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
126 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
126 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
126 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
126 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
126 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
126 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

Flat 2021 MacBook Pro Mockup Feature

Unreleased Apple Macs and Apple Watches Listed in Eurasian Database Ahead of Fall Product Launches

Monday August 2, 2021 9:34 am PDT by
Apple is preparing for a slew of fall product launches according to new filings that showed up today in the Eurasian Economic Commission database. There are listings for new Mac and Apple Watch models, all of which have previously unknown model identifiers that indicate that they're upcoming devices. There are six new Apple Watch identifiers, including A2473, A2474, A2475, A2476, A2477, and...
ifixit iphone12 mini

Apple to Make Space for Larger Batteries in iPhones, iPads, and MacBooks By Adopting Slimmer Peripheral Chips

Monday August 2, 2021 2:12 am PDT by
For future iPhones, iPads, and MacBooks, Apple plans to use smaller internal components in an effort to increase the size of the device's battery, according to DigiTimes. Image Credit: iFixit Specifically, Apple plans to "significantly increase the adoption" of IPDs or integrated passive devices for the peripheral chips in its products. These news chips will be slimmer in size and allow for...
Apple watch series 5 new case material made of titanium 091019

Titanium Apple Watch Series 6 Models Currently Widely Unavailable

Sunday August 1, 2021 6:21 am PDT by
Models of the Apple Watch Series 6 with titanium cases part of the "Apple Watch Edition" collection is currently widely unavailable for pick-up in several of Apple's retail stores in the United States and is unavailable entirely for delivery in major markets. Noted by Bloomberg's Mark Gurman in the latest edition of his "Power On" newsletter, titanium models of the Apple Watch Series 6,...
General Apps Messages

Android iMessage Competitor Puts Pressure on Apple

Friday July 30, 2021 3:15 am PDT by
Google and the three major U.S. carriers, including Verizon, AT&T, and T-Mobile, will all support a new communications protocol on Android smartphones starting in 2022, a move that puts pressure on Apple to adopt a new cross-platform messaging standard and may present a challenge to iMessage. Verizon recently announced that it is planning to adopt Messages by Google as its default messaging...
REC ASA CODE2016 20160601 205816 2745

Elon Musk Reportedly Demanded to Become Apple CEO as Part of Potential Tesla Acquisition [Update: Musk Denies]

Friday July 30, 2021 9:04 am PDT by
Tesla CEO Elon Musk reportedly once demanded that he be made Apple CEO in a brief discussion of a potential acquisition with Apple's current CEO, Tim Cook. The claim comes in a new book titled "Power Play: Tesla, Elon Musk and the Bet of the Century," as reviewed by The Los Angeles Times. According to the book, during a 2016 phone call between Musk and Cook that touched on the possibility of ...
iPhone 13 Wi Fi 6E feature update

Wi-Fi 6E Explained: What It Could Mean for iPhone 13 and Beyond

Monday August 2, 2021 8:00 am PDT by
The iPhone 13 is widely expected to come with Wi-Fi 6E capabilities, and while it may seem rather nuanced to the average consumer, with only improved speeds and being "up to date" in the realm of Wi-Fi technology, it's actually a fairly significant improvement, laying the groundwork for much of what we know the future holds. To truly understand Wi-Fi 6E, MacRumors sat down for an exclusive...
magic keyboard touch id

Apple Makes Magic Keyboard With Touch ID Available for Separate Purchase

Tuesday August 3, 2021 5:22 am PDT by
Apple has made the Magic Keyboard with Touch ID, which previously was only available with the purchase of the new 24-inch iMac, available for purchase individually for $149. Apple also retails the Magic Keyboard with Touch ID and a numeric keypad for $179. A standard Magic Keyboard without Touch ID or a numeric keypad is available for $99, and a new Magic Trackpad for $129. One major...
themorningshowcarrell

Apple Decided Not to Buy Reese Witherspoon's 'Hello Sunshine' Media Company

Monday August 2, 2021 2:02 pm PDT by
Reese Witherspoon's media company "Hello Sunshine" recently courted various buyers, and while Apple was one of parties interested in buying Hello Sunshine, the Cupertino company did not end up going through with the purchase. Hello Sunshine was valued at around $900 million thanks to its involvement in popular series like The Morning Show," "Big Little Lies," and "Little Fires Everywhere,"...
COVID19 Digital Wallet Apple Wallet

Australian Government Now Offering COVID-19 Digital Vaccination Certificates for Apple Wallet

Monday August 2, 2021 12:04 am PDT by
The Australian government has introduced support for adding COVID-19 vaccination digital certificates to Apple Wallet via the Express Plus Medicare app on iOS. Image credit: Tap Down Under As spotted by Tap Down Under, users who have received two doses of either the AstraZeneca or Pfizer vaccine now have access to the digital certificate through their Medicare online account or via the Medica...
mac pro new graphics

Apple Introduces New High-End Graphics Options for Mac Pro

Tuesday August 3, 2021 7:34 am PDT by
Apple today began offering new high-end graphics upgrade options for both the tower and rack versions of the Mac Pro desktop computer. This comes on the same day that Apple started selling the Magic Keyboard with Touch ID on a standalone basis. As noted by CNN Underscored's Jake Krol, the Mac Pro can now be configured with new AMD Radeon Pro W6800X, W6800X Duo, or W6900X graphics when...