Million-Dollar Taxi Medallions

The sale of two New York City taxi medallions for a record $1 million each in October is sparking investor interest and bolstering shares of Medallion Financial, a company that owns medallions and lends money to people who buy them. Investors see the medallions, which confer the right to operate yellow cabs in the city, as “a safe asset,” says Medallion Financial President Andrew M. Murstein. His company owns about 300 and plans to buy “several hundred more” in New York and other cities, he says. “These are little cash cows, constantly taking in fares and spitting out money to the owners.”

While it would take a lot of long rides to run up $1 million on the meter, the return on medallions compares favorably with other investments. Someone who leases a medallion to a driver or garage operator could expect to earn about $2,500 a month, according to Simon Greenbaum, a broker at NYC Medallion Brokers. That’s about a 3 percent return for a $1 million medallion, better than the 2.13 percent effective yield on U.S. AAA rated corporate bonds as of Nov. 7 and the 2.04 percent yield on 10-year Treasuries.