License for cabs in NYC up 347% over 20 years; average price now tops $800K
One of the best investments of the last 20 years may be bolted to the hoods of 13,237 yellow cars in New York City -- and it's not traded on any exchange.
From 1990 through the end of last month, the cost of individual medallions for New York City taxicabs increased by 373 percent and corporate medallions by 508 percent, according to the Taxi and Limousine Commission. The Standard and Poor's 500 Index is up 375 percent over the same period, and the MSCI World Index climbed 224 percent. Crude oil gained 245 percent.
“Taxi medallions are one of the only assets I know of in the past couple of years that have gone up in this economy,” said Andrew Murstein, president of Medallion Financial Corp., which finances sales of the license that allows drivers to pick up paying passengers on the street.
The average price of a medallion purchased by a taxi company rose 7.7 percent to $825,000 in July from a year earlier, and for individual owners it increased 6.1 percent to $607,000, according to the commission's website.
The value of the license has climbed as employers curb use of company cars, subway fares rise and cabs let customers pay with credit cards, Murstein said. In 1990, the initial charge for a taxi was $1.50, with an additional $1.25 per mile, compared with a $2.50 base and $2 per mile today, said commission spokesman Allan Fromberg.
The medallion's performance is a “tangible vote of confidence in New York City's overall business climate,” David Yassky, the commission's chairman, said in an e-mail.
‘Too Expensive'
The six-inch-wide aluminum disks have been on taxis since the Haas Act of 1937 and usually change owners through brokers. The average downpayment to finance a medallion is 25 percent of the price, Murstein said. The city collects a 5 percent transfer tax on each sale.
“Medallions are too expensive,” said Sterlin Mathieu, 38, who said he's been driving for a corporate owner for six months. He would “definitely” want to own one in the future, he said.
“Not right now,” said Mathieu, who is originally from Haiti. “Some people spend 16 to 18 hours driving just to make enough money and don't have time to enjoy it.”
Medallion Financial reported Aug. 4 that second-quarter earnings increased 39 percent. Net investment income, not including gains or losses on investments, climbed to $2.94 million, or 17 cents a share, from $2.12 million, or 12 cents, in the same period a year earlier, the New York-based firm said in a statement.
Cuomo, Weicker, Aaron
The company, whose board includes former three-term New York Governor Mario Cuomo, 78, former U.S. Senator and Connecticut Governor Lowell P. Weicker Jr., 79, and Hall of Fame baseball player Hank Aaron, 76, has seen its stock drop 36 percent through yesterday from its price of $11 in its May 1996 initial public offering, excluding dividends.
Medallion has gained about 21 percent including reinvested dividends from the end of May 1996 through last month, monthly data compiled by Bloomberg show. The S&P 500 Index more than doubled during the same period.
