New York City is breeding pawn shops but not because of an economic downturn. There has a been a 50% growth in NYC since 2010 in establishments offering short-term loans against moveable collateral. And new services like Borro have gained access to better and cheaper capital. Borro just got a $112m line of credit from Victory Park Capital. Suttons and Robertson, a London firm, just opened in Manhattan alongside New York Loan Co. which is owned by a Beverly Hills firm that does the same.
Why the demand? Rather than seeing pawnshops that cater to the wealthy as a sign of distress, we should probably see it as a comment on the value of cash. Cash is trash, as they say on Wall St., in a low interest rate environment. The wealthy are increasingly putting their money into things because they can’t get a return in safe bank deposits or bonds and worry the equity markets may be seriously over-priced. But if you’re illiquid, life might throw you a few unexpected ones high and inside. Which is why Crain’s can illustrate the reason for Borro’s success with this story:
Marc Kaye had to do something drastic when his children’s tuition bills at Columbia and Harvard came due just as his consulting business hit a dry spell.
So he pawned his Picasso.
An art collector, Mr. Kaye brought a sketch by Pablo Picasso with the title Three Nude Women Near a Window, to a firm called Borro, a pawnbroker whose sophisticated digs 18 floors above Third Avenue resemble a bank or law office with Andy Warhol drawings of John Lennon and Freddie Mercury hanging on the walls. A mere 12 hours after Borro appraised the sketch, recently valued at $65,500, money hit Mr. Kaye’s bank account and he paid the tuition bills. A few months later, his business recovered and he bought back the Picasso.
“I was in just a little pinch, and this was an elegant and discreet way to get cash,” Mr. Kaye recalled.
Pawnshops for the wealthy (Crain’s New York Business)