Turning yellow cabs into gold

Long days behind the wheel pay off as drivers become property owners

Sep.September 15, 2007 01:07 PM

It’s the quintessential American dream story, with a New York twist: An immigrant comes to the city, starts as a cab driver, works his butt off, buys property and becomes a multimillionaire.

The scenario may seem straight out of Hollywood, but is it real?

In the case of Luca Capin, the answer is yes. Capin emigrated from Istanbul about 15 years ago, where he was a writer. He drove a cab in New York, and in his free time earned his license in real estate. Soon he was working at WRA Properties, and in 1997 he started his own sales brokerage firm, Capin & Associates. The company began concentrating on properties in Harlem and the Bronx long before the areas underwent significant gentrification.

Capin & Associates has consistently climbed the rankings in brokering sales of investment properties since 2001. In 2006, it was one of the top three among the top 10 firms in number of investment sales in New York, along with Massey Knakal and GFI Realty, according to the CoStar Group, a provider of real estate information.

But Capin’s second company, a building management group called Solar Realty, has had its share of bad publicity. One Solar-managed building, 501 West 173rd Street in Washington Heights, was the subject of a New York Times article in October 2006 when the residents were evacuated because the building was too unstable for human occupancy. The six-story, 20-unit apartment building had been cited in the past for violations that included a partially collapsed ceiling and a bathtub that was falling through the floorboards. The ground-floor restaurant, Los Soneros, was also evacuated.

Capin, as well as billionaire New York City building owner Tamir Sapir, are the more extreme examples of the success countless taxi drivers have had in parlaying long hours behind the wheel of a taxi into real estate holdings. Frequently, taxi drivers use their valuable medallions as a springboard to real estate investment by leasing them to other drivers, and by borrowing against their medallions.

Robert Familant, president of the Progressive Credit Union, has been providing loans to taxi drivers who want to buy medallions for 30 years.

Medallion owners are more likely to be able to buy a house, Familant said. For one, they can borrow against their medallions, and individual medallions are being offered on the market for $425,000 — the price of a two-family house in Queens. Small fleet or corporate medallions that allow the owner to have more than one car are now worth half a million dollars. Both the individual and the corporate medallions have appreciated in much the same way that property has in the past several years, from $241,000 in January 2004 to $423,000 in the last registered sale in June 2007 for an individual medallion. That’s an appreciation of 76 percent, or almost twice its value three and a half years ago.

Individual medallion owners can drive their vehicles, and when they can’t, they can lease out their car and medallion for $500 a week and gross about $2,000 a month, Familant said. Drivers can also borrow against their medallions to come up with the down payment on a house they might purchase, and then obtain a mortgage from a mortgage lender, thereby financing anywhere from 90 to 100 percent of the home purchase. Drivers can also use the financing to start businesses.

From cabs to riches

In the widely covered story of Sapir, who came to the United States in 1975 from Georgia, part of the former Soviet Union, the American dream also came true.

Sapir moved to Louisville, Ky., with his wife and two children, where he worked as a bus driver and in a hardware store. But two years later, he landed in New York City and took a job driving a cab. He then borrowed against his medallion to
finance the purchase of an electronics store. In 1992, the money he made from that investment landed him his first significant real estate investment, 80 John Street, which he bought for $2.3 million.

Sapir plunged into real estate, using cash generated by the feverish demand for VCRs and televisions in Russia at the time — buyers would fly to New York, make a beeline for Sapir’s store and take their purchase home to be resold for a tidy profit.

Incredibly, one of these buyers was the oil and chemicals minister for the U.S.S.R, who later helped Sapir obtain a multimillion-dollar contract, launching him into the oil business.

Fast-forward to 2007. Sapir is chairman of the Sapir Organization, which he runs with his son Alex, who is president. The company owns more than 7 million square feet of prime commercial real estate in New York — including 11 Madison Avenue, 260-262 Madison, 2 Broadway, 100 Church Street and 384 Fifth Avenue — and two residential properties, 50 Murray Street and 53 Park Place.

Now Sapir, 59, is worth $2 billion and is ranked 160th among the 400 richest Americans by Forbes magazine.

In 2006, he bought the Duke Semans mansion across the street from the Metropolitan Museum of Art for $40 million, at the time the most ever paid for a townhouse in New York City. Also in 2006, he started SDS Investments LLC, a private equity real estate fund with investments in Las Vegas, Mexico, Miami and New York reported to be worth $1.5 billion.

Working 11 hours a day, six days a week

Not everyone is as lucky as Sapir and Capin. But the desire among cabdrivers to own property is strong, as established by conversations with cab drivers around the city. What is it about driving a taxi that makes drivers want property?

They are chasing the American dream, Familant said.

He noted the pervasive presence of cabs parked in the driveways of homes in Astoria and Flushing, Queens, where many drivers own homes. The majority of drivers are also foreign-born, so fulfilling the promise of home ownership could have special significance to them, he noted.

In 2005, there were 42,900 licensed cab drivers eligible to drive 12,779 licensed cabs in the city. In 2000, Bangladesh replaced Pakistan as the No. 1 country of origin for newly licensed cab drivers; some 18 percent of drivers were from the South Asian country, compared to 10 percent in 1991, and 1 percent in 1984. In all, 91 percent of New York City cabbies are foreign-born.

Drivers are very concerned about the many demands on their time, energy and finances, and worry about pitfalls such as a broken-down car, said Bhairavi Desai, executive director of the New York Taxi Workers Alliance, the only union for taxi drivers in the city. The union is planning workshops to teach cab drivers how to invest in real estate.

But Desai said the option to buy may not be open to all of the licensed drivers. Many work 10 to 12 hours, six days a week, and those who do not own medallions make from $20,000 to $30,000 a year, she said. Familant estimated a much higher gross income, about $300 a day, and said that if a driver works six days, he can net about $50,000 a year after expenses.

Most of the Taxi Alliance’s 8,500 members have to rent medallions in order to drive. For this reason, said Desai, many of the drivers also have hard-luck stories to tell.

While no hard numbers exist, when The Real Deal hit the streets and talked to taxi drivers in an anecdotal, unscientific study, we found that despite the hardships, taxi drivers are able to scrimp and save and work very hard in order to invest in real estate on a regular basis. Many of the stories were largely about immigrant men (only 2.1 percent of taxi drivers were women in 2005, according to Schaller Consulting) who have had ups and downs while driving, but most have managed somehow or another to get their hands into real estate, either on their own or through their children and siblings.

Several drivers said they owned a medallion and had or were planning to use it to bankroll their investment in a house, even if they are still paying off the loan on their medallion. Those who bought their medallions in 2004 for $250,000 and had paid down their loans were now in an excellent position to borrow against their medallion — now worth $425,000.

On the open market, the medallion price is the equivalent of a three-bedroom house in several sections of Englewood, N.J., or of a two-family in Queens.

And even though a cab driver might have taken a mortgage to buy a medallion, which they often do in partnership with one or two other drivers, they can still qualify for a home loan on the basis of their asset, said Desai.

Another thing Schaller found by studying TLC data is that most taxi drivers live in Queens or Brooklyn and tend to buy their homes there, in areas such as Jackson Heights — in addition to Astoria and Flushing — in Queens, and Borough Park, Bensonhurst and Flatbush in Brooklyn.

Guyanese immigrant Victor (who requested that his last name not be used) said he came to New York 11 years ago and has been driving a cab for one and a half years. He works 10 hours a day, five days a week to support his wife and two school-age children. Yet at the age of 42, he is doing well; he purchased a medallion for $365,000 with a partner a year ago. His payments are $3,500 a month on a 12-year loan.

Victor wants to buy a one- or two-family house in the Bronx, close to 20 other members of his extended family. “But I am not in a rush,” he said.

Another driver who emigrated from Poland more than 20 years ago, Andrew S., bought a two-family house in Linden, N.J., eight years ago. When he sold the house, he more than doubled the $175,000 he originally paid for the house.

Andrew was able to invest in another piece of property, an apartment in Krakow, Poland, his hometown.

“When I retire, I will die there,” he said.

Nilton Garrido, a 43-year-old Peruvian, is an example of a driver who does not own a medallion but was able to eke out enough to buy a house.

He has been driving a cab in the city for 14 years and owns his cab, but leases the medallion he uses. He currently owns a house in Willimantic, Conn., where his parents and niece are living. He said he bought the one-family for $75,000 two years ago, but now it is worth about $160,000. Driving 10 to 13 hours a day for four days a week, and 15 to 16 hours another two days, Garrido said he is planning to buy another house in two years, this time a two-family in Queens. He plans on renting one half while living in the other.

Familant said the default rate on medallions is close to zero, and that most cab drivers manage to pay for their medallion or realize a gain when the underlying value appreciates. “None of the taxi brokers that I know puts someone into the taxi business with the expectation that they are going to fail,” he said.

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