Hedge fund buys taxi medallions in search for distressed assets
Hedge fund MGPE is said to have purchased 46 New York City taxi medallions at a price of $186,000 per medallion. In 2013, New York City taxi medallions sold for as much as $1m, however, prices have been cheapened by the onset of ride-sharing services like Uber and Lyft. Hedge funds searching for distressed assets have shown an interest in the medallions, which can be leased to fleet operators for roughly $1,000 per month. 
An auction at a Queens hotel on Monday gave a stark indication of how beaten-up the once mighty taxi industry is, as 46 medallions sold for $186,000 apiece, according to two people familiar with the matter. A 6% premium that's owed to the auction house pushed the price to around $198,000 per medallion, or $9.1 million in total.

Taxi medallion prices topped $1 million in 2013 and reached $965,000 at an auction held by the city in early 2014. They have been falling at an escalating rate ever since Uber and other ride-hail companies began taking business away from yellow cabs in late 2014.

Medallions auctioned for under $200,000 in the mid 1990s. Among the most prolific buyers in the 2000s was Evgeny "Gene" Freidman, who owned the 46 auctioned medallions until they were foreclosed upon by Citibank.

The winning bidder was MGPE, Inc., which had been identified in court papers last week as the stalking-horse bidder for the sale. MGPE, an out-of-state hedge fund, according to one person familiar with the matter, had set a floor for Monday's auction of $167,000 per medallion.

Hedge funds and private equity firms have been circling the medallion market for months, on the hunt for a distressed asset. Monday's sale marks the first time a hedge fund has taken a position in the industry.

A spokeswoman for Maltz Auctions, which conducted the sale, declined to comment.

Freidman, who once managed 800 medallions and has been accused of bidding up prices on medallions to increase the value of his own assets, filed for Chapter 11 bankruptcy in 2015 to keep Citibank from foreclosing on his holdings. He was ordered to turn over the 46 medallions in 2016 to pay off creditors.

The auction was closed to the press, but one observer described the bidding as proceeding in small increments between two parties. The $186,000-per medallion bid was for all 46 of the placards, which prevented the auction house from accepting one-off bids that would have priced a single medallion north of $200,000, according to two sources.

The winning bidder is expected to lease the medallions to a fleet operator.

Andrew Murstein, president of taxi lender Medallion Financial, said this sale "could be the tip of the iceberg." For much of the past year he has been advising hedge funds and private equity firms on how to approach the taxi industry, though he did not take part in Monday's auction.

Murstein said he knew of fleets that would pay anywhere from $1,200 to $1,400 a month per medallion, providing investors with as much as an 8% annual return on a $200,000 purchase. He said some operators would pay around $2,000 a month if a cab were furnished along with the medallion.

Some long-time medallion owners are still being paid $1,500 a month, which until recently was a fairly typical rate. Two fleet managers who asked not to be identified said the going rate these days is around $1,000 a month.