Pawn Shops for the (Formerly) Rich
By Robert Frank
The rich have always faced periodic “liquidity shortfalls,” where they have plenty of assets but not enough cash.
Yet apparently, those shortfalls are becoming more common in the bad economy. And the cash-poor rich are fueling a continued rise in high-end pawn shops.
According to an article in the South Florida Sun-Sentinel, business is booming at Boca Raton Pawn, which will pawn everything from Hublot watches and Jimmy Choo shoes to diamonds and Lamborghinis. The shop recently got a call about a Picasso.
“We looked around and there were really no pawn shops in the area catering to the rich,” owner Seth Marcus said. “We call ourselves a pawn shop, but we’re really a high-end collateral lender.”
Boca Raton Pawn is part of a growing cottage industry of pawning to the rich. They work like regular pawn shops, where the shop gives a loan based on a piece of collateral that it holds. If the loan isn’t paid back, the shop sells the collateral. The only difference is that high-end pawn shops deal in bigger numbers.
Boomerang Lending, a Colorado-based business founded in the depths of the crisis in 2009, has pawned a $90,000 Ducati racing bike, a Corum Golden Bridge watch, and a solid-gold, 19th-century cocktail purse valued at $25,000. Boomerang Lending has dealt with a Picasso (what is it with pawned Picassos?). Their interest rate is 48%.
“There is a certain type of affluent customer that will not go into a pawn shop,” owner Todd Hills told Newsweek in 2010. “And they don’t have a $50 or $100 problem. Maybe they have a $100,000 problem.” The granddaddy of all the plutocrat pawnshops is Beverly Loan Co., in Beverly Hills, which bills itself as “the Pawnshop to the Stars” has been helping the cash-strapped and famous for nearly 75 years.
Owner Jordan Tabach-Bank told CNN in 2009 that he was “giving more loans and they’re bigger than ever.”
“I recently had a hedge-fund manager in here getting a large loan on his collection of diamonds,” he said. (Yes, Beverly Loan also lists Picassos among their previous inventory).
You’d think that after the market rebound in 2009 and 2010 that the rich would be more flush and pawn-free. Yet Seth Marcus of Boca Raton Pawn said some of Boca Raton Pawn’s business is coming from small-business owners pawning designer watches to make payroll. One woman pawned her engagement ring to buy a puppy.
Would you ever go to a high-end pawnshop?
This entry was posted on Tuesday, September 27th, 2011 at 10:34 pm
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