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New York state probes MTA deal for Grand Central Apple Store

updated 10:45 am EST, Thu December 1, 2011

Terms may have been too generous

New York state comptroller Thomas DiNapoli has started an investigation into the lease behind the Grand Central Terminal Apple Store, says the New York Post. The paper recently revealed that New York City's Metropolitan Transportation Authority gave Apple extremely generous terms, including a much lower price per square foot, and a rare exemption on revenue sharing. The only other business in the GCT with the exemption is a Chase ATM branch.

"The article in the New York Post about the MTA's contract with Apple in Grand Central Terminal is a cause for concern," says DiNapoli. "This is a prime property, and I intend to make sure that the MTA hasn't given away the store." The comptroller has been critical of the MTA in the past; in July 2010 his office published an audit of the MTA's real estate portfolio, accusing it of poor recordkeeping, having hundreds of vacancies, and doing inferior marketing of properties. The Authority was urged to sort out real estate "before making drastic service cuts and talking about fare hikes."

MTA spokesman Aaron Donovan does note that Apple is paying for upgrades to its space in the GCT, such as a row of elevators. It has also paid out $5 million to the space's previous tenant, a restaurant called Metrazur. "They [Apple] are effectively paying $180 per square foot over the 10 years of the lease, almost 10 times the previous tenant," says Donovan.

These facts may not help the MTA however, as the $5 million went to Metrazur instead of the building's owners, and the July 2010 audit is said to show that the restaurant was itself paying unusually low rent because of MTA mistakes. Metrazur took in almost $2.4 million in lease concessions from the MTA, in part because an engineering study decided that the MTA couldn't meet requests that the space be kept within a specific temperature range. "There was no evidence the MTA had conducted such a study before accepting the tenant's request for the lease provisions," the audit report reads. "We recommend the MTA ensure such special lease provisions are, in fact, practicable before it commits to them."

by MacNN Staff




  1. facebook_Samuel

    Via Facebook

    Joined: Dec 2011


    Sounds like...

    New York state comptroller Thomas DiNapoli didn't get his payoff, is mad, and now he's going to cause trouble.

  1. prl99

    Joined: Dec 1969


    loss leader

    Apple stores draw people to an area so once open, stores in GCT should see an increase in their revenue. Of course, this won't go to NYC (or the comptroller as Sam said) but I could see it causing a resurgence in stores in the GCT so why is Thomas complaining so much?

  1. c4rlob

    Joined: Dec 1969


    Leave it to MTA

    To s**** up another revenue issue! Obviously the Apple store will actually draw people into Grand Central (which indirectly will boost revenue for the other tenants and the MTA too). But of course the MTA is too irresponsible to properly communicate that to the state, so now the state gets to waste time, resources and money on an investigation. Great job MTA.

  1. TomSawyer

    Joined: Dec 1969


    In a down economy

    ... a lessor should probably consider themselves lucky to have a good tenant who pays the rent and makes improvements to their space. Worst case scenario the lease should be considered a Loss Leader.

    If the comptroller doesn't like the terms the MTA agreed to he can compensate Apple for all their expenditures to date, void the lease and hope to find another tenant to occupy the space after they've seen how he treated Apple.

  1. elroth

    Joined: Dec 1969



    This is a legitimate inquiry - I would definitely want my local government to make sure corporations aren't given unfair advantages, and taking away tax revenue.

    I think the only real question is why Apple isn't paying a percentage of revenue - it could have been a very small percentage, as the store will do mega-millions in sales. There could be market justification for not paying a percentage.

    I would assume a few things here: the fact that Aple paid the previous lease holder $5 million dollars is possibly so that Apple could move in earlier, which helps the MTA. Apple making the renovations effectively increases the rent Apple is paying, so that seems like a non-issue.

    Also, it's been reported that Apple's bid was the only one received by the MTA, so if Apple pulled out, the space could have stayed vacant. You have to set terms by the market, in this case it's a slow market.

  1. LouZer

    Joined: Dec 1969


    Re: loss leader

    Apple stores draw people to an area so once open, stores in GCT should see an increase in their revenue. Of course, this won't go to NYC (or the comptroller as Sam said) but I could see it causing a resurgence in stores in the GCT so why is Thomas complaining so much?

    So if Google or Amazon or Microsoft has a loss leader (like android, kindle, or xBox console), it's unfair and shows they can't compete without such tricks. But if someone does the same but Apple is somehow involved, it's a great business decision.

    No double standards on MacNN, that's for sure!

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