How Harlem Investors Got The Worse End When Uber Crashed The Taxi Market
Crains New York reports that when Dr. Amarpreet Singh received a tip from a patient back in 2013, he was all ears. The city was expanding its taxi fleet, the patient explained. Would he be interested in investing in cabs? “I said I’d certainly like to talk to someone about that,” recalled Singh, chief of oculo-facial plastic surgery at Harlem Hospital Center.
Singh’s patient introduced him to a taxi broker, who said the city was issuing thousands of permits for a new line of cabs, called green taxis, that would pick up passengers in the outer boroughs and upper Manhattan. Some green-taxi owners were already reaping profits of as much as $550 every week, the broker said, and it wasn’t expensive to get in on the action, because the city was offering incentives for cabs retrofitted to accommodate passengers in wheelchairs.
Singh liked the idea of helping disabled New Yorkers get around town, so he paid the broker $75,000 for five green-cab permits, plus another $325,000 for vehicles. Then he waited for drivers to rent his taxis. And waited some more. After nearly two years he got in touch with his patient to see what was up with the investment. Singh learned his cabs were lying fallow in Mill Basin, Brooklyn. He dashed over and found a parking lot filled with 600 cars, none with license plates and some not even outfitted as taxis.
“It was just a sea of green,” said Singh. “I walked out telling myself, Oh my God, what have I done?”
The collapse of the taxi business has dramatically altered New York’s streetscape. Spurred by the advent of Uber and other apps, the number of drivers looking for passengers has grown by 40%, but the surge has meant less business for cabbies, who are making 30% fewer trips than only three years ago. Those who invested in yellow or green cabs are seeing their investments wiped out as drivers flock to rivals or pursue other work and cars sit idle. Since 2013 5,000 taxi drivers have thrown in the towel, and last month Queens-based Melrose Credit Union was seized by state regulators after delinquent cab loans soared tenfold in just 18 months. The stock price of the city’s preeminent taxi lender, Medallion Financial Corp., has fallen so far that one share now costs less than a subway ride.
Among those sucked into the vortex are scores of novice investors who saw the same potential in green cabs as what yellow-taxi medallions offered decades ago: cheap investments (the first medallions sold for $10 in 1937 before peaking at more than $1 million) with yearly returns that far outpaced the stock market. But these small-time players bought green cabs just before the taxi business began its free fall. Singh is in this group along with a dozen other investors, including a home health care company president, a purchasing manager at a software firm, a vice president of sales at a printing company and a commercial real estate broker in Baltimore.
Jake Zamansky, a prominent plaintiff lawyer on Wall Street, said people need to be wary about buying into taxis and other investments that don’t have the same disclosure requirements as publicly traded stocks and bonds. “It’s imperative investors do their own due diligence or stay away,” he said.
The taxi investors are not happy about their losses and have sued in Brooklyn state court, alleging their green-cab broker and his partners cheated them out of $8 million by selling taxi permits “in the manner of a Ponzi scheme.” They also allege the defendants funneled millions of dollars’ worth of taxi money into Platinum Partners, a large hedge fund that federal prosecutors likened to a Ponzi scheme after it collapsed last year.