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| Rolexes, Picassos hit pawnshops in Beverly Hills | |
| Bloomberg / Los Angeles November 10, 2008, 0:56 IST | |
The worse the economy gets, the better it is for Jordan Tabach-Bank.
“Business is booming,” said Tabach-Bank, the chief executive officer of Beverly Loan Co in Beverly Hills, California.
Beverly Loan is a pawnshop. Not just any pawnshop, but the kind that caters to people who hock Cartiers, Harley- Davidsons and Oscar statuettes when they need cash. They really need it now, Tabach-Bank said from a third-floor office, protected by bulletproof glass, off his showroom in the Bank of America building near Rodeo Drive.
“I’ve never seen so many bankers, lawyers, doctors and actors” with valuable things to pawn, he said. He pointed to an 18-carat white gold bracelet with 69 diamonds ($2,900) and an 18-carat yellow gold Rolex Yachtmaster II (“a steal” at $18,500).
With credit drying up at regular lenders, “in many cases now, we’re not just the bank of last resort,” Tabach-Bank said. “We’re the bank of only resort.”
High-end pawnshops aren’t like most of the 10,000 dealers affiliated with the National Pawnbrokers Association, a Keller, Texas-based trade group. The average US pawn transaction is $75, according to the association’s Web site.
$2.7 Million Necklace: At Tabach-Bank’s shop, “confidential collateral loans,” as they’re called, have been made on art works by Pablo Picasso, Andy Warhol and Jean-Michel Basquiat. Amounts loaned range from several thousand dollars to “six- and seven-figure deals,” he said, with clients using the money to cover the mortgage, make alimony payments or finance cosmetic surgery.
South Beverly Jewelry and Loan, also in Beverly Hills, has seen business triple in the past six months, said owner Yossi Dina. Some of the collateral is in a parking lot: About 60 cars, including Ferraris, Porsches and a Bentley.
“We’re making loans today we never used to,
Dina, 54, said. “Millions —never used to have that. We’re selling a necklace now, the client wants $2.7 million.”
The thriving pawnshops show that hard times have reached even Beverly Hills, where the average per-capita income in 2006 was $50,218, almost triple that of all of Los Angeles County, according to the city of Beverly Hills Web site.
The median price for Beverly Hills homes sold in the 12 months through September was $1.3 million, according to Trulia.com, which tracks local residential sales. That was down 16 per cent from the year-earlier period.
Climbing Defaults: The pawning surge has a drawback, according to shop owners. Just as falling real estate prices have led to record foreclosures in some cities, customer defaults have climbed by “a couple of points over the last six months” said Tabach- Bank.
At Collateral Lender Inc of Beverly Hills, the redemption rate has fallen seven percentage points to 82 per cent and will likely drop more during the next six months, said owner Tal Schmargal, 52.
People who fail to reclaim an item generally don’t return to pawn another, brokers say. The ideal client is one who hocks a gold watch, redeems it by paying back the loan amount and interest, then hocks it again when the need arises.
“We want them to get their goods back,” Tabach-Bank said.
Under California law, a pawned item remains in a shop for four months and 10 days, after which the client may get it back by paying off the loan or delay redemption by paying just the interest.
The state dictates interest rates for loans up to $2,500, lenders for loans higher than that. The usual rate at Beverly Loan is 4 per cent a month, Tabach-Bank said. Larger Diamonds
In downtown Los Angeles, King's Jewelry & Loan began seeing luxury business pick up about 18 months ago when variable-rate mortgages started resetting to higher payments, said owner Sam Shocket, 54, a member of the national association's board.
''We were seeing more Rolexes, Patek-Philippe watches, larger diamonds,'' said Shocket, who deals almost exclusively with jewelry.
''Instead of construction workers, we'd see major contractors,'' Shocket said of his customers. ''Instead of real estate agents, we'd see brokers. Instead of actors who played bit parts, we'd see someone you might recognize from 'The Tonight Show.' ''
People who pawn in Beverly Hills confess to a wide variety of needs. Dina said he has loaned money to producers to finish movies. Tabach-Bank said clients have pawned items to pay for mortgages, emergency health-care, ''tummy tucks and face lifts'' and gambling debts, ''especially around Super Bowl season.''
Keeping Secrets
Some clients trade in things they just don't want anymore, leaving them for the shop to sell. Beverly Loan has several cases of jewelry, including a white gold bracelet that would retail for about $38,000, Tabach-Bank said. His price is $20,000.
The shop is also selling signed works by Picasso, Robert Rauschenberg, Norman Rockwell and Al Hirschfeld. Prices range from $2,500 for a Keith Haring to $250,000 for a Warhol print.
Brokers in Beverly Hills won't identify clients, citing confidentiality as a cornerstone of their success.
''We're like bartenders,'' Tabach-Bank said. ''People spill their guts to us even if it's embarrassing to them. They know we won't talk.''
To contact the reporter on this story: Michael Janofsky in , at mjanofsky@bloomberg.net
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