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Apple's Grand Central Neighbor Seeing 7% Increase In Sales
New York City's Metropolitan Transportation Authority (MTA)'s sweetheart deal for Apple's just-opened Grand Central Terminal retail store seems to be paying dividends for the MTA and neighboring stores. One restaurant is reporting a 7 percent increase in sales since the store opened in December.
Michael Jordan's The Steak House is located across the terminal from the new Apple Store, Grand Central and co-owner Peter Glazier says the restaurant has seen a 7 percent jump in sales in the seven weeks that the Apple Store has been open, reports Crains New York. Glazier also says the rise isn't because Apple replaced another restaurant, Metrazur, in the terminal. "The jump only happened after Apple opened," said Glazier, not in the several months that the space was being renovated as the store was built.
There was some criticism of the deal that Apple and the MTA worked out, most notably around the lack of a revenue sharing agreement which is standard for most tenants of Grand Central. Apple's $60-per-square-foot lease agreement is also significantly lower than what most other tenants are paying. The MTA argued that a flagship Apple Store would bring in significant foot traffic to the terminal, benefiting both other GCT tenants and the terminal as a whole.
The MTA has previously noted 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.
MTA's gamble appears to be paying off, for at least one establishment.
(Photo via Yelp/Chris F.)
Michael Jordan's The Steak House is located across the terminal from the new Apple Store, Grand Central and co-owner Peter Glazier says the restaurant has seen a 7 percent jump in sales in the seven weeks that the Apple Store has been open, reports Crains New York. Glazier also says the rise isn't because Apple replaced another restaurant, Metrazur, in the terminal. "The jump only happened after Apple opened," said Glazier, not in the several months that the space was being renovated as the store was built.
There was some criticism of the deal that Apple and the MTA worked out, most notably around the lack of a revenue sharing agreement which is standard for most tenants of Grand Central. Apple's $60-per-square-foot lease agreement is also significantly lower than what most other tenants are paying. The MTA argued that a flagship Apple Store would bring in significant foot traffic to the terminal, benefiting both other GCT tenants and the terminal as a whole.
The MTA has previously noted 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.
MTA's gamble appears to be paying off, for at least one establishment.
(Photo via Yelp/Chris F.)
[ 34 comments ]
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104 months ago
Sure nothing but MTA losing a boatload of money on a sweetheart deal with Apple. Someone is paying a price.
They aren't losing a boatload. The previous tenant had a lower rent than Apple is paying and their contract had another 7 years or so (can't remember). So, by Apple getting in this space, MTA is making more than they would have.
Further, the $60 per square foot Apple is paying to MTA isn't the total cost. Apple bought out the previous tenant with Millions of dollars up front, and Apple contributed even more to necessary renovations to the building (new elevator is what I heard.)
So, if you're the MTA, and you have someone willing to come in and bring more foot traffic, and that person agrees to improve your building, and that person agrees to pay more than a low rent tenant with a long contract, and they agree to pay-off that tenant.... what is there to say no to?
104 months ago
Sure nothing but MTA losing a boatload of money on a sweetheart deal with Apple. Someone is paying a price.
Correct me if I'm wrong, but I thought the MTA was actually getting more per square foot than they did from the previous restaurant that occupied the premises.
104 months ago
That seems a bit low. You both remove an empty anchor store, increase foot traffic, and there's a 7% increase? That's the equivalent of an extra 10 tables a night I would estimate. I don't understand how this is news.
10 extra tables a night, and let's say $50 a table (which is probably on the low side) X 7 days a week X 7 weeks so far = almost $25000 in extra sales without doing a single thing.
104 months ago
So, if you're the MTA, and you have someone willing to come in and bring more foot traffic, and that person agrees to improve your building, and that person agrees to pay more than a low rent tenant with a long contract, and they agree to pay-off that tenant.... what is there to say no to?
Ah that would be the rational response that one would have to the entire situation. However some in these forums think that Apple can do no right, so your logic won't have any effect on them.
The entire deal works in the MTA's favour.
104 months ago
They aren't losing a boatload. The previous tenant had a lower rent than Apple is paying and their contract had another 7 years or so (can't remember). So, by Apple getting in this space, MTA is making more than they would have.
Further, the $60 per square foot Apple is paying to MTA isn't the total cost. Apple bought out the previous tenant with Millions of dollars up front, and Apple contributed even more to necessary renovations to the building (new elevator is what I heard.)
So, if you're the MTA, and you have someone willing to come in and bring more foot traffic, and that person agrees to improve your building, and that person agrees to pay more than a low rent tenant with a long contract, and they agree to pay-off that tenant.... what is there to say no to?
The whole rent thing has been debunked long ago and it works in MTA's and other retailers favor, consistently, and that's from independent accounting reports. Some people just won't let go or have to find fault somewhere, and here they land.
"...10 extra tables a night, and let's say $50 a table (which is probably on the low side) X 7 days a week X 7 weeks so far = almost $25000 in extra sales without doing a single thing..."
It's actually more than that. The place is very spendy, food is great, often hard to make a reservation, and serves 200 to 360 depending on configuration. Figure all that in and it's like a grand a night. And both MTA and Apple got so much criticism (mainly from people who didn't know the facts), why not show a first look response....or is it only good to show the negatives?
104 months ago
its impressive that one store could increase traffic that much, but i am not surprised given just how busy all the apple stores are that i have been to, so there is obvious demand for more stores.
104 months ago
Fair enough, Yes - looked at the rest of the terms versus the previous tenant.
104 months ago
I agree. How would a 7% increase in sales even break even for MTA given Apple's significantly lower rent and lack of revenue sharing.
How many other stores are benefiting, and by how much?
How much more is that over the previous tenant?
What is the payoff of being associated with the most talked about brand in the US, possibly the world?
This report is likely the first of many reports to analyze the impact a store can make to the local ecosystem.
IOW, its likely premature to fully quantify the impact to GCT
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I agree. How would a 7% increase in sales even break even for MTA given Apple's significantly lower rent and lack of revenue sharing.
wait, so you close down a restaurant and the one that remains next door gets 7% more sales
Why do we assume the Apple store foot traffic has anything to do with this?
not saying it doesn't, but closing down the restaurant next door seems more likely to increase the foot traffic
According to the article, the restaurant did not see increased sales after the closing of the competition or the time the space was empty.
Sales increased AFTER the Apple store opened.
104 months ago
OMG, a NYC-based restaurant reports higher sales around Christmas and New Year's. :rolleyes:
Thumbs up, my friend. Thumbs up.
104 months ago
I agree. How would a 7% increase in sales even break even for MTA given Apple's significantly lower rent and lack of revenue sharing.
1. Apple is paying significantly "MORE" per square foot for the space that they are occupying than the previous tenants were because they were paying rent + revenue sharing whereas Apple is paying a flat fee.2. Apple paid for significant upgrades to infrastructure.
The MTA has the option to either charge a lower rental rate and then collect some more in a revenue sharing agreement or they can simply pay a higher rate and forgo the revenue sharing agreement which is what Apple has negotiated there.
If they were renting out office space, they would likely go with the same kind of arrangement since it is likely that revenue would not actually be directly generated by that office space for a company and would rather be used for supporting internal logistics.
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