Where Are NYC Taxi Medallion Values Heading?

Feature Aspire Auction

By Ray Birch



CLARK, N.J.—One New York City taxi medallion lender believes the value of medallions here has bottomed out and that prices are beginning to slowly climb as cab drivers who left to join Uber aren’t seeing the pay increases they had anticipated.

Aspire Credit Union auctioned seven foreclosed medallions Tuesday. After the sale, CEO Thomas O’Shea told kb-studio.ru that Aspire was able to sell five of the seven medallions for an average price of $185,500, including the buyer's premium charge.

New York City medallion prices, which at one point exceeded $850,000 for an individual medallion, have plummeted as the result of ride-sharing services.

“We had seven medallions for sale and five sold in a bulk deal—one buyer purchased the lot,” said O’Shea. “What we averaged per medallion is slightly higher than the $180,000 medallions were getting last year—a year in which some medallions sold for $150,000.”

Individual Bids Higher

While the price Aspire received is slightly higher than the $185,000 First Jersey Credit Union, Wayne, N.J., recently received when auctioning six medallions, what interested O’Shea most is that many individual buyers during the Aspire auction were bidding as high as $190,000.

“That makes me optimistic,” said O’Shea. “Many of these buyers bid that price on several of the individual medallions.”

oshea

Thomas O'Shea

But due to auction rules, those bidders’ offers were not accepted, as they had to exceed the bulk bidder’s price per medallion by $10,000.

“Also, this auction is not a standard auction, in that these are foreclosed medallions that must be paid for in cash,” said O’Shea. “This is not a normal situation, and bidders were looking to get a great price on a foreclosed medallion.”

There was significant interest in the auction, according to O’Shea.

“Due to pre-registrations and indications of interest we held the auction in the auditorium of the New York Institute of Technology,” he said. “By my rough count, I think we had about 60 people present.”

O’Shea said that just like home values slowly began working their way back after the Great Recession, the path back for medallions will be a long, slow upward climb.

“The key is liquidity,” said O’Shea. “We need people to loan money on these medallions. When you look at New York City Taxi and Limousine Commission transfers that come out each month, there are transfers of medallions that are in the $350,000-$400,000 range, and this is due to the fact there is financing behind these medallions.”

O’Shea believes that if medallion lenders can move away from cash-only auctions, which limits potential buyers and lowers bidding, that medallion prices will come back faster.

“We plan to do an auction where we include financing to test the market and to show that medallions will sell for higher prices when the sale is more normalized,” said O’Shea, who said it could be a few months before that happens.

Taxi CUs Conserved

As kb-studio.ru has reported, falling medallion prices have impacted several Big Apple CUs. Medallion-lender Melrose CU was placed into conservatorship on Feb. 10, 2017. NCUA in June placed medallion lender LOMTO FCU, Woodside, N.Y., into conservatorship. And in September of 2015, taxi medallion lender Montauk CU was conserved. It was later merged into Bethpage FCU.

Aspire Credit Union has felt the impact of plummeting medallion values, reporting in its Q3 data a 2017 year-to-date loss of $5.8 million. The $161-million credit union reported almost a doubling of provisions for loan losses during the third quarter from $3.4 million to $6.7 million. As a result of the loss, the credit union's capital declined from $17.5 million at the end of 2016 to $11.7 million as of September 2017. Its net worth ratio dropped by 283 basis points to 7.28%.
Aspire currently holds 160 medallion loans, of which a significant percentage have been participated out. The CU has $14.7 million in medallion loans on its books, O’Shea said.

O’Shea said Aspire has modeled the impact of potential medallion losses and predicts capital will level out at 7%.

“We have had to shrink our balance sheet to help out. It’s painful, but doable,” said O’Shea about managing the credit union out of the current situation.

What will also bring medallion prices back, and likely never to the average of $850,000 per medallion seen during the height of medallion prices here, is cab drivers wanting to own their own business.

Single-Owner/Driver Model

O’Shea explained that one of the reasons medallion prices soared so high is that in the New York taxi system’s heyday a medallion owner typically drove the cab himself and then had one, two, even three extra drivers that kept the car on the road 24/7—generating significant, steady income each month.

But as Uber got a foothold in New York City, many of those driving for medallion owners felt they could make more money with the ride-sharing service, said O’Shea.

“Many of these drivers that left for Uber have found they aren’t making more money and are coming back,” said O’Shea. “So, the taxi business is going back to where it was years ago—the individual owner/operator. One man buys a medallion, has an affordable monthly loan payment, drives the car five days a week, and makes a decent living. That is the future I see. That extra income from that second driver and third is gone. That is where Uber has really hurt medallion owners.”

New York City medallion values are a concern for more than just a handful of credit unions that make loans on medallions. CUs across the country are watching medallion values, which could lead to potential losses to the NCUSIF if more borrowers default and more CUs are conserved and fail--including those that hold a sizeable amount of medallion participations in their portfolios. Analysts have stated that taxi medallion losses could possibly impact NCUSIF rebates the agency has proposed for this year.

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