In hock, and above the hoi polloi
Pawnshops for the wealthy see business boom
LOS ANGELES - The worse the economy gets, the better it is for Jordan Tabach-Bank.
"Business is booming," said Tabach-Bank, the chief executive of Beverly Loan Co. in Beverly Hills, Calif.
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 Yacht-Master 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 website.
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 website.
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 percent from the year-earlier period.
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 7 percentage points to 82 percent 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.
Brokers 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."