be a sign of things to come in this market and a sign of the plummeting value of taxi medallions, a hedge fund paid $170,000 apiece for former taxi king Evgeny Freidman’s 131 medallions at an auction in Flushing, Queens last Thursday, according to Crain’s. The winning bid totalled $22,270,000. Another eight medallions sold for $2 million.

 

The New York Daily News described the scene at the Sheraton LaGuardia East Hotel, where a second-floor room was filled with taxi industry veterans waiting to watch the proceedings play out, almost like a funeral procession.

 

Bidders could purchase different types of medallions like those for hybrid taxis or accessible taxis. When the taxi industry was riding high, one medallion would sell for more than $1 million.

Attendees told the Daily News they wanted to check out the market for medallions, where lending is tight and revenue is smaller than in years past, thanks to Uber and other app-based car services.

 

“I want to know what’s going on, if the price is going all the way down,” Pierre DuJour, a driver and medallion owner with nearly 40 years in the industry, said before the auction to the New York Daily News. “For the time being, I don’t have any expectations,” he finished. The auction gace DuJour an idea of how much the medallions are worth today. He wants to use that information to negotiate with his lender on his 2010 $800,000 loan for his medallion.

 

“I’m going to fight with the bank to see if they can reduce it,” he said to the Daily News.

 

Barry Waldman, with City Taxi Brokerage, told the Daily News Thursday’s auction “sets a barometer for future sales,” of mainly cash purchases because “it weeds out a lot of prospective buyers who just don’t have that kind of money,” Waldman said. He believes the parties interested in purchasing medallions are taking a risk by purchasing at what they consider fire-sale prices with the hopes of the political climate changing enough in the near-future for the value of medallions to rise again.

 

Crain’s further explains what’s going on. “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 percent 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.”

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