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."