MTA on State Investigation of Apple Grand Central Terminal Deal: 'Bring It On'

Just as Apple revealed yesterday that it will open its new Grand Central Terminal retail store on December 9th, New York State Comptroller Thomas DiNapoli announced that he would be investigating the terms of the deal, which appeared at first glance to be extremely favorable for Apple compared to leases held by other terminal retail tenants and broader market rates.

apple store grand central dec 9
The Metropolitan Transportation Authority (MTA), which oversees Grand Central Terminal and the leasing of its retail space, has now issued a statement welcoming the investigation and expressing confidence that it received the best possible deal for a difficult space that had previously been underperforming expectations.

With regard to any calls for an investigation into the lease, our comment is this: “Bring it on. This is the best possible deal for the MTA, quadrupling the rent we receive and bringing foot traffic to Grand Central Terminal that will increase revenue from all of our retailers. We look forward to explaining the details of this competitively bid transaction to anyone who is interested.”

Some of the details of the MTA's argument were covered in yesterday's report, but the agency makes clear that Apple's lease is a significant upgrade over the previous tenancy from restaurant Metrazur, which paid only $263,000 per year in rent and did not earn enough revenue to require percentage rent above that amount. Apple's lease quadruples that of Metrazur's rent obligations to $1.1 million per year.

The MTA also notes that the space is a difficult one for retailers to deal with given the limitations imposed by historic preservation regulations for the open balcony space. Apple's tenancy also required a $5 million buyout of Metrazur's lease, which ran through 2019, and more than $2.5 million in improvements to the building infrastructure, including a new elevator, HVAC systems and other changes.

This is the best possible deal for the MTA. When all of the costs are included, Apple is paying more than $180 per square foot over the ten-year lease. As the competitive bidding process revealed, there are no other uses for this space that would generate the same revenue for the MTA given the up-front costs and limitations.

The MTA is clearly viewing Apple's tenancy as a high-profile addition to draw more customers to the retail component of the terminal in general, noting that for every 1% increase in sales across the terminal's retailers, the MTA will gain $500,000 in rent due to the percentage rent provisions in place on the leases of nearly every other tenant with the exception of Apple.

Other Grand Central Terminal retailers are reportedly "very pleased" that Apple will be adding its hefty retail presence to the area and are looking forward to the increased foot traffic expected from the addition.

Top Rated Comments

btbeme Avatar
119 months ago
So... Apple is happy. MTA is happy. The other retailers are happy. The building space is being used properly and with dignity. Nobody else came forward with a better plan. Improvements are being made at Apple's expense. Sales tax revenue will be huge. Traffic is expected to increase profits for all involved...

...so let's sue! Or at least investigate. Maybe occupy.
Score: 26 Votes (Like | Disagree)
goodcow Avatar
119 months ago

With all that extra revenue, tolls for bridges and tunnels will be less and their will be better train service right?


Do you realize what the MTA's budget is? Any money from this deal is more or less a rounding error for the MTA.

Also keep in mind that the ridership on the Lexington Avenue line alone (4, 5, 6) is higher than the ENTIRE ridership of the CTA (Chicago Transit Authority). The amount of people the MTA moves everyday is far greater than any other transit authority in America.

For those not from the NYC area, the MTA is the most corrupt and mismanaged entity in the city. Fares and tolls keep going up and service continues to go down.


This is in large part due to the $30B or so of outstanding debt the MTA has, in large part due to Governor Pataki and Mayor Bloomberg cutting transit subsidies. Pataki essentially told the MTA to put the capital program on a credit card (bonds) and now about 20% of the MTA budget alone goes to paying down old debt. How can anyone manage an organization when 20% of their budget is tied down like that?

Top level executive pay keeps going up as does the amount of money put into pensions of the lazy employees.


Top level executive pay doesn't keep going up. MTA Headquarters (non-union) employees have had their pay frozen and many jobs have been slashed. If you think $300K a year is excessive for somebody running the largest public transportation system in America, then you're ignorant.

As to the pensions, the amount of money going into the pension funds has been increasing because Wall Street decided to gamble everyone's money and there was that large crash you may have remembered a few years ago. If Wall Street were better regulated, the pension fund wouldn't have lost massive amounts of money and thus needed to be shored up financially.

----------

Welcome to union labor.


http://secondavenuesagas.com/2011/09/22/on-debt-a-comptrollers-report-reveals-the-obvious/

Oh hey, 18% of the budget is going to bankers to pay down debt. God damn unions.

The increased pension costs can also be attributed to Wall Street's decline, thanks to wreckless bankers and lack of regulation.

Healthcare costs are going up for everyone because the healthcare system is entirely broken in this country.

But it's okay, let's blame the unions.
Score: 13 Votes (Like | Disagree)
Liquorpuki Avatar
119 months ago

This is ridiculous! Are they going to investigate every single mall and aggregate shopping locations to see if different pricing is given to certain retailers?!


You need to learn the difference between a mall and public property
Score: 8 Votes (Like | Disagree)
iRCL Avatar
119 months ago
So, now that the full details are disclosed, this sounds like it's in complete opposite of the original rumor article about a "sweetheart" deal, since the real deal is actually fairly normal when the numbers are crunched.
Score: 7 Votes (Like | Disagree)
levitynyc Avatar
119 months ago
With all that extra revenue, tolls for bridges and tunnels will be less and their will be better train service right?

For those not from the NYC area, the MTA is the most corrupt and mismanaged entity in the city. Fares and tolls keep going up and service continues to go down. Top level executive pay keeps going up as does the amount of money put into pensions of the lazy employees.

In the end, the public loses.
Score: 7 Votes (Like | Disagree)
BC2009 Avatar
119 months ago
I said it before and I will say it again....

The previous tenant had EIGHT YEARS remaining on his lease which was only $15 per square foot. Apple offered to foot the bill to buy that guy out of his lease which was extremely cheap (i.e.: save the MTA from only getting $15 per square foot on the same space for eight more years). Then Apple signed a 10 year lease (not much longer than the previous tenant, but still guaranteeing a solid tenant for ten more years). Then agreed to give MTA four times the rent ($60) per esquire foot over that eight year lease period plus two more years. Additionally, Apple is footing the bill for all the improvements being made to the space including an elevator AND Apple will drive more business to other businesses in Grand Central thus increasing the chance of revenue sharing from those businesses for MTA. If MTA had not made this deal what other "competitive bid" would have been better? Who else was going to buy out the existing tenant's eight year lease and replace it with a ten year lease at four times the rent and do their own improvements.

If Apple vacates in ten years, MTA gets to keep the capital improvements and rent at a much higher rate if they want. If Apple stays, MTA can negotiate a new rental rate.

MTA got the sweetheart deal in all this -- though if the store does well for Apple then it will be mutually beneficial. The sad thing is that MTA will likely mismanage the money and train fares will still go up.
Score: 6 Votes (Like | Disagree)

Top Stories

Top Stories 44 Feature

Top Stories: 'Thinner and Lighter' MacBook Air, Smaller iPhone 13 Notch, iOS 14.4 Incoming

Saturday January 23, 2021 6:00 am PST by
We continued to hear a lot more about Apple's plans for its Mac lineup this week, including word of a high-end redesigned MacBook Air and the return of an SD card slot as part of the upcoming MacBook Pro redesign. It also sounds like Apple has been working on Face ID for Mac, but it won't be appearing in a redesigned iMac this year as originally planned. This week also saw rumors about the...
magsafecasedangle

Apple Elaborates on Potential for iPhone 12 and MagSafe Accessories to Interfere With Implantable Medical Devices

Saturday January 23, 2021 2:42 pm PST by
Since the launch of iPhone 12 models in October, Apple has acknowledged that the devices may cause electromagnetic interference with medical devices like pacemakers and defibrillators, but the company has now shared additional information. Apple added the following paragraph to a related support document today:Medical devices such as implanted pacemakers and defibrillators might contain...
Flat MacBook Air Feature

Bloomberg: Apple Working on 'Thinner and Lighter' High-End MacBook Air With MagSafe, Could Launch in Second Half of 2021

Friday January 22, 2021 3:34 am PST by
Apple is working on a "thinner and lighter" version of the MacBook Air that the company plans to release during the second half of this year at the earliest or in 2022, according to a new report by well-connected Bloomberg journalist Mark Gurman. It will include Apple's MagSafe charging technology and a next-generation version of the company's in-house Mac processors. Apple has discussed...
2021 mbp sd slot feature2

Bloomberg: Next MacBook Pro to Feature SD Card Reader

Friday January 22, 2021 7:50 am PST by
Last week, reputable analyst Ming-Chi Kuo outlined his expectations for new 14-inch and 16-inch MacBook Pro models later this year, including the return of the MagSafe charging connector, the removal of the Touch Bar, a new flat-edged design, and the return of more ports built into the notebooks for expanded connectivity. A concept of a modern MacBook Pro with an SD card reader Kuo did not...
airpods galaxy buds comparison

Samsung Galaxy Buds Pro vs. Apple AirPods Pro

Friday January 22, 2021 2:34 pm PST by
Samsung in January unveiled new flagship Galaxy S21 smartphones and alongside the new phones, introduced the $200 Galaxy Buds Pro, which are priced at $199 and offer Active Noise Cancellation. Subscribe to the MacRumors YouTube channel for more videos. These new Galaxy Buds Pro are clearly designed to compete with Apple's AirPods Pro, so we thought we'd compare the two sets of earbuds in our...
maxresdefault

Microsoft Touts Surface Pro 7 as 'The Better Choice' Over MacBook Pro in New Ad

Saturday January 23, 2021 11:02 am PST by
Microsoft yesterday shared a new ad on YouTube titled "Microsoft Surface Pro 7: The Better Choice," in which the company compares its tablet computer to Apple's 13-inch M1 MacBook Pro, as spotted by MSPoweruser. The ad highlights the Surface Pro 7's touchscreen and included stylus as opposed to only a "little bar" (the Touch Bar) on the MacBook Pro. Other advantages of the Surface Pro 7...
iOS 15 icon mock banner

iOS 15 Rumored to Drop Support for iPhone 6s and 2016 iPhone SE

Thursday January 21, 2021 11:58 am PST by
Apple's upcoming iOS 15 operating system, which we expect to see unveiled in June, is rumored to be dropping support for a few of Apple's older iPhones. According to French site iPhoneSoft, iOS 15 will not be able to be installed on the iPhone 6s, the iPhone 6s Plus, or the 2016 iPhone SE, all of which have an A9 chip. The iPhone 6s and 6s Plus were introduced in 2015 and are now more...
maxresdefault

Video Demos macOS Catalina Running on iPad Pro via x86 Emulation

Thursday January 21, 2021 11:36 am PST by
A video demonstrating macOS Catalina running on a current 2020 iPad Pro has been shared on YouTube, giving us a look at an interesting hack that has a Mac OS up and working on one of Apple's iPads. There's limited information about how the process of getting macOS Catalina on an iPad Pro works, but it uses x86 emulation and was done through the UTM software that allows virtual machines to...
iPhone 13 Notch Feature

iPhone 13 Rumored to Feature Smaller Notch, Pro Model Cameras to Use Larger Image Sensor

Thursday January 21, 2021 1:38 am PST by
Apple's iPhone 13 series will feature a redesigned Face ID system that will allow for a smaller notch at the top of the screen, according to a new report today. The rumor comes via hit-and-miss Taiwanese industry publication DigiTimes, whose supply chain sources also claim that the ultra wide-angle lens in Apple's next-generation iPhones is due for an upgrade. The next-generation iPhones'...
iOS 14

Apple Seeds iOS 14.4 and iPadOS 14.4 Release Candidate to Developers and Public Beta Testers

Thursday January 21, 2021 10:14 am PST by
Apple today seeded the RC version of upcoming iOS 14.4 and iPadOS 14.4 updates to developers for testing purposes, with the new betas coming a week after Apple released the second betas. iOS 14.4 and iPadOS 14.4 can be downloaded through the Apple Developer Center or over the air after the proper profile has been installed on an iPhone or iPad. Paired with the HomePod 14.4 beta that is...