A hedge fund called Nardo Acquisitions, Inc., which insiders have identified as Marblegate Asset Management, bought 131 medallions for about $170,000 each at an auction in Flushing, Queens on June 14. All of the medallions had previously been owned by “Taxi King” Evgeny Freidman.

Marblegate’s stalking-horse bid – a practice used in foreclosure auctions to set a floor – totaled $22,270,000. Marblegate is the same Greenwich, Connecticut-based hedge fund that bought 46 Freidman medallions last September for $186,000 apiece. Some industry insiders feel that a hedge fund diving into the market is a good sign for the industry.

An additional pool of eight medallions sold for $2 million, or $250,000 apiece, at the June 14 auction, in something akin to a credit sale, meaning the buyers already owned the loans, offered them at a price that no one else met and thus took control of the assets. Those medallions had also been owned by “Gene” Freidman. Freidman, who has been in financial trouble since 2015, filed for bankruptcy protection for his medallions last year and lost control of them in January.

Financial investors bidding on medallions is a new phenomenon in the industry and seems to reflect a belief that the value of the asset hit bottom. The expectation 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 their value plummet by 80% since their high point around the $1.1 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.

Bills that would restrict the growth of app-based services are under discussion in the City Council. 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.

Source: Crain’s New York Business

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