Update: Uber Driving Medallion Taxis Underwater!

By | April 24, 2015

Several weeks ago an article titled, ‘Because Of Uber, Are Taxi Medallion Lenders A Shorting Opportunity?‘ examined the painful impact that Uber is having on the taxi medallion financing industry!

Not to mention the pain being caused due to a loss in the ability of the drivers who lease the taxis from the owners to make a living and on the owners themselves who at the same time are potentially trying to pay off a loan used to finance the taxi medallion.

This loss of earnings power has in turn caused the secondary market price of the limited issue medallions to plummet affecting the collateral of the lenders.

One reason for the drop in the medallions value is the classic economic theory of supply and demand while the other is the number of medallions that are being foreclosed due to the lack of loan payments being made.

Confused? This story out of Chicago will hopefully clear it up…

A real life example from Chicago!

Changes in taxi industry leave cab owners underwater

If you were looking for a good return on investment in the last few years, it was hard to beat a Chicago taxi medallion. Medallions, which are city-issued licenses to operate cabs, increased in value at least fivefold between 2006 and 2013. But now after huge shifts in the industry, many owners are deep underwater on their medallion loans, and some say they’re nearly worthless.

“I haven’t written a new taxi loan in well over nine months? Ten months?” said Charlie Goodbar, an attorney and taxi fleet owner. “The access to capital’s disappeared.”

Chicago limits the number of medallions to roughly 7,000. Without those metal plates affixed to the hood, a taxi cannot operate in the city. Goodbar has facilitated hundreds of medallion sales over the years. But today, would-be buyers are finding it nearly impossible to find loans to purchase medallions.

“I probably have put together at least 20-30 percent of all transfers, at some point probably more than half,” said Goodbar. “And as a market-maker, and as a license broker, and as an attorney, and someone who’s in the lending business, how in good faith can I make a market when I can’t value the asset or value cash flow?”

Disruption in Chicago’s taxi industry — both from the entry of competing rideshare services, and changes to city policies affecting medallion owners — have turned the business model on its head in just two years. At one time, investing or lending in a medallion purchase was a sound business decision, because cab owners could make a good living.

“It was a way for an immigrant family to move up the social ladder and economic ladder through the use of leveraged financing in the taxi industry, and a lot of hard work,” said Goodbar.

But today, Goodbar said it’s nearly impossible to find a bank willing to lend money for a medallion purchase, and so the avenue that many immigrants once took is increasingly closed off.

You can tell by looking at the numbers. Between 2011 and 2013, when the market was robust, an average of 30-40 medallions changed hands monthly. But starting in February of 2014, that number dropped sharply, and never recovered. In 2015, only seven medallions were transferred in the first three months.

“There’s no buyer in the market,” said Shyam Arora, a medallion owner. “So it’s a piece of garbage.”

Read the rest of the article here.


Michael Haltman, President of Hallmark Abstract Service, New York.

HAS is a provider of title insurance in New York State for residential and commercial real estate transactions.

And, for anyone either buying a property or refinancing, remember that although your attorney will likely recommend a title insurance provider you always have the right to choose your own (click here to learn more)!

If you have any questions you can reach Michael by email at mhaltman@hallmarkabstractllc.com.

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